Relates to the settlement of claims

Summary of specific provisions

Section one amends subsection (a) of section 3224-a of the insurance law, as amended by chapter 666 of the laws of 1997, to provide that except in a case where the obligation of an insurer, an organization or a corporation licensed or certified pursuant to article 43 of the insurance law or article 44 of the public health law to pay a claim submitted by a policyholder or person covered under such policy or to make a payment to a health care provider is not reasonably clear, or when there is a reasonable basis supported by specific information available for review by the superintendent that such claim or bill for health care services rendered was submitted fraudulently, such insurer, organization or corporation will pay the claim to a policyholder or covered person or make a payment to a health care provider within fifteen days of receipt of a claim or bill for services rendered which is transmitted electronically or within thirty days of receipt of a claim or bill, for services rendered which is submitted in writing.

Section two amends subsection (a) of section 2406 of the insurance law, as amended by chapter 666 of the laws of 1997, to provide that if the superintendent finds, after notice and hearing, that the person complained of has engaged in an act prohibited by section 3224-a of the insurance law, the superintendent shall levy a civil penalty against such person in an amount of up to $2,500 per day for each day beyond the date that a bill or claim was to be processed in accordance with section 3224-a of the insurance law. The limitation of such penalty to an aggregate of $5,000 is also deleted by this amendment.

Justification

The provisions regarding prompt payment were enacted in 1997 to ensure, in part, that health care providers receive timely payment for care rendered to their patients from health insurance plans. Many health care providers and patients continue to raise concerns regarding the length of time it takes to obtain reimbursement. Because of the unequal bargaining power between health insurance plans and individual physicians and hospitals throughout New York State, prompt payment provisions of contracts cannot be fairly negotiated. The combination of rapidly rising office and institutional overhead costs and continuing efforts by insurers to inappropriately decelerate reimbursement for medically necessary care jeopardizes the stability of the health care system and the ability of providers to provide such care.

Moreover, advances in the processing of electronic claims allow health insurance plans to process bills for services rendered much faster than when the original prompt payment provisions were enacted. Accordingly, expedited payments to hospitals, physicians and other health care providers (from 45 to 15 days for electronic requests for payment and from 45 to 30 days for written requests) are both necessary and feasible.

In light of the substantial profits generated by the health insurance industry since the original prompt payment provisions were enacted, the financial penalties set forth in the statute have not sufficiently deterred health insurance plans from continuing to routinely inappropriately delay reimbursement to providers for health care services rendered and to patients for claims. Thus, many health insurance plans do not have an incentive to comply with prompt payment obligations. The only way to change this is by substantially increasing the penalties. Accordingly, this legislation significantly increases the amount of the penalties that may be imposed by the Superintendent of Insurance for the failure to pay health care claims or bills for services rendered in a timely fashion and makes the imposition of a civil penalty mandatory. The maximum civil penalty is increased from $500 per day for each day beyond the date that a claim or a bill was to be processed in accordance with the prompt payment provisions to $2,500 per such day. In addition, the limitation on civil penalties of $5,000 is removed. Such higher penalties can only be imposed after notice and a hearing by the Superintendent of Insurance, which safeguards the rights of t hose parties accused of violating the statute's prompt payment Provisions.

PRIOR LEGISLATIVE HISTORY; 2009: A. 3591 Referred to Insurance; 2007-06: A10078/S. 7043 Referred to Insurance

Fiscal implications

None.

Effective date

This act will take effect on the ninetieth day after it shall have become a law.