The Office of General Counsel issued the following opinion on July 21, 2003 representing the position of the New York State Insurance Department.
Re: Prepaid Membership Plan for Patients
Question Presented:
May a physician offer patients a prepaid membership plan, which, for a set annual fee and no further charge, would entitle patients to certain services, some of which may be dependent upon the happening of a fortuitous event?
Conclusion:
No. With respect to those services that are dependent upon the happening of a fortuitous event, the physician, by only charging a set fee, would be doing an insurance business under N.Y. Ins. Law § 1101 (McKinney Supp. 2003) without a license.
Facts:
A participating provider recently informed his patients that he is instituting new fees for "many of the services which (had) been provided free of charge." The patients, however, were given the option of becoming prepaid members for a one-time fee of $100 or an annual fee of $25 that would only cover controlled substance prescriptions. Prepaid members will be able to get all of the extra charge services at no extra cost, as well as one free "no show" per year. The extra charge services were listed as:
(1) Phone calls initiated by the patient (i.e., problem-oriented phone
consults);
(2) Calling in prescriptions to the patients pharmacy at the time of an office
visit;
(3) Filing out "forms";
(4) Writing any controlled substance prescription;
(5) Re-writing prescriptions (unless written at the time of an appointment);
(6) and Copying records.
Analysis:
N.Y. Ins. Law § 1101(a) (McKinney Supp. 2003) provides:
(1) "Insurance contract" means any agreement or other transaction whereby one party, the "insurer", is obligated to confer benefit of pecuniary value upon another party, the "insured" or "beneficiary", dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.
(2) "Fortuitous event" means any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.
The need for certain of the above services, such as writing a controlled substance prescription, is dependent upon the happening of a fortuitous event. A physician who, for a pre-set membership fee, obligates himself to provide services, which are dependent upon the happening of a fortuitous event, is assuming the risk of loss in rendering the services. As such, the physician would be doing an insurance business without a license, in violation of N.Y. Ins. Law § 1102 (McKinney 2000). The physician could, however, charge a pre-set membership fee and then offer a prearranged discount to members for each service that is dependent upon the happening of a fortuitous event, provided that the discounted fee would cover the cost of the service rendered. Insofar as those services that are not dependent upon the happening of a fortuitous event, the physician could provide these services at no additional charge.
For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.