Health Insurers Improperly Rely Upon NY Statute Re: Alleged Overpayments
Effective January 1, 2007, New York passed a law entitled: “Rules relating to the processing of health claims and overpayments to physicians”. At first blush, the new law appears to give a free 2-year look back period to the insurance companies in which they can freely request what they believe to be “overpayments”, without a need for establishing fraud. On closer examination, however, the law appears to only set standards for when the insurance company can begin an audit process and it contains some of the standards and situations in which the insurance companies can “initiate overpayment recovery efforts.”
The law states that the insurance company or health plan cannot initiate an overpayment recovery effort more than 2 years after the doctor received the original payment from the insurer or health plan. The exception to the 2 year rule is when the insurer or health plan has a reasonable belief of fraud, intentional misconduct, or abusive billing or when the request for an audit is made by a self insured plan or there is a state or federal government program requiring the audit. The law defines “abusive billing” as billing practices that result in the submission of claims that are not consistent with sound fiscal, business, or medical practices and are engaged in at such frequency and for such a period of time as to reflect a consistent course of conduct.
Rather than answering questions and setting real standards, this new law actually raises a number of issues. The law only determines when an insurer or health plan can “initiate” an overpayment “recovery effort.” It does not state that after an audit is initiated and an effort has been made, that a refund must be paid by the doctor just because the insurance company has requested the refund. In short, while the insurance companies appear to be using the existence of the new law to accelerate their conduct of audits, the law has not given the insurers or the health plans additional legal rights. The law has not overruled the court decisions requiring proof of actual fraud in order for a refund to be due.
The law only addresses, in this writer’s view, the timing for the initiation of an audit or overpayment recovery request, not whether the doctor will indeed owe a repayment under any particular circumstance. For those doctors who are participating in a number of plans, there should be a review of the contract the doctor entered into with the insurer or health plan to see whether there are specific audit procedures and a delineation of significant rights granted to the insurer or the health plan. If the doctor has agreed in a contract to make a repayment under defined circumstances, the written agreement would supersede the fraud court decisions and control the relationship between the doctor and the insurer or health plan. The language in these contracts needs to be reviewed carefully, and qualified legal counsel may indeed identify numerous barriers that would prevent the insurer or health plan from obtaining a repayment from the doctor. Out-of-network plans present an entirely different legal situation, since the doctor has not entered into a contract with the insurer or health plan. There is no right to an “audit” in such cases and the doctor is in a stronger position when dealing with an audit request from an out-of-network insurer or health plan.
There are many additional legal issues involved and thus medical providers should seek highly qualified counsel when dealing with requests for medical records by insurers, health plans, or their affiliates on claims that have already been paid.