New No-Fault Regulations to Take Effect April 1 in NY
Car Accidents Cases
David M. Barshay
New York Law Journal
02-14-2013
For nearly a year now, the industry
has been buzzing about the proposed changes to 11 NYCRR 65-3 (Insurance
Regulation No. 68-C), some speculating that the proposed changes would spell
the end of no-fault insurance as we know it. The proposed Fourth Amendment to
11 NYCRR 65-3 was initially released in May 2012 as part of the Cuomo
administration's aggressive insurance reform campaign aimed at ending no-fault
fraud and stopping the rapid rise in automobile insurance rates.
According to the Department of
Financial Services, the proposed new amendment was cultivated with two
predominant goals in mind: to prevent health care providers from being paid for
services they do not actually provide; and to address certain technical issues
that may be used to prevent a decision on a claim or keep an otherwise faulty
claim open. Both of these issues, according to the department, increase costs
to consumers.
To tackle these issues, the
department's amendment would: (1) do away with certain statutory requirements,
which in effect require insurers to pay for treatments that were never actually
provided or pay more than the established fee schedule for a given service; (2)
prevent health care providers from ignoring requests for verification
concerning the medical necessity of treatment by setting a 120-day deadline to
provide such requested information; and (3) close the apparent loophole that
requires insurers to pay for non-rendered medical services simply because of
technical errors made by those insurers during the claims process.
On the whole, both insurers and applicants
for benefits did not object to the Superintendent's attempts to protect
consumers from unjust depletion of benefits by attempting to streamline the
claims process, limit excessive billing or "phantom billing," and
limit litigation over technicalities in the claims process. There were,
however, concerns that the changes would be placing an unfair and
disproportionate burden on applicants.
Nevertheless, on Jan. 30, 2013, the
proposed amendment was officially adopted and will take effect on April 1,
2013. The amendment adds the following provisions to the existing regulations:
Phantom
Billing, Over-Billing
With regard to billing for services
not actually performed and/or billed in excess of the New York State Workers'
Compensation fee schedule, the current law requires insurers to pay for these
claims if they fail to timely process such, either through a timely denial or
verification request. The amendment adds two new subdivisions to section
65-3.8, providing that no payment is due where the treatments were not actually
provided or to the extent that the fees charged exceeded the fee schedule,
effectively abrogating the Court of Appeals holding in Fair Price Medical
Supply v. Travelers Indem., 10 NY3d 556 (2008).
Specifically, Subdivisions (g) through
(j) of section 65-3.8 are re-lettered subdivisions (i) through (l) and new
subdivisions (g)??and (h) are added to read as follows:
(g) (1) Proof of the fact and amount
of loss sustained pursuant to Insurance Law section 5106(a) shall not be deemed
supplied by an applicant to an insurer and no payment shall be due for such
claimed medical services under any circumstances:
(i) When the claimed medical
services were not provided to an injured party; or
(ii) for those claimed medical
service fees that exceed the charges permissible pursuant to Insurance Law
sections 5108(a) and (b) and the regulations promulgated thereunder for
services rendered by medical providers.
…
(h) With respect to a denial of
claim (NYS Form N-F 10), an insurer's non-substantive technical or immaterial
defect or omission shall not affect the validity of a denial of claim.
As a result, an insurer is no longer
precluded from denying payment on these grounds beyond the statutory period.
The justification for this change is that when providers over-bill or bill for
phantom services, the consumer's no-fault monetary limit, typically $50,000, is
unjustly depleted.
The new regulation does not
explicitly state that billing in excess of the mandated fee schedule or billing
for services not rendered are non-waivable defenses, but rather that proof of
the fact and amount of loss sustained shall not be deemed to be received by the
insurer in the first instance, a condition precedent to coverage, when the
applicant for benefits has billed in excess of the mandated fee schedule and/or
for services not rendered. Further, and crucially, amid concerns that the new
amendment would result in the denial of a claim in its entirety when the
applicant for benefits has billed in excess of the mandated fee schedule, not
just to the extent of the excess, the Superintendent has clearly stated that
only the excess portion of an excessive bill is not due, rather than the entire
bill.
This amendment, applicable to
medical services rendered on or after April 1, 2013, will have a tremendous
impact on the current state of no-fault law.
Time
Limit for Responding
Currently, an insurer is required,
within 30 days of receiving a no-fault claim from a health care provider, to
pay or deny the claim, or, within 15 days, send a request for additional
information to verify the claim. Once the insurer receives verification, it has
30 additional days to pay or deny the claim. However, there is currently no
statutory deadline for a provider to respond to a verification request. Moreover,
an insurer is not permitted to deny or close a claim if it never receives the
requested verification. As a result, some claims remain open, or tolled,
indefinitely. This can become very costly for insurers as under the law,
insurers must pay a very high interest rate on delayed payments.
The amendment addresses this issue
by setting a strict deadline for responding to the insurer's verification
request. The healthcare provider must now provide a response within 120 days of
an insurer's verification request, or provide reasonable justification why it
cannot do so. Should the applicant fail to do one or the other, the amendment
permits an insurer to deny the claim, thus speeding up the claims process and
reducing the number of claims that remain tolled indefinitely.
Specifically, new subdivisions (o)
and (p) are added to section 65-3.5 to read as follows:
(o) An applicant from whom
verification is requested shall, within 120 calendar days from the date of the
initial request for verification, submit all such verification under the
applicant's control or possession or written proof providing reasonable
justification for the failure to comply. The insurer shall advise the applicant
in the verification request that the insurer may deny the claim if the
applicant does not provide within 120 calendar days from the date of the
initial request either all such verification under the applicant's control or
possession or written proof providing reasonable justification for the failure
to comply. This subdivision shall not apply to a prescribed form (NF-Form) as
set forth in Appendix 13 of this Title, medical examination request, or
examination under oath request. This subdivision shall apply, with respect to
claims for medical services, to any treatment or service rendered on or after
April 1, 2013 and with respect to claims for lost earnings and reasonable and
necessary expenses, to any accident occurring on or after April 1, 2013.
(p) With respect to a verification
request and notice, an insurer's non-substantive technical or immaterial defect
or omission, as well as an insurer's failure to comply with a prescribed time
frame, shall not negate an applicant's obligation to comply with the request or
notice. This subdivision shall apply to medical services rendered, and to lost
earnings and other reasonable and necessary expenses incurred, on or after
April 1, 2013.
Further, paragraph (3) of section
65-3.8(b) is amended to read as follows:
(3) Except as provided in
subdivision (e) of this section, an insurer shall not issue a denial of claim
form (NYS form N-F 10) prior to its receipt of verification of all of the
relevant information requested pursuant to [section] sections 65-3.5 and 65-3.6
of this Subpart (e.g., medical reports, wage verification, etc.). However, an
insurer may issue a denial if, more than 120 calendar days after the initial
request for verification, the applicant has not submitted all such verification
under the applicant's control or possession or written proof providing reasonable
justification for the failure to comply, provided that the verification request
so advised the applicant as required in section 65-3.5(o) of this Subpart. This
subdivision shall not apply to a prescribed form (NF Form) as set forth in
Appendix 13 of this Title, medical examination request, or examination under
oath request. This paragraph shall apply, with respect to claims for medical
services, to any treatment or service rendered on or after April 1, 2013, and
with respect to claims for lost earnings and reasonable and necessary expenses,
to any accident occurring on or after April 1, 2013.
In order to comply with this new
regulation, applicants will be burdened with additional paperwork and internal
procedure changes, as they will now be required to provide additional
justification for non-compliance and to ensure timeliness of their responses.
However, insurers will share in this burden, as the amendment mandates that
they must notify their policyholders of the new time-frame requirement and that
failure to adhere to the requirement may result in a denial of the claim.
Critically, there are several
important exceptions to the 120-day verification rule. The new provision will
not apply to a prescribed form (NF-Form), a medical examination request, or an
examination under oath request.16 This carve-out should provide some
relief to applicants, since a large percentage of verification requests involve
these items. However, because it is standard practice in the industry for
insurers to request multiple items in one verification request, it raises the
question of whether the 120-day deadline applies to a single request that
contains both exempted and non-exempted items. Additionally, the amended
regulation explicitly stipulates that the applicant is only required to
provide, within 120 days of the initial request, only such verification that is
in the applicant's possession or control, or provide written proof providing
reasonable justification for the failure to comply.17 Finally, it is
also important to note that the new provision regarding verification requests
also provides that "an insurer's failure to comply with a prescribed time
frame, shall not negate an applicant's obligation to comply with the request or
notice."
Technical
Defects
Under the current no-fault law, if
there is an insignificant, non-substantive or technical defect in an insurer's
otherwise presumably valid verification request or denial, the applicant may
seek to challenge its legitimacy through the courts or arbitration.19
In an effort to cut down on what the Department of Financial Services views as
unnecessary litigation and delay, the new amendment explicitly provides that an
applicant's obligation to comply with a notice or verification request is not
negated—and a denial of claim is not invalidated—due to a non-substantive
technical or immaterial defect contained in any of these documents.
With regard to a denial of claim
form (NYS Form NF-10), subsection 65-3.8 (h) provides that "an insurer's
non-substantive technical or immaterial defect or omission shall not affect the
validity of a denial of claim. The subdivision will be applicable to medical
services rendered, and to lost earnings and other reasonable and necessary
expenses incurred, on or after April 1, 2013."With respect to a
verification request and notice, subsection 65-3.5(p) provides that "an
insurer's non-substantive technical or immaterial defect or omission, as well
as an insurer's failure to comply with a prescribed time frame, shall not
negate an applicant's obligation to comply with the request or notice. This
subdivision shall apply to medical services rendered, and to lost earnings and
other reasonable and necessary expenses incurred, on or after April 1,
2013."
Notably absent from the new
regulation is any definition or description of what constitutes a
"non-substantive technical or immaterial defect or omission." Such
glaring ambiguity will inevitably create a situation where the courts and
arbitrators will be called upon to offer clarification and conclusiveness.
Despite its best efforts, it seems that the Department of Financial Services,
in trying to craft an amendment that would reduce unnecessary litigation and
speed up the resolution of claims, has created a new potential
"loophole" to be litigated for years to come.
David M. Barshay is a member of Baker Sanders, in Garden City. Jennifer L. Zeidner,
a senior associate with the firm, assisted in the preparation of this article.
POSTED BY ATTORNEY RENE
G. GARCIA:
For more
information:- The Garcia Law Firm, P.C. was able to successfully
handle no fault cases. For a free consultation please call us at 1-866-
SCAFFOLD or 212-725-1313.
