NY Takes Aim At No-Fault Insurance Fraud

New York regulators are proposing a new regulation that they say will cut back on no-fault insurance fraud – a growing problem in the state arising from loopholes in the law that allow medical mills to obtain millions of dollars in insurance payments for services and medical devices that are not needed, and that often are not even provided. 

The proposed regulation would:
 
· Put an end to requirements that mandate that insurers pay for treatments that were never actually provided, or pay more than the established fee schedule for a given service.
 
· Prevent healthcare providers from ignoring requests for evidence that the treatments they are providing are medically necessary by setting a 120 day deadline to provide requested information.
 
· Close the loophole that allows courts and arbitrators to force insurers to pay fraudulent claims simply because the insurer made minor paperwork errors when processing a claim.
 
In particular, the proposed regulation would amend Regulation 68, which implements New York’s no-fault automobile insurance law by establishing no-fault claims settlement procedures. The proposed regulation would amend Regulation 68 in three ways:
 
1. Prevent billing for services not rendered or billing for more than the mandated fee schedule.
 
Current law provides no remedy to insurers when doctors and other health care providers bill in excess of the mandated workers’ compensation fee schedule or for services not actually rendered—two major issues plaguing the no-fault system.
 
No-fault law requires insurers to pay claims in 30 days, but often it takes longer to discover that the health care was not actually provided. Under current law, courts do not allow insurers to deny claims after the deadline based on the fact that the provider has over-billed or billed for phantom services.
 
This proposed amendment would provide that no payment is due where the treatments were not actually provided or to the extent that the fees charged exceeded the fee schedule. As a result, insurers would be able to use those as grounds for denying a claim.
 
State regulators say that consumers would benefit from curbing these practices because no-fault benefits are typically subject to a $50,000 limit. Thus, when providers over-bill or bill for phantom services, the consumer’s no-fault monetary limit is “unjustly depleted.”
 
2. Set a time limit for responding to verification requests and denial for untimely response.
 
Within 30 days of receiving a no-fault claim from a healthcare provider, an insurer must pay or deny the claim, or, within 15 days, send a request for additional information to verify the claim. Once it receives verification, an insurer has 30 more days to pay or deny the claim.
 
There is currently no deadline for responding to a verification request. In addition, an insurer is not allowed to deny or close a claim if it never receives the requested verification. Accordingly, some claims remain open indefinitely. Under the law, insurers must pay a very high interest rate on delayed payments, so anything that causes delays can substantially increase costs.
 
Regulators say that this problem would be alleviated by the provision in the proposed regulation thata would require a healthcare provider to provide a response within 120 days of an insurer’s verification request, or provide reasonable justification why it cannot do so. If the applicant fails to do one or the other, the amendment permits an insurer to deny the claim. The amendment should thus speed claims resolution and reduce the number of claims that remain open indefinitely, regulators say.
 
3. Prevent immaterial defects in notices from invalidating them.
 
Under current law, if there is a small and insignificant error in an insurer’s verification request or a claim denial, the healthcare provider can seek to fight it through the courts or arbitration. The proposed regulation states that a technical error cannot be used to avoid responding to a verification request and does not invalidate an otherwise proper claim denial. According to state regulators, the proposed regulation should substantially reduce litigation and arbitration over these issues, reducing yet another obstacle to the timely resolution of no-fault claims.
 
The proposed regulation will now go through the normal rule-making process, known as the State Administrative Procedure Act (“SAPA”) process. The regulation will be printed in the State Register on May 16, which will trigger the start of a 45-day period for public comment.