The Office of General Counsel issued the following informal opinion on November 21, 2000, representing the position of the New York State Insurance Department.
Re: Assignment of Health Insurance Benefits
Does the New York Insurance Law or the regulations promulgated thereunder, obligate an insurer to honor an assignment of benefits request made by an insured, wherein the payment of health services under a health insurance policy would go directly to the provider of the health services, and not to the insured?
No. Neither the New York Insurance Law, nor the regulations promulgated thereunder, obligates an insurer to honor an assignment of benefits request. However, New York common law may place a duty on the insurer to adhere to the assignment of benefits request.
A healthcare institute is a provider of dialysis facility services. In the course of billing an insurer for these services, the institutes billing department attaches a completed assignment of benefits form executed by the insured, requesting that the insurer send the payments directly to the institute. This is a routine method of submitting claims, which relieves the insured from tracking extra paperwork. The insurer has refused to accept the assignment of benefits request and it continues to make payments directly to the insured. The insured may not realize for several months that this payment was due to the institute, and that subsequent attempts to collect payments made in this manner causes an insured unnecessary concern and distress.
Since the New York Insurance Law or the regulations promulgated thereunder do not specifically address this issue, this opinion contains an analysis of relevant New York common law.
An "assignment" is defined as the "relinquishment of control over both the subject matter and the power to revoke the assignees authority which creates an assignment." Gingold v. State Farm Ins. Co., 168 Misc. 2d 62, 64, 642 N.Y.S.2d 812, 814 (Civ. Ct. Queens County 1996).
The New York Court of Appeals determined that "[n]o particular words are necessary to effect an assignment; it is only required that there be a perfected transaction between the assignor and assignee, intended by those parties to vest in the assignee a present right in the things assigned." Leon v. Martinez, 84 N.Y.2d 83, 88, 638 N.E.2d 511, 614 N.Y.S.2d 972 (1994) (citation omitted).
In this instance, the health care services provided by the institute to an insured form the basis for the transaction, vesting in the provider a right to obtain health insurance policys benefits. See Brandoff v. Empire Blue Cross and Blue Shield, 183 Misc. 2d 936, 938, 707 N.Y.S.2d 291 293 (Civ. Ct. N.Y. County 1999). "It is a routine practice for hospitals and other health care providers to take assignments to protect their bills for services rendered, and this is manifestly what was intended here." Gingold, 168 Misc. 2d at 64, 642 N.Y.S.2d at 813.
Although case law suggests that it is permissible to assign the benefits under a health insurance policy, other issues manifest themselves and must be examined. These include whether or not the insurance policies between the insurer and its insureds contain a "non-assignment clause," which bars the assignment of benefit rights. Another issue is whether the institutes assignment of benefits request form is sufficient to create an assignment. These are issues regarding which information has not been furnished, and which is likely to be for a court to decide.
For further information, you may contact Attorney Meredith S. Kaufer at the New York City Office.