The Office of General Counsel issued the following opinion on May 9, 2005, representing the position of the New York State Insurance Department.

Re: Small Group Health Insurance, Premium Rates

Questions Presented:

1) Must an insurer charge the same premium rate for health insurance to all small groups with an identical plan design in the same geographic region?

2) If so, what recourse would a small group have if it becomes aware that another small group with an identical plan design in the same region was being charged a lower premium?


1) Under applicable provisions of the New York Insurance Law (McKinney 2000 and 2005 Supplement) and the regulations promulgated thereunder, all such groups should be charged the same premium rate.

2) If a group becomes aware that a health insurer is in violation of the requirements of the New York Insurance Law and the regulations promulgated thereunder with respect to the premium rate charged to a small group, a complaint may be made to the New York Insurance Department.


Since this was a general question, no facts were furnished.


New York Insurance Law § 3231(a) (McKinney 2000 and 2005 Supplement), regulating policies of commercial health insurers, provides:

No . . . group health insurance policy covering between two and fifty employees or members of the group exclusive of spouses and dependents, hereinafter referred to as a small group, providing hospital and/or medical benefits . . . shall be issued in this state unless such policy is community rated and, notwithstanding any other provisions of law, the underwriting of such policy involves no more than the imposition of a pre-existing condition limitation as permitted by this article. Any . . .any small group, including all employees or group members and dependents of employees or members, applying for . . . small group health insurance coverage . . . must be accepted at all times throughout the year for any hospital and/or medical coverage offered by the insurer to . . . small groups in this state. Once accepted for coverage, an . . . small group cannot be terminated by the insurer due to claims experience. Termination of an . . . small group shall be based only on one or more of the reasons set forth in subsection (g) of section three thousand two hundred sixteen or subsection (p) of section three thousand two hundred twenty-one of this article. Group hospital and/or medical coverage . . . obtained through an out-of-state trust covering a group of fifty or fewer employees or participating persons who are residents of this state must be community rated regardless of the situs of delivery of the policy. . . . For the purposes of this section, ‘community rated’ means a rating methodology in which the premium for all persons covered by a policy or contract form is the same based on the experience of the entire pool of risks covered by that policy or contract form without regard to age, sex, health status or occupation.

2002 N.Y. Laws 557 modified the requirements for health insurance coverage of sole proprietors. As part of that modification, subsection (i) was added to New York Insurance Law § 3231:

(1) If an insurer issues coverage to an association group . . . the insurer must issue the same coverage to individual proprietors which purchase coverage through the association group as the insurer issues to groups which purchase coverage through the association group; provided, however, that an insurer which, on the effective date of this subsection, is issuing coverage to individual proprietors not connected with an association group, may continue to issue such coverage provided that the coverage is otherwise in accordance with this subsection and all other applicable provisions of law.

(2) For coverage purchased pursuant to this subsection, individual proprietors shall be classified in their own community rating category, provided however, prior to January first, two thousand six, the premium rate established for individual proprietors purchased pursuant to paragraph one of this subsection shall not be greater than one hundred twenty percent of the rate established for the same coverage issued to groups

New York Insurance Law § 4317(a) (McKinney 2000 and 2005 Supplement), regulating contracts of not-for-profit health insurers and all Health Maintenance Organizations, has identical requirements.

New York Insurance Law §§ 3231(a) and 4317(a) require that the rate being charged to a group, e.g. $X per unit of insurance, be that of the applicable community. The actual premium charged to the group is that rate multiplied by the number of insured units and the number of insured individuals.

In order to effectuate the requirements of New York Insurance Law § 3231(a) and 4317(a), the Insurance Department promulgated N.Y. Comp. Codes R. & Regs. tit 11, Part 360 (2000) (Regulation 145). The specific requirements for community rating are further explicated in N.Y. Comp. Codes R. & Regs. tit. 11, § 360.11 (2000):

(a) Pooling of experience of different community-rated policies will be required where the Superintendent determines that the policy form provides substantially similar benefits as another community-rated policy offered by the insurer in that market . . . . Policies issued during different time periods under different forms may be determined to provide substantially similar benefits. Insurers should not develop separate community rates without substantial benefit variations. Benefit variations which shall not generally be considered substantial shall include, but not be limited to, variations in deductibles, coinsurance amounts, the number of days or visits covered or the adding or deleting of benefits which do not substantially affect premiums for the policy.

. . .

(c) Rate tiers for family units (e.g., different community rates for individuals, two-person families and larger families) are permitted. However, the rate differences must be based upon the cost differences for the different family units and the rate tiers must be uniformly applied. Different rate tiers may apply to individuals than apply to small groups.

(d) The geographic rating areas filed as of July 17, 1992 may be retained or altered if, as part of the review and approval process, the superintendent determines that: (1) Each regional component is geographically distinct and separate from every other regional component. (2) The community rate for each geographic region must be based on the different costs and availability of providing health services in the respective regions. (3) A rate is not established for a region smaller than a single county. (4) A proposed region does not appear to contain configurations designed to avoid, or segregate into a separate region, particular areas within a county. . . .

(e) Community rates shall change in accordance with the following rules, unless otherwise approved by the Superintendent (1) Community rates shall change at the same time for all policies or contracts based upon the same community rates, regardless of differing renewal dates among the various groups or individuals holding such policies or contracts . . .

. . .

(j) Rate differences intended to reflect differences in expenses such as per case charges, premium volume discount or load scales and similar rate differences are not permitted.

Special rules for "association groups", as defined in N .Y. Comp. Codes R. & Regs. tit. 11, § 360.2(a) (2000), are set forth in N.Y. Comp. Codes R. & Regs. tit. 11, § 360.8(c) (2000):

Association Group means a group defined in Section 4235(c)(1)(B), (D), (H), (K), (L) and (M) of the Insurance Law, including but not limited to an association or trust of employers, if the group includes one or more member employers or other member groups which have 50 or fewer employees or members exclusive of spouses and dependents. A group containing individual members of an association will be considered an association group having member groups of 50 or fewer members.

N.Y. Comp. Codes R. & Regs. tit. 11, § 360.2(a)

Community rates based on the size of the association groups. (1) A policy issued to an association group covering at least one participating group member with 50 or fewer employees or members exclusive of spouses and dependents requires the insurer to charge the same community rate to all association members. (2) An insurer may issue an experience rated policy to an association group so long as all member employers or member groups covered by that policy exceed 50 persons exclusive of spouses and dependents. A second separate community rated policy may be issued by an insurer to the same association group covering all those member employers or member groups with 50 or fewer persons exclusive of spouses and dependents.

N.Y. Comp. Codes R. & Regs. tit. 11, § 360.8(c).

If there is information that an insurer is in violation of the requirements imposed by New York Insurance Law § 3231(a) or 4317(a), or by Regulation 145, a report should be made to:

Satya Pabuwal, FSA
Accident & Health Rating Section
Insurance Department
One Commerce Plaza
Albany, NY 12257.

For further information you may contact Principal Attorney Alan Rachlin at the New York City office.