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AG Ruling Re: Prepayment of Fees

Attorney General of Virginia
Robert F. McDonnell

99-055

PROFESSIONS AND OCCUPATIONS: MEDICINE AND OTHER HEALING ARTS.

INSURANCE: HEALTH SERVICES PLANS - HEALTH MAINTENANCE ORGANIZATIONS.

Whether violation of practice of medicine and other specialties has
occurred requires factual determination by Board of Medicine or other
appropriate regulatory authority. Physician-patient contract establishing
prepayment plan for provision of professional services is not health
services plan or health care plan established by health maintenance
organization that is subject to insurance licensure and regulation by State
Corporation Commission.

The Honorable Thomas G. Baker Jr.
Member, House of Delegates
November 29, 1999

You request guidance regarding a specific contractual arrangement
between a physician and her patients.

A physician has designed three medical care payment plans for her
patients labeled "Contractual Outpatient Medical Care for the Uninsured or
Poorly Insured" ("plan program").1 The plans are arranged according to age
groupings and health status.2 Patients pay an annual cost for each plan. The
contract specifies the coverages that patients who have paid their annual
cost will receive and also lists coverages that are excluded from the
plans.3 You ask whether the plan program violates any state statute
regarding the provision of medical care or medical insurance. You also
inquire whether there are any special applications, requirements or
regulations to oversee or monitor the plan program. You include with your
request an opinion from the Bureau of Insurance of the State Corporation
Commission concluding that the plan program is exempt from licensure as a
health services plan.4

With respect to statutes governing the provision of medical services,
§§ 54.1-2900 through 54.1-2973 of the Code of Virginia define the practice
of medicine and other specialties regulated by the Board of Medicine (the
"Board"), establish eligibility requirements for licensure in the
Commonwealth, and detail the unprofessional conduct that may subject a
licensee of the Board to professional discipline.5 The limited facts
presented do not suggest any violation of these statutory provisions. A
particular violation of any such statutes, however, requires a factual
determination to be made by the Board or other appropriate regulatory
authority.6

With respect to whether the plan program violates state insurance
statutes, the State Corporation Commission is the state agency charged with
regulation of insurance companies.7 Chapter 42 of Title 38.2, §§ 38.2-4200
through 38.2-4235 governs health services plans. Section 38.2-4200(B)
provides:

Nothing contained in this chapter shall prohibit any physician (i)
as an individual, . from entering into agreements directly with his own
patients, . involving payment for professional services to be rendered or
made available in the future.

The program plan is an agreement entered into between the physician
and her patients. The agreement sets forth an annual cost for each of three
plans covering or excluding specific medical care services. Based on these
limited facts, including the assertion that the payment plan as specified in
the contract will be offered to the physician's patients, it is my opinion
that the program plan is an agreement directly entered into by the physician
and her patients8 involving payment for the physician's services, and,
therefore, falls within this exception.

Additionally, a recognized principle of statutory construction is that
the interpretation given to a statutory provision by the state agency
charged with its enforcement is entitled to great weight.9 The Bureau of
Insurance of the State Corporation Commission concludes that the program
plan is exempt from licensure as a health services plan pursuant to §
38.2-4200. I concur in the Bureau's determination that the program plan is
not a health services plan subject to insurance licensure.

It is also my opinion that the program plan is not a health care plan
subject to the requirements of Chapter 43 of Title 38.2, §§ 38.2-4300
through 38.2-4323. Chapter 43 governs the establishment and licensure of
health maintenance organizations. Specifically, § 38.2-4300 defines "health
maintenance organization" as "any person who undertakes to provide or
arrange for one or more health care plans." This statute defines "health
care plan" as "any arrangement in which any person undertakes to provide,
arrange for, pay for, or reimburse any part of the cost of any health care
services . as distinguished from mere indemnification against the cost of
the services, on a prepaid basis."

Generally, prepaid health care plans are organizations licensed under
Title 38.2 and fall within the definition of "insurance company."10 A 1990
opinion addressing the issue of whether a self-insured employee benefit plan
is a "health care plan" under Title 38.2 notes that "the definitions in §
38.2-4300 indicate that a 'health care plan' is a plan provided by a 'health
maintenance organization' that actually arranges for or provides health care
services."11 The opinion concludes that, "unless it is established as a
licensed health maintenance organization, a self-insured employee benefit
plan does not offer 'health care plan[s].'"12 Similarly, it is my opinion
that a contract between a physician and her patients establishing a set
payment to cover the provision of specific services does not make the
physician a "health maintenance organization" administering a "health care
plan" as contemplated by Chapter 43 of Title 38.2.

With respect to your final inquiry, because it is my opinion that the
program plan constitutes a contract between a physician and her patients and
is not subject to the insurance regulatory authority of the State
Corporation Commission, I am aware of no regulations of the Commission that
would apply to such a plan.

1You include a copy of the physician's plan program with your letter.

2The ages under the three plans range from 4 to 65 and over, and
health status ranges from basically healthy to two or more chronic diseases.

3Coverages under the three plans include unlimited office visits; up
to four basic in-office laboratory tests, if needed; routine physicals;
sample drugs, if available; and the shots and EKGs specified under plans two
and three. Excluded coverages include nonsampled drugs, specialized
laboratory tests, specialist physician costs, hospital care, and x-rays.

4Letter from Douglas C. Stolte, Deputy Commissioner, Financial
Regulation Division, Bureau of Insurance, State Corporation Commission, to
you (June 4, 1999). I note that this opinion is premised on the assumption
that the physician is contracting directly with her own patients and that
the plan program is not a vehicle for direct marketing or solicitation.

51992 Op. Va. Att'y Gen. 147, 148.

6Compare 1984-1985 Op. Va. Att'y Gen. 230, 231 (concluding that
determination of whether physician who dispenses medications to his own
patients solely for their own convenience, as opposed to dispensing them for
supplementation of his income, is factual question to be resolved on
individual case basis by Boards of Medicine and Pharmacy).

7"All companies, domestic, foreign, and alien, transacting or licensed
to transact the business of insurance in this Commonwealth are subject to .
regulation by the [State Corporation] Commission." Section 38.2-200(A).

8Compare § 32.1-127.1:03(B) (defining "patient" as "a person who is
receiving or has received health services from a provider").

9Forst v. Rockingham, 222 Va. 270, 276, 279 S.E. 2d 400, 403 (1981);
Op. Va. Att'y Gen.: 1990 at 175, 176; 1989 at 354, 356.

10"'Insurance company' means any company engaged in the business of
making contracts of insurance." Section 38.2-100. The Commissioner of
Insurance of the State Corporation Commission administers "the insurance
laws of this Commonwealth." Id. (defining "Commission," "Commissioner of
Insurance"). See 1982-1983 Op. Va. Att'y Gen. 645, 646 (concluding that
prepaid health care plans are organizations licensed under Chapter 42 of
Title 38.2 and would therefore fall within definition of "insurance
company").

111990 Op. Va. Att'y Gen. supra note 9, at 176.

12Id.

 

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