Proposed Insurance Regulation No. 68-C: No Fault Insurance

The Superintendent of Financial Services has proposed Regulation No. 68-C to address no-fault insurance fraud. The proposed regulation is designed to curb abuse of the no-fault insurance system. Highlights are as follows:

• Health care providers will have to comply with a 120 day period to provide requested information or the claim can be denied.

• An insurer’s non-substantive technical error when processing a claim will not negate the obligation to comply with the request or notice.

More specifically, Regulation No.68-C will require healthcare providers to provide a response within 120 days of an insurer’s verification request, or provide reasonable justification why it cannot do so. An insurer may deny the claim if this time period is not complied with. Additionally, a technical error cannot be used to avoid responding to a verification request and does not invalidate an otherwise proper claim denial.

Regulation 68-C is intended to give insurers more time to prove fraud and prevent payment, and therefore provide a remedy to insurers when doctors and other health care providers bill in excess of applicable fee schedules or for services not actually rendered.

Among other things, Regulation 68-C is aimed at reducing no-fault insurance fraud and timely resolving no-fault claims, thereby curtailing the increase in automobile insurance premiums passed on to consumers. The proposed draft regulation will be printed in the State Register on May 16, 2012, at which time the 45-day period for public comment begins to run. Notably, on March 9, 2012, the Superintendent of Financial Services promulgated, on an emergency basis, Regulation No. 68-E, to address standards and procedures for investigating and suspending or de-authorizing providers of health services upon findings of certain unlawful conduct after investigation, notice and a hearing. Regulation 68-E, which was prepared by the Department of Financial Services (“DFS”) in consultation with the Commissioner of Health and the Commissioner of Education, is also designed to curb abuse of the no-fault insurance system.

The preamble of Regulation No. 68-E explains that certain professional services entities are “involved in activities that include intentionally staging accidents and billing no-fault insurers for heath services that were unnecessary or never in fact rendered.” No fault insurance fraud costs nofault insurers tens if not hundreds of millions of dollars which insurers pass on to New York consumers in the form of higher insurance premiums.

The new DFS regulations are part of a statewide initiative to clean up New York’s no-fault insurance system. As part of the statewide initiative, doctors who engage in fraudulent and deceptive practices with be banned by the DFS from participating in the no-fault system.

According to a recent press release issued by the DFS, it has already identified 135 medical providers whose billing practices raise concerns regarding possible nofault fraud, with investigations are ongoing. We will likely see heightened regulation and increased disciplinary and other action in the area of no-fault insurance. [