What is the legality of an EMS subscription program?
An overview of applicable state or federal legislation and opinions that may impact EMS agencies offering or considering a subscription program
EMS subscription programs have been prevalent in certain parts of the country for decades. Though these programs differ among EMS agencies, the common thread is that most charge an annual fee to subscribers – who in return receive financial benefits of some kind. Typically, the benefits of subscribing either involve the write-off or reduction of out-of-pocket charges, or a discount on the services.
Subscription (sometimes called membership) programs can be good revenue sources for EMS agencies. However, the question arises: Are there any state or federal laws that prohibit these programs?
No specific state or federal prohibitions on subscription programs
The direct answer to the question of legislative prohibition is no - there is no federal law that expressly prohibits ambulance subscription programs. We are likewise not familiar with any state laws that expressly prohibit ambulance subscription programs.
Unfortunately, the analysis cannot end there. Even though federal and state law does not specifically address subscription programs, there are several other federal and state laws - outside the ambulance realm - that can be implicated if those laws are not properly navigated in setting up a subscription program.
Other state or federal laws may be applicable
First, the federal issue. The primary federal law to be concerned about is the Federal Anti-Kickback Statute (AKS). The AKS prohibits giving anyone anything of value to induce them to use a particular healthcare provider if that provider bills all or part of those services to a federal healthcare program, such as Medicare.
If a Medicare beneficiary is given a reduction of his out-of-pocket charges that could be seen as giving the beneficiary "remuneration" for the purpose of inducing the beneficiary to continue to use that ambulance company's services in the future. A reduction or write-off of a bill for a "subscriber" could be seen as such an inducement and could therefore trigger AKS liability. Violation of the AKS, incidentally, is a felony.
In 2003, the Office of Inspector General (OIG) was asked for an Advisory Opinion on the subject a subscription program for a non-profit, emergency ambulance service. In Advisory Opinion 03-11, the OIG essentially "approved" the program, finding that the program would not violate the AKS if it operated as a sort of supplemental insurance. Meaning that if the program wasn't just a sham to waive patient balances, then it was appropriate.
The OIG adopted what is referred to as an "actuarial soundness" test. Essentially if the subscription program brings in more in revenue than it writes off in patient waivers, it is not seen as a "sham" but as a legitimate program designed to cover beneficiary cost -sharing obligations.
To the contrary, a program that charged something like $1 for a "subscription" and wrote off the patient balances would be seen as sham simply to induce beneficiaries to use that provider. But one that charges fees that, in the aggregate, cover the amount of fees waived look to be more like a form of coinsurance and the OIG approved such an arrangement.
There are several caveats that flow from Advisory Opinion 03-11, however. First, OIG Advisory Opinions are binding only on the parties that request them. They are published for informational purposes, but others can't rely on them.
Second, the requestor of Advisory Opinion 03-11 was a nonprofit EMS agency that furnished only emergency 911 services. Some companies extend their membership programs to non-emergencies, and some are offered by for-profit companies. No advisory opinions have addressed those aspects of EMS subscription programs.
Third, the OIG has jurisdiction only under certain federal healthcare fraud and abuse laws, such as the AKS. The OIG has no jurisdiction over any state laws. So, while the OIG has ruled that an EMS subscription program by a nonprofit service that waives Medicare balances is not a violation of the AKS, that opinion would not bind commercial insurers, and some insurers have claimed that reductions or waivers of patient balances is a form of insurance fraud under state law (and the scope of such state law in your state must be reviewed by knowledgeable legal counsel before implementing such a program).
In addition, the fact that subscription programs look somewhat like "supplemental insurance" raises another issue. Some state insurance departments (or insurance commissions, or whatever your state may call it) take the position that these subscription programs are insurance policies and therefore must be licensed, approved and regulated as such to be lawful.
Again, most states (actually none that we’re aware of) do not have a specific regulation prohibiting ambulance subscription programs. But in those states that have looked at the issue, there is often an opinion letter or some other sub-regulatory guidance issued by an agency (often the insurance department of the state) providing the opinion that such programs are a form of insurance and must be regulated as such.
It is important to note that those opinions, even though they may come from a state agency, are just that, opinions. The opinions may be entitled to some deference in a court of law, but they are not statements of the law nor are they binding in courts. And sometimes those opinions are dubious at best. An agency that is seriously contemplating an EMS subscription program and that is confronted with such an "opinion" or other form of sub-regulatory guidance would be well-advised to have their legal counsel look at it closely and critically, for those pronouncements are not necessarily the last word under state law.
And as for the commercial insurers who claim that subscription programs violate state insurance fraud statutes, most such laws we’ve seen across the country are based on concealment of facts material to payment of the claim. If the payer is notified of the existence of the program, both by letter and perhaps even on the face of each claim (using the claim comment field), then "concealment" can't really be an issue. And without concealment, most insurance fraud claims fail as a matter of law. But, again, only legal counsel knowledgeable on the lay of the land in your state can make that determination.
There are other state or local laws that may affect subscription programs as well, such as laws dealing with charitable solicitations, but the federal and state laws we’ve discussed above are generally the big areas that require navigation for an EMS subscription program to be operated lawfully. Again, legal counsel knowledgeable on these federal issues - and legal counsel familiar with the laws of your state - must be consulted to help you implement your program within the bounds of the law.