By Dan Schulte, J.D.
MDA Legal Counsel
From the May 2009 issue of the Journal
Question: I understand that Cigna, DenteMax and maybe other dental insurers/plan administrators are offering fee schedules to individual dental practices that are not consistent. Is it legal for dentists within the same network to be paid differently by the same dental insurer/plan administrator?
Answer: Absent a contract term to the contrary, it would not be illegal for a dental insurer or plan administrator to offer different fee schedules to dentists in the same network. The participation or other agreement with the dental insurer/plan administrator may contain a representation and warranty stating that the attached fee schedule is currently the same for all dentists in the network. The agreement might go further and contain an obligation on the part of the dental insurer/plan administrator that the attached fee schedule will remain identical for all dentists in the network. Absent such contract terms the dental insurer/plan administrator is able to offer different fee schedules to dentists in the same network.
Typically, the dental insurer/plan administrator possesses significantly more bargaining power than an individual dentist or dental practice. This unequal bargaining power results in the dentist or dental practice accepting the fee schedule offered by the dental insurer/plan administrator (as well as the dental insurer/plan administrator’s claims process, quality/utilization review procedures, etc.).
The differing fee schedules that you are hearing about might be the result of a dentist or dental practice refusing to accept a dental insurer/plan administrator’s uniform fee schedule. Perhaps this is because it is a specialty practice(s) that the dental insurer/plan administrator values having included in the network. It might also be that in a particular geographic area the dental insurer/plan administrator believes it is critical to have a certain practice and/or group of dentists in the network.
If you are concerned about this (and/or the contract you are being offered is unclear on this point), you should seek confirmation from the dental insurer/plan administrator that the fee schedule you are being offered is the same for all in the network. You could perhaps seek a protective term in your agreement that if a better fee schedule is offered to dentist(s) in the network that your agreement will automatically be amended to include the better fee schedule.
Question: My home mortgage lender has agreed to forgive part of my mortgage. Does this mean I will have additional taxable income?
Answer: This was automatically the case prior to Congress enacting the Mortgage Forgiveness Debt Relief Act of 2007. Prior to the passage of this act the amount of mortgage debt forgiven was required to be included in your taxable income. This led to many people to unwittingly substitute a tax liability they did not have the cash to pay in place of mortgage debt they could not afford.
Pursuant to the act, which is limited to tax years 2007, 2008 and 2009, taxpayers may elect to exclude $1 million ($2 million if married and filing jointly) of income arising from debt forgiven on the foreclosure or restructuring of a mortgage on a personal residence.
Instead of including the amount of debt forgiven in your taxable income you are required to reduce the cost basis of your personal residence by the same amount. This means that when you sell the personal residence you will have a lower cost basis to deduct from the sales price when determining the gain on the sale. Given the fact that taxpayers are allowed to exclude from taxable income $250,000 of gain on the sale of a personal residence ($500,000 for married taxpayers filing jointly), this cost basis adjustment should not be much of a factor.