Doctors Opting Out of Insurance: What the Law Allows and Forbids

As healthcare costs rise and administrative burdens increase, a growing number of physicians are choosing to opt out of traditional insurance networks. By operating outside of Medicare, Medicaid, and private insurance plans, these providers aim to simplify billing, reduce overhead, and offer more personalized care. However, opting out of insurance is governed by strict legal frameworks that vary by jurisdiction and payer type. 

Understanding what the law allows and forbids is critical for physicians considering this model.  The healthcare law attorneys at Daniels, Porco & Lusardi, LLP know how to help.   

What Does “Opting Out” Mean?

Opting out refers to a physician’s formal decision to disengage from insurance contracts, including government programs like Medicare and Medicaid, and private payers such as HMOs and PPOs. Instead of submitting claims for reimbursement, these providers typically charge patients directly through fee-for-service, membership, or concierge models.

Legal Requirements for Opting Out of Medicare

Medicare has specific rules for physicians who wish to opt out:

• Formal Affidavit: Physicians must submit an opt-out affidavit to Medicare every two years, affirming their decision to forgo reimbursement.
• Private Contracts: Doctors must enter into private contracts with Medicare beneficiaries, stating that neither party will seek Medicare payment for services rendered.
• Timely Filing: The affidavit must be filed within strict timeframes, and failure to comply may result in continued Medicare enrollment and billing obligations.
• Exclusions: Certain providers, such as nurse practitioners and physician assistants, may face limitations or additional requirements when opting out.

Importantly, opting out of Medicare does not exempt providers from complying with other federal laws, such as HIPAA, Stark Law, and the Anti-Kickback Statute.

Medicaid Participation Rules

Unlike Medicare, Medicaid is administered at the state level, and opt-out procedures vary widely:

• No Formal Opt-Out: Many states do not offer a formal opt-out process. Instead, providers simply decline to enroll as Medicaid participants.
• Emergency Care Obligations: Even non-participating providers may be required to treat Medicaid patients in emergency situations under the EMTALA or state-specific mandates.
• Billing Restrictions: Providers who do not accept Medicaid cannot bill the program or its managed care organizations under any circumstances.

Legal counsel should review state-specific Medicaid regulations before advising clients on non-participation strategies.

Private Insurance Networks

Physicians may also choose to opt out of private insurance contracts. This process is generally governed by contract law and payer-specific policies:

• Termination Clauses: Providers must follow termination procedures outlined in their contracts, including notice periods and patient transition requirements.
• Out-of-Network Billing: Opted-out providers may still treat insured patients but must comply with state laws governing out-of-network billing, surprise billing, and balance billing.
• Disclosure Requirements: Many states require providers to inform patients in advance about network status and estimated charges.

Recent legislation, such as the federal No Surprises Act, imposes additional restrictions on billing practices for out-of-network providers in emergency and ancillary care settings.

What the Law Forbids

Physicians who opt out of insurance must avoid several prohibited practices:

• Double Billing: Providers cannot charge patients and submit claims to insurance for the same service.
• Improper Use of NPI: Opted-out providers must not use their National Provider Identifier (NPI) to submit claims through third parties or affiliated entities.
• Misrepresentation: Advertising or representing oneself as an “in-network” provider while opted out may constitute fraud or deceptive trade practices.
• Unauthorized Billing of Government Programs: Once opted out, providers are barred from billing Medicare or Medicaid except in limited emergency scenarios.

Violations can result in civil penalties, exclusion from federal programs, and licensure consequences.

Speak with a Qualified Healthcare Attorney About Opting Out of Insurance

Opting out of insurance offers physicians greater autonomy and administrative relief, but it comes with complex legal obligations. From Medicare affidavits to private contract disclosures, compliance is critical to avoid penalties and protect patient trust. A skilled attorney can guide healthcare providers through the regulatory landscape to ensure lawful, ethical, and sustainable practice models.

Consult with the dedicated healthcare lawyers at Daniels, Porco & Lusardi, LLP for help with your case. Contact us today for a consultation.