The Office of General Counsel issued the following opinion on September 21, 2005, representing the position of the New York State Insurance Department.
Re: Physician's Assistants, Professional Liability Insurance.
1. May an insurer condition issuance of a professional liability insurance policy to a Physician's Assistant (PA) upon the assistant's supervising physician having purchased professional liability insurance from that same insurer?
2. May an insurer condition issuance of a professional liability insurance policy to a PA upon the insurer that insures the assistant's supervising physician having a specified minimum rating by a rating agency?
3. May an insurer exclude coverage for specified activities and procedures by a PA?
4. May an insurer charge a premium to a PA that is more than twice that which was charged by another insurer in the same holding company system for the prior policy period?
5. Is there a residual market mechanism for coverage of the professional liability of PAs?
6. Are the rates charged by an insurer for coverage of a PA subject to regulation by the Insurance Department?
1. Yes, provided that the condition is contained in both the physician's and PA's policies, an insurer may so condition coverage.
2. Yes, such a condition is not contrary to the New York Insurance Law (McKinney 2000 and 2005 Supplement).
3. Yes, the exclusion in the policy of specified procedures from coverage of PAs by an insurer would not constitute an unacceptable restriction on the PA's scope of practice. However, the Department is investigating whether the insurer acted properly in its implementation of the exclusion.
4. See discussion below.
5. There is no residual market mechanism for PAs.
6. Rates increases such as are the subject of your inquiry are subject to the requirements of the New York Insurance Law.
In addition to those insurers that insure physicians for professional liability, some of which also insure PAs for professional liability, there are other insurers that insure PAs, although they do not generally insure physicians in New York. Two of the insurers that insure both physicians and PAs will insure the PA only if the supervising physician is also insured by that insurer. This requirement is set forth in the policies issued by these insurers to both the physician and PA.
One of the insurers that insures a number of PAs in New York has a rule that the insurer covering the supervising physician must be rated by a specified rating agency as A- or better. Since at least one of the insurers insuring physicians for professional liability has voluntarily withdrawn from the rating system of the rating agency, this particular insurer will not insure PAs whose supervising physician is insured by the unrated insurer.
In addition, one of the insurers that insure both physicians and PAs for professional liability has issued policies that exclude coverage for certain procedures: (1) first assisting in the operating room, (2) performance of circumcisions or vaginal deliveries, and (3) performance of stress tests on pregnant women, if performed by a PA. The PAs involved have performed these activities and procedures in the past and believe that the insurer is improperly dictating the scope of practice for PAs.
Finally, one of the insurers primarily insuring PAs, which is not licensed by the Insurance Department, is charging a premium that is more than twice that charged by the insurer, which is part of the same holding company system that issued policies to PAs last year. Another insurer has notified its PA insureds that their premiums will increase to a rate that you assert is almost 100% more than the current rate.
Statutory Basis of PA Practice
New York Education Law § 6542 (McKinney 2001) authorizes the practice of PAs:
1. Notwithstanding any other provision of law, a physician assistant may perform medical services, but only when under the supervision of a physician and only when such acts and duties as are assigned to him are within the scope of practice of such supervising physician.
. . .
3. Supervision shall be continuous but shall not be construed as necessarily requiring the physical presence of the supervising physician at the time and place where such services are performed.
4. No physician shall employ or supervise more than two physician assistants . . . in his private practice.
5. Nothing in this article shall prohibit a hospital from employing physician assistants . . . provided they work under the supervision of a physician designated by the hospital and not beyond the scope of practice of such physician. The numerical limitation of subdivision four of this section shall not apply to services performed in a hospital
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Requiring that the PA and Physician Have the Same Insurer
It has been indicated, and it is assumed for the purpose of this opinion, that both the physicians policy and the PAs policy each specifically provide that the physician and PA are insured by that insurer.
New York Insurance Law § 2324(a) (McKinney 2000 and 2004 Supplement) provides:
No authorized insurer . . . and no employee or other representative of any such insurer . . . shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof . . . or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract . . . or shall give, sell or purchase, or offer to give, sell or purchase, as an inducement to the making of such insurance or in connection therewith, any stock, bond or other securities or any dividends or profits accrued thereon . . . .
The above statute prohibits "tie-in" sales in which an insurer will issue a policy covering one risk only if a separate policy covering another risk (supporting business) is purchased. However, there is no violation of the New York Insurance Law where the underlying policy specifies the tie-in requirement. Since it has been indicated that the applicable restriction is set forth in both of the relevant policies, issued to the supervising physician and PA, there is no prohibited "tie-in" sale in violation of New York Insurance Law § 2324(a). For the Insurance Department to approve a provision providing for a tie-in between two policies, there should be sufficient reason for the tie-in, which may not be misleading or against public policy.
It is the general rule in New York, Saunter v. New York Tribune, 305 N.Y. 442 (1953), that an employer is liable for the acts of an employee. Even where there is not an employer-employee relation, a physician may be held liable for the act of another where the act giving rise to the injury is one requiring close supervision and direction. Doe v. Smith, 184 Misc. 2d 186, 708 N.Y.S. 2d 800 (Sup. Ct. Bronx 2000).
Accordingly, since a PA is always under the supervision of a physician, it is likely that the supervising physician will also be sued if there is an allegation that the PA has committed malpractice. An insurer has a legitimate interest in assuring that there is coordination between the defenses of the PA and physician.
Requirement of a Minimum Claims Rating
Several private organizations have developed and utilize formulae that purport to evaluate the claims paying ability of insurers. The ratings generated by such private agencies are not utilized by the Insurance Department. The Department is aware, however, that some third parties require a minimum rating by a particular agency before such third party will accept insurance by a particular insurer. If the requirement of a minimum rating is an objective one, is in the insurer's underwriting rules, and is uniformly applied, there is no violation of the New York Insurance Law.
Dictation of Scope of Practice
Unless the action is specifically prohibited by the New York Insurance Law or the regulations promulgated thereunder, an insurer may utilize objective underwriting and rating rules. Restrictions on coverage, however, must be set forth in the policy.
The scope of practice of a PA, as delineated by the New York Education Law and the regulations promulgated thereunder, is, as was indicated, expansive. An insurer may believe that certain activities, although within the scope of practice of a PA, presents it with an unacceptable risk. Such a determination by an insurer is not a diminution of or dictation of a PAs scope of practice, but is merely the exercise of the insurer's business judgment.
The policy form of the complained of insurer, which has been approved by the Insurance Department, has a Rider where the insurer may list those procedures that it will exclude for a particular PA. Based upon the complaint against this insurer, the Insurance Department has contacted that insurer about its use of the form in question, including how it decided to exclude particular procedures.
The Insurance Department will not comment on whether the insurer properly implemented the rider until the conclusion of our investigation.
New York Insurance Law § 3426(a)(1) (McKinney 2000 and 2004 Supplement) governs the cancellation and non-renewal of professional liability insurance policies. New York Insurance Law 3426 provides for a required policy period of one year from the date the policy is renewed or first issued, subject to exceptions that are not relevant under the provided facts. Insurers are generally free at the conclusion of the required policy period to refuse to renew the policy, in accordance with the notice requirements of New York Insurance Law § 3426. New York Insurance Law § 3426(e)(1) provides:
A covered policy shall remain in full force and effect pursuant to the same terms, conditions and rates unless written notice is mailed or delivered by the insurer to the first-named insured, at the address shown on the policy, and to such insured's authorized agent or broker, indicating the insurer's intention: (A) not to renew such policy; or (B) to condition its renewal upon change of limits, change in type of coverage, reduction of coverage, increased deductible or addition of exclusion, or upon increased premiums in excess of ten percent (exclusive of any premium increase generated as a result of increased exposure units, pursuant to subsection (d) of this section, or as a result of experience rating, loss rating, retrospective rating or audit), except that with respect to an excess liability policy, the insurer may also, consistent with regulations promulgated by the superintendent, condition its renewal upon requirements relating to the underlying coverage, in which event the conditional renewal notice shall be treated as an effective notice of nonrenewal if such requirements are not satisfied as of the later of the expiration date of the policy or sixty days after mailing or delivery of such notice . . . .
The presented questions relate to two separate insurers and raise two discrete issues, one involving non-renewal of coverage.
In the first instance, an association of PAs had developed a nationwide program for the insuring of PAs. Individual policies were issued to PAs by an insurer that is licensed to transact an insurance business in New York. The insurer in question decided to withdraw from the program and sent a non-renewal notice to New York insureds that presumably was in compliance with New York Insurance Law § 3426(e)(1)(A). The association successfully located an insurer, which was part of the same holding company system of the first insurer, but was not licensed in New York, to write the program. The premium charged by this insurer is substantially in excess of that which had been charged by its sister insurer.
A license to transact an insurance business is required in New York. However, New York Insurance Law § 1101(b)(2) (McKinney 2000 and 2005 Supplement) provides exceptions:
[T]he following acts or transactions, if effected by mail from outside this state by an unauthorized foreign or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile, shall not constitute doing an insurance business in this state . . . : . . . (E) transactions with respect to policies of insurance on risks located or resident within or without this state . . . which policies are principally negotiated, issued and delivered without this state in a jurisdiction in which the insurer is authorized to do an insurance business . . . .
In addition, if certain conditions are met, an unauthorized insurer may issue a policy to a New York insured through an excess line broker.
If the authorized insurer that decided to no longer insure PAs had recommended to the association that it place the business with its affiliated insurer, which is not licensed in New York, it would have been in violation of New York Insurance Law § 2117 (McKinney 2000 and 2005 Supplement). Similarly the Association may not aid the unauthorized insurer in doing business in New York. In addition, where an insurer intends that risks transfer to an affiliated insurer, and there is a change in coverage or a premium increase in excess of 10%, the insurer must, in accordance with New York Insurance Law § 3426(e)(1)(B), issue a conditional renewal notice. If it fails to do so, the non-renewal is ineffective and the policy is deemed renewed by the first insurer at no increase in premium.
The Department will investigate the circumstances of the placement with the unauthorized insurer. Until conclusion of the investigation and a determination of the full facts, the Department cannot render an opinion as to the propriety of the insurers actions.
The standard for property/casualty insurance rates for authorized insurers is set forth in New York Insurance Law § 2303 (McKinney 2000): "such rates shall not be excessive, inadequate, unfairly discriminatory, destructive of competition or detrimental to the solvency of insurers". Further, New York Insurance Law § 2304(a) (McKinney 2000) provides:
In the making of rates, consideration shall be given to past and prospective loss experience . . . both within and without this state, to all factors reasonably attributable to the class of risks, to a reasonable profit, to past and prospective expenses both country-wide and those specially applicable to this state . . . .
The Office of General Counsel received a 1998 article from a journal published for PAs which asserts that the rate of payment by insurers for the negligence of PAs is less than the rate for physicians. Since the data relied on is more than 7 years old and indemnity payments are only one factor in establishing insurance rates, the information has little relevance for PA rates in 2005.
As to regulation of such commercial insurance rates, New York Insurance Law § 2305 (McKinney 2000 and 2005 Supplement) provides:
(a) Except as otherwise provided in subsection (b) hereof . . . prior approval of rates, rating plans, rating rules and rate manuals by the superintendent shall not be required.
(b) rate filings for: . . . 8) medical malpractice liability insurance . . . shall be filed with the superintendent and shall not become effective unless either the filing has been approved or thirty days, which the superintendent may with cause extend an additional thirty days and with further cause extend an additional fifteen days, have elapsed and the filing has not been disapproved as failing to meet the requirements of this article, including the standard that rates be not otherwise unreasonable. . .
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Medical malpractice liability insurance is defined in New York Insurance Law § 5501(b) (McKinney 2000):
"Medical malpractice insurance" means insurance against legal liability of the insured, and against loss, damage, or expense incident to a claim of such liability arising out of the death or injury of any person due to medical, dental, podiatric, certified nurse-midwifery or hospital malpractice by any licensed physician, dentist, podiatrist, certified nurse-midwife, certified registered nurse anesthetist or hospital.
In addition, New York Insurance Law § 2344 (McKinney 2000 and 2005 Supplement) authorizes the Insurance Department to establish "flex-rating" bands, outside of which prior approval is required. In accordance with N.Y. Comp Codes R. & Regs. tit. 11, § 161.4(b)(8) (2000), rate changes for professional liability insurance of more than 20% must be approved by the Insurance Department.
With respect to the second situation, involving an authorized insurer, the insurer has requested a rate increase in excess of 20%. In addition, this insurer also insures PAs as additional named insureds under policies issued to the employing hospital or physician at a percentage of the rate charged to the employer. In accordance with 1986 N.Y. Laws 266 § 40, since 1986 the Superintendent of Insurance has established the rate for physician's professional liability policies. One of the factors that will be considered by the Department in its evaluation of the rate filing will be the relationship between the rate charged in free standing PA policies and that charged as a charged as a percentage of the employers rate.
The April 28, 2005, letter from the insurer, which was furnished to the Office of General Counsel on May 31, 2005, generally explains this situation and is in compliance with New York Insurance Law § 3426(e)(1)(B).
In accordance with New York Insurance Law § 5502 (McKinney 2000 and 2005 Supplement), the Medical Malpractice Insurance Association (MMIA) was to provide a residual market for those entities listed in New York Insurance Law § 5501(b). When MMIA was dissolved in accordance with 1999 N.Y. Laws 147, the Insurance Department, N.Y. Comp. Codes R. & Regs. tit. 11, Part 430 (Regulation 170) (2000), established the New York Medical Malpractice Insurance Pool to provide a residual market for the same entities. Since PAs are not listed in either New York Insurance Law § 5501(b) or Regulation 170, there is no statutory residual market for them.
For further information you may contact Principal Attorney Alan Rachlin at the New York City office.