New York Court of Appeals Upholds No-Fault Rule Denying Health Insurer Reimbursement and Equitable Subrogation Rights
Members Left in the Middle
In a well-reasoned yet anti-consumer opinion, the NY Court of Appeals in the matter of Aetna v. Hanover has reconfirmed a position taken by the NYS Insurance Department since 2008 that health insurers do not have legal standing to assert a direct claim of subrogation or reimbursement under the NY automobile no-fault system. The Court went on to further dismiss the possibility that a health insurer could take an assignment of its members claim against the auto insurer notwithstanding health insurance contract language that may assign rights against third parties to the health insurer. Finally, the Court, without regard to over 200 years of equitable subrogation case precedent, summarily dismissed the health insurer’s equitable right to subrogation. The result is that health insurers will be required to deny all auto related claims until a final decision can be made under the NYS no- fault system. This could leave claims unpaid for years and members in the middle.
In the Hanover case, Luz Herrera was injured while operating a vehicle insured by Hanover Insurance Company. At the time of the accident Herrera also had health insurance through plaintiff Aetna Health Plan. Aetna alleged that the bills should have been paid by Hanover and sought reimbursement from Hanover without response. In 2010 Herrera submitted copies of $19,649.10 in bills paid by Aetna to Hanover. Hanover did not respond to Herrera’s demands either. Herrera then demanded arbitration under the NYS no fault statute. The arbitrator denied Herrera’s claim citing that the copies of medical bills paid by Aetna were not “bills” within the no-fault act. Aetna continued to pay an additional $23,525.73 in bills submitted directly by providers. Aetna then commenced an action against Hanover seeking reimbursement. Aetna argued that Hanover breached its contract of insurance with Herrera and that Aetna was the assignee of that right. The NY Supreme Court ruled that Aetna has no standing under NY CCR 65-3.11(a) stating that “there was no authority permitting a health insurer to bring a subrogation action against a no-fault insurer for sums the health insurer was contractually obligated to pay its insured” see http://law.justia.com/cases/new-york/court-of-appeals/2016/97.html
Health insurers, who are obligated to pay promptly upon receipt of a claim, are surely disappointed by the Appeals Court decision. Coverage under NYS no-fault is universally excluded under all health plan contracts. This is in keeping with the universal insurance maxim that specific loss policies (e.g. those that cover a specific type of injury including auto, workers’ compensation, premises liability, black lung) are primary to general accident and health type policies which provide general coverage for all injuries unless otherwise excluded or specifically covered under another primary policy covering the same risk (auto).
Health Insurers would prefer to pay claims when received and then either subrogate or coordinate coverage with other insurers leaving members with the assurance that their medical claims will be covered and treatment uninterrupted. By not allowing insurers to make a claim under 11NYCRR 65-3.11(a), the NYS Court of Appeals has failed to correct the policy of the NYS Insurance Department that leaves members in the middle. The Court confirmed the right of appeal only applies to providers not insurers. The Court also further confused the assignment of claims issue. Members traditionally assign their rights to payment by the auto carrier to the provider upon treatment (so that the provider may bill and be paid directly by the no fault carrier). The Court reasoned that if the member has already assigned the claim to the provider then the member cannot reassign its claim to the health insurer, consequently the health insurer has no standing.
NYS laws and the Court have failed to account for the reality of today’s modern electronic health payment system. Health insurers pay providers and process claims within days of the service using EDI payment processing. Members want treatment, not arguments between their auto and health insurers. Gone are the paper claim submissions and manual reviews still common with auto insurers and workers’ compensation insurers. Providers are very cash flow conscious and simply want paid without regard to which insurer is truly responsible. In the real world, auto and workers’ comp appeals are cumbersome and time consuming. Providers and members have little incentive to file appeals of auto denials when there is now almost universal secondary health insurance available.
NYS health insurers are now left without any way to recoup payments which are the responsibility of an auto insurer. They will be wise to review their claims carefully using updated processing logic and data mining to identify suspect auto cases. The Court has clearly stated there is no way for the health insurer — under law or equity — to be repaid for a claim prematurely paid when payment should have been the responsibility of the auto insurer.