Requires the use of identical measurement of group size when reviewing premium rate increases or decreases and when determining whether the insurer needs to issue a dividend or credit against future premiums for all policy holders.
TITLE OF BILL: An act to amend the insurance law, in relation to ensuring that identical calculations of group size are utilized by the department of financial services
PURPOSE: To ensure transparency and fairness by requiring that identical group size calculations are used both when premiums are approved and when there is a determination after the contract period whether a premium credit or dividend is owed to the policy holder.
SUMMARY OF PROVISIONS: This legislation would enact a new section 3231-a to the insurance law to direct the Superintendent of the Department of Financial Services (DFS) to utilize the identical group size calculations for both premium approval and determination of premium credits or dividends after the policy period. DFS has chosen to employ the state insurance law group definitions when approving premiums, but employs a different group size definition created by federal law when determining whether or not the insurer has met their minimum loss ratio (MLR). The legislation would also require DFS, for premiums that they have already approved for groups, to use the state group definition to determine compliance with the MLR when they test after the contract period. The legislation permits DFS to switch to exclusive use of the federal definition for future policy periods.
JUSTIFICATION: The Department of Financial Services is currently using two separate definitions of group size. First, when approving premiums, DFS uses the state law definition. Second, when testing whether minimum loss ratios have been met, DFS has elected to employ the group size definition established in federal law as part of the Affordable Care Act.
Unfortunately, the standards are not identical. As a result, insurers may be determined by DFS to issue premium credits or dividends in instances when they have in fact met the MLR standard applied by DFS when the premiums were approved for a group.
State and federal law use different standards to determine group size. State law uses "eligible employees" when determining group size, i.e. the employees in the group actually qualifying for the health benefit. The federal law uses "employees" instead, whether they qualify for the employer's insurance benefit, are full-time/part-time employees, etc. With these differences, it is possible that premium approved for a small group with its specific statutory minimum loss ratio under the state definition actually would be tested as large group for MLR purposes under the federal law. A premium dividend or credit could therefore be ordered despite the fact that the insurer met the minimum loss ratio that was employed when the premium was approved by DFS.
In order to ensure transparency and fairness in the determination of health insurance premiums, DFS should use an identical group size.
LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 7332 IN SENATE May 2, 2012 ___________Introduced by Sen. SEWARD -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance AN ACT to amend the insurance law, in relation to ensuring that identi- cal calculations of group size are utilized by the department of financial services THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The insurance law is amended by adding a new section 3231-a to read as follows: S 3231-A. REQUIRED USE OF AN IDENTICAL GROUP SIZE. NOTWITHSTANDING ANY PROVISION OF THIS CHAPTER, OR ANY LAW OR REGULATION TO THE CONTRARY, THE SUPERINTENDENT IS DIRECTED TO ENSURE THAT THE DEPARTMENT UTILIZES THE IDENTICAL MEASUREMENT OF GROUP SIZE WHEN (A) REVIEWING PREMIUM RATE INCREASES OR DECREASES PURSUANT TO THIS CHAPTER, AND (B) WHEN DETERMIN- ING WHETHER THE INSURER NEEDS TO ISSUE A DIVIDEND OR CREDIT AGAINST FUTURE PREMIUMS FOR ALL POLICY HOLDERS. THIS REQUIREMENT SHALL ALSO APPLY TO HEALTH INSURANCE PREMIUMS IN EFFECT THAT HAVE BEEN APPROVED BY THE DEPARTMENT PURSUANT TO THIS CHAPTER. S 2. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD15646-01-2