OGC Opinion No. 07-08-15

The Office of General Counsel issued the following opinion on August 31, 2007 representing the position of the New York State Insurance Department.

RE: Collection of Overpayments to Healthcare Providers


May a heath insurer or health maintenance organization rely on existing contractual provisions in agreements with healthcare providers, regarding “look backs”, in attempts to recoup overpayments made to health care providers that were made more than 24 months before?


No. Under Insurance Law § 3224-b(b), the 24-month limitation applies to any recoupment attempted which is commenced on or after the January 1, 2007 effective date of the statute, except as otherwise specifically provided therein.


The inquiry is of a general nature, without reference to specific facts.


Insurance Law § 3224-b became effective on January 1, 2007. It establishes a maximum time limit on attempts by a “health plan” to recoup overpayments from physicians. It provides in subsection (b):

A “health plan” is defined in Insurance Law § 3224-b(a)(1) as follows:

For purposes of this section, a “health plan” shall be defined as an insurer that is licensed to write accident and health insurance, or that is licensed pursuant to article forty-three of this chapter or is certified pursuant to article forty-four of the public health law.

Insurance Law § 3224-b(b) sets forth the recoupment standards applicable here. It provides:

(1) Other than recovery for duplicate payments, a health plan shall provide thirty days written notice to physicians before engaging in additional overpayment recovery efforts seeking recovery of the overpayment of claims to such physicians. Such notice shall state the patient name, service date, payment amount, proposed adjustment, and a reasonably specific explanation of the proposed adjustment.

(2) A health plan shall not initiate overpayment recovery efforts more than twenty-four months after the original payment was received by a physician. Provided, however, that no such time limit shall apply to overpayment recovery efforts which are: (i) based on a reasonable belief of fraud or other intentional misconduct, or abusive billing, (ii) required by, or initiated at the request of, a self-insured plan, or (iii) required by a state or federal government program. Notwithstanding the aforementioned time limitations, in the event that a physician asserts that a health plan has underpaid a claim or claims, the health plan may defend or set off such assertion of underpayment based on overpayments going back in time as far as the claimed underpayment. For purposes of this paragraph, ”abusive billing” shall be defined as a billing practice which results in the submission of claims that are not consistent with sound fiscal, business, or medical practices and at such frequency and for such a period of time as to reflect a consistent course of conduct.

(3) Nothing in this section shall be deemed to limit an insurer's right to pursue recovery of overpayments that occurred prior to the effective date of this section where the insurer has provided the physician with notice of such recovery efforts prior to the effective date of this section.

The legislative intent of Insurance Law § 3224-b(b) is set forth in the Memorandum in Support of Senate Bill 8417 (Sen. Spano), which was enacted as 2005 N.Y. Laws 551:

This legislation seeks to address some of the numerous difficulties faced by physicians and other providers in their dealings with health insurance plans. . . . These problems include . . . excessive demands for refunds of claims paid several years in the past, the lack of meaningful notice to physicians of refund claims . . . .

In Circular Letter 23 dated November 27, 2006 the Department construed Insurance Law § 3224-b and advised the industry:

Lastly, Section 3224-b also prohibits an insurer or HMO from initiating overpayment recovery efforts more than 24 months after the original payment was received by the physician. This time limit does not apply in the case of reasonable belief of fraud and abuse, abusive billing (as defined in Section 3224-b), recovery efforts initiated or required by self-insured plans or required by a state or federal government program. An insurer or HMO is not restricted from pursuing overpayments occurring prior to the effective date of this law, January 1, 2007, when notice was provided to the physician before that date.

If a physician asserts underpayment of a claim, the insurer or HMO may defend or offset the assertion by overpayments that were made within the timeframe extending as far back as the underpayment in question. . . . However, the insurer or HMO may not collect overpayments in excess of the physician underpayment , unless the overpayment occurred within the last 24 months or an exception applies as described above.

The legislative history of Insurance Law § 3224-b indicates that, unless recoupment efforts had commenced prior to the January 1, 2007 effective date of Insurance Law § 3224-b, a health plan may “look back” only 24 months to recover overpayments made to providers even where the health plan and healthcare provider had previously agreed to a longer “look back” period.

Article I, § 10, cl. 1 of the United States Constitution provides that: “No State shall . . . pass any . . . Law impairing the Obligation of Contracts”. Unlike some states, New York does not have a similar provision in its State Constitution.

Whether the limitation on “look backs” in Insurance Law § 3224-b(b) complies with the federal Constitution is for a court of competent jurisdiction, but the Department believes that the presumption of constitutionality that attaches to all legislative enactments, see United States v. American Library Association, 539 U.S. 194 (2003); Dalton v. Pataki, 5 N.Y.S.3d 243, 802 N.Y.S.2d 72 (2005), requires enforcement of the statute as written.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.