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

David A. Paterson
Governor

James J. Wrynn
Superintendent

OGC Op. No. 10-12-17

The Office of General Counsel issued the following informal opinion on December 22, 2010, representing the position of the New York State Insurance Department.

Re: Payment of Health Insurance Claims

Questions Presented:

1. Does an insurer violate the Prompt Pay requirements set forth in N.Y. Ins. Law § 3224-a (McKinney 2006 and Supp. 2010) if, when payment is to be made on a per case basis, it requests that a hospital submit itemized bills?

2. Does an insurer violate Insurance Law Article 49 (McKinney 2007 and Supp. 2010) or N.Y. Pub. Health Law Article 49 (McKinney 2002 and Supp. 2010) if it makes an adverse determination based on a lack of access to a health care provider’s medical records and treats the provider’s later submission of such records as an appeal?

3. Does ERISA preempt Insurance Law § 3224-a (the Prompt Pay Law)?

Conclusions:

1. No. An insurer’s request for itemized bills does not in itself violate the Prompt Pay Law, as long as it is made within 30 days of the insurer’s receipt of the claim.

2. No. An insurer does not violate Insurance Law Article 49 if it makes an adverse determination based on a lack of reasonable access to a health care provider’s medical records and treats a provider’s later submission of such records as an appeal, as long as it has provided reasonable notice to the insured, the insured’s designee or the insured’s health care provider and has complied with Insurance Law § 4905(i). The Insurance Department will not opine on Public Health Law Article 49.

3. The inquirer did not provide the Department with sufficient information to enable the Department to respond to her query. Questions concerning the preemptive effect of ERISA rules may be addressed to the United States Department of Labor.

Facts:

The New York City Health and Hospitals Corporation (“HHC”) owns and operates several general hospitals in New York City that are subject to N.Y. Public Health Law Article 28 (McKinney 2007 and Supp. 2010). HHC is a municipal corporation operated in accordance with the New York City Health and Hospitals Corporation Act, N.Y. Unconsol. Law § 7381 et. seq. (McKinney Supp. 2010). While the inquirer’s queries referenced several instances in which the inquirer believes that certain insurers have acted improperly in handling claims, the inquirer subsequently requested that the Department respond to general questions regarding the Prompt Pay Law, utilization review requirements and ERISA. Thus, the following is a general response to the inquirer’s questions.

Analysis:

I. Prompt Payment of Claims

The inquirer first asks whether an insurer violates the Prompt Pay Law if it requests that a hospital submit itemized bills when payment will be on a per case basis. 1

Insurance Law § 3224-a sets forth standards for prompt, fair and equitable settlement of claims for health care and payments for health care services. Insurance Law § 3224-a(a) states, in relevant part, as follows:

Except in a case where the obligation of an insurer or an organization or corporation licensed or certified pursuant to article forty-three or forty-seven of this chapter or article forty-four of the public health law to pay a claim submitted by a policyholder or person covered under such policy (“covered person”) or make a payment to a health care provider is not reasonably clear, or when there is a reasonable basis supported by specific information available for review by the superintendent that such claim or bill for health care services rendered was submitted fraudulently, such insurer or organization or corporation shall pay the claim to a policyholder or covered person or make a payment to a health care provider within thirty days of receipt of a claim or bill for services rendered that is transmitted via the internet or electronic mail, or forty-five days of receipt of a claim or bill for services rendered that is submitted by other means, such as paper or facsimile.

Insurance Law § 3224-a(b) in turn provides:

In a case where the obligation of an insurer or an organization or corporation licensed or certified pursuant to article forty-three or forty seven of this chapter or article forty-four of the public health law to pay a claim or make a payment for health care services rendered is not reasonably clear due to a good faith dispute regarding the eligibility of a person for coverage, the liability of another insurer or corporation or organization for all or part of the claim, the amount of the claim, the benefits covered under a contract or agreement, or the manner in which services were accessed or provided, an insurer or organization or corporation shall pay any undisputed portion of the claim in accordance with this subsection and notify the policyholder, covered person or health care provider in writing within thirty calendar days of the receipt of the claim:

(1) that it is not obligated to pay the claim or make the medical payment, stating the specific reasons why it is not liable; or

(2) to request all additional information needed to determine liability to pay the claim or make the health care payment.

In accordance with the above, generally an insurer must pay a claim or bill for health care services that is transmitted via the internet or electronic mail within 30 days of receipt of the claim or bill, or within 45 days of receipt of a claim or bill for services rendered that is submitted by other means, such as paper or facsimile. Where an insurer’s obligation to make payment is not “reasonably clear,” the insurer must pay any undisputed portion within the 30 or 45-day timeframe and notify the policyholder, covered person or health care provider within 30 days of the receipt of the claim that: (1) an obligation to pay does not exist and state the specific reasons why, or (2) additional information is necessary to determine liability.

Moreover, 11 NYCRR Part 217 (Regulation 178), which sets forth guidelines for the prompt payment of health insurance claims, is relevant to your inquiry. 11 NYCRR § 217.2(a) states that an insurer, in order to make a determination as to its obligation to pay a claim, may request additional information that is different from the information that is on the claim form. That provision reads, in relevant part, as follows:

(a) A claim for payment of medical or hospital services submitted on paper shall be deemed complete if it contains the minimum data elements set forth in this Part…Even if the claim is deemed complete, a payer may, pursuant to the provision of section 3224-a(b) of the New York Insurance Law, request specific additional information, distinct from information on the claim form, necessary to make a determination as to its obligation to pay such claim.

In addition, 11 NYCRR Part 17 (Regulation 88), which addresses the contents of standard health insurance claims forms and requests for additional information, is also relevant to the inquiry. Section 17.3 provides, in relevant part, as follows:

The establishment of any standard claim form by the superintendent shall not preclude a commercial insurer or an article IX-C [recodified as Article 43] corporation from obtaining any necessary additional information regarding a claim from the claimant, provider of health care or treatment, or certifier of coverage. . .[N]ecessary additional information should be requested only when a claim cannot be resolved without obtaining such information or certification of coverage is needed.

Here, even where an insurer pays on a per case basis, an itemized bill may provide the insurer with the additional information that it needs to determine its liability (e.g., when necessary to ascertain whether an insurer has applied the correct code to a particular service). Under such circumstances, an insurer may request an itemized bill within the timeframes set forth in the Prompt Pay Law.

However, an insurer that fails to pay the undisputed portion of the claim, if any, within the requisite timeframes and requests additional information more than 30 days after receiving the claim would stand in violation of the Prompt Pay Law. Violation of the Prompt Pay Law subjects the non-complying insurer to penalties including payment of the claim with interest if the insurer is liable for payment of the claim. The applicable interest rate is 12% per annum or the corporate tax rate set by the New York State Division of Taxation and Finance, whichever is greater. See Ins. Law § 3224-a(c). Interest is calculated from the date the insurer should have paid the claim.

II. Utilization Review Requirements 2

The second question asks whether an insurer violates Insurance Law Article 49 or Public Health Law Article 49 where it makes an adverse determination 3 based on a lack of reasonable access to a health care provider’s medical records and treats the provider’s later submission of such records as an appeal.

N.Y. Ins. Law § 4905 (McKinney 2007) sets forth required and prohibited practices for utilization review agents. Subsections (g) and (k) thereof are relevant to the inquiry. Those provisions read:

(g) When making prospective, concurrent, and retrospective determinations, utilization review agents shall collect only such information as is necessary to make such determination and shall not routinely require health care providers to numerically code diagnoses or procedures to be considered for certification or routinely request copies of medical records of all patients reviewed. During prospective or concurrent review, copies of medical records shall only be required when necessary to verify that the health care services subject to such review are medically necessary. In such cases, only the necessary or relevant sections of the medical record shall be required. A utilization review agent may request copies of partial or complete medical records retrospectively. This subsection shall not apply to health maintenance organizations licensed pursuant to article forty-three of this chapter or certified pursuant to article forty-four of the public health law.

* * *

(k) A utilization review agent shall not base an adverse determination on lack of reasonable access to a health care provider’s medical or treatment records unless the utilization review agent has provided reasonable notice to the insured, the insured’s designee or the insured’s designee or the insured’s health care provider, in which case the insured must be notified, and has complied with all provisions of subsection (i) of this section.

Thus, when making an adverse determination, a utilization review agent may only collect information necessary to make the determination, and cannot base an adverse determination on a lack of reasonable access to a health care provider’s medical records unless the utilization review agent has provided reasonable notice to the insured, the insured’s designee or the insured’s health care provider and has complied with Insurance Law § 4905(i).

Any adverse determination gives rise to a right to appeal for the insured, the insured’s designee or the insured’s health care provider. See Ins. Law § 4904 (regarding appeals from adverse determinations rendered by utilization review agents).

Therefore, an insurer would not violate Article 49 if it makes an adverse determination based on a lack of reasonable access to a health care provider’s medical records and treats a provider’s later submission of such records as an appeal, as long as it has provided reasonable notice to the insured, the insured’s designee or the insured’s health care provider and has complied with Ins. Law § 4905(i).

Although Public Health Law Article 49 is similar to Insurance Law Article 49, the interpretation and enforcement of the Public Health Law is within the purview of the Department of Health, and accordingly the Insurance Department does not opine on Public Health Law Article 49. For direction on matters involving the Public Health Law the inquirer was directed to contact the:

New York State Department of Health
Corning Tower
Empire State Plaza
Albany, NY 12237

III. ERISA Preemption

The inquirer’s last question asks whether ERISA preempts New York’s Prompt Pay Law. Generally, ERISA does not preempt state regulation of insurers. However, because the inquirer did not explain or elaborate on why ERISA and the Prompt Pay Law would be incompatible, we can not answer the inquirer’s question as posed.

Questions concerning ERISA may be addressed to:

Employee Benefit Security Administration
United States Department of Labor
31 Whitehall Street
New York, NY 10004

With respect to the specific insurers that the inquirer mentioned in her queries, the inquirer may wish to file a complaint electronically through the New York State Insurance Department website located at http://www.ins.state.ny.us or by mail at:

Consumer Services Bureau
NYS Insurance Department
One Commerce Plaza
Albany, NY 12257

or

Consumer Services Bureau
NYS Insurance Department
25 Beaver Street
New York, NY 10004-2319

For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.

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1 Under a per case payment regime, the insurer uses a flat rate for a particular service.

2 Insurance Law § 4900(h) and Public Health Law § 4900(8) define the term “utilization review” as “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. . . .”

3 Insurance Law § 4900(a) and Public Health Law § 4900(1) define “adverse determination” as “a determination by a utilization review agent that an admission, extension of stay, or other health care service, upon review based upon the information provided, is not medically necessary.”