The Office of General Counsel issued the following opinion on February 1, 2008 representing the position of the New York State Insurance Department.
Re: Provision of Managed Behavioral Healthcare Licensing and Other Requirements
Would the services of Inquirer, as described below, require it to be licensed as either an independent adjuster or a utilization review agent?
Based upon the information that furnished to the Department, Inquirer would have to be licensed as a utilization review agent in accordance with N.Y. Ins. Law Art. 49 (McKinney 2008) and N.Y. Pub. Health Art. 49 (McKinney 2002). In addition, Inquirer might be considered to be an independent practice association ("IPA"), as that term is defined under regulations promulgated by the Commissioner of Health, and thus would have to comply with the regulations promulgated by the New York State Health Department. Inquirer would not have to be licensed as an independent adjuster.
It is reported that Inquirer provides managed behavioral healthcare to policyholders and contractholders of insurers, including health maintenance organizations ("HMO"), and to persons covered under various self-funded health plans. Inquirers website describes "Managed Behavioral Healthcare" as:
A specific service aimed at coordinating mental health and substance abuse treatment as part of a health care plan, with emphasis on controlling costs while ensuring adequate care.
While Inquirer does not presently do so, it will, if requested, provide services through insurers to individuals covered under self-funded health plans where the insurer provides administrative services to the self-funded plan.
It is reported that Inquirer will contract with licensed mental health professionals, review requests for services, and authorize such services if deemed necessary. In addition, Inquirer will perform what is characterized as "quality review", including:
Outpatient treatment documentation review, Compliance with [Inquirers] Clinical Management Guidelines monitoring, 30 day inpatient readmission monitoring, Monitoring of continuity of care among [Inquirer] providers, Continuity of care between medical and behavioral care monitoring.
It is further reported that Inquirer is licensed in Florida, its domiciliary jurisdiction, as a third party administrator ("TPA") in accordance with Fla. Stat. § 626.8805 (2007) and as a utilization review agent in accordance with Fla. Stat. § 395.0199(2) (2007). In addition, you state that Inquirer operates in other jurisdictions, and is appropriately licensed in those jurisdictions.
Finally, it is reported that Inquirer is compensated by its customers on the basis of a fee per covered individual per month ("capitation"), and compensates the licensed providers in its network on the basis of a negotiated fee for service.
It is inquired whether, if Inquirer were to operate in New York, it would be required to be licensed as either an independent adjuster or utilization review agent.
New York does not license TPAs as such, but if such an entity performs functions that require a license, that entity must be appropriately licensed.
Both Insurance Law Article 49, which governs utilization review for all insurers (except HMOs) and Public Health Law Article 49, which governs utilization review for HMOs and all other entities, are relevant to your inquiry. Insurance Law § 4900(h) defines "utilization review" as follows:
[T]he 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.
Public Health Law §4900(8) sets forth an identical definition.
Insurance Law § 4900(i) defines a "utilization review agent" as follows:
[A]ny insurer subject to article thirty-two [pertaining to commercial insurers] or forty-three [pertaining to not-for-profit insurers] of this chapter performing utilization review and any independent utilization review agent performing utilization review under contract with such insurer.
Public Health Law § 4900(9) defines the same term as follows:
[A]ny 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 [i.e. Medicaid]; (d) a hospital's internal quality assurance program except if associated with a health care financing mechanism; or (e) any insurer subject to article thirty-two or forty-three of the insurance law and any independent utilization review agent performing utilization review under a contract with such insurer, which shall be subject to article forty-nine of the insurance law.
Based upon Inquirer's representations, Inquirer would be a utilization review agent, as defined in Insurance Law § 4900(i), for its work with insurers. It also appears that Inquirer would constitute a utilization review agent under Public Health Law § 4900(9), based on Inquirers work for its work with HMOs and self-funded plans (other than any plan regulated pursuant to the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A § 1011 et seq.) Therefore, in accordance with Insurance Law §4901 and Public Health Law §4901, Inquirer would have to file bi-annual reports with the Superintendent of Insurance and Commissioner of Health, respectively.
With respect to HMOs, Inquirers contracting with licensed health professionals could also render Inquirer an independent practice association ("IPA"). An IPA is defined in a regulation of the Health Department, N.Y. Comp. Codes R. & Regs, tit. 10, § 98-1.2(w), as:
[A] corporation, limited liability company, or professional services limited liability company . . . which contracts directly with providers of medical or medically related services or another IPA in order that it may then contract with one or more MCOs [i.e. Managed Care Organizations] . . . to make the services of such providers available to the enrollees of an MCO and/or to injured workers participating in a workers" compensation preferred provider arrangement. An IPA may also be considered a provider . . .to the extent it shares risk with an MCO and/or the IPA's contracting providers . . . .
In accordance with 10 NYCRR 98-1.1, an HMO is considered to be an MCO.
Questions concerning acting as an IPA in New York, including questions about the corporate requirements established by 10 NYCRR § 98-1.5(b)(6)(vii), may be directed to the following address: Bureau of Managed Care, Department of Health, Tower Building, Empire State Plaza, Albany, NY 12237.
New York prohibits the doing of an insurance business without a license. The doing of an insurance business is defined in Insurance Law § 1101(a):
(1) "Insurance contract" means any agreement or other transaction whereby one party, the "insurer", is obligated to confer benefit of pecuniary value upon another party, the "insured" or "beneficiary", dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.
(2) "Fortuitous event" means any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.
The receipt of capitated compensation by an IPA at the beginning of the month constitutes the doing of an insurance business. However, the Insurance Department has promulgated 11 NYCRR Part 101 (2002) [a copy of which is enclosed herewith], which permits capitation payments to IPAs and imposes financial requirements on such IPAs. The Insurance Department is not aware of capitation agreements where, as here, the capitation would be paid at the end of the month, but there is nothing in Part 101 that would disallow it.
The term "independent adjuster" is defined in Insurance Law § 2101(g)(1):
The term "independent adjuster" means any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster . . . .
Whether a utilization review agent must also be licensed as an independent adjuster is a question of fact. See Office of General Counsel opinion dated March 9, 2005. Based upon the facts submitted, especially that the discretion exercised as a utilization review agent does not include functions that are commonly considered adjusting, Inquirer would not be performing adjusting functions, and therefore would not have to be licensed as an independent adjuster.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.