New York community rating and the definition of small group (Ins. Law 4317; Reg 145)

Why New York rates health insurance as a community

Most states let health insurers charge a small business more when its workers are older or sicker. New York does not. For individual and small group hospital and medical coverage, New York requires community rating: everyone covered under the same policy form pays the same premium, no matter who they are. The rules sit in two parallel sections of the Insurance Law. § 3231 governs commercial insurers (Article 32), and § 4317 governs not-for-profit health service and medical expense indemnity corporations (Article 43). The Department of Financial Services implements them through Regulation 145. The two sections say almost the same thing, so learn the rule once.

What counts as a "small group"

A small group is a group health policy covering between one and one hundred employees or members, not counting spouses and dependents. That has been the line for policies issued or renewed on or after January 1, 2016. Before that date the ceiling was fifty, and both sections still recite the older 1-to-50 range alongside the current one.

Keep two traps in mind:

• Spouses and dependents are excluded from the count. An employer with 80 employees and 150 covered family members is still a small group.
• The first employee counts. The range starts at one. A sole employee of a corporation or a sole proprietor can buy group-type coverage through an association if they work at least 20 hours a week, have been an association member for at least 60 days before the policy takes effect, and provide proof of employment every year, such as NYS-45 tax forms, a Schedule C, a W-2 or a 1099. Since January 1, 2014, that coverage is rated in the individual category.

A group of 101 or more is a large group. Community rating does not apply, and insurers may experience-rate it, pricing it on that group's own claims history.

What "community rated" means

The statute defines it precisely. The premium for all persons covered by a policy form is the same. It is based on the experience of the entire pool of individuals or small groups the insurer covers, without regard to:

• age,
• sex,
• health status,
• tobacco usage, or
• occupation.

This is pure community rating. The federal Affordable Care Act allows rates to vary by age (up to 3 to 1) and tobacco use. New York allows neither. A 25-year-old and a 63-year-old on the same plan in the same region pay the same rate for the same coverage tier.

Medicare supplement coverage is also community rated, but its pool is narrower. The pool is everyone covered by that policy or contract form.

What may still change the price

Community rating does not mean one statewide price. The law allows:

• Coverage tiers. The Superintendent may set standard premium tiers, such as individual or family, and the relativities between them. The Superintendent may also set a relativity for child-only policies.
• Separate pools. An insurer must keep separate community rates for individuals and for small groups.
• Geography. Separate rates are allowed for reasonable geographic regions, which may be as small as one county, as approved by the Superintendent in the rate filing.

The companion protections

Community rating comes with access rules so that insurers cannot avoid risk another way:

• Open access. Small groups, with all of their employees and dependents, must be accepted at all times throughout the year for any hospital or medical coverage the insurer offers to small groups. Individual coverage is subject to its own enrollment rules.
• Limited underwriting. Underwriting may go no further than a pre-existing condition limitation, and only where the law otherwise permits one.
• No termination for claims. Once accepted, a small group cannot be terminated because of its claims experience. It can be terminated only for the reasons the law lists.
• Out-of-state trusts. Coverage that a small group of New York residents gets through an out-of-state trust must be community rated regardless of where the policy is delivered.
• Associations. In a trust or association, member employers that qualify as small groups are rated as small groups, and individual or sole-proprietor members go into the individual pool.
• No self-funding workaround. An insurer, its subsidiary or a controlled person may not act as an administrator or claims-paying agent for small groups, and an insurer may not sell them stop-loss coverage. Narrow grandfather rules remain. Certain 51-to-100 groups that had stop-loss coverage in effect on January 1, 2015 may keep renewing it, and the restrictions do not apply to coverage insuring certain association-type plans for member small employers that were in effect on or before December 31, 1991 and meet the statute's conditions.

Exam tip: "Small group in New York" means 1 to 100 employees, excluding spouses and dependents. "Community rated" means same premium regardless of age, sex, health status, tobacco use or occupation.