N.Y. Insurance Law § 4308: Supervision of superintendent

§ 4308. Supervision of superintendent. (a) No corporation subject to

the provisions of this article shall enter into any contract unless and

until it shall have filed with the superintendent a copy of the contract

or certificate and of all applications, riders and endorsements for use

in connection with the issuance or renewal thereof, to be formally

approved by him as conforming to the applicable provisions of this

article and not inconsistent with any other provision of law applicable

thereto. The superintendent shall, within a reasonable time after the

filing of any such form, notify the corporation filing the same either

of his approval or of his disapproval of such form.

(b) No corporation subject to the provisions of this article shall

enter into any contract unless and until it shall have filed with the

superintendent a schedule of the premiums or, if appropriate, rating

formula from which premiums are determined, to be paid under the

contracts and shall have obtained the superintendent's approval thereof.

The superintendent may refuse such approval if he finds that such

premiums, or the premiums derived from the rating formula, are

excessive, inadequate or unfairly discriminatory, provided, however, the

superintendent may also consider the financial condition of such

corporation in approving or disapproving any premium or rating formula.

Any adjustments to an approved schedule of premiums or to the approved

rating formula for non-community rated contracts shall also be subject

to the approval of the superintendent provided, however, such

adjustments shall not be subject to the requirements of subsection (c)

of this section. Any premium or formula approved by the superintendent

shall make provision for such increase as may be necessary to meet the

requirements of a plan approved by the superintendent in the manner

prescribed in section four thousand three hundred ten of this article

for restoration of the statutory reserve fund required by such section.

Notwithstanding any other provision of law, the superintendent, as part

of the rate increase approval process, may defer, reduce or reject a

rate increase if, in the judgment of the superintendent, the salary

increases for senior level management executives employed at

corporations subject to the provisions of this article are excessive or

unwarranted given the financial condition or overall performance of such

corporation. The superintendent is authorized to promulgate rules and

regulations which the superintendent deems necessary to carry out such

deferral, reduction or rejection.

(c) (1) An increase or decrease in premiums with respect to community

rated contracts shall not be approved by the superintendent unless it is

in compliance with the provisions of this subsection as well as other

applicable provisions of law.

(2) A corporation desiring to increase or decrease premiums for any

contract subject to this subsection shall submit a rate filing or

application to the superintendent. A corporation shall send written

notice of the proposed rate adjustment, including the specific change

requested, to each contract holder and subscriber affected by the

adjustment on or before the date the rate filing or application is

submitted to the superintendent. The notice shall prominently include

mailing and website addresses for both the department of financial

services and the corporation through which a person may, within thirty

days from the date the rate filing or application is submitted to the

superintendent, contact the department of financial services or

corporation to receive additional information or to submit written

comments to the department of financial services on the rate filing or

application. The superintendent shall establish a process to post on the

department's website, in a timely manner, all relevant written comments

received pertaining to rate filings or applications. The corporation

shall provide a copy of the notice to the superintendent with the rate

filing or application. The superintendent shall immediately cause the

notice to be posted on the department of financial services' website.

The superintendent shall determine whether the filing or application

shall become effective as filed, shall become effective as modified, or

shall be disapproved. The superintendent may modify or disapprove the

rate filing or application if the superintendent finds that the premiums

are unreasonable, excessive, inadequate, or unfairly discriminatory, and

may consider the financial condition of the corporation in approving,

modifying or disapproving any premium adjustment. The determination of

the superintendent shall be supported by sound actuarial assumptions and

methods, and shall be rendered in writing between thirty and sixty days

from the date the rate filing or application is submitted to the

superintendent. Should the superintendent require additional information

from the corporation in order to make a determination, the

superintendent shall require the corporation to furnish such

information, and in such event, the sixty days shall be tolled and shall

resume as of the date the corporation furnishes the information to the

superintendent. If the superintendent requests additional information

less than ten days from the expiration of the sixty days (exclusive of

tolling), the superintendent may extend the sixty day period an

additional twenty days, to make a determination. The application or

rate filing will be deemed approved if a determination is not rendered

within the time allotted under this section. A corporation shall not

implement a rate adjustment unless the corporation provides at least

sixty days advance written notice of the premium rate adjustment

approved by the superintendent to each contract holder and subscriber

affected by the rate adjustment.

(3) (A) The expected minimum loss ratio for a contract form subject to

this subsection for which a rate filing or application is made pursuant

to this paragraph, other than a medicare supplemental insurance

contract, or, with the approval of the superintendent, an aggregation of

contract forms that are combined into one community rating experience

pool and rated consistent with community rating requirements, shall not

be less than eighty-two percent. In reviewing a rate filing or

application, the superintendent may modify the eighty-two percent

expected minimum loss ratio requirement if the superintendent determines

the modification to be in the interests of the people of this state or

if the superintendent determines that a modification is necessary to

maintain insurer solvency. No later than July thirty-first of each year,

every corporation subject to this subparagraph shall annually report the

actual loss ratio for the previous calendar year in a format acceptable

to the superintendent. If an expected loss ratio is not met, the

superintendent may direct the corporation to take corrective action,

which may include the submission of a rate filing to reduce future

premiums, or to issue dividends, premium refunds or credits, or any

combination of these.

(B) The expected minimum loss ratio for a medicare supplemental

insurance contract form shall not be less than eighty percent. No later

than May first of each year, every corporation subject to this

subparagraph shall annually report the actual loss ratio for each

contract form subject to this section for the previous calendar year in

a format acceptable to the superintendent. In each case where the loss

ratio for the contract form fails to comply with the eighty percent loss

ratio requirement, the corporation shall submit a corrective action plan

to the superintendent for assuring compliance with the applicable

minimum loss ratio standard. The corrective action plan shall be

submitted to the superintendent within sixty days of the corporation's

submission of the annual report required by this subparagraph. The

corporation's plan may utilize premium refunds or credits, subject to

the approval of the superintendent.

(4) In case of conflict between this subsection and any other

provision of law, this subsection shall prevail.

(d) The superintendent shall order an independent management and

financial audit of corporations subject to the provisions of this

article with a combined premium volume exceeding two billion dollars

annually in order to develop a detailed understanding of such

corporation's financial status and to determine the viability of such

corporation's products. Such audit shall be performed by an organization

upon submission of a program plan in response to a request for proposal

approved by the superintendent in consultation with the commissioner of

health and the state comptroller. Such audit shall not be performed by

any organization that has in any way performed or furnished services of

any kind to the corporation within the past five years, unless it is

adequately demonstrated that such services would not compromise that

organization's performance and objectivity. The audit shall be completed

and a report submitted by May first, nineteen hundred ninety-three to

the superintendent, the commissioner of health, and the chairs of the

senate and assembly committees on health and insurance. The scope of the

audit shall include, but not be limited to, financial and competitive

position, corporate structure and governance, organization and

management, strategic direction, rate adequacy, and the regulatory and

competitive environment in the state of New York. Specifically, the

audit shall include, but not be limited to:

(i) determining the corporation's financial and market position,

including its reserves, trends in membership, market share, and

profitability by market segment;

(ii) evaluating the corporation's product offerings with respect to

market requirements and trends, the corporation's responses to the New

York health care market, and its management of medical claims costs;

(iii) assessing the effectiveness of the organizational and management

structure and performance, including, but not limited to, possible

improvement in the size, structure, composition and operation of the

board of directors, productivity improvement, information systems,

management development, personnel practices, mix and level of skills,

personnel turnover, investment practices and rate of return upon

investment activities;

(iv) analyzing the corporation's strategic directions, its adequacy to

meet competitive, market, and existing regulatory trends, including an

evaluation of the use of brokers in marketing products, and the impact

of those strategies on the corporation's future financial performance

and on the health care system of New York;

(v) evaluating the adequacy of rates for existing products,

particularly (but not limited to) small group, medicare supplemental,

and direct payment to identify areas that may need immediate remedial

attention;

(vi) identifying any changes to the regulatory and legislative

environment that may need to be made to ensure that the corporation can

continue to be financially viable and competitive;

(vii) identifying and assessing specific transactions such as the

procurement of reinsurance, sale of real property and the sale of future

investment income to improve the financial condition of the corporation;

and

(viii) evaluating and identifying possible improvements in the

corporation's managed care strategies, operations and claims handling.

(e) Notwithstanding any other provision of law, the superintendent

shall have the power to require independent management and financial

audits of corporations subject to the provisions of this article

whenever in the judgment of the superintendent, losses sustained by a

corporation jeopardize its ability to provide meaningful coverage at

affordable rates or when such audit would be necessary to protect the

interests of subscribers. The audit shall include, but not be limited

to, an investigation of the corporation's provision of benefits to

senior citizens, individual and family, and small group and small

business subscribers in relation to the needs of those subscribers. The

audit shall also include an evaluation of the efficiency of the

corporation's management, particularly with respect to lines of business

that are experiencing losses. In every case in which the superintendent

chooses to require an audit provided for in this subsection, the

superintendent shall have the authority to select the auditor. Any costs

incurred as a result of the operation of this subsection shall be

assessed on all domestic insurers in the same manner as provided for in

section two hundred six of the financial services law.

(f) The results of any audit conducted pursuant to subsections (d) and

(e) of this section shall be provided to the corporation and each member

of its board of directors. The superintendent shall have the authority

to direct the corporation in writing to implement any recommendations

resulting from the audit that the superintendent finds to be necessary

and reasonable; provided, however, that the superintendent shall first

consider any written response submitted by the corporation or the board

of directors prior to making such finding. Upon any application for a

rate adjustment by the corporation, the superintendent shall review the

corporation's compliance with the directions and recommendations made

previously by the superintendent, as a result of the most recently

completed management or financial audit and shall include such findings

in any written decision concerning such application.

(g)(1) Until September thirtieth, two thousand ten, as an alternate

procedure to the requirements of subsection (c) of this section, a

corporation subject to the provisions of this article desiring to

increase or decrease premiums for any contract subject to this section

may instead submit a rate filing or application to the superintendent

and such application or filing shall be deemed approved, provided that

(A) the anticipated incurred loss ratio for a contract form shall not be

less than eighty-two percent for individual direct payment contracts or

eighty-two percent for small group and small group remittance contracts,

nor, except in the case of individual direct payment contracts with a

loss ratio of greater than one hundred five percent during nineteen

hundred ninety-four, shall the loss ratio for any direct payment, group

or group remittance contract be more than one hundred five percent of

the anticipated earned premium, and (B) the corporation submits, as part

of such filing, a certification by a member of the American Academy of

Actuaries or other individual acceptable to the superintendent that that

corporation is in compliance with the provisions of this subsection,

based upon that person's examination, including a review of the

appropriate records and of the actuarial assumptions and methods used by

the corporation in establishing premium rates for contracts subject to

this section. A corporation shall not utilize the alternate procedure

pursuant to this subsection to implement a change in rates to be

effective on or after October first, two thousand ten. For purposes of

this section, a small group is any group whose contract is subject to

the requirements of section forty-three hundred seventeen of this

article.

(2) Prior to January first, two thousand, no rate increase or decrease

may be deemed approved under this subsection if that increase or

decrease, together with any other rate increases or decreases imposed on

the same contract form, would cause the aggregate rate increase or

decrease for that contract form to exceed ten percent during any

continuous twelve month period. No rate increase may be imposed pursuant

to this subsection unless at least thirty days advance written notice of

such increase has been provided to each contract holder and subscriber.

(h)(1) Each calendar year, a corporation subject to the provisions of

this article shall return, in the form of aggregate benefits incurred

for each contract form filed pursuant to the alternate procedure set

forth in subsection (g) of this section, at least eighty-two percent for

individual direct payment contracts or eighty-two percent for small

group and small group remittance contracts, but, except in the case of

individual direct payment contracts with a loss ratio of greater than

one hundred five percent in nineteen hundred ninety-four, for any direct

payment, group or group remittance contract, not in excess of one

hundred five percent of the aggregate premiums earned for the contract

form during that calendar year. Corporations subject to the provisions

of this article shall annually report, no later than June thirtieth of

each year, the loss ratio calculated pursuant to this subsection for

each such contract form for the previous calendar year.

(2) In each case where the loss ratio for a contract form fails to

comply with the eighty-two percent minimum loss ratio requirement for

individual direct payment contracts, or the eighty-two percent minimum

loss ratio requirement for small group and small group remittance

contracts, as set forth in paragraph one of this subsection, the

corporation shall issue a dividend or credit against future premiums for

all contract holders with that contract form in an amount sufficient to

assure that the aggregate benefits incurred in the previous calendar

year plus the amount of the dividends and credits shall equal no less

than eighty-two percent for individual direct payment contracts, or

eighty-two percent for small group and small group remittance contracts,

of the aggregate premiums earned for the contract form in the previous

calendar year. The dividend or credit shall be issued to each contract

holder or subscriber who had a contract that was in effect at any time

during the applicable year. The dividend or credit shall be prorated

based on the direct premiums earned for the applicable year among all

contract holders or subscribers eligible to receive such dividend or

credit. A corporation shall make a reasonable effort to identify the

current address of, and issue dividends or credits to, former contract

holders or subscribers entitled to the dividend or credit. A corporation

shall, with respect to dividends or credits to which former contract

holders that the corporation is unable to identify after a reasonable

effort would otherwise be entitled, have the option, as deemed

acceptable by the superintendent, of prospectively adjusting premium

rates by the amount of such dividends or credits, issuing the amount of

such dividends or credits to existing contract holders, depositing the

amount of such dividends or credits in the fund established pursuant to

section four thousand three hundred twenty-two-a of this article, or

utilizing any other method which offsets the amount of such dividends or

credits. All dividends and credits must be distributed by September

thirtieth of the year following the calendar year in which the loss

ratio requirements were not satisfied. The annual report required by

paragraph one of this subsection shall include a corporation's

calculation of the dividends and credits, as well as an explanation of

the corporation's plan to issue dividends or credits. The instructions

and format for calculating and reporting loss ratios and issuing

dividends or credits shall be specified by the superintendent by

regulation. Such regulations shall include provisions for the

distribution of a dividend or credit in the event of cancellation or

termination by a contract holder or subscriber.

(3) In each case where the loss ratio for a contract form fails to

comply with the one hundred five percent maximum loss ratio requirement

of paragraph one of this subsection, the corporation shall institute a

premium rate increase in an amount sufficient to assure that the

aggregate benefits incurred in the previous calendar year shall equal no

more than one hundred five percent of the sum of the aggregate premiums

earned for the contract form in the previous calendar year and the

aggregate premium rate increase. The rate increase shall be applied to

each contract that was in effect as of December thirty-first of the

applicable year and remains in effect as of the date the rate increase

is imposed. All rate increases must be imposed by September thirtieth of

the year following the calendar year in which the loss ratio

requirements were not satisfied. The annual report required by paragraph

one of this subsection shall include a corporation's calculation of the

premium rate increase, as well as an explanation of the corporation's

plan to implement the rate increase. The instructions and format for

calculating and reporting loss ratios and implementing rate increases

shall be specified by the superintendent by regulation.

(i) The alternate procedure described in subsections (g) and (h) of

this section shall apply to individual direct payment contracts issued

pursuant to sections four thousand three hundred twenty-one and four

thousand three hundred twenty-two of this article on and after January

first, nineteen hundred ninety-seven. Such alternate procedure shall not

be utilized to implement a change in rates to be effective on or after

October first, two thousand ten.

(j) All community rated contracts, other than medicare supplemental

insurance contracts, issued or in effect during calendar year two

thousand ten shall be subject to a minimum loss ratio requirement of

eighty-two percent. Corporations may use the alternate procedure set

forth in subsection (g) of this section to adjust premium rates in order

to meet the required minimum loss ratio for calendar year two thousand

ten. The rate filing or application shall be submitted no later than

September thirtieth, two thousand ten.