New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on March 4, 2004, representing the position of the New York State Insurance Department.

RE: Small Employer Health Insurance

Questions Presented:

1. Has New York taken any action connection with small employer health insurance?

2. Does New York mandate coverage of specific conditions or procedures by health insurers?

3. Does New York have any programs to improve access to health insurance for small employers?

4. Does New York maintain checklists of filing requirements for health insurers?

5. Is the New York Insurance Law (McKinney 2000 and 2004 Supplement) and related documents available on the Department website?

Conclusions:

1. New York has required that health insurance policies and contracts issued to individuals and small groups are subject to open enrollment and be community rated.

2. New York has numerous health insurance mandates.

3. New York has a program, Healthy New York, which supplanted previous programs, to improve access to health insurance for small employers.

4. Such checklists are maintained by the Department and are available on its website.

5. In addition to McKinney, a West Publishing Company subsidiary, several other firms publish copies of the New York Insurance Law. A link to the text of the New York Insurance Law is available on the Department’s website.

Facts:

In an effort to improve access to health insurance, Oregon has established, Or. Rev. Stat. § 735.600 et seq. (2001), the Oregon Medical Insurance Pool. The inquirer asked what New York has done in the area of small employer health insurance reform.

Analysis:

Open Enrollment and Community Rating

New York Insurance Law § 3231(a) (McKinney 2000 and 2004 Supplement, added by 1992 N.Y. Laws 501 and applicable to commercial health 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 . . . 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. Any individual, and dependents of such individual, and any small group, including all employees or group members and dependents of employees or members, applying for individual health insurance coverage . . . or small group health insurance coverage . . . must be accepted at all times throughout the year for any hospital and/or medical coverage offered by the insurer to individuals or small groups in this state. . . . 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) was added at the same time and imposes an identical requirement on not-for-profit insurers, primarily Blue Cross/Blue Shield plans, and Health Maintenance Organizations.

As a companion to New York Insurance Law §§ 3231 and 4317, the Legislature enacted New York Insurance Law § 3233 (McKinney 2000):

(a) Notwithstanding any provision of this chapter or any other chapter . . . the superintendent shall promulgate regulations to assure an orderly implementation and ongoing operation of the open enrollment and community rating required by sections thirty-two hundred thirty-one and forty-three hundred seventeen of this chapter, including provisions designed to encourage insurers to remain in or enter the small group or individual health insurance markets. The regulations shall apply to all insurers and health maintenance organizations subject to community rating. The regulations shall be designed to promote an insurance marketplace where premiums do not unduly fluctuate, insurers and health maintenance organizations are reasonably protected against unexpected significant shifts in the number of persons insured, and other market stability features deemed appropriate by the superintendent. Such regulations shall not require any insurer or health maintenance organization subject to this section, or any subsidiary or controlled person of a holding company of such insurer or health maintenance organization, to enter, continue to conduct, or withdraw from any line of business as a condition of entering, continuing in, or withdrawing from any other line of business.

. . .

The Department has promulgated N.Y. Comp. Codes R. & Regs tit. 11, Part 360 (2000) (Regulation 145) to effectuate the requirements of New York Insurance Law §§ 3231 and 4317 and has promulgated and subsequently amended N.Y. Comp. Codes R. & Regs tit. 11, Part 361 (2002) to effectuate the requirements of New York Insurance Law § 3233.

Mandated Benefits

New York has mandated coverage of a number of conditions and procedures. While the mandates are too numerous to list in this letter, the mandates applicable to group health insurance may be found, for commercial insurers at New York Insurance Law §§ 3221 (McKinney 2000 and 2004 Supplement and 4235 (McKinney 2000 and 2004 Supplement), for not-for-profit insurers and HMOs at New York Insurance Law §§ 4303 (McKinney 2000 and 2004 Supplement) and 4305 (McKinney 2000 and 2004 Supplement). In addition, they are generally listed on the Department website, www.ins.state.ny.us, under Insurer/Health.

Healthy New York and Prior Programs

In 1988 N.Y. Laws 703, New York passed an Expanded Health Care Coverage Act, as part of which New York Insurance Law § 1118 (McKinney 2000) was enacted to establish a Regional Pilot Program (RPP):

(a) An authorized insurer subject to the provisions of this chapter and organized to write the kind of insurance specified in paragraph three of subsection (a) of section one thousand one hundred thirteen of this article [health insurance], and a health maintenance organization authorized pursuant to article forty-three of this chapter or article forty-four of the public health law, may be authorized by the superintendent to issue contracts or otherwise enter into arrangements with approved organizations in connection with regional pilot projects to test models for the purpose of providing insurance and equivalent coverage mechanisms for the uninsured. . . . For the purpose of this section, regional pilot projects shall mean projects authorized pursuant to the expanded health care coverage act of nineteen hundred eighty-eight.

. . .

As part of a major reform of health care, New York enacted New York Public Health Law §§ 921 (McKinney 2002) and 922 (McKinney 2002) to replace the RPP with New York State Small Business Health Insurance Partnership Program (NYSHIPP):

921. Definitions For the purposes of this article, unless the context clearly requires otherwise:. . . 2. ‘Eligible employer’ means a sole proprietor or an employer of between one and fifty full-time employees, who has not within the twelve-month period prior to the effective date of this section provided group health insurance benefits to any employee associated with the employers' business. . . . 4. ‘Small group health insurance policy’ means a group health insurance policy or comprehensive health services plan issued on a community-rated, open-enrolled basis pursuant to article thirty-two or forty-three of the insurance law by an insurer licensed pursuant to article forty-one or forty-two of the insurance law, a corporation organized pursuant to article forty-three of the insurance law, or a health maintenance organization certified pursuant to article forty-four of the public health law; provided, however, in no event shall premiums be used to purchase riders to policies or to purchase non-comprehensive policies. . . .

922. New York state small business health insurance partnership program 1. The commissioner is authorized to the extent of funds available therefor to establish the New York state small business health insurance partnership program.

2. New York state small business health insurance partnership program. (a) A small business health insurance partnership program shall assist eligible employers in purchasing small group health insurance policies for their full-time employees and dependents. (b) An eligible employer may apply to the commissioner for approval in the small business health insurance partnership program by submitting an application on a form prescribed by the commissioner. . . .

As part of another major reform of health care, New York enacted New York Insurance Law §§ 4326 (McKinney 2000 and 2004 Supplement) and 4327 (McKinney 2000 and 2004 Supplement), that supplanted NYSHIPP with Healthy New York:

§ 4326. Standardized health insurance contracts for qualifying small employers and individuals (a) A program is hereby established for the purpose of making standardized health insurance contracts available to qualifying small employers and qualifying individuals as defined in this section. Such program is designed to encourage small employers to offer health insurance coverage to their employees and to also make coverage available to uninsured employees whose employers do not provide group health insurance.

(b) Participation in the program established by this section and section four thousand three hundred twenty-seven of this article is limited to corporations or insurers organized or licensed under this article or article forty-two of this chapter and health maintenance organizations issued a certificate of authority under article forty-four of the public health law or licensed under this article. Participation by all health maintenance organizations is mandatory. . . . For the purposes of this section and section four thousand three hundred twenty-seven of this article, article forty-three corporations or article forty-two insurers which voluntarily participate in compliance with the requirements of this program shall be eligible for reimbursement from the stop loss funds created pursuant to section four thousand three hundred twenty-seven of this article under the same terms and conditions as health maintenance organizations.

(c) The following definitions shall be applicable to the insurance contracts offered under the program established by this section:(1) A qualifying small employer is an employer that is either: (A) An individual proprietor who is the only employee of the business: (i) without health insurance which provides benefits on an expense reimbursed or prepaid basis in effect during the twelve month period prior to application for a qualifying group health insurance contract under the program established by this section; . . . or (B) An employer with: (i) not more than fifty eligible employees; (ii) no group health insurance which provides benefits on an expense reimbursed or prepaid basis covering employees in effect during the twelve month period prior to application for a qualifying group health insurance contract under the program established by this section; and (iii) at least thirty percent of its eligible employees receiving annual wages from the employer at a level equal to or less than thirty thousand dollars. . . . (C) The requirements set forth in item (i) of subparagraph (A) of this paragraph and in item (ii) of subparagraph (B) of this paragraph shall not be applicable where an individual proprietor or employer is transferring from a health insurance contract issued pursuant to the New York state small business health insurance partnership program established by section nine hundred twenty-two of the public health law or from health care coverage issued pursuant to a regional pilot project for the uninsured established by section one thousand one hundred eighteen of this chapter.) . . .

(d) The contracts issued pursuant to this section by health maintenance organizations, corporations or insurers and approved by the superintendent shall only provide in-plan benefits, except for emergency care or where services are not available through a plan provider. . . .

. . .

(f) Except as included in the list of covered services in subsection (d) of this section, the mandated and make-available benefits set forth in sections . . . three

thousand two hundred twenty-one of this chapter and four thousand three hundred three of this article shall not be applicable to the contracts issued pursuant to this section. . . .

. . .

§ 4327. Stop loss funds for standardized health insurance contracts issued to qualifying small employers and qualifying individuals (a) The superintendent shall establish a fund from which health maintenance organizations, corporations or insurers may receive reimbursement, to the extent of funds available therefor, for claims paid by such health maintenance organizations, corporations or insurers for members covered under qualifying group health insurance contracts issued pursuant to section four thousand three hundred twenty-six of this article. This fund shall be known as the ‘small employer stop loss fund’. The superintendent shall establish a separate and distinct fund from which health maintenance organizations, corporations or insurers may receive reimbursement, to the extent of funds available therefor, for claims paid by such health maintenance organizations, corporations or insurers for members covered under qualifying individual health insurance contracts issued pursuant to section four thousand three hundred twenty-six of this article. This fund shall be known as the ‘qualifying individual stop loss fund’.

The Department has promulgated N.Y. Comp. Codes R. & Regs. tit. 11, Part 362 (Regulation 171) (2003) to effectuate New York Insurance Law §§ 4326 and 4327.

Questions concerning the Healthy New York Program may be addressed to:

Thomas Zyra, Esq.
Co-Chief
Health Bureau
New York Insurance Department
One Commerce Plaza
Albany, NY 12257.

Questions concerning the RPP or the NYSHIPP should be addressed to:

Ms. Judith Arnold
Deputy Commissioner"
Division of Planning, Policy and Resource Development
Department of Health
Tower Building
Empire State Plaza
Albany, NY 12237.

Department Approval of Policy Forms

New York Insurance Law § 3201(b)(1) (McKinney 2000 and 2004 Supplement) requires that all health insurance policy forms and proposed premium rates be submitted to the Department for approval. New York Insurance Law § 3201(b)(6) establishes an optional expedited approval process for policy forms. Enclosed is Circular Letter No 4 of 2003 (September 15, 2003) describing the expedited procedure.

Availability of Information

The official publisher of the New York Insurance Law is McKinney, a subsidiary of the West Publishing Company. In addition, other publishers have compiled and printed copies of the New York Insurance Law. Copies of the New York Insurance Law are available in most business and law libraries.

The Department website has information on Healthy New York, as well as links that access the New York Insurance Law, the regulations promulgated thereunder, as well as other documents, including the forms referenced in Circular Letter 3 of 2003.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.