The Office of General Counsel issued the following opinion on October 14, 2004 representing the position of the New York Insurance Department.
Re: Utilization Review Organizations
May an organization that is licensed as an independent adjuster and also functions as an Independent Practice Association (IPA), also function as a Utilization Review Agent, by virtue of its adjusters license and recognition as an IPA?
No, such an organization, in accordance with New York Insurance Law Article 49 (McKinney 2000) and New York Public Health Law Article 49 (McKinney 2002), would have to register as a utilization review agent.
The inquirer has been retained by a Management Company, (hereinafter MC) which performs a number of functions for health insurers, including Health Maintenance Organizations, in New York. MC has been informed that, by virtue of the claims services it provides, it must be licensed as an independent adjuster in accordance with New York Insurance Law § 2108(a)(3) McKinney 2000 and 2004 Supplement). In addition, MC has been informed that, by virtue of the further services it provides to insurers, primarily HMOs, it will be considered to be an IPA.
MC wishes to provide utilization review services to insurers and the inquirer wants to know whether any other requirements have to be met.
New York Insurance Law § 2101(g)(1) (McKinney 2000 and 2004 Supplement) defines an independent adjuster:
The term independent adjuster means 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 . . . .
New York Insurance Law § 2108(b) provides:
The holder of a license under this section may act as an adjuster without any other or additional license.
The above provision does not confer any additional authority to function other than as an adjuster.
A regulation of the Department of Health, N.Y. Comp. Codes R. & Regs. tit. 10, § 98-1.5(b)(6)(iv) (2001), limits the authority of IPAs as part of the requirements for receiving a Certificate as an HMO in accordance with New York Public Health Law § 4403 (McKinney 2002):
An HMO shall not enter into a contract with a not-for-profit or business corporation which did not receive all approvals required for incorporation prior to August 8, 1986, and proposing to provide the services of an independent practice association (IPA) unless: (a) the certificate of incorporation of the IPA contains powers and purposes limited to arranging by contract for the delivery or provision of health services by individuals, entities and facilities licensed or certified to practice medicine and other health professions, and, as appropriate, ancillary medical services and equipment, by which arrangements such health care providers and suppliers will provide their services in accordance with and for such compensation as may be established by a contract between the corporation and one or more health maintenance organizations which have been granted a certificate of authority pursuant to the provisions of article 44 of the Public Health Law of the State of New York, as amended;
. . .
(c) any general powers and purposes contained in the certificate . . . are by express provision in the certificate to be exercised only as powers and purposes incidental to accomplishing the primary IPA powers and purposes of the corporation;.
. . .
New York Insurance Law § 4900(h) (McKinney 2000) defines utilization review:
Utilization review means the review to determine whether health care services that have been provided, are being provided or are proposed to be provided to a patient, whether undertaken prior to, concurrent with or subsequent to the delivery of such services are medically necessary. . . .
New York Public Health Law § 4900(8) (McKinney 2002) has an identical definition.
New York Insurance Law § 4900(i) and New York Public Health Law § 4900(9) define utilization review agent respectively:
Utilization review agent means any insurer subject to article thirty-two or forty-three of this chapter performing utilization review and any independent utilization review agent performing utilization review under contract with such insurer.
Utilization review agent means any company, organization or other entity performing utilization review, except: (a) an agency of the federal government; (b) an agent acting on behalf of the federal government, but only to the extent that the agent is providing services to the federal government; (c) an agent acting on behalf of the state and local government for services provided pursuant to title XIX of the federal social security act; (d) a hospital's internal quality assurance program except if associated with a health care financing mechanism; or (e) any insurer subject to article thirty-two or forty-three of the insurance law and any independent utilization review agent performing utilization review under a contract with such insurer, which shall be subject to article forty-nine of the insurance law.
Since the performance of utilization review is not encompassed within the descriptions of the functions of either independent adjusters or IPAs; in order for MC to function as a utilization review agent it will have to register with the Insurance Department and, if it will function as such for an HMO with the Health Department. In addition, pursuant to N.Y. Comp. Codes R. & Regs. tit. 10, § 98-1.5(6)(iv)(c), if MC desires to be both an IPA and an independent adjuster it may have to specify such authority in its Certificate of Incorporation.
Finally, if MC does function as a utilization review agent, it would be subject to all applicable requirements of New York Insurance Law Article 49 and New York Public
Health Law Article 49, as well as the regulations promulgated thereunder, N.Y. Comp. Codes R. & Regs. tit. 10, Part 410 (2001) (Regulation 166) and tit. 10, Part 98-2 (2001).
For further information one may contact Principal Attorney Alan Rachlin at the New York City office.