S T A T E O F N E W Y O R K
________________________________________________________________________
650
2009-2010 Regular Sessions
I N S E N A T E
January 12, 2009
___________
Introduced by Sens. LARKIN, SEWARD, ALESI, BONACIC, DeFRANCISCO, FARLEY,
FLANAGAN, GOLDEN, LAVALLE, LEIBELL, LITTLE, MAZIARZ, MORAHAN, NOZZO-
LIO, SALAND, SKELOS, VOLKER -- read twice and ordered printed, and
when printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to licensing and regulat-
ing health insurance purchasing cooperatives
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 2101 of the insurance law is amended by adding a
new subsection (v) to read as follows:
(V) IN THIS ARTICLE, A "HEALTH INSURANCE PURCHASING COOPERATIVE" OR
"COOPERATIVE" MEANS ANY INDIVIDUAL, FIRM, ASSOCIATION, BUSINESS CORPO-
RATION OR NOT-FOR-PROFIT CORPORATION LICENSED PURSUANT TO THIS ARTICLE
THAT PROVIDES HEALTH INSURANCE OR A HEALTH BENEFITS PLAN THROUGH MULTI-
PLE UNAFFILIATED PARTICIPATING INSURERS OR HEALTH MAINTENANCE ORGANIZA-
TIONS TO MEMBER SOLE PROPRIETORS AND SMALL EMPLOYERS AND THEIR EMPLOYEES
WITHIN A DEFINED SERVICE AREA AUTHORIZED BY THE SUPERINTENDENT. FOR THE
PURPOSES OF THIS SUBSECTION, "SMALL EMPLOYER" SHALL MEAN ANY EMPLOYER
THAT EMPLOYS NOT FEWER THAN TWO NOR MORE THAN NINETY-NINE EMPLOYEES.
S 2. The insurance law is amended by adding a new section 2104-a to
read as follows:
S 2104-A. HEALTH INSURANCE PURCHASING COOPERATIVE: LICENSING. (A) THE
SUPERINTENDENT MAY ISSUE A HEALTH INSURANCE PURCHASING COOPERATIVE
LICENSE TO ANY NON-RISK BEARING INDIVIDUAL, FIRM, ASSOCIATION, BUSINESS
CORPORATION, OR NOT-FOR-PROFIT CORPORATION WHO OR WHICH IS DEEMED BY THE
SUPERINTENDENT TO BE TRUSTWORTHY AND COMPETENT TO ACT AS AN INSURANCE
BROKER PURSUANT TO SECTION TWO THOUSAND ONE HUNDRED FOUR OF THIS ARTICLE
AND TO EXERCISE THE ADDITIONAL POWERS GRANTED TO A COOPERATIVE LICENSEE
PURSUANT TO THIS SECTION. BEFORE ISSUING A COOPERATIVE LICENSE, THE
APPLICANT MUST HAVE AN INSURANCE BROKER'S LICENSE OR HAVE EMPLOYED BY
SUCH COOPERATIVE AN EMPLOYEE THAT HAS A BROKER'S LICENSE.
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD05217-01-9
S. 650 2
(B) A COOPERATIVE MAY MARKET, SELL OR OFFER FOR SALE OR ARRANGE FOR A
PACKAGE OF ONE OR MORE HEALTH INSURANCE BENEFITS PLANS UNDERWRITTEN BY
THREE OR MORE INSURERS OR HEALTH MAINTENANCE ORGANIZATIONS TO SOLE
PROPRIETORS AND SMALL EMPLOYERS AND THEIR EMPLOYEES. FOR THE PURPOSES OF
THIS SECTION, "SMALL EMPLOYER" MEANS ANY EMPLOYER THAT EMPLOYS NOT FEWER
THAN TWO NOR MORE THAN NINETY-NINE EMPLOYEES. A COOPERATIVE MAY NOT
ISSUE CONTRACTS OR QUOTE PREMIUM RATES OR PROVIDE COVERAGE UNTIL
CONTRACTS AND PREMIUM RATES FOR INSURERS AND HEALTH MAINTENANCE ORGAN-
IZATIONS PARTICIPATING IN THE COOPERATIVE ARE APPROVED BY THE SUPER-
INTENDENT.
(C) BEFORE A HEALTH INSURANCE PURCHASING COOPERATIVE LICENSE SHALL BE
ISSUED OR RENEWED, THE PROSPECTIVE LICENSEE SHALL PROPERLY FILE WITH THE
SUPERINTENDENT A WRITTEN APPLICATION AND PAY A FEE OF ONE HUNDRED
DOLLARS. EVERY LICENSE SHALL HAVE A DURATION OF TWO YEARS. THE LICENSE
APPLICATION SHALL CONTAIN THE FOLLOWING INFORMATION TO DEMONSTRATE THAT:
(1) A SPECIFIC BUSINESS PLAN HAS BEEN DEVELOPED TO DEMONSTRATE HOW THE
APPLICANT INTENDS TO REDUCE THE COST OF HEALTH INSURANCE OR ADMINISTRA-
TIVE COSTS FOR MEMBER BUSINESSES AND INCREASE ACCESS TO HEALTH INSUR-
ANCE;
(2) THE APPLICANT WILL HAVE THE EXPERTISE AND LOGISTICAL SUPPORT TO
ADEQUATELY SERVE MEMBER SOLE PROPRIETORS AND SMALL EMPLOYERS AND THEIR
EMPLOYEES;
(3) THE APPLICANT IS NOT A DISTRIBUTION NETWORK FOR A SINGLE PRODUCT
OR THE PRODUCTS OF A SINGLE HEALTH INSURER OR HEALTH MAINTENANCE ORGAN-
IZATION;
(4) ADEQUATE AND ONGOING FINANCIAL CONTROLS AND SECURITY ARRANGEMENTS
WILL BE INSTITUTED TO ENSURE THAT THE APPLICANT WILL REMAIN SOLVENT;
(5) THE APPLICANT WILL INSTITUTE ADEQUATE SAFEGUARDS WITH EACH PARTIC-
IPATING INSURER AND HEALTH MAINTENANCE ORGANIZATION TO ENSURE CONTINUITY
OF COVERAGE FOR PLAN SUBSCRIBERS SHOULD THE APPLICANT CEASE OPERATIONS;
(6) THE APPLICANT SHALL ATTEMPT TO EXTEND PURCHASING COOPERATIVE SPON-
SORED INSURANCE COVERAGES TO A LARGE NUMBER OF SMALL EMPLOYERS WITHIN
THE APPLICANT'S SERVICE AREA;
(7) THE APPLICANT HAS SATISFIED THE CRITERIA NECESSARY FOR OBTAINING
AN INSURANCE BROKER'S LICENSE PURSUANT TO SECTION TWO THOUSAND ONE
HUNDRED FOUR OF THIS ARTICLE; AND
(8) THE APPLICANT WILL COMPLY WITH ALL PROVISIONS RELATING TO COMMUNI-
TY RATING AND OPEN ENROLLMENT PURSUANT TO SECTION THREE THOUSAND TWO
HUNDRED THIRTY-THREE OF THIS CHAPTER.
(D) COOPERATIVE LICENSEES SHALL HAVE THE FOLLOWING POWERS:
(1) TO SELL, MARKET, OFFER OR ARRANGE FOR SALE TO SOLE PROPRIETORS AND
SMALL EMPLOYERS, THEIR EMPLOYEES AND THEIR FAMILIES A VARIETY OF HEALTH
INSURANCE PLANS.
(2) PREPARE AND DISSEMINATE INFORMATIONAL AND SOLICITATION MATERIALS
TO FACILITATE COMPARISON OF THE VARIOUS HEALTH INSURANCE PLANS OFFERED
TO MEMBER SOLE PROPRIETORS AND SMALL EMPLOYERS BY THE COOPERATIVE.
(3) SET REASONABLE PURCHASING COOPERATIVE MEMBERSHIP FEES AND COOPER-
ATIVE ADMINISTRATIVE FEES TO SERVICE EMPLOYER AND INSURER ENROLLMENT,
BILLING, COLLECTION, PREMIUM DISBURSEMENT AND RECONCILIATION, COMMISSION
DISBURSEMENT AND PROCESSING ACTIVITIES. THESE FEES MAY VARY BASED ON THE
SIZE OF THE EMPLOYER.
(4) PROVIDE ENROLLMENT, BILLING, PREMIUM COLLECTION, PREMIUM DISBURSE-
MENT AND RECONCILIATION, COMMISSION DISBURSEMENT AND OTHER PROCESSING
SERVICES FOR HEALTH INSURANCE PLANS OFFERED THROUGH THE COOPERATIVE.
(5) CONTRACT WITH QUALIFIED THIRD PARTIES TO PROVIDE FOR ANY SERVICE
NECESSARY TO CARRY OUT THE COOPERATIVE'S POWERS AND DUTIES.
S. 650 3
(6) CONTRACT WITH LICENSED INSURANCE AGENTS AND BROKERS TO MARKET AND
SERVICE COVERAGES MADE AVAILABLE THROUGH THE COOPERATIVE AND NEGOTIATE
THE DIVISION OF COMMISSION FEES BETWEEN THE INSURANCE AGENT, BROKER AND
COOPERATIVE.
(7) NEGOTIATE WITH PARTICIPATING INSURERS AND HEALTH MAINTENANCE
ORGANIZATIONS THE ADMINISTRATIVE EXPENSES PORTION OF PREMIUM RATES
CHARGED FOR COVERAGE OFFERED BY THE COOPERATIVE.
(8) EXERCISE THOSE POWERS GRANTED TO AN INSURANCE BROKER PURSUANT TO
SECTION TWO THOUSAND ONE HUNDRED FOUR OF THIS ARTICLE.
(9) ANY OTHER POWERS THAT THE SUPERINTENDENT DEEMS NECESSARY TO FACIL-
ITATE A COOPERATIVE'S ABILITY TO REDUCE THE COST OF HEALTH INSURANCE OR
ADMINISTRATIVE COSTS FOR MEMBER BUSINESSES OR TO INCREASE ACCESS TO SUCH
INSURANCE.
(E) INFORMATION PROVIDED TO THE SUPERINTENDENT BY AN APPLICANT FOR A
COOPERATIVE LICENSE OR A COOPERATIVE LICENSEE RELATING TO ITS FINANCES
OR OPERATIONS WILL, UPON REQUEST BY THE COOPERATIVE, BE GIVEN CONSIDER-
ATION AS A TRADE SECRET PURSUANT TO PARAGRAPH (D) OF SUBDIVISION TWO OF
SECTION EIGHTY-SEVEN OF THE PUBLIC OFFICERS LAW.
S 3. Section 2110 of the insurance law, as amended by chapter 687 of
the laws of 2003, is amended to read as follows:
S 2110. Revocation or suspension of license of insurance producer,
insurance consultant or adjuster. (a) The superintendent may refuse to
renew, revoke, or may suspend for a period the superintendent determines
the license of any insurance producer, HEALTH INSURANCE PURCHASING COOP-
ERATIVE, insurance consultant or adjuster, if, after notice and hearing,
the superintendent determines that the licensee or any sub-licensee has:
(1) violated any insurance laws, or violated any regulation, subpoena
or order of the superintendent [of insurance] or of another state's
insurance commissioner, or has violated any law in the course of his,
HER, OR ITS dealings in such capacity;
(2) provided materially incorrect, materially misleading, materially
incomplete or materially untrue information in the license application;
(3) obtained or attempted to obtain a license through misrepresen-
tation or fraud;
(4)(A) used fraudulent, coercive or dishonest practices;
(B) demonstrated incompetence;
(C) demonstrated untrustworthiness; or
(D) demonstrated financial irresponsibility in the conduct of business
in this state or elsewhere;
(5) improperly withheld, misappropriated or converted any monies or
properties received in the course of business in this state or else-
where;
(6) intentionally misrepresented the terms of an actual or proposed
insurance contract or application for insurance;
(7) has been convicted of a felony;
(8) admitted or been found to have committed any insurance unfair
trade practice or fraud;
(9) had an insurance producer license, or its equivalent, denied,
suspended or revoked in any other state, province, district or territo-
ry;
(10) forged another's name to an application for insurance or to any
document related to an insurance transaction;
(11) improperly used notes or any other reference material to complete
an examination for an insurance license;
(12) knowingly accepted insurance business from an individual who is
not licensed;
S. 650 4
(13) failed to comply with an administrative or court order imposing a
child support obligation; or
(14) failed to pay state income tax or comply with any administrative
or court order directing payment of state income tax.
(b) Before revoking or suspending the license of any HEALTH INSURANCE
PURCHASING COOPERATIVE, insurance producer or other licensee pursuant to
the provisions of this article, the superintendent shall, except when
proceeding pursuant to subsection (f) of this section, give notice to
the licensee and to every sub-licensee and shall hold, or cause to be
held, a hearing not less than ten days after the giving of such notice.
(c) If A HEALTH INSURANCE PURCHASING COOPERATIVE'S LICENSE, an insur-
ance producer's license or other licensee's license pursuant to the
provisions of this article is revoked or suspended by the superinten-
dent, [he] THE SUPERINTENDENT shall forthwith give notice to the licen-
see.
(d) The revocation or suspension of any HEALTH INSURANCE PURCHASING
COOPERATIVE'S LICENSE, insurance producer's license or other licensee's
license pursuant to the provisions of this article shall terminate
forthwith such COOPERATIVE'S LICENSE, producer's license or other
licensee's license and the authority conferred thereby upon all sub-li-
censees.
(e) (1) No individual, corporation, firm or association whose license
as A HEALTH INSURANCE PURCHASING COOPERATIVE, an insurance producer or
other licensee subject to subsection (a) of this section has been
revoked, and no firm or association of which such individual is a
member, and no corporation of which such individual is an officer or
director, shall be entitled to obtain any license under the provisions
of this chapter for a period of one year after such revocation, or, if
such revocation be judicially reviewed, for one year after the final
determination thereof affirming the action of the superintendent in
revoking such license.
(2) If any such license held by a firm, association or corporation be
revoked, no member of such firm or association and no officer or direc-
tor of such corporation shall be entitled to obtain any license, or to
be named as a sub-licensee in any such license, for the same period of
time, unless the superintendent determines, after notice and hearing,
that such member, officer or director was not personally at fault in the
matter on account of which such license was revoked.
(f) (1) As used in this subsection, "non-resident insurance producer's
license or sub-license" means a license or sub-license in such capacity
issued pursuant to paragraph five of subsection (g) of section two thou-
sand one hundred three or subsection (e) of section two thousand one
hundred four of this article.
(2) A non-resident insurance producer's license or sub-license may be
summarily revoked in the event that the licensee's license as an agent,
broker, adjuster or in any other capacity under the insurance law of the
licensee's home state of domicile or such license of the firm or associ-
ation of which the licensee is a member, employee or sub-licensee, or
such license of the corporation of which the licensee is an officer,
director, employee or sub-licensee has been suspended or revoked or
renewal thereof denied in the licensee's home state of domicile by a
procedure affording to the licensee or it a statutory right to a hear-
ing, for action or conduct which, if it had been established upon a
hearing before the superintendent, would have constituted grounds for
revocation of a license under subsection (a) of this section.
S. 650 5
(3) Before revoking the license of any non-resident insurance producer
in accordance with this section, the superintendent shall give ten days'
notice in writing to such producer of the action proposed to be taken,
which notice shall be given in accordance with the applicable provisions
of subsections (a) and (d) of section three hundred three of this chap-
ter.
(4) Upon submission to the superintendent of satisfactory proof that a
suspension or revocation of a license issued by a home state to act as
an insurance agent, insurance broker, adjuster or in another licensed
capacity under the insurance law of such other state or a denial of
renewal thereof has been duly withdrawn, set aside, reversed or voided,
the superintendent shall thereupon reinstate and restore any and all
licenses revoked in accordance with the provisions of this subsection.
(g) If ANY HEALTH INSURANCE PURCHASING COOPERATIVE, any licensed
insurance producer or any person aggrieved shall file with the super-
intendent a verified complaint setting forth facts tending to show
sufficient ground for the revocation or suspension of any insurance
producer's license OR ANY COOPERATIVE'S LICENSE, or if any licensed
adjuster or any person aggrieved files with the superintendent a veri-
fied complaint setting forth facts showing sufficient grounds for the
suspension or revocation of any adjuster's license, the superintendent
shall, after notice and a hearing, determine whether such license shall
be suspended or revoked.
(h) The superintendent shall retain the authority to enforce the
provisions of and impose any penalty or remedy authorized by this chap-
ter against any person or entity who is under investigation for or
charged with a violation of this chapter, even if the person's or enti-
ty's license or registration has been surrendered, or has expired or has
lapsed by operation of law.
(i) A licensee subject to this article shall report to the superinten-
dent any administrative action taken against the licensee in another
jurisdiction or by another governmental agency in this state within
thirty days of the final disposition of the matter. This report shall
include a copy of the order, consent to order or other relevant legal
documents.
(j) Within thirty days of the initial pretrial hearing date, a licen-
see subject to this article shall report to the superintendent any crim-
inal prosecution of the licensee taken in any jurisdiction. The report
shall include a copy of the initial complaint filed, the order resulting
from the hearing and any other relevant legal documents.
S 4. Section 2120 of the insurance law, subsection (d) as added by
chapter 527 of the laws of 2004, is amended to read as follows:
S 2120. Fiduciary capacity of insurance agents, HEALTH INSURANCE
PURCHASING COOPERATIVES, insurance brokers and reinsurance interme-
diaries. (a) Every insurance agent, EVERY HEALTH INSURANCE PURCHASING
COOPERATIVE and every insurance broker acting as such in this state
shall be responsible in a fiduciary capacity for all funds received or
collected as insurance agent, COOPERATIVE or insurance broker, and shall
not, without the express consent of his, HER or its principal, mingle
any such funds with his, HER or its own funds or with funds held by him,
HER or it in any other capacity.
(b) Every reinsurance intermediary acting as such in this state shall
be responsible, in a fiduciary capacity for all funds received or
collected in such capacity, and shall not, without the express consent
of his, HER or its principal or principals, mingle any such funds with
S. 650 6
his, HER or its own funds or with funds held by him, HER or it in any
other capacity.
(c) This section shall not require any such agent, broker, COOPERATIVE
or reinsurance intermediary to maintain a separate bank deposit for the
funds of each such principal, if and as long as the funds so held for
each such principal are reasonably ascertainable from the books of
account and records of such agent, broker, COOPERATIVE or reinsurance
intermediary, as the case may be.
(d) A retail insurance producer who violates paragraph (a) of subdivi-
sion two of section five hundred seventy-seven-a of the banking law
shall be liable for actual damages for the failure to notify, in writ-
ing, the premium finance agency of the information required pursuant to
such paragraph (a).
S 5. Section 2122 of the insurance law is amended to read as follows:
S 2122. Advertising by insurance agents [and], brokers AND COOPER-
ATIVES. (a) (1) No insurance agent [or insurance], broker OR COOPER-
ATIVE shall make or issue in this state any advertisement, sign,
pamphlet, circular, card or other public announcement purporting to make
known the financial condition of any insurer, unless the same shall
conform to the requirements of section one thousand three hundred thir-
teen of this chapter.
(2) No insurance agent, insurance broker, COOPERATIVE or other person,
shall, by any advertisement or public announcement in this state, call
attention to any unauthorized insurer or insurers.
(b) Every agent of any insurer and every insurance broker AND COOPER-
ATIVE shall, in all advertisements, public announcements, signs,
pamphlets, circulars and cards, which refer to an insurer, set forth
therein the name in full of the insurer referred to and the name of the
city, town or village in which it has its principal office in the United
States.
S 6. Every purchasing alliance or cooperative operating pursuant to a
memorandum of understanding with the insurance department prior to the
effective date of this act shall be exempt from this act until the
superintendent of insurance reasonably determines that such alliances or
cooperatives are able to comply with such provisions of this act.
Under no circumstances shall the superintendent of insurance mandate
that any existing purchasing alliance or cooperative operating prior to
the effective date of this act must comply with the provisions of this
act for a period of at least five years from the effective date of this
act or revoke or nullify in any way any memorandum of understanding with
such alliances or cooperatives for a period of at least five years.
S 7. This act shall take effect on the one hundred eightieth day after
it shall have become a law; provided however, that any rules or regu-
lations necessary to implement this act shall be promulgated on or
before such effective date.
