OGC Op. No. 10-02-04
The Office of General Counsel issued the following opinion on February 12, 2010, representing the position of the New York State Insurance Department.
RE: Applicability of Insurance Law
§ 4224(c) to Health Maintenance Organizations
Does N.Y. Ins. Law
Yes. Since an HMO contract is subject to Article 43 of the Insurance Law as if the HMO contract was a subscriber contract issued by a non-profit medical and dental indemnity or health and hospital service corporation, Insurance Law
ABC Health Plan, Inc. (“ABC”) is an HMO operating in New York with a certificate of authority in accordance with N.Y. Pub. Health Law
On September 6, 2007, the Department’s Health Bureau and Office of General Counsel (“OGC”) met with ABC and its counsel concerning the Program, at which time OGC communicated its position that the benefits ABC offers through the Program constitute the doing of an insurance business as defined in the Insurance Law. ABC informed the Department that it would submit to the Department a revised Program that conforms to the Insurance Law, and ABC’s counsel confirmed such in a letter to OGC’s Assistant Deputy Superintendent dated November 13, 2007. On December 27, 2007, OGC requested that counsel for ABC submit the revised Program. However, counsel for ABC informed OGC that it had not received any revised Program from its client, and that it would submit a revised Program upon receipt. On April 14, 2008, when OGC contacted counsel for ABC again for the status of the Program, counsel was unable to offer any information.
Since the Department never received a revised Program, the Assistant Deputy Superintendent and Health Bureau Chief directed ABC in a letter to ABC’s Chairman and Chief Executive Officer (“CEO”) dated October 28, 2008 to cease offering the Program in New York unless and until ABC demonstrates that the Program fully complies with the Insurance Law and regulations promulgated thereunder. In a letter to the Assistant Deputy Superintendent and Health Bureau Chief dated November 7, 2008, ABC’s Chairman and CEO represented that ABC had removed the objectionable benefits, and that “[n]one of the Program’s benefits promote participation in a wellness plan and therefore do not appear to be covered by the provisions of Section 3239.”
Nonetheless, the Department’s Health Bureau has concerns that certain benefits that the Program continues to offer may constitute rebates or inducements. Therefore, the Health Bureau asked OGC to clarify whether Insurance Law
Although Insurance Law
Moreover, Insurance Law
Except as otherwise provided and except as the context otherwise requires, every medical expense indemnity corporation, dental expense indemnity corporation, health service corporation, and hospital service corporation shall be subject to all requirements of this chapter made applicable to insurance companies generally, and to the rules and regulations of the superintendent except in so far as said laws, rules and regulations may be inconsistent with other provisions of this article.
Thus, any corporation subject to Article 43 of the Insurance Law is subject to all Insurance Law requirements applicable to insurers generally.
There are a number of sections of the Insurance Law that pertain to rebating and inducements, including Insurance Law
Insurance Law § 2324 applies generally to all kinds of insurers and insurance, except as specifically excluded under Insurance Law
(a) No authorized insurer, no licensed insurance agent, no licensed insurance broker, and no employee or other representative of any such insurer, agent or broker shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of the insured, either as an inducement to the making of insurance or after insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract, other than any article of merchandise not exceeding fifteen dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker….
(e) This section shall not apply to any policy or contract of reinsurance nor to any contract or policy of life insurance, accident insurance or health insurance which is subject to the provisions of section four thousand two hundred twenty-four of this chapter, nor to any contract or policy of marine insurance, other than contracts or policies of automobile insurance, or of marine protection and indemnity insurance, nor to any insurance contract, or rate of insurance in connection with any insurance contract either against loss or damage to, or legal liability in connection with, any property located wholly outside of this state or any activity carried on outside of this state or any motor vehicle or aircraft principally garaged and used outside of this state.
While Insurance Law
Except as permitted by section three thousand two hundred thirty-nine of this chapter, 1 no such life insurance company and no such savings and insurance bank and no officer, agent, solicitor or representative thereof and no such insurer doing in this state the business of accident and health insurance and no officer, agent, solicitor or representative thereof, and no licensed insurance broker and no employee or other representative of any such insurer, agent or broker, shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to any person to insure, or shall give, sell or purchase, or offer to give, sell or purchase, as such inducement, or interdependent with any policy of life insurance or annuity contract or policy of accident and health insurance, any stocks, bonds, or other securities, or any dividends or profits accruing or to accrue thereon, or any valuable consideration or inducement whatever not specified in such policy or contract; nor shall any person in this state knowingly receive as such inducement, any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits to accrue on any such policy or contract, or knowingly receive any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever which is not specified in such policy or contract.
Since an HMO contract is subject to Article 43 of the Insurance Law as if the HMO contract was a subscriber contract, Insurance Law
In light of the foregoing, ABC’s Chairman and CEO was informed that the Department’s Health Bureau will contact him soon to discuss the changes that ABC must make to the Program.
For further information, you may contact Senior Attorney Joana Lucashuk at the New York City office.
1 Insurance Law
2 In OGC Opinion 86-38 (NILS) (Apr. 17, 1986), the Department opined that “[s]ection 1109(a) of the Insurance Law limits our jurisdiction over HMOs authorized under Article 44 of the Public Health Law to those areas mentioned in that statute. Neither