NYS Governor David A. Paterson signed into law Governor’s Program Bill No. 278, that reinstates the New York State Insurance Department’s authority to review and approve health insurance premium increases before they take effect. Since 2000, New York had regulated health insurance premiums under a “file and use” law that significantly limited the State’s ability to disapprove health insurance premium increases and allowed the insurance industry to self-regulate.

“Deregulation of health insurance premiums is a failed experiment leading to unjustified premium increases and more people losing their health insurance coverage,” Governor Paterson said. “Health care is a right, not a privilege, and requires sound, balanced regulation to make sure insurance premiums are fair and justified. I am pleased to sign into law my program bill, which will help make coverage more affordable and allow more small businesses and individuals to keep their coverage.”

The new law, which is part of Governor Paterson’s successful health insurance reform agenda, requires health insurers and HMOs to make an application to the Insurance Department to implement premium increases. The Department would have the opportunity to review the rate applications, as well as the underlying calculations, to ensure that the rates are justified and not excessive, and may approve, modify or disapprove the rate application. The law would apply to all rate increases taking effect on or after October 1, 2010.

In addition, the legislation will immediately require health insurers and HMOs to spend more of every premium dollar they collect on medical claims. In particular, the legislation raises the “medical loss ratio” – the percentage of premium spent to provide medical care – from 75 percent to 82 percent for small businesses and from 80 percent to 82 percent for individuals. This would allow the State to ensure that a greater percentage of premiums are returned to consumers in the form of benefits.

“Not only will stronger oversight of rate increases benefit New York’s individuals and small businesses, but prior approval will also provide us with the tools necessary to make sure federal health care reform is implemented in a fair and efficient manner,” the Governor added.

Under the Federal Patient Protection and Affordable Care Act, health insurers will be required to report justifications for “unreasonable” rates increases as well as the percentage of premiums spent on claims, quality of care, taxes and administrative costs.

New York State Insurance Department Superintendent James J. Wrynn said: “This legislative victory, under Governor Paterson’s unwavering leadership, is the culmination of years of battling for more affordable quality health care. Prior approval will work in tandem with President Obama’s health care reform to make sure insurers’ premium rates are transparent and their reporting is correct. Prior approval will also ensure that insurers comply with the requirements of the health insurance exchanges that will be developed under federal reform.”

The legislation also provides an opportunity for policyholders and the public to provide comments to the insurer and the Insurance Department on the rate applications. The Insurance Department is required to post relevant comments on its website to provide a forum for public input and discussion. Small businesses and individuals will also receive longer notice of rate increases – 60 days instead of 30 days – allowing them more time to consider alternative coverage options if they cannot afford a rate increase.

The bill signed into law is part of Governor Paterson’s ambitious health insurance reform agenda. The Governor’s initiatives in this area have thus far:

• Extended COBRA benefits for unemployed workers from 18 months to 36 months;
• Required insurers to allow unmarried young adults, through 29 years of age, to be covered under a parent’s group health insurance policy; and
• Reformed the managed care system to help consumers receive the care they need and to reduce red tape which often leads to inappropriately delayed or denied claims.

(YWN Desk – NYC)