DFS Finalizes Regulation to Strengthen New York No-Fault Insurance Law

A new regulation issued by the New York State Department of Financial Services (DFS) aims to curb costs and abuses of New York’s no-fault insurance law while leveling the playing field for New York insurers, according to a DFS press release announcing the final regulation.

The finalized regulation limits the amount that insurers can reimburse for healthcare services performed outside of New York State under its no-fault insurance law. This move comes after DFS previously learned certain providers were in the practice of charging the prevailing fee, or more than the prevailing fee, in their geographical location outside of New York, the press release said. This practice exceeds New York limits and is believed to lead to inflated claims, depleted coverage, increased litigation and higher premiums, the release added.

“New York’s no-fault insurance law will not be abused by out-of-state providers charging excessive rates,” Superintendent Maria T. Vullo said in the press release. “Under this final regulation, there are limits on the amounts insurers in New York State will be allowed to reimburse.”

In addition, DFS learned that New York residents eligible for no-fault benefits for physical injuries often were being influenced to seek healthcare services from non-New York providers that engage in such practice. The new regulation clarifies the intent of the current law and aims to eliminate this practice and its resulting disadvantage to consumers, the release stated.

“By limiting the amounts reimbursable under no-fault law to New York parameters, the regulation eliminates abuses and ensures that policy limit amounts will provide for necessary policyholder benefits and lost wages,” Vullo added in the release.

Professional Insurance Agents of New York (PIANY), a voluntary, membership-based trade association representing professional, independent property and casualty insurance agents in New York, is in support of reforming the no-fault system, according to PIANY Government Affairs Counsel Bradford J. Lachut, Esq., in a statement provided to Insurance Journal.

“No-fault abuses have long threated to destroy New York’s auto insurance marketplace and costs the state’s auto insurance policyholders hundreds of millions annually,” Lachut said. “That said, no-fault remains sound public policy, but its existence remains threatened if excessive costs from out-of-state health care providers are allowed to continue unchecked.”

No-fault insurance provides for reimbursement of medical expenses and lost wages for a policyholder injured in an automobile accident regardless of who is at fault. Under the final regulation, when a professional healthcare service reimbursable under the no-fault law is performed outside of New York to an injured person who is a New York resident, the amount that the insurer can reimburse for the service is the fee applicable in the New York region that has the highest value in the no-fault fee schedule for such service, according to the DFS press release. In addition, an insurer may not reimburse an amount that exceeds the amount the provider is legally permitted to charge for a service under the laws of the jurisdiction where the services are provided.

“Steps like the one the Department took with this regulation are important in curbing abuses of the system while still preserving a no-fault system that eliminated the delays and uncertainties associated with the payment of medical claims and wage losses inherent in the tort-based system that existed prior,” Lachut stated.

Tim Dodge, a spokesperson for Big I New York (formerly IIABNY), a New York trade association that exists to fulfill the educational, political and business interests of its member agencies and their employees, added that Big I New York also supports this change as a way to cap no-fault costs.

“That should in turn help keep no-fault insurance premiums down for New York drivers, which is good for everyone,” he stated.

The new rule adopted by DFS took into consideration comments that were submitted during a 45-day comment period for the proposed regulation published in May 2017.