New York Proposes New Rule to Crack Down on No-Fault Insurance Fraud

New York State regulators are expanding their effort to stop no-fault auto insurance fraud.

The New York Department of Financial Services announced on Tuesday a new draft regulation, Regulation 68, that would make it easier for insurers to detect fraudulent activities and cut red tape to speed resolutions.

Regulation 68 puts an end to requirements that mandate insurers pay for treatments that were never actually provided, or pay more than the established fee schedule for a given service. The Department of Financial Services noted that the 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.

The new regulation also prevents 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. Under the current system, there is no specific deadline for healthcare providers for responding to a verification request from insurers.

Currently, no-fault law requires insurers to pay claims in 30 days or pay a very high interest rate on delayed payments. But oftentimes, 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 even if the provider has over-billed or billed for phantom services. Under the new regulation, insurers must pay or deny the claim within 30 days of receiving a no-fault claim from a healthcare provider, or send a request to healthcare providers within 15 days for additional information to verify the claim. (And the healthcare providers, in turn, would now have 120 days to provide requested information.) Once the insurer receives verification, it has 30 more days to pay or deny the claim.

Regulation 68 also closes the loophole that allowed courts and arbitrators in the past to force insurers to pay fraudulent claims simply because the insurer made minor paperwork errors when processing a claim. 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 new amendment states that a technical error cannot be used to avoid responding to a verification request and does not invalidate an otherwise proper claim denial.

The new draft regulation can be found on the New York Department of Financial Services’ website. It will now go through the normal rule-making process, known as the State Administrative Procedure Act 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.