OGC Op. No. 08-09-01

The Office of General Counsel issued the following opinion on September 3, 2008 representing the position of the New York State Insurance Department.

Re: Group Health Insurance, Eligibility for HMO Coverage

Question Presented:

May a health maintenance organization (HMO) refuse to enroll an employer because its present experience-rated policy indicates premium rates higher than the current HMO rates?


No. The prohibition set forth in 11 NYCRR § 52.40(c)(2)(vii) is not applicable to HMOs.


The inquirer reports that he has been informed, at a meeting of an agent’s association, that 11 NYCRR § 52.40(c)(2)(vii) precludes a group from transferring from a commercial insurer to an HMO if its present experience-rated insurance contract “indicates premium rates higher than the current HMO rates.” He asks whether the information received at the meeting is correct.


According to the records of the Insurance Department, the inquirer is licensed as an insurance agent pursuant to New York Insurance Law § 2013(a), and is a sublicensee for his employer, which is licensed in multiple capacities.

He asks about the proper interpretation of 11 NYCRR § 52.40(c)(2)(vii). That provision, which is part of a larger section entitled “Procedures and requirements for filing of rates,” reads as follows:

(c) Required rate filings for individual insurance including franchise, blanket insurance and community-rated contracts of article 43 corporations. The following rules shall apply with respect to rates for individual insurance including franchise, blanket insurance, and community-rated contracts of article 43 corporations: . . .

(2) Every insurer shall file and maintain two current New York rate manuals in convenient form. The active rate manual shall include rates for policy forms currently available and being actively marketed. The inactive rate manual shall include the currently applicable rates on policy forms no longer available or being actively marketed, where such rates have been approved or filed subsequent to the effective date of this Part. Each manual shall include the following: . . .

(vii) an outline of the general underwriting rules and methods of marketing the policy form, including, with respect to article 43 corporations, a rule providing that no community-rated contract may be issued to a group whose experience under a group insurance policy with any insurer, including such article 43 corporation indicates a rate in excess of the then current community rate; however, this rule does not apply to a group which does not have a sufficient number of employees or members to qualify, under the article 43 corporation's underwriting rules, for experience rating;

While it could be argued that 11 NYCRR § 52.40(c)(2)(vii) is applicable to HMOs, because New York Public Health Law § 4406(1) (McKinney 2002 and Supp. 2008) mandates that HMO subscriber contracts be subject to the requirements applicable to not-for-profit health insurers organized in accordance with Article 43 of the New York Insurance Law, that mandate prescribes the content of subscriber contracts, not the procedure for form approval. HMOs have their own comprehensive filing requirements, as set forth in 11 NYCRR § 52.42, which do not impose the same prohibition concerning transfer from an insurer under an experience-rating regimen and methodology. Accordingly, 11 NYCRR § 52.40(c)(2)(vii) is not applicable to HMOs.

In addition, to make the prohibition set forth in 11 NYCRR § 52.40(c)(2)(vii) applicable to HMOs would be contrary to public policy, see Public Health Law § 4400, which aims to encourage enrollment in HMOs, and thus health coverage for the state’s citizens, by requiring HMO premium rates to be calculated in accordance with the principles of community rating.

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