Senate Bill S7334

                                BILL NUMBER:S7334

TITLE OF BILL:
An act
to amend the insurance law and the public health law, in relation to
health maintenance organization benefit designs

PURPOSE:
To permit persons interested in purchasing HMO products to
have more affordable coverage due to impending federal tax advantages
of certain HMO products.

SUMMARY OF PROVISIONS:
Amends section 1109(e) of the insurance law to
clarify provisions relating to the modification of HMO benefit
designs, and adds a new subdivision 6 to section 4406 of the public
health law to permit HMOs to offer contracts at the 60%, 70%, 80% and
90% actuarial valuation levels.

JUSTIFICATION:
The percentage of New Yorkers who have HMO coverage
continues to decline each year. They are transitioning to insurance
coverage, typically utilizing an Exclusive Provider Organization
(EPO) because the EPO premiums tend to be lower than HMO premiums.
New York allows greater cost sharing in EPO products than it does for
HMO products resulting in lower EPO premiums.
              

One of the benefits of the HMO is its emphasis on preventive and well
care services. In the Healthy NY program, an enrollee can access
certain preventive services before the deductible is reached, which
include well-child and routine prenatal care, prostate cancer
screening, mammography, cervical cytology, and adult physicals and
immunizations.

A robust HMO market helps drive down health care costs, while
improving the quality of health care. New York needs to reverse the
declining enrollment trends in HMO products. To do so, New York
should change its outdated limitations for cost sharing in HMO
products. New York should permit HMOs to offer coverage with cost
sharing levels that are comparable to EPO products.

There is precedent for permitting cost sharing changes in the existing
portfolio of New York State insurance products. Healthy New York
currently offers a health plan that requires the enrollee to pay for
most medical expenses up to a certain dollar amount before the
insurance policy begins to cover them. In fact, as of January 1,
2012, this plan is the only plan available to new Healthy New York
enrollees.

In 2014, a new federal health insurance tax (HIT) will be imposed on
all health coverage, including Medicaid, Medicare Advantage and all
other fully insured products. The health insurers will pay the HIT
based on their market share of the fully insured market across the
nation. However, health insurers that are exempt from federal income
tax (e.g. non-profit Article 44 HMOs in New York) will be eligible
for a 50 percent tax credit against their HIT liability.


This tax advantage can be leveraged to reduce the cost of health
insurance, Unfortunately, the existing rules that restrict cost
sharing designs for HMO products make it impossible for an Article 44
HMO to issue contracts at varying actuarial valuation levels
established. Customers, especially those on a more limited budget,
who are interested in purchasing HMO coverage, would lose the pricing
advantages provided by the federal tax policy if the current
limitations on HMO products are maintained.

Article 44 HMO policies are not for everyone. However, consumers
should be given the choice at all levels of actuarial value to
purchase Article 44 policies in all markets, especially given the
favorable federal tax treatment of
these policies which will increase their affordability. This will
result in more New Yorkers accessing health coverage.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
January 1, 2013 and applies to policies and contracts
issued, renewed, modified, altered or amended on or after such date.