A recent decision in the Supreme Court, Kings County, has confirmed that health care providers have a private cause of action under N.Y. Insurance Law § 3224-a (the “Prompt Pay Law”).
In Maimonides Med. Ctr. v. First United Am. Life Ins. Co., 2012 NY Slip Op. 22039 (decided February 22, 2012), the Court determined that the Prompt Pay Law meets all the criteria to establish a private right of action against insurance companies that fail to pay claims in a timely fashion. In Maimonides, the plaintiff provided inpatient health care services to six patients who held Medigap policies issued by the defendant, First United. The Medigap plans provided 100% coverage of hospitalization expenses after the patient’s Medicare coverage is exhausted. For the six patients, Maimonides invoiced First United $19,075,525, but was paid only $4,078,663.
The Prompt Pay Law requires that:
- the health care provider or patient must be paid within 30 days of receipt of an electronically transmitted claim, or within 45 days of receipt of a claim transmitted by other means;
- unless, within 30 days of receipt of the claim, the insurer provides written notification disputing its liability or seeking additional information necessary to determine its liability.
- If the insurer fails to meet these standards, it is obligated to pay the health care provider or person submitting the claim the full amount of the claim plus interest at the statutory rate (a minimum rate of 12% per annum).
First United did not provide the requisite notice within the 30 day period and did not challenge the validity of the contractual claims, but instead asserted that since the Prompt Pay Law authorizes the Superintendent of Insurance (now the Superintendent of Financial Services) to investigate violations and assess civil penalties, the Legislature contemplated only administrative enforcement of the Prompt Pay Law, and therefore no private right of action exists.
However, the court in Maimonides noted that “a private right of action may at times further a legislative goal and coalesce smoothly with the existing statutory scheme” (quoting the Court of Appeals (New York’s highest court) in Uhr v East Greenbush Cent. School Dist., 94 N.Y.2d 32, N.Y. 1999). Following the present authority of the Second Department, the court in Maimonides determined that even though a body of law has a potent official enforcement mechanism, this does not preclude a private cause of action under the statute.
This case establishes that health care providers have the right to timely reimbursement for rendered services and ensures that providers have greater enforcement power than under a purely public enforcement mechanism. Insurers must be vigilant in issuing dispute notices in a timely manner to avoid having to pay the full amount of a claim against which the insurer may have a legitimate dispute.