The Office of General Counsel issued the following opinion on June 24, 2004 representing the position of the New York State Insurance Department.

Re: Medicare Prescription Drug, Improvement and Modernization Act (MMA), Prompt Pay Law

Question Presented:

Has the New York Prompt Pay Law, New York Insurance Law § 3224-a (McKinney 2000), been preempted by the enactment of the MMA?


Since the New York Prompt Pay Law did not previously regulate payments under Medicare+Choice, any change in Federal statutes is of no effect in this regard.


Since this was a general inquiry, no facts were presented.


The inquirer's organization is a Prepaid Health Service Plan with a Certificate of Authority from the Commissioner of Health in accordance with New York Public Health Law § 4403-a (McKinney 2002 and 2004 Supplement).

The scope of the New York Prompt Pay Law is set forth in New York Insurance Law § 3224-a:

In the processing of all health care claims submitted under contracts or agreements issued or entered into pursuant to articles thirty-two, forty-two and forty-three of this chapter and article forty-four of the public health law and all bills for health care services rendered by health care providers pursuant to such contracts or agreements, any insurer or organization or corporation licensed or certified pursuant to article forty-three of this chapter or article forty-four of the public health law shall adhere to the following standards: . . . .

Medicare+Choice is a program of managed care for Medicare beneficiaries established by Public Law No. 105-33 (1997) and regulated by 42 U.S.C.A. § 1395w-21 et seq. (West 2003 and 2004 Supplement) and the regulations promulgated thereunder. Section 232 of the MMA, Public Law No. 108-173 (2003), titled "Avoiding Duplicative State Regulation", amended 42 U.S.C.A. § 1395w-26(b)(3) (West 2004 Supplement) to read:

Relation to State laws. The standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA [Medicare Advantage] plans which are offered by MA organizations under this part.

Prior to the enactment of MMA § 232, the former version of the preemption statute, 42 U.S.C.A. § 1385w-26(b)(3) (West 2003), only preempted state laws and regulations to the extent that such laws and regulations were inconsistent with federal enactments. In effectuating then 42 U.S.C.A. § 1395w-26(b)(3), the United States Department of Health and Human Services (HHS) promulgated 42 C.F.R. § 422.402(b) (1998):

Specific preemption. As they might otherwise apply to the M+C plans of an M+C organization in a State, State laws and regulations pertaining to the following areas are specifically preempted by this part: (1) Benefit requirements, such as mandating the inclusion in an M+C plan of a particular service, or specifying the scope or duration of a service . . . . State cost-sharing standards with respect to any benefits are preempted only if they are inconsistent with this part . . . . (2) Requirements relating to inclusion or treatment of providers and suppliers. (3) Coverage determinations (including related appeal and grievance processes for all benefits included under an M+C contract). Determinations on issues other than whether a service is

covered under an M+C contract, and the extent of enrollee liability under the M+C plan for such a service, are not considered coverage determinations for purposes of this paragraph.

As of now, HHS has not modified 42 C.F.R. § 422.402.

Since, in accordance with 42 U.S.C.A. § 1385w-26(b)(3) as originally enacted and 42 C.F.R. § 422.402(b), the Department did not approve contract forms issued to Medicare+Choice beneficiaries, New York Insurance Law § 3224-a was not applicable. Accordingly, the modifications to 42 U.S.C.A. § 1385w-26(b)(3) made by § 232 of the MMA do not affect the extent and scope of the New York Prompt Pay Law.

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