OGC Opinion No. 08-07-24: Independent Adjuster License

OGC Op. No. 08-07-24

The Office of General Counsel issued the following opinion on July 29, 2008, representing the position of the New York State Insurance Department.

RE: Independent Adjuster License

Question Presented:

Must Company A and its employees become licensed as independent adjusters to provide the claims processing services described in your inquiry?

Conclusion:

No. Company A and its employees do not need to become licensed as independent adjusters to provide the claims processing services described in your inquiry.

Facts:

An attorney inquired as to whether his client, to whom he referred as “Company A,” must obtain an adjuster’s license in order to conduct the claims processing work that was described in his letters dated April 23, 2008 and July 2, 2008, and during a telephone conversation on June 11, 2008. The following is a description of the claims processing work that the inquirer reported Company A plans to provide:

Company A’s employees will process health care claims at service centers located outside the United States for U.S. domestic insurers and health plan administrators (“Insurers”). Company A’s employees will manually process claims that cannot be auto-adjudicated through an Insurer’s own computerized system. Auto-adjudication occurs when an Insurer’s computerized system receives an electronic claims filing directly from a claimant that the system recognizes as a complete and accurate filing.

In the inquirer’s July 2, 2008 letter, he provided specific examples of the work Company A’s employees are expected to conduct, which were described as follows:

Company A receives a claim for a Rhinoplasty. The insurer’s benefit structure requires prior authorization for the coverage of cosmetic procedures and for this reason the claim cannot be automatically adjudicated. Company A personnel would review the claim against system edits to determine the required course of action. If the insurer’s benefit structure requires pre-authorization to be obtained and no pre-authorization is noted on the claim, Company would route the claim to the Insurer’s clinical personnel, who would complete the required medical review. If the claim file indicates that prior authorization has been completed, Company A’s actions would be directed by the pre-authorization instructions that are reflected on the claim. Based on the pre-authorization instructions, Company A could enter the required information into the system and release the claim back into the insurers’ system for payment. Alternatively, if the claim indicates that the insurer has already received a pre-authorization request and declined to authorize coverage for the procedure, Company A would enter that information into the system and route it back to the insurer for further action. In no event would Company A or its personnel be involved in determining whether the procedure in question was medically necessary. Those types of decisions and judgments would always be made by the insurer and its personnel.
Company A receives an electronic claim that has been rejected by the insurer’s auto-adjudication process. Company A personnel would consult the insurer’s checklist for complete claim requirements, and see that the CPT code that is required on the electronic claim form is missing, misnumbered, or entered in the wrong field. Company A personnel would review the claims information, identify and enter the correct CPT code(s) and release the claim back into the insurer’s system for payment.
Company A receives a claim that cannot be auto-adjudicated because the provider mailing address is different from the address where the services were provided, as reflected on the claim. To allow the insurer’s auto-adjudication system to determine the usual and customary charges in connection with the service delivered, Company A’s personnel would review the claims information, determine where the services were provided, enter the service location zip code into the system, and release the claim back into the insurer’s system for payment.

Analysis:

Relevant to the inquiry is N.Y. Ins. Law § 2101(g)(1) (McKinney 2006), which defines an independent adjuster as follows:

. . . 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[.]

Insurance Law § 2102(a)(1) requires a person, firm, association or corporation who acts as an insurance adjuster to be licensed.

In determining the meaning of “investigating and adjusting claims” within the meaning of Insurance Law § 2101(g)(1), the Insurance Department considers whether the duties performed in the course of claim handling require the exercise of insurer-conferred discretionary authority, or whether they are strictly ministerial tasks. The Department has opined that discretionary acts that require licensing include claims review and processing; payment authorization; check signing and issuance; loss evaluation; responding to claimant inquiries; and making recommendations to the insurer. However, tasks such as data entry and processing are considered ministerial in nature. See Office of General Counsel Opinions dated 8/2/2006, 1/20/2006, 4/23/2003, 6/29/2001, 4/17/2001, and 12/31/1996.

The Department considers the acts that were reported to be contemplated by Company A as ministerial in nature. Company A and its employees do not negotiate with the insureds, make recommendations, or engage in any other discretionary acts. Thus, to the extent that Company A and its employees perform only the services described in the April 23, 2008 and July 2, 2008 letters, neither Company A nor its employees need to be licensed as independent adjusters.