OGC Op. No. 07-06-20
The Office of General Counsel issued the following opinion on June 25, 2007, representing the position of the New York State Insurance Department.
RE: HMO Requirement That Members Over 65 Enroll in Medicare Parts A & B
1) May a health maintenance organization (HMO) require one of its members, who has attained the age of 65 and is a member of an insured group of less than 20 persons, to enroll in Medicare Parts A & B as the primary insurance carrier?
2) If the answer to the above is yes, is the group, as a whole, entitled to a reduction in premiums since the insurance carried under the HMO is secondary to Medicare?
1) Yes. Pursuant to the federal law, and the regulations promulgated under New York State law, an HMO may require a member who has attained the age of 65, and is part of a group of less than 20, to enroll in Medicare Parts A & B as the primary insurance carrier.
2) No. Since small group health insurance contracts are community rated, only the community rated pool as a whole, and not the individual member or the group, experiences a slight reduction in premium when a portion of the risk is shifted to Medicare.
The inquirer reports that a constituent of his is an insured who is enrolled in an HMO as part of a group of less than 20 persons. The HMO informed him that because he is over 65, he must enroll in Medicare Parts A & B. In that circumstance, Medicare would be his primary insurance carrier, and the HMO would be his secondary carrier. Furthermore, the HMO has informed the insured that his premiums would remain the same as when it was his primary carrier.
Medicare Part A is a federal insurance program that provides basic protection against the costs of hospital, related post-hospital, home health services, and hospice care for certain individuals, including those aged 65 and over and eligible for retirement. Medicare Part B provides medical insurance benefits for aged and disabled individuals who elect to enroll under the program. Medicare Part B is financed from premium payments by enrollees, together with contributions from funds appropriated by the federal government. Title XVIII of the federal Social Security Act governs Medicare benefits. Accordingly, 42 U.S.C. § 1395y(b), which governs medicare as a secondary payor, is relevant to the inquiry. It provides as follows:
Medicare as secondary payer.
(1) Requirements of group health plans.
(A) Working aged under group health plans.
(i) In general. A group health plan—
(I) may not take into account that an individual (or the individual's spouse) who is covered under the plan by virtue of the individual's current employment status with an employer is entitled to benefits under this title under section 226(a) [42 U.S.C. § 426(a)], and
(II) shall provide that any individual age 65 or older (and the spouse age 65 or older of any individual) who has current employment status with an employer shall be entitled to the same benefits under the plan under the same conditions as any such individual (or spouse) under age 65.
(ii) Exclusion of group health plan of a small employer. Clause (i) shall not apply to a group health plan unless the plan is a plan of, or contributed to by, an employer that has 20 or more employees for each working day in each of 20 or more calendar weeks in the current calendar year or the preceding calendar year.
In addition, Section 52.26 of the New York Comp. Codes R. & Regs., tit. 11, Part 52 (Regulation 62) sets forth rules relating to the exclusion of Medicare benefits. It reads in pertinent part as follows:
(a) Policies may provide for termination of coverage upon eligibility for Medicare by reason of age only. An exception to this rule is subject to approval by the superintendent, and will be considered only if:
(1) the insurer offers conversion to a Medicare supplement contract;
(2) the conversion contract plus Medicare provide the same or greater benefits for the same or lesser premium than the original contract plus Medicare would have provided; and
(3) the insurer provides that the insured can obtain, without evidence of insurability and without limitations as to preexisting conditions, the same or similar coverage as that in the original contract in the event Medicare coverage ceases.
With regard to the inquirer’s first question, the HMO’s actions here do not conflict with applicable federal law, state insurance regulations, or its own contract with subscribers. Federal law provides as a general matter that a group health plan may not take into account that a member who is covered under the plan is eligible for Medicare. Moreover, the plan must afford a member over the age of 65 the same benefits that it accords to members under the age of 65. But federal law clearly provides that neither of these dictates applies to group plans of employers with less than 20 employees. In addition, the Insurance Department’s regulations, with a limited exception that has no relevance here, do not prohibit an insurer from terminating coverage upon a member’s eligibility for Medicare for reasons only related to age. And, in electing not to terminate coverage when a group member becomes eligible for Medicare due to age but instead exercising its right, as set forth in its subscriber contract, to reduce benefits that it would pay under its contract by any amounts payable under Medicare (even if the HMO member does not enroll in Medicare), the HMO is acting in accordance with the law.
The inquirer’s second inquiry asks whether the insured, or the group as a whole, is entitled to a reduction in premiums for the secondary insurance carried under the HMO. Small group HMO contracts must be “community” rated pursuant to New York Insurance Law § 4317 (McKinney 2007. (Insurance Law § 3231 sets forth the same requirements for commercial health insurers.) Community rating is a 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. See Insurance Law § 4317(a). Because small group health insurance contracts are community rated, any savings that might accrue as a result of the HMO providing benefits secondary to Medicare will be reflected in the premium rate applicable to the entire community of persons enrolled under the same contract, rather than specifically attributed to a single group. There is no requirement under law that obligates an insurer to recognize Medicare beneficiaries as a discrete group, since the experience of either the community pool or a particular group should reflect the primacy of Medicare coverage for some insureds. See Insurance Department Office of General Counsel Opinion dated February 8, 2005.
For further questions about health insurance coverage, the inquirer and his constituent were directed to call the Health Insurance Information Counseling Assistance program at 1-800-701-0501.
For further information you may contact, Deputy Superintendent and General Counsel Robert H. Easton at the New York City Office.