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(B) The end of the period for which premium payments were made, if the empioyee or member fails to make timely payment of required premium payment; or

(0) In the case of an eligible dependent of an employee or member, the date thirty-six months after the date such person's benefits under the contract would otherwise have terminated by reason of:

(i) the death of the employee or member;

(ii) the divorce or legal separation of the employee or member from his or her spouse;

(iii) the employee or member becoming entitled to benefits under title XVIII of the United States Social Security Act (Medicare); or,

(iv) a dependent child ceasing to be a dependent child under the generally applicable requirements of the contract; or

(D) In the case of an employee or member who is determined, under title II or title XVI of the Social Security Act, to have been disabled at the time of termination of employment or membership, the date twentynine months after the date the employee's or member's benefits under the contract would otherwise have terminated because of termination of employment or membership; provided, however, that if such employee or member is no longer disabled, the benefits provided in this subparagraph shall terminate the later of (i) the date provided by subparagraph (A) of this paragraph, or (ii) the month that begins more than thirty-one days after the date of the final determination under title II

title XVI of the United States Social Security Act that the employee or member is no longer disabled; or

(E) The date on which the group remittance contract with that remitting agent is terminated or, in the case of an employee, the date his employer terminates participation under the group remittance contract. However, if this clause applies and the coverage ceasing by

of such termination is replaced by similar coverage under another group or group remittance contract, the following shall apply:

(1). The employee or member shall have the right to become covered under that other group or group remittance contract, for the balance of the period that he would have remained covered under the prior group remittance contract in accordance with this subparagraph had a termination described in this subparagraph not occurred, and

(ii) The minimum level of benefits to be provided by the other group or group remittance contract shall be the applicable level of benefits of the prior group remittance contract reduced by any benefits payable under that prior group remittance contract, and

(iii) The prior group remittance contract shall continue to provide benefits to the extent of its accrued liabilities and extension of benefits as if the replacement had not occurred.

§ 10. Paragraph 1 of subsection (d) of section 4305 of the insurance law, as amended by chapter 306 of the laws of 1987, is amended to read as follows:

(1) A group contract issued pursuant to this section shall contain a provision to the effect that in case of a termination of coverage under such contract of any member of the group because of (I) termination for any reason whatsoever of his employment or membership, if he has been covered under the group contract for at least three months, or (II) termination for any reason whatsoever of the group contract itself unless the group contract holder has replaced the group contract with similar and continuous coverage for the same

group whether

insured

selfinsured, he shall be entitled to have issued to him by the corporation, without evidence of insurability, upon application therefor and payment of the first premium made to the corporation within forty-five days after termination of the coverage, an individual direct payment contract, covering such member and his eligible dependents who were covered by the group contract, [of the type and class of individual direct payment contract, then being generally issued by, such corporation] which provides (benefits] coverage most nearly comparable to the [benefits provided] type of coverage under the group contract, which coverage shall be no less than the minimum standards for basic hospital, basic medical, ma jor medical

prov vided for in insurance department regulation; provided, however, that if the corporation does not issue such major medical contract,'then to a comprehensive or comparable type of coverage which is most commonly being sold to group remitting agents. The converEXPLANATION-Matter in italics is new; matter in brackets [ ] is old law

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privilege afforded herein shall also be available: (A) upon the divorce or annulment of the marriage of a member, to the divorced spouse or

former spouse of such member, (B) upon the death of the member, to the surviving spouse and other dependents covered under the contract, and (C) to a dependent if longer within the definition in the contract.

§ 11. Subsection (b) of section 4308 of the insurance law, as amended by chapter 266 of the laws of 1986, is amended to read as follows:

(b) “No corporation subject to the provisions of this article shall enter into any contract unless and until it shall have filed with the superintendent a schedule of the premiums or, if appropriate, rating formula from which premiums are determined, to be paid under the contracts and shall have obtained the superintendent's approval thereof. The superintendent may refuse such approval if he finds that such premiums, or the premiums derived from the rating formula, are excessive, inadequate or unfairly discriminatory, provided, however, the superintendent may also consider the financial condition of such corporation in approying or disapproving any premium or rating, formula. Any premium or formula approved by the superintendent shall make provision for such increase as may be necessary to meet the requirements of a plan

plan approved by the superintendent in the manner prescribed in section four thousand three hundred ten of this article for restoration of the statutory reserye fund required by such section. Notwithstanding any other provis sion of law, the superintendent, as part of the rate increase approval process, may defer, reduce or reject' a rate increase if, in the judgment of the superintendent, the salary increases for senior level management executives employed at corporations subject to the provisions of this article are excessive or unwarranted given the financial condition overall performance of such corporation. The superintendent is authorized to promulgate rules and regulations which the superintendent deems necessary to carry out such deferral, reduction or rejection.

§ 12. Section 4308 of the insurance law is amended by adding three new subsections (d), (e) and (f) to read as follows:

(d) The superintendent shall order an independent management and financial audit of corporations subject to the provisions of this article with a combined premium volume exceeding two billion dollars annually in order to develop a detailed understanding of such corporation's financial status and to determine the viability of such corporation's products. Such audit shall be performed by an organization upon submission of a program plan in response to a request for proposal approved by the superintendent in consultation with the commissioner of health and the state comptroller. Such audi shall not be performed by any organi; zation that has in any way performed or furnished services of to the corporation within the past five years, unless it is adequately demonstrated that such services would not compromise that organization's performance and objectivity. The audit shall be completed and a report 'submitted by May first, nineteen hundred ninety-three to the superintendent, the commissioner of health, and the chairs of the senate and assembly, committees on health and insurance. The scope of the audit shall include, but not be limited to, financial and competitive position, corporate structure and governance, organization and management, strategic direction, rate adequacy, and the regulatory and competitive environment in the state of New York. Specifically, the audit shall include, but not be limited to:

(i) determining the corporation's financial and market position, including its reserves, trends in membership, market share, and profitability by market segment;

(ii) evaluating the corporation's product offerings with respect to market requirements and trends, the corporation's responses to the New York health care market, and its management of medical claims costs;

(iii) assessing the effectiveness of the organizational and management structure and performance, including, but not limited to, possible, im, provement in the size, structure, composition and operation of the board of directors, product iyity improvement, information systems, management development, personnel practices, mix and level of skills, personnel turnover, investment practices and rate of return upon investment activa ities;

(iv) analyzing the corporation's strategic directions, its adequacy to meet competitive,, market, and existing regulatory trends, including an evaluation of the use of brokers in marketing products, and the impact

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of those strategies on the corporation's future financial performance and on the health care system of New York;

(V) evaluating the adequacy of rates for existing products, particularly (but not limited to) small

group, medicare supplemental, and direct payment to identify areas that may need immediate remedial attention;

(vi) identifying any changes to the regulatory and legislative environment that may need to be made to ensure that the

corporation continue to be financially viable and competitive;

(vii) identifying and assessing specific transactions such as the procurement of reinsurance, sale of real property and the sale of future investment income to improve the financial condition of the corporation; and

(viii) evaluating and identifying possible improvements in the corporation's managed care strategies, operations and claims handling.

(e) Notwithstanding any other provision of law, the superintendent shall have the power to require independent management and financial audits of corporations subject to the provisions of this article whenever in the judgment of the superintendent, losses sustained by a corporation jeopardize its ability to provide meaningful coverage at affordable rates or when such audit would be necessary to protect the interests of subscribers. The audit shall include, but not be limited to, an investigation of the corporation's provision of benefits, to senior citizens, individual and family, and small group and small business subscribers in relation to the needs of those subscribers. The audit shall also include an evaluation of the efficiency of the corporation's management, particularly with respect to lines of business which are experiencing losses. In every case in which the superintendent chooses to require an audit provided for in this subsection, the

superintendent shall have the authority to select the auditor. Any costs incurred as a result of the operation of this subsection shall be assessed on all domestic insurers in the same manner as provided for in section three hundred thirty-two of this chapter.

(f) The results of any audit conducted pursuant to subsections. (d) and (e) of this section shall be provided to the corporation and each member of its board of directors. The superintendent shall have the authority to direct the corporation in writing to implement any. recommendations resulting from the audit that the superintendent finds to be necessary and reasonable; provided, however, that the superintendent shall first consider any written response submitted by the corporation or the board of directors prior to making such finding. Upon any, application for a rate ad justment by the corporation, the superintendent shall review the corporation's compliance with the directions and recommendations made previously by the superintendent, as a result of the most recently completed management or financial audit and shall include such findings in any written decision concerning such application.

§ 13. Subsection (a) of section 4309 of the insurance law is amended to read as follows:

(a) No corporation subject to the provisions of this article shall,
during any one

year,
disburse

than the percentages hereafter prescribed of the aggregate amount of the premiums received during such year as expenditures for expenses, which, for the purposes of this article, shall include all expenses

paid or incurred by the corporation which do not constitute benefit payments made to or on behalf of persons covered under contracts issued by such corporations:

(1) For hospital service corporations: fifteen per centum reduced by one per centum for each five million dollars or fraction thereof above one million dollars of premiums received to ten per centum.

(2) A11 other corporations: twenty per centum reduced by one per centum for each five million dollars or fraction thereof above one million dollars of premiums received to fifteen per centum except that for any corporation which derives more than fifty per centum of its premiums received from the sale of

contracts which provide hospital service benefits: seventeen and one-half per centum reduced by per centum for each five million dollars or fraction thereof above one million dollars of premiums received to twelve and one-half per centum.

(3) Upon written application, the superintendent may waive the limitations in paragraph one or two of this subsection for any corporation EXPLANATION-Matter in italics is new; matter in brackets [ ] is old law

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which has not attained the level of enrollment which it needs to attain
a break-even position. The break-even position is attained when the
amount of annual losses and expenses incurred by the corporation is
equal to the amount of premiums earned during this period. Such corpora-
tion shall be subject to such limitations in the calendar year following
the year in which it attains a break-even position.
၌ 14.

The insurance law is amended by adding a section 4317 to
read as follows:
§ 4317. Rating of individual and small

group health

insurance contracts. (a) No individual health insurance contract and

group health insurance contract covering between three and fifty employees or members of the groụp exclusive of spouses and dependents, including contracts for which the premiums are paid by a remitting agent for group, hereinafter referred to as a small group, providing hospital and/or medical benefits, including medicare supplemental insurance, shall be issued in this state unless such contract is community rated and, notwithstanding any other provisions of law, the underwriting of such contract involves no more than the imposition of a pre-existing condition limitation as permitted by this article. Any individual, and dependents of such individual, and any small group, including all employees

group members, and dependents of employees or members, applying for individual or small group health insurance coverage must be accepted at all times throughout the year for any hospital and/or medical coverage, including medicare supplemental insurance, offered by the corporation to individuals or small groups in this state. Once accepted for coverage, an individual or small group cannot be terminated by the insurer due to claims experience. For the purposes of this section, "community rated" means a rating methodology in which the premium for all persons covered by a policy or contract form is the same, based on the experience of the entire pool of risks covered by that policy contract form without regard to age, sex, health status or occupation.

(b) Nothing herein shall prohibit the use of premium rate structures to establish different premium rates for individuals

opposed to family units or separate community rates for individuals as opposed to small groups. Individual proprietors and groups of two must be classified in the individual or small group rating category by the corporation. (c) The superintendent shall

permit the use of separate community rates for reasonable geographic regions, which may, in a given case, include a single county. The regions shall be approved by the superintendent as part of the rate filing. The superintendent shall not the inclusion of any specific geographic regions within the proposed community rated regions selected by the corporation in its rate filing

long as the corporation's proposed regions do not contain configurations designed to avoid or segregate particular areas within a county covered by the corporation's community rates.

(d) This section shall also apply to contracts issued to a group defined in subsection (c) of section four thousand two hundred thirtyfive, including but not limited to an association or trust of employers, if the group includes one or

member employers other member groups

which have fifty fewer employees or members exclusive of spouses and dependents.

(e) (1) Notwithstanding any other provision of this chapter, no insurer, subsidiary of an insurer, or controlled person of a holding pany system may act as an administrator or claims paying agent, as op, posed to an insurer, on behalf of small groups which, if they purchased insurance, would be subject to this section. No insurer, subsidiary of an insurer, or controlled person of a holding company may provide stop loss, catastrophic reinsurance coverage to small groups which, if they purchased insurance, would be subject to this section.

(2) This subsection shall not apply to coverage insuring a plan which was in effect on

before December thirty-first, nineteen hundred ninety-one and

issued to a group which includes member small employers or other member, small groups, including but not limited to association groups, , provided that" (A) acceptance of additional small member employers (or other member groups comprised of fifty or fewer employees or members, exclusive of spouses and dependents) into the group on or after June first, nineteen hundred ninety-two and before April 'first, nineteen hundred ninety-four does not exceed an amount equal to ten percent per year of the total number of persons covered under the group of June first, nineteen hundred ninety-two, but nothing in this subpara

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graph shall limit the addition of larger member employers; (B) (i) after April first, nineteen hundred ninety-four, the group thereafter accepts member small employers and member small groups without underwriting by any more than the imposition of a pre-existing condition limitation as permitted by this article and the cost for participation in the group for all persons covered shall be the same based on the experience of the entire pool of risks covered under the entire group, without regard to age, sex, health status or occupation; and (ii) once accepted for coverage, an individual or small group cannot be terminated due to claims experience; (C) the insurer has registered the names of such groups, including the total number of persons covered as of June first, nineteen hundred ninety-two, with the superintendent, in a form prescribed by the superintendent, on or before April first, nineteen hundred ninety-three and shall report annually thereafter until such groups comply with the provisions of subparagraph (B) of this paragraph; and (D) the types categories of employer's or groups eligible to join the association are not altered or expanded after June first, nineteen hundred ninety-two.

(3) A corporation may apply to the superintendent for an extension or extensions of time beyond April first, nineteen hundred ninety-four in which to implement the provisions of this subsection as they relate to groups registered with the superintendent pursuant to subparagraph (C) of paragraph two of this subsection; any such extension or extensions may not exceed two years in aggregate duration, and the ten percent per year limitation of subparagraph (A) of paragraph two of this subsection shall be reduced to five percent per year during the period of any such extension extensions. Any application for an extension shall demonstrate that a significant financial hardship to such group would result from such implementation.

§ 15. The insurance law is amended by adding by adding* a new section 4318 to read as follows:

§ 4318. Pre-existing condition provisions. Every individual health insurance contract and every small group health insurance contract issued

issued for delivery in this state which includes a pre-existing condition provision shall contain in substance the following provision provisions which in the opinion of the superintendent are more favorable to individuals, members of the group and their eligible dependents:

(a) In determining whether a pre-existing condition provision applies to an insured person, the contract shall credit the time the person previously covered under a previous health insurance plan or policy or employer-provided health benefit arrangement, if the previous coverage was continuous to a date not more than sixty days prior to the effective date of the new coverage. In the case of previous health maintenance organization coverage, any waiting period prior to that previous coverage becoming effective shall also be credited pursuant to this subsection.

(b), No pre-existing condition provision shall exclude coverage for a
period in excess of twelve months following the effective date of
erage for the covered person and may only relate to conditions manifest-
ing themselves in symptoms which would cause an ordinary prudent person
to, seek medical advice, diagnosis, care or treatment or for which medi-
cal advice, diagnosis, care or treatment recommended received
during the six months immediately preceding the effective date of cov-
erage or as to a pregnancy existing on the effective date of coverage.

§. 16. Section 225 of the public health law is amended by adding a new subdivision 11 to read as follows:

11. The public health council, in consultation with the superintendent of insurance, shall, no later than March thirty-first, nineteen hundred ninety-three, report

to the governor and the legislature regarding the efficacy of developing wellness incentives that could be used

to allow premium reductions for certain individuals from established community rates in the individual and small group health insurance markets. Wellness incentives to be considered shall include, but not be limited to, smoking status, physical fitness activities, frequency of physician fitness evaluations and dietary habits. The council shall consider the effects of such wellness incentives on the individual and small group health insurance markets and on the health status of the population as a

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