New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following opinion on April 9, 2001 representing the position of the New York State Insurance Department.

RE: Provision of Managed Behavioral Healthcare Services, Licensure as Independent Adjuster

Question Presented:

Is an entity that, on behalf of an insurer, develops and administers a network of licensed professionals providing behavioral modification therapy required to be licensed as an independent adjuster?

Conclusion:

No, provided the entity does not negotiate with either the insureds or subscribers or their representatives.

Facts:

Administrator has developed a network of licensed psychologists that it offers under contract to insurers and self-funded benefit plans. One of Administrator’s customers is a Health Service Corporation (Insurer) licensed by this Department in accordance with New York Insurance Law Article 43 (McKinney 2000).

Administrator’s agreement with Insurer obligates Administrator to provide its network for services in accordance with a specific subscriber contract issued by the insurer. The contract in question provides, inter alia, that Insurer will provide a specified number of sessions of defined behavioral modification services.

As part of its services, Administrator has furnished Insurer with the name and addresses of those psychologists who participate in the network. This list has been transmitted to those physicians who are participating providers under Insurer’s subscriber contract and the physicians have been instructed to make referrals for behavioral modification therapy only to practitioners in the network. The physicians make referrals directly, after receiving authorization from Insurer, and without prior notification to Administrator.

When a participating psychologist submits a claim for payment directly to Administrator, Administrator first reviews a copy of the physician’s referral slip to verify that a referral was made to a participating psychologist for one of Insurer’s subscribers. Administrator then verifies that the number of sessions is not in excess of the number allowed under Insurer’s subscriber contract and that the amount requested by the psychologist is not in excess of the amount allowed by Insurer.

If all conditions precedent are met, Administrator provides Insurer with details of the services provided by the psychologist, indicates that all required verifications have been performed, and informs Insurer of the amount to be paid. Insurer issues any check directly to the psychologist.

The contract between Administrator and the psychologist provides that, with respect to this particular subscriber contract of Insurer, if the psychologist does not receive and transmit a proper referral slip, he or she will not receive payment for those treatments from Insurer. If the amount billed, either as to the number of treatments or as to the psychologist’s fee, is in excess of Insurer’s guidelines, Administrator will only authorize payment in accordance with Insurer’s guidelines.

Analysis:

It appears that Insurer’s contract meets the definition of managed care contract as set forth in New York Insurance Law §4801((c) (McKinney 2000) and that the services in question meet the requirement of New York Insurance Law §4303(h) (McKinney 2000).

New York Insurance Law §2101(g)(1) defines, in relevant part:

The term ‘independent adjuster’ means any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster … .

New York Insurance Law §2108(a)(3) proscribes operating as an independent adjuster without a license from this Department.

While the term "adjust" is not defined in the New York Insurance Law, it does have a meaning in New York jurisprudence: to settle or bring to a satisfactory state so that parties will agree in the result. Flaherty v. Continental Insurance Company, 20 App. Div. 275, 46 N.Y.S. 934 (4th Dept. 1897). Implicit in "adjustment" is the exercise of discretion on behalf of the Insurer and contact with the insured, or a representative of the insured.

It appears, based upon your representations, that Administrator does not exercise any discretion on behalf of Insurer, the final payment determination residing with Insurer, and that, if all is in order, Administrator has no further contact with the patient or, if the insured is not the patient, the insured. If, however, there were to be a problem with the referral or the billed amount, Administrator’s function is limited and any further contact is between the Administrator and the psychologist, and not with the insured.

Accordingly, this Department concurs with the inquirer that, as to the particular subscriber contract in question, Administrator is not required to be licensed as an independent adjuster. Since determinations as to licensing requirements of independent adjusters are fact specific, this letter should not be construed as expressing any opinion as to Administrator’s functions with respect to any other insurance policy or subscriber contract.

For further information, you may contact Principal Attorney Alan Rachlin at the New York City office.