The Office of General Counsel issued the following opinion on June 9, 2004, representing the position of the New York State Insurance Department.
Re: Licensing Requirements for Independent Adjusters in New York
1. Pursuant to the New York Insurance Law, is a corporation that processes well eye care benefit claims, as described below under "Facts", required to be licensed as an independent adjuster in New York?
2. If a corporation is required to be licensed as an independent adjuster in New York, is each employee who handles claims required to be individually licensed as an independent adjuster, or will only those employees that adjust New York claims need to be licensed?
1. No. A corporation that engages in the activities that you described would not be required to be licensed as an independent adjuster.
2. In addition to the corporation, each employee of the corporation that performs investigating and adjusting of claims in New York, as defined under Section 2101(g), must be licensed as an independent adjuster in New York.
The inquirer stated that a Delaware corporation operates as a billing service and third party administrator ("TPA"). The corporation contracts with insurers, health maintenance organizations, preferred provider organizations, employer groups, unions and other groups ("Groups") on a national basis to arrange for the provision of well eye care services and materials through the corporations preferred vision provider network.
The corporations line of business is limited to providing services for well eye care plans. Unlike other types of insurance, well eye exam insurance is a very limited benefit that has clearly defined boundaries (e.g. one covered exam per year). In determining whether a claim is covered, the corporation makes no medical necessity determination or any subjective decision. If the individual receiving an eye exam is a covered enrollee and if the benefit has not already been used during the plan year, the claim is paid.
94% of the claims that the corporation receives are in-network claims, which the corporation processes through an electronic claims processing system, with no human interaction. The remaining 6% of the claims are out-of-network claims, which must be initially processed on paper. Specifically, 96% of these claims are enrollee-initiated out-of-network claims. These are claims where the enrollee received services from a provider who is not in the corporations preferred vision provider network. The enrollee directly pays the provider and the corporation reimburses the enrollee. For these claims, the corporations staff verifies that the enrollee is currently enrolled in the Groups plan, that the benefits are available, and verifies that a receipt is attached to the form. The receipt provides evidence that the service was performed and states the retail amount of the service. If the receipt is attached, the corporations staff member enters the data into the electronic claims processing system and the claim is paid, in the same manner as if it were submitted electronically.
The remaining 4% of the out-of-network claims are network provider-initiated claims. For these claims, the corporations staff verifies that the provider has submitted a valid benefit verification number for the enrollee. If so, the staff member enters the data into the electronic claims processing system for payment.
The corporation also handles inquiries regarding payment and the availability of benefits. For example, if an individual makes an inquiry, the corporations analysis is very simple; either the individual is enrolled or is not enrolled and has used the benefit during the year or has not. The corporation also handles complaints regarding services or payments. In reviewing these complaints, the corporations analysis is limited to whether the individual was enrolled at the time that the service was provided and whether the benefit was used once during the plan year.
At the outset it should be noted that there is no licensing or registration requirement for TPAs as such under the New York Insurance Law. However, any person or entity, including a TPA, that performs functions that require licensing as an independent adjuster or otherwise must be accordingly licensed.
N.Y. Ins. Law § 2102(a)(1)(McKinney 2000), as amended by Ch. 687 of the Laws of 2003, provides, in pertinent part, that:
(a)(1) No person, firm, association or corporation shall act as an insurance producer or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.
N.Y. Ins. Law § 2101(g)(1)(McKinney 2000) defines the term "independent adjuster", in pertinent part, as follows:
(g)(1) [A]ny person, firm, association or corporation who, or which, for money, commission or any other thing of value acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster . . . (emphasis supplied)1
Thus, in accordance with the above, entities that investigate and adjust claims on behalf of insurers must be licensed as independent adjusters. The Department has consistently opined that even entities that function on behalf of exempt insurers must be licensed as independent adjusters, irrespective of whether the insurer itself is required to be licensed. The fact that an insurer is exempted from licensing under the Insurance Law does not create a similar exemption for an entity that is acting on behalf of the insurer. Additionally, under section 2101(g)(1), licensing as an independent adjuster would also be required to investigate and adjust claims on behalf of an independent adjuster.
In determining what constitutes "investigating and adjusting of claims" under section 2101, this Department considers the facts of each individual case and whether the duties performed in the handling of a claim requires the exercise of discretionary authority conferred by the insurer, as opposed to the performance of strictly ministerial tasks.
Based upon the facts presented, the corporation appears to be acting in a purely ministerial capacity and would not exercise discretionary authority in performing the tasks that you described. Therefore, the corporation would not be investigating and adjusting claims within the purview of section 2101(g)(1) and, consequently, it would not have to become licensed as an independent adjuster in New York.
In regard to the second question, if a corporation is required to become licensed as an independent adjuster, the corporation and each of its employees who adjust claims in New York must be licensed as independent adjusters pursuant to N.Y. Ins. Law Article 21 (McKinney 2000), as amended by Ch. 687 of the Laws of 2003.
The scope of this opinion is limited to the specific facts herein and the licensing requirements under the New York Insurance Law. Licensing may be required pursuant to the New York General Business Law or some other New York State statute. We offer no opinion regarding licensing requirements under any other law of this state.
For further information you may contact Senior Attorney Pascale Joasil at the New York City Office.
1 Although the statute lists exemptions from this licensing requirement, none of them are applicable to this inquiry.