Source: https://www.dfs.ny.gov/insurance/ogco2009/rg090408.htm
Timestamp: 2019-12-09 15:17:15
Document Index: 212179281

Matched Legal Cases: ['§ 3224', '§ 3224', '§ 3224', '§ 3224', '§ 4237', '§ 3224', '§ 216', 'art 216']

Stop-Loss Insurance, Prompt Claim Settlement | Department of Financial Services
OGC Op. No. 09-04-08
The Office of General Counsel issued the following opinion on April 17, 2009 representing the position of the New York State Insurance Department.
Re: Stop-Loss Insurance, Prompt Claim Settlement
Are stop-loss1 insurers subject to the prompt-pay rules of Insurance Law § 3224-a?
No. Although stop-loss insurance is considered accident and health insurance, insurers that issue such policies are not subject to Insurance Law § 3224-a, but rather the general requirements of the New York Insurance Law regulating accident and health insurance policies.
The inquirer is a third-party administrator (TPA) in New York for several self-funded benefit plans, and also is licensed as an insurance agent in New York. At least one such plan2 has purchased a stop-loss policy from an insurer which is licensed in New York to write, among other kinds of insurance, accident and health insurance. The policy is administered by a Third Party Administrator (TPA).
When the inquirer notified the insurer, through the TPA, of its belief that the insurer is obligated to pay claims promptly under Insurance Law § 3224-a, the TPA indicated its disagreement:
Section 3224-a concerns the payment of “health care claims.” A claim made under a stop loss policy is not a health care claim. With respect to the stop loss claims at issue, the underlying health care claims have already been paid to the health care providers. The group does not seek payment for health care services (since the policyholder corporation does not provide or receive health care services and the stop loss insurer has no liability to any health care provider or person covered under a health plan), but for alleged losses under the stop-loss policy.
The inquiry asks whether stop-loss insurers are subject to the prompt-pay rules of Insurance Law § 3224-a. In April 1982, the Insurance Department issued Circular Letter 7, which provides that stop-loss insurance is not reinsurance, but rather a form of accident and health insurance that may not be placed by excess line brokers. In 1999, the Legislature confirmed that stop-loss insurance is a form of accident and health insurance by enacting Insurance Law § 4237-a. That statute reads in pertinent part as follows:
(a) An insurer authorized to do the business of accident and health insurance in this state . . . shall be authorized to issue stop-loss insurance as provided in this section.
(b) ‘Stop-loss insurance’ means an insurance policy whereby the insurer agrees to pay claims or indemnify an employer for losses incurred under a self-insured employee benefit plan in excess of specified loss limits for individual claims and/or for all claims combined, or any similar arrangement.
Insurance Law § 3224-a, commonly known as the “prompt-pay” law, also is relevant to your inquiry. That statute establishes requirements for the settlement of health insurance claims by insurers, and reads in pertinent part as follows:
In the processing of all health care claims submitted under contracts or agreements issued or entered into pursuant to articles thirty-two, forty-two and forty-three of this chapter and article forty-four of the public health law and all bills for health care services rendered by health care providers pursuant to such contracts or agreements, any insurer . . . shall adhere to the following standards . . .
In addition, § 216.6 of 11 NYCRR Part 216 (Regulation 64) sets forth the standards for the prompt, fair, and equitable settlement of accident and health insurance claims. That regulation reads in pertinent part as follows:
(c) Within 15 business days after receipt by the insurer of a properly executed proof of loss and/or receipt of all items, statements and forms which the insurer requested from the claimant, the claimant, or the claimant's authorized representative, shall be advised in writing of the acceptance or rejection of the claim by the insurer. . . .If the insurer needs more time to determine whether the claim should be accepted or rejected, it shall so notify the claimant, or the claimant's authorized representative, within 15 business days after receipt of such proof of loss, or requested information. Such notification shall include the reasons additional time is needed for investigation. If the claim remains unsettled, . . . the insurer shall, 90 days from the date of the initial letter setting forth the need for further time to investigate, and every 90 days thereafter, send to the claimant, or the claimant's authorized representative, a letter setting forth the reasons additional time is needed for investigation. . . . .
(f) Every insurer shall pay any amount finally agreed upon in settlement of all or part of any claim not later than five business days from the receipt of such agreement by the insurer, or from the date of the performance by the claimant of any condition set by such agreement, whichever is later . . . .
Thus, under Regulation 64, the insurer must: inform the claimant in writing, within 15 business days, of the acceptance or rejection of the claim; keep the claimant informed every 90 days of any additional time that is needed for investigation if the claim remains unsettled; promptly inform the claimant in writing of a determination that there was no policy in force or that the insurer is disclaiming liability because the policyholder breached the policy provisions; pay those elements of the claim where there is no dispute as to the insurer’s liability when payment can be made without prejudice; and pay any finally agreed upon amount in settlement of all or part of any claim no later than 5 business days from the insurer’s receipt of the agreement, or the date of the claimant’s performance of any condition set by the agreement, whichever is later.
1 Stop-loss insurance is insurance that indemnifies a self-funded welfare plan for amounts in excess of specified loss limits. See Opinions of the Insurance Department’s Office of General Counsel dated September 20 and September 17, 2007.
2 It is presumed, for the purpose of this opinion, that the plan is governed by the federal Employee Retirement Income Security Act (ERISA), 29 U.S.C. Chapter 18, and thus not subject to the New York Insurance Law.