NEW YORK (Reuters) - A New York doctor is offering flat-rate health care for the uninsured for $79 a month, but he has run afoul of state insurance regulations in a case that challenges the established norms of the U.S. health system.

A doctor checks the blood pressure of a patient in a file photo. REUTERS/Lucy Nicholson

U.S. President Barack Obama has pledged a major overhaul of the $2.5 trillion U.S. healthcare industry, which operates on a system of private health insurance and state-funded Medicare and Medicaid programs for the elderly and poor.

The United States spends more on healthcare than any other country, but at least 46 million people have no insurance.

Dr. John Muney, president of AMG Medical Group, said he started the program in September after noticing that many of his patients were losing their jobs, and therefore, their health insurance coverage.

About 500 people have registered for Muney’s $79-a-month plan, accounting for 15 percent of patients at the practice, which has offices in each of New York’s five boroughs.

The monthly $79 fee -- roughly equivalent to the price of a Starbucks coffee a day -- covers unlimited preventive visits and onsite medical services such as minor surgery, physical therapy, lab work and gynecological care.

Ilana Clay, a 28-year-old who works in marketing for a jewelry firm, said she signed up in March because she could not afford her employer’s health insurance, which would have cost around $300 a month.

“I hadn’t been to a doctor in a couple of years at that point,” she told Reuters. She had a scar removed in a quick onsite procedure that was covered by the plan.

Muney said another patient came in with a tumor on her finger: “Somebody else asked $3,000 to remove it. The first visit, we were able to remove it, 15 minutes it took us.”

BILL TO CHANGE STATE LAW

So far the program has not turned a profit, but Muney said he estimates that it could be profitable with 4,000 patients. In the meantime, he said, his motive is to give something back and provide a model of how healthcare can be more efficient.

“Our healthcare system lends itself to abuse, fraud and waste,” he said, adding that bypassing insurers saved on administrative costs, which he said were about 25 percent of the price of care. “With this model, we’re bypassing all that.”

Muney said he received initial complaints from state insurance authorities in November. “The law says you can do preventive checkups unlimited, but if they come for sick visits you have to charge your overhead costs,” he told Reuters.

In February he received a letter instructing him that he must charge that minimum cost, which he calculates at $33 a visit -- a price he says will deter people from signing up.

Troy Oechsner, deputy superintendent of the state insurance department, said the rules were designed to protect consumers.

“Our concern is ... making sure that consumers can rely on any promises made to them and that they will get the services they paid for when they need them,” he said.

New York State Assemblyman Adam Clayton Powell said on Thursday he would present a bill to exempt primary health care providers from the insurance regulations in question.

“This is something he’s doing to give back, as a service to the community in tough times,” Powell said of Muney. “I think any common person would say this is a good thing, however, we know the health insurance companies are going to fight it.”