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 December 16, 2003, representing the position of the New York State Insurance Department.

RE: Health Insurance, Retroactive Reversal of Claim

Question Presented:

1. May an insurer recover payments made in error when, under the applicable Coordination of Benefits provision in the policy or contract, another insurer should have been primary?

2. May the insured now submit a claim to the appropriate insurer?

Conclusions:

1. There is nothing in the New York Insurance Law (McKinney 2000 and 2003 Supplement) or the regulations issued thereunder that would prevent such a recovery. The right of the insurer to recover such payments from the participating provider may be governed by the contract between the insurer and the provider.

2. Depending upon the language of the insurance policy or contract and the factual circumstances, such a claim might be timely.

Facts:

The inquirer’s client, Mrs. A, has been a New York City school teacher since August 2001 and has health insurance coverage through her employment. Prior to becoming so employed, she was covered as a dependent under a policy issued to her husband’s employer and submitted claims for these services to that insurer.

For a period of time after becoming employed by New York City, Mrs. A received medical services from a physician who was a participating physician with the insurer which had issued the policy to her husband’s employer and that insurer made payments to the physician. The insurer recently discovered that, since August 2001, because of Mrs. A’s coverage through her employment, the insurer that issued a policy to the employer, should have been primary. Accordingly, the insurer that had paid the claim requested a refund of the amounts paid from its participating provider.

The inquirer has heard anecdotally that an insurer may not go back more than one year in requiring reimbursement of payments made in error and seeks confirmation of his understanding. In addition, Mrs. A fears that, if the physician must refund the payments to the insurer that made them, he or she will then charge her directly and that she will be unable to submit a claim to the insurer which issued the group policy to her employer.

Analysis:

New York Insurance Law § 4235(c)(1)(A) (McKinney 2000 and 2003 Supplement) authorizes the issuance of a group health insurance policy or contract to an employer covering the employees of that employer. New York Insurance Law § 4235(c)(1), applicable to commercial insurers, provides that a group health insurance policy may cover an employed individual’s dependents. New York Insurance Law § 4305(c)(1) (McKinney 2000 and 2003 Supplement) has a similar authorization for group contracts issued by not-for-profit health insurers and Health Maintenance Organizations.

The Department has issued a regulation, Regulation 62, effectuating the various statutory requirements for health insurance. That regulation provides, N.Y. Comp. Codes R. & Regs. tit. 11, § 52.23(2002):

(a) This section is intended to establish uniformity in the permissive use of overinsurance provisions and to avoid claim delays and misunderstandings that could otherwise result from the use of inconsistent or incompatible provisions among plans.

(b) A coordination of benefits (COB) provision is one that is intended to avoid claims payment delays and duplication of benefits when a person is covered by two or more plans providing benefits or services for medical, dental or other care or treatment. It avoids claims payment delays by establishing an order in which plans pay their claims and providing the authority for the orderly transfer of information needed to pay claims promptly. . . .

(n) Order of benefit determination rules. (1) The primary plan must pay or provide its benefits as if the secondary plan or plans did not exist. A secondary plan may take the benefits of another plan into account only when, under these rules, it is secondary to that other plan. . . . (3) The order of benefit payments is determined using the first of the following rules which applies: (i) the benefits of a plan which covers the person as an employee, member or subscriber . . . are determined before those of a plan which covers the person as a dependent; . . . .

Accordingly, after August 2001, Mrs. A’s claims should have been submitted first to the insurer covering her as an employee and thus her husband’s insurer is correct in asserting that it had paid its participating provider in error.

There is nothing in the New York insurance Law or the regulations issued thereunder that would restrict the ability of an insurer to recover payments made in error to a participating provider. However, the right of the insurer to collect such payments may be governed by the contract between the insurer and the provider.

New York Insurance Law § 3221(a)(8) (McKinney 2000 and 2003 Supplement), dealing with group health insurance policies of commercial insurers, provides that such policies must contain a provision at least as beneficial to the insured as:

That written notice of claim must be given to the insurer within twenty days after the occurrence or commencement of any loss covered by the policy. Failure to give notice within such time shall not invalidate or reduce any claim if it shall be shown not to have been reasonably possible to give such notice and that notice was given as soon as was reasonably possible.

While such a provision is not required in group contracts issued by not-for-profit health insurers and HMOs, many such companies do include a similar provision in their contracts.

It is possible, if the language of Mrs. A’s policy or contract so provides and if a reasonable explanation is provided, that said insurer will still accept the claims.

For further information you may contact Principal Attorney Alan Rachlin at the New York City office.