2. • For nearly a year now, the industry has been buzzing about
the proposed changes to 11 NYCRR 65-3 (Insurance
Regulation No. 68-C), some speculating that the proposed
changes would spell the end of no-fault insurance as we know
it. The proposed Fourth Amendment to 11 NYCRR 65-3 was
initially released in May 2012 as part of the Cuomo
administration's aggressive insurance reform campaign aimed
at ending no-fault fraud and stopping the rapid rise in
automobile insurance rates.
• According to the Department of Financial Services, the
proposed new amendment was cultivated with two
predominant goals in mind: to prevent health care providers
from being paid for services they do not actually provide; and
to address certain technical issues that may be used to prevent
a decision on a claim or keep an otherwise faulty claim open.
Both of these issues, according to the department, increase
costs to consumers.
3. • To tackle these issues, the department's amendment would:
(1) do away with certain statutory requirements, which in
effect require insurers to pay for treatments that were never
actually provided or pay more than the established fee
schedule for a given service; (2) prevent health care providers
from ignoring requests for verification concerning the medical
necessity of treatment by setting a 120-day deadline to
provide such requested information; and (3) close the
apparent loophole that requires insurers to pay for non-
rendered medical services simply because of technical errors
made by those insurers during the claims process.
• On the whole, both insurers and applicants for benefits did not
object to the Superintendent's attempts to protect consumers
from unjust depletion of benefits by attempting to streamline
the claims process, limit excessive billing or "phantom billing,"
and limit litigation over technicalities in the claims process.
There were, however, concerns that the changes would be
placing an unfair and disproportionate burden on applicants.
4. Phantom Billing, Over-Billing
With regard to billing for services not actually performed and/or
billed in excess of the New York State Workers' Compensation
fee schedule, the current law requires insurers to pay for these
claims if they fail to timely process such, either through a
timely denial or verification request. The amendment adds two
new subdivisions to section 65-3.8, providing that no payment
is due where the treatments were not actually provided or to
the extent that the fees charged exceeded the fee schedule,
effectively abrogating the Court of Appeals holding in Fair Price
Medical Supply v. Travelers Indem., 10 NY3d 556 (2008).
Specifically, Subdivisions (g) through (j) of section 65-3.8 are
re-lettered subdivisions (i) through (l) and new subdivisions
(g)??and (h) are added to read as follows:
(1) Proof of the fact and amount of loss sustained pursuant to
Insurance Law section 5106(a) shall not be deemed supplied
by an applicant to an insurer and no payment shall be due for
such claimed medical services under any circumstances:
5. (i) When the claimed medical services were not provided to an
injured party; or
(ii) for those claimed medical service fees that exceed the charges
permissible pursuant to Insurance Law sections 5108(a) and
(b) and the regulations promulgated thereunder for services
rendered by medical providers.
(h) With respect to a denial of claim (NYS Form N-F 10), an
insurer's non-substantive technical or immaterial defect or
omission shall not affect the validity of a denial of claim.
As a result, an insurer is no longer precluded from denying
payment on these grounds beyond the statutory period. The
justification for this change is that when providers over-bill or
bill for phantom services, the consumer's no-fault monetary
limit, typically $50,000, is unjustly depleted.
The new regulation does not explicitly state that billing in
excess of the mandated fee schedule or billing for services not
rendered are non-waivable defenses,
6. but rather that proof of the fact and amount of loss sustained
shall not be deemed to be received by the insurer in the first
instance, a condition precedent to coverage, when the
applicant for benefits has billed in excess of the mandated fee
schedule and/or for services not rendered. Further, and
crucially, amid concerns
that the new amendment would result in the denial of a claim
in its entirety when the applicant for benefits has billed in
excess of the mandated fee schedule, not just to the extent of
the excess, the Superintendent has clearly stated that only the
excess portion of an excessive bill is not due, rather than the
entire bill.
This amendment, applicable to medical services rendered on
or after April 1, 2013, will have a tremendous impact on the
current state of no-fault law.
7. Time Limit for Responding
Currently, an insurer is required, within 30 days of receiving a
no-fault claim from a health care provider, to pay or deny the
claim, or, within 15 days, send a request for additional
information to verify the claim. Once the insurer receives
verification, it has 30 additional days to pay or deny the claim.
However, there is currently no statutory deadline for a provider
to respond to a verification request. Moreover, an insurer is not
permitted to deny or close a claim if it never receives the
requested verification. As a result, some claims remain open,
or tolled, indefinitely. This can become very costly for insurers
as under the law, insurers must pay a very high interest rate
on delayed payments.
The amendment addresses this issue by setting a strict
deadline for responding to the insurer's verification request.
The healthcare provider must now provide a response within
120 days of an insurer's verification request, or provide
reasonable justification why it cannot do so
8. . Should the applicant fail to do one or the other, the
amendment permits an insurer to deny the claim, thus
speeding up the claims process and reducing the number of
claims that remain tolled indefinitely.
Specifically, new subdivisions (o) and (p) are added to section
65-3.5 to read as follows:
(o) An applicant from whom verification is requested shall, within
120 calendar days from the date of the initial request for
verification, submit all such verification under the applicant's
control or possession or written proof providing reasonable
justification for the failure to comply. The insurer shall advise
the applicant in the verification request that the insurer may
deny the
claim if the applicant does not provide within 120 calendar
days from the date of the initial request either all such
verification under the applicant's control or possession or
written proof providing reasonable justification for the failure
to comply.
9. • This subdivision shall not apply to a prescribed form (NF-Form)
as set forth in Appendix 13 of this Title, medical examination
request, or examination under oath request. This subdivision
shall apply, with respect to claims for medical services, to any
treatment or service rendered on or after April 1, 2013 and
with respect to claims for lost earnings and reasonable and
necessary expenses, to any accident occurring on or after April
1, 2013.
(p) With respect to a verification request and notice, an
insurer's non-substantive technical or immaterial defect or
omission, as well as an insurer's failure to comply with a
prescribed time frame, shall not negate an applicant's
obligation to comply with the request or notice. This
subdivision shall apply to medical services rendered, and to
lost earnings and other reasonable and necessary expenses
incurred, on or after April 1, 2013.
Further, paragraph (3) of section 65-3.8(b) is amended to read
as follows:
10. (3) Except as provided in subdivision (e) of this section, an
insurer shall not issue a denial of claim form (NYS form N-F
10) prior to its receipt of verification of all of the relevant
information requested pursuant to [section] sections 65-3.5
and 65-3.6 of this Subpart (e.g., medical reports, wage
verification, etc.). However, an insurer may issue a denial
if, more than 120 calendar days after the initial request for
verification, the applicant has not submitted all such
verification under the applicant's control or possession or
written proof providing
reasonable justification for the failure to comply, provided that
the verification request so advised the applicant as required in
section 65-3.5(o) of this Subpart. This subdivision shall not
apply to a prescribed form (NF Form) as set forth in Appendix
13 of this Title, medical examination request, or examination
under oath request. This paragraph shall apply, with respect
to claims for medical services, to any treatment or service
rendered on or after April 1, 2013, and with respect to claims
for lost earnings and reasonable and necessary expenses, to
any accident occurring on or after April 1, 2013.
11. In order to comply with this new regulation, applicants will be
burdened with additional paperwork and internal procedure
changes, as they will now be required to provide additional
justification for non-compliance and to ensure timeliness of
their responses. However, insurers will share in this burden, as
the amendment mandates that they must notify their
policyholders of the new time-frame requirement and that
failure to adhere to the requirement may result in a denial of
the claim.
Critically, there are several important exceptions to the 120-
day verification rule. The new provision will not apply to a
prescribed form (NF-Form), a medical examination request, or
an examination under oath request.16 This carve-out should
provide some relief to applicants, since a large percentage of
verification requests involve these items. However, because it
is standard practice in the industry for insurers to request
multiple items in one verification request, it raises the question
of whether the 120-day deadline applies to a single request
that contains both exempted and non-exempted items.
Additionally, the amended regulation explicitly stipulates
12. that the applicant is only required to provide, within 120 days
of the initial request, only such verification that is in the
applicant's possession or control, or provide written proof
providing reasonable justification for the failure to comply.17
Finally, it is also important to note that the new provision
regarding verification requests also provides that "an insurer's
failure to comply with a prescribed time frame, shall not
negate an applicant's obligation to comply with the request or
notice."
Technical Defects
Under the current no-fault law, if there is an insignificant, non-
substantive or technical defect in an insurer's otherwise
presumably valid verification request or denial, the applicant
may seek to challenge its legitimacy through the courts or
arbitration.19 In an effort to cut down on what the Department
of Financial Services views as unnecessary litigation and delay,
the new amendment explicitly provides that an applicant's
obligation to comply with a notice or verification request is not
13. • negated—and a denial of claim is not invalidated—due to a
non-substantive technical or immaterial defect contained in any
of these documents.
With regard to a denial of claim form (NYS Form NF-10),
subsection 65-3.8 (h) provides that "an insurer's non-
substantive technical or immaterial defect or omission shall not
affect the validity of a denial of claim. The subdivision will be
applicable to medical services rendered, and to lost earnings
and other reasonable and necessary expenses incurred, on or
after April 1, 2013."With respect to a verification request and
notice, subsection 65-3.5(p) provides that "an insurer's non-
substantive technical or immaterial defect or omission, as well
as an insurer's failure to comply with a prescribed time frame,
shall not negate an applicant's obligation to comply with the
request or notice. This subdivision shall apply to medical
services rendered, and to lost earnings and other reasonable
and necessary expenses incurred, on or after April 1, 2013."
14. • Notably absent from the new regulation is any definition or
description of what constitutes a "non-substantive technical or
immaterial defect or omission." Such glaring ambiguity will
inevitably create a situation where the courts and arbitrators
will be called upon to offer clarification and conclusiveness.
Despite its best efforts, it seems that the Department of
Financial Services, in trying to craft an amendment that would
reduce unnecessary litigation and speed up the resolution of
claims, has created a new potential "loophole" to be litigated
for years to come.
• David M. Barshay is a member of Baker Sanders, in Garden
City. Jennifer L. Zeidner, a senior associate with the firm,
assisted in the preparation of this article.
POSTED BY ATTORNEY RENE G. GARCIA:
For more information:- The Garcia Law Firm, P.C. was able to successfully
handle no fault cases. For a free consultation please call us at 1-866-
SCAFFOLD or 212-725-1313.