Paul F. Millus ()
In these very difficult times in the health care arena, doctors who are not associated with a health care network are being squeezed by insurance companies and self-funded health plans more than ever, thus negatively impacting on patient care. Insurance carriers attempt to limit patient access to out-of-network coverage and want to force practicing physicians into the contractually cozy confines of their in-network world to control costs. Thus, the aim of physicians collecting the usual and customary rate (or anything remotely close) for their out-of-network services, even if they comply with New York FAIR Health guidelines (an independent database providing rates physicians regularly use when billing patients and insurers for out-of-network services), is far from guaranteed. As for patients, their choice of doctors and treatment is increasingly under attack even when they pay insurance companies high premiums to allow them to avail themselves of out-of-network coverage.
Insurance Law §3224-a, known as the Prompt Pay Law, purportedly imposed standards on insurers for the “prompt, fair and equitable” payment of claims for health care services for the benefit of patients as well as those physicians that treat them. Originally passed in 1997, the statute sets forth time frames within which an insurer must either pay a claim, notify the claimant of the reason for denying a claim, or request additional information. An insurer that fails to comply with the provisions of the Prompt Pay Law is obligated to pay the full amount of the claim, with interest at 12 percent as required by a companion bill passed the same day as the Prompt Pay Law.1
However, the law has never been user-friendly for patients or physicians. Between the initial submission of the claim, requests for clarification and possible payment, the process can take a minimum of 120 days. Then, if the carrier still refuses to pay, providers can file a prompt payment complaint with the New York State Department of Financial Services, previously the Superintendent of Insurance, and wait for the government to come to their aid. For physicians, having enough difficulty practicing medicine in the new and ever-changing regulatory environment, the process has proved daunting. No other option was available as insurance companies have always taken the position that there is no private right of action for providers to seek relief directly from insurance companies—until recently.
New Hope: ‘Maimonides’
In a new development, with the Second Department’s recent decision in Maimonides Medical Center v. First United American Life Insurance, 2014 WL 840589 (2d Dept. 2014), patients and physicians have a potent weapon previously unavailable to them to force the carrier’s hands. The court, in what it acknowledged was a case of first impression, was asked to determine whether the Prompt Pay Law affords claimants a private right of action to recover payment for health care services based on a violation of the statute, or whether enforcement of the statute is vested solely with the state.
Maimonides Medical Center commenced the action to recover monies owed for its care of the six patients alleging a violation of the Prompt Pay Law as well as other causes of action. It alleged that, despite repeated demands for payment in full, First United failed to pay the balance owed. Maimonides also alleged that First United American Life Insurance never provided written notice, as required by the Prompt Pay Law, that it was not obligated to pay in full the amounts billed by Maimonides for services furnished to the six patients.
First United moved, pursuant to CPLR 3211(a)(7) to dismiss arguing, inter alia, that, under the Prompt Pay Law, there is no private right of action—express or implied. In opposition to Maimonides’ contention that it had an implied right of action under the Prompt Pay Law, First United argued that the enforcement of the law is vested solely in the New York State Superintendent of Insurance (which is now part of the Department of Financial Services.)
It further argued that recognition of an implied private right of action based on the Prompt Pay Law would be inconsistent with the law’s legislative scheme, and that the law only provided for the superintendent to impose penalties for violations, including an award of 12 percent interest per annum. The court below (Demarest, J.) denied the motion to dismiss stating that it did not agree that the current enforcement mechanism contained in Insurance Law §3224-a was limited to administrative action holding that the statute expressly contemplates private litigation to enforce its purpose.2
The Second Department recently affirmed the standard enunciated by the Court of Appeals in Brian Hoxie’s Painting v. Cato-Meridian Cent. School Dist.,3 to determine whether a statute that does not provide an express right of private action, nonetheless may imply the existence of such a right. In those instances where a statute does not expressly confer a private cause of action upon those it is intended to benefit, a private party may seek relief under the statute “only if a legislative intent to create such a right of action is ‘fairly implied’ in the statutory provisions and their legislative history.”
This inquiry involves three factors: “‘(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme.’”4 In Maimonides, only the third factor was in dispute. The court held that a private right of action in addition to administrative enforcement was “fully consistent with the legislative scheme, and that a private right of action is to be implied.”
In a painstaking review of the statutory language and the decision below, the court disagreed with the lower court that Insurance Law §3224-a(c)(1), which provides that the insurer “shall be obligated” to pay the health care provider, expressly provided for a private right of action. However, it held that the statute does “impose specific duties upon insurers and create rights in patients and health care providers, and thus militates in favor of the recognition of an implied private right of action to enforce such rights.”5
Likewise, the court’s review of the legislative history of the Prompt Pay Law led it to the same conclusion. The clear and unambiguous purpose of the law, as reflected in the legislative history, was that “the law was directed toward the protection of health care providers and patients from late payment of claims, and was not primarily designed to provide a mechanism for preventing harm to the public in general.”
Whether comments were from the Senate sponsor’s memorandum, the Insurance Department or the governor’s memorandum when he signed the bill into law, one thing remained constant: All relevant parties agreed the law was designed to “provide protection to both patients and health care providers in connection with the timely payment of claims by insurers and health maintenance organizations.”6 The court also recognized that the remedies available to the superintendent did not adequately address the individual harm to patients and providers when insurance companies fail to pay on behalf of their insured, noting that fines paid to the superintendent are not distributed to health care providers.
Significantly, the court noted that the insurance industry, in urging a veto of the bill, recognized that private causes of action might be implied and thus “promote excessive litigation” because unlike other insurance law statutes, which require violations of such frequency to indicate a “general business practice,” (i.e. N.Y. Insurance Law §2601) even a single violation could subject the carrier to liability.7
Finally, the court dismissed First United’s observation that there had been unsuccessful legislative attempts to amend the Prompt Pay Law to create an express private right of action and that it somehow mitigated against the finding of such a right. The court found that this had no effect on the analysis of whether a private right of action may be fairly implied, stating, “unsuccessful attempts to codify an express private right of action do not establish that the Legislature intended to prohibit private actions…’Where, as here, there is no express legislative authorization, whether the violation of a statute gives rise to an independent private cause of action is a matter for the courts.’”8
Accordingly, it is likely that the holding in Maimonides will empower patients and physicians who will look to the courts for relief in increasing numbers. Considering the amount of money charged for complex surgeries and other treatments, there is no question that, even with the high cost of litigation, it will pale in comparison to recoveries physicians now have within their power to obtain, lessening the burden to their patients.
Paul F. Millus is of counsel to Meyer, Suozzi, English & Klein in Garden City. John H. Jankoff, a partner at Jankoff & Gabe, assisted in the preparation of this article.
1. N.Y.S. Insurance Law §2404 (which also amended Insurance Law §2406 to provide that the Superintendent, after finding a violation of the Prompt Pay law, may levy civil penalties up to $500 per day for each day beyond the date that the claim was to be processed, and not to exceed $5,000).
2. Maimonides Medical Center v. First United American Life Ins., 35 Misc.3d 570, 941 N.Y.S.2d 447 (N.Y. Sup. Kings Co. 2012).
3. Brian Hoxie’s Painting v. Cato–Meridian Cent. School Dist., 76 N.Y.2d 207, 211, 557 N.Y.S.2d 280, 556 N.E.2d 1087, citing Sheehy v. Big Flats Community Day, 73 N.Y.2d 629, 633, 543 N.Y.S.2d 18, 541 N.E.2d 18.
4. Carrier v. Salvation Army, 88 N.Y.2d at 302, 644 N.Y.S.2d 678, 667 N.E.2d 328, quoting Sheehy v. Big Flats Community Day, 73 N.Y.2d at 633, 543 N.Y.S.2d 18, 541 N.E.2d 18.
5. Maimonides Medical Center v. First United American Life Insurance Company, 2014 WL 840589.
6. Governor’s Approval Mem, Bill Jacket, L. 1997, ch. 637.
7. Mem of Life Insurance Council of New York, Bill Jacket, L. 1997, ch. 637.
8. Henry v. Isaac, 214 A.D.2d 188, 632 N.Y.S.2d 169 (2d Dept. 1995).