New York Health Care Reform Act of 2000 Summary

December 23, 1999

For HCRA questions please contact Ray Kolarsey, Sean Doolan, or Steve Cleary.

This is a brief summary of new legislation passed by the Assembly on Wednesday, December 22, extending the 1996 HCRA legislation, which was due to expire on December 31, 1999. The Senate is expected to return on Tuesday, December 28 to pass the bill. The extension is for 3 1/2 years, through June 30, 2003.

1.Subsidies for HMO Direct Pay Products.

The legislation allocates $35 million in the year 2000, $36 million in 2001, and $39 million in 2002 to subsidizing the standard direct pay products that all HMOs are mandated to issue.

The device to distribute the subsidy funds is a stop-loss or reinsurance program. There will be one stop-loss program for the direct pay HMO product (funded at $17.5 million in 2000) and a separate stop-loss pool and program for the direct pay point of service product (also funded at $17.5 million in 2000). The separate programs will allow state regulators to direct more assistance to the HMO product, providing a financial incentive for members currently enrolled in the POS product to switch to HMO coverage.

HMOs will be eligible for stop-loss reimbursement for 90% of claims of any particular member whose claims expenses exceed $20,000 per member per year, up to $100,000 per member per calendar year. Claims over $100,000 are solely the responsibility of the HMO.

The stop-loss program could be administered by the Department or a pool administrator without a true stop-loss insurance policy being involved. In the alternative, the Department is authorized to actually purchase a genuine stop-loss or reinsurance policy and in that case the reimbursement would be paid by that insurer pursuant to that official insurance policy form.

The payments of "premium" to fund the stop-loss program will be made from the new pool containing proceeds from the tobacco settlement, not from the HMOs who cover the direct pay members. Thus the HMOs will obtain receipts from the stop-loss program but at no expense to the HMO, so the receipts are essentially a subsidy from the HMO's perspective.

At the end of each calendar year HMOs would submit their claims to the stop-loss program for their members who had claims over the $20,000 threshold. In order to assure that the process works swiftly, the claims must have been incurred and paid during the calendar year. The claims must then be submitted to the Department by April 1.

If the sum total of the claims submitted by all HMOs exceed the funds available, then each HMO will be paid a pro-rata amount based on its proportionate share of the total claims submitted for reimbursement.

Several suggestions were adopted to improve the legislation as it was originally proposed by the Insurance Department:

• The information submitted to request reimbursement is limited to claims data. This will hopefully avoid the type of problems encountered under the Regulation 146 Specified Medical Condition program where payors had to collect medical records and other documentation that had not necessarily been submitted when the claim was submitted and paid.
• The Department had initially proposed authority for itself to deny reimbursement or change the stop-loss conditions if the Department felt the HMO was not sufficiently aggressive in utilization control or in negotiating rates with providers. These provisions were deleted from the final bill text.

2. HCRA Surcharges.

The 8.18% surcharge will remain at the 8.18% level. However, it will be discontinued for two categories of laboratory payments. First, the 8.18% surcharge on independent clinical laboratories will end effective October 1, 2000. Second, the 8.18% surcharge as applied to hospital based laboratories is intended to end as well (the repeal for hospital based labs applies only to "referred ambulatory clinical lab services"). This is in large measure to assure that hospital based labs are not placed at a competitive disadvantage compared to independent clinical labs. However, before the hospital laboratory surcharge elimination can take effect, New York State needs approval from the federal Health Care Financing Administration to assure that surcharging some but not all hospital services does not violate federal prohibitions on provider taxes.

The statewide reduction in the covered lives payments under the finalized bill will be $0 for calendar year 2000, $20 million for 2001 and $40 million for 2002.

3. New Programs for the Uninsured.

The legislation includes a number of new programs to provide health insurance for individuals who are uninsured. These new programs will be funded primarily from the New York State annual receipts of $500 million from the tobacco settlement, as well as receipts from a new increase in the cigarette tax.

A new "Family Health Plus" program is established specifically for adults whose income level is just above the level that would ordinarily qualify them for Medicaid. The program would begin in January 2001. Although technically these persons will become eligible for Medicaid, they will have a separate benefit package that differs from the typical Medicaid benefit package. The income level for Family Health Plus is from the current Medicaid eligibility level up to 100% of the federal poverty level, but rises to 111% by October 1, 2001. As with Child Health Plus it will be implemented by HMOs or insurers who contract with the State to write the coverage.

Several new programs are adopted for home care workers, particularly in New York City. Home health aides and personal care workers will be provided health insurance by the home care agencies employing them. The expense of that new health insurance will be paid to the home care agencies by the State Medicaid Program through an increase in the Medicaid rate that the State pays to the home care agencies. The expense of the Medicaid rate adjustment will be paid partly by the State and partly by the ordinary federal matching funds that are available for State Medicaid expenditures.

Of particular interest to HMOs (and insurers) is a new program for individuals and small businesses where the workers have higher income than would qualify them for the Family Health Plus described above, but not so much that they can readily afford health insurance on their own in the ordinary direct pay market. Although there are two separate programs, one for individuals and one for small groups with low wage employees, they will have a common benefit package and will have one community rated claims experience "bucket" for both programs so that the same premium rate applies to persons whether they are enrolled directly or enrolled through the small group program.

The new program, known as "Healthy New York," is essentially a mandate requiring all HMOs to issue the coverage for this new program. As in the case of the standard direct pay policies, the benefit package will be uniform among all HMOs and no HMO will be able to offer additional benefits.

Healthy New York is designed for:

• Sole proprietors of a business who are the only employee, with an income below 208% of the federal poverty level (same level as Child Health Plus).
• Employers with less than 50 employees, where at least 30% of the employees have incomes under $30,000 per year, and the employer has not offered health insurance. It is not clear whether "employee pay all" programs fit that definition. The employer must pay at least 50% of the premium.
• Individuals may enroll on their own if they are employed and have not had health insurance for a year and their income is less than 208% of the federal poverty level.

There are exceptions when the person was previously in another program for the uninsured or has lost prior coverage due to death of a family member, loss of employment, etc.

Coverage under the Healthy New York program will be subsidized through the tobacco receipts pool. The device for the subsidy will be a stop-loss program just like the one that applies to the HMO direct pay market. The only difference is that the threshold stop-loss limit is higher ($30,000 instead of $20,000). The program for individuals is subsidized at $6 million for 2001 while the subsidy for small groups is funded at $34 million in 2001.

This new program does not begin until January 2001. It was designed as a program only for HMOs where benefits are only available in the network (no POS feature). However, insurers can participate as well.

The bill also continues to fund the Child Health Plus Program and provide additional funding higher than in prior years.

4. Miscellaneous

The legislation includes $5,000,000 to fund audits of payors under the HCRA surcharge process. The legislation also adds stiff penalties to payors who do not respond to auditor's request for information within approximately 30 days.

Previous funding of programs for health quality information and research and development regarding quality of care indicators is discontinued.

There are numerous cuts and reductions in Medicaid payment rates to hospitals, nursing homes and home care agencies which are contained in the legislation. Some of them are continuations of prior cuts which are now authorized into future years.

The existing program of Elderly Pharmaceutical Insurance Coverage (EPIC) receives substantial additional funds such as $107 million for 2000.