New York Proposes Regulation to Standardize Out-of-Network Health Insurance Coverage.

 Written by Attorneys Francine L. Semaya and William K. Broudy

Note: This article is an interpretation of current law and is offered for informational purposes only. This material is not legal advice and should not be construed or used as a substitute for the advice of an attorney.

The New York Attorney General recently reached settlements, effective for five years, with twelve health insurers to permit insureds to know beforehand how much they will be reimbursed for out-of-network treatment. The New York Insurance Department (the "Department") has now proposed a new subsection to Regulation No. 62 (11 NYCRR 52) to standardize and make permanent procedures for determining out-of-network reimbursement rates. The Department will accept public comment on the proposed Regulation.[1]

In addition to bringing transparency and certainty to out-of-network reimbursement rates, the primary objective of the amendment to Regulation 62 is to eliminate conflicts of interest in determining reimbursements rates. This is to be accomplished by using an independent non-affiliated source to establish usual and customary rates ("UCR"). Under the Regulation, insurers are prohibited from using an entity that is owned or controlled or otherwise affiliated with the insurer to determine out-of-network reimbursement rates.

The "usual and customary" out-of-network rate schedule used by an insurer to generate reimbursement rates must fairly and accurately reflect market rates, including that it:

•· fairly and accurately reflects geographic differences in costs;

•· is based on sufficient data, to the extent available, to constitute a representative and statistically valid sample of charge data for the same or comparable service and type of provider;

•· is credible in methodology, data and relationships;

•· includes input from a diverse group of relevant companies, groups, health care providers, and market researchers; and independent research conducted by the source of the data for the UCR schedule to confirm the accuracy of all data submitted; and

•· is updated periodically to reflect changes in health care provider charges, but no less frequently than once in any consecutive twelve-month period.[2]

The Regulation introduces the term "UCR schedule" for an accident or health insurer's schedule of usual and customary or reasonable reimbursement for charges for out-of-network service providers. The proposed new Section of Regulation 62 provides that the insurer also must, with respect to the UCR schedule:

● disclose the specific amount of reimbursement for a particular procedure or treatment within three business days of a request by the insured or subscriber;

● post a copy of the UCR schedule on a website that is accessible to its insureds or subscribers;

● prominently disclose in its accident and health insurance policies and subscriber contracts:

•(i) the method upon which the usual and customary or reasonable charge is determined;

•(ii) the percentile of charges upon which the reimbursement is based and;

•(iii) that the usual and customary or reasonable charge may be lower than the health care provider's actual charges and that the insured or subscriber may be responsible to pay the health care provider the difference.[3]

An insurer or health maintenance organization that uses a UCR schedule is further required to disclose the method upon which the usual and customary charge is determined, including the source of the data relied upon and, if applicable, the name of the entity that the insurer or health maintenance organization relies upon to calculate the usual and customary or reasonable charge.[4]

Finally, the Proposed Regulation sets the following guidelines to eliminate conflicts of interest in the UCR schedule process:

An insurer or health maintenance organization shall only use a person or entity as the source of the UCR schedule if that person or entity is free from conflicts of interest. An insurer or health maintenance organization shall not use any person or entity as the source of the UCR schedule that owns or controls, or is owned or controlled by, or is an affiliate of, or is unduly influenced by, any person or entity with a pecuniary interest in the development or use of the UCR schedule, including any insurer, health maintenance organization, medical association, or health care provider.[5]

Insurers that opt to use a set fee schedule, defined by the Regulation as a schedule used by an insurer who uses a form of reimbursement other than a UCR schedule for out-of-network covered benefits[6] shall:

...disclose the specific amount of reimbursement for a particular procedure or treatment within three business days of a request by the insured or subscriber and post a copy of the fee schedule on the insurer's or health maintenance organization's website; provided, however, access to the schedule may be limited by the insurer or health maintenance organization to its insureds or subscribers.[7]

The investigation by the New York Attorney General arose from allegations that a database used by health insurers to set out-of-network reimbursement rates was controlled by a subsidiary of a health insurer, with a vested interest in setting the reimbursement rates low, forcing consumers to pay more than they should have.

The adoption of this Regulation and the return to the use of "usual and customary" rates in the geographic area where the professional services are rendered, will allow consumers to select health care providers in whom they have trust and permit them to afford the best medical care available. Particularly in larger metropolitan areas, access to choice in medical care has become very limited due to the unconscionably low reimbursement rates for services rendered by out-of-network providers. In New York City, as in other major cities, often specialists and other medical providers do not take insurance, and therefore such specialists become out of reach because of the de minimus reimbursements paid to the insureds. With the implementation of "UCR" and the ability to know in advance the reimbursement schedule, consumers will be able to enjoy not only choice, but reimbursement in line with their medical costs.