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

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

OGC Op. No. 08-07-20

The Office of General Counsel issued the following opinion on July 28, 2008 representing the position of the New York State Insurance Department.

Re: Usual and customary or reasonable rates for ambulance services

Question presented:

Who establishes the UCR rates for out-of-network ambulance service providers: the ambulance service provider, or a health maintenance organization (“HMO”) or insurer?

Conclusion:

The HMO or insurer, if so provided in the policy or contract, establishes the UCR rates for out-of-network ambulance service providers. New York Insurance Law §§ 3216(i)(24), 3221(l)(15) (McKinney 2006 & Supp. 2008) and 4303(aa) (McKinney 2007 & Supp. 2008) require an insurer, in the absence of a participating provider contract, to pay for certain ambulance services at the UCR rate, which insurers typically establish using claims data collected by the insurer (or data purchased by a data collection agency) and set forth in the insurance policy or contract. In addition, the statutory provisions explicitly prohibit an ambulance company from balance billing1 a patient when an authorized New York insurer or HMO that provides major medical or similar comprehensive-type coverage has made to it a partial payment.

Facts:

The inquirer reports that he manages an emergency ambulance service. The ambulance service charged $701.00 for emergency service that it provided to an HMO’s member. The HMO subsequently paid the ambulance service $456.35 on the basis that that amount represented the UCR rate. The inquirer then sought to recover on behalf of the ambulance service $244.65 by filing a complaint with the Department’s Consumer Services Bureau (“CSB”). Although the HMO subsequently paid, the inquirer appeals to the Department’s Office of General Counsel (“OGC”) CSB’s determination that “nothing in the New York Insurance Law or Regulations [define] what a health insurer should pay to a non-contracted provider. Consequently, we cannot require [the HMO] to make additional payment on the claim in question. By law, HMO members may not be held financially responsible.”

Analysis:

Most health insurance policies pay providers who are not part of the insurer’s network for services rendered on a UCR basis. While the New York Insurance Law and the regulations promulgated thereunder refer to “usual and customary or reasonable” fees, see, e.g., Insurance Law § 3217(a), the Insurance Law and regulations promulgated thereunder do not define those terms or establish UCR fees for specific medical procedures. Instead, UCR fees are typically defined in the insurance policy or contract between the insurer or health maintenance organization (HMO), and the insured. See OGC Opinion dated February 13, 2007. Nevertheless, a “reasonable and customary” fee is defined generally as the “usual fee for a procedure charged by the majority of physicians with similar training and experience within the same geographical area.” See Barron’s Dictionary of Insurance Terms (3rd ed., 1995). While the methods for arriving at that fee vary by insurer, or data purchased from a data collection agency, the Department does not participate in the establishment of UCR fees.

With respect to ambulance service, Insurance Law § 4303(aa) (which applies to an HMO2 and not-for-profit medical and dental indemnity, or health and hospital service corporations), Insurance Law § 3221(l)(15) (which applies to commercial group or blanket accident and health insurance policies), and Insurance Law § 3216(i)(24) (which applies to commercial individual accident and health insurance policies) all contain a similar provision that states:

An insurer shall provide reimbursement for those services prescribed by this section at rates negotiated between the insurer and the provider of such services. In the absence of agreed upon rates, an insurer shall pay for such services at the usual and customary charge, which shall not be excessive or unreasonable.

Put another way, an insurer must reimburse for pre-hospital emergency medical services for the treatment of an emergency condition when the services are provided by an ambulance service issued a certificate of operation pursuant to Public Health Law § 3005. And, the insurer must provide reimbursement for those services at rates negotiated between the insurer and the provider. But in the absence of a participating provider contract (i.e., an out-of-network provider), the insurer must pay for the services at the UCR rate, which may not be excessive or unreasonable. Again, the statutory provisions do not define the terms or establish the UCR fees.

Furthermore, Insurance Law §§ 3216(i)(24), 3221(l)(15), and 4303(aa) explicitly prohibit the ambulance company to balance bill a patient when an authorized New York insurer or HMO that provides major medical or similar comprehensive-type coverage has made to it a partial payment. Indeed, all three of those statutes contain a provision that reads:

Payment by an insurer pursuant to this section shall be payment in full for the services provided. An ambulance service reimbursed pursuant to this section shall not charge or seek any reimbursement from, or have any recourse against an insured for the services provided pursuant to this subsection, except for the collection of copayments, coinsurance or deductibles for which the insured is responsible for under the terms of the policy.

But if a contract that provides major medical or similar comprehensive-type coverage is not involved, Insurance Law §§ 3216(i)(24), 3221(l)(15), and 4303(aa) do not apply, and the ambulance company may bill patients directly. See OGC Opinion dated June 7, 2006. In addition, these provisions do not address a situation where a New York authorized insurer or HMO has denied payment entirely for emergency ambulance services (e.g., where the insurer or HMO maintains that coverage was not in effect, or that treatment was not medically necessary). In such cases, the ambulance company may directly bill the patient.

In his appeal to the OGC, the inquirer claims that it is “without a logical foundation to suggest that…the insurer/carrier is the one to determine the ‘usual and customary charge’ for then there would be no necessity for the qualifying language ‘which shall not be excessive.’”

There is nothing in the legislative history of the statutes discussed above that supports the inquirer’s position. In fact, the Department’s comments on the bill, S. 5213B, 224th Leg. Sess. (NY 2001), which enacted Chapter 506 of the Laws of 2001, and added §§ 3216(i)(24), 3221(l)(15), and 4303(aa) to the Insurance Law, recognized that the legislation actually mandates a payment arrangement (between the provider and insurer or HMO) in the absence of a provider contract:

[We] are concerned with the bill’s attempt to require ambulance service providers to accept the insurer’s rate of payment as payment in full, less contractual copayment, coinsurance or deductible…A provider’s agreement to accept the payor’s reimbursement as payment in full is usually the subject of a participating provider contract between a health plan and the service provider. Pursuant to this bill, the payment arrangement exists even in the absence of a provider contract.3

The inquirer also protests the insurer’s determination that a UCR rate that is 125% of the Medicare rate is “consistent” with the usual and customary standard. He states that there is no precedent in New York State that allows a private commercial insurer to adopt a U.S. Government mandated rate, such as Medicare, or any other state’s or federal department’s rate. Further, he believes that the New York State Legislature would have adopted the term “locally prevailing rate,” rather than “usual and customary” rate, had it not intended an ambulance service to set the UCR rate.4

In sum, there is no definition of “UCR” contained in the Insurance Law or regulations promulgated thereunder, and the insurance policy or HMO contract generally defines the term. However, if an out-of-network provider believes that the reimbursement it receives from an insurer or HMO does not reflect the UCR rate, the provider may submit a written complaint to the Department’s CSB that asks CSB to investigate the method used by the insurer to develop the UCR rate. In those instances, the insurer or HMO would be required to demonstrate how it arrived at the reimbursement rate, and whether the rate reflects the actual UCR rate charged by similar providers in that particular geographic region.

For further information you may contact Senior Attorney Sapna Maloor at the New York City Office.

___________________________________________________________________________________________________

1  “Balance billing” is a billing practice in which the insured is billed for the difference between what the insurer pays and the fee that the provider normally charges. Balance billing is prohibited under most HMO contracts in New York, but may occur when a patient uses the services of out-of-network providers under other managed care arrangements. See Health Insurance Glossary of Terms, http://www.ins.state.ny.us/website1/inshelp/c_hterm.htm.

2  Although HMOs are primarily regulated by the New York State Department of Health, their subscriber contracts are regulated by the Insurance Department as if they were subscriber contracts of not-for-profit medical and dental indemnity, or health and hospital service corporations. See New York Public Health Law § 4406(1) (McKinney 2002 & Supp. 2008).

3  In its comments on the bill, the New York Health Plan Association (HPA), an industry association, voiced similar concerns. HPA had advocated for a default payment rate to address instances where an ambulance service provider and a health plan had no contractual relationship.

4  The inquirer cites to the term “locally prevailing rate” in New York Comp. Codes R. & Reg. (“NYCRR”), tit. 18, § 505.10, which are regulations promulgated by the New York State Department of Social Services, and which pertain to transportation for medical care and services. However, that definition is relevant only to those regulations; the Legislature is not mandated to adopt any definitions that a state agency sets forth in its own regulations. In addition, the inquirer cites to 10 NYCRR § 88-5.2, a Department of Health regulation, to support the claim that the ambulance service provider can demonstrate that its rate has been in effect for two years. The relevance of that point is elusive, but in any event, that regulation by its terms only relates to Helen Hayes Hospital, New York State Veterans’ Home, and Roswell Park Memorial Institute.