Authorizes the superintendent of insurance to modify or disapprove health insurance rate filings as unreasonable, excessive, inadequate or unfairly discriminatory.
STATE OF NEW YORK
________________________________________________________________________
5470
2009-2010 Regular Sessions
IN SENATE
May 8, 2009
___________
Introduced by Sens. BRESLIN, DUANE, ESPADA, HASSELL-THOMPSON, KRUEGER,
ONORATO, SAMPSON, STAVISKY, STEWART-COUSINS -- (at request of the
Governor) -- read twice and ordered printed, and when printed to be
committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to prior approval of
health insurance premium rates
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 3231 of the insurance law, as
2 added by chapter 501 of the laws of 1992, is amended to read as follows:
3 (e) (1) (A) An insurer desiring to increase or decrease premiums
4 [after April first, nineteen hundred ninety-three] for any policy form
5 subject to this section shall submit a rate filing or application to the
6 superintendent. The superintendent shall determine whether the filing
7 or application shall become effective as filed, shall become effective
8 as modified, or shall be disapproved. The superintendent may modify or
9 disapprove the rate filing or application if the superintendent finds
10 that the premiums are unreasonable, excessive, inadequate, or unfairly
11 discriminatory, and may consider the financial condition of the insurer
12 when approving, modifying or disapproving any premium adjustment. An
13 insurer shall not implement a rate increase unless the insurer provides
14 at least thirty days advance written notice of the increase to each
15 policy holder and certificate holder affected by the rate increase.
16 (B) The expected minimum loss ratio for a policy form subject to this
17 section, for which a rate filing or application is made pursuant to this
18 paragraph, other than a medicare supplemental insurance policy, or, with
19 the approval of the superintendent, an aggregation of policy forms that
20 are combined into one community rating experience pool and rated
21 consistent with community rating requirements, shall not be less than
22 eighty-five percent. In reviewing a rate filing or application, the
23 superintendent may modify the eighty-five percent expected minimum loss
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD12006-04-9
S. 5470 2
1 ratio requirement if the superintendent determines the modification to
2 be in the interests of the people of this state. No later than May first
3 of each year, every insurer subject to this subparagraph shall annually
4 report the actual loss ratio for the previous calendar year in a format
5 acceptable to the superintendent. If an expected loss ratio is not met,
6 the superintendent may direct the insurer to take corrective action,
7 which may include the submission of a rate filing to reduce future
8 premiums, or to issue dividends, premium refunds or credits, or any
9 combination of these.
10 (2) (A) [Beginning October first, nineteen hundred ninety-four] Until
11 December thirty-first, two thousand nine, as an alternate procedure to
12 the requirements of paragraph one of this subsection, an insurer desir-
13 ing to increase or decrease premiums for any policy form subject to this
14 section may instead submit a rate filing or application to the super-
15 intendent and such application or filing shall be deemed approved,
16 provided that: (i) the anticipated minimum loss ratio for a policy form
17 shall not be less than [seventy-five] eighty-five percent of the premi-
18 um[,]; and (ii) the insurer submits, as part of such filing, a certif-
19 ication by a member of the American Academy of Actuaries or other indi-
20 vidual acceptable to the superintendent that the insurer is in
21 compliance with the provisions of this paragraph, based upon that
22 person's examination, including a review of the appropriate records and
23 of the actuarial assumptions and methods used by the insurer in estab-
24 lishing premium rates for policy forms subject to this section. An
25 insurer shall not utilize the alternate procedure pursuant to this para-
26 graph to implement a change in rates to be effective on or after January
27 first, two thousand ten.
28 (B) Each calendar year, an insurer shall return, in the form of aggre-
29 gate benefits for each policy form filed pursuant to the alternate
30 procedure set forth in this paragraph at least [seventy-five] eighty-
31 five percent of the aggregate premiums collected for the policy form
32 during that calendar year. Insurers shall annually report, no later than
33 May first of each year, the loss ratio calculated pursuant to this para-
34 graph for each such policy form for the previous calendar year. In each
35 case where the loss ratio for a policy form fails to comply with the
36 [seventy-five] eighty-five percent loss ratio requirement, the insurer
37 shall issue a dividend or credit against future premiums for all policy
38 holders with that policy form in an amount sufficient to assure that the
39 aggregate benefits paid in the previous calendar year plus the amount of
40 the dividends and credits shall equal [seventy-five] eighty-five percent
41 of the aggregate premiums collected for the policy form in the previous
42 calendar year. The dividend or credit shall be issued to each policy
43 holder who had a policy which was in effect as of December thirty-first
44 of the applicable year [and remains in effect as of the date the divi-
45 dend or credit is issued]. The dividend or credit shall be prorated
46 based on the direct premiums earned for the applicable year among all
47 policy holders eligible to receive such dividend or credit. An insurer
48 shall make a reasonable effort to identify the current address of, and
49 issue dividends or credits to, former policy holders entitled to the
50 dividend or credit. All dividends and credits must be distributed by
51 September thirtieth of the year following the calendar year in which the
52 loss ratio requirements were not satisfied. The annual report required
53 by this paragraph shall include an insurer's calculation of the divi-
54 dends and credits, as well as an explanation of the insurer's plan to
55 issue dividends or credits. The instructions and format for calculating
56 and reporting loss ratios and issuing dividends or credits shall be
S. 5470 3
1 specified by the superintendent by regulation. Such regulations shall
2 include provisions for the distribution of a dividend or credit in the
3 event of cancellation or termination by a policy holder.
4 § 2. Section 4308 of the insurance law, subsection (b) as amended and
5 subsections (d), (e) and (f) as added by chapter 501 of the laws of
6 1992, paragraph 3 of subsection (c) as amended by chapter 520 of the
7 laws of 1999 and subsections (g), (h), (i) and (j) as added by chapter
8 504 of the laws of 1995, is amended to read as follows:
9 § 4308. Supervision of superintendent[; public hearings]. (a) No
10 corporation subject to the provisions of this article shall enter into
11 any contract unless and until it shall have filed with the superinten-
12 dent a copy of the contract or certificate and of all applications,
13 riders and endorsements for use in connection with the issuance or
14 renewal thereof, to be formally approved by him as conforming to the
15 applicable provisions of this article and not inconsistent with any
16 other provision of law applicable thereto. The superintendent shall,
17 within a reasonable time after the filing of any such form, notify the
18 corporation filing the same either of his approval or of his disapproval
19 of such form.
20 (b) No corporation subject to the provisions of this article shall
21 enter into any contract unless and until it shall have filed with the
22 superintendent a schedule of the premiums or, if appropriate, rating
23 formula from which premiums are determined, to be paid under the
24 contracts and shall have obtained the superintendent's approval thereof.
25 The superintendent may refuse such approval if he finds that such premi-
26 ums, or the premiums derived from the rating formula, are excessive,
27 inadequate or unfairly discriminatory, provided, however, the super-
28 intendent may also consider the financial condition of such corporation
29 in approving or disapproving any premium or rating formula. Any premium
30 or formula approved by the superintendent shall make provision for such
31 increase as may be necessary to meet the requirements of a plan approved
32 by the superintendent in the manner prescribed in section four thousand
33 three hundred ten of this article for restoration of the statutory
34 reserve fund required by such section. Notwithstanding any other
35 provision of law, the superintendent, as part of the rate increase
36 approval process, may defer, reduce or reject a rate increase if, in the
37 judgment of the superintendent, the salary increases for senior level
38 management executives employed at corporations subject to the provisions
39 of this article are excessive or unwarranted given the financial condi-
40 tion or overall performance of such corporation. The superintendent is
41 authorized to promulgate rules and regulations which the superintendent
42 deems necessary to carry out such deferral, reduction or rejection.
43 (c) (1) [Except for an application pursuant to subsection (f) of
44 section four thousand three hundred four of this article, no] An
45 increase or decrease in premiums with respect to [individual] community
46 rated contracts [issued pursuant to the provisions of such section]
47 shall not be approved by the superintendent unless it is in compliance
48 with the provisions of this subsection as well as other applicable
49 provisions of law.
50 (2) [Prior to any such filing or application by or on behalf of a
51 corporation for an increase or decrease in premiums for such contracts,
52 such corporation, when directed by the superintendent, shall conduct a
53 public hearing with respect to the terms of such filing or application.
54 Notice of such hearing shall be published on three successive days in at
55 least two newspapers having general circulation within the territory or
56 district wherein such corporation seeking approval of the filing is
S. 5470 4
1 authorized to do business. The date specified for the hearing shall be
2 not less than ten nor more than thirty days from the date of the first
3 publication of the hearing. The notice of hearing shall state the
4 purpose thereof, the time when and the place where the public hearing
5 will be held. The public hearing shall be held at a time and location
6 deemed by the superintendent to be most convenient to the greatest
7 number of persons affected by such filing. At such hearing any person
8 may be heard in favor of, or against, the terms of the filing or appli-
9 cation.
10 (3) Following the public hearing held pursuant to paragraph two of
11 this subsection, a transcript of the testimony therein shall be submit-
12 ted together with a rate filing or application, to the superintendent.
13 Upon receipt of such filing or application by or on behalf of a corpo-
14 ration, the superintendent shall order that a public hearing be held
15 with respect to the terms of such filing or application. Notice of such
16 hearing shall be published on three successive days in at least two
17 newspapers having general circulation within the territory or district
18 wherein such corporation seeking approval of the filing or application
19 is authorized to do business. For a corporation writing more than three
20 billion dollars in premiums as of December thirty-first, nineteen
21 hundred ninety-six and whose service territory is greater than ten coun-
22 ties, such notice is to be published in at least one newspaper having
23 general circulation in each county where persons in the service territo-
24 ry are affected by the proposed change. The date specified for the hear-
25 ing shall be not less than ten nor more than thirty days from the date
26 of the last publication of the hearing. The notice of hearing shall also
27 state the purpose thereof, the time when and the place where the public
28 hearing will be held. For those corporations writing more than three
29 billion dollars in premiums as of December thirty-first, nineteen
30 hundred ninety-six, and whose territory is greater than ten counties,
31 the notice of hearing shall also state the changes proposed, the
32 contracts to be affected and the time when such changes would take
33 effect. The notice of hearing shall state, in prominent display, a toll-
34 free telephone number of the insurance department that may be contacted
35 to receive additional information on the subject rate application. The
36 public hearing shall be held at a time and location deemed by the super-
37 intendent to be most convenient to the greatest number of persons
38 affected by such filing or application. A copy of such notice of hearing
39 shall be forwarded by the superintendent by registered or certified mail
40 to the principal address of the corporation seeking approval of such
41 filing or application. The hearing may be continued or adjourned from
42 day to day within the discretion of the superintendent. At such hearing
43 any person may be heard in favor of, or against, the terms of the filing
44 or application. After conclusion of the public hearing the superinten-
45 dent shall render a written decision determining whether the filing or
46 application shall become effective as filed, shall become effective as
47 modified, or shall be disapproved. If, subsequent to the hearing, but
48 prior to the issuing of the superintendent's written decision on a rate
49 increase request, the corporation increases its requested rate for any
50 contract by two percent or more, a re-hearing shall be held. The time,
51 location, and notice requirements for such re-hearing shall be deter-
52 mined by the superintendent.
53 (4)] (A) A corporation desiring to increase or decrease premiums for
54 any contract subject to this section shall submit a rate filing or
55 application to the superintendent. The superintendent shall determine
56 whether the filing or application shall become effective as filed, shall
S. 5470 5
1 become effective as modified, or shall be disapproved. The superinten-
2 dent may modify or disapprove the rate filing or application if the
3 superintendent finds that the premiums are unreasonable, excessive,
4 inadequate, or unfairly discriminatory, and may consider the financial
5 condition of the corporation in approving, modifying or disapproving any
6 premium adjustment. A corporation shall not implement a rate increase
7 unless the corporation provides at least thirty days advance written
8 notice of the increase to each contractholder and subscriber affected by
9 the increase.
10 (B) The expected minimum loss ratio for a contract form subject to
11 this subsection for which a rate filing or application is made pursuant
12 to this paragraph, other than a medicare supplemental insurance
13 contract, or, with the approval of the superintendent, an aggregation of
14 contract forms that are combined into one community rating experience
15 pool and rated consistent with community rating requirements, shall not
16 be less than eighty-five percent. In reviewing a rate filing or applica-
17 tion, the superintendent may modify the eighty-five percent expected
18 minimum loss ratio requirement if the superintendent determines the
19 modification to be in the interests of the people of this state. No
20 later than May first of each year, every corporation subject to this
21 subparagraph shall annually report the actual loss ratio for the previ-
22 ous calendar year in a format acceptable to the superintendent. If an
23 expected loss ratio is not met, the superintendent may direct the corpo-
24 ration to take corrective action, which may include the submission of a
25 rate filing to reduce future premiums, or to issue dividends, premium
26 refunds or credits, or any combination of these.
27 (C) The expected minimum loss ratio for a medicare supplemental insur-
28 ance contract form shall not be less than eighty percent. No later than
29 May first of each year, every corporation subject to this subparagraph
30 shall annually report the actual loss ratio for each contract form
31 subject to this section for the previous calendar year in a format
32 acceptable to the superintendent. In each case where the loss ratio for
33 the contract form fails to comply with the eighty percent loss ratio
34 requirement, the corporation shall submit a corrective action plan to
35 the superintendent for assuring compliance with the applicable minimum
36 loss ratio standard. The corrective action plan shall be submitted to
37 the superintendent within sixty days of the corporation's submission of
38 the annual report required by this subparagraph. The corporation's plan
39 may utilize premium refunds or credits, subject to the approval of the
40 superintendent.
41 (3) In case of conflict between this subsection and any other
42 provision of law, this subsection shall prevail.
43 (d) The superintendent shall order an independent management and
44 financial audit of corporations subject to the provisions of this arti-
45 cle with a combined premium volume exceeding two billion dollars annual-
46 ly in order to develop a detailed understanding of such corporation's
47 financial status and to determine the viability of such corporation's
48 products. Such audit shall be performed by an organization upon
49 submission of a program plan in response to a request for proposal
50 approved by the superintendent in consultation with the commissioner of
51 health and the state comptroller. Such audit shall not be performed by
52 any organization that has in any way performed or furnished services of
53 any kind to the corporation within the past five years, unless it is
54 adequately demonstrated that such services would not compromise that
55 organization's performance and objectivity. The audit shall be completed
56 and a report submitted by May first, nineteen hundred ninety-three to
S. 5470 6
1 the superintendent, the commissioner of health, and the chairs of the
2 senate and assembly committees on health and insurance. The scope of the
3 audit shall include, but not be limited to, financial and competitive
4 position, corporate structure and governance, organization and manage-
5 ment, strategic direction, rate adequacy, and the regulatory and compet-
6 itive environment in the state of New York. Specifically, the audit
7 shall include, but not be limited to:
8 (i) determining the corporation's financial and market position,
9 including its reserves, trends in membership, market share, and profit-
10 ability by market segment;
11 (ii) evaluating the corporation's product offerings with respect to
12 market requirements and trends, the corporation's responses to the New
13 York health care market, and its management of medical claims costs;
14 (iii) assessing the effectiveness of the organizational and management
15 structure and performance, including, but not limited to, possible
16 improvement in the size, structure, composition and operation of the
17 board of directors, productivity improvement, information systems,
18 management development, personnel practices, mix and level of skills,
19 personnel turnover, investment practices and rate of return upon invest-
20 ment activities;
21 (iv) analyzing the corporation's strategic directions, its adequacy to
22 meet competitive, market, and existing regulatory trends, including an
23 evaluation of the use of brokers in marketing products, and the impact
24 of those strategies on the corporation's future financial performance
25 and on the health care system of New York;
26 (v) evaluating the adequacy of rates for existing products, partic-
27 ularly (but not limited to) small group, medicare supplemental, and
28 direct payment to identify areas that may need immediate remedial atten-
29 tion;
30 (vi) identifying any changes to the regulatory and legislative envi-
31 ronment that may need to be made to ensure that the corporation can
32 continue to be financially viable and competitive;
33 (vii) identifying and assessing specific transactions such as the
34 procurement of reinsurance, sale of real property and the sale of future
35 investment income to improve the financial condition of the corporation;
36 and
37 (viii) evaluating and identifying possible improvements in the corpo-
38 ration's managed care strategies, operations and claims handling.
39 (e) Notwithstanding any other provision of law, the superintendent
40 shall have the power to require independent management and financial
41 audits of corporations subject to the provisions of this article whenev-
42 er in the judgment of the superintendent, losses sustained by a corpo-
43 ration jeopardize its ability to provide meaningful coverage at afforda-
44 ble rates or when such audit would be necessary to protect the interests
45 of subscribers. The audit shall include, but not be limited to, an
46 investigation of the corporation's provision of benefits to senior citi-
47 zens, individual and family, and small group and small business
48 subscribers in relation to the needs of those subscribers. The audit
49 shall also include an evaluation of the efficiency of the corporation's
50 management, particularly with respect to lines of business which are
51 experiencing losses. In every case in which the superintendent chooses
52 to require an audit provided for in this subsection, the superintendent
53 shall have the authority to select the auditor. Any costs incurred as a
54 result of the operation of this subsection shall be assessed on all
55 domestic insurers in the same manner as provided for in section three
56 hundred thirty-two of this chapter.
S. 5470 7
1 (f) The results of any audit conducted pursuant to subsections (d) and
2 (e) of this section shall be provided to the corporation and each member
3 of its board of directors. The superintendent shall have the authority
4 to direct the corporation in writing to implement any recommendations
5 resulting from the audit that the superintendent finds to be necessary
6 and reasonable; provided, however, that the superintendent shall first
7 consider any written response submitted by the corporation or the board
8 of directors prior to making such finding. Upon any application for a
9 rate adjustment by the corporation, the superintendent shall review the
10 corporation's compliance with the directions and recommendations made
11 previously by the superintendent, as a result of the most recently
12 completed management or financial audit and shall include such findings
13 in any written decision concerning such application.
14 (g)(1) [Beginning January first, nineteen hundred ninety-six] Until
15 December thirty-first, two thousand nine, as an alternate procedure to
16 the requirements of subsection (c) of this section, a corporation
17 subject to the provisions of this article desiring to increase or
18 decrease premiums for any contract subject to this section may instead
19 submit a rate filing or application to the superintendent and such
20 application or filing shall be deemed approved, provided that (A) the
21 anticipated incurred loss ratio for a contract form shall not be less
22 than eighty-five percent for individual direct payment contracts or
23 [seventy-five] eighty-five percent for small group and small group
24 remittance contracts, nor, except in the case of individual direct
25 payment contracts with a loss ratio of greater than one hundred five
26 percent during nineteen hundred ninety-four, shall the loss ratio for
27 any direct payment, group or group remittance contract be more than one
28 hundred five percent of the anticipated earned premium, and (B) the
29 corporation submits, as part of such filing, a certification by a member
30 of the American Academy of Actuaries or other individual acceptable to
31 the superintendent that that corporation is in compliance with the
32 provisions of this subsection, based upon that person's examination,
33 including a review of the appropriate records and of the actuarial
34 assumptions and methods used by the corporation in establishing premium
35 rates for contracts subject to this section. A corporation shall not
36 utilize the alternate procedure pursuant to this subsection to implement
37 a change in rates to be effective on or after January first, two thou-
38 sand ten. For purposes of this section, a small group is any group whose
39 contract is subject to the requirements of section forty-three hundred
40 seventeen of this article.
41 (2) Prior to January first, two thousand, no rate increase or decrease
42 may be deemed approved under this subsection if that increase or
43 decrease, together with any other rate increases or decreases imposed on
44 the same contract form, would cause the aggregate rate increase or
45 decrease for that contract form to exceed ten percent during any contin-
46 uous twelve month period. No rate increase may be imposed unless at
47 least thirty days advance written notice of such increase has been
48 provided to each contract holder and subscriber.
49 (h)(1) Each calendar year, a corporation subject to the provisions of
50 this article shall return, in the form of aggregate benefits incurred
51 for each contract form filed pursuant to the alternate procedure set
52 forth in subsection (g) of this section, at least eighty-five percent
53 for individual direct payment contracts or [seventy-five] eighty-five
54 percent for small group and small group remittance contracts, but,
55 except in the case of individual direct payment contracts with a loss
56 ratio of greater than one hundred five percent in nineteen hundred nine-
S. 5470 8
1 ty-four, for any direct payment, group or group remittance contract, not
2 in excess of one hundred five percent of the aggregate premiums earned
3 for the contract form during that calendar year. Corporations subject
4 to the provisions of this article shall annually report, no later than
5 May first of each year, the loss ratio calculated pursuant to this
6 subsection for each such contract form for the previous calendar year.
7 (2) In each case where the loss ratio for a contract form fails to
8 comply with the eighty-five percent minimum loss ratio requirement for
9 individual direct payment contracts, or the [seventy-five] eighty-five
10 percent minimum loss ratio requirement for small group and small group
11 remittance contracts, as set forth in paragraph one of this subsection,
12 the corporation shall issue a dividend or credit against future premiums
13 for all contract holders with that contract form in an amount sufficient
14 to assure that the aggregate benefits incurred in the previous calendar
15 year plus the amount of the dividends and credits shall equal no less
16 than eighty-five percent for individual direct payment contracts, or
17 [seventy-five] eighty-five percent for small group and small group
18 remittance contracts, of the aggregate premiums earned for the contract
19 form in the previous calendar year. The dividend or credit shall be
20 issued to each contract holder or subscriber who had a contract that was
21 in effect as of December thirty-first of the applicable year [and
22 remains in effect as of the date the dividend or credit is issued]. The
23 dividend or credit shall be prorated based on the direct premiums earned
24 for the applicable year among all contract holders or subscribers eligi-
25 ble to receive such dividend or credit. A corporation shall make a
26 reasonable effort to identify the current address of, and issue divi-
27 dends or credits to, former contract holders or subscribers entitled to
28 the dividend or credit. All dividends and credits must be distributed by
29 September thirtieth of the year following the calendar year in which the
30 loss ratio requirements were not satisfied. The annual report required
31 by paragraph one of this subsection shall include a corporation's calcu-
32 lation of the dividends and credits, as well as an explanation of the
33 corporation's plan to issue dividends or credits. The instructions and
34 format for calculating and reporting loss ratios and issuing dividends
35 or credits shall be specified by the superintendent by regulation. Such
36 regulations shall include provisions for the distribution of a dividend
37 or credit in the event of cancellation or termination by a contract
38 holder or subscriber.
39 (3) In each case where the loss ratio for a contract form fails to
40 comply with the one hundred five percent maximum loss ratio requirement
41 of paragraph one of this subsection, the corporation shall institute a
42 premium rate increase in an amount sufficient to assure that the aggre-
43 gate benefits incurred in the previous calendar year shall equal no more
44 than one hundred five percent of the sum of the aggregate premiums
45 earned for the contract form in the previous calendar year and the
46 aggregate premium rate increase. The rate increase shall be applied to
47 each contract that was in effect as of December thirty-first of the
48 applicable year and remains in effect as of the date the rate increase
49 is imposed. All rate increases must be imposed by September thirtieth of
50 the year following the calendar year in which the loss ratio require-
51 ments were not satisfied. The annual report required by paragraph one of
52 this subsection shall include a corporation's calculation of the premium
53 rate increase, as well as an explanation of the corporation's plan to
54 implement the rate increase. The instructions and format for calculating
55 and reporting loss ratios and implementing rate increases shall be spec-
56 ified by the superintendent by regulation.
S. 5470 9
1 (i) The alternate procedure described in subsections (g) and (h) of
2 this section shall apply to individual direct payment contracts issued
3 pursuant to sections four thousand three hundred twenty-one and four
4 thousand three hundred twenty-two of this article on and after January
5 first, nineteen hundred ninety-seven. Such alternate procedure shall
6 not be utilized to implement a change in rates to be effective on or
7 after January first, two thousand ten.
8 [(j) The eighty-five percent minimum loss ratio for individual direct
9 payment contracts described in subsections (g) and (h) of this section
10 shall be reduced to eighty-two and one-half percent as of January first,
11 nineteen hundred ninety-seven and shall be further reduced to eighty
12 percent as of January first, nineteen hundred ninety-eight and thereaft-
13 er. The refund or credit requirements for failure to meet minimum loss
14 ratios will continue, but at these reduced percentages.]
15 § 3. This act shall take effect immediately.
