Assembly Bill A8280

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  8280

                       2009-2010 Regular Sessions

                          I N  A S S E M B L Y

                              May 12, 2009
                               ___________

Introduced  by  M. of A. MORELLE -- (at request of the Governor) -- read
  once and referred 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:

  Section 1. Subsection (e) of section 3231 of  the  insurance  law,  as
added by chapter 501 of the laws of 1992, is amended to read as follows:
  (e)  (1)  (A)  An  insurer  desiring  to increase or decrease premiums
[after April first, nineteen hundred ninety-three] for any  policy  form
subject to this section shall submit a rate filing or application to the
superintendent.    The superintendent shall determine whether the filing
or application shall become effective as filed, shall  become  effective
as  modified, or shall be disapproved.  THE SUPERINTENDENT MAY MODIFY OR
DISAPPROVE THE RATE FILING OR APPLICATION IF  THE  SUPERINTENDENT  FINDS
THAT  THE  PREMIUMS ARE UNREASONABLE, EXCESSIVE, INADEQUATE, OR UNFAIRLY
DISCRIMINATORY, AND MAY CONSIDER THE FINANCIAL CONDITION OF THE  INSURER
WHEN  APPROVING,  MODIFYING  OR  DISAPPROVING ANY PREMIUM ADJUSTMENT. AN
INSURER SHALL NOT IMPLEMENT A RATE INCREASE UNLESS THE INSURER  PROVIDES
AT  LEAST  THIRTY  DAYS  ADVANCE  WRITTEN NOTICE OF THE INCREASE TO EACH
POLICY HOLDER AND CERTIFICATE HOLDER AFFECTED BY THE RATE INCREASE.
  (B) THE EXPECTED MINIMUM LOSS RATIO FOR A POLICY FORM SUBJECT TO  THIS
SECTION, FOR WHICH A RATE FILING OR APPLICATION IS MADE PURSUANT TO THIS
PARAGRAPH, OTHER THAN A MEDICARE SUPPLEMENTAL INSURANCE POLICY, OR, WITH
THE  APPROVAL OF THE SUPERINTENDENT, AN AGGREGATION OF POLICY FORMS THAT
ARE COMBINED  INTO  ONE  COMMUNITY  RATING  EXPERIENCE  POOL  AND  RATED
CONSISTENT  WITH  COMMUNITY  RATING REQUIREMENTS, SHALL NOT BE LESS THAN
EIGHTY-FIVE PERCENT. IN REVIEWING A  RATE  FILING  OR  APPLICATION,  THE
SUPERINTENDENT  MAY MODIFY THE EIGHTY-FIVE PERCENT EXPECTED MINIMUM LOSS
RATIO REQUIREMENT IF THE SUPERINTENDENT DETERMINES THE  MODIFICATION  TO
BE IN THE INTERESTS OF THE PEOPLE OF THIS STATE. NO LATER THAN MAY FIRST

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD12006-04-9
              

A. 8280                             2

OF  EACH YEAR, EVERY INSURER SUBJECT TO THIS SUBPARAGRAPH SHALL ANNUALLY
REPORT THE ACTUAL LOSS RATIO FOR THE PREVIOUS CALENDAR YEAR IN A  FORMAT
ACCEPTABLE  TO THE SUPERINTENDENT. IF AN EXPECTED LOSS RATIO IS NOT MET,
THE  SUPERINTENDENT  MAY  DIRECT  THE INSURER TO TAKE CORRECTIVE ACTION,
WHICH MAY INCLUDE THE SUBMISSION OF  A  RATE  FILING  TO  REDUCE  FUTURE
PREMIUMS,  OR  TO  ISSUE  DIVIDENDS,  PREMIUM REFUNDS OR CREDITS, OR ANY
COMBINATION OF THESE.
  (2) (A) [Beginning October first, nineteen hundred ninety-four]  UNTIL
DECEMBER  THIRTY-FIRST,  TWO THOUSAND NINE, as an alternate procedure to
the requirements of paragraph one of this subsection, an insurer  desir-
ing to increase or decrease premiums for any policy form subject to this
section  may  instead  submit a rate filing or application to the super-
intendent and such application  or  filing  shall  be  deemed  approved,
provided  that: (i) the anticipated minimum loss ratio for a policy form
shall not be less than [seventy-five] EIGHTY-FIVE percent of the  premi-
um[,];  and  (ii) the insurer submits, as part of such filing, a certif-
ication by a member of the American Academy of Actuaries or other  indi-
vidual   acceptable  to  the  superintendent  that  the  insurer  is  in
compliance with the  provisions  of  this  paragraph,  based  upon  that
person's  examination, including a review of the appropriate records and
of the actuarial assumptions and methods used by the insurer  in  estab-
lishing  premium  rates  for  policy  forms subject to this section.  AN
INSURER SHALL NOT UTILIZE THE ALTERNATE PROCEDURE PURSUANT TO THIS PARA-
GRAPH TO IMPLEMENT A CHANGE IN RATES TO BE EFFECTIVE ON OR AFTER JANUARY
FIRST, TWO THOUSAND TEN.
  (B) Each calendar year, an insurer shall return, in the form of aggre-
gate benefits for each policy  form  filed  pursuant  to  the  alternate
procedure   set   forth   in  this  paragraph  at  least  [seventy-five]
EIGHTY-FIVE percent of the aggregate premiums collected for  the  policy
form during that calendar year. Insurers shall annually report, no later
than  May first of each year, the loss ratio calculated pursuant to this
paragraph for each such policy form for the previous calendar  year.  In
each  case  where  the loss ratio for a policy form fails to comply with
the [seventy-five]  EIGHTY-FIVE  percent  loss  ratio  requirement,  the
insurer shall issue a dividend or credit against future premiums for all
policy  holders  with that policy form in an amount sufficient to assure
that the aggregate benefits paid in the previous calendar year plus  the
amount   of   the  dividends  and  credits  shall  equal  [seventy-five]
EIGHTY-FIVE percent of the aggregate premiums collected for  the  policy
form  in  the  previous  calendar  year. The dividend or credit shall be
issued to each policy HOLDER WHO HAD A POLICY which was in effect as  of
December  thirty-first  of the applicable year [and remains in effect as
of the date the dividend or credit is issued]. THE  DIVIDEND  OR  CREDIT
SHALL BE PRORATED BASED ON THE DIRECT PREMIUMS EARNED FOR THE APPLICABLE
YEAR AMONG ALL POLICY HOLDERS ELIGIBLE TO RECEIVE SUCH DIVIDEND OR CRED-
IT.  AN  INSURER  SHALL MAKE A REASONABLE EFFORT TO IDENTIFY THE CURRENT
ADDRESS OF, AND ISSUE DIVIDENDS OR CREDITS  TO,  FORMER  POLICY  HOLDERS
ENTITLED  TO  THE  DIVIDEND OR CREDIT. All dividends and credits must be
distributed by September thirtieth of the year  following  the  calendar
year in which the loss ratio requirements were not satisfied.  The annu-
al  report  required by this paragraph shall include an insurer's calcu-
lation of the dividends and credits, as well as an  explanation  of  the
insurer's  plan  to  issue  dividends  or  credits. The instructions and
format for calculating and reporting loss ratios and  issuing  dividends
or  credits shall be specified by the superintendent by regulation. Such
regulations shall include provisions for the distribution of a  dividend

A. 8280                             3

or  credit in the event of cancellation or termination by a policy hold-
er.
  S  2. Section 4308 of the insurance law, subsection (b) as amended and
subsections (d), (e) and (f) as added by chapter  501  of  the  laws  of
1992,  paragraph  3  of  subsection (c) as amended by chapter 520 of the
laws of 1999 and subsections (g), (h), (i) and (j) as added  by  chapter
504 of the laws of 1995, is amended to read as follows:
  S  4308.  Supervision  of  superintendent[;  public  hearings]. (a) No
corporation subject to the provisions of this article shall  enter  into
any  contract  unless and until it shall have filed with the superinten-
dent a copy of the contract or  certificate  and  of  all  applications,
riders  and  endorsements  for  use  in  connection with the issuance or
renewal thereof, to be formally approved by him  as  conforming  to  the
applicable  provisions  of  this  article  and not inconsistent with any
other provision of law applicable  thereto.  The  superintendent  shall,
within  a  reasonable time after the filing of any such form, notify the
corporation filing the same either of his approval or of his disapproval
of such form.
  (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 premi-
ums, or the premiums derived from the  rating  formula,  are  excessive,
inadequate  or  unfairly  discriminatory,  provided, however, the super-
intendent may also consider the financial condition of such  corporation
in  approving 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 approved
by  the superintendent in the manner prescribed in section four thousand
three hundred ten of this  article  for  restoration  of  the  statutory
reserve  fund  required  by  such  section.  Notwithstanding  any  other
provision 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  condi-
tion  or  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.
  (c)  (1)  [Except  for  an  application  pursuant to subsection (f) of
section four thousand  three  hundred  four  of  this  article,  no]  AN
increase  or decrease in premiums with respect to [individual] COMMUNITY
RATED contracts [issued pursuant to  the  provisions  of  such  section]
shall  NOT  be approved by the superintendent unless it is in compliance
with the provisions of this  subsection  as  well  as  other  applicable
provisions of law.
  (2)  [Prior  to  any  such  filing or application by or on behalf of a
corporation for an increase or decrease in premiums for such  contracts,
such  corporation,  when directed by the superintendent, shall conduct a
public hearing with respect to the terms of such filing or  application.
Notice of such hearing shall be published on three successive days in at
least  two newspapers having general circulation within the territory or
district wherein such corporation seeking  approval  of  the  filing  is
authorized  to do business.  The date specified for the hearing shall be

A. 8280                             4

not less than ten nor more than thirty days from the date of  the  first
publication  of  the  hearing.  The  notice  of  hearing shall state the
purpose thereof, the time when and the place where  the  public  hearing
will  be  held.  The public hearing shall be held at a time and location
deemed by the superintendent to  be  most  convenient  to  the  greatest
number  of  persons  affected by such filing. At such hearing any person
may be heard in favor of, or against, the terms of the filing or  appli-
cation.
  (3)  Following  the  public  hearing held pursuant to paragraph two of
this subsection, a transcript of the testimony therein shall be  submit-
ted  together  with a rate filing or application, to the superintendent.
Upon receipt of such filing or application by or on behalf of  a  corpo-
ration,  the  superintendent  shall  order that a public hearing be held
with respect to the terms of such filing or application. Notice of  such
hearing  shall  be  published  on  three successive days in at least two
newspapers having general circulation within the territory  or  district
wherein  such  corporation seeking approval of the filing or application
is authorized to do business. For a corporation writing more than  three
billion  dollars  in  premiums  as  of  December  thirty-first, nineteen
hundred ninety-six and whose service territory is greater than ten coun-
ties, such notice is to be published in at least  one  newspaper  having
general circulation in each county where persons in the service territo-
ry are affected by the proposed change. The date specified for the hear-
ing  shall  be not less than ten nor more than thirty days from the date
of the last publication of the hearing. The notice of hearing shall also
state the purpose thereof, the time when and the place where the  public
hearing  will  be  held.  For those corporations writing more than three
billion dollars  in  premiums  as  of  December  thirty-first,  nineteen
hundred  ninety-six,  and  whose territory is greater than ten counties,
the notice of  hearing  shall  also  state  the  changes  proposed,  the
contracts  to  be  affected  and  the  time when such changes would take
effect. The notice of hearing shall state, in prominent display, a toll-
free telephone number of the insurance department that may be  contacted
to  receive  additional information on the subject rate application. The
public hearing shall be held at a time and location deemed by the super-
intendent to be most  convenient  to  the  greatest  number  of  persons
affected by such filing or application. A copy of such notice of hearing
shall be forwarded by the superintendent by registered or certified mail
to  the  principal  address  of the corporation seeking approval of such
filing or application. The hearing may be continued  or  adjourned  from
day to day within the discretion of the superintendent.  At such hearing
any person may be heard in favor of, or against, the terms of the filing
or  application.  After conclusion of the public hearing the superinten-
dent shall render a written decision determining whether the  filing  or
application  shall  become effective as filed, shall become effective as
modified, or shall be disapproved. If, subsequent to  the  hearing,  but
prior  to the issuing of the superintendent's written decision on a rate
increase request, the corporation increases its requested rate  for  any
contract  by  two percent or more, a re-hearing shall be held. The time,
location, and notice requirements for such re-hearing  shall  be  deter-
mined by the superintendent.
  (4)]  (A)  A CORPORATION DESIRING TO INCREASE OR DECREASE PREMIUMS FOR
ANY CONTRACT SUBJECT TO THIS SECTION  SHALL  SUBMIT  A  RATE  FILING  OR
APPLICATION  TO  THE  SUPERINTENDENT. THE SUPERINTENDENT SHALL DETERMINE
WHETHER THE FILING OR APPLICATION SHALL BECOME EFFECTIVE AS FILED, SHALL
BECOME EFFECTIVE AS MODIFIED, OR SHALL BE DISAPPROVED.  THE  SUPERINTEN-

A. 8280                             5

DENT  MAY  MODIFY  OR  DISAPPROVE  THE RATE FILING OR APPLICATION IF THE
SUPERINTENDENT FINDS THAT  THE  PREMIUMS  ARE  UNREASONABLE,  EXCESSIVE,
INADEQUATE,  OR  UNFAIRLY DISCRIMINATORY, AND MAY CONSIDER THE FINANCIAL
CONDITION OF THE CORPORATION IN APPROVING, MODIFYING OR DISAPPROVING ANY
PREMIUM  ADJUSTMENT.  A  CORPORATION SHALL NOT IMPLEMENT A RATE INCREASE
UNLESS THE CORPORATION PROVIDES AT LEAST  THIRTY  DAYS  ADVANCE  WRITTEN
NOTICE OF THE INCREASE TO EACH CONTRACTHOLDER AND SUBSCRIBER AFFECTED BY
THE INCREASE.
  (B)  THE  EXPECTED  MINIMUM  LOSS RATIO FOR A CONTRACT FORM SUBJECT TO
THIS SUBSECTION FOR WHICH A RATE FILING OR APPLICATION IS MADE  PURSUANT
TO   THIS  PARAGRAPH,  OTHER  THAN  A  MEDICARE  SUPPLEMENTAL  INSURANCE
CONTRACT, OR, WITH THE APPROVAL OF THE SUPERINTENDENT, AN AGGREGATION OF
CONTRACT FORMS THAT ARE COMBINED INTO ONE  COMMUNITY  RATING  EXPERIENCE
POOL  AND RATED CONSISTENT WITH COMMUNITY RATING REQUIREMENTS, SHALL NOT
BE LESS THAN EIGHTY-FIVE PERCENT. IN REVIEWING A RATE FILING OR APPLICA-
TION, THE SUPERINTENDENT MAY MODIFY  THE  EIGHTY-FIVE  PERCENT  EXPECTED
MINIMUM  LOSS  RATIO  REQUIREMENT  IF  THE SUPERINTENDENT DETERMINES THE
MODIFICATION TO BE IN THE INTERESTS OF THE  PEOPLE  OF  THIS  STATE.  NO
LATER  THAN  MAY  FIRST  OF EACH YEAR, EVERY CORPORATION SUBJECT TO THIS
SUBPARAGRAPH SHALL ANNUALLY REPORT THE ACTUAL LOSS RATIO FOR THE  PREVI-
OUS  CALENDAR  YEAR  IN A FORMAT ACCEPTABLE TO THE SUPERINTENDENT. IF AN
EXPECTED LOSS RATIO IS NOT MET, THE SUPERINTENDENT MAY DIRECT THE CORPO-
RATION TO TAKE CORRECTIVE ACTION, WHICH MAY INCLUDE THE SUBMISSION OF  A
RATE  FILING  TO  REDUCE FUTURE PREMIUMS, OR TO ISSUE DIVIDENDS, PREMIUM
REFUNDS OR CREDITS, OR ANY COMBINATION OF THESE.
  (C) THE EXPECTED MINIMUM LOSS RATIO FOR A MEDICARE SUPPLEMENTAL INSUR-
ANCE CONTRACT FORM SHALL NOT BE LESS THAN EIGHTY PERCENT. NO LATER  THAN
MAY  FIRST  OF EACH YEAR, EVERY CORPORATION SUBJECT TO THIS SUBPARAGRAPH
SHALL ANNUALLY REPORT THE ACTUAL  LOSS  RATIO  FOR  EACH  CONTRACT  FORM
SUBJECT  TO  THIS  SECTION  FOR  THE  PREVIOUS CALENDAR YEAR IN A FORMAT
ACCEPTABLE TO THE SUPERINTENDENT. IN EACH CASE WHERE THE LOSS RATIO  FOR
THE  CONTRACT  FORM  FAILS  TO COMPLY WITH THE EIGHTY PERCENT LOSS RATIO
REQUIREMENT, THE CORPORATION SHALL SUBMIT A CORRECTIVE  ACTION  PLAN  TO
THE  SUPERINTENDENT  FOR ASSURING COMPLIANCE WITH THE APPLICABLE MINIMUM
LOSS RATIO STANDARD. THE CORRECTIVE ACTION PLAN SHALL  BE  SUBMITTED  TO
THE  SUPERINTENDENT WITHIN SIXTY DAYS OF THE CORPORATION'S SUBMISSION OF
THE ANNUAL REPORT REQUIRED BY THIS SUBPARAGRAPH. THE CORPORATION'S  PLAN
MAY  UTILIZE  PREMIUM REFUNDS OR CREDITS, SUBJECT TO THE APPROVAL OF THE
SUPERINTENDENT.
  (3) In  case  of  conflict  between  this  subsection  and  any  other
provision of law, this subsection shall prevail.
  (d)  The  superintendent  shall  order  an  independent management and
financial audit of corporations subject to the provisions of this  arti-
cle with a combined premium volume exceeding two billion dollars annual-
ly  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 audit shall not be  performed  by
any  organization that has in any way performed or furnished services of
any kind 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

A. 8280                             6

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 manage-
ment, strategic direction, rate adequacy, and the regulatory and compet-
itive  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 profit-
ability 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
improvement  in  the  size,  structure, composition and operation of the
board  of  directors,  productivity  improvement,  information  systems,
management  development,  personnel  practices, mix and level of skills,
personnel turnover, investment practices and rate of return upon invest-
ment activities;
  (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
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, partic-
ularly (but not limited to)  small  group,  medicare  supplemental,  and
direct payment to identify areas that may need immediate remedial atten-
tion;
  (vi)  identifying  any changes to the regulatory and legislative envi-
ronment that may need to be made to  ensure  that  the  corporation  can
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  corpo-
ration'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 whenev-
er  in  the judgment of the superintendent, losses sustained by a corpo-
ration jeopardize its ability to provide meaningful coverage at afforda-
ble 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 citi-
zens,  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.

A. 8280                             7

  (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  adjustment 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.
  (g)(1)  [Beginning  January  first, nineteen hundred ninety-six] UNTIL
DECEMBER THIRTY-FIRST, TWO THOUSAND NINE, as an alternate  procedure  to
the  requirements  of  subsection  (c)  of  this  section, a corporation
subject to the provisions  of  this  article  desiring  to  increase  or
decrease  premiums  for any contract subject to this section may instead
submit a rate filing or  application  to  the  superintendent  and  such
application  or  filing  shall be deemed approved, provided that (A) the
anticipated incurred loss ratio for a contract form shall  not  be  less
than  eighty-five  percent  for  individual  direct payment contracts or
[seventy-five] EIGHTY-FIVE percent  for  small  group  and  small  group
remittance  contracts,  nor,  except  in  the  case of individual direct
payment contracts with a loss ratio of greater  than  one  hundred  five
percent  during  nineteen  hundred ninety-four, shall the loss ratio for
any direct payment, group or group remittance contract be more than  one
hundred  five  percent  of  the  anticipated earned premium, and (B) the
corporation submits, as part of such filing, a certification by a member
of the American Academy of Actuaries or other individual  acceptable  to
the  superintendent  that  that  corporation  is  in compliance with the
provisions of this subsection, based  upon  that  person's  examination,
including  a  review  of  the  appropriate  records and of the actuarial
assumptions and methods used by the corporation in establishing  premium
rates  for  contracts  subject  to this section. A CORPORATION SHALL NOT
UTILIZE THE ALTERNATE PROCEDURE PURSUANT TO THIS SUBSECTION TO IMPLEMENT
A CHANGE IN RATES TO BE EFFECTIVE ON OR AFTER JANUARY FIRST,  TWO  THOU-
SAND TEN. For purposes of this section, a small group is any group whose
contract  is  subject to the requirements of section forty-three hundred
seventeen of this article.
  (2) Prior to January first, two thousand, no rate increase or decrease
may be deemed  approved  under  this  subsection  if  that  increase  or
decrease, together with any other rate increases or decreases imposed on
the  same  contract  form,  would  cause  the aggregate rate increase or
decrease for that contract form to exceed ten percent during any contin-
uous twelve month period. No rate increase  may  be  imposed  unless  at
least  thirty  days  advance  written  notice  of such increase has been
provided to each contract holder and subscriber.
  (h)(1) Each calendar year, a corporation subject to the provisions  of
this  article  shall  return, in the form of aggregate benefits incurred
for each contract form filed pursuant to  the  alternate  procedure  set
forth  in  subsection  (g) of this section, at least eighty-five percent
for individual direct payment contracts  or  [seventy-five]  EIGHTY-FIVE
percent  for  small  group  and  small  group remittance contracts, but,
except in the case of individual direct payment contracts  with  a  loss
ratio of greater than one hundred five percent in nineteen hundred nine-

A. 8280                             8

ty-four, for any direct payment, group or group remittance contract, not
in  excess  of one hundred five percent of the aggregate premiums earned
for the contract form during that calendar year.   Corporations  subject
to  the  provisions of this article shall annually report, no later than
May first of each year, the  loss  ratio  calculated  pursuant  to  this
subsection for each such contract form for the previous calendar year.
  (2)  In  each  case  where the loss ratio for a contract form fails to
comply with the eighty-five percent minimum loss ratio  requirement  for
individual  direct  payment contracts, or the [seventy-five] EIGHTY-FIVE
percent minimum loss ratio requirement for small group and  small  group
remittance  contracts, as set forth in paragraph one of this subsection,
the corporation shall issue a dividend or credit against future premiums
for all contract holders with that contract form in an amount sufficient
to assure that the aggregate benefits incurred in the previous  calendar
year  plus  the  amount of the dividends and credits shall equal no less
than eighty-five percent for individual  direct  payment  contracts,  or
[seventy-five]  EIGHTY-FIVE  percent  for  small  group  and small group
remittance contracts, of the aggregate premiums earned for the  contract
form  in  the  previous  calendar  year. The dividend or credit shall be
issued to each contract HOLDER OR SUBSCRIBER WHO HAD A CONTRACT that was
in effect as of  December  thirty-first  of  the  applicable  year  [and
remains  in effect as of the date the dividend or credit is issued]. THE
DIVIDEND OR CREDIT SHALL BE PRORATED BASED ON THE DIRECT PREMIUMS EARNED
FOR THE APPLICABLE YEAR AMONG ALL CONTRACT HOLDERS OR SUBSCRIBERS ELIGI-
BLE TO RECEIVE SUCH DIVIDEND OR  CREDIT.  A  CORPORATION  SHALL  MAKE  A
REASONABLE  EFFORT  TO  IDENTIFY THE CURRENT ADDRESS OF, AND ISSUE DIVI-
DENDS OR CREDITS TO, FORMER CONTRACT HOLDERS OR SUBSCRIBERS ENTITLED  TO
THE DIVIDEND OR CREDIT. All dividends and credits must be distributed by
September thirtieth of the year following the calendar year in which the
loss  ratio  requirements were not satisfied. The annual report required
by paragraph one of this subsection shall include a corporation's calcu-
lation of the dividends and credits, as well as an  explanation  of  the
corporation's  plan  to issue dividends or credits. The instructions and
format for calculating and reporting loss ratios and  issuing  dividends
or  credits shall be specified by the superintendent by regulation. Such
regulations shall include provisions for the distribution of a  dividend
or  credit  in  the  event  of cancellation or termination by a contract
holder or subscriber.
  (3) In each case where the loss ratio for a  contract  form  fails  to
comply  with the one hundred five percent maximum loss ratio requirement
of paragraph one of this subsection, the corporation shall  institute  a
premium  rate increase in an amount sufficient to assure that the aggre-
gate benefits incurred in the previous calendar year shall equal no more
than one hundred five percent of  the  sum  of  the  aggregate  premiums
earned  for  the  contract  form  in  the previous calendar year and the
aggregate premium rate increase. The rate increase shall be  applied  to
each  contract  that  was  in  effect as of December thirty-first of the
applicable year and remains in effect as of the date the  rate  increase
is imposed. All rate increases must be imposed by September thirtieth of
the  year  following  the calendar year in which the loss ratio require-
ments were not satisfied. The annual report required by paragraph one of
this subsection shall include a corporation's calculation of the premium
rate increase, as well as an explanation of the  corporation's  plan  to
implement the rate increase. The instructions and format for calculating
and reporting loss ratios and implementing rate increases shall be spec-
ified by the superintendent by regulation.

A. 8280                             9

  (i)  The  alternate  procedure described in subsections (g) and (h) of
this section shall apply to individual direct payment  contracts  issued
pursuant  to  sections  four  thousand three hundred twenty-one and four
thousand three hundred twenty-two of this article on and  after  January
first,  nineteen  hundred ninety-seven.   SUCH ALTERNATE PROCEDURE SHALL
NOT BE UTILIZED TO IMPLEMENT A CHANGE IN RATES TO  BE  EFFECTIVE  ON  OR
AFTER JANUARY FIRST, TWO THOUSAND TEN.
  [(j)  The eighty-five percent minimum loss ratio for individual direct
payment contracts described in subsections (g) and (h) of  this  section
shall be reduced to eighty-two and one-half percent as of January first,
nineteen  hundred  ninety-seven  and  shall be further reduced to eighty
percent as of January first, nineteen hundred ninety-eight and thereaft-
er. The refund or credit requirements for failure to meet  minimum  loss
ratios will continue, but at these reduced percentages.]
  S 3. This act shall take effect immediately.