NY Times
Gov. David A. Paterson has signed legislation that gives the state the power to block what it deems unreasonably high New York health insurance quotes increases for millions of New Yorkers.
The new law, which covers about three million people enrolled in small-employer or individually purchased plans, requires insurance companies to apply to the state Insurance Department before they can raise premiums. The state then has 60 days to determine whether the rates are justified.
The governor and consumer advocates said the law would slow down rampant premium increases, which they said had forced many small businesses and individual policyholders to drop their insurance, driving prices higher as costs were spread over a smaller pool of customers who tended to have high health care needs. New York has the highest average premiums for individually bought policies — $6,630 for single people and $13,296 for families in 2009, more than double the national average, according to industry figures.
Advocates said that the law could become a model for other states as they monitor rates in the new insurance exchanges, or organized marketplaces, required under the federal health care overhaul.
Over the last decade, “New York H.M.O.’s made outlandish profits,” Mark P. Scherzer, an insurance lawyer and consumer advocate, said on Wednesday. “What this is really going to do is save consumers money.”
The new law also requires insurance companies to spend 82 percent of premiums on medical care, rather than on administrative costs and profits, up from 75 percent for small-business policies and 80 percent for individual ones.
The law reinstates a system of prior approval that New York phased out between 1996 and 2000. Under the system in place for a decade, New York reviewed increases retroactively and issued refunds. The insurance industry contended that giving the state prior approval over rate increases would make the process more political.
Mark L. Wagar, president of Empire BlueCross BlueShield, said the legislation addressed that concern by giving automatic approval to a proposed rate increase if the state did not act within 60 days, and by requiring the state to give an actuarial basis for denying a rate increase.
The state does not similarly regulate most New York group health insurance plans, leaving it to employers to negotiate rates, an Insurance Department spokesman said.
The new law, which covers about three million people enrolled in small-employer or individually purchased plans, requires insurance companies to apply to the state Insurance Department before they can raise premiums. The state then has 60 days to determine whether the rates are justified.
The governor and consumer advocates said the law would slow down rampant premium increases, which they said had forced many small businesses and individual policyholders to drop their insurance, driving prices higher as costs were spread over a smaller pool of customers who tended to have high health care needs. New York has the highest average premiums for individually bought policies — $6,630 for single people and $13,296 for families in 2009, more than double the national average, according to industry figures.
Advocates said that the law could become a model for other states as they monitor rates in the new insurance exchanges, or organized marketplaces, required under the federal health care overhaul.
Over the last decade, “New York H.M.O.’s made outlandish profits,” Mark P. Scherzer, an insurance lawyer and consumer advocate, said on Wednesday. “What this is really going to do is save consumers money.”
The new law also requires insurance companies to spend 82 percent of premiums on medical care, rather than on administrative costs and profits, up from 75 percent for small-business policies and 80 percent for individual ones.
The law reinstates a system of prior approval that New York phased out between 1996 and 2000. Under the system in place for a decade, New York reviewed increases retroactively and issued refunds. The insurance industry contended that giving the state prior approval over rate increases would make the process more political.
Mark L. Wagar, president of Empire BlueCross BlueShield, said the legislation addressed that concern by giving automatic approval to a proposed rate increase if the state did not act within 60 days, and by requiring the state to give an actuarial basis for denying a rate increase.
The state does not similarly regulate most New York group health insurance plans, leaving it to employers to negotiate rates, an Insurance Department spokesman said.
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