§ 4308 — Supervision of superintendent

New York § 4308

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 43: Non-profit Medical and Dental Indemnity, or Health and Hospital Service Corporations

Text

§ 4308. Supervision of superintendent. (a) No corporation subject to\nthe provisions of this article shall enter into any contract unless and\nuntil it shall have filed with the superintendent a copy of the contract\nor certificate and of all applications, riders and endorsements for use\nin connection with the issuance or renewal thereof, to be formally\napproved by him as conforming to the applicable provisions of this\narticle and not inconsistent with any other provision of law applicable\nthereto. The superintendent shall, within a reasonable time after the\nfiling of any such form, notify the corporation filing the same either\nof his approval or of his disapproval of such form.\n (b) No corporation subject to the provisions of this article shall\nenter into any contract unless and until it shall have filed with the\nsuperintendent a schedule of the premiums or, if appropriate, rating\nformula from which premiums are determined, to be paid under the\ncontracts and shall have obtained the superintendent's approval thereof.\nThe superintendent may refuse such approval if he finds that such\npremiums, or the premiums derived from the rating formula, are\nexcessive, inadequate or unfairly discriminatory, provided, however, the\nsuperintendent may also consider the financial condition of such\ncorporation in approving or disapproving any premium or rating formula.\nAny adjustments to an approved schedule of premiums or to the approved\nrating formula for non-community rated contracts shall also be subject\nto the approval of the superintendent provided, however, such\nadjustments shall not be subject to the requirements of subsection (c)\nof this section. Any premium or formula approved by the superintendent\nshall make provision for such increase as may be necessary to meet the\nrequirements of a plan approved by the superintendent in the manner\nprescribed in section four thousand three hundred ten of this article\nfor restoration of the statutory reserve fund required by such section.\nNotwithstanding any other provision of law, the superintendent, as part\nof the rate increase approval process, may defer, reduce or reject a\nrate increase if, in the judgment of the superintendent, the salary\nincreases for senior level management executives employed at\ncorporations subject to the provisions of this article are excessive or\nunwarranted given the financial condition or overall performance of such\ncorporation. The superintendent is authorized to promulgate rules and\nregulations which the superintendent deems necessary to carry out such\ndeferral, reduction or rejection.\n (c) (1) An increase or decrease in premiums with respect to community\nrated contracts shall not be approved by the superintendent unless it is\nin compliance with the provisions of this subsection as well as other\napplicable provisions of law.\n (2) A corporation desiring to increase or decrease premiums for any\ncontract subject to this subsection shall submit a rate filing or\napplication to the superintendent. A corporation shall send written\nnotice of the proposed rate adjustment, including the specific change\nrequested, to each contract holder and subscriber affected by the\nadjustment on or before the date the rate filing or application is\nsubmitted to the superintendent. The notice shall prominently include\nmailing and website addresses for both the department of financial\nservices and the corporation through which a person may, within thirty\ndays from the date the rate filing or application is submitted to the\nsuperintendent, contact the department of financial services or\ncorporation to receive additional information or to submit written\ncomments to the department of financial services on the rate filing or\napplication. The superintendent shall establish a process to post on the\ndepartment's website, in a timely manner, all relevant written comments\nreceived pertaining to rate filings or applications. The corporation\nshall provide a copy of the notice to the superintendent with the rate\nfiling or application. The superintendent shall immediately cause the\nnotice to be posted on the department of financial services' website.\nThe superintendent shall determine whether the filing or application\nshall become effective as filed, shall become effective as modified, or\nshall be disapproved. The superintendent may modify or disapprove the\nrate filing or application if the superintendent finds that the premiums\nare unreasonable, excessive, inadequate, or unfairly discriminatory, and\nmay consider the financial condition of the corporation in approving,\nmodifying or disapproving any premium adjustment. The determination of\nthe superintendent shall be supported by sound actuarial assumptions and\nmethods, and shall be rendered in writing between thirty and sixty days\nfrom the date the rate filing or application is submitted to the\nsuperintendent. Should the superintendent require additional information\nfrom the corporation in order to make a determination, the\nsuperintendent shall require the corporation to furnish such\ninformation, and in such event, the sixty days shall be tolled and shall\nresume as of the date the corporation furnishes the information to the\nsuperintendent. If the superintendent requests additional information\nless than ten days from the expiration of the sixty days (exclusive of\ntolling), the superintendent may extend the sixty day period an\nadditional twenty days, to make a determination. The application or\nrate filing will be deemed approved if a determination is not rendered\nwithin the time allotted under this section. A corporation shall not\nimplement a rate adjustment unless the corporation provides at least\nsixty days advance written notice of the premium rate adjustment\napproved by the superintendent to each contract holder and subscriber\naffected by the rate adjustment.\n (3) (A) The expected minimum loss ratio for a contract form subject to\nthis subsection for which a rate filing or application is made pursuant\nto this paragraph, other than a medicare supplemental insurance\ncontract, or, with the approval of the superintendent, an aggregation of\ncontract forms that are combined into one community rating experience\npool and rated consistent with community rating requirements, shall not\nbe less than eighty-two percent. In reviewing a rate filing or\napplication, the superintendent may modify the eighty-two percent\nexpected minimum loss ratio requirement if the superintendent determines\nthe modification to be in the interests of the people of this state or\nif the superintendent determines that a modification is necessary to\nmaintain insurer solvency. No later than July thirty-first of each year,\nevery corporation subject to this subparagraph shall annually report the\nactual loss ratio for the previous calendar year in a format acceptable\nto the superintendent. If an expected loss ratio is not met, the\nsuperintendent may direct the corporation to take corrective action,\nwhich may include the submission of a rate filing to reduce future\npremiums, or to issue dividends, premium refunds or credits, or any\ncombination of these.\n (B) The expected minimum loss ratio for a medicare supplemental\ninsurance contract form shall not be less than eighty percent. No later\nthan May first of each year, every corporation subject to this\nsubparagraph shall annually report the actual loss ratio for each\ncontract form subject to this section for the previous calendar year in\na format acceptable to the superintendent. In each case where the loss\nratio for the contract form fails to comply with the eighty percent loss\nratio requirement, the corporation shall submit a corrective action plan\nto the superintendent for assuring compliance with the applicable\nminimum loss ratio standard. The corrective action plan shall be\nsubmitted to the superintendent within sixty days of the corporation's\nsubmission of the annual report required by this subparagraph. The\ncorporation's plan may utilize premium refunds or credits, subject to\nthe approval of the superintendent.\n (4) In case of conflict between this subsection and any other\nprovision of law, this subsection shall prevail.\n (d) The superintendent shall order an independent management and\nfinancial audit of corporations subject to the provisions of this\narticle with a combined premium volume exceeding two billion dollars\nannually in order to develop a detailed understanding of such\ncorporation's financial status and to determine the viability of such\ncorporation's products. Such audit shall be performed by an organization\nupon submission of a program plan in response to a request for proposal\napproved by the superintendent in consultation with the commissioner of\nhealth and the state comptroller. Such audit shall not be performed by\nany organization that has in any way performed or furnished services of\nany kind to the corporation within the past five years, unless it is\nadequately demonstrated that such services would not compromise that\norganization's performance and objectivity. The audit shall be completed\nand a report submitted by May first, nineteen hundred ninety-three to\nthe superintendent, the commissioner of health, and the chairs of the\nsenate and assembly committees on health and insurance. The scope of the\naudit shall include, but not be limited to, financial and competitive\nposition, corporate structure and governance, organization and\nmanagement, strategic direction, rate adequacy, and the regulatory and\ncompetitive environment in the state of New York. Specifically, the\naudit shall include, but not be limited to:\n (i) determining the corporation's financial and market position,\nincluding its reserves, trends in membership, market share, and\nprofitability by market segment;\n (ii) evaluating the corporation's product offerings with respect to\nmarket requirements and trends, the corporation's responses to the New\nYork health care market, and its management of medical claims costs;\n (iii) assessing the effectiveness of the organizational and management\nstructure and performance, including, but not limited to, possible\nimprovement in the size, structure, composition and operation of the\nboard of directors, productivity improvement, information systems,\nmanagement development, personnel practices, mix and level of skills,\npersonnel turnover, investment practices and rate of return upon\ninvestment activities;\n (iv) analyzing the corporation's strategic directions, its adequacy to\nmeet competitive, market, and existing regulatory trends, including an\nevaluation of the use of brokers in marketing products, and the impact\nof those strategies on the corporation's future financial performance\nand on the health care system of New York;\n (v) evaluating the adequacy of rates for existing products,\nparticularly (but not limited to) small group, medicare supplemental,\nand direct payment to identify areas that may need immediate remedial\nattention;\n (vi) identifying any changes to the regulatory and legislative\nenvironment that may need to be made to ensure that the corporation can\ncontinue to be financially viable and competitive;\n (vii) identifying and assessing specific transactions such as the\nprocurement of reinsurance, sale of real property and the sale of future\ninvestment income to improve the financial condition of the corporation;\nand\n (viii) evaluating and identifying possible improvements in the\ncorporation's managed care strategies, operations and claims handling.\n (e) Notwithstanding any other provision of law, the superintendent\nshall have the power to require independent management and financial\naudits of corporations subject to the provisions of this article\nwhenever in the judgment of the superintendent, losses sustained by a\ncorporation jeopardize its ability to provide meaningful coverage at\naffordable rates or when such audit would be necessary to protect the\ninterests of subscribers. The audit shall include, but not be limited\nto, an investigation of the corporation's provision of benefits to\nsenior citizens, individual and family, and small group and small\nbusiness subscribers in relation to the needs of those subscribers. The\naudit shall also include an evaluation of the efficiency of the\ncorporation's management, particularly with respect to lines of business\nthat are experiencing losses. In every case in which the superintendent\nchooses to require an audit provided for in this subsection, the\nsuperintendent shall have the authority to select the auditor. Any costs\nincurred as a result of the operation of this subsection shall be\nassessed on all domestic insurers in the same manner as provided for in\nsection two hundred six of the financial services law.\n (f) The results of any audit conducted pursuant to subsections (d) and\n(e) of this section shall be provided to the corporation and each member\nof its board of directors. The superintendent shall have the authority\nto direct the corporation in writing to implement any recommendations\nresulting from the audit that the superintendent finds to be necessary\nand reasonable; provided, however, that the superintendent shall first\nconsider any written response submitted by the corporation or the board\nof directors prior to making such finding. Upon any application for a\nrate adjustment by the corporation, the superintendent shall review the\ncorporation's compliance with the directions and recommendations made\npreviously by the superintendent, as a result of the most recently\ncompleted management or financial audit and shall include such findings\nin any written decision concerning such application.\n (g)(1) Until September thirtieth, two thousand ten, as an alternate\nprocedure to the requirements of subsection (c) of this section, a\ncorporation subject to the provisions of this article desiring to\nincrease or decrease premiums for any contract subject to this section\nmay instead submit a rate filing or application to the superintendent\nand such application or filing shall be deemed approved, provided that\n(A) the anticipated incurred loss ratio for a contract form shall not be\nless than eighty-two percent for individual direct payment contracts or\neighty-two percent for small group and small group remittance contracts,\nnor, except in the case of individual direct payment contracts with a\nloss ratio of greater than one hundred five percent during nineteen\nhundred ninety-four, shall the loss ratio for any direct payment, group\nor group remittance contract be more than one hundred five percent of\nthe anticipated earned premium, and (B) the corporation submits, as part\nof such filing, a certification by a member of the American Academy of\nActuaries or other individual acceptable to the superintendent that that\ncorporation is in compliance with the provisions of this subsection,\nbased upon that person's examination, including a review of the\nappropriate records and of the actuarial assumptions and methods used by\nthe corporation in establishing premium rates for contracts subject to\nthis section. A corporation shall not utilize the alternate procedure\npursuant to this subsection to implement a change in rates to be\neffective on or after October first, two thousand ten. For purposes of\nthis section, a small group is any group whose contract is subject to\nthe requirements of section forty-three hundred seventeen of this\narticle.\n (2) Prior to January first, two thousand, no rate increase or decrease\nmay be deemed approved under this subsection if that increase or\ndecrease, together with any other rate increases or decreases imposed on\nthe same contract form, would cause the aggregate rate increase or\ndecrease for that contract form to exceed ten percent during any\ncontinuous twelve month period. No rate increase may be imposed pursuant\nto this subsection unless at least thirty days advance written notice of\nsuch increase has been provided to each contract holder and subscriber.\n (h)(1) Each calendar year, a corporation subject to the provisions of\nthis article shall return, in the form of aggregate benefits incurred\nfor each contract form filed pursuant to the alternate procedure set\nforth in subsection (g) of this section, at least eighty-two percent for\nindividual direct payment contracts or eighty-two percent for small\ngroup and small group remittance contracts, but, except in the case of\nindividual direct payment contracts with a loss ratio of greater than\none hundred five percent in nineteen hundred ninety-four, for any direct\npayment, group or group remittance contract, not in excess of one\nhundred five percent of the aggregate premiums earned for the contract\nform during that calendar year. Corporations subject to the provisions\nof this article shall annually report, no later than June thirtieth of\neach year, the loss ratio calculated pursuant to this subsection for\neach such contract form for the previous calendar year.\n (2) In each case where the loss ratio for a contract form fails to\ncomply with the eighty-two percent minimum loss ratio requirement for\nindividual direct payment contracts, or the eighty-two percent minimum\nloss ratio requirement for small group and small group remittance\ncontracts, as set forth in paragraph one of this subsection, the\ncorporation shall issue a dividend or credit against future premiums for\nall contract holders with that contract form in an amount sufficient to\nassure that the aggregate benefits incurred in the previous calendar\nyear plus the amount of the dividends and credits shall equal no less\nthan eighty-two percent for individual direct payment contracts, or\neighty-two percent for small group and small group remittance contracts,\nof the aggregate premiums earned for the contract form in the previous\ncalendar year. The dividend or credit shall be issued to each contract\nholder or subscriber who had a contract that was in effect at any time\nduring the applicable year. The dividend or credit shall be prorated\nbased on the direct premiums earned for the applicable year among all\ncontract holders or subscribers eligible to receive such dividend or\ncredit. A corporation shall make a reasonable effort to identify the\ncurrent address of, and issue dividends or credits to, former contract\nholders or subscribers entitled to the dividend or credit. A corporation\nshall, with respect to dividends or credits to which former contract\nholders that the corporation is unable to identify after a reasonable\neffort would otherwise be entitled, have the option, as deemed\nacceptable by the superintendent, of prospectively adjusting premium\nrates by the amount of such dividends or credits, issuing the amount of\nsuch dividends or credits to existing contract holders, depositing the\namount of such dividends or credits in the fund established pursuant to\nsection four thousand three hundred twenty-two-a of this article, or\nutilizing any other method which offsets the amount of such dividends or\ncredits. All dividends and credits must be distributed by September\nthirtieth of the year following the calendar year in which the loss\nratio requirements were not satisfied. The annual report required by\nparagraph one of this subsection shall include a corporation's\ncalculation of the dividends and credits, as well as an explanation of\nthe corporation's plan to issue dividends or credits. The instructions\nand format for calculating and reporting loss ratios and issuing\ndividends or credits shall be specified by the superintendent by\nregulation. Such regulations shall include provisions for the\ndistribution of a dividend or credit in the event of cancellation or\ntermination by a contract holder or subscriber.\n (3) In each case where the loss ratio for a contract form fails to\ncomply with the one hundred five percent maximum loss ratio requirement\nof paragraph one of this subsection, the corporation shall institute a\npremium rate increase in an amount sufficient to assure that the\naggregate benefits incurred in the previous calendar year shall equal no\nmore than one hundred five percent of the sum of the aggregate premiums\nearned for the contract form in the previous calendar year and the\naggregate premium rate increase. The rate increase shall be applied to\neach contract that was in effect as of December thirty-first of the\napplicable year and remains in effect as of the date the rate increase\nis imposed. All rate increases must be imposed by September thirtieth of\nthe year following the calendar year in which the loss ratio\nrequirements were not satisfied. The annual report required by paragraph\none of this subsection shall include a corporation's calculation of the\npremium rate increase, as well as an explanation of the corporation's\nplan to implement the rate increase. The instructions and format for\ncalculating and reporting loss ratios and implementing rate increases\nshall be specified by the superintendent by regulation.\n (i) The alternate procedure described in subsections (g) and (h) of\nthis section shall apply to individual direct payment contracts issued\npursuant to sections four thousand three hundred twenty-one and four\nthousand three hundred twenty-two of this article on and after January\nfirst, nineteen hundred ninety-seven. Such alternate procedure shall not\nbe utilized to implement a change in rates to be effective on or after\nOctober first, two thousand ten.\n (j) All community rated contracts, other than medicare supplemental\ninsurance contracts, issued or in effect during calendar year two\nthousand ten shall be subject to a minimum loss ratio requirement of\neighty-two percent. Corporations may use the alternate procedure set\nforth in subsection (g) of this section to adjust premium rates in order\nto meet the required minimum loss ratio for calendar year two thousand\nten. The rate filing or application shall be submitted no later than\nSeptember thirtieth, two thousand ten.\n