The Truth About Co-pays – Is the Dr. Breaking the Law

Most people in the medical billing industry are aware that there are compliance issues with professional courtesies or the waiving of patient responsibilities but there still seems to be a lot of confusion surrounding the issue.  What they are not aware of is that the practice of waiving the patient responsibility may actually be breaking the law.

Many providers do not understand why they cannot decide to extend a break for services rendered to a family member or friend.  They feel that they have a right to choose if they want to collect the money that the insurance carrier deems to be the patient’s share.

The insurance carriers feel differently about the situation.  They feel that by waiving the patient responsibility the provider is intentionally charging a different price for the same service.  For example, a provider charges $100 for a level 3 established patient office visit and the patient’s insurance carrier pays $80 and the patient has a $20 copay.  If the provider waives the $20 copay the insurance carrier feels that the provider is willing to accept $80 for the level 3 established patient office visit.  Based on that they feel that they overpaid the provider $20.  They should  have paid $60 and the patient should have paid $20.

Why does the insurance carrier feel this way?  Basically all of these concepts, deductible, co-pay and co-insurance, are cost share obligations.  The rules of managed care state that the patient CANNOT see the doctor until they make their co-payment. Managed care is governed by federal law and is not open to interpretation. To “write-off” a co-pay, or to allow a patient in to see the doctor without collecting the co-payment, is against federal law.

Federal law never allows waivers of patient responsibility to be offered as part of any advertisement or solicitation.  Basically a provider cannot use the enticement of waving the patient’s responsibility to get a patient in the door.  A provider may think that they can advertise a special where they will waive the patient’s co-pay for a new patient consultation to try to get more patient’s into their practice but this is illegal.

Most managed care contracts that providers sign when enrolling to be participating with an insurance carrier forbid waiving patient responsibility.  They consider such waivers to constitute insurance fraud, misrepresentation and unfair competition.  If an insurance carrier discovers a provider is waiving co-payments the insurance carrier has the right to stop payments on a claim and/or recover amounts already paid on claims.

Professional courtesies must be distinguished from waiving patient responsibilities.  A professional courtesy is when the provider waives the entire fee for a physician, or the dependent of a physician.  A professional courtesy may also be a discount such as 50% for such an individual or the provider may choose to waive only the patient’s out of pocket expenses as well.  This is known as accepting “insurance only” as payment in full.  The issue is that this professional courtesy is often extended to many others such as staff, family of staff, friends, etc.

Generally if the professional courtesy is the waiving of the entire fee or a percentage of the entire fee it is considered legal.  However, if the professional courtesy is waiving the co-pay or the patient responsibility it is generally considered illegal especially if the patient has a federal insurance plan such as Medicare.  This is true even if the patient is a physician.

It would also be considered illegal if the professional courtesy was extended to a patient who is in a position to refer business to the provider.  This could be considered fraud and abuse, especially in the case of Medicare patients.  Waiving patient responsibility for Medicare patients violates a federal statute that states that the provider knows that waiving the patient responsibility is likely to influence the patient to seek care from that provider.

Some individual states agree with the insurance carrier’s perception and have declared the insurance only courtesy is insurance fraud.  If the provider accepts insurance only then the state feels that they are misrepresenting their fees by charging insurance carriers a fee that is higher than the fee that they actually intend to collect.

There are many situations where waiving the patient’s responsibility either in the form of a deductible, co-pay or coinsurance is deemed illegal.  Federal plans and managed care plans are covered under federal law and most commercial plans, depending on the state, are covered under state laws.  If not illegal, it is most likely a violation of the provider’s contract with the insurance carrier.  Violating the contract may result in the provider being removed from the insurance carrier panel.

Basically, providers are not supposed to ‘forgive’ patient responsibilities without proof of financial hardship.  Such financial hardship cases must be consistent and not provided routinely and the hardship should be documented in the patient’s chart.  Therefore, the best course is to avoid waiving the patient responsibility unless a financial hardship has been established.  Office policies should be reviewed regarding any courtesy discounts to make sure that they are compliant.


8 Responses to “The Truth About Co-pays – Is the Dr. Breaking the Law”

  1. pmrnc Says:


  2. Don Self Says:

    anytime you say “breaking the law” or “illegal”, you really should point out a LAW that is being broken – such as the legislation that was passed a a congressional body (state or federal) and signed into law by the executive branch (president or governor). I agree that it is probably a violation of a civil contract the doctor may have – but where is the proof that the title of the article is valid?

  3. solutionsmedicalbilling Says:

    That’s a good point Don. The problem is that the laws from state to state vary so it would be impossible to point out each one. Even though laws vary, it is an illegal practice in most of them. I don’t know for sure if it is considered illegal in all 50 states and the laws do vary so there is always that gray area.

    • pmrnc Says:

      You don’t need to even use the word “illegal” unless referencing federal regs in conjunction with waiving Medicare/Medicaid, Don makes a good point. You could instead reference contractual obligations patients have in regards to their insurance policies. Usually found under “Cost Sharing Provisions”. You could also note filing a false claim, a claim that represents a different amount than what the patient is being charged in reality;, is a false claim.

      • solutionsmedicalbilling Says:

        Yes, both are very good points. Our biggest concern is that most providers/staff think that it is ok for the provider to decide when/who/where they wish to ‘give breaks’ to people. We wanted to bring awareness that there may be laws and/or contracts being broken.

  4. Willow Claims Says:

    I love the article and understand the “type of provider and the “type” of patient the author is trying to represent when writing this article. I think the biggest take away is the fact that if you are going to extend a write off or a discount, the provider needs to show in the patients chart that there is a financial hardship on the part of the patient that is the determining factor to the write-off. Family, friends and co-workers getting to slide on their portion of cost sharing could result in potential legal trouble. As far as Don asking where the proof that the title is valid really makes no sense since the title is asking a question, not making a statement. It leaves room for all of the “grey areas” in the law, the rules, and state legislatures.

    • pmrnc Says:

      I don’t believe Don was taking anything away from the article. Just anticipating what your average lay physician would ask as they love to have us “prove it”. I think he also meant the article could carry a lot of weight with just the reference of the right laws and verbiage about breach of contract and even false claims act. Again, a physician / biller sending off a claim with a different amount on it than what they are accepting from patients is indeed sending a false claim. The article was excellent I agree.. 🙂

  5. Barbara Griswold, LMFT Says:

    Excellent article. I think the comment from Willow Claims suggests, though, that you have discretion at waiving a copay when you’ve documented financial hardship, but this isn’t true. You cannot waive the copay or deductible in advance of a session, or cut the client a break in this way. This is different than forgiving outstanding balances when a client is unable to pay, and you’ve made reasonable attempts to collect. You can slide your total fee if the client pays a percentage of your fee (coinsurance), but be sure to report the reduced fee on your invoice/claim.

    Barbara Griswold, LMFT
    Author, Navigating the Insurance Maze: The Therapist’s Complete Guide to Working With Insurance — And Whether You Should

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