New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter III - Policy and Certificate Provisions
Subchapter A - Life, Accident and Health Insurance
Part 52 - Minimum Standards For Form, Content And Sale Of Health Insurance, Including Standards Of Full And Fair Disclosure
Section 52.42 - Health maintenance organization (HMO) contract forms and premium rates

Universal Citation: 11 NY Comp Codes Rules and Regs § 52.42

Current through Register Vol. 46, No. 39, September 25, 2024

(a) Requirements for prior approval of forms and rates.

(1) Contracts, certificates, applications, riders and endorsements used by an HMO to provide benefits and their proposed rates must be filed with and approved by the superintendent in accordance with section 4308 of the Insurance Law.

(2) Reasonable differentials between group and direct payment rates may be established to reflect differences in marketing costs as well as different administrative costs in collecting payments from direct pay contract holders.

(3) The premium adjustments of all community rated contracts are subject to the provisions of section 4308 of the Insurance Law.

(b) Guaranteed rates.

(1) An HMO may guarantee a subscriber rate if such rate is based upon an approved rate at the effective date of the contract and satisfies the requirements of this subdivision. Any HMO that guarantees a rate without first obtaining an approved rate will be in violation of section 4308 of the Insurance Law.

(2) To guarantee rates the HMO must obtain the superintendent's approval for any contract provision, remitting agent agreement or rider which limits the HMO to adjustment of rates only on a policy anniversary date. This requirement applies to both group contracts and group remittance arrangements.

(3) Permissible methods to guarantee the rates include the following:

(i) Rolling premium rates. This is a method that establishes a scale of annual subscriber rates that vary by quarter or month of issue. The premium rate in effect at each quarter (or month) remains constant for a stated period (usually one year). A rolling rate may be approved for a period not to exceed two years. Approved rates remain in effect until a new application is received and acted upon by the superintendent. The application of rolling premium rates may be illustrated by the following example (based on a 2% increase in premium each quarter):

*Year*	*Quarter*	*Basic Single Premium*
1	2	$100.00
1	2	102.00
1	3	104.04
1	4	106.12
2	1	108.24
2	2	110.41
2	3	112.62
2	4	114.87

(a) Contract holders enrolled during the first quarter would pay a monthly premium of $100 for a single employee. At renewal (after the first year) the rate would be $108.24. Similarly, enrollees during the second quarter of the first year would have an initial monthly premium of $102.00 and a renewal premium of $110.41.

(b) The above illustration is based on a quarterly change of rates but could be arranged on a monthly basis.

(c) For the third year, if no rate adjustment has been requested by the HMO and approved by the superintendent, then the highest approved rate ($114.87 in the above example) remains in effect.

(ii) Annual level subscriber rates. A method whereby an HMO defers its right to a change in subscriber rates until the next contract anniversary date using an appropriate estimated premium with either a prospective or retrospective adjustment. The prospective adjustment may involve a surcharge to the approved rates.

(a) By use of an approved rider or remitting agent agreement an HMO may establish an estimated annual subscriber rate to accommodate employers who prefer a level monthly premium payment for the contract year. This rider may be applied to a group contract or group remittance arrangement where the group remitting agent agrees to accept liability for payments due to the HMO. Any difference between the approved subscriber rate and the estimated annual subscriber rate must be reconciled by use of an advance premium deposit account (the accumulated surcharges). Settlement of the account must occur no later than 12 months after the end of the prior contract year or upon termination of the contract if earlier. Advance premium deposit accounts and the settlements of such accounts do not require the approval of the superintendent.

A prospective adjustment example:

Assume that the current approved monthly premium rate for a single contract holder is $100. However, the HMO expects that its premium will be increased to $110 in six months. The HMO will agree with the policyholder to a monthly premium of $105 for a one year period. The extra $5 per month during the first six months will compensate the HMO for the shortfall of $5 a month during the last six months of the contract year. In the event the expected rate increase is reduced or denied, the extra premium collected (overage) will be applied towards the following year's premium. If the requested rate increase is approved for an amount in excess of what had been expected, then an adjustment for the shortage will be made, commencing at the yearly anniversary date, to ensure a level monthly rate of premium payment.

(b) By use of an approved rider or remitting agent agreement an HMO may charge the current community rate, subject to a future increase or decrease to the premium. This rider may be applied to a group contract or group remittance arrangement where the group remitting agent agrees to accept liability for payments due to the HMO. Any such change to the premium should be debited or credited to a retroactive adjustment account. Settlement of the account must occur no later than 12 months after the end of the prior contract year or upon termination of the contract, if earlier.

A retrospective adjustment example:

Assume that there is agreement between the HMO and the employer that the rate previously approved by the Department of Financial Services of $100 will be maintained for a year, subject to any subsequent adjustments. Six months later, the HMO receives the superintendent's approval for a premium rate increase, so that the new rate will be $110. The employer continues to pay $100 so that at the end of the year it would have underpaid by $60. Upon renewal, its rate would be $115 so that it will be covering the current approved rate of $110 and will be paying off the $60 shortfall under its renewal agreement.

An HMO may only use an approved premium tier structure (e.g., individual/family, individual/two person/family, etc.) to match that of the employer's current major health insurance carrier unless the employer agrees to the HMO's use of an alternate premium tier structure. The use of any premium tier structure that has not been approved by the superintendent is a violation of section 4308 of the Insurance Law. Approval of premium tier structures may be granted at the time of the original rate filing or at any subsequent time by submission of either a formula for the determination of premium tier structures or by the submission of requested subscriber rates.

(d) Regional component for community rated contracts.

An HMO may establish a separate community rate for separate regional components of the HMO upon a satisfactory demonstration of the following:

(1) Each regional component is geographically distinct and separate from every other regional component.

(2) Each regional component provides substantially the full range of basic health services to its members without extensive referral between components of the organization for such services and without substantial utilization by any two regional components of the same health facilities. The separate community rate for each regional component of the HMO must be based on the different costs of providing health services in the respective regions.

(e) Commissions or fees payable by health maintenance organizations to an insurance broker as authorized by 10 NYCRR Part 98.

A health maintenance organization (HMO) issued a certificate of authority pursuant to article 44 of the Public Health Law, an HMO operated as a line of business of a health service corporation licensed under article 43 of the Insurance Law and having a certificate of authority pursuant to article 44 of the Public Health Law, or an HMO organized prior to the enactment of article 44 of the Public Health Law that has a license from the Superintendent of Financial Services as a health service corporation pursuant to article 43 of the Insurance Law and a certificate of need as a health facility from the Commissioner of Health pursuant to article 28 of the Public Health Law, may, as authorized by 10 NYCRR Part 98, pay commissions or fees to a licensed insurance broker. Such authority to pay commissions or fees by a corporation, other than a corporation solely holding a certificate of authority from the Commissioner of Health, shall be restricted to its HMO operation only. No licensed insurance broker shall receive such commissions or fees from an HMO, unless the HMO has filed the actual rate to be paid and included the anticipated expenses for such payments to insurance brokers in its application to amend its community premium rates pursuant to the provisions of section 4308 of the Insurance Law. Such rate shall be incorporated into the HMO's premium rate manual. The actual rate per annum may not exceed four percent of the HMO's approved premium for the contract sold.

(f) Other compensation received in connection with the administration of coverage provided by a health maintenance organization.

Any broker shall comply with the applicable provisions of section 2119 (c) of the Insurance Law with regard to any other compensation in connection with coverage placed with a health maintenance organization.

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