OGC Opinion No. 08-07-30

The Office of General Counsel issued the following opinion on July 7, 2008 representing the position of the New York State Insurance Department.

RE: Ambulance Subscription / Membership Plans

Question Presented

How are ambulance “membership” or “subscription” plans treated under the New York Insurance Law?

Conclusion

Ambulance membership or subscription plans of the type the inquirer described constitute the doing of an insurance business under the New York Insurance Law, for which a duly issued license is required.

Facts

An inquirer states that various volunteer ambulance services throughout New York offer so-called membership or subscription plans pursuant to which residents within the coverage area pay an annual fee. In exchange, if the member or subscriber requires the use of an ambulance, the ambulance service agrees to accept whatever payment that the member’s or subscriber’s insurance coverage will pay and will not collect any co-payment or deductible. The inquirer did not indicate what charges are imposed if the member or subscriber does not have insurance coverage.

Analysis

The inquiry referred to a 2001 opinion of the Department’s Office of General Counsel (“O.G.C.”), presumably O.G.C. Opinion No. 01-05-27 (May 29, 2001) (the “2001 Letter”), (posted on the Department’s website at http://www.ins.state.ny.us/ogco2001/rg105291.htm). The 2001 Letter represents the longstanding view of this Department that ambulance membership or subscription plans constitute the doing of an insurance business within the meaning of the Insurance Law. See, e.g., O.G.C. Opinion (March 12, 1956) (Selling “ambulance club” memberships that would entitle members to free ambulance services constitutes the doing of an insurance business); O.G.C Opinion (September 24, 1986) (Proposed “prepaid annual charge” in exchange for the company’s acceptance of an assignment of a person’s Medicare or other insurance benefits as payment in full of the Company’s ambulance fee, even if the fee exceeds the amount of the insurance coverage available, held to constitute insurance); and O.G.C Opinion (October 14, 1994) (Concluding that an air ambulance association that promised to provide air transport in the event of a member’s serious medical emergency is an insurance business). Since its issuance, the 2001 Letter has not been rescinded, overruled or superseded.

As noted in the 2001 Letter and earlier opinions, the agreement central to the operation of an ambulance subscription or membership plan of the nature described by the inquirer requires that the ambulance service provide a benefit of pecuniary value to the subscriber or member upon the occurrence of a fortuitous event. Such an agreement comes within the definition of insurance contract set forth in N.Y. Ins. Law § 1101(a) (McKinney 2006).¹

Further, the intentional waiving of a deductible or co-payment by the ambulance service could constitute insurance fraud under New York Penal Law § 176.05 (McKinney Supp. 2007). See O.G.C. Opinion No. 07-10-05 (October 11, 2007) (a waiver of a deductible by provider of services constitutes a fraudulent act where insurer is unaware of the waiver but the bill for the services provided is for the full amount nonetheless.)

Accordingly, an ambulance subscription or membership plan under which the subscribers or members pay an annual fee to an ambulance company in exchange for the ambulance company’s waiver of any ambulance fees that are not covered (such as co-payments or deductibles) by the subscriber’s or member’s health insurance plan or policy will be viewed by this Department as a contract of insurance. Any ambulance company offering such a plan would have to be licensed as an insurer. See N.Y. Ins. Law § 1102. And even if an ambulance company were to become licensed, the practice of waiving properly payable co-payments and deductible charges conceivably could constitute a violation of the New York Penal Law.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City office.

¹ However, a membership or subscription plan may provide for services that are dependent upon the happening of a fortuitous event, without constituting the doing of an insurance business, if a separate fee for each such service is charged, and the fee for the service fully covers the cost of rendition of such services, including reasonable overhead, thus avoiding the assumption of a risk of loss in rendering the service. See O.G.C. Opinion No. 08-04-06 (April 3, 2008) (An attorney retainer agreement does not constitute the doing of an insurance business when it provides for services that are dependent upon the happening of a fortuitous event, where a separate fee for each such service is charged, and where the fee for the service fully covers the cost of rendition of such services); O.G.C. Opinion (March 9, 2000) (Prepaid legal service plan did not constitute the doing of an insurance business where a separate fee is charged for each service, and the fee for the service fully covers the cost of providing the services, thus avoiding the assumption of a risk of loss); and O.G.C. Opinion (June 11, 1979) (Dental services plan did not constitute the doing of an insurance business where benefits provided without charge were non-fortuitous in nature and all other benefits are paid for by the enrollee, at a discounted fee which covered the cost of rendition). In other words, the arrangement may provide for a prearranged discount on the services, but the provider of the services may not assume a risk of loss. That does not appear to be the case here, though, since the fee is not predetermined by the service to cover the actual cost.