Senate Bill S7332

                                BILL NUMBER:S7332

TITLE OF BILL:
An act
to amend the insurance law, in relation to ensuring that identical
calculations of group size are utilized by the department of financial
services

PURPOSE:
To ensure transparency and fairness by
requiring that
identical group size calculations are used both when premiums are
approved and when there is a determination after the contract period
whether a premium credit or dividend is owed to the policy holder.

SUMMARY OF PROVISIONS:
This legislation would enact a new section
3231-a to the insurance law to direct the Superintendent of the
Department of Financial Services (DFS) to utilize the identical group
size calculations for both premium approval and determination of
premium credits or dividends after the policy period. DFS has chosen
to employ the state insurance law group definitions when approving
premiums, but employs a different group size definition created by
federal law when determining whether or not the insurer has met their
minimum loss ratio (MLR). The legislation would also require DFS, for
premiums that they have already approved for groups, to use the state
              

group definition to determine compliance with the MLR when they test
after the contract period. The legislation permits DFS to switch to
exclusive use of the federal definition for future policy periods.

JUSTIFICATION:
The Department of Financial Services is currently using
two separate definitions of group size.
First, when approving premiums, DFS uses the state law definition.
Second, when testing whether minimum loss ratios have been met, DFS
has elected to employ the group size definition established in
federal law as part of the Affordable Care Act.

Unfortunately, the standards are not identical. As a result, insurers
may be determined by DFS to issue premium credits or dividends in
instances when they have in fact met the MLR standard applied by DFS
when the premiums were approved for a group.

State and federal law use different standards to determine group size.
State law uses "eligible employees" when determining group size, i.e.
the employees in the group actually qualifying for the health
benefit. The federal law uses "employees" instead, whether they
qualify for the employer's insurance benefit, are full-time/part-time
employees, etc. With these differences, it is possible that premium
approved for a small group with its specific statutory minimum loss
ratio under the state definition actually would be tested as large
group for MLR purposes under the federal law. A premium dividend or
credit could therefore be ordered despite the fact that the insurer
met the minimum loss ratio that was employed when the premium was
approved by DFS.


In order to ensure transparency and fairness in the determination of
health insurance premiums, DFS should use an identical group size.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.