Is It Illegal to Waive Co-pays?

Providers often waive co-pays or coinsurance for friends, colleagues and patients who are suffering a financial hardship.   But what is their legal responsibility?  Although you don’t hear of providers being arrested for not charging a patient their share of the cost of the service, the provider can still get in trouble for performing this practice.

First of all there is the issue of offering a professional courtesy.  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.

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 is not allowed to 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.

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.

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.

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