The Office of General Counsel issued the following opinion on July 21, 2004, representing the position of the New York State Insurance Department.
Re: Independent Adjuster Licensing
Issues:
1. May a medical expense indemnity corporation, which is licensed in accordance with New York Insurance Law § 4302(b) (McKinney 2000) and specializes in vision care services, contract with a Health Maintenance Organization, having a Certificate of Authority from the Commissioner of Health in accordance with New York Public Health Law § 4403 (McKinney 2002), in order to make its network of providers available to the HMO members who require vision care services?
2. Would a director, officer or employee of such medical service corporation who investigates or resolves such claims be exempt from the requirement of obtaining a license as an independent adjuster?
Conclusions
1. There is no prohibition in the New York Insurance Law (McKinney 2000 and 2004 Supplement) and the regulations promulgated thereunder that would prevent a medical expense indemnity company from so contracting with an HMO. The contracts between the HMO and medical expense indemnity corporation would be subject to approval by both the Insurance Department and the Health Department.
2. A director, officer or employee of the medical expense indemnity corporation, as well as the corporation itself, would have to be licensed as an independent adjuster in order to investigate or resolve claims of the HMO.
Facts:
A firm operates a medical expense indemnity company in New York that has put together a network of health care providers of vision care services and desires to contract with New York HMOs to make its network available to such HMOs. The HMO would compensate the medical expense indemnity company on a capitated basis. Information regarding how the New York medical expense indemnity company compensates the providers is not provided.
Analysis:
Sharing of Networks
An HMO is defined in New York Public Health Law § 4401 (McKinney 2002):
1. "Health maintenance organization" . . . means any person, natural or corporate, or any groups of such persons who enter into an arrangement, agreement or plan or any combination of arrangements or plans which propose to provide or offer, or which do provide or offer, a comprehensive health services plan.
2. "Comprehensive health services plan" . . . means a plan through which each member of an enrolled population is entitled to receive comprehensive health services in consideration for a basic advance or periodic charge. . . .
3. "Comprehensive health services" means all those health services which an enrolled population might require in order to be maintained in good health . . . . Such term may be further defined by agreement with enrolled populations providing additional benefits necessary, desirable or appropriate to meet their health care needs.
New York Public Health Law § 4403(1) (McKinney 2002) provides, in pertinent part:
The commissioner [of health] shall not issue a certificate of authority to an applicant therefor unless the applicant demonstrates that: . . . (c) it is financially responsible and may be expected to meet its obligations to its enrolled members. For the purpose of this paragraph, 'financially responsible' means that the applicant shall assume full financial risk on a prospective basis for the provision of comprehensive health services, . . . within the area served by the plan, except that it may require providers to share financial risk under the terms of their contract, it may have financial incentive arrangements with providers or it may obtain insurance or make other arrangements for the cost of providing comprehensive health services to enrollees; any insurance or other arrangement required by this paragraph shall be approved as to adequacy by the superintendent as a prerequisite to the issuance of any certificate of authority by the commissioner; . . .
Financial sharing arrangements by HMOs, however, are regulated by both the Insurance Department in accordance with N.Y. Comp. Codes R. & Regs. tit. 11, Part 101 (Reg. 164) (2002), and the Department of Health in accordance with N.Y. Comp. Codes R. & Regs. tit. 10, § 98-1.5(b)(6)(iv) (2001).1 Regulation 164 provides, N.Y. Comp. Codes R. & Regs. tit. 11, §§ 101.2 (2002) and 101.3(h) (2002):
Except as otherwise provided, this Part applies to entities certified under article 44 of the Public Health Law, insurance companies authorized to do accident and health insurance in the State of New York and corporations licensed pursuant to article 43 of the Insurance Law which enter into agreements to share financial risk through a capitation arrangement with health care providers. This regulation does not apply to risk sharing agreements among entities defined as insurers herein.
An "insurer" shall mean an insurance company licensed to do accident and health insurance, a corporation licensed pursuant to article 43 of the Insurance Law or an entity possessing a certificate of authority under article 44 of the Public Health Law.
Risk sharing arrangements between insurers are regulated by N.Y. Comp. Codes R. & Regs. tit. 10, § 98-1.8(b):
Any amendments to the risk-sharing arrangements contained in any contracts between the HMO and insurers shall not be entered into without prior approval of the commissioner and the superintendent. All new contracts with new types of health services providers, and material amendments to existing contracts between the HMO and health services providers, shall require prior approval and be submitted to the commissioner at least 30 days in advance of their anticipated execution.
Accordingly, the proposed arrangement between the medical service corporation and any HMO should be submitted to both the Insurance and Health Departments. The submission to the Insurance Department should be made to:
Mr. Charles Lovejoy
Supervising Insurance Examiner
New York State Insurance Department
25 Beaver Street
New York, NY 10004.
The submission to the Health Department should be made to:
Ms. Valencia Lloyd
Director
Bureau of Managed Care Certification
Department of Health
Tower Building
Empire State Plaza
Albany, NY 12237.
While New York Insurance Law § 4325(f) (McKinney 2000) permits the medical service corporation to compensate its network providers on a capitated basis, the requirements of Regulation 164 would be applicable.
Licensure as an Adjuster
New York Insurance Law § 2101(g)(1) (McKinney 2000), as amended by 2003 N.Y. Laws 692, defines the term "independent adjuster":
The term "independent adjuster" means any 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, except that such term shall not include: (A) any officer, director or regular salaried employee of an authorized insurer, or any manager thereof, individual or corporate . . .; (B) any officer, director or regular salaried employee of an authorized health insurer . . . or any manager thereof, individual or corporate, when the claim to be adjusted is submitted for payment under a health benefit plan that is issued or administered by another health insurer . . . within the same holding company system as the authorized insurer or health maintenance organization adjusting the claim; . . . .
A director, officer or employee of the health service corporation adjusting claims made to the health service corporation would not have to be licensed as an independent adjuster. In the situation postulated here, however, if the director, officer or employee of the medical service corporation could be investigating or resolving claims of an unaffiliated entity, the HMO, such individuals, as well as the corporation, would have to be licensed as independent adjusters.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.
1 While the Insurance Department does have jurisdiction over subscriber contracts issued by HMOs in accordance with New York Public Health Law § 4406(1) (McKinney 2002), regulation of medical care, including those aspects of contracts with health care providers, resides with the Health Department.