OGC Opinion No. 04-02-25

The Office of General Counsel issued the following opinion on February 24, 2004 representing the position of the New York State Insurance Department.

Re: Waiver of Co-Payments

Question Presented

Are health care providers prohibited from waiving the contractually imposed charges for co-payments?


If the health care provider services patients pursuant to a contract where such waiver would affect the amount the insurer would pay for the provider’s service, such health care provider may be guilty of insurance fraud in violation of Article 4 of the N.Y. Ins. Law.


No facts were provided.


N.Y. Penal Law § 176.05(2) (McKinney Supp. 2004)states in relevant part:

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. . . .

"Insurance fraud", as it is defined in N.Y. Penal Law § 176.05 (McKinney Supp. 2004) has been adopted by Article 4 in N.Y. Ins. Law § 403 (a) (McKinney 2000). N.Y. Ins. Law § 403 (c) (McKinney 2000) states in relevant part:

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; . . .

If an individual was insured under a health insurance policy obligating the insurer to reimburse the insured 80% of the fee, and the health care provider informed the insurer that his or her fee for a procedure was $100, the insurer would reimburse the insured $80, and assume that the insured paid $20 to the health care provider. If, however, the health care provider waived the $20 co-payment, the health care provider’s fee would actually be $80. Under those circumstances, the obligation of the insurer should only be $64. See, OGC opinions February 6, 2001 and April 4, 2003. Whether this constitutes fraud would depend on the facts of the particular case and the intent of the parties.

If Medicare or Medicaid were involved, then a federal statute, 42 U.S.C.A. § 1320a-7b (West 2004), criminalizes a number of acts involving Federal health care programs. The United States Secretary of Health and Human Services has by Regulation, 42 CFR § 1001.952(k) (West 2004) clarified when waivers do not constitute illegal remuneration.

For further information one may contact Senior Attorney Susan Dess at the New York City Office.