Supplement No. 1 to Insurance Circular Letter No. 10 (2018)
November 1, 2018
All Insurers Authorized to Write Accident and Health Insurance in New York State, Article 43 Corporations, Health Maintenance Organizations and all Agents and Brokers Licensed to Sell Accident and Health Insurance in New York State
Applicability of the Insurance Law to Coverage Issued to Associations, including Associations that are “Single Group Health Plans” under Federal Law
STATUTORY REFERENCES: N.Y. Ins. Law §§ 3201, 3231, 4235 and 4317
Insurance Circular Letter No. 10 (2018) reminded insurers authorized to write accident and health insurance in this State, Article 43 corporations, and health maintenance organizations (collectively, “issuers”), and insurance agents and brokers, that New York requirements for accident and health insurance coverage obtained through associations are not preempted by federal law. The purpose of this Supplement to Insurance Circular Letter No. 10 (2018) is to further remind issuers and insurance agents and brokers that New York requirements for permissible groups, and the rating rules applicable thereto, are not preempted by federal law. This Supplement also reminds issuers, insurance agents and brokers that even if an association is considered a “single group health plan”1 under federal law, issuers must determine what type of group the association is under the New York Insurance Law and ensure that the coverage issued to the association complies with all New York Insurance Law and regulation requirements.
For purposes of this Supplement, consistent with the guidance provided by the Centers for Medicare & Medicaid Services (“CMS”) in its September 1, 2011 bulletin describing association coverage, the term “association” means an entity offering health insurance coverage to collections of individuals and/or employers through membership in that entity, which may be called an association, trust, multiple employer welfare arrangement, purchasing alliance, purchasing cooperative, consortium, or other similar term.2
The Patient Protection and Affordable Care Act (“ACA”) applies to all coverage sold in either the individual or group markets.3 The ACA does not recognize “association coverage” and, generally, requires coverage issued to any association to be rated based on its underlying member employers and not based on the size of the association (i.e., large employer members must be issued large group coverage, small employer members must be issued small group coverage, and individual members must be issued individual coverage).4 This requirement is often referred to as the “look through” provision.
In 2011, the U.S. Department of Health & Human Services (“HHS”) issued guidance on the applicability of the ACA and its “look through” provisions on coverage sold to, or through, associations.5 In that guidance, HHS stated, “…in most situations involving employer-based association coverage, the group health plan exists at the individual employer level and not at the association-of-employers level.”6 HHS also stated:
In the rare instance where the association of employers is, in fact, sponsoring the group health plan and the association is deemed the “employer,” the association coverage is considered a single group health plan. In that case, the number of employees employed by all of the employers participating in the association determines whether the coverage is subject to the small group market or the large group market rules.7 (Emphasis added)
The HHS guidance effectively states that while most coverage issued to associations will be rated at the employer level and not at the association level due to the ACA “look through” provision, there are rare instances when an association is considered a “single group health plan” under federal law and therefore exempt from the ACA “look through” provision. Based strictly on federal law and in the absence of state regulation, associations that are considered a “single group health plan” may offer their small employer members large group coverage that does not contain critical ACA consumer protections such as community rating, essential health benefits, metal tiering, and risk adjustment. This federal option is not available in New York.
New York codified the ACA “look through” provision in Insurance Law §§ 3231(g) and 4317(d) and made it applicable to coverage issued to groups defined in Insurance Law § 4235(c). However, the Insurance Law does not provide an exemption to the “look through” provision for coverage issued to an association that is considered a “single group health plan” under federal law. Thus, all coverage issued to a group defined in Insurance Law § 4235(c) must comply with the “look through” provisions in the Insurance Law.
The ACA specifically provides that federal law shall not be construed to preempt state law that does not “prevent the application” of the ACA.8 As such, state laws that broaden the protections in the ACA, but do not inhibit them, are not preempted. Thus, New York laws that apply the protections of the “look through” provision to all association groups, including those that may be considered a “single group health plan” under federal law, are not preempted by federal law.
The “look through” provisions of the Insurance Law apply to coverage issued to every association that is a permissible group under Insurance Law § 4235(c). Whether an association is considered a “single group health plan” under federal law is irrelevant for purposes of application of the “look through” provisions of the Insurance Law.
Please direct any questions regarding this Supplement to Jon Thayer, Associate Attorney, by mail at New York State Department of Financial Services, Health Bureau, One Commerce Plaza, Albany, New York 12257, or by email at [email protected].
Very truly yours,
Bureau Chief, Health Bureau
1 29 U.S.C § 1002(37)(B); 29 U.S.C. § 1301(b)(1).
2 U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Insurance Standards Bulletin, Application of Individual and Group Market Requirements under Title XXVII of the Public Health Service Act when Insurance Coverage is Sold to, or through, Associations (September 1, 2011), available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/association_coverage_9_1_2011.pdf.
3 42 U.S.C. § 300gg-1; 45 CFR § 144.102; 45 § CFR 147.104.
4 45 CFR § 147.104(c), 78 FR 13406, 13408 provides that, “[a]ll non-grandfathered health insurance coverage offered through associations and through multiple employer welfare arrangements (MEWAs) is subject to the premium rating rules applicable to the appropriate market, as defined by PHS Act section 2791(e)(1), (3), and (5) (definitions of individual market, large group market, and small group market, respectively).”
5 CMS Insurance Standards Bulletin (September 1, 2011), supra at 2.
8 42 U.S.C. § 18041(d).