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ACA: Empire State Adopts Health Rate Law

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The New York State Insurance Department now has the authority to review and approve health premium increases before they are implemented by carriers.

New York Gov. David Paterson, D, has signed Governor’s Program Bill Number 278 into law.

The new health rate review law replaces a “file and use” system that gave the department little authority to control health premium increases, officials say.

New York already prohibits health carriers from using health status and health history information in setting rates, but Paterson says the law is needed to ensure that health premiums are “fair and justified.”

The new law will make coverage more affordable, Paterson says.

The new law will require health insurers and health maintenance organizations to apply for New York department approval of rate increases. The rate applications will be reviewed by the department and can be approved, modified or disapproved.

Policyholders and members of the public can comment on the rate applications, and the New York department will post relevant comments on its website.

The law is set to take effect Oct. 1.

The new federal Affordable Care Act, the legislative package that includes the Patient Protection and Affordable Care Act, will require health insurers to report the reasons for rates increases along with the percentage of premiums spent on claims, quality of care, taxes, and administrative costs.

“Prior approval will work in tandem with President Obama’s health care reform to make sure insurers’ premium rates are transparent and their reporting is correct,” says New York Insurance Superintendent James Wrynn.

The New York Health Plan Association, Albany, N.Y., has criticized efforts to impose prior-approval requirements on health insurers in the state, arguing that they could lead to arbitrary health rate decisions based on political considerations rather than actuarial reality.

In Massachusetts, which now has prior-approval rules, “the division of insurance capped rates even with the knowledge that four of the five major health plans in Massachusetts experienced operating losses last year,” HPA President Paul Macielak said in a statement earlier this year. “The division’s action will put premiums at levels it knows are insufficient to cover the cost of medical services and will result in losses.”


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