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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. 08-09-03

The Office of General Counsel issued the following opinion on September 17, 2008 representing the position of the New York State Insurance Department.

Re: Claims Administrator as Independent Adjusters

Questions Presented:

1. Is dental insurance a kind of accident and health insurance?

2. Must the employees of a claims administrator who will actually review and adjust claims be licensed as independent adjusters?

Conclusions:

1. Yes. Dental insurance is included within “accident and health insurance”, as that kind of insurance is defined in N.Y. Ins. Law § 1113(a)(3) (McKinney 2008).

2. Yes. Each individual employee of the claims administrator who actually engages in the adjustment of claims, as well as the claims administrator, must be licensed as an independent adjuster. In addition, the claims administrator might have to register as a utilization review agent.

Facts:

A life insurer is considering offering dental insurance. The policy will include preventive/diagnostic services, as well as restorative services. It is the insurer’s intention, if the product is offered, to utilize the services of a third party claims administrator. The inquirer describes as follows the anticipated claims handling:

Regarding claims, any service or treatment that is expected to exceed $200 requires pre-determination from the proposed administrator prior to the date when treatment has begun. The Pre-determination must include: a) complete list of the services to be done using the ADA [i.e. American Dental Association] codes; b) itemized cost of each service; c) any necessary records, including x-rays, for evaluation of the proposed treatment plan. The proposed administrator will review the treatment plan and estimate what will be paid under the dental plan. If the proposed administrator does not agree with a treatment plan, they have the right to base the payments on treatment suited to the insured person's condition by applying accepted standards of dental practice.

The inquirer asks: (1) whether such dental insurance is encompassed within the New York Insurance Law’s definition of health insurance, and (2) whether the individual employees of the claims administrator must be licensed as independent adjusters, or whether licensure of the claims administrator as an independent adjuster would suffice.

Analysis:

According to the records of the Insurance Department, the insurer is licensed to transact the business of life insurance, annuities, and accident and health insurance.

Insurance Law § 1113(a)(3), which is relevant to the inquiry, defines “accident & health insurance” as:

(i) insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workers' compensation law, except as specified in item (ii) hereof; and (ii) non-cancellable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but excluding insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective date or renewal date.

The type of insurance that the insurer is considering would constitute insurance against an ailment of or injury to a particular body part, and thus would come within the definition set forth in Insurance Law § 1113(a)(3). Accordingly, the insurer may, without modification of its license, issue policies of the type contemplated, subject to policy form approval by the Insurance Department in accordance with Insurance Law § 3201(b).

Insurance Law § 2101(g)(1), too, is relevant to the inquiry. That statute defines an “independent adjuster” in pertinent part as:

[A]ny 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 . . . .

Insurance Law § 2108(a)(3) prohibits acting as an independent adjuster without a license.

Since the services being provided by the claims administrator here are within the definition of adjusting, an independent adjuster’s license is required. Insurance Law § 2101(g)(1) also requires those individuals who actually adjust on behalf of the adjuster to be so licensed.

Insurance Law § 4900(h) & (i), which define “utilization review” and “utilization review agent” respectively, also may be relevant to the inquiry:

(h) "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. For the purposes of this article none of the following shall be considered utilization review: . . . (3) The review of the appropriateness of the application of a particular coding to a patient, including the assignment of diagnosis and procedure; (4) Any issues relating to the determination of the amount or extent of payment other than determinations to deny payment based on an adverse determination; and (5) Any determination of any coverage issues other than whether health care services are or were medically necessary.

(i) "Utilization review agent" means any insurer subject to article thirty-two or forty-three of this chapter and any municipal cooperative health benefit plan certified pursuant to article forty-seven of this chapter performing utilization review and any independent utilization review agent performing utilization review under contract with such insurer or municipal cooperative health benefit plan.

Based upon the information provided in the inquiry, the services provided by the claims administrator might constitute utilization review, and the administrator might also have to register as a utilization review agent. As the Insurance Department has previously stated, it is a question of fact as to whether the services of an entity registered as a utilization review agent also require licensing as an independent adjuster. See Opinions of the Office of General Counsel dated, July 9, 2002 and March 9, 2005. At the present time, the Department lacks sufficient facts to render an opinion on that issue.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.