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 informal opinion on September 20, 2002, representing the position of the New York State Insurance Department.

Re: Licensing Requirements for Health Insurance Adjusters

QUESTION PRESENTED:

Must ABC Network ("ABC") obtain an independent adjuster’s license where, on behalf of an insurer, it reviews hospital and provider bills, verifies provider coding to determine that the appropriate procedures are assigned the correct CPT codes for billing purposes, and negotiates with out-of-network providers regarding individual reimbursement rates, but does not make coverage determinations, pay claims, assess subrogation potentials or get involved in coordination of benefits determinations?

CONCLUSION:

ABC Network ("ABC") must obtain an independent adjuster license where, on behalf of an insurer, it reviews hospital and provider bills, verifies CPT coding to determine that providers have applied the appropriate CPT code, and also contacts out-of-network providers to negotiate individual reimbursement rates.

FACTS:

ABC is a medical cost containment company that operates under a contract with various health care insurers. Recently, a New York client has expressed interest in hiring ABC. ABC’s duties include reviewing hospital and provider bills and verifying CPT coding to determine that the providers have assigned procedures to their appropriate CPT codes. The inquirer states that where, for example, a provider uses several CPT codes in its billing, but the insurer uses one inclusive CPT code to cover the list of procedures billed by the provider, ABC would call the provider to advise him or her of the inclusive CPT code. At this point ABC will inform the provider that no payment will be made above the amount allowed under the inclusive CPT code. Thus, if by using several CPT codes, the provider charges more, ABC will negotiate with the provider for the use of the all inclusive CPT code and acceptance of the proposed amount as payment in full.

ABC’s duties also include contacting out-of-network providers to negotiate individual rates with them based on bills they submitted to the inquirer’s clients. During such negotiation, ABC will inform the out-of-network provider that, because of his or her status as a non-participating provider, the insurer will only pay a certain percentage (70% or 80%) of the total cost billed. ABC will then request that the provider accept such amount as payment in full and not bill the patient for any additional amount. Thus, if the provider sends a bill for $90.00 for an office visit and only $60.00 is allowed under the contract in question, ABC would ask that the provider accept the $60.00 as payment in full and not bill the patient for the additional $30.00. However, in circumstances where the provider refuses to accept the $60.00 as payment in full and agrees to accept $70.00 instead, ABC would go back to the insurer with the provider’s $70.00 proposal and depending on what the insurer says ABC would either pay the $70 or pay the $60.00 that is allowed under the contract.

The inquirer states that ABC does not make coverage determinations or pay any claims. In addition, it does not assess subrogation potentials and does not get involved in any coordination of benefits determinations. The inquirer would like to know whether an adjuster’s license is necessary.

ANALYSIS:

N. Y. Ins. Law § 2108(a)(1) & (3) (McKinney 2000) states:

(a)(1) Adjusters shall be licensed as independent adjusters or as public adjusters.

….

(3) No adjuster shall act on behalf of an insurer unless licensed as an independent adjuster, and no adjuster shall act on behalf of an insured unless licensed as a public adjuster.

Because the inquirer states that she will be acting on behalf of insurers, not on behalf of insureds, N. Y. Ins. Law § 2101(g)(1) (McKinney 2000) is relevant to the inquiry. That section provides in pertinent part:

(1) 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….

Tasks performed by ABC, such as reviewing CPT codes to determine accuracy, then negotiating with providers to use a specific code resulting in a difference in the amount of the bill, as well as negotiating rates with out-of-network providers on behalf of its clients, are not merely ministerial in nature. Such tasks constitute claims adjustment even though ABC does not have final authority to approve the reimbursement rates. It would be a violation of N. Y. Ins. Law § 2102(a)(1) (McKinney 2000) for ABC to adjust New York claims on behalf of an insurer without an independent adjuster’s license. Accordingly, ABC must obtain a New York independent adjuster’s license to perform such tasks.

Please contact the Department’s Licensing Bureau at One Commerce Plaza, Albany, NY 12257 or call (518) 474-7159 to obtain the appropriate licenses.

For further information you may contact Senior Attorney D. Monica Marsh at the New York City Office.


N.Y. Ins. Law § 2101(g)(1)(A), (B) and (C) (McKinney 2000), list the exceptions to the independent adjuster licensing requirements, none of which appears to apply to the inquirer’s specific inquiry.