Claimants have a private right of action against insurers under New York’s Prompt Pay Law, N.Y. Ins. Law 3224-a, according to the Appellate Division in Maimonides Med. Ctr. v. First United Am. Life Ins. Co., decided earlier this month.
Under the Prompt Pay Law, an insurer must pay undisputed claims within 45 days, and within 30 if electronic submission is received. The insurer must pay any undisputed portion of a disputed claim within 30 days and notify the policyholder, covered person, or healthcare provider of the reason the insurer is not liable. The insurer may also request additional information to determine its potential liability. A violation of the Prompt Pay Law obligates the insurer to pay the full amount of the claim plus 12% interest.
Maimonides Medical Center billed First United American Life Insurance Co. over $19 million for medical services, but First United paid only slightly more that $4 million. Maimonides sued under the Prompt Pay Law, and First United argued that the statute did not provide a private right of action, but could only be enforce by the Superintendent of Insurance.
The Appellate Division, Second Department held that the claimants including health care providers have a private right of action to sue under the Prompt Pay Law. The parties did not dispute the first two requirements for finding a private right of action, that plaintiff is one of the class for whose particular benefit the statute was enacted, and that recognition of a private right of action would promote the legislative purpose. As to the third, the Appellate Division held that a private right of action would be fully consistent with the legislative scheme. The Court found that the Prompt Pay Law “does impose specific duties upon insurers and creates 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.” The Court noted that the legislative history of the statute reflected its purpose in protecting health care providers and patients from late payment, and not as a mechanism for preventing harm to the public in general.
This decision gives health care providers and patients a powerful tool against recalcitrant insurers. First United will likely seek to bring this issue before the Court of Appeals, and we may see a definitive ruling from New York’s highest court on this important issue.