Relates to excepting from community rating requirements group health insurance policies issued to multiple employer trusts

BILL NUMBER:S1597

Title of bill

An act to amend the insurance law, in relation to excepting from community rating requirements group health insurance policies issued to multiple employer trusts consisting of municipal corporations and public benefit corporations

Purpose

The bill would provide an exception to the community rating requirements to allow municipalities with 50 or fewer employees to join multiple employer or similar trusts that are experience rated.

Summary of specific provisions

Section 1: Amends Section 3231 of the Insurance Law by excepting from community rating requirements groups comprised of municipal corporations and public benefit corporations.

Section 2: Amends Section 4317 of the Insurance law by excepting from community rating requirements groups comprised of municipal corporations and public benefit corporations.

Section 3: Establishes the effective date of the bill.

Existing law

Currently a multiple employer trust or similar trust comprised of several municipalities that purchase health insurance must have a community rated health plan if any of its member employers has 50 or fewer employees, even if the aggregate number within the trust is greater than 50.

Justification

According to the Office of the New York State Comptroller's 2007 Annual Report on Local Government, spending by local government is increasing by more than double the rate of inflation. One of the main reasons for this increase is due to the high cost of employee benefits. Health insurance comprises about 50% of the spending on employee benefits. Municipalities are attempting to control the high cost of health insurance by taking advantage of economies of scale and developing shared insurance plans with neighboring municipalities. Many larger municipalities have joined multiple employer or similar trusts to jointly purchase health insurance plans. By joining multiple employer and similar trusts and spreading the risk among a larger pool of risks, these municipalities have lowered health insurance costs by reducing administrative costs through negotiating power, amortizing costs across similar pools of risk, and risk sharing, all in an effort to stabilize health claims costs.

However, small municipalities with 50 or fewer employees are unable to take advantage of these costs savings due to New York's community rating laws. Since 1992, New York has required that individual and small group health insurance policies, those insuring groups of 50 or fewer, be community rated. Under community rating, the premium is

determined by the collective claims experience of all insured's in a particular community pool, without regard to age, sex, health status or occupations.

Conversely, premiums for groups with more than 50 members are developed using experience rating methodology which determines the premium based upon a portion or all of the group's specific claims experience. New York's community rating law not only requires municipalities with fewer than 50 employees to have a community rated health plan, but also requires that a multiple employer or similar trust comprised of several municipalities must have a community rated health plan if any of its members has 50 or fewer employees. Therefore, small municipalities have not been allowed to join multiple employer or similar trusts and cannot share in the costs savings benefits associated with these experience rate trusts. This bill would allow small municipalities to join multiple employer or similar trusts that are experience rated so they may share in the health insurance costs savings of these trusts.

Prior legislative history

S.3360 of 2011-12; Referred to Insurance S.5080 of 2009-2010; Referred to Insurance S.8225A of 2008; Moved to Rules

Fiscal implications

None.

Effective date

Immediately.