New York's no-fault insurance law has recently made national headlines as over 36 people have been charged with perpetrating a $113 million dollar fraud against insurers through the system. As a direct result of the recent arrests, insurers are jumping on their soapboxes screaming "fraud is everywhere!" News media is now swamped by insurance company opinions expressing outrage over the "pervasive" fraud being committed within the no-fault industry. Consequently, New York State has already launched an unprecedented investigation into 135 no-fault healthcare providers. Notably, I have not seen any news describing the abuses committed by no-fault insurers through the very same system.
Rubin & Licatesi has assisted no-fault healthcare providers in combating insurance company abuses for over twenty five- years. Past experience with the insurance industry leaves little doubt that the real victims of the recent high profile scam will be those injured in accidents and the medical professionals who provide those injured with care and necessary treatment.
Everyone is harmed when a fraud is committed against an insurance company. However, such harm pales in comparison to the damage that has been caused to countless injured people and medical professionals by no-fault insurance companies willing to use any and all means to delay or deny paying a claim, thereby depriving benefits to thousands of policyholders. Whether denying further treatment based upon a five minute "Independent" Medical Examination conducted by an insurance company doctor or using a Peer Review to refuse payment of over 80% of diagnostic tests, the insurance industry is anything but the victim in the no-fault system. As a matter of fact, insurers have already used the recent scandal to set the stage for expanding current "non-payment" or "claim avoidance" protocol.
This blog will focus on our experiences with one particular tactic insurers have been using more frequently in recent years to avoid paying legitimate claims, the now infamous"Mallela" requests. Mallela is particularly relevant in light of recent events which has given insurers a prominent stage to promote claim avoidance in the name of combating no-fault fraud. In fact, Mallela itself was a result of heavy insurance industry lobbying that additional steps were needed to curb "widespread" fraud in the no-fault system.
Rubin & Licatesi currently defeats abusive insurance company Mallela requests in most circumstances. However, the current state of events threatens to give insurers more leverage to expand current no-fault regulations to a point where medical professionals will need to spend more time proving licensing credentials and corporate structure than treating patients. In order to understand Mallela and how harmful expanding its scope can be, it is necessary to have some background in the history and purposes of New York State's no-fault laws.
The no-fault law was enacted in 1974 and was designed to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence. It was enacted to reduce the burden on the courts and to provide substantial premium savings to New York motorists. Insurance companies received a huge benefit because accident victims were severely restricted in their right to recover for injuries sustained in a car accident. In exchange for this windfall to insurers and in response to outrage from consumer advocacy groups, the no-fault law contained provisions obligating insurance companies to pay all reasonable and necessary medical expenses arising out of a car accident utilizing the following claims practices principles:
(a) Have as your basic goal the prompt and fair payment to all automobile accident victims.
(b) Assist the applicant in the processing of a claim. Do not treat the applicant as an adversary.
(c) Do not demand verification of facts unless there are good reasons to do so. When verification of facts is necessary, it should be done as expeditiously as possible.
(d) Clearly inform the applicant of the insurer's position regarding any dispute matter.
From its enactment into the early 1990s, the no fault system operated relatively smoothly. The processing and payment of no-fault bills was more or less a ministerial task, consisting mostly of processing emergency room bills, hospital bills, and bills for follow-up visits to the doctor's office. The job of the no-fault examiner was basically to log in medical bills and pay for them.
All this changed in the 1990s when the Insurance Research Council bombarded lawmakers with study after study alleging that fraud in the no-fault field was endemic with more than one of every three bodily-injury claims from car crashes involving fraud. At the same time, no fault-insurers began flagrantly ignoring the claims practice principles and started effectuating claim avoidance practices. Conspicuously, what insurers did not publicize was record profits and increased shareholder valuation of stock.
The no-fault insurers' propaganda worked. In 2002, the Insurance Department Superintendent issued a regulation that a healthcare provider that was either unlicensed or fraudulently licensed was not eligible for no-fault payments. By 2005, the issue made its way to the Court of Appeals where the court held in State Farm v. Mallela that insurers could withhold payment to medical providers if they could show "good cause" to believe that the provider is engaged in behavior tantamount to fraud. That very same year, the state legislature enacted Financial Services Law § 301(b), which gave the Department of Financial Services the power to regulate doctor participation in the no-fault system.
Following the Court of Appeal's ruling, insurers have perverted Mallela and turned their investigatory privilege into a deadly weapon utilized for delay and recalcitrance. Frivolous denials based upon unfounded licensing and/or corporate structure allegations have provided insurers with perhaps their most effective tool in claim avoidance. It opened a floodgate allowing insurers to use boiler plate forms for blanket denials of all claims submitted by healthcare providers. Since the Mallela case, most insurers have completely ignored the "good cause" requirement in seeking verification and have inundated no-fault healthcare providers with abusive requests for financial documents and Examinations Under Oath (EUO) in order to delay or avoid payment of legitimate claims.
In the same week that the no-fault scam made front page news, Rubin & Licatesi prevailed in a string of cases where we were able to expose State Farm for committing a litany ofMallela related unfair claims practices against a prominent multi-practice healthcare provider. Of course, we do not have the resources of the trillion dollar insurance industry, and outside of this blog I doubt anyone will discuss the abuses that physicians have endured and continue to be subjected to. Unfortunately, these cases highlight just one type of measure insurance companies are willing to take to avoid paying for legitimate claims.
In the first set of cases, the healthcare provider provided necessary medical treatment to a patient who sustained serious injuries in a car accident. The patient was entitled to medical benefits from their auto insurer, State Farm. As a matter of course and with no explanation, State Farm denied the claim, arranged for an EUO of the provider, and demanded an exhaustive list of documents to "verify the providers eligibility to receive no-fault benefits." The demands included the provider's W-2s, 1099s, bank statements, billing services, certificate of incorporation, consulting agreements, corporate as well as personal tax returns, general accounting ledgers, management agreements, hourly schedules of supervising doctors, stock certificates, stock ledgers, etc.
Insurance companies argue that they are entitled to request such personal and confidential information for every individual policyholder who makes a claim for medical expenses despite case law to the contrary. Imagine if you were a doctor subjected to such requests for doing nothing more than treating an injured person whose injuries were covered by their insurance premiums. To make matters worse, insurers are often unwilling to give any explanation as to why they require such documents feeling that Mallela has given them a carte blanche right to accuse medical providers of being fraudulent. No wonder 9 out of 10 physicians do not accept a no-fault assignment! Moreover, no-fault is the only forum of medical insurance where a healthcare provider cannot confirm payment for a service priorto treatment. An insurance claim rep will simply tell the healthcare provider to mail in the bill and "we will let you know." The answer comes many months, if not years, down the road thereby making no-fault patients undesirable to the healthcare industry.
Our office responded to States Farm's request by inquiring as to State Farm's reasons for making such inquisitive demands. We even provided State Farm with much of what they asked for and attempted to schedule an EUO with a doctor to answer any questions State Farm had pertaining to the treatment of the patient in question. Predictably, our good faith attempts went nowhere and State Farm denied all payments. Ultimately, we were forced to submit this claim and many similar ones to arbitration where the healthcare provider prevailed proving that State Farm clearly acted in contravention of the statute by treating the healthcare provider as an adversary.
The other cases that were decided last week highlight how a Mallela request can impact a healthcare provider that has no representation. Under the current law, if a provider fails to object to a document and/or EUO request, no matter how unreasonable the requests may be, the provider may have forfeited their right to any payment for services rendered. Insurers are well aware that by denying claims based upon a "global" document and EUO request, they are in direct contravention of New York State law. However, even if its denial was to ultimately fail in a particular case, this abusive tactic undertaken by State Farm (and most other no-fault insurers) has the effect of discouraging a healthcare provider from accepting a State Farm patient, thereby depriving a victim of necessary healthcare while putting a big smile on the State Farm corporate face.
We were first retained by the client after they had been setting aside State Farm's Mallela related requests for over a year. As such, the provider played right into State Farm's hands and all claims the provider submitted to State Farm were denied. Fortunately, in their rush to send out a flurry of document and EUO requests, State Farm had neglected to follow timing regulations established by the no-fault statute. Because we were unable to timely object to State Farm's requests, only through this technicality were we able to protect a healthcare provider who did nothing other than properly treat insured auto victims who were injured in an accident.
The proceeding cases are just a small sample of no-fault insurance company abuses that we see on a daily basis at Rubin & Licatesi. Unfortunately, the battle to prevent insurer unfair claims practices has extended beyond arbitration and into New York's civil, supreme, and appellate courts. As no-fault insurers will not yield in their quest to pay out on as little as possible on the premiums they collect, a healthcare provider needs to be represented vigilantly in order to protect its rights under the no-fault statute.
Insurers are now seeking to expand their Mallela based licensing/corporate structure defense to a point which will render the claims practice principles obsolete, thereby greatly advancing their claims avoidance agenda. The recent no-fault scam has provided them a golden opportunity, and now even the Governor is reviewing the corporate structures of no-fault providers. More than ever, it is imperative for no-fault healthcare providers to review their corporate structures to make sure they are in conformity with all New York State laws for Professional Corporations. For the first time in history, the Department of Financial Services has utilized the previously mentioned Financial Services Law § 301(b) [as well as Insurance Law § 405(b)] to obtain various information from no-fault healthcare providers. Failure to comply with the Department's request within 14 days could result in exclusion from the no-fault system as an authorized medical provider. Such harsh action will undoubtedly put no-fault healthcare providers out of business!
Already many healthcare providers have decided not to accept no-fault insurance, and if left unchecked, the insurance industry will see to it that no healthcare provider is financially able to treat accident victims. Insurance companies will undoubtedly recover from the recent fraud. In 2011, New York's leading auto insurers, Travelers, Allstate, Nationwide, and Progressive each posted profits near or above a billion dollars. AIG, the same insurer that was able to lobby for over 100 billion dollars in taxpayer money posted a 19.8 billion dollar profit in the fourth quarter of last year alone! If not stopped, New York's no-fault insurers will continue to turn their policyholders' premiums into massive profits while they are shouting "fraud"; at the same time, the innocent accident victims who have paid thousands of dollars for benefits will receive none and be left with nowhere to go for treatment of their injuries.
***IMPORTANT FIRM NEWS: In light of the recent no-fault insurance scam allegedly perpetrated in the Bronx and Brooklyn, New York State has launched an investigation into no-fault insurance fraud. Governor Cuomo has revealed that the state has already targeted hundreds of no-fault healthcare providers in New York City and Long Island for investigation.Click here for more information on the new regulation that enables New York State to investigate and ban medical providers who engage in fraudulent and deceptive practices from participation in no-fault. If your practice is subject to the no-fault investigation, you must act immediately or risk being banned from the no-fault system. Call us today at 516-227-2662***