Senate Bill S1597

                                BILL NUMBER:S1597

TITLE OF BILL:
An act
to amend the insurance law, in relation to excepting from community
rating requirements group health insurance policies issued to multiple
employer trusts consisting of municipal corporations and public benefit
corporations

PURPOSE:
The bill would provide an exception to the community rating
requirements to allow municipalities with 50 or fewer employees to
join multiple employer or similar trusts that are experience rated.

SUMMARY OF SPECIFIC PROVISIONS:

Section 1: Amends Section 3231 of the Insurance Law by excepting from
community rating requirements groups comprised of municipal
corporations and public benefit corporations.

Section 2: Amends Section 4317 of the Insurance law by excepting from
community rating requirements groups comprised of municipal
corporations and public benefit corporations.

Section 3: Establishes the effective date of the bill.

              

EXISTING LAW:
Currently a multiple employer trust or similar trust comprised of
several municipalities that purchase health insurance must have a
community rated health plan if any of its member employers has 50 or
fewer employees, even if the aggregate number within the trust is
greater than 50.

JUSTIFICATION:
According to the Office of the New York State Comptroller's 2007
Annual Report on Local Government, spending by local government is
increasing by more than double the rate of inflation. One of the main
reasons for this increase is due to the high cost of employee
benefits. Health insurance comprises about 50% of the spending on
employee benefits. Municipalities are attempting to control the high
cost of health insurance by taking advantage of economies of scale
and developing shared insurance plans with neighboring
municipalities. Many larger municipalities have joined multiple
employer or similar trusts to jointly purchase health insurance
plans. By joining multiple employer and similar
trusts and spreading the risk among a larger pool of risks, these
municipalities have lowered health insurance costs by reducing
administrative costs through negotiating power, amortizing costs
across similar pools of risk, and risk sharing, all in an effort to
stabilize health claims costs.

However, small municipalities with 50 or fewer employees are unable to
take advantage of these costs savings due to New York's community
rating laws. Since 1992, New York has required that individual and
small group health insurance policies, those insuring groups of 50 or
fewer, be community rated. Under community rating, the premium is


determined by the collective claims experience of all insured's in a
particular community pool, without regard to age, sex, health status
or occupations.

Conversely, premiums for groups with more than 50 members are
developed using experience rating methodology which determines the
premium based upon a portion or all of the group's specific claims
experience. New York's community rating law not only requires
municipalities with fewer than 50 employees to have a community rated
health plan, but also requires that a multiple employer or similar
trust comprised of several municipalities must have a community rated
health plan if any of its members has 50 or fewer employees.
Therefore, small municipalities have not been allowed to join
multiple employer or similar trusts and cannot share in the costs
savings benefits associated with these experience rate trusts. This
bill would allow small municipalities to join multiple employer or
similar trusts that are experience rated so they may share in the
health insurance costs savings of these trusts.

PRIOR LEGISLATIVE HISTORY:

S.3360 of 2011-12; Referred to Insurance
S.5080 of 2009-2010; Referred to Insurance
S.8225A of 2008; Moved to Rules

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediately.