New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on April 1, 2003, representing the position of the New York Insurance Department.

Re: Right of the United States to recover from a No-Fault insurer the reasonable cost to the United States of health services provided to a member of the Armed Forces at a Army hospital

Question Presented

Are the statutory limitations placed upon charges by providers of health services under N.Y. Ins. Law § 5108 (McKinney 2000) of the New York No-Fault law applicable when the United States is pursuing its right under Federal law to recover from a No-Fault insurer the reasonable cost of health services that were provided to a member of the Armed Forces at a Army hospital?

Conclusion

No. The limitations upon the fees that health service providers may charge under N.Y. Ins. Law § 5108 of the New York No-Fault law do not apply, in this instance, where the United States has provided health services to a member of the Armed Forces as a result of an automobile accident in New York State. In this instance, the United States is pursuing its right to recover from the No-Fault insurer the reasonable cost of the health services it provided to a member of the Armed Forces as permitted under Federal law (specifically, 10 U.S.C.A. § 1095(a)(1) (West 1998 and Supp. 2002) and 42 U.S.C.A. § 2651 (West 1994 and Supp. 2002)) and, therefore, it is entitled to be reimbursed for its reasonable costs in providing the services under applicable Federal regulations and schedules.

Facts

A member of the United States Army was involved in a motor vehicle accident on October 16, 2000, and, because of her status, she received medical care (specifically, physical therapy services) for the injuries sustained by her in the accident at an Army Community Hospital. The Army Office of the Staff Judge Advocate/Claims sent a notice to all parties asserting the United State’s claim for reimbursement of these health services in the amount of $4,420.00, pursuant to 10 U.S.C.A. § 1095 (West 1998 and Supp. 2002) and 42 U.S.C.A. §§ 2651-53 (West 1994 and Supp. 2002), known as the Federal Medical Care Recovery Act ("FMCRA"). The No-Fault insurer ("insurer"), on March 19, 2002 sent the United States a check in the amount of $2,528.85, reducing the charges in accordance with the allowable health service fees under the applicable No-Fault fee schedule promulgated by the Superintendent of Insurance. The Insurer sent the United States military, along with its claim payment, an Explanation of Benefits form that explained the "reduced" payment. The payment is for an amount less than what the United States calculates is the reasonable cost of the services rendered in accordance with applicable federal third party payer fee schedules. By letter of March 20, 2002 the United States informed the Insurer that it still had an outstanding lien against it in the amount of $2,057.15 (hereinafter referred to as "the disputed amount"). The United States disputes the amount of the claim payment, taking the position that charges for health services provided pursuant to coverage afforded by a No-Fault insurance policy to an eligible injured person who also happens to be a member of the United States military by a health services provider employed by the United States government, are not subject to the fee limitations contained in the New York law. The United States takes the position that the New York No-Fault law, as to the limitations on health service fees, is preempted by Federal law. It therefore asserts that the Insurer is responsible to reimburse the United States for these health services for the full amount billed by the United States.

The insurer takes the opposite position arguing that the No-Fault health service fee limitations contained in the New York No-Fault Law apply to all health care providers, be they private or government, and that they are not preempted by federal law. Therefore, the health service fees that are reimbursable in the instant No-Fault claim are limited to those fees specified in the applicable fee schedule adopted by the Superintendent. It is the insurer’s position that it does not owe any more money than it has already paid to the United States.

Analysis

In seeking reimbursement the United States relies on both 10 U.S.C.A. § 1095 (West 1998 and Supp. 2002), commonly referred to as the Third-Party Payer Statute, and the FMCRA (42 U.S.C.A. 2651-53 (West 1994 and Supp. 2002) in seeking repayment directly from the No-Fault insurer, for the reasonable charges for the health services rendered at the Army hospital. It is the position of the United States that the reasonable charges for such services are to be calculated in accordance with federal regulations establishing the reasonable value of such fees, and not the fees established as reasonable for all health service providers under the §5108 of the New York No-Fault Law. The insurer, on the other hand, takes the position that reimbursement to the United States is subject to the fee limitations imposed on all providers of health services, as specified in the New York No-Fault law, and that such limitations constitute the reasonable charges for the health services provided by the United States.

N.Y. Ins. Law § 5108 (McKinney 2000) places limits on charges by providers of health services under the No-Fault Law. It provides, as follows:

(a) The charges for services specified in paragraph one of subsection (a) of section five thousand one hundred two of this article and any further health service charges which are incurred as a result of the injury and which are in excess of basis economic loss, shall not exceed the charges permissible under the schedules prepared and established by the chairman of the workers’ compensation board for industrial accidents, except where the insurer or arbitrator determines that unusual procedures or unique circumstances justify the excess charge.

(b) The superintendent, after consulting with the chairman of the workers’ compensation board and the commissioner of health, shall promulgate rules and regulations implementing and coordinating the provisions of this article and the workers’ compensation law with respect to charges for the professional health services specified in paragraph one of subsection (a) of section five thousand one hundred two of this article, including the establishment of schedules for all such services for which schedules have not been prepared and established by the chairman of the workers’ compensation board.

(c) No provider of health services specified in paragraph one of subsection (a) of section five thousand one hundred two of this article may demand or request any payment in addition to the charges authorized pursuant to this section. Every insurer shall report to the commissioner of health any patterns of overcharging, excessive treatment or other improper actions by a health provider within thirty days after such insurer has knowledge of such pattern.

The Superintendent has promulgated, under the authority of the foregoing statute, N.Y. Comp. Codes R. & Regs. tit. 11, § 68 (2002) (Regulation 83) which establishes fee schedules which set permissible charges for medical, hospital and other professional health services that are payable as part of basic economic loss under the No-Fault law. The Superintendent has thereby adopted for use the Workers’ Compensation Fee Schedules and also has established other fee schedules for health services not covered by the workers’ compensation schedules. As to health services not covered by one of the fee schedules, the fees applicable are those charged for similar services in the geographical area in which the services were rendered. Regulation 83, § 68.5(b).

Accordingly, under § 5108 of the New York No-Fault law providers of health services are prohibited from demanding or requesting any payment for services in excess of the permissible charges contained in the fee schedules or, if the service provided is not contained in a fee schedule, the reasonable cost for such services in the location in which they were rendered.

Third-Party Payer Law

10 U.S.C.A. § 1095(a)(1)(West 1994 and Supp. 2002) grants the United States the right to collect from a third-party payer, "…reasonable charges for health care services incurred by the United States on behalf of [a person who is a covered beneficiary] through a facility of the uniformed services to the extent that the person would be eligible to receive reimbursement or indemnification from the third-party payer if the person were to incur such costs on the person’s own behalf…" [Emphasis added]. The statute establishes the obligation of third party payers to reimburse the United States the reasonable charges of health care services provided by facilities of the Uniformed Services to uniformed military personnel and other covered beneficiaries, who are also covered by a third party payer’s plan. The term "third party payer" is defined in subsection (h) to include a "no fault insurance carrier".

The law expressly provides that the third-party payer is responsible to reimburse the United States for reasonable charges for health care services to the extent that the person would be eligible to receive reimbursement or indemnification from the insurer, the third-party payer, if she had to pay for the services provided by the Government. "The obligation to pay is to the extent that the beneficiary would be eligible to receive reimbursement or indemnification from the third party payer if the beneficiary were to incur the costs on the beneficiary’s own behalf," 32 C.F.R. § 220.2(a).

However, 10 U.S.C.A. § 1095(b) (West 1998 and Supp. 2002) proscribes any such application of the New York No-Fault Law to health services provided by the United States at a facility of the uniformed services. It provides, in pertinent part, as follows:

(b) No provision of any insurance, medical service, or health plan contract or agreement having the effect of excluding from coverage or limiting payment of charges for certain care shall operate to prevent collection by the United States under subsection (A) if that care is provided –

(1) through a facility of the uniformed services; . . .

The federal regulations implementing the Third-Party Payer Law are contained in 32 C.F.R. §§ 220.1-220.14 32 C.F.R. § 220.2(e) addresses the preemption of certain State laws, as follows:

(e) Preemption of conflicting State laws. Any provision of a law or regulation of a State or political subdivision thereof that purports to establish any requirement on a third party payer that would have the effect of excluding from coverage or limiting payment, for any health care services for which payment by the third party payer under 10 U.S.C. 1095 or this part is required, is preempted by 10 U.S.C. 1095 and shall have no force or effect in connection with the third party payer’s obligations under 10 U.S.C. 1095 or this part.

Accordingly, the right of the United States to seek reimbursement under the Third-Party Payer Law is not limited by the substantive provisions of the New York No-Fault Law.

In addition, 32 C.F.R. § 220.3(a) provides that under Section 1095(b), no provision of a no-fault insurance policy that has the effect of excluding from coverage or limiting payment for certain care if that care is provided in a facility of the uniformed services shall prevent collection by the United States.

The Federal Medical Care Recovery Act

The other statute upon which the United States relies in seeking reimbursement is 42 U.S.C.A. § 2651 (West 1994 and Supp. 2002), which is part of the Federal Medical Care Recovery Act ("FMCRA"). It addresses the right of recovery by the United States and subsections (a) and (c) thereof provide, in pertinent part, as follows:

(a) Conditions; exceptions; persons liable; amount of recovery; subrogation; assignment.

In any case in which the United States is authorized or required by law to furnish or pay for hospital, medical, surgical, or dental care and treatment (including prostheses and medical appliances) to a person who is injured or suffers a disease, after the effective date of this Act, under circumstances creating a tort liability upon some third person (other than or in addition to the United States and except employers of seamen treated under the provisions of section 249 of this title), to pay damages therefor, the United States shall have a right to recover (independent of the rights of the injured or diseased person) from said third person, or that person’s insurer, the reasonable value of the care and treatment so furnished, to be furnished, paid for, or to be paid for and shall, as to this right be subrogated to any right or claim that the injured or diseased person,…has against such third person to the extent of the reasonable value of the care and treatment so furnished,…The head of the department or agency of the United States furnishing such care or treatment may also require the injured or diseased person,…. [Emphasis added]

(b) Third-party beneficiary status of United States.

(1) If, pursuant to the laws of a State that are applicable in a case of a member of the uniformed services who is injured or contracts a disease as a result of tortious conduct of a third person, there is in effect for such a case (as a substitute or alternative for compensation for damages through tort liability) a system of compensation or reimbursement for expenses of hospital, medical, surgical, or dental care and treatment or for lost pay pursuant to a policy of insurance, contract, medical or hospital service agreement, or similar arrangement, the United States shall be deemed to be a third-party beneficiary of such a policy, contract, agreement, or arrangement.

(2) For the purposes of paragraph (1) –

(A) the expenses incurred or to be incurred by the United States for care and treatment for an injured or diseased member as described in subsection (a) of this section shall be deemed to have been incurred by the member;

* * *

(C) the United States shall be subrogated to any right or claim that the injured or diseased member … have under a policy, contract, agreement, or arrangement referred to in paragraph (1) to the extent of the reasonable value of the care and treatment …[Emphasis added]

Those provisions of the foregoing statute addressing the United State’s rights against an insurance carrier or other entity responsible for paying or reimbursing expenses were added in 1996, Pub.L. 104-201, Sept. 23, 1996,110 Stat. 2661.

Under 42 U.S.C.A. § 2652(a) (West 1994), in order to determine and establish the reasonable value of care and treatment the President is given the right to promulgate regulations for the determination and establishment of the reasonable value of the hospital, medical, surgical, or dental care and treatment. Pursuant to an Executive Order, the President has given the Attorney General the right to enact such regulations. The Regulations establishing Army medical rates under the FMCRA are to be found at 32 C.F.R. §§ 537.21-537.24.

There appears to be no case law specifically addressing the question of whether the New York No-Fault law’s limitation upon provider fees under No-Fault applies where the United States is seeking reimbursement under the Third-Party Payer Law or FMCRA. However, based on the express language of the Third-Party Payer Law, where the United States is pursuing its right under Federal law to seek repayment from the No-Fault insurer of its reasonable costs in providing the health service to the eligible injured person who is also a member of the Armed Services, § 5108 is preempted by 10 U.S.C. 1095, 42 U.S.C.A. § 2651, and 32 C.F.R. 220.2(e).

Accordingly, the United States is entitled to recover from the No-Fault insurer its reasonable cost for providing such services, as calculated under applicable Federal regulations.

For further information you may contact Associate Attorney Barbara A. Kluger at the New York City Office.