The Office of General Counsel issued the following opinion on February 6, 2001, representing the position of the New York State Insurance Department.

Health Insurance; Co-payments


Would a waiver by a physician of otherwise applicable co-payment amounts imposed by a Health Maintenance Organization be in violation of Federal or State laws?


No, under the factual circumstances of the inquirer’s hypothesis there would be no statutory violation.


The inquirer’s organization has contracted with a Health Maintenance Organization (HMO) to render services to individuals who are not covered under either Medicare or Medicaid. The HMO has contracted to pay the inquirer’s organization on a fee-for-service basis an amount that, together with a co-payment by the patient or other responsible party, represents a mutually agreed amount of compensation. The inquirer inquires if there would be a violation of either Federal or State law, if the inquirer’s organization waived the co-payment.


New York Penal Law §176.05(1) (McKinney 1999) defines Insurance Fraud, inter alia:

A fraudulent insurance act is committed by any person who, knowingly and with intent to defraud presents, causes to be presented, or prepares with knowledge or belief that it will be presented to or by an insurer, self insurer, or purported insurer, or purported self insurer, or any agent thereof, any written statement as part of, or in support of … a claim for payment or other benefit pursuant to an insurance policy or self insurance program for commercial or personal insurance which he knows to: (i) contain materially false information concerning any fact material thereto; or (ii) conceal, for the purpose of misleading, information concerning any fact material thereto.

New York Insurance Law § 403(c) (McKinney 1999) authorizes the Superintendent of Insurance to impose a civil penalty for insurance fraud:

In addition to any criminal liability arising under the provisions of this section, the superintendent shall be empowered to levy a civil penalty not exceeding five thousand dollars and the amount of the claim for each violation upon any person, including those persons and their employees licensed pursuant to this chapter, who is found to have: (i) committed a fraudulent insurance act or otherwise violates the provisions of this section; … .

A physician who, as a general business practice, waives otherwise applicable co-insurance, co-payments or deductibles, where such waiver would affect the amount the insurer would pay, would be guilty of insurance fraud. For example, if an individual were to be insured under a health insurance policy obligating the insurer to reimburse the insured 80% of the physician’s usual and customary charges and were the physician to inform the insurer that his or her usual and customary charge for a procedure was $100, the insurer would, in anticipation that the physician would require the patient to pay him or her $20, reimburse the insured $80. If, however, the physician were to, as a general business practice, waive the $20 co-payment, the physician’s usual and customary charge would be $80. Under those circumstances, the obligation of the insurer would be $64.

However, if a physician were to occasionally waive a co-insurance, co-payment or deductible as a courtesy to a family member or fellow physician or for an indigent patient he or she would not be guilty of insurance fraud. In addition, a failure, in the exercise of business judgment, to pursue the full legal remedies available to collect a debt would not constitute insurance fraud.

In the inquirer’s situation the amount of the HMO’s payment has been set and would not be affected by any waiver of the co-payment amount.

A different situation would be presented, however, if Medicare or Medicaid were involved. A Federal statute, 42 U.S.C.A. § 1320a-7b (West 1999), criminalizes a number of acts involving Federal health care programs. The United States Secretary of Health and Human Services has by Regulation, 42 CFR § 1001.952(k) (1999) clarified when waivers do not constitute illegal remuneration.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.