Insurance Circular Letter No. 2 (2023)
May 9, 2023
All 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, Prepaid Health Services Plans, and Health Care Providers
Criteria to Determine a Reasonable Fee Under the Independent Dispute Resolution Process
STATUTORY AND REGULATORY REFERENCES: N.Y. Financial Services Law Article 6; 23 NYCRR Part 400
The purpose of this circular letter is to provide guidance to 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”) and health care providers (“providers”) regarding the criteria used to determine a reasonable fee under New York’s independent dispute resolution (“IDR”) process, which is set forth in Financial Services Law Article 6 (“Article 6”) and 23 NYCRR Part 400, and to remind issuers and providers that they must submit all relevant information to the IDR entity at the time of application or upon the IDR entity’s request in order for the IDR entity to consider the information when making its determination.
Article 6 established an IDR process for out-of-network emergency services in hospital facilities, for surprise bills in participating hospitals and participating ambulatory surgical centers, and for out-of-network services when a patient is referred by a participating physician. Article 6 also requires issuers and providers to ensure that an insured incurs no greater out-of-pocket costs for emergency services and surprise bills than the insured would have incurred with an in-network provider. Effective January 1, 2020, the Legislature expanded Article 6 to apply to hospital bills for out-of-network emergency services and to include inpatient services following an emergency room visit. The Legislature further expanded Article 6 to conform to the federal No Surprises Act so that emergency services and surprise bills relating to the services of non-participating health care providers would be eligible for IDR effective April 9, 2022.
The IDR process set forth in Article 6 and 23 NYCRR Part 400 establishes a mechanism for issuers and providers to resolve payment disputes for bills for emergency services, including inpatient services following an emergency room visit, and surprise bills. If an issuer or provider disagrees with the issuer’s payment or provider’s charges for emergency services or a surprise bill, either party may submit a dispute to the New York State Department of Financial Services (“DFS”) for random assignment to an IDR entity.
The IDR entity must determine whether the provider’s charge or the issuer’s payment is reasonable using the criteria set forth in Financial Services Law § 604. The IDR entity must consider all relevant factors, including: (1) whether there is a gross disparity between the fee charged by the provider for services rendered as compared to fees paid to the provider for the same services rendered by the provider to other patients covered by issuers with which the provider is not participating, and for a dispute involving an issuer, fees paid by the issuer to reimburse similarly qualified providers for the same services in the same region who do not participate with the issuer; (2) the level of training, education, and experience of the provider, and in the case of a hospital, the teaching staff, scope of services, and case mix; (3) the provider’s usual charge for comparable services for patients covered by issuers in which the provider does not participate; (4) the circumstances and complexity of the particular case, including time and place of the service; (5) individual patient characteristics; (6) the median of the rate recognized by the issuer to reimburse similarly qualified providers for the same or similar services in the same region that are participating with the issuer; and (7) with regard to physician services, the usual and customary cost of the service.
Financial Services Law § 603(i) defines “usual and customary cost,” in relevant part, as “the eightieth percentile of all charges for the particular health care service performed by a provider in the same or similar specialty and provided in the same geographical area as reported in a benchmarking database maintained by a nonprofit organization specified by the superintendent.” Article 6 does not define the term “same geographical area.” Typically, an IDR entity considers the ZIP code or geozip where the provider rendered the service. However, the IDR entity must also consider other ZIP codes or geozips in the surrounding area where the provider rendered the service if submitted by an issuer or provider. For example, if the usual and customary cost for a particular ZIP code or geozip is significantly different from neighboring ZIP codes or geozips, an issuer or provider may decide to submit ZIP codes or geozips from the surrounding area, and an IDR entity must consider the ZIP codes or geozips from the surrounding area if submitted by a party to the dispute. Additionally, an IDR entity must consider any other relevant information submitted by the parties when making its determination. See 23 NYCRR § 400.8(i).
Subpart A of Part AA of Chapter 57 of the Laws of 2022 amended Financial Services Law § 604 to add an additional criterion that an IDR entity must consider when making a determination. As of April 9, 2022, an IDR entity must consider the median in-network rate used by the issuer to reimburse similarly qualified providers for the same or similar services in the same region, as referenced above. All criteria listed in Financial Services Law § 604 carry the same weight, and no single factor is determinative. Issuers must submit information regarding the median in-network rate with the IDR application, or upon request from the IDR entity, so that it will be considered by the IDR entity when making a determination.
It has come to DFS’s attention that issuers and providers may not be providing all information necessary for an IDR entity to make determination on a dispute. Pursuant to 23 NYCRR § 400.7(c) and (d), issuers and providers must submit all the information with the IDR application or upon request from the IDR entity. Additionally, issuers and providers may also submit any other relevant information for the IDR entity to consider before the IDR entity makes a determination. This information allows the IDR entity to determine whether the provider’s charge or the issuer’s payment is reasonable.
Pursuant to Financial Services Law §§ 605(a)(3) and 607(a)(5), an IDR entity must make a determination within 30 business days of receipt of the dispute for review. An IDR entity must request additional information from the parties within three business days of determining the dispute is eligible for review pursuant to 23 NYCRR § 400.8(c). This section also provides that if the requested information is not received within five business days, an IDR entity must make a determination based on the information available to the IDR entity. Furthermore, an IDR entity is prohibited from reconsidering a dispute after a determination is made based upon receipt of additional information subsequent to the determination pursuant to 23 NYCRR § 400.8(m). Therefore, issuers and providers are reminded that they must submit all information for the dispute with the IDR application, or upon request from the IDR entity, if they want the IDR entity to consider the information, as the IDR entity must make its determination based on the information it has at the time it makes the determination.
Issuers and providers are advised that an IDR entity must make a determination based on the information available to the IDR entity in order to determine a reasonable fee. All criteria listed in Financial Services Law § 604 carry the same weight, and no single factor is determinative. Issuers and providers are also reminded that they must submit all relevant information with the IDR application, or upon request from the IDR entity, in order for the IDR entity to consider the information when it makes a determination.
Please direct any questions regarding this circular letter by email to [email protected].
Very truly yours,
Chief, Health Bureau
 Financial Services Law § 603(b) defines “emergency services” to mean, “with respect to an emergency condition: (1) a medical screening examination as required under section 1867 of the social security act, 42 U.S.C. § 1395dd, which is within the capability of the emergency department of a hospital, including ancillary services routinely available to the emergency department to evaluate such emergency medical condition; and (2) within the capabilities of the staff and facilities available at the hospital, such further medical examination and treatment as are required under section 1867 of the social security act, 42 U.S.C. § 1395dd, to stabilize the patient.”
 Financial Services Law § 603(h) defines a “surprise bill,” in relevant part, as “a bill for health care services, other than emergency services, with respect to: (1) an insured for services rendered by a non-participating provider at a participating hospital or ambulatory surgical center, where a participating provider is unavailable or a non-participating provider renders services without the insured’s knowledge, or unforeseen medical services arise at the time the health care services are rendered; provided, however, that a surprise bill shall not mean a bill received for health care services when a participating provider is available and the insured has elected to obtain services from a non-participating provider; [or] (2) an insured for services rendered by a non-participating provider, where the services were referred by a participating physician to a non-participating provider without explicit written consent of the insured acknowledging that the participating physician is referring the insured to a non-participating provider and that the referral may result in costs not covered by the health care plan….”