The Office of General Counsel issued the following informal opinion on April 30, 2002, representing the position of the New York State Insurance Department.
Re: Community Rating of Association Groups
May an insurer place both large and small groups in the same rating pool?
Yes, such an action is encouraged, but not required, by the Insurance Law.
Since this is a general question, no facts were furnished.
New York Insurance Law § 3231(a) (McKinney 2000), regulating policies of commercial insurers, provides:
No individual health insurance policy and no group health insurance policy covering between two and fifty employees or members of the group exclusive of spouses and dependents, hereinafter referred to as a small group, providing hospital and/or medical benefits, including medicare supplemental insurance, shall be issued in this state unless such policy is community rated and, notwithstanding any other provisions of law, the underwriting of such policy involves no more than the imposition of a pre-existing condition limitation as permitted by this article. . . . For the purposes of this section, "community rated" means a rating methodology in which the premium for all persons covered by a policy or contract form 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.
New York Insurance Law § 4317(a) (McKinney 2000), regulating contracts of Not-for-Profit Health Service Corporations and all Health Maintenance Organizations, has an identical requirement.
In order to effectuate the requirements of New York Insurance Law §§ 3231(a) and 4317(a), the Superintendent of Insurance promulgated N.Y. Comp. R. & Regs. tit. 11, Part 360 (1998) (Regulation 145). Regulation 145, N.Y. Comp. R. & Regs. tit. 11, § 360.2(a), defines "association groups":
Association Group means a group defined in Section 4235(c)(1)(B) [trade associations], (D) [unions], (H) [common profession, trade or occupation], (K) [associations formed for other than insurance purposes], (L) [customers of a creditor] and (M) [affinity group approved by the Superintendent of Insurance] of the Insurance Law, including but not limited to an association or trust of employers, if the group includes one or more member employers or other member groups which have 50 or fewer employees or members exclusive of spouses and dependents. A group containing individual members of an association will be considered an association group having member groups of 50 or fewer members.
Regulation 145, N.Y. Comp. R. & Regs. tit. 11, § 360.8, establishes rules for association groups that, in essence, require that such groups be community rated if any member employer has less than 50 employees, N.Y. Comp. R. & Regs. tit. 11, § 360.8(e)(1), and provides the circumstances under which a large association group may have its own community rate. N.Y. Comp. R. & Regs. tit. 11, § 360.8(a)(1). In addition, N.Y. Comp. R. & Regs. tit. 11, § 360.11(b) provides, inter alia:
Insurers which currently utilize one experience pool for developing community rates for both small groups subject to chapter 501 [New York Insurance Law §§ 3231(a) & 4317(a)] and large groups not subject to chapter 501 are encouraged, but not required, to continue, this practice.
Accordingly, the practice about which you inquire is not only not contrary to the community rating law, but is encouraged to effectuate community rating.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.