Preservation of public health and general welfare.
Specific reasons underlying the finding of necessity:
Chapter 1 of the Laws of 1999 enacted the Healthy New York program, an initiative designed to encourage small employers to offer health insurance to their employees and to encourage uninsured individual proprietors and working uninsured individuals to purchase insurance coverage. The federal Medicare Prescription Drug, Improvement and Modernization Act of 2003, Pub. L. No. 108-173, added a new Section 223 to the Internal Revenue Code. The new section authorizes those insured by a high deductible health plan, as defined in the federal legislation, to establish a tax-deductible health savings account to pay for certain medical expenses. In his 2006 State of the Union Address, President Bush emphasized the importance of high deductible health plans and health savings accounts (HSAs) in expanding health care options and reducing the number of the uninsured. Changes to the federal law at the end of 2006 made high deductible health plans more advantageous for tax savings by removing many limitations and making certain retirement funds as eligible for deposit into an HSA. People with HSAs can now roll over funds from a health reimbursement arrangement, flex spending account, or individual retirement account into an HSA on a one-time basis.
Prior to January 1, 2007, Healthy New York participants seeking comprehensive health insurance coverage could not access high deductible health plans and establish health savings accounts in accordance with the federal standards. These employers and individuals were not eligible for the tax deductions they would otherwise enjoy for funds deposited into health savings accounts and used for qualified medical expenses. The funds deposited into the health savings accounts accrue tax-deferred until the account owner seeks reimbursement for medical expenses or reaches Medicare eligibility.
Health insurance costs have escalated dramatically in recent years, with some health plans implementing increases in the range of 25% to 30%. The increased cost of insurance has, in turn, contributed to a decline in the number of employers who offer insurance to their employees. Recent census data indicates that approximately 15% of New York's population is uninsured. A large portion of New York State's uninsured population is individuals who are self-employed or who work for small employers.
This amendment to Part 362 of 11 NYCRR requires health maintenance organizations and insurers participating in the Healthy New York program to offer high deductible health plans, as defined by the federal Medicare legislation, to qualifying small employers and individuals. The high deductible health plans have lower premiums than the standard Healthy New York plans. The reduction in cost encourages more small businesses and individuals to purchase health insurance coverage and should therefore result in a decrease in the number of uninsureds. In addition, the high deductible health plans purchased with the health savings accounts give New Yorkers access to another health insurance alternative that complies with federal standards. The new option also provides New Yorkers with access to a tax-advantaged method of purchasing health insurance that was previously not available to individuals.
Employers generally renew existing insurance arrangements or enroll in new insurance policies during the fall. These new policies become effective in January of the following year. In order for these high deductible health plans to be sold with a January 1, 2007 effective date, the health plans had to be able to market them to employers along with other new product offerings in the fall. The prior emergency filings of this amendment required health plans to issue high deductible health plan contracts beginning January 1, 2007. This amendment must be filed as an emergency measure in order to keep existing program requirements concerning high deductible health plans in place.
This emergency filing is necessary to continue the requirement that health plans provide new benefits under the program. A prior emergency filing of this amendment added the following new benefits to the Healthy New York program as of January 1, 2007: diagnostic screening for prostate cancer and a limited number of post-hospital or post-surgical home health care and physical therapy services. The addition of the prostate cancer screening benefit facilitates prompt and early detection of prostate cancer, which in turn should decrease mortality and reduce treatment costs. Prior to January 1, 2007, the Healthy New York program covered surgery and hospitalizations but did not cover subsequent home health care and physical therapy care. Consequently, Healthy New York enrollees experienced extended hospitalizations in order to receive therapy. It is anticipated that the addition of post-hospitalization and post-surgical home health and physical therapy services will result in shorter hospital stays and lower hospital costs, which will in turn reduce costs to the State.
Consequently, it is critical that this amendment be adopted as promptly as possible. For the reasons stated above, this rule must be promulgated on an emergency basis for the furtherance of the public health and general welfare.
Subject:
Minimum standards for the form and content of policies and contracts subject to the provisions of section 4326 of the Insurance Law.
Purpose:
To create additional health insurance options for qualifying small employers and individuals by requiring health maintenance organizations and participating insurers to offer high deductible health plans in conjunction with the Health New York Program.
Text of emergency rule:
New subdivisions (d), (e) and (f) are added to section 362-2.7 to read as follows:
§ 362-2.7 Healthy New York benefit adjustments.
(d) Beginning January 1, 2007, qualifying health insurance contracts shall include a benefit for up to forty post-hospital or post-surgical home health care visits per calendar year.
(e) Beginning January 1, 2007, qualifying health insurance contracts shall include a benefit for up to thirty post-hospital or post-surgical physical therapy visits.
(f) Beginning January 1, 2007, qualifying health insurance contracts shall include a benefit for diagnostic screening for prostatic cancer consistent with the benefit set forth in section 4303(z-1) of the Insurance Law.
A new section 362-2.8 is added to read as follows:
§ 362-2.8 High deductible health plan under the Healthy New York Program.
(a) For purposes of this section:
(1) “High deductible health plan” shall mean a qualifying health insurance contract with a plan year deductible of at least $1,150 for individual coverage and $2,300 for family coverage. Out-of-pocket expenses, including the deductible and copayments, shall be capped at $5,250 for individual coverage and $10,500 for family coverage for the plan year.
(2) “Family coverage” means any coverage that is not self-only.
(b) Effective January 1, 2007, every health maintenance organization and insurer participating in the Healthy New York program shall offer a high deductible health plan with a plan year deductible of $1,150 for individual coverage and $2,300 for family coverage to qualifying small employers and qualifying individuals under the Healthy New York program in connection with a Health Savings Account (hereinafter “HSA”) authorized by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Pub. L. No. 108-173). The health maintenance organization or insurer must provide qualifying small employers and qualifying individuals that select a high deductible health plan with a separate disclosure statement which prominently discloses the existence of the deductible.
(c) Health maintenance organizations and participating insurers may also offer additional high deductible health plans with deductibles exceeding the minimum amounts set forth in subdivision (a) of this section in connection with qualifying health insurance contracts. Any such additional options must contain the cap on out-of-pocket expenses set forth in subdivision (a) of this section.
(d) When necessary to meet the federal minimums for a high deductible health plan, each of the dollar amounts referred to in subdivision (a) of this section shall be adjusted by an amount which is consistent with the automatic cost-of-living adjustment as set forth in section 223(g) of the Internal Revenue Code, 26 USC section 223.
(e) The plan year deductible shall not apply to those services described in section 4326(d)(7) and (8) of the Insurance Law, prostatic cancer screenings, or routine prenatal care. Health maintenance organizations and participating insurers may also exempt from the deductible such other preventive services which would not jeopardize the eligibility of the high deductible health plan to be used in conjunction with an HSA.
(f) The calendar year prescription drug deductible set forth in section 4326(e)(5) of the Insurance Law shall not be applied in addition to the overall plan year deductible for the high deductible health plan.
(g) At the time of application, the health maintenance organization or participating insurer shall obtain a certification that the applicant or their employees, as appropriate, intend to establish an HSA, or if applicable, HSAs. At the time of annual recertification, the qualifying employer or individual shall submit a recertification confirming the status of the HSA or HSAs.
(h) A small employer or individual may choose between a high deductible health plan or a qualifying health insurance contract at the time of enrollment. Once enrolled, any change from one type of plan to another may occur only at the time of the annual recertification.
This notice is intended
to serve only as a notice of emergency adoption. This agency intends to adopt this emergency rule as a permanent rule and will publish a notice of proposed rule making in the State Register at some future date. The emergency rule will expire June 6, 2007.
Text of emergency rule and any required statements and analyses may be obtained from:
Andrew Mais, Insurance Department, 25 Beaver St., New York, NY 10004, (212) 480-2285, e-mail: amais@ins.state.ny.us
Regulatory Impact Statement
1. Statutory authority: The superintendent's authority for the adoption of the third amendment to 11 NYCRR 362 is derived from sections 201, 301, 1109, 3201, 3217, 3221, 4235, 4303, 4304, 4305 and 4326 of the Insurance Law.
Sections 201 and 301 authorize the superintendent to prescribe regulations interpreting the provisions of the Insurance Law, effectuate any power granted to the superintendent under the Insurance Law, and prescribe forms.
Section 1109 authorizes the superintendent to promulgate regulations in effectuating the purposes and provisions of the Insurance Law and Article 44 of the Public Health Law with respect to the contracts between a health maintenance organization (HMO) and its subscribers.
Section 3201 authorizes the superintendent to approve accident and health insurance policy forms for delivery or issuance for delivery in this state.
Section 3217 authorizes the superintendent to issue regulations to establish minimum standards, including standards of full and fair disclosure, for the form, content and sale of accident and health insurance policies.
Section 3221 sets forth the standard provisions to be included in group or blanket accident and health insurance policies written by commercial insurers.
Section 4235 defines group accident and health insurance and the types of groups to which such insurance may be issued.
Section 4303 governs the accident and health insurance contracts written by non-for-profit corporations and sets forth the benefits that must be covered under such contracts.
Section 4304 includes requirements for individual health insurance contracts written by not-for-profit corporations.
Section 4305 includes requirements for group health insurance contracts written by not-for profit corporations.
Section 4326 authorizes the creation of a program to provide standardized health insurance to qualifying small employers and qualifying working uninsured individuals. Section 4326(g) authorizes the superintendent to modify the copayment and deductible amounts for qualifying health insurance contracts. Section 4326(g) also authorizes the superintendent to establish additional standardized health insurance benefit packages to meet the needs of the public after January 1, 2002.
2. Legislative objectives: The federal Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, added a new section 223 to the Internal Revenue Code. The new section authorizes those insured by a high deductible health plan, as defined in the federal legislation, to establish a tax-deductible health savings account to pay for certain medical expenses. Chapter 1 of the Laws of 1999 enacted the Healthy New York program, an initiative designed to encourage small employers to offer health insurance to their employees and to encourage individual proprietors and working uninsured individuals to purchase insurance coverage.
3. Needs and benefits: Currently, small employer and individual participants in the Healthy New York program seeking comprehensive health insurance coverage cannot purchase high deductible health plans and establish health savings accounts in accordance with federal standards. These participants in the Healthy New York program are not currently eligible for the tax deductions for funds deposited into health savings accounts and used for qualified medical expenses. This amendment will create products that are compatible with health savings accounts. Health savings accounts allow users to deposit pre-tax money into an account and withdraw the money tax-free for qualified medical expenses.
Due in part to the rising cost of health insurance coverage, many small employers are currently unable to provide health insurance coverage to their employees. The high cost of insurance prevents many individual proprietors and working individuals from purchasing their own coverage.
These amendments to Part 362 of 11 NYCRR will require HMOs and participating insurers to offer high deductible health plans using the Healthy New York small employer and individual programs. The high deductible health plans will have lower premiums than current Healthy New York benefit packages. The reduction in premium will encourage more small businesses and individuals to purchase comprehensive health insurance coverage. In addition, the high deductible health plans purchased for use with the health savings accounts will give New Yorkers access to another health insurance alternative that complies with recently-enacted federal standards. This new option will also provide New Yorkers with access to a tax-advantaged method of purchasing health insurance.
In addition, this amendment will provide for prostatic cancer screening and a limited home health care and physical therapy benefit. The addition of the prostate cancer screening benefit will facilitate prompt and early detection of prostate cancer, which in turn should decrease mortality and reduce treatment costs. The addition of post-hospitalization and post-surgical home health and physical therapy services will result in insureds being discharged from the hospital sooner now that they can obtain these services in an outpatient setting. Shorter hospital stays will reduce costs. The addition of the new benefits will in turn reduce costs to the State, because the State reimburses the health plans for certain claims.
4. Costs: This amendment imposes no compliance costs upon state or local governments. HMOs and participating insurers will incur some minor costs in drafting the contract riders that will create the high deductible health plans and add the new benefits. The Department has provided HMOs and participating insurers with model language and forms to use in implementing the amendment. The Health Care Reform Act allocated a fixed amount to the Healthy New York program to encourage uninsured businesses and individuals to purchase health insurance. This amendment will not alter the amounts dedicated to the program. However, this amendment may decrease the per head cost to the State to be distributed from the overall allocation for the program for workers enrolled in Healthy New York because the addition of the home health care and physical therapy benefits will reduce hospitalization costs by allowing insureds to receive services in less costly settings. In addition, the prostatic screening benefit may reduce costs to the state by resulting in some instances of cancer being detected earlier, with fewer medical costs. The amendment creates a less expensive option under Healthy New York, which should attract additional people to the program and increase enrollment. The overall costs of the program are capped at the appropriated funding amounts.
5. Local government mandates: This amendment imposes no new mandates on any county, city, town, village, school district, fire district or other special district.
6. Paperwork: Healthy New York requires HMOs and participating insurers to report enrollment changes on a monthly basis and also requires an annual request for reimbursement of eligible claims. Twice a year, enrollment reports that discern enrollment on a county-by-county basis are submitted to the Insurance Department. This amendment will not impose any new reporting requirements, though it will require separate identification of enrollment in the high deductible health plan option.
7. Duplication: There are no known federal or other states' requirements that duplicate, overlap, or conflict with this regulation.
8. Alternatives: The adoption of this amendment will require high deductible health plans to be issued under the Healthy New York program for qualifying individuals and small employers. One alternative would be to not offer the high deductible health plan option. The Department has determined that this is not an attractive alternative, because without a high deductible health plan, these small businesses, individuals, and sole proprietors could not open health savings accounts. The Department also considered alternative levels of deductibles. However, deductible amounts lower than those chosen would either not qualify for use with health savings accounts, or would require revision soon after implementation due to deductible limit adjustments each year for use with health savings accounts. Another alternative considered by the Department was to require only one set of deductible amounts, rather than to allow additional amounts. After discussions with industry representatives, the flexibility to offer additional deductible amounts in qualifying health insurance contracts appeared to better serve the intended enrollees, and allowed the health plans to be creative in their product offerings. This amendment also adds prostatic cancer screening and a limited post-hospital and post-surgical physical therapy and home health care benefit to the Healthy New York program. Currently, the program does not cover these benefits. The Department has received extensive comments and suggestions from the health insurance industry in preparing these regulations. The Department has met several times with representatives from groups that represent the health maintenance organization and not-for-profit health insurance industry and has held numerous phone conferences. Some of these conversations have been with experts in high deductible health plans and health savings accounts. These industry representatives have provided the Department with comments and suggestions on the drafting of this regulation, including technical advice and cost analysis of the deductibles and benefits.
9. Federal standards: The federal Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, added a new section 223 to the Internal Revenue Code. The new section authorizes those insured by a high deductible health plan, as defined in the federal legislation, to establish tax-deductible health savings accounts to pay for certain medical expenses.
10. Compliance Schedule: HMOs and participating insurers were required to comply by January 1, 2007.
Regulatory Flexibility Analysis
This amendment will not impose reporting, recordkeeping or other requirements on small businesses since the provisions of this Part apply only to health maintenance organizations (HMOs) and participating insurers. The Insurance Department has reviewed the filed Reports on Examination and Annual Statements of HMOs and participating insurers and concluded that none of them comes within the definition of “small business” contained in section 102(8) of the State Administrative Procedure Act, because there are none that are both independently owned and that employ fewer than 100 persons.
This amendment will also have no adverse economic impact on local governments and does not impose reporting, recordkeeping or other compliance requirements on local governments. The basis for this finding is that this rule is directed at participating insurance companies and HMOs, none of which is a local government.
Rural Area Flexibility Analysis
1. Types and estimated numbers of rural areas: Health maintenance organizations (HMOs) and participating insurers to which this regulation is applicable do business in every county of the State, including rural areas as defined under section 102(13) of the State Administrative Procedure Act. Small employers and individuals in need of health insurance coverage are located in every county of the State, including rural areas as defined under section 102(13) of the State Administrative Procedure Act.
2. Reporting, recordkeeping and other compliance requirements; and professional services: Healthy New York requires HMOs and participating insurers to report enrollment changes on a monthly basis and also requires an annual request for reimbursement of eligible claims. Twice a year, enrollment reports that discern enrollment on a county by county basis are submitted to the Insurance Department. This revision will not add any new reporting requirements, though it will require separate identification of enrollment in the high deductible health plan option. Nothing in this revision distinguishes between rural and non-rural areas. No special type of professional services will be needed in a rural area to comply with this requirement.
3. Costs: HMOs and participating insurers may incur some modest costs in drafting the contract riders that will create the high deductible plans and include the additional benefits. There are no costs to local governments. This amendment has no impact unique to rural areas.
4. Minimizing adverse impact: Because the same requirements apply to both rural and non-rural entities, the amendment will have the same impact on all affected entities.
5. Rural area participation: None.
Job Impact Statement
This amendment will not adversely affect jobs or employment opportunities in New York State. This amendment is intended to improve access to comprehensive health insurance for small employers and working individuals. This amendment provides qualifying small employers and individuals with the ability to obtain a federal tax deduction through the purchase of a high deductible health plan. It also reduces the cost of Healthy New York health insurance by adding a deductible and benefits that will reduce costs to the program, which will in turn improve access to health insurance by lowering health insurance premiums.
