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 24, 2002, representing the position of the New York State Insurance Department.

Re: Prompt Pay

Question Presented:

1. Does New York State have prompt pay laws for payment of medical bills, and if so, within how many days must a claim be paid?

2. If New York State has such prompt pay laws, what is a "clean claim?"

3. If New York State has such prompt pay laws, how does one file a complaint that an insurance company has violated the law?

4. If New York State has such prompt pay laws, what is the penalty and how is it imposed?

Conclusions:

1. N.Y. Ins. Law § 3224-a (McKinney 2000) requires payment of health claims by health insurance companies within 45 days of receipt of such claim; N.Y. Ins. Law § 5106 (McKinney 2000) requires motor vehicle no-fault providers to pay health claims arising from vehicular accidents to be paid within 30 days of receipt of such claim.

2. There is no New York statutory definition of a "clean claim."

3. A complaint may be filed on-line at the web-site www.ins.state.ny.us; or, by mailing a letter to the New York Insurance Department, Consumer Services Bureau, One Commerce Plaza, Albany, New York 12257.

4. N.Y. Ins. Law § 3224-a(c) (McKinney 2000) sets the interest rate for violation of payment deadlines that is imposed upon health insurers and Health Maintenance Organizations (hereinafter, HMOs). N.Y. Ins. Law § 5106 (McKinney 2000) sets the interest rate for violation of payment deadlines of health claims arising from vehicular accidents. In addition, N.Y. Ins. Law § 2406 (McKinney 2000) provides that the Superintendent may impose fines for certain violations of the Insurance Law.

Facts:

You state that you are starting a medical billing service, and for this reason, you would like to learn about prompt pay laws.

Analysis:

N.Y. Ins. Law § 3224-a (McKinney 2000) regulates payment of health insurance claims by insurers, including HMOs, and states in the relevant part:

In the processing of all health care claims submitted under contracts or agreements . . . and all bills for health care services rendered by health care providers pursuant to such contracts or agreements, any insurer or organization or corporation . . . shall adhere to the following standards:

(a) Except in a case where the obligation of an insurer or an organization or corporation licensed or certified pursuant to article forty-three of this chapter or article forty-four of the public health law to pay a claim submitted by a policyholder or person covered under such policy or make a payment to a health care provider is not reasonably clear, or when there is a reasonable basis supported by specific information available for review by the superintendent that such claim or bill for health care services rendered was submitted fraudulently, such insurer or organization or corporation shall pay the claim to a policyholder or covered person or make a payment to a health care provider within forty-five days of receipt of a claim or bill for services rendered.

(b) In a case where the obligation of an insurer or an organization or corporation licensed or certified pursuant to article forty-three of this chapter or article forty-four of the public health law to pay a claim or make a payment for health care services rendered is not reasonably clear due to a good faith dispute regarding the eligibility of a person for coverage, the liability of another insurer or corporation or organization for all or part of the claim, the amount of the claim, the benefits covered under a contract or agreement, or the manner in which services were accessed or provided, an insurer or organization or corporation shall pay any undisputed portion of the claim in accordance with this subsection and notify the policyholder, covered person or health care provider in writing within thirty calendar days of the receipt of the claim:

(1) that it is not obligated to pay the claim or make the medical payment, stating the specific reasons why it is not liable; or

(2) to request all additional information needed to determine liability to pay the claim or make the health care payment.

Upon receipt of the information requested in paragraph two of this subsection or an appeal of a claim or bill for health care services denied pursuant to paragraph one of this subsection, an insurer or organization or corporation licensed pursuant to article forty-three of this chapter or article forty-four of the public health law shall comply with subsection (a) of this section.

(c) Each claim or bill for health care services processed in violation of this section shall constitute a separate violation. In addition to the penalties provided in this chapter, any insurer or organization or corporation that fails to adhere to the standards contained in this section shall be obligated to pay to the health care provider or person submitting the claim, in full settlement of the claim or bill for health care services, the amount of such claim or health care payment plus interest on the amount of such claim or health care payment of the greater of the rate equal to the rate set by the commissioner of taxation and finance for corporate taxes . . . or twelve percent per annum, to be computed from the date the claim or health care payment was required to be made. When the amount of interest due on such claim is less then two dollars, an insurer or organization or corporation shall not be required to pay interest on such claim.

N.Y. Ins. Law, Article 51, (McKinney 2000), otherwise known as the "Comprehensive Motor Vehicle Insurance Reparations Act," and colloquially known as "no-fault," controls liability insurance providing coverage for personal injuries arising from motor vehicle accidents. N.Y. Ins. Law § 5106(a) (McKinney 2000) states:

Payments of first party benefits and additional first party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. If proof is not supplied as to the entire claim, the amount which is supported by proof is overdue if not paid within thirty days after such proof is supplied. All overdue payments shall bear interest at the rate of two percent per month. If a valid claim or portion was overdue, the claimant shall also be entitled to recover his attorney’s reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim, subject to limitations promulgated by the superintendent in regulations.

Neither of these sections of the law use the term "clean claim," nor is such term used anywhere else in the New York State Insurance Law.

Whether the complaint arises from a provider of health insurance, HMO or a "no-fault" provider, a complaint may be filed on-line at the web-site www.ins.state.ny.us; or, by mailing a letter to the New York Insurance Department, Consumer Services Bureau, One Commerce Plaza, Albany, New York 12257.

Currently, the interest rate paid on violations of N.Y. Ins. Law § 3224-a (McKinney 2000) is 12 % per year as provided by N.Y. Ins. Law § 3224-a(c) (McKinney 2000). An insurer should automatically pay interest for all claims that are paid past the statutory time limit of 45 days. Interest is payable to whomever received payment for the claim. If such interest is not paid, the claimant may file a complaint with the Department at the above listed address or web site.

The Department will investigate the allegations that a claim is overdue or that interest is due, and notify the complainant of the Department’s findings. If the Department determines that interest is due, the Department will notify the insured of this finding, and ensure that the interest paid. Subsequently, the Department may also fine such insurer. N.Y. Ins. Law § 2406(a) (McKinney 2000) states in the relevant part:

. . . If the superintendent finds that the person complained of has engaged in a defined violation, the order shall require the person to cease and desist from engaging in such defined violation. Furthermore, if the superintendent finds, after notice and hearing, that the person complained of has engaged in an act prohibited by section three thousand two hundred twenty-four-a of this chapter, the superintendent is authorized to levy a civil penalty against such person in an amount up to five hundred dollars per day for each day beyond the date that a bill or claim was to be processed in accordance with section three thousand two hundred twenty-four-a of this chapter, but in no event shall such penalty exceed five thousand dollars.

The rate of interest paid by "no-fault" providers for violations of N.Y. Ins. Law § 5106 (McKinney 2000), ("No Fault," Fair Claims Settlement), is 2% per month as provided for by N.Y. Ins. Law § 5106 (a) (McKinney 2000) and N.Y. COMP. CODES R. & REGS. tit. 11, § 65-3.9(a) (2001). This interest should be paid automatically to the claimant at the time the late payment is made on the underlying claim. N.Y. COMP. CODES R. & REGS. tit. 11, § 65-3.9(a) (2001). If the insurer fails to comply, the claimant may initiate an arbitration case or an action in a court of law. N.Y. COMP. CODES R. & REGS. tit. 11, § 65-3.9 (2001). Finally, the claimant may also file a complaint with the Department, which may result in the Superintendent instituting a disciplinary action against the insurer. N.Y. Ins. Law §§ 2404-2406 (McKinney 2000). Although such a proceeding would not result in an award of interest with respect to a no-fault claim.

If a "no-fault" provider denies a claim, or any part of it, the applicant may contest such denial by initiating an arbitration case or bringing an action in a court of law. N.Y. COMP. CODES R. & REGS. tit. 11, § 65-3.9 (2001). N.Y. COMP. CODES R. & REGS. tit. 11 § 65-3.9 (2001) states in the relevant part:

If an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken. . . .

If, however, the applicant files either an arbitration request or lawsuit within 30 days of receiving a denial, and such applicant prevails, the interest due on the claim that the insurer improperly denied, will start ". . . 30 days after proof of claim . . . was received by the insurer and ending with the date of payment of the award, . . . " N.Y. COMP. CODES R. & REGS. tit. 11, § 65-4.5(s) (2001).

For further information you may contact Senior Attorney Susan A. Dess at the New York City Office.