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 30, 2003, representing the position of the New York State Insurance Department.

Re: Insurance Regulation No. 68 No-Fault Benefits

Questions Presented:

1. When the provider of health services has submitted a bill to the No-Fault insurer for payment, and the insurer denies payment, may the provider bill the patient's medical insurance on the patient's behalf, or may it bill the patient directly for the services rendered?

2. When a provider of health services has submitted a bill to a No-Fault insurer for payment, the insurer has denied payment, and the patient has gone to arbitration on his own behalf and lost the arbitration, is the patient still obligated to make payment to the provider of health services?

3. When a provider of health services has submitted a bill to a No-Fault insurer for payment, the insurer has denied payment, and the patient states that he has no medical insurance, no money to pay for the health services rendered by the provider and does not want to arbitrate the matter, may the patient execute a new NYS Form NF-3 authorizing the health service provider to seek arbitration on his behalf (an assignment of rights)?

Conclusions:

1. Under the "Authorization" option, the provider retains the right to bill the eligible injured person ("patient") for the health services provided and the patient retains all rights, privileges and remedies to which he or she is entitled under Article 51 (the No-Fault statute) of the Insurance Law. Except under a narrow exception found in section 68.7(a) of Regulation 83 (or in the event that a determination is made by the No-Fault insurer that the patient's injuries were not related to the automobile accident), the provider would be limited to billing the patient directly for the services rendered.

2. Under the "Authorization" option, the patient's obligation to make payment to the provider of health services is not contingent upon his or her ability to recover from the No-Fault insurer.

3. Yes. Nothing in Regulation No. 68 would prohibit the parties to the NYS Form NF-3 (the No-Fault claimant and the provider of health services) from executing an assignment pursuant to Option 21, whereby the claimant assigns all rights, privileges and remedies to payment to the provider of health services. This would give the provider the right to pursue arbitration on behalf of the patient.

Facts:

A radiology facility ("Facility") sometimes renders health services to patients covered under the No-Fault system. Such patients are advised that they will be responsible for making direct payment of the bill for services rendered to the Facility, after the Facility has submitted claims to the No-Fault insurer, in the event that the No-Fault insurer denies payment.

Analysis:

In order to address the inquiry, it is necessary to recognize the distinction made between an assignment of No-Fault benefits ("Assignment") from an eligible injured person (the patient) to their provider of health services, and an authorization by the patient (Authorization") to their No-Fault insurer to pay benefits directly to the provider of health services, under the Department No-Fault Regulation 68.

Pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, § 65-3.11(b) (Regulation 68) (2003), entitled "Direct payments":

(b) In order for a health care provider/hospital to receive direct payment from the insurer, the health care provider or hospital must submit to the insurer:

(1) a properly executed Authorization to Pay Benefits as contained on NYS Forms NF-3, NF-4 or NF-5 or other claim form acceptable to the insurer. Execution of an authorization to pay benefits shall not constitute or operate as a transfer of all rights from the eligible injured person to the provider; or

(2) a properly executed assignment on:

(i) the prescribed Verification of Treatment by Attending Physician or Other Provider of Service form (NYS Form NF-3); or

(ii) the prescribed Verification of Hospital Treatment form (NYS Form NF-4), or the prescribed Hospital Facility form (NYS Form NF-5); or

(iii) the prescribed No-Fault Assignment of Benefits form (NYS Form NF-AOB) contained in Appendix 13 or an equivalent form containing non-substantive enhancements, but no changes may be made to the assignment language itself.

An agreement to accept either an Assignment or Authorization is always voluntary on the part of a No-Fault provider. If the patient and provider agree to an assignment of benefits, they must use the prescribed assignment language that appears in the above-referenced forms as required by Regulation 68. Specifically, the mandatory assignment language assigns to the health care provider "all rights, privileges and remedies to payment for health care services provided . . . under Article 51." Further, the health provider agrees that they will not pursue payment directly from the patient after receiving a denial based upon a lack of medical necessity. However, the assignment may be revoked by the provider based upon the assignor patient’s lack of coverage based upon violation of a policy condition due to the actions or conduct of the patient.

The effect of acceptance of an assignment of benefits by a health provider is that by accepting the transfer of the right to receive benefits, which were available directly to the eligible injured party, the health provider also assumes the right to, and responsibility for, pursuing available remedies when claims are denied, since the assignee provider now stands in the shoes of the eligible injured person. Therefore, after an assignment has been effected, an assignee provider, who has submitted a claim for services rendered, must be the party to request and pursue arbitration when the claim has been denied.

The rights and obligations imposed under an Assignment of Benefits do not exist under an Authorization to Pay Benefits form, which is executed by the eligible injured person. The optional authorization language in NYS Forms NF-3, NF-4 and NF-5 states: "I authorize payment of health benefits to the undersigned health care provider or supplier of services described below. I retain all rights, privileges and remedies to which I am entitled under Article 51 (the No-Fault provision) of the Insurance Law." (emphasis added).

Under either an Assignment or Authorization, a patient is not required to pay their health service provider at the time that services are rendered. As stated above, while an Assignment serves to transfer all rights, privileges and remedies from the patient to the provider, no such transfer occurs under an Authorization. An Authorization is no more than direction from an eligible injured person to their No-Fault insurer to send reimbursement benefits directly to their health provider. Accordingly, if an Authorization is used, the provider retains the right to bill the patient directly when a claim has been denied by the No-Fault insurer. In addition, unlike an Assignment, where the right to dispute a denial through arbitration is transferred to the provider, the patient executing an Authorization retains the right to dispute a denial.

The first query posed is whether, where the No-Fault insurer has denied a claim, the provider may file a claim directly with the patient's medical insurance on the patient's behalf, as opposed to billing the patient directly for the services.

In 1973, the New York Legislature enacted the Automobile Insurance Reparations Act ("the No-Fault law"). The purpose of the No-Fault law was to ensure that individuals injured in automobile accidents would be promptly compensated for their economic loss, irrespective of fault. Pursuant to N.Y. Ins. Law § 5102(a) (McKinney 2000) the term "basic economic loss" is defined as follows:

(a) up to fifty thousand dollars per person of the following combined items, subject to the limitations of section five thousand one hundred eight of this article:

(1) All necessary expenses incurred for: (i) medical, hospital . . . surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical and occupational therapy and rehabilitation; (iii) any non-medical remedial care and treatment rendered in accordance with a religious method of healing recognized by the laws of this state; and (iv) any other professional health services; all without limitation as to time, provided that within one year after the date of the accident causing the injury it is ascertainable that further expenses may be incurred as a result of this injury. For the purpose of determining basic economic loss, the expenses incurred under this paragraph shall be in accordance with the limitations of section five thousand one hundred eight of this article.

This provision identifies No-Fault benefits as the primary source of benefits for payment of health care services for the treatment of injuries arising out of a motor vehicle accident in New York, up to $50,000 per person (ie. "basic economic loss") subject to fee schedule limitations established under N.Y. Ins. Law § 5108 (McKinney 2000). Therefore, the payment of $50,000 in No-Fault benefits per person for basic economic loss under section 5102 and for all motor vehicle policies issued in New York must be paid by the No-Fault insurer in accordance with the mandated fee schedules before No-Fault coverage for that person is exhausted. Only upon exhaustion of available No-Fault benefits may an individual submit bills for reimbursement to his or her health insurer and, as previously stated, payment for health services rendered under the health policy must be limited by the fee schedules established pursuant to section 5108. However, N.Y. Comp. Codes. R. & Regs. tit. 11, § 68.7(a) (Regulation 83) provides as follows:

(a) No provider of health services specified in section 5102(a)(1) may demand or request any payment in addition to the charges permitted by the provisions of this Part. If the insured also possesses health insurance coverage and such health insurance contract does not exclude payment for no-fault benefits, payment by the health insurer for health services under such contract is restricted by the limitations of section 5108 of the Insurance Law, unless such limitation would impair the terms of a provider’s contract with the health insurer, in which case payment by the health insurer to the provider may be made in accordance with the provider’s contract; however, the provider may not receive duplicate payment. (emphasis added).

Thus, a provider may not be reimbursed under that person’s health insurance policy for additional care at the provider’s usual and customary fees, which exceed those established under the No-Fault fee schedule, unless the exception contained in section 68.5 applies, or there is a contractual exception under a section 68.7(a) health policy.

In the first query, the patient's claim has been denied by the No-Fault insurer. Under normal circumstances the provider retains the right to bill the patient directly and cannot bill the insured's health insurer. The exceptions pertain to situations where there is a contractual exception as explained under section 68.7(a) of Regulation 83 or in the event that a determination is made by the No-Fault insurer that the patient's injuries were not related to the automobile accident.

The second query supposes that, after the No-Fault insurer denied the claim, the patient went to arbitration on his own behalf and lost the arbitration. It is asked whether the patient is still obligated to make payment to the provider of health services. As stated above, under the Authorization option, once the No-Fault insurer has denied payment of the claim, the provider may pursue payment directly from the patient.

The third query involves a situation where the No-Fault insurer has denied the claim and the patient is essentially judgment proof. The patient has no medical coverage or other assets available to pay the amount due to the provider. Under these circumstances, assuming the patient has no interest in pursuing arbitration, it is asked whether the NYS Form NF-3 may be "modified" by substituting the Assignment clause for the Authorization clause. Nothing in the Insurance Law or regulations would prohibit such a modification, if agreed to by the patient and the provider. Further, it does not appear that the patient's rights would be prejudiced in any way.

For further information you may contact Associate Attorney Sam Wachtel at the New York City Office.