The Office of General Counsel issued the following opinion on October 7, 2005, representing the position of the New York State Insurance Department.
Re: Licensing Inquiry for Third Party Administrators
Question Presented:
Under the facts described below, does a Third Party Administrator ("TPA") need to be licensed under New York State Insurance Law (McKinney 2000 & 2005 Supp.)?
Conclusion:
No, New York does not have a TPA license requirement. However, depending on the activities of the TPA, it may require another license under the New York Insurance Law. In this case, based on the represented facts, it appears that Medical Claims Management Corporation will not require any additional licensing under New York Insurance Law.
Facts:
Medical Claims Management Corporation is a TPA which administers self-funded "group" health plans only. The inquirer's e-mail described, specifically, what the company does:
The client has a Plan Document that specifies what is covered and what is not covered. We data enter the claims in the system which then adjudicates the claim based on the parameters in our software to process a final claim payment based on "80% after the deductible etc" (It was indicated that the parameters of the software were the insurers parameters not the TPA's parameters). We do not inve[sti]gate claims/settle claims. We do investigate eligibility and pre-existing conditions and student status (those type of issues), but we do not determine a claim amount or vary a payment based on our own decisions. We administer based on the Plan Document. We have a specific guideline to follow and we enter the details in the system based on the HCFA/UB82 standard billing from the providers.
The inquirer would like to know if, under these set of facts, the company need to be licensed under New York Insurance Law.
Analysis:
New York State does not have a TPA license requirement. Rather, the specific activities of the TPA must be analyzed to determine whether they require licensing under the New York Insurance Law. In many cases, TPA activities involve acting as an insurance agent or independent adjuster, as defined by the Insurance Law.
N.Y. Ins. Law § 2102 (a) (1) (McKinney 2000 & 2005 Supp.) states:
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 (McKinney 2000 & 2005 Supp.), defines insurance producer and insurance adjuster, in relevant part, as follows:
(a) In this article "insurance agent" means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker[.]
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(c) In this article, "insurance broker" means any person, firm, association or corporation who or which for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or selling any insurance or annuity contract or in placing risks or taking out any insurance, on behalf of an insured other than himself, herself, or itself or on behalf of any licensed insurance broker [.]
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(g) In this article, "adjuster" means any "independent adjuster" or "public adjuster" as defined below:
(1) 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...
Based on the inquirer's representations, Medical Claims Management Corporation does not negotiate or enter into insurance contracts and, thus, need not be licensed as an insurance agent or broker. The next question is whether Medical Claims Management Corporation qualifies as an independent adjuster. The department has previously opined that where the actions are of a "ministerial function" (OGC Opinion # 01-06-36) or where there is no "discretionary authority" used by the TPA (OGC Opinion # 05-07-06) then the TPA need not qualify as an adjuster. Where Medical Claims Management Corporation just plugs in data, they are performing "ministerial functions" and are not considered adjusters. Further, the performance of a check on pre-existing condition or student status is not considered adjusting actions. Rather Medical Claims Management Corporation is just acting under the insurer's guidelines and is, thus, acting "without discretion." However, if the Plan Document gives them any discretion or greater role in the payment of claims they may be adjusting. Please note also that an entity adjusting claims for a Self-Funded plan would be acting for an insurer, albeit an exempt one, and would have to be licensed.
In summation, under the activities described by the inquirer, Medical Claims Management Corporation does not qualify under Insurance Law as an insurance agent, broker, or independent adjuster. Therefore, Medical Claims Management Corporation does not have to be licensed by the Department.
For further information please contact Principal Attorney Alan Rachlin at the New York City Office.