Moving the HME Industry Forward


Waiving Copayments for Out-of-Network Patients – Be Careful

February 17, 2014

AMARILLO, TX – DME suppliers are facing a common challenge. Commercial insurers are closing their provider panels, thereby not allowing the suppliers to bill the insurers as in-network suppliers. This relegates the out-of-network suppliers to one of two choices: 1) decline to serve the patient or 2) to serve the patient and bill the insurer as an out-of-network supplier.  

The challenge with billing as an out-of-network supplier is that the patient normally has to pay a higher copayment than if the DME supplier was an in-network supplier. This has led some out-of-network suppliers to offer to waive the patient’s copayment if the patient purchases from the out-of-network supplier. The problem with waiving such copayments is that the out-of-network supplier may be setting itself up for liability.

Private parties, including insurers and competitors, often file lawsuits against out-of-network health care providers that routinely waive copayments and deductibles. For example, Aetna has pursued an aggressive legal campaign against out-of-network providers that waive copayments and deductibles.

Aetna has brought suits against providers in California, New Jersey, New York, and Texas. Similarly, other insurers have brought suit against out-of-network providers who waive copayments and deductibles. Many of these suits allege breach of contract claims and unjust enrichment. Allegations of fraud and deceptive trade practices are also common.

Claims of statutory and common law fraud allege that providers who waive copayments submit claims that do not reflect the actual discounted charge and, therefore, materially misrepresent the transaction. As an example, such claims have succeeded in the federal and state courts of New Jersey. In other states, regulatory authorities have issued guidance indicating that routine waivers of patients’ cost-sharing obligations constitute fraud.

As evidenced by the suits brought by various private parties, a DME supplier will be at risk of having to defend a lawsuit for steering patients to an out-of-network supplier and waiving copayments.

A number of state and federal courts have addressed cases involving out-of-network providers that routinely waived copayments and deductibles.  A common claim in these cases is that the provider submits a false or fraudulent claim and overcharges the insurer when the provider bills the insurer the full amount but does not intend to collect the copayment.  

Upon reviewing case law, several legal scholars have concluded that the non-collection of the patient’s copayment or deductible may be lawful in and of itself, but the intentional or contractual waiver of the obligation to pay the deficiency prior to submitting a claim is, by contrast, unlawful.

An example of a case ruling in favor of the insurer is Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir. 1991).  In Kennedy, a chiropractor sued CIGNA because CIGNA refused to pay a claim submitted by the chiropractor who was an out-of-network provider.  Under CIGNA’s insurance policy, CIGNA covered 80 percent of medical expenses and the beneficiary was required to pay the remaining 20 percent.  

When the chiropractor submitted a claim of $1,727, CIGNA suspected that he did not collect the 20 percent copayment.  Therefore, CIGNA requested proof that the $1,727 represented 80 percent of the full amount charged.  In the process, CIGNA received information that the chiropractor waived the patient’s copayment.  As a result, CIGNA refused to pay the claim and the chiropractor sued.  The court ruled in favor of CIGNA.  According to the court, if the chiropractor “wishes to receive payment under a plan that requires co-payments, then he must collect those co-payments – or at least leave the patient legally responsible for them.”

Another case is Feiler v. New Jersey Dental Association, 467 A.2d 276 (N.J. Super. Ct. Ch. Div. 1983).  In Feiler, a dental association sought an injunction against the billing practices of Dr. Melvin Feiler who waived copayments for 97 percent of his patients.  Moreover, Dr. Feiler advertised that he would waive copayments.  The association claimed that Dr. Feiler’s activities were fraudulent and constituted unfair competition.  The court agreed and ordered that Dr. Feiler either bill insurers for the amounts he actually collected or inform insurers of any waivers provided to patients.

A number of state insurance agencies have weighed in on this issue.  For example, the New York Department of Insurance has taken the position that the practice of waiving copayments may constitute fraud in the state:

Depending on the circumstances, the waiver of otherwise applicable co-payments could constitute insurance fraud.

If a health care provider, as a general business practice, waives otherwise required co-insurance requirements, that provider may be guilty of insurance fraud. See opinion of the Office of General Counsel dated March 27, 2008. For example, if a health care provider indicates that the charge for a procedure is $100 and the insurer anticipates that the provider will collect a 20% co-payment amount, the insurer will reimburse the insured $80. If, however, the provider waives the co-payment, that provider’s actual charge becomes $80, which then obligates the insurer, assuming payment at 80% of the usual charge, to reimburse the insured only $64.

See N.Y. Ins. Dep’t, Position Statement, “Re:  Health Insurance, Waiver of Deductibles and Co-Insurance” (April 2, 2008).

In the event a DME supplier accepts the risks associated with waiving copayments for out-of-network patients, then it would be prudent for the out-of-network supplier to notify the insurer that the supplier waived the patient’s cost-sharing responsibility.  Such notice may serve as a credible defense against any claim of fraud and deceptive trade practices.  However, such notice may cause the insurer to deny the claim.

will be presenting at Medtrade Spring 2014 in Las Vegas, where he will
share his expertise, advice, and ideas. CLICK HERE to register for
Medtrade Spring, held from March 10-12, 2014, at the Mandalay Bay
Convention Center, Las Vegas. – See more at:

Baird will be presenting at Medtrade Spring 2014 in Las Vegas, where he will share his expertise, advice, and ideas. CLICK HERE to register for Medtrade Spring, held from March 10-12, 2014, at the Mandalay Bay Convention Center, Las Vegas.

Jeffrey S. Baird, Esq, is Chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents DME suppliers, pharmacies, infusion companies, and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or