The Office of General Counsel issued the following opinion on August 12, 2005 representing the position of the New York State Insurance Department.
Re: Article 48 and Preferred Provider Organizations.
Question Presented:
1. Are preferred provider organizations (PPOs) subject to the requirements of Article 48 of the N.Y. Ins. Law?
2. If so, does Article 48 apply to a PPO insurance contract covering behavioral health and dental services?
Conclusion:
1. The Insurance Law does not define the term PPO, nor does Article 48 specifically refer to PPOs. However, Article 48 of the N.Y. Ins. Law applies to any insurance contract that meets the definition contained in N.Y. Ins. Law § 4801(c).
2. Article 48 applies to a health insurance contract that provides behavioral health and dental services if such contract meets the definition contained in N.Y. Ins. Law § 4801(c).
Facts:
No facts were provided. The inquiry is of a general nature.
Analysis:
N.Y. Ins. Law § 4801 (McKinney 2000) provides, in relevant part, as follows:
The provisions of this article shall apply to all managed care products, as defined in subsection (c) of this section, which are delivered or issued for delivery in this state by insurers licensed under this chapter; provided, however, that none of the provisions of this article shall apply to any health maintenance organization lines of business of such insurers or to health maintenance organizations certified under article forty-four of the public health law or licensed under article forty-three of this chapter, which are subject to the provisions of article forty-four of the public health law. For purposes of this article:
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(b) an "insurer" shall mean an insurance company subject to article thirty-two of this chapter, or a corporation subject to article forty-three of this chapter.
(c) a "managed care health insurance contract" or "managed care product" shall mean a contract which requires that all medical or other health care services covered under the contract, other than emergency care services, be provided by, or pursuant to a referral from, a designated health care provider chosen by the insured (i.e. a primary care gatekeeper), and that services provided pursuant to such a referral be rendered by a health care provider participating in the insurer's managed care provider network. In addition, in the case of (i) an individual health insurance contract, or (ii) a group health insurance contract covering no more than three hundred lives, imposing a coinsurance obligation of more than twenty-five percent upon services received outside of the insurer's provider network, and which has been sold to five or more groups, a managed care product shall also mean a contract which requires that all medical or other health care services covered under the contract, other than emergency care services, be provided by, or pursuant to a referral from, a designated health care provider chosen by the insured (i.e. a primary care gatekeeper), and that services provided pursuant to such a referral be rendered by a health care provider participating in the insurer's managed care provider network, in order for the insured to be entitled to the maximum reimbursement under the contract.
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The Insurance Law does not define the term "Preferred Provider Organization" nor does Article 48 of the Insurance Law specifically refer to PPOs. However, the Department defines a PPO as:
[a] type of managed care coverage based on a network of doctors and hospitals that provide care to an enrolled population at a pre-arranged discounted rate. PPO members usually pay more when they receive care outside the PPO network. New York Consumer Guide to Health Insurers (N.Y. Insurance Department 2004) at 7.
Similarly, the Barrons Business Guides: Dictionary of Insurance Terms (4th ed. 2000) at 391 defines a PPO as:
hospital, physician, or other provider of health care that an insurer recommends to insureds. A PPO allows insurance companies to negotiate directly with hospitals and physicians for health services at a lower price than would normally be charged. A PPO tries to combine the best elements of a fee-for-service and Health Maintenance Organization (HMO) systems.
Using either definition, it is not possible to categorically exclude PPOs from the definition contained in N.Y. Ins. Law § 4801(c). As a result, it is necessary to evaluate the applicability of Article 48 with respect to PPOs on a case by case basis considering the characteristics of each particular PPO insurance contract.
Finally, Article 48 applies to a health insurance contract that provides behavioral health and dental services if the contract meets the definition contained in N.Y. Ins. Law § 4801(c). Such services are included within the phrase "medical and other health care services." See Opinions of General Counsel No. 04-03-04 (March 4, 2004) and No. 01-04-09 (April 9, 2001).
For further information you may contact Assistant Counsel Brenda M. Gibbs at the Albany Office.