INS-36-09-00001-P Minimum Standards for the Form, Content and Sale of Health Insurance, Including Standards of Full and Fair Disclosure

9/9/09 N.Y. St. Reg. INS-36-09-00001-P

NEW YORK STATE REGISTER

VOLUME XXXI, ISSUE 36

September 09, 2009

RULE MAKING ACTIVITIES

INSURANCE DEPARTMENT

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. INS-36-09-00001-P

Minimum Standards for the Form, Content and Sale of Health Insurance, Including Standards of Full and Fair Disclosure

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Amendment of section 52.70(e)(2) of Title 11 NYCRR.

Statutory authority:

Insurance Law, sections 201, 301, 1009 and 3234

Subject:

Minimum Standards for the Form, Content and Sale of Health Insurance, Including Standards of Full and Fair Disclosure.

Purpose:

Amend 11 NYCRR 52.70(e)(2) to comply with N.Y. Ins. Law 3234(b), pursuant to Benesowitz v. Metropolitan Life Insurance Company.

Text of proposed rule:

Section 52.70(e)(2) is amended to read as follows:

(2) Except for dental insurance, disability income insurance subject to section 3234 of the Insurance Law, insurance written under section 4235(c)(1)(H) of the Insurance Law (unless such insurance is as described in paragraph (3) of this subdivision), and to the extent that insurance written under section 4235(c)(1)(B) and (D) of the Insurance Law insures employees of an employer with less than 300 employees (unless such insurance is as described in paragraph (3) of this subdivision), any group insuring 300 or more persons, excluding dependents, shall insure all persons without evidence of individual insurability, provided that coverage is elected during an initial period of eligibility of at least 30 days.

Text of proposed rule and any required statements and analyses may be obtained from:

Andrew Mais, New York State Insurance Department, 25 Beaver Street, New York, NY 10004, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Lisette M. Johnson, Esq., New York State Insurance Department, One Commerce Plaza, Albany, NY 12257, [phone], email: [e-mail]

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory authority: The Superintendent's authority for the 41st amendment to 11 NYCRR 62 derives from Sections 201, 301, 1109 and 3234 of the Insurance Law.

Sections 201 and 301 of the Insurance Law authorize the Superintendent to effectuate any power accorded to him by the Insurance Law, and prescribe regulations interpreting the Insurance Law.

Section 1109 authorizes the Superintendent to promulgate regulations to effectuate the purposes and provisions of the Insurance Law and Article 44 of the Public Health Law with respect to contracts between a health maintenance organization and its insureds.

Section 3234 addresses the use of pre-existing condition provisions in group and blanket disability policies.

2. Legislative objectives: The statutory sections cited above establish a framework for the form, content and sale of health insurance. The proposed amendment is consistent with legislative objectives in that it will effectuate the intent of Section 3234(b) of the Insurance Law to permit medical underwriting for groups insured under disability income policies, regardless of size.

3. Needs and benefits: This amendment is needed to ensure that 11 NYCRR § 52.70(e)(2) conforms to Section 3234(b) of the Insurance Law. Specifically, this amendment will rectify an inconsistency between the current regulation, which prohibits medical underwriting for groups of 300 or more persons, and the statute, which permits medical underwriting in group and blanket disability policies.

The amendment is also necessary to ensure that the regulation is consistent with the decision by the New York Court of Appeals in Benesowitz v. Metropolitan Life Insurance Company, 8 N.Y.3d 661 (2007).

In Benesowitz, the Court of Appeals unanimously construed Section 3234(a)(2) of the Insurance Law to establish a waiting period, rather than a total bar, for coverage of disabilities due to a pre-existing condition that manifests itself within the first 12 months after an insured's effective date of coverage. In so holding, however, the Court noted that neither its decision nor Section 3234(b) of the Insurance Law prevents insurers from excluding or limiting disability coverage based on an individual's prior medical history other than, or in addition to, a pre-existing condition. This amendment brings the regulation into conformance with the statute and Benesowitz by permitting group policyholders of 300 or more persons to opt for medical underwriting of newly eligible employees in a uniform manner that precludes policyholder selection of specific employees for such treatment. After the Court of Appeals handed down its decision in Benesowitz, the Department, in Circular Letter No. 14 (2007), notified insurance companies that the Department intended to amend this regulation.

4. Costs: This amendment might only create minimal costs for insurers, health maintenance organizations, or individuals, and there should be no costs associated with this amendment to the Insurance Department, the Health Department or state or local government, either. Circular Letter No. 14 (2007), issued by the Insurance Department on December 14, 2007, instructed insurers and health maintenance organizations that if revisions to their existing policy forms were necessary in light of the decision of the Court of Appeals in Benesowitz, they were required to do so by late January 2008. Therefore, most of the costs for insurers or health maintenance organizations associated with this regulation already have been incurred. Going forward, an insurer or health maintenance organization subject to this regulation would incur additional costs only to the extent that it needs to file revised forms or rate materials in order to use medical underwriting for individuals becoming insured under group disability policies covering 300 or more persons.

5. Local government mandates: The proposed regulation imposes no new programs, services, duties or responsibilities on local governments.

6. Paperwork: At this point in time, only a minimal amount of paperwork could be created by this regulation because forms that needed to be revised in order to comply with the Court of Appeals' decision in Benesowitz have already been filed. Otherwise, this amendment will require insurers or health maintenance organizations to file paperwork only to the extent that they choose to use medical underwriting for individuals becoming insured under group disability policies covering 300 or more persons. Such a practice may require insurers to submit amended rate filings for Insurance Department approval.

7. Duplication: This amendment will not result in any duplication.

8. Alternatives: There are no feasible alternatives to this amendment, and no feasible alternative were proposed when the Insurance Department met with industry representatives after the Court of Appeals handed down its decision in Benesowitz, but prior to the issuance of Circular Letter No. 14 (2007). Through the Health Bureau and its Office of General Counsel, the Department circulated a draft of the Circular Letter before it was issued and received comments from industry groups such as the Life Insurance Council of New York, the American Council of Life Insurers, and America's Health Insurance Plans, Inc. Failure to amend this regulation in accordance with the Department's Circular Letter would allow an inconsistency between the regulation and Section 3234(b) of the Insurance Law to persist, potentially causing confusion regarding the use of medical underwriting for individuals becoming insured under group disability policies covering 300 or more persons.

9. Federal standards: There are no minimum standards of the federal government for the same or similar subject areas.

10. Compliance schedule: Compliance will be required immediately upon the amendment's effective date.

Regulatory Flexibility Analysis

The Insurance Department finds that this rule would not impose reporting, recordkeeping or other requirements on small businesses. The rule is directed at insurers licensed and health maintenance organizations certified to do business in this state. Based on information provided in the annual statements filed with the Insurance Department, insurers and health maintenance organizations do not fall within the definition of small business found 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. Accordingly, there is no need to prepare any special guidance materials for small businesses with regard to this rule.

The Insurance Department finds that this rule will not impose reporting, recordkeeping or other compliance requirements on local governments. The basis for this finding is that this rule is directed at insurers and health maintenance organizations, none of which are local governments.

Rural Area Flexibility Analysis

1. Types and estimated numbers of rural areas: Insurers and health maintenance organizations, 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. Since the rule applies to the insurance market throughout New York, not only to rural areas, the same regulation will apply to regulated entities across the state. Therefore, there is no adverse impact on rural areas as a result of this rule.

2. Reporting, recordkeeping and other compliance requirements; and professional services: This amendment will require insurers or health maintenance organizations to file paperwork only to the extent that they choose to use medical underwriting for individuals becoming insured under group disability policies covering 300 or more persons. Such a practice may require insurers to submit amended rate filings for Insurance Department approval. Nothing in this amendment distinguishes between rural and non-rural areas. Professional services beyond those already available to insurers and health maintenance organizations should not be needed to comply with this requirement.

3. Costs: This amendment might only create minimal costs for insurers, health maintenance organizations, or individuals, and there should not be costs associated with this amendment to the Insurance Department, the Health Department or state or local government. Circular Letter No. 14 (2007), issued by the Insurance Department on December 14, 2007, instructed insurers that if revisions to their existing policy forms were necessary in order to conform to the decision of the Court of Appeals, they were required to do so by late January 2008. Therefore, most of the costs for insurers or health maintenance organizations associated with this regulation have already been incurred. Going forward, an insurer or health maintenance organization subject to this regulation would incur additional costs only to the extent that it needs to file revised forms or rate materials in order to use medical underwriting for individuals becoming insured under group disability policies covering 300 or more persons. This amendment will not have any impact unique to rural areas.

4. Minimizing adverse impact: The same requirements apply to both rural and non-rural entities, and the amendment will have the same impact on all affected entities.

Job Impact Statement

This amendment is not likely to impact job or employment opportunities in New York. This amendment allows insurers to use medical underwriting for individuals becoming insured under group disability policies covering 300 or more persons, but neither the Court of Appeals' decision in Benesowitz v. Metropolitan Life Insurance Company, 8 NY3d 661 (2007) nor this regulation create any continuing paperwork obligations for insurers or health maintenance organizations. Circular Letter No. 14 (2007), issued by the Insurance Department on December 14, 2007 after the Court of Appeals' decision, required some insurers and health maintenance organizations to revise existing forms but did not require them to file new forms. Therefore, any insurers or health maintenance organizations making such filings should not have to hire any new employees or pay for outside services related to the filings.