The Part of No New York No-Fault Insurers Must Understand -- HCRA Surcharges May No Longer Be Offset Against Aggregate No-Fault Limits

Back in December 2009, I posted about the New York State Insurance Department's withdrawal after only 81 days of Circular Letter No. 21 (2009), entitled "The New York State Health Care Reform Act and No-Fault Insurance", which for a time superseded Circular Letter No. 16 (1996) and Supplement No. 1 to Circular Letter No. 16 (1996).  It all had to do with the the Department's position on whether New York no-fault insurers and self-insurers could offset an applicant's aggregate no-fault benefit limit by the amount of any HCRA surcharges paid directly to the New York State Department of Health's (“DOH”) Office of Pool Administration.  The Department's position on that question from November 22, 1996 through September 16, 2009 was YES, such HCRA surcharge payments could be applied as an offset, NO from September 16 through December 6, 2009, and YES again from December 7, 2009 to present, retroactive to its 1996 circular letter.

Once again, the answer is NO, and it's likely to stay that way indefinitely. On August 24, 2010,  the Department released Circular Letter No. 12 (2010).  Alike its withdrawn 2009 predecessor, this circular letter again supersedes and withdraws Circular Letter No. 16 (1996) and Supplement No. 1 to Circular Letter No. 16 (1996) and again advises New York no-fault insurers and self-insurers that the Department has "reconsidered its position on this issue."

Quoting a June 16, 2010 opinion of the Department's Office of General Counsel, the circular letter states:

The Legislature clearly intended payment to health providers to be included as part of basic economic loss when it enacted Article 51 of the Insurance Law. There is no similar evidence, however, that the Legislature intended payment of the surcharge to be included as a reimbursable health expense under the no-fault law. To the contrary, when it enacted the law providing for HCRA surcharge, the Legislature did not amend the no-fault law in any manner. Accordingly, the interpretive guidance set forth in Circular Letter No. 16 no longer should be followed, and insurers may not offset the HCRA surcharge against any no-fault benefits to which an injured person is entitled under Insurance Law § 5102(a).

 In light of OGC Opinion No. 10-06-05, insurers and self-insurers may not offset an applicant's aggregate no-fault benefit limit for the payment of a surcharge when the surcharge is paid directly to the DOH's Office of Pool Administration.

Since there is no effective date to this circular letter, it took effect immediately upon its issuance.  No more offsetting HCRA surcharges against aggregate no-fault limits. 

The Second Coming of No -- Offsetting HCRA Surcharges Against Aggregate No-Fault Limits

Back in December 2009, I posted about the New York State Insurance Department's withdrawal after only 81 days of Circular Letter No. 21 (2009), entitled "The New York State Health Care Reform Act and No-Fault Insurance", which for a time superseded Circular Letter No. 16 (1996) and Supplement No. 1 to Circular Letter No. 16 (1996).  It all had to do with the the Department's position on whether New York no-fault insurers and self-insurers could offset an applicant's aggregate no-fault benefit limit by the amount of any HCRA surcharges paid directly to the New York State Department of Health's (“DOH”) Office of Pool Administration.  The Department's position on that question from November 22, 1996 through September 16, 2009 was YES, such HCRA surcharge payments could be applied as an offset, NO from September 16 through December 6, 2009, and YES again from December 7, 2009 to present, retroactive to its 1996 circular letter.

Soon it'll be NO again.  Yesterday, the Department released a draft of Circular Letter No. XX dated July XX, 2010.  Alike its withdrawn 2009 predecessor, this proposed circular letter again supersedes and withdraws Circular Letter No. 16 (1996) and Supplement No. 1 to Circular Letter No. 16 (1996) and again advises New York no-fault insurers and self-insurers that the Department has "reconsidered its position on this issue."

Quoting a June 16, 2010 opinion of the Department's Office of General Counsel, which is not yet posted to the Department's website, the proposed circular letter states:

The Legislature clearly intended payment to health providers to be included as part of basic economic loss when it enacted Article 51 of the Insurance Law. There is no similar evidence, however, that the Legislature intended payment of the surcharge to be included as a reimbursable health expense under the no-fault law. To the contrary, when it enacted the law providing for HCRA surcharge, the Legislature did not amend the no-fault law in any manner. Accordingly, the interpretive guidance set forth in Circular Letter No. 16 no longer should be followed, and insurers may not offset the HCRA surcharge against any no-fault benefits to which an injured person is entitled under Insurance Law § 5102(a).  In view of OGC Opinion No. 06-16-2010, insurers and self-insurers may not offset an applicant's aggregate no-fault benefit limit for the payment of a surcharge when the surcharge is paid directly to the DOH's Office of Pool Administration.

The last sentence should probably be its own paragraph, rather than within the proposed circular letter's quotation of OGC Opinion No. 06-16-2010 (which are usually numbered YY-MM-DD).  One of my regular Insurance Department readers -- please tell Debra Parris.

According to the Department's website, the proposed circular letter will be available for review for only five (5) business days, or through July 14, 2010.  Comments on the proposed circular letter may be directed here.

New York State Insurance Department Unchanges Its Mind -- Withdraws Circular Letter No. 21 (2009) Regarding New York HCRA & No-Fault Insurance Surcharge

This may be a new record for the shortgevity of a NYSID circular letter.  Circular Letter No. 21 (2009), issued on September 16, 2009, has been withdrawn effective December 7, 2009.  That's a shelf life of only 81 days.

For the 81 days it was in effect, Circular Letter No. 21 (2009), entitled "The New York State Health Care Reform Act and No-Fault Insurance", expressly superseded Circular Letter No. 16 (1996) and Supplement No. 1 to  Circular Letter No. 16 (1996), which the Department withdrew on 9/16/2009.  With today's withdrawal of Circular Letter No. 21 (2009), Circular Letter No. 16 (1996) and its Supplement No. 1 presumably go back into effect.

In Circular Letter No. 16 (1996), issued November 22, 1996, the Department advised all authorized insurers writing motor vehicle insurance and motor vehicle automobile self-insurers that they were obligated, under the Health Care Reform Act (“HCRA”) set forth in New York Public Health Law § 2807-c and related provisions, to pay a surcharge to the Public Goods Pool on payments made for services rendered in general hospitals, diagnostic and treatment centers, and freestanding clinical laboratories. Supplement No. 1 to Circular Letter No. 16 (1996), issued November 21, 2003, updated the information set forth in Circular Letter No. 16 to take account of amendments to HCRA.  Both Circular Letter No. 16 (1996) and Supplement No. 1 advised insurers and self-insurers that they could offset an applicant's aggregate no-fault benefit limit for the payment of a surcharge when the surcharge was paid directly to the New York State Department of Health's (“DOH”) Office of Pool Administration.

Based on a December 30, 2008 OGC opinion (which has also been withdrawn and rescinded), the Department "changed its position" on the surcharge issue and declared in Circular Letter No. 21 (2009) that insurers and self-insurers were not allowed to offset an applicant's aggregate no-fault benefit limit by the amount of any HCRA surcharges paid directly to the DOH's Office of Pool Administration.

With the withdrawal of both the OGC Opinion No. 08-12-07 and Circular Letter No. 21 (2009), New York insurers subject to HCRA (payors pursuant to the New York State workers' compensation law, volunteer firefighters' benefits law, ambulance workers' benefit law, and the comprehensive motor vehicle insurance reparations act [article 51 of the New York Insurance Law]) may continue to reduce or offset an applicant's aggregate no-fault benefit limit by the amount of any HCRA surcharges paid directly to the DOH's Office of Pool Administration.

The Department's withdrawal of Circular Letter No. 21 (2009) should not affect the increases in HCRA surcharges enacted by the New York state legislature in its 2009-2010 State Fiscal Year Budget.  For services rendered in general hospitals, diagnostic and treatment centers, and freestanding clinical laboratories from 1/1/06 through 03/31/09, the HCRA surcharge percentages were 8.95% and 26.26% (both being owed if paid directly to the provider; just the former if paid directly to the DOH's Office of Pool Administration).

For services rendered from 4/1/09 through 12/31/11, the HCRA surcharge percentages were raised to 9.63% and 28.27%.

Insurers that did not offset or reduce an eligible insured's aggregate PIP limit by HCRA surcharge payments made in 2009 in accordance with the Department's now withdrawn OGC opinion and circular letter on the subject may wish to recalculate the available limits on the involved policies.