The question whether it is acceptable for dental offices to waive a patient’s co-payment when accepting their dental insurance plan and accept the insurance as payment in full frequently arises. Many dentists who demand the patient’s full co-pay feel they are unable to compete with neighboring dentists who accept insurance as payment in full in that patients may make their practice selection based upon the financial demands of the office. Dentists who do waive co-pay feel they are making dental services available to those who could not otherwise afford them by fully utilizing the plan. Further, this issue arises in State Board actions and other civil and criminal actions alleging insurance fraud and other related claims against dentists.

As a practicing dentist, I always thought that to waive co-pay was ‘illegal.’ This is generally the case, however, the question is certainly not that simple. And, to complicate matters, the different regulating and enforcement agencies and courts often disagree. In this article I will briefly review some of the different positions and discuss other legal issues on the subject.

California Court Law 
California statutes and case law does not expressly prohibit a dentist’s waiver of a patient’s co-payment, however most courts have found such waivers to constitute insurance fraud and unfair competition. Additionally, courts of other states have also similarly concluded that the practice is fraudulent and the routine waiver of co-payments is deceptive.

The legality of requiring co-pays was recently upheld in Smilecare Dental Group v. Delta Dental Plan of California. In that case, Smilecare offered a supplemental plan (Smilecare Coverage Plus) which provided coverage for the co-payment. Delta does not recognize co-pays made by supplemental insurers as contractually valid and finds dentists who accept such payments to be in breach of contract. Smilecare’s position was that Delta’s policy violates the Sherman Anti-trust Act by restricting competition. 

The court found in Delta’s favor and uttered a profound statement: “insurance creates a moral hazard because it desensitizes patients to costs and induces them to seek inordinate amounts of care; co-payments offset this hazard by forcing patients to reflect upon the cost of services and moderate their demands for treatment.” 
Insurance Companies Position 
It isn’t difficult to guess insurance company’s general position. Basically all insurance 
companies write their policies to remove their responsibility to pay for a claim if the dentist does not collect the required co-payment. Therefore, if an insurance company finds a dental office is waiving co-payments, the insurance company has the right to stop payments on a claim and/or recover amounts already paid on claims. Also, insurance companies believe that failure to collect the co-pay is insurance fraud and misrepresentation.
Attorney General’s Decisions 
In taking a contrary position, the California Attorney General, the prosecuting and
enforcement arm of the State Board of Dental Examiners, has stated in a written opinion that a dentist who waived a co-payment did not violate any California laws against misrepresentation and fraud even though the patient’s dental insurance plan provided that the co-payment had to be paid. However, note that this case is from 1981, but has not been superseded by any other Attorney General’s opinion. Also, such opinions may not be controlling law on the issue when the courts have taken an opposite position.
Other Legal Issues 
Dentists should be aware that insurance companies are seeking to enforce the collection of the co-pay amount from patients by additionally filing lawsuits against dentists under ‘RICO.’ (‘RICO’ is the Racketeer Influenced and Corrupt Organizations Act, a criminal law act, which moves the case out of civil court into a criminal venue.) At least one court has found that this was an appropriate legal route for an insurance company to take in a lawsuit against a dentist by an insurance company when the dentist routinely waived co-pays. Criminal prosecutions certainly ‘up the ante’ for a dentist waiving co-pays in that such violations usually involve mandatory prison time.

In conclusion, the issue is still somewhat unsettled and it remains a ripe area for future litigation. But, if I were you, I wouldn’t hang my hat on the Attorney General’s opinion because the stakes may be high!

© Bette Robin, DDS, JD 8/98