New York State Assemblyman Fred W. Thiele, Jr. (I, D, WF-Sag Harbor) has joined with State Assembly Health Committee Chair Richard Gottfried (D-Manhattan) in sponsoring A.9311, which would establish the New York Health Insurance Consumer Protection Security Fund.

In the event of an insolvency or failure by a health insurance company, the fund would reimburse providers for uncompensated care delivered to its enrollees. The fund would be financed by a onetime, temporary assessment on remaining health insurers, not a permanent tax. In addition, the legislation would prohibit insurers from passing on assessments to policyholders. The assessment on remaining insurers would be based on premiums received during the previous calendar year. The Department of Financial Services superintendent would be authorized to adjust or suspend the assessment based on a health insurer's financial situation.

Thiele stated, “Consumers and providers were severely harmed by the failure of Health Republic Insurance of New York (HRINY). The company owes hospitals and doctors across the state hundreds of millions of dollars and its demise left consumers worried about their access to care as they scrambled for new coverage. This is not the first time that a New York health insurer has failed. The last major one was Wellcare in 1998. New York has no system of protection for consumers and providers when a health insurance plan becomes insolvent. This bill would remedy that situation by creating a health insurance guaranty fund, a basic consumer protection enjoyed by every other state in the nation. Had such a health insurance guaranty fund existed, it could have minimized the confusion caused by HRINY's failure and promoted confidence in a shaken health insurance marketplace. The fund would enable consumers of a bankrupt insurer to continue to receive care from their own doctors and hospitals by guaranteeing that providers would be paid for the care they provided.”

A health insurance guaranty fund would neither create a new permanent tax nor require an investment by the State. It would not affect consumer premiums either. Although insurers would pay a one-time assessment in the event of insolvency, this would be offset by new customers (and new premiums) from failed competitors. The bill also prohibits insurers from passing on assessments to policyholders.

Thiele added, “Fortunately, insurer failures are rare, but when they do occur we need a statutory framework with protections that allow consumers to transition smoothly to other coverage and ensure they have continued access to health services through stable provider networks. New York has a property and casualty insurance guaranty fund. It should extend the same protection to health insurance policy holders.”

The legislation has 32 sponsors in the State Assembly and 5 in the State Senate.