INSIGHT: Health-Care Providers’ Challenge—Risks of Copay Waivers, Discounts

For health-care providers that are out-of-network with a patient’s insurance, navigating reimbursement is a tactical imperative. The current economic environment makes it more difficult for patients to pay coinsurance, while insurers are increasingly motivated to cut expenses.

Creative billing solutions, such as reducing a patient’s copay may seem attractive and provide more predictability for patients and providers. But large insurers like Aetna, Cigna, and UnitedHealthcare have labeled some discounting tactics as “fictitious billing” and have initiated or brought counterclaims in nearly 20 lawsuits against ambulatory surgery centers nationwide, alleging fraud and seeking damages.

Outcomes have been mixed, requiring providers to carefully consider their programs to manage billing for out-of-network claims.

Insurers Aiming at Out-of-Network Billing Tactics, Especially at ASCs

Insurers have implemented rigorous review programs that target and analyze out-of-network billing practices. These programs have resulted in insurers refusing to pay claims, or heavily discounting them. The insurers also have pursued litigation and countersuits in response to payment demands, taking the position that patient discounts can render a provider’s bills to the insurers false and not eligible for payment.

The numerous lawsuits have challenged several programs used by out-of-network providers, in particular, waiving or heavily discounting copays and coinsurance as if the patient were in-network with the insurer; and providing substantial prompt-pay discounts that did not relate to the collection costs associated with delayed payment.

Insurers maintain that it is a misrepresentation to bill the patient an amount that does not relate to what was billed to the insurer—the billed charges submitted to the insurer are not the provider’s actual charges, which are the amounts charged to the patient.

Alternatively, insurers argue that health plans require a patient to pay their cost-sharing responsibility (copays, deductibles, and co-insurance), and a provider’s effort to avoid that responsibility renders the claims ineligible for payment.

Most of the cases were brought in the last five years and have settled at this point. The insurers initiated the lawsuit in some cases, pursuing recovery on amounts paid to the provider ASCs; while in other cases the ASCs sued the insurers for additional payment and the insurers filed counterclaims to recover what was paid or otherwise argued that no further payment was due.

The court decisions have been inconsistent. Some courts concluded that a provider may commit fraud, misrepresentation, and tortious interference, and be subject to equitable relief under ERISA, by billing one amount to insurers, while waiving co-insurance or otherwise discounting the charges for the patient.

Other courts have ruled in favor of the providers, finding that the insurers had no right to withhold payment, particularly when the insurer was given prior, written notice of the ASCs’ billing practices.

At least one of these disputes is still pending in court, with a provider having recently filed suit against an insurer for failure to pay claims after the provider disclosed that its billing practices were structured to mirror in-network rates. See Crescent City Surgical Centre v. Cigna, 2:18-cv-11385 (E.D. La). This pending litigation confirms that out-of-network co-insurance disputes continue to be a focus for insurers.

In addition to litigation tactics, insurers are introducing in their coverage documents, and in employer-sponsored plan documents, terms that limit payment to out-of-network providers that engage in the challenged “fee forgiveness” practices.

Litigation Doesn’t Allow Clear Pathway to Avoid Insurers’ Scrutiny or Non-Payment

Because litigation can be financially devastating—some of the ASCs that litigated these cases have been forced into bankruptcy—providers may look to these cases for guidance on how to structure their programs.

When providers were alleged to have written off large portions of their bills in advance, or routinely not billed patients the out-of-network coinsurance, the courts more often than not held that this constituted a form of misrepresentation that was actionable by the insurer. Less frequently, the courts also allowed the insurers to bring claims of unjust enrichment and tortious interference.

While most of these cases involved some form of a “fee forgiveness” program, often setting coinsurance at an amount similar to in-network amounts, some of the cases reflected the providers offering patients a substantial prompt-pay discount. The few decisions addressing these programs depended in large part on how closely the provider’s program resembled a documented, good-faith prompt-pay discount. Publicly advertising the program, and disclosing it to all patients and to the insurer in advance, likely led to more favorable results for the provider.

However, prompt-pay discounts, even when disclosed to the insurer, did not completely shield the providers. In one court decision, the provider disclosed but did not fully explain the discount to the insurer, and the court found that the amounts billed to the patient were too removed from what was billed to the insurer that the insurer did not abuse its discretion by not paying claims. See Conn. Gen. Life Ins. Co. v. Humble Surgical Hosp., LLC, 878 F.3d 478 (5th Cir. 2017).

The Cases Provide Guideposts to Mitigate Against a Payment Dispute

While the court decisions were no way consistent, the cases illustrate several points for out-of-network providers to reduce the risk of non-payment or litigation:

Early and repeated written disclosure to the insurer that describe the discount program increased the likelihood that the provider would prevail.
Blanket waivers and discounts of coinsurance for patients that were removed from the amount billed to the insurer increased the appearance of overbilling insurers, and resulted in more rulings against the providers.
Prompt-pay discount programs are more likely to avoid scrutiny, especially when they are disclosed in some detail and do not have the appearance of a blanket coinsurance waiver.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Brian Schneider is a trusted business adviser to trade associations and technology firms in Arent Fox’s Complex Litigation Group.