Recent changes to policy and plan language and increased litigation by third-party payers suggests that out-of-network providers who waive co-pays and deductibles may be in for some rough sailing. Providers must be aware of and monitor applicable third-party payers’ plan provisions when developing their out-of-network and patient responsibility strategies and must carefully consider applicable state laws, which may impact the design of their programs.

Historically, most third-party payer agreements excluded services for which the member had no legal obligation to pay, or for which no charge is made to the individual. Typically, when faced with waivers of patient responsibility amounts, insurers have alleged that by failing to charge or collect or by collecting only a reduced amount of patient responsibility, the provider has misrepresented its actual charge to the third-party payer. This language has met with mixed results in litigation and has required a multistep approach for third-party payers to refuse reimbursements to out-of-network facilities.

Recently, policy and plan language has been enhanced by some third-party payers to more directly permit recoupment and nonpayment when patient responsibility amounts are waived or reduced. A third-party payer’s recent complaint against an out-of-network provider cited the enhanced plan language suggesting that the payer had no obligation to pay for services associated with a reduced patient responsibility amount. The plan language read as follows:

If [it] determines that a provider is or has waived, reduced, or forgiven any portion of its charges and/or any portion of copayment, deductible, and/or coinsurance amount(s) [the member is] required to pay for a [c]overed [s]ervice … without [the payer’s] express consent, then [the third-party payer] in its sole discretion shall have the right to deny the payment of benefits in connection with the [c]overed [s]ervice, or reduce the benefits in proportion to the amount of the copayment, deductible, and/or coinsurance amounts waived, forgiven or reduced, regardless of whether the provider represents that [the member] remain[s] responsible for any amounts that [the member’s] plan does not cover. In the exercise of that discretion, [third-party payer] shall have the right to require [the member] to provide proof sufficient to [the third-party payer] that [the member has] made [the member’s] required cost share payment(s) prior to the payment of any benefits by [the third-party payer]. This exclusion includes, but is not limited to, charges of a Non-Participating Provider who has agreed to charge [the member] or charged [the member] at an in-network benefits level or some other benefits level not otherwise applicable to the services received.

In addition, some third-party payers have added an exclusion to their plans that permits them to avoid paying a claim if a provider’s charges arise out of or relate “to any violation of a healthcare-related state or federal law or which themselves are a violation of a healthcare-related state or federal law.” This language may allow third-party payers to argue that violations of almost any health law by a provider are sufficient to permit nonpayment. We are, for example, seeing third-party payers argue in pharmacy audits that technical violation of pharmacy practice standards are sufficient for them to avoid payment. Additionally, in litigation with out-of-network providers, third-party payers are attempting to avoid paying providers by arguing that:

  1. Physician ownership interests are kickbacks and violate state kickback and anti-solicitation laws (e.g., Texas Occupations Code § 102.001; § 102.006 and Fla. Stat. Ann. § 817.505).
  2. Waivers of patient responsibility amounts violate state law. For example, Fla. Stat. Ann. § 817.234(7) provides that it is “insurance fraud … for any service provider, other than a hospital, to engage in a general business practice of billing amounts as its usual and customary charge, if such provider has agreed with the insured or intends to waive deductibles or copayments, or does not for any other reason intend to collect the total amount of such charge.” Also see, Texas Insurance Code § 1204.055.
  3. Claims related to waived patient responsibility amounts falsely state patient charges and therefore are prohibited under state laws (e.g., Texas Occupations Code § 105.002 and Fla. Stat. Ann. § 817.234).
  4. Waived patient responsibility amounts result in a provider charging different prices for the same product or service provided to patients with differing medical coverage in violation of state law (e.g., Texas Insurance Code § 552.003).

Finally, to discourage such referrals, several major third-party payers have begun to terminate the provider agreements of physicians who make referrals to out-of-network providers. This is especially the case with respect to physician investors in out-of-network providers.