NEW NO-FAULTREGULATIONS TOTAKE EFFECT APRIL1 IN NY CARACCIDENTS CASES David M. Barshay New York Law Journal 02/14/13
• 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 administrations 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 departments 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 Superintendents 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.
Phantom Billing, Over-BillingWith regard to billing for services not actually performed and/orbilled in excess of the New York State Workers Compensationfee schedule, the current law requires insurers to pay for theseclaims if they fail to timely process such, either through atimely denial or verification request. The amendment adds twonew subdivisions to section 65-3.8, providing that no paymentis due where the treatments were not actually provided or tothe extent that the fees charged exceeded the fee schedule,effectively abrogating the Court of Appeals holding in Fair PriceMedical Supply v. Travelers Indem., 10 NY3d 556 (2008).Specifically, Subdivisions (g) through (j) of section 65-3.8 arere-lettered subdivisions (i) through (l) and new subdivisions(g)??and (h) are added to read as follows:(1) Proof of the fact and amount of loss sustained pursuant toInsurance Law section 5106(a) shall not be deemed suppliedby an applicant to an insurer and no payment shall be due forsuch 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 insurers 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 consumers 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 sustainedshall not be deemed to be received by the insurer in the firstinstance, a condition precedent to coverage, when theapplicant for benefits has billed in excess of the mandated feeschedule and/or for services not rendered. Further, andcrucially, amid concernsthat the new amendment would result in the denial of a claimin its entirety when the applicant for benefits has billed inexcess of the mandated fee schedule, not just to the extent ofthe excess, the Superintendent has clearly stated that only theexcess portion of an excessive bill is not due, rather than theentire bill.This amendment, applicable to medical services rendered onor after April 1, 2013, will have a tremendous impact on thecurrent state of no-fault law.
Time Limit for RespondingCurrently, an insurer is required, within 30 days of receiving ano-fault claim from a health care provider, to pay or deny theclaim, or, within 15 days, send a request for additionalinformation to verify the claim. Once the insurer receivesverification, it has 30 additional days to pay or deny the claim.However, there is currently no statutory deadline for a providerto respond to a verification request. Moreover, an insurer is notpermitted to deny or close a claim if it never receives therequested verification. As a result, some claims remain open,or tolled, indefinitely. This can become very costly for insurersas under the law, insurers must pay a very high interest rateon delayed payments.The amendment addresses this issue by setting a strictdeadline for responding to the insurers verification request.The healthcare provider must now provide a response within120 days of an insurers verification request, or providereasonable 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 applicants 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 applicants 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 insurers non-substantive technical or immaterial defect or omission, as well as an insurers failure to comply with a prescribed time frame, shall not negate an applicants 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 applicants 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 beburdened with additional paperwork and internal procedurechanges, as they will now be required to provide additionaljustification for non-compliance and to ensure timeliness oftheir responses. However, insurers will share in this burden, asthe amendment mandates that they must notify theirpolicyholders of the new time-frame requirement and thatfailure to adhere to the requirement may result in a denial ofthe claim.Critically, there are several important exceptions to the 120-day verification rule. The new provision will not apply to aprescribed form (NF-Form), a medical examination request, oran examination under oath request.16 This carve-out shouldprovide some relief to applicants, since a large percentage ofverification requests involve these items. However, because itis standard practice in the industry for insurers to requestmultiple items in one verification request, it raises the questionof whether the 120-day deadline applies to a single requestthat contains both exempted and non-exempted items.Additionally, the amended regulation explicitly stipulates
that the applicant is only required to provide, within 120 daysof the initial request, only such verification that is in theapplicants possession or control, or provide written proofproviding reasonable justification for the failure to comply.17Finally, it is also important to note that the new provisionregarding verification requests also provides that "an insurersfailure to comply with a prescribed time frame, shall notnegate an applicants obligation to comply with the request ornotice."Technical DefectsUnder the current no-fault law, if there is an insignificant, non-substantive or technical defect in an insurers otherwisepresumably valid verification request or denial, the applicantmay seek to challenge its legitimacy through the courts orarbitration.19 In an effort to cut down on what the Departmentof Financial Services views as unnecessary litigation and delay,the new amendment explicitly provides that an applicantsobligation 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 insurers 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 insurers non- substantive technical or immaterial defect or omission, as well as an insurers failure to comply with a prescribed time frame, shall not negate an applicants 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.