Relates to establishment of "freedom health insurance plans"

Summary of provisions

Sections 1 through 5 amend sections 3216, 3221, 4304 and 4322 of the insurance law to authorize HMOs and insurers to offer new "Freedom policies." These policies would cost approximately 40% less than existing policies, have higher deductibles, and be coupled with new Health Savings Accounts (HSAs). Health Savings Accounts are tax free, portable accounts used to pay out-of-pocket expenses. Freedom policies would be mandate free, giving choice of benefits and providers. They would be eligible for proposed federal tax deductions and state tax credits.

Sections 6 through 11 amend sections 210, 606, 1456 and 1511 of the tax law, providing small businesses of fifty employees or less and individuals purchasing their own insurance a state tax credit equal to 50% of the cost of health insurance premiums. The tax credits would be phased in over a ten year period.

Sections 12 through 14 amend section 4326 of the insurance law to expand the Healthy NY program by increasing income eligibility for individual purchasers from 208% of the federal poverty level to 250% of the federal poverty level, and allowing persons with incomes over 250% of the federal poverty level to purchase a Healthy NY policy at the actuarial price, without the stop loss subsidy.

Sections 15 through 18 and Section 25 amend sections 4327, 4321-a, 4322-a and 2406 of the insurance law to enhance the small group and direct pay market stop loss pools by adding $31 million to reimburse claims up to the statutory level and to create a new catastrophic stop loss fund for claims in the individual market above $500,000. Penalties collected from violations of the prompt pay law would be deposited in stop loss pools.

Sections 19 tough 23 amend sections 3231 and 4317 of the insurance law and section 4401 of the public health law relating to rating of similar products in the small group market and adverse selection in the large group market. The bill would allow similar, but different policies with in a community pool to be rated separately. It also gives health maintenance organizations the same ability as insurers to establish minimum participation levels for large group policies.

Justification

The commercial market has become increasingly expensive and offers little choice of benefit design or pricing flexibility. Without reform, the individual and small group market in New York State will become unsustainable. The sponsors believe that the private market should be preserved through a reformed model which transitions from first dollar coverage to more traditional insurance, offers policy design and benefit choices, and ensures access to preventive, primary and acute care.

The federal Medicare reform law signed in December of 2003, established Health Savings Accounts (HSAs) which must be coupled with a health insurance policy that has at least a $1,000 deductible for individuals and $2,000 for family coverage. Authorization of such policies in New York, free of benefit mandates, would allow a range of coverage options and opportunities combined with funds from an HSA. The consumer is assured protection from costly health risk and has access to funds to pay for care from any provider which is not covered by the policy.

Tax credits for businesses offer an incentive to provide coverage and will help prevent shifting costs to employees. A credit for individuals purchasing their own coverage will help reduce net cost of coverage. The Healthy NY program offers a two pronged approach towards affordability: 1) a streamlined benefit package that maintains coverage for essential, primary. preventive and acute services, with a prescription drug option, and; 2) state subsidization of costs through a stop loss program which reimburses plans for high cost claims. Expansion of the program is possible through existing program funds and would make this affordable program available to more people.

Providing rating flexibility while maintaining community rating principles will provide lower cost and incentive for efficiently designed and managed policies and will prevent negative effects of adverse selection. Taken together, these measures represent a comprehensive, multi-facet approach towards ensuring that people in New York can afford health insurance and have access to the care that they need. The bill gives people choices and access to coverage and care. It offers tax advantages and uses state funds to give people real health care. It preserves the private market and protects those who need health care most.

Legislative history

2003-04: A.10251/S.6332 (Passed Senate) 2005-06: A.2688 2007-08: A.2524

Fiscal implications

The tax credit provisions of the bill would cost approximately $1.6 billion per year when fully implemented.

Effective date

The bill would take effect on the proceeding first of January, however, the tax credits would be phased in over ten years.