In a memo to the NYS Senate and Assembly, the New York Health Plan Association (HPA) shared a story issued by POLITICO, saying:
POLITICO broke a story last night detailing a last minute budget proposal that would allow New York to confiscate money from private not-for-profit health insurers, to be placed in a public asset fund to be used for “community health reinvestment,” according to a draft of the proposal obtained by POLITICO.
A copy of the full story is attached.
Cuomo’s latest proposal would hit Fidelis, MetroPlus
By DAN GOLDBERG and NICK NIEDZWIADEK
03/26/2018 08:35 PM EDT
New York State would be allowed to confiscate money from private not-for-profit health insurers under Gov. Andrew Cuomo’s latest budget pitch, a proposal that has left many in the insurance industry apoplectic.
A draft proposal obtained by POLITICO outlines the idea, which bears a striking resemblance to an unsuccessful plan proposed by former Republican Gov. Chris Christie in New Jersey, and one that so far has little traction with legislators.
The governor’s proposal would apply to not-for-profit prepaid health service plans — the kind that offer only Medicaid — that have more than 150 percent of the minimum contingent reserve. The minimum contingent reserve is equal to 7.5 percent of a company’s net premium income.
For the moment, the only two companies that meet that definition are Fidelis, which harshly criticized the governor’s efforts to recoup some of the proceeds from the company’s sale to Centene, and MetroPlus, the insurance arm of NYC Health + Hospitals, which is run by Mayor Bill de Blasio, a favorite Cuomo target.
As the story explains, taking plan reserves can be very risky business and the proposal ignores the very reason that plans are required to have reserves in the first place.
- Health plan reserves are an important protection for consumers and providers, helping ensure that doctors, hospitals and other providers are paid if an unexpected or catastrophic event occurs that would result in an unpredictably high level of claims. Examples of this include a bad flu season, such as New York has experienced this year.
- Reserves also protect against unexpected financial losses, volatility in the capital markets, or unanticipated costs like when a high-cost prescription drug comes to market. A good example of this is the introduction of high-cost drugs such as Sovaldi.
- Inadequate reserves also threaten plan solvency. In 2015, the sudden failure of Health Republic created tremendous confusion and disruption for individuals enrolled in the health plan and left some physicians and hospitals with approximately $200 million in unpaid claims for the services they provided.
As Senate Insurance Committee chair James Seward rightly noted: “The reserves are set aside to pay claims and these are not just excess funds being banked. … I would personally not favor this proposal because it cuts it too close and could potentially put our health plans at financial risk. That’s my hesitation.”
Assembly Insurance Committee chair Kevin Cahill raised similar concerns about meddling with plan reserves, and highlighted what can happen, worst case scenario, if plan reserves are not adequate: “In light of what happened with Health Republic, because they were not required to have significant reserves … we should be very careful before we make [insurers] financial situation more precarious.”
This proposal is problematic and may undermine the financial stability of the state’s nonprofit health plans. Moreover, it is unnecessary because cuts to federal health care programs that the funds this proposal might generate have not materialized.
As you continue your work towards finalizing the new state budget, we ask that you remain steadfast in rejecting proposals such as this one that will impede health plans’ efforts to provide affordable coverage and quality health care services to millions of New Yorkers.