A small but growing trend to regulate the practice of “concierge medicine” (or “retainer medicine”) could significantly impact the healthcare and insurance industries. On October 11, 2016, the State of Washington Insurance Commissioner issued a Cease and Desist Order[1] against a dental practice in that state, David Ford, DDS dba David Ford Dental. The order obliges the dental practice to immediately cease and desist from:
- Engaging in or transacting the unauthorized business of insurance or acting as an unregistered health care service contractor in the state of Washington.
- Seeking, pursuing, and obtaining any insurance or health care service contractor business in the state of Washington.
- Soliciting Washington residents to enter into agreements which require prepayment for health care services.
This action by the Washington Commissioner advances a strict regulatory policy applicable to the increasingly common practice of “doctors offering personalized services in return for retainer fees” which, in many instances, offers “same day appointments, cell-phone access, physical exams and other primary-care services — to patients willing to pay … retainer fees.”[2]
The dental office was advertising its “Patient Loyalty Program,” an in-office dental benefit program for patients without dental coverage, which has an annual cost of $450 per person and provides two cleanings, two exams, necessary X-rays, two fluoride treatments, and a 20 percent discount on most other services.
The Washington Insurance Code effectively equates the practice of “concierge” or “retainer” medicine or dentistry with “doing the business of insurance.” The commissioner and some licensed health insurers reason that retainer doctors are assuming risk and, therefore, are subject to regulation.[3]
The code requires such health care service providers to register with, and to report to, the Commissioner’s office annually, although such contract providers are not required to obtain a certificate of insurance or to submit to full regulation as insurance companies. The policy is popularly referred to as “regulation lite,”[4] because it exempts providers of so-called “concierge medicine” from more rigorous insurance regulations while requiring such health care service contractors to “register with the Insurance Commissioner.” Providers are also required by the Revised Code of Washington to put retainer fees into a trust account until the end of the period covered by the retainer fees.[5]
Some commissioners and traditional health insurers claim that “retainer doctors are assuming risk and therefore are subject to regulation,” reasoning that was initially rejected by the Washington State Medical Association, which maintains that “retainer medical practices no more act as insurers than do lawn services or cell-phone companies that charge monthly fees.”[6]
The Washington Commissioner’s position advances the interests of fully licensed (health) insurance companies and is fully consistent with the longtime refusal to recognize the practice of “direct procurement,”[7] despite the federal constitutional protection recognized by the U.S. Supreme Court since Allgeyer v. Louisiana,[8] and most strongly advanced by the U.S. Supreme Court’s decision in State Board of Insurance v. Todd Shipyards.[9]
Section 48.44.010(9), Revised Code of Washington, defines a “health care service contractor” to include any “provider or group of providers, who or which not otherwise being engaged in the insurance business, accepts prepayment for healthcare services from or for the benefit of persons or groups of persons as consideration for providing such persons with any health care services.” The prepayment for health care services can present a close call.
There are several models of concierge medicine practiced today. The “Fee for Care” model (FFC) is the model used by Washington-based David Ford Dental in which the patient pays a monthly, quarterly, or annual retainer fee in cash to the medical (or dental) provider, covering agreed services that are not otherwise covered by the patient’s insurance plan.[10] Another model,[11] the “Fee for Extra Care” model is similar to the FFC model; however, additional services are charged to the patient’s insurance plan.
Concierge medicine practices have become increasingly popular[12] since the implementation of the Patient Protection and Affordable Care Act (ACA)[13] and can be found operating in some form in about half of the states. Only six states (including Washington) explicitly recognize them under their state insurance statutes. The laws of Arkansas,[14] Kansas,[15] Missouri,[16] Utah,[17] and Oregon[18] recognize the existence of concierge service arrangements and explicitly do not consider them to be the “business of insurance”; however, unlike Washington, none of these other states appears to view such arrangements as analogous to the “business of insurance.” Like Washington, however, some of these states impose minimal requirements on such agreements. We are not, however, aware of similar actions taken by the commissioners of insurance of such states. There is pending legislation to impose minimal requirements on concierge medicine in a handful of states, including California and New York.
The American Medical Association (AMA) has issued guidance supporting the development of concierge medical practices as consistent with its traditional support of pluralism in the delivery and financing of healthcare and the establishment of trust-based physician-patient relationships.[19]
The practice of concierge medicine has been accused of promoting a two-tiered health system[20] that favors the wealthy, limits the number of physicians to care for those who cannot afford them, and burdens the middle and lower classes with a higher cost of insurance. Detractors also contend that, while this approach is more lucrative for some physicians and makes care more convenient for their patients, it makes care less accessible[21] for other patients who cannot afford, or choose not to pay, the required retainer fees.
We are following legislative and administrative developments in the state insurance laws and state insurance departments in this area. Alternative arrangements such as this may play an important role once President-elect Donald J. Trump is sworn in due to his pledge to repeal and replace the ACA. The full impact on the healthcare and insurance industries remains yet to be seen.
This article was originally published on The Insurance and Reinsurance Report blog (insurerereport.com).