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 July 9, 2002, representing the position of the New York State Insurance Department.

Re: Utilization Review Company’s Licensing as an Independent Adjuster in New York

Question Presented:

Is a utilization review company, certified as such in New York, that provides a professional recommendation to its clients, administrators of dental plans, as to necessity, appropriateness, possible alternate benefits and application of plan limitations and guidelines, subject to the requirement of an independent adjuster’s license?

Conclusion:

Yes. A utilization review company must be licensed in New York as an independent adjuster in order to provide a professional recommendation to administrators of dental plans as to necessity, appropriateness, possible alternate benefits and application of plan limitations and guidelines.

Facts:

A utilization review company (the "company") provides claim review services to its clients, administrators of dental plans. Clients send certain types of claims to the company in order to obtain a professional recommendation.

The company employs licensed dentists and oral surgeons to review the claim in order to produce a recommendation for its clients. One goal of the review is to establish the degree of necessity for a particular treatment. Relevant documents such as X-rays and doctor’s notes are reviewed along with the claim in order to determine whether the treatment is medically necessary and appropriate, or is purely for cosmetic purposes.

Another purpose of the review is to ensure that fees are usual and customary. If the company concludes that the fees in the claim are in excess of the usual and customary, it will withhold approval of the fees charged, or recommend they be reduced.

Through its review, the company is also able to determine whether alternate benefits are available and possibly more appropriate for the claim. This involves the exploration into whether the stated condition may be treated with a different, less expensive dental procedure. The company also examines the dental plan in order to ensure limitations and guidelines of said plan are adhered to.

Upon completion of the claim review process, the company ultimately provides its clients with a recommendation as to necessity, appropriateness, usual and customary fees, possible alternate benefits and application of plan limitations and guidelines. The company does not make decisions on adjudication of providers’ claims. The administrator of the dental plan makes all final decisions on benefit determination and which services are covered.

Analysis:

N.Y. Ins. Law § 4900 (h)(McKinney 2000) defines "utilization review" as:

[T]he review to determine whether health care services that have been provided, are being provided or are proposed to be provided to a patient, whether undertaken prior to, concurrent with or subsequent to the delivery of such services are medically necessary.

Licensure as an independent adjuster is not required for a utilization review agent to perform activities that come within the above definition. However, licensure as an independent adjuster is required where the utilization review agent’s activities exceed said definition and come within the definition of an independent adjuster.

Certain activities of a utilization review agent may come within the licensing requirements of the Insurance Law. N.Y. Ins. Law § 2102(a)(1)(McKinney 2000) prohibits any person, firm, association or corporation from acting as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in New York without the appropriate license. In addition, N.Y. Ins. Law § 2108(a)(3)(McKinney 2000) requires that no adjuster shall act on behalf of an insurer unless licensed as an independent adjuster or on behalf of an insured unless licensed as a public adjuster.

N.Y. Ins. Law § 2101(g)(1) defines the term "independent adjuster" as:

[A]ny 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….(emphasis added).

The Department has opined that investigating includes the review of claims to uncover unnecessary medical treatments, fees above the usual and customary, coding errors or abuses, experimental procedures, and pre-existing conditions. Adjusting has been defined by the Department to mean the exercise of discretionary authority conferred by the insurer and not merely the performance of ministerial functions. Prior Department opinions have concluded that recommendations to insurers come within the purview of adjusting.

It is the opinion of this Department that, from the description provided, the company is investigating and adjusting claims. The company’s review of claims to uncover unnecessary treatments, fees above the usual and customary, possible alternate benefits, as well as to ensure proper application of plan limitations and guidelines, constitutes investigating.

After the company reviews the claim, the recommendation provided to its clients comes within the purview of adjusting. The company is not merely performing a ministerial function. The plan administrator has conferred discretionary authority upon the company. The fact that the company makes a non-binding recommendation and the administrator ultimately makes the final decision does not change the result.

Therefore, it is the conclusion of this Department that the company must be licensed as an independent adjuster in New York State.

For further information, you may contact Supervising Attorney Joan Siegel at the New York City Office.