HEALTH LAW SUPPLEMENT Winter 2020

Waiver of co-payments and deductibles and insurance fraud. This topic has been addressed before briefly in the Supplement but bears in-depth review now. There have recently been a spate of audits by the New York State Comptroller’s Office in instances where they suspect that an out-of-network provider is waiving or reducing co-payments and deductibles for patients insured by the New York State Health Insurance Plan (NYSHIP), or Empire Plan, that includes coverage for out-of-network services. NYSHIP is one of the nation’s largest public sector health insurance programs and covers over 1.2 million active and retired State, local government and school district employees and their dependents. Commercial insurers also seem to be increasing the frequency and targets of their financial audits, previously limited to large providers.
The Comptroller is of the opinion that a significant cost savings to NYSHIP (and therefore for State taxpayers) would occur if more out-of-network providers who improperly waive or reduce members’ out-of-pocket costs discontinued the practice and joined the Empire Plan network instead. In-network providers are, of course, paid rates significantly less than that of typical out-of-network providers, usually about half. One might wonder why the Comptroller and commercial insurers don’t increase payment for in-network services rather than investigating billing practices of out-of-network providers in order to increase in-network participation, but that does not seem to have occurred or be planned. See Preventing Inappropriate and Excessive Costs in the New York State Health Insurance Program, Office of the NYS Comptroller, State Health Insurance Program, A Summary of Audits Identifying Out-of-Network Providers Engaged in Routine Waiving, Office of the NYS Comptroller, 2016-D-1, MAY 2018.
Waiver occurs as follows: Suppose a patient is insured under a health insurance policy obligating the insurer to reimburse the insured 80% of the provider’s charges. If the provider informs the insurer, by way of filing a claim for reimbursement either directly to the provider or to the patient, that their charge for a procedure is $300, the insurer would, in anticipation that the provider would require the patient to pay the provider $60, reimburse the provider or the insured $240. If however, the provider were to waive the $60 co-payment, the provider’s true charge would not be $300 but would be $240. Under those circumstances, the obligation of the insurer would be $192.
The Comptroller or commercial insurance auditor would believe that an overpayment of $48 had been made on the above claim. On audit, the insurance company would demand repayment of all alleged overpayments made by use of an extrapolation formula. For example, if an auditor found that in the audited sample 50% of patient co-payments had been waived, they may demand the return of alleged overpayments for 50% of all claims paid by the insurer over the past six years. The Statute of Limitations on civil fraud in New York State is 6 years, NY CPLR Section 213(8).
Similarly, if a patient’s insurance policy required them to pay a $1000 deductible before the insurer reimbursed the provider or patient for the provider’s charges, and the provider reported to the insurer that their charge for services was $1500, the insurer would pay the provider $500 expecting that the provider would require the patient to pay the remaining $1000. By waiving the $1000 deductible, the provider would be charging less for the services than they reported to the insurer. And similarly, on audit, an insurer might demand repayment based on an extrapolation formula.
It is generally accepted by insurance auditors that a provider may occasionally waive or reduce a co-payment or deductible due from an indigent patient. Auditors seem to believe that this might be justifiable if done for a small minority of patients, maybe no more than 10%, and with some formal procedure for the provider to determine financial need. In addition, a decision by a provider not to pursue the full legal remedies available to collect a debt may be acceptable if exercised with good faith business judgment and in accordance with the provider’s customary collection procedures.
If, however, the health care provider were to make such waivers or reductions a common practice and were the provider not to amicably resolve the matter with an auditing insurer by repayment satisfactory to the insurer, then the health care provider might be sued for civil insurance fraud in violation of NY Insurance Law Section 403(c), the penalties for which are a fine of $5000 plus the entire amount of the fraudulent claims. The provider may also be threatened with criminal prosecution pursuant to NY Penal Law Section 176.05(2) on the grounds that the claim submitted to the insurer contained “materially false information.” On some occasions, in my experience, insurers have even filed licensing board complaints with the State Education Department alleging the “filing of false claims” in violation of Rules of the Board of Regents, Part 29.1 (a)(6). Whether waivers constitute fraud, however, would depend upon the facts of each case and, importantly, the intent of the provider, which is difficult to prove. Generally, waivers and reductions must be routine rather than occasional for allegations of fraud to be viable.
If Medicare or Medicaid were involved, then a federal criminal statute, 42 USC Section 1320a-7b, might also be implicated as such routine waivers are considered to constitute illegal remuneration, i.e., a kick-back by the provider to the patient.
Given the above, some clients then ask how they are to accommodate patients with limited financial means, if not by waiving or reducing co-payments and deductibles. The answer is to reduce the fee of the patient as stated on the insurance claim such that the patient is able to pay in full whatever amount remains owed to the provider once insurance reimbursement is received. For example, if a patient with a plan that covers 80% of the provider’s charge is able only to pay a co-payment of $40, then the fee stated on the insurance claim should be $200 (with a consequent insurance reimbursement of $160.)
Sometimes clients or their billing companies are averse to ever reducing their standard fee for a procedure on insurance claims, but if a significant number of patients are unable to pay co-payments in full, then doing just that is the only means that I know of by which to avoid charges of routine waiver and fraud. Some clients are of the belief that varying charges to patients based on patients’ financial capability is ethically questionable, but I know of no ethics precept that prohibits fees that are not exploitative or unconscionable, and there is a long tradition in psychotherapy practice of adjusting fees for patients of differing means.
(Some of the above article is based on an Opinion of the General Counsel, NYS Department of Financial Services, 05-04-07.)

Interstate practice for COVID “Countermeasures.” This month the Public Readiness and Emergency Preparedness Act (PREP Act), was amended by the US Department of Health and Human Services (HHS) to expand access to COVID-19 “Covered Countermeasures” through telehealth. The amendment preempts, under certain circumstances, state laws that have limited cross-border practice using telehealth. The licensure exception is limited to providers who are ordering or administering “Covered Countermeasures,” defined as drugs, diagnostic tests, devices or vaccines that diagnose, prevent, treat, or cure COVID. The amendment does not pertain to mental healthcare, but it may help foster the development of interstate practice in physical and mental healthcare in its implication that the requirement for multiple state licenses is an impediment to the efficient delivery of healthcare.

Bruce has just been approved by the New York State Education Department as a provider of CE credits for psychologists in New York State, #PSY-0011. Beginning January 1, 2021, psychologists are required to take approved CE courses to maintain licensure in the State. Bruce offers classes on ethics and law in psychotherapy practice, for social workers in addition to psychologists. Inquiries about private online-live classes for up to 40 participants are welcome.

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INFORMATION IN THIS NEWSLETTER IS NOT LEGAL ADVICE FOR ANY PARTICULAR CLIENT OR SITUATION. CONSULT WITH AN ATTORNEY INDIVIDUALLY FOR LEGAL ADVICE REGARDING THE SPECIFICS OF YOUR SITUATION.

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