New York's highest court recently visited the topic of out-of-network medical providers providing patient care to people covered by the New York State Health Insurance Program (or the Empire Plan as it is commonly called).
In the Matter of Plastic Surgery Group P.C., v. Comptroller of the State of N.Y., it was held that the Comptroller of the State of New York has constitutional and statutory duty to audit payments of state money, including payments to private companies that provide health care to beneficiaries of a state program.
In-Network vs. Out-of-Network Medical Insurance Billing
The New York State Health Insurance Program (NYSHIP) provides health insurance coverage to government employees, retirees, and their dependents. The NYSHIP's primary coverage option is the Empire Plan. Under a contract with the State, United Healthcare Insurance of New York processes and pays claims made by Empire Plan beneficiaries. After United has processed a claim, the State covers its full cost and pays United an administrative fee. Essentially, the State funds the Empire Plan as a self-insurer. United merely acts as an intermediary and passes state money to the proper medical providers.
The Empire Plan gives members the option to choose their doctors. The health care providers fall within two categories: participating (commonly called "in-network") and nonparticipating (commonly called "out-of-network") providers . The fee structure and billing arrangement vary between the two types of providers. Participating health care providers have negotiated with United the fees they may charge. These providers bill claims directly to United, less a patient co-pay.
On the other hand, out-of-network medical providers charge market rates for their services and can bill the patient directly. United then reimburses the patient 80% of either the actual fee charged or the "customary and reasonable charge" for the service, whichever is lower. The patient must remit these funds to the provider, along with the remaining 20%, paid out of the patient's pocket.
Penalties for Not Collecting Co-Payments From Patients
As with all other claims, United receives payment from the New York State to cover the cost of the claims. Out-of-network providers have a legal duty to collect patients' co-payments (see Matter of Martin H. Handler, M.D., P.C., v DiNapoli, 23 NY3d 239 ). Although there may be business reasons not to pursue collection of any and all co-payments, failure to collect these fees can result in civil and criminal penalties for insurance fraud (see Insurance Law § 403 [c]; Penal Law § 176.05 ). It could also result in independent enforcement action from the State of New York to collect over payments (see below for an example).
Reasoning Behind The Legal Duty
At first glance, this may seem harsh and an intrusion by the government into a private medical provider's business operations. But a doctor's failure to collect a co-payment from an Empire Plan member inflates a claim's cost to New York State and adversely impacts the State's fisc.
As an example, a doctor that charges $1000 for a service, and who collects $800 in state money, must collect $200 from the Empire Plan member by law. In the event that the provider does not collect the co-payment, it has essentially provided the medical service for $800, not $1000, and in effect, New York State should have paid only $640 of that cost. In this scenario, New York State has overpaid the medical provider by $160. Now, for a treasury as large as New York State that might seem infinitesimal. But taken in the aggregate, across all medical providers in New York State, these over payments can add up to millions of dollars annually.
If you are a apart of a medical practice or an independent medical provider that sees patients who are covered under the Empire Plan, you must be very diligent in your billing practices. Under no circumstances should you outright waive any co-pay or coinsurance obligation of the patient. Our healthcare law practice can assist medical providers comply with New York State Law by commencing litigation against patients who fail to remit their co-pay and patient responsibility under the Empire Plan. We can also provide guidance to practice administrators on best practices in collecting claims owed without the need of resorting to litigation.
Disclaimer: The Plastic Surgery Group P.C., and Martin H. Handler M.D., P.C., are both current clients of our firm. However, we did not represent them in the lawsuits cited in this article.