New York Senate Bill 4007 and Assembly Bill 3007, which represent Governor Kathy Hochul’s state budget proposal, include provisions to amend Article 77 of the New York Insurance Law, the Life Insurance Company Guaranty Corporation of New York Act, to add coverage for health insurance, including long term care insurance and disability income insurance policies and group certificates, issued in New York by health insurers (including HMOs) and property/casualty insurers. Although health insurance is covered by the Life Insurance Company Guaranty Corporation if written by a life insurer, New York does not currently have guaranty association coverage for health insurance policies written by health insurers or by property/casualty insurers under their accident and health authority. These amendments would bring New York’s guaranty fund into conformity with the NAIC’s Life and Health Insurance Guaranty Association Model Act (Model 520), which provides such coverage in the other 49 states.

Superintendent of Financial Services Adrienne A. Harris testified before the Legislature regarding New York’s existing gap in guaranty fund coverage. “New York is the only state in the country that does not have a guaranty fund for health insurers. Consequently, if a consumer purchases a long term care policy from a life insurer that becomes insolvent, she will be fully protected by the Life Guaranty Fund. However, if a consumer purchased the same policy from a health insurer, she will not be protected. New Yorkers with long term care plans purchased through these insurers would lose decades of investments or, if currently on claim, might no longer be able to afford their care. Further, in the event that a health insurer operating in multiple states becomes insolvent, out-of-state consumers would be fully protected, but New Yorkers would be left without recourse.” Superintendent Harris concluded that “[t]his is bad public policy.”

Under the proposal, the renamed Life and Health Insurance Company Guaranty Corporation of New York would include coverage for accident and health insurance written by life insurance companies, health insurance companies and property/casualty insurance companies, and property/casualty and health insurers will be members of the Guaranty Corporation, obviating the need for a new guaranty fund structure. In general, with the exception of Long Term Care insurance, assessments would be allocated to all companies offering accident and health insurance in proportion to health insurance premiums. As with the NAIC Model, any assessment for long-term care insurance would be allocated 50% to health insurance companies and 50% to life insurance companies (with property/casualty companies treated as health insurance companies for this purpose). The proposal includes a provision relieving any insured covered by a health insurance policy issued in New York from liability to a provider of health care services for any covered services of an insolvent insurance company.

We understand that this legislation is a priority for the Department of Financial Services, which is concerned about potential insolvencies of health insurance companies offering long-term care insurance. The amendments would subject health insurance companies to assessments for the first time, and expand the scope of assessments for which life insurance companies and property/casualty companies could be assessed, albeit in conformity with the provisions already in place in other states.

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