A New Year for Collecting Deductibles and Coinsurance Payments

January, 2016

January 1 was the first day of the New Year. Many events and efforts begin on the first day of the year, including the start of a new insurance claims cycle - which brings with it new deductible and coinsurance/copayment obligations.

Some physicians, healthcare professionals and providers (collectively referred to as "Providers") think waiving patients' coinsurance and/or deductible obligations is a good business development strategy. In fact, routinely waiving patients' coinsurance and/or deductible obligations and forgoing monies the practice is otherwise entitled to receive may have significant financial and legal consequences.

Most private payers require their insureds or enrollees to be responsible for an annual deductible and copayments for health care items and services. Requiring insureds/enrollees assume responsibility for a portion of the cost of their health care items and services may make them reluctant to "run to the doctor" without a real need. In addition, paying a portion of Providers' charges mitigates the cost of the insurance itself.

Whether in a good faith effort to help patients, avoid the associated overhead cost, or to induce patients to obtain items and services, some Providers make no attempt to collect their patients' coinsurance and deductible obligations. This is not a prudent practice:

It shall constitute … insurance fraud, … for any … [P]rovider, 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 ...

817.234, Florida Statutes. Violations are classified as felonies under Florida's penal code. Physicians who are found to have violated this statute also face sanctioning by their licensing board.

Private insurers that become aware of Providers routinely waiving their insureds or enrollees deductible or copayment obligations are becoming increasingly aggressive in addressing these situations. Payer are suing the Providers for the entire amount they received, arguing that the payments were fraudulently induced or a breach of contract. Payers also withhold any amounts due a Provider until the matter is resolved. If the payer represents a significant portion of the Provider's revenue, the result can be catastrophic. Indeed, a payer may terminate its relationship with that Provider altogether, while still seeking to recover amounts it views as improperly paid.

Providers also must be aware of their obligations under the Medicare program. For example, Medicare beneficiaries, who are not members of Medicare Advantage Plan, have a Part B deductible obligation in 2016 of $166.00, in addition to their 20% coinsurance obligation. Except in cases of documented financial hardship, waving either or both of these financial obligations can be viewed as offering a beneficiary a financial inducement to seek healthcare items and services paid for by a Federal health care program from that Physician (i.e., a kickback).

Many hospitals waive Medicare beneficiaries' coinsurance and deductible obligations, because they are covered under one of the "Safe Harbor" regulations that mitigate the Federal Kickback Prohibition's restrictions. However, those hospitals must be reimbursed under Medicare's prospective payment system, among other things; there is no exception for items and services provided by other types of Providers.

As with private payers, a deliberate practice of waiving coinsurance or deductible amounts owed by Medicare beneficiaries can have serious consequences. While most of the consequences parallel those discussed above, there are two that deserve further mention. First, this practice may be viewed as submitting a false claim and serve as the basis for an action under the federal Civil False Claims Act. Violators of this statute can be subject to treble damages plus a fine of as much as $11,000 per claim. Second, if a violation is prosecuted successfully, a violator will be excluded from participation in all of the Federal health care programs for a minimum of 5 years.

Providers need to collect patients' coinsurance and deductible payments. While there are reasons to ignore these patient obligations, the consequences can be very significant and far costlier than the cost of collecting these amounts.

If you have any questions concerning the limits of the obligation to collect deductible and coinsurance amounts, you should consult with legal counsel who is familiar with this area of the law.