Insurance Circular Letter No. 14 (2018)

November 1, 2018

STATUTORY AND REGULATORY REFERENCES: N.Y. Insurance Law Articles 32, 43 and 49 and § 3103; 11 NYCRR 52 (Insurance Regulation 62) and 11 NYCRR 360 (Insurance Regulation 145)

I. Introduction

The Department of Financial Services (the “Department”) has become aware that some insurers authorized to write accident and health insurance in New York State have continued to market and issue in New York expense-incurred limited benefits health insurance policies or contracts that cover hospital, surgical, or medical care (“limited benefits health insurance policies or contracts”). Such limited benefits health insurance policies or contracts are not permitted under New York law and regulation. The purpose of this circular letter is to remind insurers authorized to write accident and health insurance in New York State and Article 43 corporations (collectively, “issuers”) that they may not deliver or issue for delivery limited benefits health insurance policies or contracts in New York that do not comply with all statutory and regulatory requirements for comprehensive health insurance coverage. Issuers that have such policies or contracts in-force should immediately contact the Department. Issuers will need to either discontinue the policies and contracts upon renewal or amend the policies and contracts so that they meet all statutory and regulatory requirements for comprehensive health insurance.¹

II. Discussion

Insurance policies or contracts that provide hospital, surgical, or medical care on an expense-incurred basis are subject to the requirements set forth in Insurance Law Articles 32, 43 and 49. Specifically, these State laws set forth minimum standards and consumer protections applicable to comprehensive hospital, surgical, and medical insurance coverage. Furthermore, New York codified many of the protections of the Affordable Care Act (“ACA”) into State law.² For example, the prohibition on annual and lifetime limits on essential health benefits was adopted in State law.³ These State laws are independent of federal law and apply to an individual, group or blanket policy or contract of hospital, surgical, or medical expense insurance.

In determining whether a health insurance policy or contract pays on an expense-incurred basis, issuers must use the standards set forth in 11 NYCRR 52.5 and 52.6. Health insurance policies or contracts that exceed the benefit amounts in §§ 52.5 and 52.6 are deemed expense-incurred insurance in accordance with 11 NYCRR 360.2(c) and (f). Expense-incurred hospital, surgical, or medical insurance is subject to all requirements for comprehensive health insurance coverage under New York law including mandated benefits, minimum loss ratios, community rating for individual and small groups, prohibitions on annual and lifetime limits, and prohibitions on pre-existing condition limitations. The requirements under New York law are independent of federal law. While a limited benefits health insurance policy or contract may meet the definitions of excepted benefits in federal rules,⁴ no such excepted benefit status is recognized under New York law.

In addition, Insurance Law § 3103(a) provides that “…any policy of insurance or contract of annuity delivered or issued for delivery in this state in violation of any of the provisions of this chapter shall be valid and binding upon the insurer issuing the same, but in all respects in which its provisions are in violation of the requirements or prohibitions of this chapter it shall be enforceable as if it conformed with such requirements or prohibitions.” Therefore, a limited benefits health insurance policy or contract that exceeds the benefit amounts contained within §§ 52.5 and 52.6 is deemed expense-incurred hospital, surgical, or medical insurance and subject to all requirements for comprehensive health insurance coverage under New York law.

III. Conclusion

Issuers are advised that although policy or contract approval may have predated the ACA and changes to New York law, once a change in State law becomes effective, policies or contracts must comply with such law or terminate upon renewal. Issuers should review their coverage offerings to determine whether they issue limited benefits health insurance policies or contracts. Issuers that have in-force limited benefits health insurance policies or contracts should notify the Department immediately. Issuers shall either discontinue the limited benefits health insurance policies or contracts upon renewal, or submit amendments to the policies and contracts to the Department for approval so that they meet all statutory and regulatory requirements for comprehensive health insurance coverage. The Department will continue to fully enforce State requirements vigorously to ensure that limited benefits health insurance policies or contracts are not offered within New York unless they comply with all statutory and regulatory requirements for comprehensive health insurance coverage. If an issuer has issued such a policy or contract in violation of New York law, the Department expects the issuer to provide coverage in accordance with New York law.

Please direct any questions or notifications regarding this circular letter to Jason St. James, Senior Attorney, Health Bureau, New York State Department of Financial Services, One Commerce Plaza Albany, New York 12257 or by e-mail at [email protected].

Very truly yours,

Lisette Johnson
Bureau Chief, Health Bureau