The Office of General Counsel issued the following informal opinion on February 20, 2001, representing the position of the New York State Insurance Department.
RE: HMO Premium Rate Regulation
Does a fraternal benefit group, which has 300 members, have their HIP-Prime HMO insurance premium rate regulated by the New York State Insurance Department?
The premium rates for HMO insurance are regulated by the New York State Insurance Department pursuant to the provisions of the N.Y. Insurance Law § 4308 (McKinney 2000). The public may examine and/or order copies of the premium rate increase filing made and approved for HIP.
A member of a fraternal benefit society, which membership subscribes to HIP-Prime, a contract offered by HIP, stated that it was told that because of its small number of subscribers (300+), their HIP premium rates are not regulated by the Insurance Department.
The N.Y. Ins. Law Article 43 (McKinney 2000) provides an extensive regulatory plan for "Non-Profit Medical and Dental Indemnity, or Health and Hospital Service Corporations", including the contracts and rates used by Health Maintenance Organizations ("HMOs").
N.Y. Ins. Law § 4308 (McKinney 2000) provides for the filing and approval by the Superintendent of Insurance of contract forms and premium rates of all HMOs, regardless of the number of subscribers.
Section 4308(c) provides in pertinent part that the Superintendent of Insurance ("Superintendent") shall hold a public hearing with respect to a rate increase application by an HMO at which any person may be heard in favor of, or against, the increase application, after which he shall render a decision approving, modifying or disapproving the increase.
Section 4308(g) provides in pertinent part for an alternate procedure to that described in Section 4308(c), beginning with a rate increase application to the Superintendent which shall be deemed approved provided that (A) the anticipated incurred loss ratio for a contract form shall be less than 85% for individual direct payment contracts or 75% for small group contracts and (B) the HMO submits a certification by a qualified actuary that the actuarial assumptions are proper. Prior to January 1, 2000, rate increases under this procedure were limited to 10% per year. Effective January 1, 2000, there is no limit on the amount of a rate increase that may be approved. Thirty days advance written notice of any rate increase must be provided to each subscriber.
N.Y. Ins. Law § 4317 (McKinney 2000) defines small group health insurance contracts as those covering between 2 and 50 members, and their spouses and dependents. Individual and small group HMO contracts must be community rated. Community rating is a rating method in which the premium for all covered persons is the same, based on the experience of the entire pool of risks covered by that policy or contract form without regard to age, sex, health status or occupation. N.Y. Ins. Law § 4317(a) (McKinney 2000).
The reader is advised to read Section 4308 of the Insurance Law, Regulations 62, 145, and 146 of the Insurance Department, which are all pertinent to this inquiry (N.Y. Comp. R. & Regs. tit 11, Parts 52, 360 and 361), and the 2000 edition of the Insurance Departments New York Consumer Guide to Health Insurers.
To obtain a copy of HIPs most recent rate filing, please send your written request to the Records Access Officer, State of New York Insurance Department, either by postal service, fax or e-mail. The Department will advise the copying costs.
For further information you may contact Associate Counsel Sidney B. Glaser.