Insurance Circular Letter No. 8 (2022)

July 20, 2022

STATUTORY AND REGULATORY REFERENCES: N.Y. Insurance Law §§ 3217-a(b)(10), 4324(b)(10), 4802(o), and Article 49; Public Health Law § 4408(2)(j), 4408-a(15), and Article 49; 42 U.S.C. § 300gg-19; 29 C.F.R. § 2560.503-1; 45 C.F.R. § 147.136

I. Purpose

The purpose of this circular letter is to remind insurers authorized to write accident and health insurance in New York State, Article 43 corporations, health maintenance organizations, student health plans certified pursuant to Insurance Law § 1124, municipal cooperative health benefit plans, and prepaid health services plans (collectively, “issuers”), utilization review agents, and health care providers (“providers”) about utilization review requirements with respect to comprehensive health insurance coverage, including when there is a delegation of utilization review, and to provide recommended best practices for conducting utilization review.

II. Background

Insurance Law and Public Health Law Articles 49 set forth the requirements for utilization review. Specifically, Insurance Law § 4900(h) and Public Health Law § 4900(8) define “utilization review” as a review to determine whether health care services that have been provided, are being provided or are proposed to be provided to a patient, whether undertaken prior to, concurrent with, or subsequent to the delivery of such services, are medically necessary. Insurance Law § 4900(i) defines “utilization review agent” as any insurer subject to Insurance Law Articles 32 or 43 and any municipal cooperative health benefit plan certified pursuant Insurance Law Article 47 performing utilization review and any independent utilization review agent performing utilization review under contract with such insurer or municipal cooperative health benefit plan. Under Public Health Law § 4900(9), “utilization review agent” means any company, organization or other entity performing utilization review, except: (a) an agency of the federal government; (b) an agent acting on behalf of the federal government, but only to the extent that the agent is providing services to the federal government; (c) an agent acting on behalf of the state and local government for services provided pursuant to title XIX of the federal Social Security Act; (d) a hospital’s internal quality assurance program except if associated with a health care financing mechanism; or (e) any insurer subject to Insurance Law Articles 32 or 43 and any independent utilization review agent performing utilization review under a contract with such insurer, which shall be subject to Insurance Law Article 49. Insurance Law § 4901 requires utilization review agents to report certain information to the Superintendent of Financial Services (“Superintendent”) biennially, while Public Health Law § 4901 requires utilization review agents to register with the Commissioner of Health biennially and report certain information. Insurance Law and Public Health Law §§ 4902 establish utilization review program standards; §§ 4903 and 4904 include standards for utilization review determinations and appeals; and §§ 4905 sets forth required and prohibited utilization review practices. The United States Department of Labor claims payment regulation codified at 29 C.F.R. § 2560.503-1 (“DOL Regulation”) also includes standards and requirements for utilization review. In addition, the federal Affordable Care Act and its implementing regulations contain standards and requirements for utilization review and appeals, extending the DOL Regulation to apply to issuers in the individual and group health insurance markets. See 42 U.S.C. § 300gg-19 and 45 C.F.R. § 147.136.

Along with these statutory and regulatory requirements, the Health Care Administrative Simplification Workgroup ¹ (the “Workgroup”), consisting of a diverse group of health care industry leaders representing consumer groups, providers, insurers and other persons, discussed and evaluated mechanisms to reduce health care administrative costs and complexities and protect consumers through standardization, simplification, or technology. One of the topics examined by the Workgroup was utilization review. The Workgroup issued a written report on October 3, 2021 detailing its recommendations, including recommendations for best practices for utilization review.

III. Discussion

1. Delegation of Utilization Review

   The requirements set forth in Insurance Law and Public Health Law Articles 49 pertaining to utilization review apply to issuers and their utilization review agents, even in circumstances when there has been a delegation of utilization review to an independent utilization review agent. Insurance Law § 4901(b)(13) and Public Health Law § 4902(2)(m) provide that utilization review agent reports must contain a “description of the mechanisms employed by the utilization review agent to assure that all subcontractors, subvendors, agents, or employees affiliated by contract or otherwise with such utilization review agent will adhere to the standards and requirements of this title.” In addition, Insurance Law § 4902(b) and Public Health Law § 4902(2) require each utilization review agent to ensure adherence by all contractors, subcontractors, subvendors, agents, and employees affiliated by contract or otherwise with such utilization review agent to the utilization review program standards in Insurance Law § 4902(a) and Public Health Law § 4902(1), including: written policies and procedures that govern all aspects of the utilization review process; written clinical review criteria developed pursuant to a utilization review plan; a process to ensure utilization reviews and determinations are conducted within required timeframes; procedures to notify an insured, an insured’s designee or an insured’s health care provider of adverse determinations; and procedures for appeals of adverse determinations.

   Issuers are therefore responsible for ensuring that a delegated utilization review agent complies with all requirements when conducting utilization review pursuant to Insurance Law and Public Health Law Articles 49, and utilization review agents are responsible for reporting on how they will ensure compliance with these requirements.

2. Clinical Review Criteria

   Insurance Law § 4902(a)(3) and Public Health Law § 4902(1)(c) require utilization review agents to use written clinical review criteria developed pursuant to a utilization review plan. When conducting utilization review for substance use disorder treatment, Insurance Law § 4902(a)(9) and Public Health Law § 4902(1)(i) require that a utilization review agent use an evidence-based and peer reviewed clinical review tool that is appropriate to the age of the patient, and for treatment provided in New York, a utilization review agent must use an evidence-based and peer reviewed clinical review tool that is designated by the Office of Addiction Services and Supports (“OASAS”) that is consistent with the treatment services level within the OASAS system.

   With respect to utilization review for mental health conditions, Insurance Law § 4902(a)(12) and Public Health Law § 4902(1)(j) require that a utilization review agent use evidence-based and peer reviewed clinical review criteria that is appropriate to the age of the patient and deemed appropriate and approved for such use by the commissioner of the Office of Mental Health (“OMH”) and the Superintendent.² Insurance Law § 4902(a)(10) and Public Health Law § 4902(3) require that a utilization review agent use recognized evidence-based and peer reviewed clinical review criteria that also takes into account the needs of atypical patient populations and diagnoses when establishing the clinical review criteria for step therapy protocol. Additionally, for utilization review for step therapy protocol override determinations, Insurance Law § 4902(a)(11) and Public Health Law § 4902(4) require a utilization review agent to use recognized evidence-based and peer reviewed clinical review criteria that are appropriate for the insured and the insured’s medical condition.

3. Access to Clinical Review Criteria

   Insurance Law §§ 3217-a(b)(10) and 4324(b)(10) and Public Health Law § 4408(2)(j) require issuers to provide specific written clinical review criteria relating to a particular condition or disease, including clinical review criteria relating to a step therapy protocol override determination, and where appropriate, other clinical information that the issuer might consider in its utilization review, upon the written request of the insured, a prospective insured, or the insured’s provider. If the information is proprietary to the issuer, the insured or prospective insured may only use the information for the purposes of assisting the insured or prospective insured in evaluating the covered services provided by the issuer. Such information must also be made available to a health care professional on behalf of an insured. Adverse determinations issued pursuant to Insurance Law and Public Health Law §§ 4903 must include a statement that the clinical review criteria relied upon to make the determination are available upon the request of the insured or the insured’s designee. In addition, Insurance Law § 4905(l) and Public Health Law § 4905(12) prohibit a utilization review agent and the entity for which the agent provides utilization review from discouraging the insured, the insured’s designee, or the insured’s health care provider from undertaking an appeal, dispute resolution, or judicial review of an adverse determination.

   In order to ensure compliance with the Insurance Law and Public Health Law, issuers must make their clinical review criteria available to insureds in a timely manner so that insureds are fully able to exercise their appeal rights. As a best practice, issuers and their delegated utilization review agents should provide clinical review criteria within five days of receiving a request for the information from an insured, the insured’s authorized representative, or the insured’s provider. If the request involves an expedited appeal, issuers and their delegated utilization review agents should provide the clinical review criteria within a shorter time period.

   In addition, as a best practice, issuers should post their clinical review criteria, including criteria used by delegated utilization review agents, in a single, conspicuous place on their websites that is available to the public. If an issuer is unable to post the clinical review criteria on the issuer’s website because it is considered proprietary by a third party, the issuer should create an online process for requesting the clinical review criteria. Moreover, issuers should include instructions for obtaining their clinical review criteria on notices of initial and final adverse determinations.

4. Preauthorization

   Insurance Law § 4905(f) and Public Health Law § 4905(6) provide that utilization review shall not be conducted more frequently than is reasonably required to assess whether the health care services under review are medically necessary. Insurance Law § 4905(g) and Public Health Law § 4905(7) also provide that when making prospective, concurrent, and retrospective determinations, utilization review agents may collect only such information as is necessary to make such determination. Until recently, there was a limited exemption for health maintenance organizations with respect to the collection of information. However, sections 5 and 6 of subpart C of Part AA of Chapter 57 of the Laws of 2022 removed this exemption. Given these requirements, issuers should review services, at least annually, that are generally approved through preauthorization to identify where preauthorization requirements may be removed. It is also recommended that, as a best practice, issuers should review circumstances where repeat preauthorization requirements for the same patient or same treatment can be eliminated. Issuers should adopt evidence-based and peer-reviewed clinical guidelines with the most current data informing best practices for patient care and make the guidelines available to providers. Providers should similarly order services that are consistent with the issuer’s evidence-based clinical guidelines, recognizing that there will be circumstances when the patient’s medical condition will necessitate variation from such clinical guidelines. In addition, issuers should clearly identify the services that are subject to preauthorization.

5. Peer-to-Peer Reviews

   The Workgroup discussed peer-to-peer reviews for hospital services, which are conversations between a hospital and the issuer regarding a patient’s care. The Workgroup acknowledged that it is important for physicians discussing the case to have knowledge of the patient’s case and the specialty area involved in the patient’s care. As a result, it is recommended that peer-to-peer reviews for hospital services should involve physician to physician communication, which may include the treating physician or a physician who is designated by, and either employed by or has privileges at, the hospital. The physicians discussing a patient on behalf of the issuer and the hospital should be knowledgeable about the patient and treatment. In addition, the physician reviewing the case for the issuer must meet the definition of a “clinical peer reviewer” as defined in Insurance Law § 4900(b)(1) and Public Health Law § 4900(2)(a).

6. Electronic Transmission of Documents

   Members of the Workgroup expressed concern about inefficiencies in the transmission of documents between issuers and providers, including for preauthorization requests, when done by mail or facsimile. As such, issuers and providers are encouraged to transmit documents electronically. Issuers and providers are also encouraged to adopt the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) standards for electronic transmission of documents for preauthorization requests, where available. In addition, the electronic submission of claim attachments, where feasible, such as the use of a web portal, is strongly recommended. Issuers should also offer assistance to providers to facilitate the use of issuer web portals.

7. Designees

   The Insurance Law and Public Health Law permit insureds to designate a representative to assist them in the appeals process of an issuer or a utilization review agent. In addition, the DOL Regulation provides, in relevant part, that claims procedures will be deemed reasonable only if “[t]he claims procedures do not contain any provision, and are not administered in a way, that unduly inhibits or hampers the initiation or processing of claims for benefits…”; and “[t]he claims procedures do not preclude an authorized representative of a claimant from acting on behalf of such claimant in pursuing a benefit claim or appeal of an adverse benefit determination. See 29 CFR § 2560.503-1(b)(3) and (4). The Employee Benefits Security Administration (“EBSA”) addresses the intent of these provisions in its benefit claims procedure regulation FAQs. In response to question B-3, the EBSA explains that for purposes of the claim procedure rules, an issuer should direct all information and notices to a clearly designated authorized representative of the claimant who can act on the claimant’s behalf, unless directed otherwise by the claimant. This includes initial determinations, requests for documents, and appeals. Issuers are reminded that to ensure compliance with these requirements, they must permit an insured to designate a representative. In addition, issuers should timely process an insured’s authorization form designating a representative to ensure that an insured’s appeal rights are not adversely impacted.

8. Grievance and Utilization Review Notifications

   Insurance Law §§ 4802(o) and 4903(i) and Public Health Law §§ 4408-a(15) and 4903(9) require issuers to have procedures for obtaining the insured’s or the insured’s designee’s preference for receiving notifications of grievance and utilization review determinations. Under these sections, written and telephone notifications to the insured or the insured’s designee may be provided by electronic means where the insured or the insured’s designee has informed the issuer or utilization review agent in advance of a preference to receive such notifications by electronic means. The insured and the insured’s designee must be permitted to change the preference at any time. Issuers are reminded that they must abide by the insured’s or insured’s designee’s clearly stated preference.

IV. Conclusion

Issuers and utilization review agents are reminded that they must comply with the requirements set forth in Insurance Law and Public Health Law Articles 49 and in federal law and regulation, including the DOL Regulation, with respect to requirements and standards for utilization review. Issuers are also reminded that they are responsible for ensuring that a delegated utilization review agent complies with all requirements in Insurance Law and Public Health Law Articles 49.

Issuers and providers are also encouraged to follow the recommended best practices for utilization review. Adherence to these best practices ensures compliance with statutory and regulatory requirements for utilization review.

Please direct any questions regarding this circular letter by email to [email protected].

Very truly yours,

Lisette Johnson
Chief, Health Bureau

¹ The Administrative Simplification Workgroup was established in Part YY of Chapter 56 of the Laws of 2020, which added Insurance Law § 3224-a(k).

² OMH issued a Best Practices Manual for Utilization Review for Adult and Child Mental Health Services.