OGC Opinion No. 03-01-49: Health Insurance, Appeal of Adverse Determinations

OGC Op. No. 03-01-49

The Office of General Counsel issued the following opinion on January 31, 2003, representing the position of the New York State Insurance Department.

Re: Health Insurance, Appeal of Adverse Determinations

Question Presented:

Does a notification of a "change of status" or "change in level of care" by an insurer constitute an adverse determination within the meaning of New York Insurance Law Article 49 (McKinney 2000) or New York Public Health Law Article 49 (McKinney 2002)?

Conclusion

Yes, such actions as the inquirer describes would constitute adverse determinations.

Facts

A not-for-profit organization that is part of a network operates a hospital, as well as out-patient facilities in the Albany area. The inquirer has furnished notifications received by the hospital from a physicians health plan (PHP), a Health Maintenance Organization holding a Certificate of Authority from the Commissioner of Health pursuant to New York Public Health Law § 4403 (McKinney 2002). The inquirer has indicated that the furnished PHP notifications are similar to notifications received by the hospital from other insurers that insure hospital patients.

The notifications inform the hospital that the HMO considers the patient, who may be either already discharged or still in the hospital, to be in out-patient status retroactive to the date of admission. You have indicated that some notifications will "convert" the patient to out-patient status as of a date subsequent to admission but retroactive to a date prior to the notification.

Analysis

While this analysis cites provisions of the New York Insurance Law applicable to commercial insurers and not-for-profit Health Service Corporations, there are identical provisions in the New York Public Health Law applicable to HMOs.

New York Insurance Law § 4900 defines the relevant terms as follows:

(a) Adverse determination means a determination by a utilization review agent that an admission, extension of stay, or other health care service, upon review based on the information provided, is not medically necessary.

(d) Insured means a person subject to utilization review.

(d-4) Final adverse determination means an adverse determination which has been upheld by a utilization review agent with respect to a proposed health care service following a standard appeal, or an expedited appeal where applicable, pursuant to section four thousand nine hundred four of this title.

(d-5) Health care plan means an insurer subject to article thirty-two or forty-three of this chapter, or any organization licensed under article forty-three of this chapter.

(e) (1) For purposes of this title and for appeals requested pursuant to paragraph one of subsection (b) of section four thousand nine hundred ten of title two of this article, health care service means: (A) health care procedures, treatments or services (i) provided by a facility licensed pursuant to article twenty-eight . . . of the public health law . . . .

(g) Health care provider means a health care professional or a facility licensed pursuant to article twenty-eight . . .of the public health law . . . .

(h) Utilization review means the 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. . . .

It is assumed, from the information provided, that the hospital in question is licensed pursuant to New York Public Health Law Article 28 (McKinney 2002 and 2003 Supplement) and thus is a health care provider providing health care services. Based upon the information provided, it appears that insurers have denied coverage for in-patient hospital services after finding that the level of care was not appropriate. A review to determine the appropriateness of the level of care is a determination of medical necessity and thus falls within the definition of utilization review. A finding that the level of care is not appropriate is an adverse determination.

New York Insurance Law § 4904 (McKinney 2000) provides:

(a) An insured, the insured's designee and, in connection with retrospective adverse determinations, an insured's health care provider, may appeal an adverse determination rendered by a utilization review agent.

(b) A utilization review agent shall establish an expedited appeal process for appeal of an adverse determination involving (1) continued or extended health care services, procedures or treatments or additional services for an insured undergoing a course of continued treatment prescribed by a health care provider . . . .

New York Insurance Law § 4910 (McKinney 2000) provides:

(a) There is hereby established an insured's right to an external appeal of a final adverse determination by a health plan.

(b) An insured, the insured's designee and, in connection with retrospective adverse determinations, an insured's health care provider, shall have the right to request an external appeal when: (1) (A) the insured has had coverage of the health care service, which would otherwise be a covered benefit under a subscriber contract . . . denied on appeal, in whole or in part, pursuant to title one of this article on the grounds that such health care service is not medically necessary, and (B) the health care plan has rendered a final adverse determination with respect to such health care service or both the plan and the insured have jointly agreed to waive any internal appeal; . . . .

Accordingly, based upon the information provided, if internal appeals within the insurer do not result in a favorable determination, the hospital may have a right to an external appeal under New York Insurance Law Article 49