New York Enacts Health Insurance Law With New Medical Loss Ratio

Janice Simmons, June 10, 2010

In what may become part of a trend among the states, New York Gov. David Paterson signed into law Wednesday a bill that reinstates the New York State Insurance Department's authority to review and approve health insurance premium increases before they take effect and adds a medical loss ratio that insurers must meet.

Beginning in 2000, New York had regulated health insurance premiums with a "file and use" law that limited the state's ability to disapprove health insurance premium increases and allowed the insurance industry to self regulate.

The new law contains provisions to ensure that a specified percentage of premiums are returned to consumers in the form of benefits: It raises the medical loss ratio—the percentage of premium spent to provide medical care—from 75% to 82% for small businesses and from 80% to 82% for individuals.

In a statement released late Wednesday, Health and Human Services Secretary Kathleen Sebelius called the New York action "a bold move to hold insurance companies accountable and prevent the kind of unreasonable rate increases that have made health insurance unaffordable for many American families."

Last month, Sebelius had sent a letter to governors and state insurance commissioners that called on them to review the authority they have under their state laws to determine whether they have the regulatory tools needed to approve health insurance rates before they take effect.

Earlier this week, HHS announced the availability of $51 million in Health Insurance Premium Review Grants under the new healthcare reform act. This money will fund the first round of grants available to states through a new $250 million grant program that is aimed at strengthening insurance rate review processes.

The new law will apply to all rate increases taking effect on or after Oct. 1, 2010. Under the new provision, health insurers and managed care plans will be required to send an application to the state insurance department to implement premium increases. The department will have the opportunity to review the rate applications, as well as the underlying calculations, and may approve, modify or disapprove the rate application.

The legislation also provides an opportunity for policyholders and the public to comments to the insurer and the insurance department on the rate applications. The insurance department is required to post the comments on its Website through a forum designed for public input and discussion.

Also, under the legislation, small businesses and individuals will also receive longer notice of rate increases—60 days instead of 30 days—to allow them more time to consider alternative coverage options if they cannot afford a rate increase.

Janice Simmons Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at
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