The New York State Insurance Department has come up with a proposal for a new system for helping individual and small group health insurers cover the sickest patients.

New York, which requires insurers to charge sick customers the same rates that they charge healthy members, tries to lighten the risk of antiselection by requiring all individual and small group in the state to support a risk-adjustment mechanism.

New York has shut down the old risk-adjustment mechanism, a “market stabilization” pool, and it hopes to have a simpler, more consistent mechanism in place by 2007, officials say in a statement discussing the design for the proposed risk-pooling program.

Officials have proposed creating the program by adopting it on an emergency basis as an amendment to Regulation 146.

“This amendment is the result of comments and suggestions received by the department in relation to the current market stabilization pool,” officials write in a discussion about why they are creating the new risk-pooling system.

“The proposed amendment is needed because of the widely differing methodologies used by insurers and health maintenance organizations and the inconsistencies and resulting confusion as to how to apply the distributions and/or contributions to premium rates,” officials write.

A copy of the proposed amendment posted on the Web shows that the individual and small group risk pool would get $80 million in state support in 2007, $120 million in 2008 and $160 million each year starting in 2009.

A carrier could collect from the risk pool if it paid more than $20,000 in claims for an insured in a given year.

Officials are asking affected carriers to start submitting initial premium and claim reports needed to implement the new risk-pooling system in the next few months.

“Payments under the new pooling process will be made in 2008,” officials write.

Some carriers have suggested holding costs down by increasing the minimum claim threshold to $100,000, from $20,000, according to New York department officials.

The New York department “found that the risk sharing and market stabilization would be significantly diminished and that legislative goals would not be accomplished” in the $100,000 threshold were adopted, officials write.

Links to documents related to the new risk-pooling program are on the Web at Document Link