Improving business with out-of-network patients
by Jeffrey S. Baird, Esq.

An increasing number of commercial insurers are closing their provider panels—not allowing the suppliers to bill the insurers as in-network suppliers. This relegates the out-of-network suppliers to: 1) decline to serve the patient, or 2) to serve the patient and bill the insurer as an out-of-network supplier. The challenge with billing as an out-of-network supplier is that the patient normally has to pay a higher copayment than if the DME supplier was an in-network supplier. This has led some out-of-network suppliers to offer to waive the patient’s copayment if the patient purchases from the out-of-network supplier. The problem with waiving such copayments is that the out-of-network supplier may be setting itself up for liability. Insurers sometimes file lawsuits against out-of-network health care providers that routinely waive copayments and deductibles. Many of these suits allege breach of contract, unjust enrichment, and fraud. Claims of law fraud allege that providers that waive copayments submit claims that do not reflect the actual discounted charge and, therefore, materially misrepresent the transaction. Some state regulatory authorities have issued guidance indicating that routine waivers of patients’ cost-sharing obligations constitute fraud. A common claim in court cases addressing out-of-network providers waiving copayments is that the provider submits a false or fraudulent claim and overcharges the insurer when the provider bills the insurer the full amount but does not intend to collect the copayment. Several legal scholars have concluded that the non-collection of the patient’s copayment or deductible may be lawful in and of itself, but the intentional or contractual waiver of the obligation to pay the deficiency prior to submitting a claim is, by contrast, unlawful. In Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir. 1991), a chiropractor sued CIGNA because CIGNA refused to pay a claim submitted by the chiropractor who was an out-of-network provider. Under CIGNA’s insurance policy, CIGNA covered 80 percent of medical expenses and the beneficiary was required to pay the remaining 20 percent. When the chiropractor submitted a claim, CIGNA suspected that he did not collect the 20 percent copayment. Therefore, CIGNA requested proof that the claim represented 80 percent of the full amount charged. In the process, CIGNA received information that the chiropractor waived the patient’s copayment. As a result, CIGNA refused to pay the claim and the chiropractor sued. The court ruled in favor of CIGNA. According to the court, if the chiropractor “wishes to receive payment under a plan that requires co-payments, then he must collect those co-payments—or at least leave the patient legally responsible for them.” In Feiler v. New Jersey Dental Association, 467 A.2d 276 (N.J. Super. Ct. Ch. Div. 1983, a dental association sought an injunction against the billing practices of Dr. Melvin Feiler who waived copayments for 97 percent of his patients. Moreover, Dr. Feiler advertised that he would waive copayments. The association claimed that Dr. Feiler’s activities were fraudulent and constituted unfair competition. The court agreed and ordered that Dr. Feiler either bill insurers for the amounts he actually collected or inform insurers of any waivers provided to patients. If a health care provider, as a general business practice, waives otherwise required co-insurance requirements, that provider may be guilty of insurance fraud. For example, if a health care provider indicates that the charge for a procedure is $100 and the insurer anticipates that the provider will collect a 20 percent co-payment amount, the insurer will reimburse the insured $80. If, however, the provider waives the co-payment, that provider’s actual charge becomes $80, which then obligates the insurer, assuming payment at 80 percent of the usual charge, to reimburse the insured only $64. See N.Y. Ins. Dep’t, Position Statement, “Re: Health Insurance, Waiver of Deductibles and Co-Insurance” (April 2, 2008). If a DME supplier accepts the risks associated with waiving copayments for out-of-network patients, then it would be prudent for the out-of-network supplier to notify the insurer that the supplier waived the patient’s cost-sharing responsibility. Such notice may serve as a credible defense against any claim of fraud and deceptive trade practices. However, such notice may cause the insurer to deny the claim.