New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

Eliot Spitzer
Governor

Eric R. Dinallo
Superintendent

The Office of General Counsel issued the following opinion on October 3, 2007, representing the position of the New York State Insurance Department.

Re: Service Provider Contracts

Question Presented:

Pursuant to the acquisition of ABC HMO by XYZ Insurer, may XYZ Insurer automatically switch ABC HMO’s service providers from one provider plan to another without the providers’ prior knowledge and approval?

Conclusion:

In general, New York Public Health Law governs provider contracts with health maintenance organizations (“HMOs”) such as ABC. Therefore, whether or not XYZ Insurer may automatically switch ABC HMO’s service providers from one provider plan to other provider plans, without the providers’ prior knowledge and approval, depends on the requirements in the Public Health Law, as well as the contract between the provider and the HMO.

Facts:

The inquirer reports that he is a service provider for ABC HMO, and that pursuant to the merger between ABC HMO and XYZ Insurer, XYZ Insurer has automatically switched him to preferred provider organization (“PPO”), exclusive provider organization (“EPO”), and point of service (“POS”) provider plans without his prior knowledge or approval. The inquirer asks whether XYZ Insurer’s action is legal, and whether ABC HMO may drop providers who refuse to enroll with XYZ Insurer.

Analysis:

The inquirer asks whether, in light of XYZ Insurer’s merger with ABC HMO (the HMO for which he currently provide services), XYZ Insurer may automatically switch the inquirer to PPO,1 EPO2 or POS3 provider plans without the inquirer’s prior knowledge or approval. As a preliminary matter, the Insurance Department notes that XYZ Insurer has acquired, not merged with, ABC HMO.

Article 71 of the Insurance Law addresses mergers, consolidations and acquisitions. However, that Article does not address health care provider contracts or notices. Instead, provider contracts with HMOs such as ABC HMO are governed by the New York Public Health Law. The New York State Department of Health, and not the Insurance Department, interprets the Public Health Law. Therefore, whether XYZ Insurer may switch the inquirer to other provider plans without his prior knowledge or approval may depend on the terms of the contract the inquirer has with ABC HMO, as well as requirements in the Public Health Law. The inquirer is urged to forward the inquiry to the Department of Health for its opinion on this issue.

Further, in light of the fact that there appears to be a question regarding XYZ Insurer’s action in regard to the provider contract that the inquirer has signed with ABC HMO, please note that the Insurance Department handles complaints against insurers. Therefore, we urge the inquirer to review the terms of his provider contract. If, after reviewing the provider contract, the inquirer still believes that XYZ Insurer has violated the contract’s terms, the inquirer may direct a complaint to the New York State Insurance Department’s Consumer Services Bureau, 25 Beaver Street, 5th Floor, New York, NY 10004.

For further information, you may contact Associate Attorney D. Monica Marsh at the New York City office.

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1 This plan typically involves a contract that provides the subscriber with the option of obtaining treatment through a provider network for a lower cost to the subscriber.

2 Usually, this plan is similar to a PPO, except that the subscriber has no option.  There is only coverage for treatment obtained from providers in the network.

3 Typically, this plan is offered by HMOs, and provides the subscriber with the option of seeing providers outside of the HMO's provider network, although there is greater cost to the subscriber.