New York State Department of Financial Services Introduces Guidance and Proposed Regulation to Strengthen New York’s Surprise Medical Bill Resolution Process

Guidance Accompanies Newly Proposed Regulation that Implements FY27 Budget

Strengthens Efficiency While Protecting New Yorkers from Surprise Medical Bills During Health Insurer and Health Care Provider Disputes

New York State Department of Financial Services (DFS) Acting Superintendent Kaitlin Asrow today issued new guidance to health insurers, health care providers, and independent dispute resolution (“IDR”) entities implementing improvements to the IDR process signed into law by Governor Hochul as a part of her Fiscal Year 2026-2027 (FY27) Budget.  The IDR program protects patients from the financial consequences of disputes between out-of-network health care providers and health insurers.  Along with this guidance, the Department is publishing a draft regulation to further implement reforms in the Budget.

“This guidance and regulation ensure that New York’s Independent Dispute Resolution system runs effectively and efficiently while continuing to protect New Yorkers from surprise medical bills,” said New York State Department of Financial Services Acting Superintendent Kaitlin Asrow.  “This advances Governor Hochul’s mission to make health care fairer, more affordable, and more accessible for all New Yorkers.”

The Legislature recently amended Financial Services Law Article 6 to exclude Medicaid Managed Care coverage from the IDR process, add the Empire Plan and Student Employee Health Plan to the IDR process, and establish unique criteria for disputes involving these plans.  The amended law also increases the time IDR entities have to issue decisions and requires health care providers and health insurers to pay an IDR entity before the IDR entity reviews the dispute, among other things.  Governor Hochul signed these amendments into law on May 28, 2026, as part of the FY27 enacted Budget and broader efforts to modernize insurance-related laws in New York State.

The draft regulation is subject to a 10-day preproposal comment period beginning today.  A 60-day public comment period will commence upon the proposed regulation’s publication in the State Register.  The law takes effect on August 26, 2026.  In order to ameliorate conflicts between the new law and existing regulation and to fill in gaps in the law that are necessary for the proper handling of disputes on August 26, the amendments to the regulation will be temporarily adopted on an emergency basis effective August 26 while the proposed version of the amendments work their way through the regulatory process.

For more information about the IDR process, please visit the Department’s IDR webpage.  Health insurers, health care providers, and IDR entities with questions are encouraged to contact DFS.  The circular letter and draft regulation can be found on the Department’s website.  Draft regulation: DFS Proposed IDR Amendments.

Insurance Circular Letter No. 5 (2026)

August 13, 2026

TO: All Insurers Authorized to Write Accident and Health Insurance in New York State, Article 43 Corporations, Health Maintenance Organizations, a Health Benefit Plan Operated Pursuant to Civil Service Law Article 11, Student Health Plans Certified Pursuant to Insurance Law § 1124, Municipal Cooperative Health Benefit Plans, Prepaid Health Services Plans, Health Care Providers, and Independent Dispute Resolution Entities

RE: Amendments to the Independent Dispute Resolution Process

STATUTORY AND REGULATORY REFERENCES: N.Y. Financial Services Law Article 6 and 23 NYCRR Part 400

I. Purpose

The purpose of this circular letter is to provide guidance to insurers authorized to write accident and health insurance in New York State, Article 43 corporations, health maintenance organizations, a health benefit plan operated pursuant to Civil Service Law Article 11 (the Empire Plan and Student Employee Health Plan, collectively, the “State Plans”), student health plans certified pursuant to Insurance Law § 1124, municipal cooperative health benefit plans, and prepaid health services plans (collectively, “issuers”), health care providers (“providers”), and independent dispute resolution (“IDR”) entities regarding amendments to New York’s IDR process, which is set forth in Financial Services Law Article 6 (“Article 6”) and 23 NYCRR Part 400, and to remind issuers and providers that they must submit all relevant information to an IDR entity at the time of application or upon the IDR entity’s request in order for the IDR entity to consider the information when making its determination.

II. Background

Article 6 established an IDR process for out-of-network emergency services in hospital facilities, for surprise bills in participating hospitals and participating ambulatory surgical centers, and for out-of-network services when an insured is referred by a participating physician. Article 6 also requires issuers and providers to ensure that an insured incurs no greater out-of-pocket costs for out-of-network emergency services and surprise bills than the insured would have incurred with an in-network provider. Article 6 does not apply to disputes for health care services in a participating hospital or ambulatory surgical facility when a participating provider is available and the insured has elected to obtain services from a non-participating provider as these disputes do not meet the Article 6 definition of a “surprise bill” set forth in Financial Services Law § 603(h)(1). In addition, once an IDR entity issues a decision, Article 6 does not provide a right to appeal to the Department of Financial Services (“DFS”). An IDR entity’s determination is binding on the issuer, provider, and State Plans pursuant to Financial Services Law §§ 605(c) and 607(c).

On May 28, 2026, the Governor signed into law Part BB of Chapter 57 of the Laws of 2026 (“Part BB”), which amended Article 6 to: (1) exclude medical assistance program coverage subject to Social Service Law § 364-j (Medicaid Managed Care) from the IDR process; (2) define a “health care plan” to include the State Plans for the purpose of the New York IDR process; (3) establish unique criteria that an IDR entity must use for disputes involving the State Plans; (4) establish scenarios in which an IDR entity cannot award fees; (5) require a non-participating provider and a health care plan to make payment to the IDR entity before an IDR entity reviews the dispute; (6) expand the time that IDR entities have to issue a decision; (7) prohibit an IDR entity from commingling payments for the dispute resolution process with any other funds held by the IDR entity and require an IDR entity to hold all payments in a separate account; and (8) require an IDR entity to issue a refund of the dispute resolution process payment to the prevailing party within 30 days of rendering a determination on the dispute or rejecting the dispute as ineligible. With the exception of the Medicaid Managed Care exclusion as discussed further below, these amendments take effect on August 26, 2026, and apply to disputes submitted on and after that date.

III. Discussion

     A. Medicaid Managed Care

Part BB amended Financial Services Law § 602 to exclude from the IDR process disputes involving Medicaid Managed Care coverage that are filed on or after May 28, 2026. A dispute is considered “filed” when a provider or issuer enters the dispute into the IDR portal application found on the DFS website.

Therefore, a provider cannot file a dispute involving Medicaid Managed Care coverage as of May 28, 2026, and issuers should inform an IDR entity assigned to the dispute if such a dispute involving the issuer is incorrectly filed.

     B. State Plans

For disputes filed on and after August 26, 2026, a State Plan is a “health care plan” as defined in Financial Service Law § 603(c) that will use the Article 6 IDR process for those disputes that meet the eligibility criteria. If a provider received a decision involving a State Plan through the federal IDR process or has a dispute pending through the federal process, then the provider is not eligible to submit that dispute through the Article 6 process. 

Part BB established separate criteria for determining a reasonable fee when the State Plans provide the coverage. Specifically, Part BB amended Financial Services Law § 604 to provide that when determining a reasonable fee for disputes involving State Plan coverage, the IDR entity must select either the issuer’s payment or the provider’s fee, depending on which one is closest to the allowed benchmark. New Financial Services Law § 603(j) defines “allowed benchmark” in relevant part as the 50th percentile of all allowed amounts for the particular health care service performed by a participating provider in the same or similar specialty and provided in the same geographical area as reported in a benchmarking database maintained by a nonprofit organization specified by the Superintendent of Financial Services (“Superintendent”).

However, the IDR entity may choose the State Plan’s payment or the provider’s fee if it is not closest to the allowed benchmark when the State Plan’s payment or the provider’s fee is equally distant from the allowed benchmark, or the IDR entity determines that the allowed benchmark is not appropriate, based on any of the following information submitted by either party: (1) the level of training, education, and experience of the provider, and in the case of a hospital, the teaching staff, scope of services, and case mix; (2) the circumstances and complexity of the particular case, including time and place of the service; or (3) individual patient characteristics. Part BB also added several factors on which the IDR entity may not base its decision, and those factors are set forth in Financial Services Law § 604(b)(2) and are as follows: (A) whether there is a gross disparity between the fee charged by the provider for services rendered as compared to fees paid to the involved provider for the same services rendered by the provider to other patients in plans in which the provider is not participating, or in the case of a dispute involving an issuer, fees paid by the issuer to reimburse similarly qualified providers for the same services in the same region who are not participating with the issuer; (B) the provider’s usual charge for comparable services with regard to patients in plans in which the provider is not participating; or (C) with regard to physician services, the usual and customary cost of the service, as defined in Financial Services Law § 603(i).

If the IDR entity determines that the amount closest to the allowed benchmark is not appropriate based on the criteria specified above, then the IDR entity’s written decision must include an explanation of the factors that demonstrate that the State Plan’s payment or the provider’s fee closest to the allowed benchmark was materially different from the appropriate payment for the health care service. If the IDR entity determines that the provider’s fee is a reasonable fee for the services rendered, then the amount owed by the State Plan cannot exceed the maximum fee. Amount owed means any payments made by the State Plan prior to the IDR entity’s determination plus any additional amount paid by the State Plan as a result of the IDR entity’s determination. Financial Services Law § 603(k) defines “maximum fee” in relevant part as the 80th percentile of all allowed amounts for the particular health care service performed by a participating provider in the same or similar specialty and provided in the same geographical area as reported in a benchmarking database maintained by a non-profit organization specified by the Superintendent. Article 6 does not define the term “same geographical area.” Pursuant to § 400.8 of the emergency regulation effective August 26, 2026, where the dispute does not involve a physician described in Financial Service Law § 604(b)(5), the IDR entity can only consider the geozip where the provider rendered the services for the purpose of determining the same geographical area for the allowed benchmark and maximum fee.

The State Plans should identify any dispute involving State Plan coverage and provide to the IDR entity information relevant to the criteria specified in the law for the State Plans. Pursuant to Financial Services Law § 604(b)(5), an IDR entity cannot review any dispute under the new criteria established for State Plan coverage as described above where the dispute involves services rendered by a physician who is employed by a general hospital licensed under Public Health Law Article 28 or such hospital’s affiliated medical school or who is part of a group practice that is established as a captive professional services corporation whose shareholders are employees of such hospital. Instead, Financial Services Law § 604(b)(5) requires the IDR entity to use the criteria described in Financial Services Law § 604(a), which are the criteria for non-State Plan coverage. A physician filing a dispute against a State Plan or responding to a dispute filed by a State Plan, who is employed by a general hospital licensed under Public Health Law Article 28 or such hospital’s affiliated medical school or who is part of a group practice that is established as a captive professional services corporation whose shareholders are employees of such hospital, should submit to the IDR entity written proof of such employment or that the physician is part of such group practice. Written proof may include, but is not limited to, an employment contract or a letter from the hospital’s medical board or governing body on hospital letterhead. If a State Plan has written proof that a physician is employed in such manner or is part of such a group, then it should provide that written proof to the IDR entity.

     C. No Fee Awarded

Part BB added a new Financial Services Law § 604(c) that states that an IDR entity may not award any fee for services rendered pursuant to Article 6 if the issuer can demonstrate that: (1) it had a contract with the provider or a subsidiary or other entity owned or operated by the provider that was in effect at the time the disputed service or services were provided, to provide the same service or services at the same location; or (2) a notice of determination for prior authorization, under Insurance Law or Public Health Law § 4903, was issued to the patient’s provider, identifying the health care service or services in dispute as out-of-network, or for a patient covered by an issuer not subject to Insurance Law or Public Health Law § 4903, if a notice of determination for prior authorization was issued to the patient’s provider that includes all of the required disclosures set forth in such laws and that clearly identifies the service or services in dispute as out-of-network. 

Any dispute involving services where the issuer demonstrates that the dispute falls into either of these categories is not eligible for the IDR process under Article 6. Issuers are reminded of their obligation to provide written documentation demonstrating that either or both of these criteria are met at the beginning of the dispute process so that the IDR entity can determine whether the dispute is eligible for the IDR process under Article 6. Issuers may not assert that one of these criteria were met after the IDR entity has issued its decision.

     D. Payment of the IDR Entity’s Fee

Part BB amended Financial Services Law § 608(b) to require a non-participating provider and issuer to make full payment for the IDR to the IDR entity upon submission of the application or, if the responding party, when responding to the IDR entity’s request for eligibility information and supporting documents. An IDR entity may not commingle the payments for the dispute resolution process with any other funds held by the IDR entity and must hold all payments in a separate account. The IDR entity must issue a refund of the full fee to the prevailing party within 30 days of rendering a determination on the dispute or to the applicant within 30 days of rejecting the dispute as ineligible. Pursuant to 23 NYCRR § 400.10, the IDR entity will issue a refund minus an application processing fee for any dispute that the IDR entity determines is not eligible. In addition, the IDR entity will issue a pro-rated refund pursuant to § 400.10 where the parties to the dispute reach a settlement or when the IDR entity issues a split decision. A split decision is when the IDR entity finds in favor of the provider for a portion of the claim and finds in favor of the issuer for the remainder of the claim.

     E. Timing for Issuing a Decision

Part BB amended Financial Services Law §§ 605(a)(3) and 607(a)(5) to extend the time by which IDR entities must render a decision. Prior to the amendment, IDR entities had 30 business days from receipt of the application to obtain all necessary information, review the dispute, and issue a decision. Now IDR entities will have 45 business days from receipt of all information the IDR entity determines it needs to review the dispute. 

Issuers and providers are reminded of their obligation to provide all the information the IDR entity requests by the date specified by the IDR entity. 

IV. Conclusion

Issuers, providers, State Plans, and IDR entities should review the amendments made by Part BB, as described in this circular letter, and ensure that they are in compliance. 

Please direct any questions regarding this circular letter to IDRquestions@dfs.ny.gov.