Senate Bill S7528

                                BILL NUMBER:S7528

TITLE OF BILL:
An act
to amend the general municipal law, in relation to limitations on
expenditures from the insurance reserve fund

SUMMARY OF PROVISIONS:
This bill would strike out the current
reference to paragraph three of subsection (a) of section one
thousand one hundred thirteen of the insurance law, currently
contained in section 6-n(2) (a) of the general municipal law.

JUSTIFICATION:
The law currently authorizes municipal corporations to
purchase a health insurance plan or to self-insure to provide health
insurance for their officers and employees, and retired officers and
employees. Further, section 6-n of the general municipal law
authorizes municipal corporations to establish and make expenditures
from an insurance reserve fund for any loss, claim, action or
judgment for which the municipal corporation is authorized or
required to purchase or maintain insurance.
However, section 6-n exempts certain kinds of risks enumerated in the
insurance law, including accident and health insurance, from the
types of risks for which the municipality may make such expenditures.
In this way, section 6-n of the general municipal law prohibits
              

municipal corporations from making expenditures from insurance
reserve funds in relation to self-funded health insurance programs.

However, there is an anomaly in the law because section 4706 of the
insurance law recognizes the stabilizing benefits of maintaining a
reserve fund by requiring such a fund where three or more municipal
corporations join together to form a municipal cooperative health
benefit plan. This legislation recognizes that the same rationale
makes a health insurance reserve fund beneficial in the context of a
single municipal corporation that self-insures.

By deleting the reference to health insurance from the list of
exemptions in 6-n, this legislation extends to municipal corporations
and taxpayers the significant stabilizing benefits of maintaining a
reserve fund, and avoids the financial burden that would result when
a municipal corporation wishing to self-insure could not do so
because of the large year-to-year variations in claims against a
self-funded health insurance program.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
None to the State.

EFFECTIVE DATE:
This act shall take effect immediately upon becoming law.