The office of General Counsel issued the following informal opinion on April 11, 2001, representing the position of the New York State Insurance Department.
RE: Accident & Health Insurance, Independent Adjusters
Does an Independent Practice Association under contract to a Health Maintenance Organization have to be licensed as an independent adjuster?
Yes. Depending upon the factual circumstances, an Independent Practice Association under contract to a Health Maintenance Organization may have to be licensed as an independent adjuster.
There is no particular fact pattern.
It remains this Departments position that, depending upon the factual circumstances, an Independent Practice Association under contract to a Health Maintenance Organization might have to be licensed as an independent adjuster. If an IPA may not function as a Utilization Review Agent for an HMO in accordance with New York Public Health Law Article 49 (McKinney 2001), than an IPA would rarely perform functions that would require it to be licensed as an independent adjuster.
Additionally, certain activities performed for a commercial insurer licensed pursuant to New York Insurance Law Articles 41 or 42, a Health Service Corporation, or an HMO, would not require licensure as an independent adjuster. Based upon the definition of adjuster, the Department agrees with the assessment as to the following functions:
1. Code Review: This is where a vendor is contracted by a health plan to review the various codes, such Common Physician Terminology (utilized by most physicians) or Diagnostic & Statistical Manual (utilized in mental health treatment), to verify that the descriptions are accurate and that the provider has not applied an inappropriate code to secure a higher payment. Such reviews are an integral part of an anti-fraud plan.
2. Recovery of Overpayments: This is where a vendor is contracted with by a health plan to ascertain if a claim was paid in error, such as where an individual was terminated as a member of a group and has not secured a statutory extension of coverage. This Department would not construe the term to refer to an entity that actually attempts to collect the overpayment.
3. Coordination of Benefits Determinations: This is where a vendor is contracted with by a health plan to ascertain whether an individual has other coverage that may be primary. This vendors functions would be limited to such ascertainment and reporting its results to the health plan, and would not extend to collection efforts.
4. Subrogation Assessments: This is where a vendor is contracted by a health plan to ascertain if there is other coverage, such as workers compensation or automobile no-fault, and recommending whether recovery should be pursued with other carriers.
5. Determinations of Coverage: This is where a health plan subcontracts ascertainment of whether the patient is covered under the policy or contract, whether a service is covered under a policy or contract, whether a provider is a participating provider, or whether the charge is in accordance with the policy or contract. The vendor then reports the results of its review to the health plan, which contacts the insured or provider directly or through an independent adjuster.
6. Pharmacy Benefit Management: This is where a vendor utilizes an algorithm developed by the health plan to electronically review pharmacy claims. Any contact with either the subscriber or provider on behalf of the health plan must be by the health plan directly or through a licensed independent adjuster.
7. Fraud Investigations: This is where a health plan subcontracts, as is authorized by New York Insurance Law §409(b)(2), an investigation of possible fraud. This Department concurs that, since such functions must be separate from claims functions, the vendor could not be considered to be an independent adjuster. The vendor however, depending on the functions performed, might have to be licensed as a private investigator pursuant to New York General Business Law §79 (McKinney 2000).
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.