Relates to requiring the superintendent of financial services to fairly calculate compliance with minimum loss ratios in the Healthy New York insurance program.
TITLE OF BILL: An act to amend the insurance law, in relation to requiring the superintendent of financial services to fairly calculate compliance with minimum loss ratios in the Healthy New York insurance program
PURPOSE: To maintain the existing Healthy New York blended rate for small groups and individuals, while developing an actuarially sound accounting of the small group and individual experience under such policies so they may be fairly tested on meeting their minimum loss ratio requirements.
SUMMARY OF PROVISIONS: Adds a new section 3231-a to the insurance law to direct the Superintendent of the Department of Financial Services (DFS) to approve a single blended rate for Healthy New York policies, which would apply to both small groups and individuals. In addition to such information as may be required to allow the department to approve a premium rate for such policies, the superintendent shall also require insurers to submit Such information as may be required to permit DFS to determine the actual experience of both small group and individuals insured under such policies for the purposes of determining compliance with the minimum loss ratio requirements.
JUSTIFICATION: Changes in federal law affecting health and insurance policy have created unanticipated consequences in New York's insurance markets. One such unanticipated consequence is in the Healthy New York program. Under existing state policy, both small groups and individual purchasers are able to purchase a Healthy New York policy with a single, blended premium rate. The single rate does not reflect the actual experience of either the small group pool or the individual pool. However, when the medical loss ratio test is applied after the contract period, federal law does not permit testing of the blended rate, but rather requires that the small group experience and individual experience be tested separately. By definition, the small group experience will not meet the medical loss ratio test because it is in effect subsidizing the individual experience, and a premium rebate will be required despite the fact that the insurer has met the medical loss ratio for the combined population. The state must figure out a way to maintain the single, blended rate which benefits purchasers, and provide an actuarially sound accounting for the each pool which allows it to be tested fairly.
LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: 90 days after it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 7333 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 requiring the super- intendent of financial services to fairly calculate compliance with minimum loss ratios in the Healthy New York insurance program 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. HEALTHY NEW YORK POLICY BLENDED RATE. (A) CONSISTENT WITH SECTIONS FOUR THOUSAND THREE HUNDRED TWENTY-SIX AND FOUR THOUSAND THREE HUNDRED TWENTY-SEVEN OF THIS CHAPTER AND DEPARTMENT REGULATIONS, THE SUPERINTENDENT SHALL APPROVE A SINGLE, BLENDED PREMIUM RATE FOR HEALTHY NEW YORK POLICIES THAT IS APPLICABLE TO BOTH SMALL GROUP AND INDIVIDUAL PURCHASERS. IN ADDITION TO PROVIDING SUCH INFORMATION AS MAY BE REQUIRED TO ALLOW THE DEPARTMENT TO APPROVE A BLENDED RATE, THE SUPERINTENDENT SHALL REQUIRE INSURERS OFFERING HEALTHY NEW YORK POLICIES TO ALSO SUBMIT SUCH INFORMATION AS MAY BE REQUIRED TO DETERMINE SEPARATE PREMIUM RATES FOR EACH OF THE SMALL GROUP AND INDIVIDUAL RISK POOLS THAT ARE INSURED UNDER THE BLENDED RATE. (B)(1) IN THE EVENT THAT THE SEPARATE RATES DIFFER FROM THE BLENDED RATE, THE DEPARTMENT SHALL IDENTIFY THE PREMIUM RATE THAT IS LOWER THAN THE BLENDED RATE, WHICH SHALL BE KNOWN AS THE SUPPORTING RATE. THE PREMIUM RATE THAT IS GREATER THAN THE BLENDED RATE SHALL BE KNOWN AS THE NON-SUPPORTING RATE. (2) THE DEPARTMENT SHALL SUBTRACT THE SUPPORTING RATE FROM THE BLENDED RATE TO DETERMINE THE DIFFERENCE, WHICH SHALL BE KNOWN AS THE PREMIUM SUPPORT FACTOR. (3) THE DEPARTMENT SHALL MULTIPLY THE PREMIUM SUPPORT FACTOR BY THE TOTAL NUMBER OF CONTRACTS IN THE SUPPORTING RATE RISK POOL, THE PRODUCT OF WHICH SHALL BE DEEMED AN ASSESSMENT FOR REPORTING PURPOSES UNDER US 45 CFR 158.162(B)(1) AND SHALL BE DEEMED AN ASSESSMENT FOR MEDICAL LOSS RATIO CALCULATIONS UNDER US 45 CFR 158.221(C).EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD15690-02-2 S. 7333 2
(C) THE DEPARTMENT SHALL ALSO MULTIPLY THE PREMIUM SUPPORT FACTOR BY THE TOTAL NUMBER OF CONTRACTS IN THE NON-SUPPORTING RATE RISK POOL, THE PRODUCT OF WHICH SHALL BE DEEMED EARNED PREMIUM, REFLECTED AS AN ADJUST- MENT TO THE NON-SUPPORTING RATE'S EARNED PREMIUM AMOUNT, AS DEFINED IN US 45 CFR 158.130(B)(3) AND REPORTED AS PART OF MEDICAL LOSS RATIO CALCULATIONS UNDER US 45 CFR 158.221(C). (D) APPLICATION OF THIS SECTION AND CLASSIFICATION OF ANY PART OF PREMIUM RATES AS AN ASSESSMENT OR EARNED PREMIUMS ARE FOR PURPOSES OF MEDICAL LOSS RATIO CALCULATIONS ONLY. S 2. This act shall take effect on the ninetieth day after it shall have become a law.