INS-02-11-00013-P Minimum Standards for the Form, Content and Sale of Health Insurance, Including Full and Fair Disclosure

1/12/11 N.Y. St. Reg. INS-02-11-00013-P

NEW YORK STATE REGISTER

VOLUME XXXIII, ISSUE 2

January 12, 2011

RULE MAKING ACTIVITIES

INSURANCE DEPARTMENT

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. INS-02-11-00013-P

Minimum Standards for the Form, Content and Sale of Health Insurance, Including Full and Fair Disclosure

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Amendment of Part 52 of Title 11 NYCRR.

Statutory authority:

Insurance Law, sections 201, 301, 1109, 1117, 2601, 3217, 3234 and 4512

Subject:

Minimum standards for the form, content and sale of health insurance, including full and fair disclosure.

Purpose:

To establish standards for an internal appeal procedure for long term care insurance.

Text of proposed rule:

Section 52.25 is hereby amended to add a new subdivision (f) to read as follows:

(f) Internal Appeal.

(1) General requirement.

(i) This subdivision establishes minimum standards for internal appeal benefits found in long term care insurance, nursing home and home care insurance, nursing home insurance only, and home care insurance only policies and certificates.

(ii) No policy or certificate shall be delivered or issued for delivery in this State as long term care insurance, nursing home insurance only, home care insurance only, or nursing home and home care insurance unless the policy or certificate contains provisions setting forth an internal appeal benefit that, at a minimum, complies with the requirements of this subdivision.

(iii) The requirements of this subdivision are in addition to any external appeal benefits afforded to insureds as required by the New York State Partnership for Long Term Care program established under Section 367-f of the Social Services Law.

(2) Reasonable opportunity to appeal an adverse claim determination. (i) Every insurer issuing a policy or certificate subject to this section shall establish, and describe in the policy or certificate, a procedure providing the insured, subscriber or an authorized representative thereof with reasonable opportunity to appeal to the insurer an initial adverse claim determination. The insurer shall allow an internal appeal for an adverse claim determination involving expense incurred coverage where the insured, subscriber or the estate thereof has been billed a valid charge for long term care services. For coverage provided without regard to expenses incurred as permitted under the Internal Revenue Code, the insurer shall allow an internal appeal for an adverse claim determination where a plan of care has been prescribed by a licensed health care practitioner for the insured.

(ii) Every insurer shall provide an initial adverse claim determination in writing, which contains the information provided in subparagraph (iii) of this paragraph.

(iii) The policy or certificate shall state that the initial adverse claim determination shall be in writing and include:

(a) The specific reason for the initial adverse claim determination, including a specific reference to policy or certificate language that supports the denial, if applicable;

(b) Instructions to the insured, subscriber or an authorized representative thereof on how and when to initiate and facilitate the insurer's effective handling of an internal appeal, which shall:

(1) include the mailing address and other contact information where the written appeal must be sent and the time frame available for initiating such internal appeal;

(2) specify that the insurer will consider any new or modified information or explanations the insured, subscriber or an authorized representative thereof sends to the insurer; and

(3) state the insurer will accept the names, addresses and phone numbers of persons who may facilitate the insurer's effective handling of the internal appeal; and

(c) A notification that the insured, subscriber or an authorized representative thereof is entitled to all documents, records and other information relevant to the claim.

(3) Request to appeal. The insurer shall permit the insured, subscriber or an authorized representative thereof at least 60 days from receipt of the initial adverse claim determination to appeal the denial to the insurer. The insurer shall require that the appeal of the initial adverse claim determination must be in writing; however, the insurer shall not require the insured, subscriber or an authorized representative thereof to use a special form to appeal the initial adverse claim determination.

(4) Internal appeal procedures.

(i) Every insurer shall issue a determination with regard to an internal appeal within 60 days of the insurer's receipt of the appeal.

(ii) If the insurer reasonably needs additional information from the insured, subscriber or an authorized representative thereof to issue a determination on the internal appeal, the insurer shall request in writing the additional information from the insured, subscriber or authorized representative thereof within 15 business days of receipt of the internal appeal. The insurer shall allow the insured, subscriber or the authorized representative thereof at least 45 days from receipt of the insurer's written request to provide the additional information to the insurer.

(iii) If the insurer cannot reasonably decide the internal appeal within the 60-day timeframe because the insurer is awaiting additional information from the insured, subscriber or an authorized representative thereof, then the insurer shall provide the insured, subscriber or authorized representative thereof with written notice of an extension to decide the internal appeal prior to the expiration of the initial 60-day period. The written notice of an extension shall describe the need to await further information and indicate the date by which the insurer expects to issue the determination. In no event shall the extension afforded the insurer exceed 120 days from receipt of the internal appeal by the insurer.

(iv) If the additional information is not received within 120 days from receipt of the internal appeal by the insurer, the insurer shall immediately issue an internal appeal determination based on the information available to the insurer at that time.

(v) The internal appeal determination shall be made by a person not involved in the initial adverse claim determination by the insurer, and the person shall have the ability and expertise to reasonably evaluate and decide the internal appeal.

(5) Internal appeal determination. The internal appeal determination shall be made in writing to the insured, subscriber or an authorized representative thereof and include:

(i) A statement as to whether the initial adverse claim determination is upheld or reversed in whole or in part;

(ii) A detailed explanation, with references to specific policy or certificate language if applicable, of the reason(s) why the initial adverse claim determination is being upheld in whole or in part;

(iii) If the denial is reversed in whole or in part, a detailed description of the benefits that will be paid; and

(iv) A notification that the insured, subscriber or an authorized representative thereof is entitled to copies of all documents, records or other relevant information regarding the claim and the internal appeal.

Subdivision (a) of section 52.90 is amended by adding a new paragraph (19) to read as follows:

(19) Effective upon adoption, with respect to section 52.25(f) of this Part, affecting policies and certificates delivered or issued for delivery in this State six months or more from such effective date.

Text of proposed rule and any required statements and analyses may be obtained from:

Andrew Mais, NYS Insurance Department, 25 Beaver Street, New York, NY 10004, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Colleen Rumsey, NYS Insurance Department, One Commerce Plaza, Albany, NY 12257, [phone], email: [e-mail]

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory authority: The Superintendent's authority for the promulgation of the forty-third amendment to Regulation 62 derives from Insurance Law Sections 201, 301, 1109, 1117, 2601, 3217, 3234 and 4512.

Sections 201 and 301 of the Insurance Law authorize the Superintendent to prescribe regulations interpreting the provisions of the Insurance Law, as well as effectuate any power given to him under the provisions of the Insurance Law to prescribe forms or otherwise make regulations.

Section 1109 of the Insurance Law authorizes the Superintendent to promulgate regulations affecting health maintenance organizations (HMOs) and effectuating the purposes and provisions of the Insurance Law and Article 44 of the Public Health Law.

Section 1117 of the Insurance Law authorizes the Superintendent to permit the sale of plans providing coverage for long term care services by insurers, HMOs, Article 43 corporations and fraternal benefit societies; indicates that all contracts issued pursuant to Section 1117 are subject to all provisions of the Insurance Law and regulations promulgated under the Insurance Law; and authorizes the Superintendent to modify or suspend any provision or regulations upon making the determinations set forth in subsection (f) of Section 1117.

Section 2601 of the Insurance Law prohibits insurers doing business in this state from engaging in unfair claims settlement practices.

Section 3217 authorizes the Superintendent to issue regulations to establish minimum standards for the form, content and sale of health insurance.

Section 3234 of the Insurance Law requires insurers to provide the insured or subscriber with an explanation of benefits form in response to the filing of any claim under a policy or certificate providing coverage for nursing home expense or home care expense benefits.

Section 4512 of the Insurance Law authorizes the Superintendent to alter or supersede reasonable rules prescribing the required, optional and prohibited provisions in accident and health insurance certificates issued by fraternal benefit societies.

2. Legislative objectives: The statutory sections cited above establish a framework for the form, content and sale of insurance containing long term care benefits. The Superintendent is granted authority under Sections 1117 and 3217 of the Insurance Law to promulgate regulations that establish minimum standards for the form, content, and sale of health insurance, including long term care insurance. One of the purposes of establishing minimum standards is reasonable standardization and simplification of coverages to facilitate understanding and comparisons. This rule furthers the legislative objective by adopting current industry best practices as the minimum standards applying to internal appeals for long term care insurance across the industry. Recent adoption of long term care internal appeal provisions in the NAIC (National Association of Insurance Commissioners) Long Term Care Insurance Model Regulation provides the impetus to examine legislative objectives under New York Insurance Law and regulations and pursue this amendment.

3. Needs and benefits: Long term care insurance plans were first approved by the Insurance Department during 1986. These plans provided benefits that were somewhat limited in amount and in the type of services covered. Only a few insurers showed initial interest in writing long term care insurance. In order to encourage more insurers to offer such plans, the Insurance Department did not, at that time, establish minimum standards, but approved the plans under Section 1117 of the Insurance Law.

In 1991, following a public hearing, the Insurance Department promulgated the Sixteenth Amendment to Insurance Department Regulation 62 (11 NYCRR Part 52), which established minimum standards and set forth disclosure requirements for long term care insurance. The amendment took effect on January 1, 1992. In establishing the minimum standards, the Insurance Department recognized that long term care insurance should provide a comprehensive range of benefits. The Department was also aware that such a benefit package could price many people out of the long term care insurance market and was also mindful that consumers have differing needs and desires concerning coverage of long term care services. The amendment established four categories of insurance policies providing long term care benefits: long term care insurance, nursing home & home care insurance, nursing home insurance only and home care insurance only. The amendment set minimum standards for the four categories of policies and other standards that applied to all four categories, such as make available inflation protection and non-forfeiture benefits.

The proposal establishes minimum standards for internal appeal procedures for long term care insurance, nursing home & home care insurance, nursing home insurance only and home care insurance only. As stated above, long term care insurance has been sold in New York for almost 25 years. Due to the long tailed nature of this product, consumers purchase the policy not expecting to make a claim for benefits for years. As more consumers purchase long term care insurance and file claims on their coverage, this regulation helps ensure that consumers are adequately protected at time of claim by requiring insurers to have an internal appeal procedure available to insureds, subscribers and their authorized representatives. Currently, all long term care insurers offer their insureds an internal appeal procedure for denied claims but these procedures and the form language regarding internal appeals can be dissimilar among insurers. The establishment of these minimum standards for internal appeal procedures will assure adequate public protection by making pertinent policy and certificate provisions less confusing and easier to understand by facilitating the comparison of different policies or certificates by insureds or subscribers with regard to internal appeal procedures. The minimum standards that are established under the rule will help to promote more consistent and detailed descriptions about internal appeals in insurer form language.

4. Costs: Insurers issuing long term care insurance have been aware of the Department's intent to promulgate this regulation for several years; for example, notice was published in the January and June 2009 and 2010 Regulatory Agendas. Insurers will have to update their appeals language, if necessary, to comply with this amendment. As stated above, all insurers have existing internal appeal procedures, and those that are similar to this rule may not need to update their policy and certificate form language. If updated language is necessary, insurers can submit a one-page rider to the Department for approval to be inserted into their policies and certificates. This change can be performed with existing staff at the insurers, who already submit various form and rate filings to the Insurance Department. Thus, insurers will have minimal, if any, costs to alter their current internal appeal procedures to comply with this rule.

Costs to the Insurance Department also should be minimal, as existing personnel are already available to review any filings necessitated by the amendment. These rules impose no compliance costs on state or local governments or health care providers.

5. Local government mandates: These rules do not impose any program, service, duty or responsibility upon a city, town, village, school district or fire district.

6. Paperwork: The proposal imposes no new reporting requirements. Insurers may need to revise policy form filings to comply with the regulation, but the changes will be minor, as most policy forms already contain an appeal provision that is similar to the proposed rule.

7. Duplication: The long term care insurance market in New York is predominantly individual, as 76% of insureds are covered by individual policies. For this vast segment of the market, no other rule governs internal appeals and no duplication exists. For group plans offered by employers or labor unions, the U.S. Department of Labor promulgated a rule (29 C.F.R. Section 2560.503-1) setting minimum standards for claim payment procedures, including internal appeal procedures. The federal rule allows states to exceed the minimum standards set in the federal rule. This federal rule, first promulgated in 1977 and updated in 2001, has broad application to all types of group employer/union employee benefit plans and is not specifically tailored to long term care insurance. For this much smaller group segment of the long term care insurance market in New York, this rule complements and enhances the federal rule by indicating a definite time frame for actions by both insurer and insured to better provide for prompt determinations of internal appeals when additional information is needed to decide the internal appeal. The requirements of this rule are the same as the federal rule except that this rule has an enhanced time requirement when an insurer needs additional information to decide an internal appeal. Under that limited circumstance, the insurer must request the additional information within 15 business days of receiving the internal appeal. Under this rule, the insured must act more promptly and provide the additional information within 45 days of the request from the insurer. This enhancement was made because of comment from an insurer during outreach that highlighted the importance of prompt action and finality on internal appeals so that claims information does not become stale while an extended amount of time elapses while the insurer awaits additional information. Thus, this rule is not duplicative of the federal rule for more than three-fourths of the New York market. For group employer/union plans, this rule enhances the federal minimum standards as a result of outreach to insurers. Insurers are receiving greater volumes of long term care insurance claims in recent years, making application of the federal rule more prevalent and adoption of this rule necessary.

8. Alternatives: The Department sent out an outreach draft to insurers and a trade group representing most insurers writing long term care insurance in New York on December 2, 2009, asking interested parties to submit comments. The Department met with the insurers and interested parties on January 28, 2010 to discuss the comments. Based upon some of the comments the proposal has been revised.

The outreach draft contained a provision requiring the insurers to establish procedures for an expedited internal appeal under certain extenuating circumstances involving the insured's condition. The insurer would have been required to issue a determination on an expedited appeal within 30 days from receipt of the appeal. Insurers indicated that an expedited appeal was unnecessary since long term care insureds are typically seeking reimbursement for services already provided and insurers are not managing the care of the insureds before the care is rendered to the long term care insured. The Department agreed with the insurers' suggestion and removed the expedited appeal procedure from the rule.

Insurers suggested following the recently adopted NAIC Long Term Care Insurance Model Regulation, which limits internal appeals only to benefit trigger determinations. The Department receives claim denial reports from insurers, on an NAIC form, required to be sent by federal law. The NAIC form in 2008 shows approximately 29% of net denied claims were for benefit trigger determinations and 35% of net denied claims were because the services were not covered under the contract. A reason for claim payment delay is that the elimination period time limit has not yet been met.. Under the NAIC model, these other claim denials (other than benefit trigger denials) or delays would not be eligible for an internal appeal. Furthermore, current appeal language in policies and certificates does not restrict the right to an internal appeal to benefit trigger denials only. However, the NAIC model states that it sets minimum standards for internal appeal procedures and permits states to exceed the minimums set forth in the model. The Department determined that it would be of even greater benefit to the insured to expand beyond the NAIC model and include the other reasons for claim denials or delays as the NAIC model permits.

9. Federal standards: As discussed in the duplication section above, this rule complements a rule promulgated by the Federal Department of Labor. 29 C.F.R. Section 2560.503-1(k) states that the federal regulation shall not be construed to supersede any provision in State law that regulates insurance, except to the extent that such law prevents the application of the federal regulation. Also, 29 C.F.R. Section 2560.503-1(a) states that the federal regulation sets minimum requirements for employee benefit plan procedures, allowing states to exceed the federal minimum requirements. This rule complements the federal regulation, is more beneficial to consumers, and will not prevent the application of the federal regulation.

10. Compliance schedule: The rule will take effect immediately upon its adoption, and will affect policies and certificates delivered or issued for delivery in this State six months or more from such effective date.

Regulatory Flexibility Analysis

1. Small businesses: The Insurance Department believes that this rule will not impose any adverse economic impact on small businesses and will not impose any reporting, recordkeeping or other compliance requirements on small businesses. The basis for this belief is that this rule is directed at insurers that write accident and health insurance, none of which falls within the definition of "small business" set forth in section 102(8) of the State Administrative Procedure Act. Indeed, the Insurance Department has reviewed filed Reports on Examination and Annual Statements of these entities, and believes that there are none that are both independently owned and that employ fewer than 100 persons. Accordingly, there is no need to prepare any special guidance materials for small businesses with regard to this rule.

2. Local governments: The regulations do not impose any impact, including any adverse impact, or reporting, recordkeeping, or other compliance requirements on any local governments. The basis for this finding is that this rule is directed at insurers that write accident and health insurance, none of which are local governments.

Rural Area Flexibility Analysis

1. Types and estimated numbers of rural areas: All insurers that write accident and health insurance, to which this regulation is applicable, do business in every county of the State, including rural areas as defined under section 102(13) of the State Administrative Procedure Act. Since the rule applies to the insurance market throughout New York, not only to rural areas, the same regulation will apply to regulated entities across the state.

2. Reporting, recordkeeping and other compliance requirements; and professional services: The regulation imposes no new reporting requirements. Insurers may need to revise policy form filings to comply with the regulation, but the changes will be minor, as most policy forms already contain an appeal provision that is similar to the proposed rule. Parties in rural areas will not incur expenses to access this data.

3. Costs: This regulation does not impose any new cost requirements on regulated parties. As stated above, all insurers have existing internal appeal procedures that are similar to this rule and may not need to update their policy and certificate form language. If updated language is necessary, insurers will submit a one page rider to the Department for approval to be inserted into their policies and certificates. This change can be performed with existing staff at the insurers, who already submit various form and rate filings to the Insurance Department. This rule closely follows the existing internal appeal procedures now used by insurers. Thus, insurers will have minimal, if any, costs to alter their current internal appeal procedures to comply with this rule.

4. Minimizing adverse impact: This rule will not impose any adverse impacts on entities in rural areas.

5. Rural area participation: Notification of the Department's intent to propose these regulations were included in the Department's Regulatory Agenda for January 2010. In addition, the Department sent an outreach draft to insurers and a trade group representing most insurers writing long term care insurance in New York on December 2, 2009, asking interested parties to submit comments. The Department met with the insurers and interested parties on January 28, 2010 to discuss the comments. Through this comment process and meeting on January 28, 2010, insurers located in and/or doing business in rural areas had an opportunity to participate in the rulemaking process for this regulatory change. Based upon some of the comments the proposal has been revised.

Job Impact Statement

The amendment to Regulation 62 will not adversely impact job or employment opportunities in New York. The regulation will involve the establishment of an internal appeal procedure to which all issuers of long term care insurance must adhere. The adoption of an internal appeal procedure for long term care insurance will not have any negative effect on jobs or employment opportunities.

Insurers issuing long term care insurance have been aware of the Department's intent to promulgate this regulation for several years; for example, notice was published in the Regulatory Agenda. Insurers will have to update their appeals language, if necessary, to comply with this amendment. All insurers have existing internal appeal procedures, and those insurers with procedures that are similar to this rule may not need to update their policy and certificate form language. If updated language is necessary, insurers can submit a one-page rider to the Department for approval to be inserted into their policies and certificates. This change can be performed with existing staff at the insurers, who already submit various form and rate filings to the Insurance Department. Thus, insurers will have minimal, if any, costs to alter their current internal appeal procedures to comply with this rule.