STATE OF NEW YORK
25 BEAVER STREET
NEW YORK, NEW YORK 10004
|Circular Letter No. 26 (2000)
August 3, 2000
|To:||All Public Health Law Article 44 HMOs, Insurance Law Article 43 Corporations, and Insurers Licensed to Write Accident and Health Insurance in New York State|
On May 17, 1999 the Insurance Department issued Circular Letter No.
13 which set forth criteria for determining the premium rate for point-of-service
"POS" products in order to address the inappropriateness of blending a community
rated component (in-network benefit) with an experience rated component (out-of-network
benefit). POS products combine a comprehensive health services in-network benefit with an
out-of-network indemnity benefit, and in the large group marketplace are generally issued
by an HMO to provide the in-network community rated benefit and an insurer licensed to do
health insurance to provide the out-of-network experience rated benefit.
The application of the criteria set forth in Circular Letter 13 (1999), namely identifying where the majority of the services to be provided under a POS product will be performed, would have resulted in an "in-network response" for every POS product and, under the terms of Circular Letter No. 13 (1999), the premium for the entire POS product would have to be rated using the rating methodology currently used by all HMOs, namely community rating.
While there is nothing inherently wrong with a large group community rated POS product the Department does recognize that POS products must compete with other products sold in the large group maketplace which are very similar to a POS product, including an indemnity contract with a preferred provider organization (PPO) component which can be fully experience rated. The perceived marketplace advantages of these products (e.g. fully experience rated) has led certain HMOs to discontinue their large group POS products in favor of an indemnity/PPO experience rated contract issued by an affiliated insurer.
To permit HMOs to better compete in the large group POS marketplace and to address the inappropriateness of using a rating methodology which combines a community rated component with an experience rated component the Department hereby repeals Circular Letter No. 13 (1999) and in its place issues the following guidelines for HMOs and insurers who are writing POS products:
All other contracts issued by HMOs, including large group HMO only contracts shall continue to be community rated in accordance with the provisions Section 4308, 11 NYCRR Part 52.42 and 10 NYCRR Part 98.5.
All HMOs who are filing an experience rating formula, in accordance with the provisions of this Letter, should direct same to Supervising Actuary William Millering at the New York City Office of the Health Bureau.