The Office of General Counsel issued the following opinion on September 21, 2004, representing the position of the New York State Insurance Department.
Re: Third Party Administrator Adjusting Claims
1. Must a Third Party Administrator ("TPA") operating from its Nevada office be licensed as an independent adjuster in order to adjust health insurance claims of New York residents on behalf of self-funded ERISA plans?
2. If the TPA obtains an individual adjusters license, would it cover all employees adjusting claims or are individual licenses required for such employees?
1. Yes. A TPA that adjusts claims for New York insureds must become licensed as an independent adjuster, regardless of the location of its office.
2. Individual independent adjusters licenses are required for employees of a TPA whose functions include adjusting claims within the meaning of N.Y. Ins. Law § 2101(g)(1) (McKinney 2000).
A TPA has an office in Nevada where it pays and processes claims as a TPA on behalf of self-funded ERISA plans for New York employers. There is no insurance company involved and the TPA has no employees in New York. There would be communications between the TPA and the New York insureds by telephone or mail. The TPA would receive the claims, review same, make the determination as to the value of the benefit allowed under the plan, and pay the claim.
The New York State Insurance Law does not specifically define "third party administrator" and does not regulate activities of TPAs as such. However, any person or entity that engages in activities in New York that would require licensing (e.g., acting as an adjuster) must obtain the appropriate license from the New York Insurance Department. Conducting adjusting activities with a person in New York by e-mail, telephone, or mail would constitute doing business in New York, regardless of whether the claimant was a New York resident.
Under the facts presented, the TPA would be acting as an independent adjuster for self-funded ERISA plans.
N.Y. Ins. Law § 2101(g)(1) (McKinney 2000) defines independent adjuster to mean:
any 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 added)
N.Y. Ins. Law § 2108(a)(3) (McKinney Supp. 2004) requires that no adjuster may act on behalf of an insurer unless it is licensed as an independent adjuster. The Department considers the term "insurer" to encompass any entity that is doing an insurance business, as defined in N.Y. Ins. Law § 1101 (McKinney Supp. 2004), regardless of whether such entity must be licensed by this Department. Accordingly, the Department has consistently held that licensing is required for adjusting activities on behalf of an exempt insurer, such as a self-funded ERISA plan.
Since individuals are encompassed within the definition in N.Y. Ins. Law § 2101(g) (McKinney 2000), any individual in the TPAs office engaging in adjusting activity that involves discretionary authority and not purely ministerial acts would need an independent adjusters license.
The Licensing Bureau in Albany, which has an automated line at 518-474-6630, may be contacted for licensing forms to obtain independent adjusters licenses and for any further information.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.