NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7153
SPONSOR: Simone (MS) TITLE OF BILL:
An act to amend the insurance law and the state finance law, in relation
to creating the health insurance guaranty fund
PURPOSE:
To protect consumers and providers from the failure of a health insurer
to perform its contractual obligations due to financial impairment or
insolvency.
SUMMARY OF SPECIFIC PROVISIONS:
Amends various provisions of Insurance Law and State Finance Law to
establish the New York Health Insurance Consumer Protection Security
Fund. In the event of an insolvency or failure by a health insurance
company, the fund would reimburse providers for uncompensated care
delivered to its enrollees. The fund would he financed by a onetime,
temporary assessment on remaining health insurers-not a permanent tax.
Other provisions of note: prohibits insurers from passing on assessments
to policyholders; assessment on remaining insurers would be based on
premiums received during the previous calendar year; allows the Depart-
ment of Financial Services superintendent to adjust or suspend the
assessment based on a health insurer's financial situation.
JUSTIFICATION:
Consumers and providers were severely harmed by the failure of Health
Republic Insurance of New York (HRINY). The company owed hospitals and
doctors across the state hundreds of millions of dollars and its demise
left consumers worried about their access to care as they scrambled for
new coverage.
While the Department of Financial Services expressed hope that "modest
payments" would resume, there was no information on how much money, if
any, remained. vailable within HRINY to reimburse providers for
outstanding claims. This was not the first time that a New York health
insurer has failed-the last major one was Wellcare in 1998-and likely
won't be the last.
New York has no system of protection for consumers and providers when a
health insurance plan becomes insolvent. This bill seeks to remedy that
situation by creating a health insurance guaranty fund-a basic consumer
protection enjoyed by every other state in the nation, along with Wash-
ington, DC and Puerto Rico. The fund would be financed by a one-time,
temporary assessment-levied only in the event of a health plan's insol-
vency-on other insurers.
In 1999, legislation similar to this bill, A.8828, included a health
guaranty fund and passed the Assembly. Had such a health insurance guar-
anty fund existed, it could have minimized the confusion caused by
IRINY's failure and promoted confidence in a shaken health insurance
marketplace: the fund would enable consumers of a bankrupt insurer to
continue to receive care from their own doctors and hospitals by guaran-
teeing that providers would he paid for care provided.
A health insurance guaranty fund would neither create a new permanent
tax nor require an investment by the State. It would not affect consumer
premiums either: though insurers would pay a temporary assessment in the
event of an insolvency, this would be offset by new customers (and new
premiums) from failed competitors. The bill also prohibits insurers from
passing on assessments to policyholders.
Fortunately. insurer failures are rare, but when they do occur we need a
statutory framework with protections that allow consumers to transition
smoothly to other coverage and ensure they have continued access to
health services through stable provider networks. New York has a proper-
ty and casualty insurance guaranty fund. It should extend the same
protection to health insurance policy holders.
PRIOR LEGISLATIVE HISTORY:
2016: A.9311 - referred to Insurance Committee
2017-2018: A.4328 - referred to Insurance Committee
2019-2020: A.2910 - referred to Insurance Committee
2021-2022: A912
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
Immediately.
STATE OF NEW YORK
________________________________________________________________________
7153
2023-2024 Regular Sessions
IN ASSEMBLY
May 11, 2023
___________
Introduced by M. of A. SIMONE, STIRPE, HEVESI, FAHY, SEAWRIGHT, BENEDET-
TO, MAGNARELLI, WEPRIN, THIELE, PAULIN, BRAUNSTEIN, OTIS, COLTON,
JEAN-PIERRE, PEOPLES-STOKES, HUNTER, STECK, D. ROSENTHAL, LAVINE,
L. ROSENTHAL, DICKENS, GONZALEZ-ROJAS -- Multi-Sponsored by -- M. of
A. COOK, EPSTEIN, GLICK, LUPARDO, SIMON -- read once and referred to
the Committee on Insurance
AN ACT to amend the insurance law and the state finance law, in relation
to creating the health insurance guaranty fund
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subsection (e) of section 7402 of the insurance law is
2 amended to read as follows:
3 (e) Is found, after examination, to be in such condition that its
4 further transaction of business will be hazardous to its policyholders,
5 creditors, or the public. This shall include a health insurer, as
6 defined in article eighty-one of this chapter, that is consistently
7 unable to meet the requirements of section three thousand two hundred
8 twenty-four-a of this chapter.
9 § 2. Section 7403 of the insurance law is amended by adding a new
10 subsection (e) to read as follows:
11 (e)(1) Upon a determination by the superintendent and the rehabilita-
12 tor that funds from the New York health insurance consumer protection
13 security fund are necessary to meet the requirements of article eighty-
14 one of this chapter, the superintendent shall make available such funds
15 as are necessary, pursuant to the requirements of such article.
16 (2) The superintendent shall advance such funds as may be necessary
17 pursuant to subsection (d) of section eight thousand one hundred four of
18 this chapter. The rehabilitator and the superintendent shall establish a
19 plan, if possible, for repayment of the advance, at a rate of interest
20 determined by the superintendent.
21 (3) Advances, pursuant to paragraph two of this subsection, shall, in
22 all respects except to rate of interest, be subject to the provisions of
23 section one thousand three hundred seven of this chapter, provided that
24 in the event that an insurer which has received an advance pursuant to
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD07942-01-3
A. 7153 2
1 this subsection is subsequently the subject of an order of liquidation,
2 the claim of the fund for the advance and any accrued interest shall
3 have priority above claims of all nonsecured creditors, provided the
4 requirements of article eighty-one of this chapter have been met, and
5 shall be paid immediately to the fund or as soon as assets are available
6 therefor.
7 § 3. Paragraph 1 of subsection (f) of section 7405 of the insurance
8 law, as amended by chapter 33 of the laws of 2005, is amended to read as
9 follows:
10 (1) No later than one hundred eighty days after a final order of
11 liquidation with an adjudication of insolvency of an insurer by a court
12 of competent jurisdiction of this state, the liquidator may in his sole
13 discretion make application to the court for approval of a proposal to
14 disburse assets out of marshalled assets, from time to time as such
15 assets become available, to any fund established by article seventy-six
16 of this chapter, article six-A of the workers' compensation law [and],
17 any foreign entity performing a similar function, and any fund estab-
18 lished pursuant to article eighty-one of this chapter, provided that the
19 requirements of subsection (a) of section eight thousand one hundred
20 three of this chapter have been met, having obligations because of such
21 insolvency. If the liquidator determines that there are insufficient
22 assets to disburse, the application authorized by this subsection shall
23 be considered satisfied by a filing by the liquidator stating the
24 reasons for this determination.
25 § 4. The insurance law is amended by adding a new article 81 to read
26 as follows:
27 ARTICLE 81
28 HEALTH INSURANCE GUARANTY FUND
29 Section 8101. Purpose.
30 8102. Definitions.
31 8103. New York health insurance consumer protection security
32 fund.
33 8104. Powers of the superintendent.
34 § 8101. Purpose. The purpose of this article is to protect covered
35 individuals against the failure or inability of a health insurer to
36 perform its contractual obligations due to financial impairment or
37 insolvency. To provide this protection, the legislature hereby creates a
38 New York health insurance consumer protection security fund to serve as
39 a guaranty fund mechanism capable of insuring that the financial obli-
40 gations of health insurers to their enrollees and health care providers
41 are satisfied.
42 § 8102. Definitions. As used in this article:
43 (a) "Fund" means the New York health insurance consumer protection
44 security fund created by this article.
45 (b) "Health insurer" means any organization or entity providing
46 reimbursement for a covered expense under any individual, group or blan-
47 ket policy or contract covering the kinds of insurance described in item
48 (i) of paragraph three of subsection (a) of section one thousand one
49 hundred thirteen of this chapter and licensed under article thirty-two
50 or forty-two of this chapter, which is not a member of, or participant
51 in, or a subsidiary of a member of or participant in, the funds created
52 pursuant to articles seventy-five, seventy-six, and seventy-seven of
53 this chapter; a corporation organized under article forty-three of this
54 chapter; or an organization certified under article forty-four of the
55 public health law.
A. 7153 3
1 (c) "Contractual obligation" means any payment or reimbursement owed
2 by a health insurer for a covered benefit under a policy, contract, or
3 comprehensive health benefits plan.
4 (d) "Impaired health insurer" means a health insurer for whom the
5 superintendent has initiated a proceeding under the provisions of arti-
6 cle seventy-four of this chapter.
7 (e) "Commissioner" means the commissioner of taxation and finance.
8 § 8103. New York health insurance consumer protection security fund.
9 (a) Consistent with the provisions of subdivision one of section nine-
10 ty-eight-d of the state finance law, there is hereby established a New
11 York health insurance consumer protection security fund. Such fund shall
12 be used in the payment of unpaid contractual obligations, in whole or in
13 part, by an impaired health insurer, after application of any funds
14 available from a proceeding implemented pursuant to article seventy-four
15 of this chapter.
16 (b)(1) Payment into the fund by health insurers shall be made through
17 an assessment based on the premiums received by a health insurer for
18 business in this state for the most recent calendar year for which
19 premium information is available, excluding premiums received for indi-
20 viduals under title XIX of the social security act. The superintendent
21 shall establish assessment levels sufficient to fully pay all unpaid
22 claims of an impaired health insurer, pursuant to subsections (b), (c)
23 and (d) of section eight thousand one hundred four of this article, and
24 to repay any transfers made pursuant to subdivision five of section
25 seventy-two of the state finance law.
26 (2) The superintendent may exempt, abate or defer, in whole or in
27 part, the assessment of a health insurer if the superintendent deter-
28 mines that payment of the assessment would endanger the ability of the
29 health insurer to fulfill its contractual obligations or place the
30 health insurer in an unsafe or unsound financial condition.
31 (3) In the event an assessment against a health insurer is exempted,
32 abated or deferred, in whole or in part, the amount by which that
33 assessment is exempted, abated or deferred shall be assessed against
34 other health insurers in a manner consistent with this section.
35 (c) Repayment of health insurers when funds become available from a
36 proceeding pursuant to article seventy-four of this chapter shall be
37 proportionate to the contribution from each health insurer.
38 § 8104. Powers of the superintendent. (a) For any impaired health
39 insurer, the superintendent shall direct the commissioner to make
40 payments from the New York health insurance consumer protection security
41 fund to ensure that payments to health care providers, or indemnity
42 payments to covered individuals, are made in full for services provided
43 that would not otherwise be fully reimbursed despite the proceedings
44 implemented pursuant to article seventy-four of this chapter. Services
45 provided either prior to the implementation of a proceeding under arti-
46 cle seventy-four of this chapter or after implementation of such
47 proceeding shall be eligible for reimbursement, in part or in whole,
48 from the fund. Payment in full shall be determined by the terms of the
49 health insurance contract, any contract between a health care provider
50 and the impaired health insurer and any applicable state or federal laws
51 or regulations including but not limited to part H of chapter sixty of
52 the laws of two thousand fourteen and section two thousand nineteen-a of
53 the Public Health Services Act, as amended by the Patient Protection and
54 affordable Care Act.
55 (b) The superintendent shall direct the commissioner to make payments
56 to ensure that payment in full is made to health care providers, or
A. 7153 4
1 indemnity payments to covered individuals, for services provided before
2 the implementation of proceedings pursuant to article seventy-four of
3 this chapter within thirty days of the implementation of such proceed-
4 ing.
5 (c) The superintendent shall direct the commissioner to ensure that
6 payment in full is made to health care providers, or indemnity payments
7 to covered individuals, for services provided after the implementation
8 of proceedings pursuant to article seventy-four of this chapter within
9 thirty days of receipt of a claim.
10 (d) If necessary, the superintendent shall direct the commissioner to
11 advance monies from the fund to comply with the provisions of
12 subsections (b) and (c) of this section.
13 (e) The superintendent shall notify the director of the budget of the
14 need for monies to be transferred pursuant to subdivision five of
15 section seventy-two of the state finance law to meet the requirements of
16 subsections (b), (c) and (d) of this section.
17 (f) The superintendent shall direct the commissioner to use the monies
18 of the fund to repay any transfers made pursuant to subdivision five of
19 section seventy-two of the state finance law, when such funds are paid
20 pursuant to subsection (b) of section eight thousand one hundred three
21 of this article.
22 (g) The superintendent shall ensure that the cost of assessments
23 established pursuant to subdivision (b) of section eight thousand one
24 hundred three of this article are not included in premiums by any health
25 insurer.
26 § 5. Section 72 of the state finance law is amended by adding a new
27 subdivision 5 to read as follows:
28 5. Notwithstanding any provision of law to the contrary, upon notifi-
29 cation from the superintendent of financial services of the need for
30 monies to meet the requirements of subsections (b), (c) and (d) of
31 section eight thousand one hundred four of the insurance law, the direc-
32 tor of the budget shall transfer such funds as are necessary.
33 § 6. The state finance law is amended by adding a new section 98-d to
34 read as follows:
35 § 98-d. New York health insurance consumer protection security fund.
36 1. There is hereby established in the custody of the commissioner of the
37 department of taxation and finance an account of the miscellaneous
38 special revenue fund to be known as the New York health insurance
39 consumer protection security fund account.
40 2. Notwithstanding any other law, rule or regulation to the contrary,
41 the commissioner of taxation and finance is hereby authorized and
42 directed to receive for deposit to the credit of the New York health
43 insurance consumer protection security fund account, assessments imposed
44 pursuant to article eighty-one of the insurance law and transfers from
45 the general fund pursuant to subdivision five of section seventy-two of
46 this article.
47 3. The commissioner of taxation and finance shall make payments from
48 the monies on deposit in the New York health insurance consumer
49 protection security fund account in the amounts and at the times deter-
50 mined by the superintendent of insurance.
51 § 7. This act shall take effect immediately and shall be applicable to
52 any health insurer determined by the superintendent of financial
53 services, on or after such effective date, to be insolvent within the
54 meaning of section 1309 of the insurance law.
