S T A T E O F N E W Y O R K
________________________________________________________________________
4540--A
2015-2016 Regular Sessions
I N S E N A T E
March 26, 2015
___________
Introduced by Sens. SEWARD, VALESKY -- read twice and ordered printed,
and when printed to be committed to the Committee on Insurance --
recommitted to the Committee on Insurance in accordance with Senate
Rule 6, sec. 8 -- committee discharged, bill amended, ordered
reprinted as amended and recommitted to said committee
AN ACT to amend the insurance law, in relation to rating of individual
and small group health insurance policies; and to repeal certain
provisions of such law relating thereto
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subsections (d) and (e) of section 3231 of the insurance
law, subsection (d) as amended by section 1 of part A of chapter 494 of
the laws of 2009, subsection (e) as amended by chapter 107 of the laws
of 2010, subparagraph (A) of paragraph 1 of subdivision (e) as further
amended by section 104 of part A of chapter 62 of the laws of 2011 and
subparagraph (B) of paragraph 1 of subsection (e) as amended by section
61 of part D of chapter 56 of the laws of 2013, are amended to read as
follows:
(d) (1) Notwithstanding any other provision of this chapter to the
contrary, no NEW OR INITIAL policy form subject to this section shall be
issued or delivered, nor any insurance contract entered into, unless and
until the insurer has filed with the superintendent a schedule of premi-
ums, not to exceed twelve months in duration, to be paid under the poli-
cy forms and obtained the superintendent's approval thereof. The super-
intendent may refuse such approval if he or she finds that such premiums
are excessive, inadequate, or unfairly discriminatory. The superinten-
dent may consider the financial condition of such insurer in approving
or disapproving any premium. In determining whether to approve the sche-
dule of premiums filed, the superintendent shall, subject to the
provisions of section three thousand two hundred thirty-three of this
article, consider the prior experience of the insurer's community pool
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD10031-02-6
S. 4540--A 2
and the insurer's projections relating to claim costs, utilization and
administrative expenses and shall not adjust the insurer's rates based
upon the rates approved for other insurers.
(2) An insurer shall provide specific claims experience to a municipal
corporation, as defined in subsection (f) of section four thousand seven
hundred two of this chapter, covered by the insurer under a community
rated policy when the municipal corporation requests its claims experi-
ence for purposes of forming or joining a municipal cooperative health
benefit plan certified pursuant to article forty-seven of this chapter.
Notwithstanding the forgoing provisions, no insurer shall be required to
provide more than three years' claims experience to a municipal corpo-
ration making this request.
(e) (1) (A) An insurer desiring to increase or decrease premiums for
any PREVIOUSLY APPROVED policy form subject to this section shall submit
a rate filing [or application] to the superintendent[.
An insurer shall send written notice of the proposed rate adjustment,
including the specific change requested, to each policy holder and
certificate holder affected by the adjustment on or before the date the
rate filing or application is submitted to the superintendent. The
notice shall prominently include mailing and website addresses for both
the department of financial services and the insurer through which a
person may, within thirty days from the date the rate filing or applica-
tion is submitted to the superintendent, contact the department of
financial services or insurer to receive additional information or to
submit written comments to the department of financial services on the
rate filing or application. The superintendent shall establish a process
to post on the department's website, in a timely manner, all relevant
written comments received pertaining to rate filings or applications.
The insurer shall provide a copy of the notice to the superintendent
with the rate filing or application. The superintendent shall immediate-
ly cause the notice to be posted on the department of financial
services' website. The superintendent shall determine whether the filing
or application shall become effective as filed, shall become effective
as modified, or shall be disapproved. The superintendent may modify or
disapprove the rate filing or application if the superintendent finds
that the premiums are unreasonable, excessive, inadequate, or unfairly
discriminatory, and may consider the financial condition of the insurer
when approving, modifying or disapproving any premium adjustment. The
determination of the superintendent shall be supported by sound actuari-
al assumptions and methods, and shall be rendered in writing between
thirty and sixty days from the date the rate filing or application is
submitted to the superintendent. Should the superintendent require addi-
tional information from the insurer in order to make a determination,
the superintendent shall require the insurer to furnish such informa-
tion, and in such event, the sixty days shall be tolled and shall resume
as of the date the insurer furnishes the information to the superinten-
dent. If the superintendent requests additional information less than
ten days from the expiration of the sixty days (exclusive of tolling),
the superintendent may extend the sixty day period an additional twenty
days to make a determination. The application or rate filing will be
deemed approved if a determination is not rendered within the time
allotted under this section. An insurer shall not implement a rate
adjustment unless the insurer provides at least sixty days advance writ-
ten notice of the premium rate adjustment approved by the superintendent
to each policy holder and certificate holder affected by the rate
adjustment.
S. 4540--A 3
(B) The expected minimum loss ratio for a policy form subject to this
section, for which a rate filing or application is made pursuant to this
paragraph, other than a medicare supplemental insurance policy, or, with
the approval of the superintendent, an aggregation of policy forms that
are combined into one community rating experience pool and rated
consistent with community rating requirements, shall not be less than
eighty-two percent. In reviewing a rate filing or application, the
superintendent may modify the eighty-two percent expected minimum loss
ratio requirement if the superintendent determines the modification to
be in the interests of the people of this state or if the superintendent
determines that a modification is necessary to maintain insurer solven-
cy. No later than July thirty-first of each year, every insurer subject
to this subparagraph shall annually report the actual loss ratio for the
previous calendar year in a format acceptable to the superintendent. If
an expected loss ratio is not met, the superintendent may direct the
insurer to take corrective action, which may include the submission of a
rate filing to reduce future premiums, or to issue dividends, premium
refunds or credits, or any combination of these.
(2) (A) Until September thirtieth, two thousand ten, as an alternate
procedure to the requirements of paragraph one of this subsection, an
insurer desiring to increase or decrease premiums for any policy form
subject to this section may instead submit a rate filing or application
to the superintendent] and such [application or] filing shall be deemed
approved, provided that: (i) the anticipated minimum loss ratio for a
policy form shall not be less than eighty-two percent of the premium;
and (ii) the insurer submits, as part of such filing, a certification by
a member of the American Academy of Actuaries or other individual
acceptable to the superintendent that the insurer is in compliance with
the provisions of this paragraph, based upon that person's examination,
including a review of the appropriate records and of the actuarial
assumptions and methods used by the insurer in establishing premium
rates for policy forms subject to this section. [An insurer shall not
utilize the alternate procedure pursuant to this paragraph to implement
a change in rates to be effective on or after October first, two thou-
sand ten.] AN INSURER SHALL NOT IMPLEMENT A PREMIUM RATE ADJUSTMENT
UNLESS THE INSURER PROVIDES AT LEAST ONE HUNDRED TWENTY DAYS ADVANCE
NOTICE OF THE PREMIUM RATE ADJUSTMENT BY WRITTEN NOTICE TO EACH POLICY
HOLDER AND CERTIFICATE HOLDER AFFECTED BY THE RATE ADJUSTMENT.
(B) Each calendar year, an insurer shall return, in the form of aggre-
gate benefits for each policy form [filed pursuant to the alternate
procedure set forth in this paragraph] at least eighty-two percent of
the aggregate premiums collected for the policy form during that calen-
dar year. Insurers shall annually report, no later than [June thirtieth]
JULY THIRTY-FIRST of each year, the loss ratio calculated pursuant to
this paragraph for each such policy form for the previous calendar year.
In each case where the loss ratio for a policy form fails to comply with
the eighty-two percent loss ratio requirement, the insurer shall issue a
dividend or credit against future premiums for all policy holders with
that policy form in an amount sufficient to assure that the aggregate
benefits paid in the previous calendar year plus the amount of the divi-
dends and credits shall equal eighty-two percent of the aggregate premi-
ums collected for the policy form in the previous calendar year. The
dividend or credit shall be issued to each policy holder who had a poli-
cy which was in effect at any time during the applicable year. The divi-
dend or credit shall be prorated based on the direct premiums earned for
the applicable year among all policy holders eligible to receive such
S. 4540--A 4
dividend or credit. An insurer shall make a reasonable effort to identi-
fy the current address of, and issue dividends or credits to, former
policy holders entitled to the dividend or credit. An insurer shall,
with respect to dividends or credits to which former policy holders that
the insurer is unable to identify after a reasonable effort would other-
wise be entitled, have the option, as deemed acceptable by the super-
intendent, of prospectively adjusting premium rates by the amount of
such dividends or credits, issuing the amount of such dividends or cred-
its to existing policy holders, depositing the amount of such dividends
or credits in the fund established pursuant to section four thousand
three hundred twenty-two-a of this chapter, or utilizing any other meth-
od which offsets the amount of such dividends or credits. All dividends
and credits must be distributed by September thirtieth of the year
following the calendar year in which the loss ratio requirements were
not satisfied. The annual report required by this paragraph shall
include an insurer's calculation of the dividends and credits, as well
as an explanation of the insurer's plan to issue dividends or credits.
The instructions and format for calculating and reporting loss ratios
and issuing dividends or credits shall be specified by the superinten-
dent by regulation. Such regulations shall include provisions for the
distribution of a dividend or credit in the event of cancellation or
termination by a policy holder.
[(3) All policy forms subject to this subsection, other than medicare
supplemental insurance policy forms, issued or in effect during calendar
year two thousand ten shall be subject to a minimum loss ratio require-
ment of eighty-two percent. Insurers may use the alternate filing proce-
dure set forth in paragraph two of this subsection to adjust premium
rates in order to meet the required minimum loss ratio for calendar year
two thousand ten. The rate filing or application shall be submitted no
later than September thirtieth, two thousand ten.]
S 2. Subsections (c) and (d) of section 4308 of the insurance law are
REPEALED and two new subsections (c) and (d) are added to read as
follows:
(C) A CORPORATION SUBJECT TO THE PROVISIONS OF THIS ARTICLE DESIRING
TO INCREASE OR DECREASE PREMIUMS FOR ANY PREVIOUSLY APPROVED COMMUNITY
RATED CONTRACT SUBJECT TO THIS SECTION SHALL SUBMIT A RATE FILING TO THE
SUPERINTENDENT AND SUCH FILING SHALL BE DEEMED APPROVED, PROVIDED THAT
(1) THE ANTICIPATED INCURRED LOSS RATIO FOR A CONTRACT FORM, OTHER THAN
A MEDICARE SUPPLEMENTAL INSURANCE CONTRACT, SHALL NOT BE LESS THAN
EIGHTY-TWO PERCENT, AND (2) THE CORPORATION SUBMITS, AS PART OF SUCH
FILING, A CERTIFICATION BY A MEMBER OF THE AMERICAN ACADEMY OF ACTUARIES
OR OTHER INDIVIDUAL ACCEPTABLE TO THE SUPERINTENDENT THAT SUCH CORPO-
RATION IS IN COMPLIANCE WITH THE PROVISIONS OF THIS SUBSECTION, BASED
UPON THAT PERSON'S EXAMINATION, INCLUDING A REVIEW OF THE APPROPRIATE
RECORDS AND OF THE ACTUARIAL ASSUMPTIONS AND METHODS USED BY THE CORPO-
RATION IN ESTABLISHING PREMIUM RATES FOR CONTRACTS SUBJECT TO THIS
SECTION. THE EXPECTED MINIMUM LOSS RATIO FOR A MEDICARE SUPPLEMENTAL
INSURANCE CONTRACT FORM SHALL BE NOT LESS THAN EIGHTY PERCENT. A CORPO-
RATION SHALL NOT IMPLEMENT A PREMIUM RATE ADJUSTMENT UNLESS THE CORPO-
RATION PROVIDES AT LEAST ONE HUNDRED TWENTY DAYS ADVANCE NOTICE OF THE
PREMIUM RATE ADJUSTMENT BY WRITTEN NOTICE TO EACH POLICY HOLDER AND
CERTIFICATE HOLDER AFFECTED BY THE RATE ADJUSTMENT.
(D) (1) EACH CALENDAR YEAR, A CORPORATION SUBJECT TO THE PROVISIONS OF
THIS ARTICLE SHALL RETURN, IN THE FORM OF AGGREGATE BENEFITS INCURRED
FOR EACH CONTRACT FORM FILED PURSUANT TO THE PROCEDURE SET FORTH IN
SUBSECTION (C) OF THIS SECTION, AT LEAST EIGHTY-TWO PERCENT, OR IN THE
S. 4540--A 5
CASE OF MEDICARE SUPPLEMENTAL INSURANCE CONTRACT FORM, AT LEAST EIGHTY
PERCENT OF THE AGGREGATE PREMIUMS EARNED FOR THE CONTRACT FORM IN THE
PREVIOUS CALENDAR YEAR. CORPORATIONS SUBJECT TO THE PROVISIONS OF THIS
ARTICLE SHALL ANNUALLY REPORT, NO LATER THAN JULY THIRTY-FIRST OF EACH
YEAR, THE LOSS RATIO CALCULATED PURSUANT TO THIS SUBSECTION FOR EACH
SUCH CONTRACT FORM FOR THE PREVIOUS CALENDAR YEAR.
(2) IN EACH CASE WHERE THE LOSS RATIO FOR A CONTRACT FORM FAILS TO
COMPLY WITH THE MINIMUM LOSS RATIO REQUIREMENT, AS SET FORTH IN PARA-
GRAPH ONE OF THIS SUBSECTION, THE CORPORATION SHALL ISSUE A DIVIDEND OR
CREDIT AGAINST FUTURE PREMIUMS FOR ALL CONTRACT HOLDERS WITH THAT
CONTRACT FORM IN AN AMOUNT SUFFICIENT TO ASSURE THAT THE AGGREGATE BENE-
FITS INCURRED IN THE PREVIOUS CALENDAR YEAR PLUS THE AMOUNT OF THE DIVI-
DENDS AND CREDITS SHALL EQUAL NO LESS THAN EIGHTY-TWO PERCENT (OR EIGHTY
PERCENT IN THE CASE OF A MEDICARE SUPPLEMENTAL INSURANCE CONTRACT FORM),
OF THE AGGREGATE PREMIUMS EARNED FOR THE CONTRACT FORM IN THE PREVIOUS
CALENDAR YEAR. THE DIVIDEND OR CREDIT SHALL BE ISSUED TO EACH CONTRACT
HOLDER OR SUBSCRIBER WHO HAD A CONTRACT THAT WAS IN EFFECT AT ANY TIME
DURING THE APPLICABLE YEAR. THE DIVIDEND OR CREDIT SHALL BE PRORATED
BASED ON THE DIRECT PREMIUMS EARNED FOR THE APPLICABLE YEAR AMONG ALL
CONTRACT HOLDERS OR SUBSCRIBERS ELIGIBLE TO RECEIVE SUCH DIVIDEND OR
CREDIT. A CORPORATION SHALL MAKE A REASONABLE EFFORT TO IDENTIFY THE
CURRENT ADDRESS OF, AND ISSUE DIVIDENDS OR CREDITS TO, FORMER CONTRACT
HOLDERS OR SUBSCRIBERS ENTITLED TO THE DIVIDEND OR CREDIT. A CORPORATION
SHALL, WITH RESPECT TO DIVIDENDS OR CREDITS TO WHICH FORMER CONTRACT
HOLDERS THAT THE CORPORATION IS UNABLE TO IDENTIFY AFTER A REASONABLE
EFFORT WOULD OTHERWISE BE ENTITLED, HAVE THE OPTION, AS DEEMED ACCEPTA-
BLE BY THE SUPERINTENDENT, OF PROSPECTIVELY ADJUSTING PREMIUM RATES BY
THE AMOUNT OF SUCH DIVIDENDS OR CREDITS, ISSUING THE AMOUNT OF SUCH
DIVIDENDS OR CREDITS TO EXISTING CONTRACT HOLDERS, DEPOSITING THE AMOUNT
OF SUCH DIVIDENDS OR CREDITS IN THE FUND ESTABLISHED PURSUANT TO SECTION
FOUR THOUSAND THREE HUNDRED TWENTY-TWO-A OF THIS ARTICLE, OR UTILIZING
ANY OTHER METHOD WHICH OFFSETS THE AMOUNT OF SUCH DIVIDENDS OR CREDITS.
ALL DIVIDENDS AND CREDITS MUST BE DISTRIBUTED BY SEPTEMBER THIRTIETH OF
THE YEAR FOLLOWING THE CALENDAR YEAR IN WHICH THE LOSS RATIO REQUIRE-
MENTS WERE NOT SATISFIED. THE ANNUAL REPORT REQUIRED BY PARAGRAPH ONE OF
THIS SUBSECTION SHALL INCLUDE A CORPORATION'S CALCULATION OF THE DIVI-
DENDS AND CREDITS, AS WELL AS AN EXPLANATION OF THE CORPORATION'S PLAN
TO ISSUE DIVIDENDS OR CREDITS. THE INSTRUCTIONS AND FORMAT FOR CALCULAT-
ING AND REPORTING LOSS RATIOS AND ISSUING DIVIDENDS OR CREDITS SHALL BE
SPECIFIED BY THE SUPERINTENDENT BY REGULATION. SUCH REGULATIONS SHALL
INCLUDE PROVISIONS FOR THE DISTRIBUTION OF A DIVIDEND OR CREDIT IN THE
EVENT OF CANCELLATION OR TERMINATION BY A CONTRACT HOLDER OR SUBSCRIBER.
S 3. Subsections (e) and (f) of section 4308 of the insurance law, as
amended by chapter 107 of the laws of 2010, are amended to read as
follows:
(e) Notwithstanding any other provision of law, the superintendent
shall have the power to require independent management and financial
audits of corporations subject to the provisions of this article whenev-
er in the judgment of the superintendent, losses sustained by a corpo-
ration jeopardize its ability to provide meaningful coverage at afforda-
ble rates or when such audit would be necessary to protect the interests
of subscribers. The audit shall include, but not be limited to, an
investigation of the corporation's provision of benefits to senior citi-
zens, individual and family, and small group and small business
subscribers in relation to the needs of those subscribers. The audit
shall also include an evaluation of the efficiency of the corporation's
S. 4540--A 6
management, particularly with respect to lines of business which are
experiencing losses. In every case in which the superintendent chooses
to require an audit provided for in this subsection, the superintendent
shall have the authority to select the auditor. Any costs incurred as a
result of the operation of this subsection shall be assessed on all
domestic insurers in the same manner as provided for in section [three
hundred thirty-two of this chapter] TWO HUNDRED SIX OF THE FINANCIAL
SERVICES LAW.
(f) The results of any audit conducted pursuant to [subsections (d)
and] SUBSECTION (e) of this section shall be provided to the corporation
and each member of its board of directors. The superintendent shall have
the authority to direct the corporation in writing to implement any
recommendations resulting from the audit that the superintendent finds
to be necessary and reasonable; provided, however, that the superinten-
dent shall first consider any written response submitted by the corpo-
ration or the board of directors prior to making such finding. Upon any
application for a rate adjustment by the corporation, the superintendent
shall review the corporation's compliance with the directions and recom-
mendations made previously by the superintendent, as a result of the
most recently completed management or financial audit and shall include
such findings in any written decision concerning such application.
S 4. Subsections (g), (h), (i) and (j) of section 4308 of the insur-
ance law are REPEALED.
S 5. This act shall take effect immediately.