The Office of General Counsel issued the following informal opinion on December 6, 2001, representing the position of the New York State Insurance Department.
Re: Individual Health Insurance Policies: Out-patient vs. In-patient Services
What Insurance laws or regulations require that an insurance company, in a written policy, treat out-patient and in-patient services similarly?
Is there any legal insurance literature that supports treating policy premiums for out-patient and in-patient services the same?
What Insurance laws or regulations require an insurance company to notify policyholders of its practices or procedures regarding benefits for out-patient services where the policy refers only to in-patient services?
Because the requestor failed to submit a copy of the policy or policies involved so that we could examine the language of the provisions in question, we are unable to supply specific responses to the questions posed. Examination of the policies would reveal, among other things, the type of individual health policies that are involved and whether they were delivered or issued for delivery in New York. As a result, this opinion will only discuss, in general terms, specific provisions of New York Insurance Law that are relevant to individual health insurance policies. Additional information about other state laws and regulations should be directed to the respective insurance departments for those states.
The inquirer states that a company sells multiple industrial supplemental hospital and surgical expense policies, which are independent of each other, to insureds. These policies pay specific scheduled benefits for medical services rendered to the insured. For example, the policies state that they pay for "laboratory" expenses incurred not to exceed $20.00 for any one accident or any one period of sickness. When an insured has a service covered by the policy, each policy pays the scheduled amount for that service. For example, if an insured with three policies has a laboratory service that costs $44.00, the policies should each pay out the scheduled amount (expenses incurred up to $20.00, for a total of $60.00 on the three policies) for the service, regardless whether the expenses incurred is only $44.00.
The inquirer further claims that the companys uniform practice is to provide the benefits for services performed outside a legally constituted hospital (out-patient services) as well as in-patient services. Without modifying the written language of the policies, the company pays for out-patient services so long as those services would have been covered by the policy as an in-patient service. The company states that it waived the hospital confinement provision and provides a policy enhancement for out-patient services.
In practice, the inquirer claims that the company combines the benefits on the policies and pays only expenses incurred for out-patient services. For example, if an insured with three policies has a laboratory expense of $44.00, the company would pay only $44.00. The company pays $20.00 on the first policy, $20.00 on the second policy and $4.00 on the third policy.
As a preliminary matter, the inquirer was asked to send us copies of the policies in question but failed to do so. Knowing what type of policy is involved is vital if specific answers are required because we would need to examine the language of the provisions in question. In addition, it is unclear whether the company that issued the policies is a New York authorized insurer and/or whether the policies were delivered, or issued for delivery, in New York. If the policies were delivered or issued for delivery in another state, New York law may not apply. As a result, this opinion will only discuss, in general terms, specific provisions of New York Insurance Law that are relevant to individual health insurance policies.
N.Y. Ins. Law § 3201 (McKinney 2000) defines a "policy form" as any policy, contract, certificate or evidence of insurance and any application, rider or endorsement form. That section also provides that such policy forms relating to accident/health insurance must be filed with the Superintendent of Insurance before they can be issued to policyholders.
Pursuant to N.Y. Ins. Law § 3202 (McKinney 2000) the Superintendent may disapprove any accident/health insurance policy form if the benefits provided are unreasonable in relation to the premiums charged. The Superintendent may also disapprove such form if it contains provisions that encourage misrepresentations or are unjust, deceptive, inequitable, misleading, contrary to law or New Yorks public policy. N.Y. Ins. Law § 3204 (McKinney 2000) provides that each policy must contain the entire contract between the parties and nothing may be incorporated by reference into the policy unless a copy is attached to the policy when issued.
N.Y. Ins. Law § 3216 (McKinney 2000) requires all individual health policies to conform to certain requirements. Specifically, Section 3216(d)(2) (McKinney 2000) provides optional standard language that an insurer may add to the policy addressing multiple coverages with the same or different insurers. N.Y. Ins. Law § 3216(d)(2)(C), (D), (E) (McKinney 2000) provides that such policies must contain provisions regarding other insurance, which are intended to prevent duplication of benefits or over-insurance.
N.Y. Ins. Law § 3216(i)(5) (McKinney 2000) list the instances in which an individual policy of health insurance is delivered or issued for delivery in New York must provide reimbursement or coverage for a specific medical service or expense. Specifically, that section provides that whenever a policy would provide reimbursement for laboratory tests or diagnostic X-Ray services, it must, at the same rate, provide such reimbursement whether the tests or services are performed in an in-patient or out-patient setting. See also, N.Y. Ins. Law §3216(i)(7) (9) (McKinney 2000).
N.Y. Ins. Law § 3217 (McKinney 2000) directs the Superintendent of Insurance to issue regulations establishing minimum standards, including disclosure standards, relating to the form, content and sale of health insurance policies in New York. N.Y. Ins. Law § 3217(b) (McKinney 2000) provides for (1) reasonable standardization and simplification of coverages, (2) elimination of misleading, unreasonable, or confusing provisions, (3) elimination of deceptive sales practices, (4) elimination of provisions which might be contrary to the health care needs of the public and (5) elimination of coverages which are so limited in their scope as to have no substantial economic value to policyholders. As a result, the Superintendent promulgated N.Y. Comp. Codes R. & Regs. tit. 11, §52 (1999) (Regulation 62), which sets forth the minimum standards requirements for individual policies.
N.Y. Ins. Law § 3217-a(a)(1) (McKinney 2000), entitled Disclosure of Information provides in pertinent part:
The requirements of this section shall apply to all comprehensive, expense-reimbursed health insurance contracts; managed care health insurance contracts; or any other health insurance contract or product for which the superintendent deems such disclosure appropriate.
Each insurer subject to this article shall supply each insured, and upon request each prospective insured prior to enrollment, written disclosure information, which may be incorporated into the insurance contract or certificate, containing at least the information set forth below .
(1) a description of coverage provisions; health care benefits; benefit maximums, including benefit limitations; and exclusions of coverage, including the definition of medical necessity used in determining whether benefits will be covered.
It is possible that the policies referred to are limited benefits health insurance policies. Limited benefits health insurance policies are addressed in N.Y. Ins. Law § 3235 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11, §§52.10, 52.16 (1999) and 52.59 (1995) (Regulation 62).
For further information you may contact Attorney D. Monica Marsh at the New York City Office.