New York State Seal

STATE OF NEW YORK

INSURANCE DEPARTMENT

25 BEAVER STREET

NEW YORK, NEW YORK 10004

David A. Paterson

Governor

James J. Wrynn

Superintendent

OGC Op. No. 10-06-06

The Office of General Counsel issued the following opinion on June 29, 2010, representing the position of the New York State Insurance Department.

Re: Municipality Waiver of Ambulance Co-Payment, Co-Insurance or Deductible for Residents

Question Presented:

May an ambulance service provider that operates under the direction of a municipality, without an insurer’s knowledge, waive co-payments, co-insurance, or deductibles for the non-Medicare recipients that live in the municipality?

Conclusion:

No. An ambulance service provider that operates under the direction of municipality may not, without an insurer’s knowledge, waive co-payments, co-insurance, or deductibles for the non-Medicare recipients that live in the municipality, because such a waiver may constitute insurance fraud.

Facts:

The inquirer reports that it represents an ambulance service provider that operates under the direction of a municipality. The inquirer asks whether the ambulance service provider may waive co-payments, co-insurance, or deductibles for the non-Medicare recipients that live in the municipality. The inquirer states that, because residents of the municipality pay taxes that indirectly fund the ambulance service, those taxes effectively cover the cost of any co-payment, co-insurance, or deductible that a resident may be required to pay. The inquirer points to an opinion issued by the Office of the Inspector General of the U.S. Department of Health and Human Services that pertains to Medicare and states that:

[T]here is a special rule for providers and suppliers that are owned and operated by a State or a political subdivision of a State, such as a municipality or a fire district…that a [State or local government] facility which reduces or waives its charges for patients unable to pay, or charges patients only to the extent of their Medicare and other health insurance coverage, is not viewed as furnishing free services and may therefore receive program payment.

OIG Advisory Opinion No. 01-11 (July 20, 2001).

The inquirer asks whether a similar rule applies under the New York Insurance Law for non-Medicare recipients.

Analysis:

Title XVIII of the federal Social Security Act governs Medicare, a federal insurance program. However, the New York Insurance Law governs most commercial insurance contracts, non-profit medical and dental indemnity or health and hospital service corporations (see Insurance Law Article 43); managed care health insurance contracts (see Insurance Law Article 48); and, on a limited basis, the contracts of health maintenance organizations (“HMOs”) (see Insurance Law § 1109).

A provider that waives otherwise applicable co-payments, co-insurance, or deductibles, where such waiver would affect the amount the insurer would pay, may be guilty of insurance fraud. A patient may also be guilty if he or she knowingly submits a claim to an insurer when the provider has waived the co-payment, co-insurance, or deductible. Insurance fraud is defined in N.Y. Penal Law § 176.05(2) as:

2. A fraudulent health care insurance act is committed by any person who, knowingly and with intent to defraud, presents, causes to be presented, or prepares with knowledge or belief that it will be presented to, or by, an insurer or purported insurer or self-insurer, or any agent thereof, any written statement or other physical evidence as part of, or in support of, an application for the issuance of a health insurance policy, or a policy or contract or other authorization that provides or allows coverage for, membership or enrollment in, or other services of a public or private health plan, or a claim for payment, services or other benefit pursuant to such policy, contract or plan, which he knows to:

(a) contain materially false information concerning any material fact thereto; or

(b) conceal, for the purpose of misleading, information concerning any fact material thereto. Such policy or contract or plan or authorization shall include, but not be limited to, those issued or operating pursuant to any public or governmentally-sponsored or supported plan for health care coverage or services or those otherwise issued or operated by entities authorized pursuant to the public health law . . . (emphasis added).

Furthermore, N.Y. Ins. Law § 403(c) (McKinney 2000) authorizes the Superintendent of Insurance to impose a civil penalty for insurance fraud and provides as follows:

(c) In addition to any criminal liability arising under the provisions of this section, the superintendent shall be empowered to levy a civil penalty not exceeding five thousand dollars and the amount of the claim for each violation upon any person, including those persons and their employees licensed pursuant to this chapter, who is found to have: (i) committed a fraudulent insurance act or otherwise violates the provisions of this section; or (ii) knowingly and with intent to defraud files, makes, or assists, solicits or conspires with another to file or make an application for a premium reduction, pursuant to subsection (a) of section two thousand three hundred thirty-six of this chapter, containing any materially false information or which, for the purpose of misleading, conceals information concerning any fact material thereto.

The Office of General Counsel (“OGC”) has opined on the matter of a waiver of charges constituting insurance fraud in several different contexts, including with respect to the waiver of: (1) co-insurance by a physician who has no contractual relationship with a managed care health insurer (see OGC Opinion dated April 4, 2003); (2) co-payments by a provider who services patients pursuant to a contract with an insurer (see OGC Opinion dated February 24, 2004); (3) co-payments and/or deductibles in the context of private insurance (see OGC Opinion dated April 8, 2005); and (4) co-payments pursuant to a provider’s contract with an HMO (see OGC Opinion dated February 6, 2001).

These opinions recognize that if an insurer is not aware of the amount that a provider is actually charging, then the claim may contain materially false information concerning any material fact thereto. For example, if an individual were insured under a health insurance policy that obligates the insurer to reimburse to the insured 80% of the provider’s charge of $100 (or the usual and customary charge, whichever is less), but the provider only charges the individual $80 for the physician’s services and waives a $20 co-payment, then the provider’s charge is in fact $80 and the provider is in effect billing the insurer for 100% of the provider’s actual charge. However, a health care provider in this circumstance would not be guilty of insurance fraud if the provider were to make the insurer aware of the waiver, since the claim would not contain materially false information concerning a material fact thereto. The provider is expected to make insurers aware of any lower fee in the same manner as it reports its charges for other patients, since this information may affect the calculation of the payment for a service. See OGC Opinion dated April 2, 2008.

OGC is aware of no law in this state that exempts from the Penal Law or Insurance Law § 403(c) a municipality or an ambulance service that contracts therewith. Accordingly, an ambulance service provider that operates under the direction of a municipality may not waive co-payments, co-insurance, or deductibles for the non-Medicare recipients that live in the municipality without the insurer’s knowledge, because such a business practice may constitute insurance fraud.

For further information you may contact Senior Attorney Sapna Maloor at the New York City office.