The Office of General Counsel issued the following opinion on November 2, 2007 representing the position of the New York State Insurance Department.
RE: Prepaid Health Service Plans, Agent’s Licensing
May the Insurance Department license agents of a PHSP?
Based upon applicable statutes and regulations, the Insurance Department is authorized to license agents of a PHSP. In fact, no person may act as an agent of a PHSP unless licensed as an insurance agent, and reported as such by the PHSP, or licensed as an insurance broker.
The inquirer represents an entity which has a Certificate of Authority from the Commissioner of Health pursuant to N.Y. Pub. Health Law § 4403-a (McKinney 2002) to operate as a PHSP. Previously, the inquirer reported that the client originally was issued a Certificate of Authority as a full health maintenance organization (“HMO”) pursuant to Public Health Law § 4403, and subsequently became a PHSP.
Recently, the inquirer reported that the PHSP would be marketing a “Medicare Advantage” product and asked that the Insurance Department license the PHSP’s agents in New York.
PHSPs operate pursuant to Public Health Law § 4403-a(1), which provides:
The commissioner may issue a special purpose certificate of authority to a provider, . . . seeking to offer a comprehensive health services plan on a prepaid contractual basis either directly, or through an arrangement, agreement or plan or combination thereof to an enrolled population, which is substantially composed of persons eligible to receive benefits under title XIX of the federal social security act [Medicaid] or other public programs.
The entities that may operate as a PHSP are limited by Public Health Law § 4403-a(2):
A not-for-profit corporation established to operate a hospital pursuant to article twenty-eight of this chapter, a government agency, an entity or a group of entities seeking to provide comprehensive health services pursuant to the provisions of this section may apply for a special purpose certificate of authority; provided, however, that a shared health facility, as defined by article forty-seven of the public health law, shall not be eligible for such a certificate.
The term “Medicare Advantage” has been denominated, pursuant to Pub. L. No. 108-173, § 201 (2003), to encompass both Medicare Managed Care (also known as Medicare Part C), and the Medicare Prescription Drug Program (also known as Medicare Part D). Both programs are “public programs” within the purview of Public Health Law § 4403-a(1). See Office of General Counsel opinion of April 16, 2001.
The Health Department considers PHSPs to be managed care organizations (“MCOs”), N.Y. Comp. Codes R. & Regs tit. 10, § 98-1.2(x) (2005). An MCO may pay commissions pursuant to 10 NYCRR § 98-1.11(t) to a licensed insurance agent or broker, provided that the MCO also is in compliance with N.Y. Ins. Law § 4312 (McKinney 2007). The regulations of the Commissioner of Health, however, cannot confer jurisdiction of the Insurance Department to license agents of MCOs; that jurisdiction must be conferred by the Legislature.
Unlike managed long term care plans, which are specifically made subject to the jurisdiction of the Insurance Department as if they were HMOs, see Public Health Law § 4403-f(5); Office of General Counsel opinion of April 20, 2007, there is no explicit statutory provision with respect to PHSPs.
The query asks that the Insurance Department license agents of a PHSP. Insurance Law § 2101(a) defines an “insurance agent” as follows:
In this article, "insurance agent" means any authorized or acknowledged agent of an insurer, . . . health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker, . . . .
Insurance Law § 2112(a), in turn, requires that any HMO seeking to license an agent must file a notice of appointment with the Insurance Department.
The term HMO is defined in Public Health Law § 4401(a):
"Health maintenance organization" . . . means any person, natural or corporate, or any groups of such persons who enter into an arrangement, agreement or plan or any combination of arrangements or plans which propose to provide or offer, or which do provide or offer, a comprehensive health services plan.
Moreover, Public Health Law § 4401(3) defines “comprehensive health services” as follows:
“Comprehensive health services" means all those health services which an enrolled population might require in order to be maintained in good health, and shall include, but shall not be limited to, physician services (including consultant and referral services), in-patient and out-patient hospital services, diagnostic laboratory and therapeutic and diagnostic radiologic services, and emergency and preventive health services. Such term may be further defined by agreement with enrolled populations providing additional benefits necessary, desirable or appropriate to meet their health care needs.
The Certificate of Authority issued to PHSPs by the Health Department denominates them as HMOs and subsequently describes and limits their authority.
Based on the definition of HMO found in Public Health Law § 4401(a), and the powers of PHSPs enunciated in Public Health Law § 4403-a(1), a PHSP is an HMO within the meaning of Insurance Law §§ 1109 and 2101(a). It therefore follows that the Insurance Department is required to and will license agents of a PHSP, and no person may act as an agent of a PHSP unless licensed as an insurance agent, and reported as such by the PHSP, or licensed as an insurance broker.
Nothing in this opinion should be construed to express a view about the Insurance Department’s jurisdiction over other special purpose entities authorized by Public Health Law Article 44, or about the requirements of any other federal or state statutes regulating Medicare or Medicaid.
For further information you may contact Principal Attorney Alan Rachlin at the New York City office.