New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter XIV - Individual And Small Group Health Insurance › Part 361 - Establishment And Operation Of Market Stabilization Mechanisms For Individual And Small Group Health Insurance And Medicare Supplement Insurance › Section 361.1 - Preamble

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Chapter 501 of
				the Laws of 1992 requires that the superintendent promulgate regulations
				regarding the orderly implementation of open enrollment and community-rating of
				policies issued to small groups and individuals pursuant to sections 3231 and
				4317  of the Insurance Law. Such regulations
				are to include provisions designed to encourage insurers to remain in or enter
				the small group or individual health insurance markets, provisions designed to
				promote an insurance marketplace where premiums do not unduly fluctuate,
				insurers and HMOs are reasonably protected against unexpected significant
				shifts in the number of persons insured, and other market stability features
				deemed appropriate by the superintendent.
(b) Prior to enactment of sections 3231 and
				4317  of the Insurance Law there was some
				concern that the open enrollment process would expose insurers and HMOs to
				financial losses due to the enrollment of persons for coverage who are very ill
				or have a history of poor health, and whose cost of health care would be higher
				than the amounts assumed in the establishment of premium rates. Insurers which
				encountered these situations, or feared they might encounter them, might cease
				their participation in either the small group health insurance or individual
				health insurance markets, or both. HMOs, which are required to participate in
				those markets, might suffer ruinous losses. In order to avoid those results the
				Legislature enacted section 3233  of the Insurance Law which explicitly
				requires that these regulations include market stability and other provisions
				designed to encourage insurers to remain in or enter those markets, and to
				protect all insurers and HMOs in those markets from extreme losses due to open
				enrollment.
(c) Chapter 501 was
				designed to cause insurers and HMOs to compete with each other in the small
				group and individual health insurance markets on the basis of administrative
				efficiency, customer satisfaction, the ability to manage care and
				cost-effective provider agreements, rather than on the basis of avoiding or
				terminating coverage of persons whose health care costs are high. In order to
				implement the statutory intent that insurers and HMOs be prevented from
				avoiding high cost persons in order to obtain a marketplace advantage over
				their competitors, the market stability provisions need to include all insurers
				and HMOs participating in the individual and small group health insurance
				markets. If the mechanism were voluntary, insurers and HMOs which did not cover
				a proportionate share of high cost persons would naturally decline to
				participate and thus continue to reap benefits from not covering a
				proportionate share of high cost persons.
(d) The purpose of this regulation is to
				establish a market stabilization process which achieves the following goals:
(1) to share among insurers and HMOs those
				substantive cost variations attributable to significant differences in
				demographic characteristics or specified medical conditions of the persons
				covered. The protection afforded by this sharing process will facilitate the
				introduction of mandated open enrollment and community rating by providing some
				assurance to insurers and HMOs that their business and competitive interests
				will be secure because they are protected from sudden or significant changes in
				the proportion of high cost persons they cover, and because other insurers and
				HMOs will not obtain a competitive advantage by avoiding or failing to insure a
				proportionate share of high cost persons;
(2) to promote competition among insurers and
				HMOs on the basis of efficient claims handling, ability to manage health care
				services, consumer satisfaction, and low administrative costs, and to deter
				competition on the basis of avoiding or terminating coverage of persons whose
				health care costs are high;
(3) to
				protect insurers and HMOs which are subject to the open enrollment and
				community-rating provisions of chapter 501 of the Laws of 1992 from undue
				variations in costs which are not related to differences in operating
				efficiency, the ability to manage care, or provider agreements; and
(4) to encourage insurers to enter, remain
				in, and compete vigorously in the small group health insurance and/or
				individual health insurance markets.