| James H. "Jim" Brown |
Commissioner of Insurance
State of Louisiana
P.O. Box 94214
Ms. Kathy Chittom, Executive Director
This is in reply to your September 16, 1996 letter in which you request a departmental opinion regarding the legality of pre-paid chiropractic services plans. You also provided a copy of an article "Insurance Commissioners Rule Patient Prepay Plans Illegal" by Mr. Michael Schroeder, which appeared in the August 15, 1996 edition of Dynamic Chiropractic.
As you know the Department previously issued Louisiana Insurance Directive #133 on September 22, 1995 (copy enclosed) as notice to all concerned that pre-paid health care plans which involve the assumption of insurance risk are illegal unless the provider is licensed as an insurer or health maintenance organization. Our department directive is based upon the National Association of Insurance Commissioners' Bulletin mentioned in Mr. Schroeder's article. As a matter of fact, Mr. Schroeder's article provides a superb explanation of why certain pre-paid plans are considered the business of insurance and subject to state insurance licensure requirements.
In your letter you presented two scenarios and asked whether either represents the "business of insurance."
The doctor projects extended treatment plan of "x" number of visits, and the patient can arrange/contract to pre-pay in cash for that course of treatment.
This is probably not insurance if the doctor diagnosis a condition requiring treatment. This appears synonymous to the case of an orthodontist who requires full or partial pre-payment for treatment of misalignment of the teeth over an extended time period.
For a flat up-front payment (annual), patient is entitled to unlimited chiropractic care on an as-needed basis. Pre-payment covers everything except P.I. and workers' compensation cases.
This case appears to definitely represent insurance, because over the terms of the agreement, the doctor may or may not be required to provide treatment. To a limited degree, the doctor is acting as a health maintenance organization.
In summary, the best advice I can give you is to suggest that a chiropractor intending to offer pre-paid plans, follow Mr. Schroeder's advice in avoiding activities which would constitute the unauthorized and illegal business of insurance. I do not believe I have seen a better outline and explanation relative to this issue.
Lester J. Dunlap
1. Schroeder, M. Insurance commissioners rule patient prepay plans illegal. Dynamic Chiropr, August 15, 1996, 14(17):1,26.