Relates to rating of individual and small group health insurance policies; repealer

1 Co-sponsor

• David J. Valesky

Title of bill

An act to amend the insurance law, in relation to rating of individual and small group health insurance policies; and to repeal certain provisions of such law relating thereto

Purpose

To amend the insurance law, relating to the health insurance premium rate setting process currently used by the Department of Financial Services ("DFS")

Summary of provisions

Sections 1 and 2 of the bill amend sections 3231 and 4308 of the insurance law to allow health plans to use the "file and use" methodology for any adjustments to a health insurance rate filing or application for commercial community rated products. New insurance products will continue to need approval from DFS through the "prior approval" process.

Section 3 is the effective date.

Justification

The "prior approval" process that existed before the enactment of the "file and use" system in 1996 was highly susceptible to arbitrary rate suppression, not based on sound actuarial principles, and compromised the solvency of some insurers. In 2010, when DFS proposed reinstituting prior approval, DFS provided assurances to the Legislature that it would not revert to the politicization of rate setting and would instead use a system that would yield actuarially sound rates. Unfortunately, the rate setting process has once again become subject to arbitrary rate reductions and DFS has made it a priority to keep premium increases to below the rate of growth of health care costs. The demise of Health Republic, which left thousands of individuals scrambling for coverage throughout the state, was due, in large part, to the failure of the prior approval rate setting process. The current prior approval process led to average rate reductions of 50 percent and 30 percent in the past two years. During that same time period plans servicing New Yorkers on the state exchange lost hundreds of millions of dollars. If the process is not changed, the ongoing suppression of rates will affect the stability of the commercial insurance market going forward. The stability of the health insurance marketplace is needed to protect consumers by providing access and choice as well as certainty of coverage.

Legislative history

2015: S.4540/A.7439 - Passed in the Senate

Fiscal implications

None.

Effective date

Immediately.