Insurance Circular Letter No. 7 (2018)
June 21, 2018
All Insurers Authorized to Write Accident and Health Insurance in New York State, Article 43 Corporations, and Health Maintenance Organizations
Prohibition on Short-Term Limited Duration Plans
STATUTORY AND REGULATORY REFERENCES: N.Y. Insurance Law §§ 3216, 3221, 4303, 4304, 4305, 4328 and §§ 52.5, 52.6 and 52.71 of 11 NYCRR 52 (Insurance Regulation 62)
This circular letter is issued to remind insurers authorized to write accident and health insurance in this state, Article 43 corporations, and health maintenance organizations (collectively, “issuers”) that short-term limited duration plans are prohibited in the individual and group health insurance markets in New York, regardless of federal regulatory changes.
The Departments of Health and Human Services, Labor and Treasury have released a proposed rule to significantly expand the policy term for short-term limited duration plans that may be offered in the individual market. The current federal regulation permits short-term limited duration plans to be offered in the individual market only if the term is less than three months.1 Short-term limited duration plans are specifically exempted from the definition of individual health insurance coverage and thus are exempt from important requirements in federal law that apply to individual health insurance coverage, such as the Affordable Care Act.2 Under the federal government’s proposal, a short-term limited duration plan may be issued provided that the coverage term is up to one day less than one year.3 Such “limited health” plans, whether limited to less than three months or one year, are not short-term at all, but rather an end-run around requirements applicable to individual or group hospital, surgical or medical expense coverage and are prohibited under New York State law.
Notwithstanding the proposed federal rule, issuers are reminded that they must continue to comply with New York requirements. In New York, every individual and small group accident and health insurance policy or contract that provides hospital, surgical or medical expense coverage must be comprehensive and provide coverage for essential health benefits.4 Every large group policy that provides hospital, surgical or medical expense coverage (e.g., those policies that exceed the requirements for either basic hospital insurance in 11 NYCRR 52.5 or basic medical insurance in 11 NYCRR 52.6) must also meet all Insurance Law mandated benefit requirements for comprehensive coverage. These requirements apply irrespective of the duration of the policy or contract, and may not be circumvented through the issuance of a short-term limited duration plan.
Additionally, Insurance Law §§ 3221(p)(1), 4304(b)(2) and 4305(j)(1) require that an individual or group policy or contract that provides hospital, medical or surgical expense coverage must automatically be renewed at the option of the policyholder or contract holder. Insurance Law §§ 3216(g)(1), 3221(p)(2), 4304(c)(2) and 4305(j)(2) prohibit issuers from refusing to renew a policy or contract providing hospital, surgical or medical expense insurance coverage except for one of the following reasons: nonpayment of premiums; fraud or an intentional misrepresentation of a material fact; discontinuance of a class of hospital, surgical or medical expense policies or contracts in a respective market; discontinuance of all hospital, surgical or medical expense policies or contracts in a respective market; for issuers that offer coverage through a network plan, the insured (or with respect to group coverage all insureds) no longer resides, lives or works in the service area; or for such other reasons that are acceptable to the Superintendent and authorized by the Health Insurance Portability and Accountability Act of 1996. In addition to the foregoing reasons, group coverage may be non-renewed if the policyholder or contract holder fails to meet group participation requirements for insurance (non-HMO) coverage, ceases to meet the requirements for a group under Insurance Law § 4235, or the participating employer ceases participation in the group to which the policy or contract is issued. None of the aforementioned reasons permits an issuer to refuse to renew coverage due to a limit on the term of the coverage. Issuers are reminded that policies or contracts that provide hospital, surgical, or medical expense insurance coverage must comply with these guaranteed renewability requirements and be continuously renewed at the option of the policyholder or contract holder, regardless of whether short-term limited duration plans are permitted under federal law. These guaranteed renewability requirements under the New York Insurance Law are independent of and not preempted by federal law. Accordingly, issuers are prohibited in this State from offering a policy or contract of hospital, surgical or medical expense insurance coverage that has a limit on the term of such policy or contract since it must be continuously renewed at the option of the policyholder or contract holder.
In accordance with Insurance Law §§ 3216(g)(1), 3221(p)(1) and (2), 4304(b)(2), 4304(c)(2), and 4305(j)(1) and (2), all issuers in New York are prohibited from offering short-term limited duration plans because short-term limited duration plans do not comply with the guaranteed renewability requirements of New York law applicable to individual or group hospital, surgical or medical expense coverage. Additionally, pursuant to Insurance Law §§ 3216(l), 3221, 4303, 4304(l) and 4328(b) and 11 NYCRR § 52.71, every accident and health insurance policy or contract that provides hospital, surgical or medical expense coverage must be comprehensive and, with respect to individual and small group coverage, must provide coverage for essential health benefits. These guaranteed renewability and comprehensive coverage requirements in the Insurance Law and Insurance Regulation 62 are independent of and not preempted by the requirements in federal law. The Department will continue to enforce State requirements vigorously and to the fullest extent of State law to ensure that short-term limited duration plans are not offered within New York.
Please direct any questions regarding this circular letter to Colleen Rumsey, Supervising Insurance Attorney, by mail at New York State Department of Financial Services, Health Bureau, One Commerce Plaza, 19th Floor, Albany, New York 12257, or by email at [email protected].
Very truly yours,
Bureau Chief, Health Bureau