New York State
Insurance Department


ISSUED: 3/20/2000

FOR IMMEDIATE RELEASE

LEVIN CLARIFIES RESPONSIBILITY FOR LATE PAYMENTS
MADE BY INDEPENDENT PRACTICE ASSOCIATIONS

             Superintendent of Insurance Neil D. Levin today reminded HMOs and insurance companies that they are fully responsible for compliance with the state’s Prompt Pay Law, even in cases where contracts are in place with outside entities that process claims, including Independent Practice Associations.

            "Our primary concern is to have New York State consumers and providers reimbursed in a timely manner," said Levin. "This directive makes it clear to the insurers that they will be held accountable for any late payments."

            Under the state’s Prompt Pay Law, all insurers are required to pay undisputed claims and bills within 45 days of receipt. Therefore, Levin said that insurers are ultimately responsible for compliance with this law, which includes the payment of interest due on the late claim and any fines imposed by the Department for violations. The Department’s directive is outlined in the Department’s Circular Letter #12.

            In an effort to spread financial risk, many HMOs are engaging in risk-sharing arrangements with Independent Practice Associations (IPAs). These entities accept and manage risk for the HMO and accept capitated payments. IPAs range in size from small physician practices to large multi-specialty organizations with hundreds of physician members. However, when an IPA is unable to manage the risk adequately and incurs enormous losses, this arrangement can seriously impact the HMO’s solvency – placing consumers at risk of losing their coverage.

            To address this issue, the Department recently proposed Regulation 164, which is currently open for regulatory review and public comment. The regulation addresses an insurer’s obligation to assess the financial responsibility of the provider demonstrated by a financial security deposit equal to12.5% of the estimated annual capitation. The ability of the provider to meet this financial security deposit demonstrates that it is able to assume risk and absorb potential losses.


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