N.Y. High Court Backs File-and-Use Statute

April 7, 2004

The New York State Court of Appeals has ruled that the state insurance commissioner does not have the authority to disapprove or modify rate increases or decreases on filings that are properly submitted under the state’s file-and-use statute.

The decision (Excellus health Plan, Inc. v. Gregory V. Serio) upheld lower court rulings, which found that Superintendent of Insurance Gregory Serio had exceeded his statutory authority in 2002 when he denied Excellus Health Plan Inc. a rate increase.

Under the file-and-use statute rate increases are to be deemed approved when the loss ratio anticipated under the proposed new rate falls within certain parameters. The minimum loss ratio is 80 percent and the maximum is 105 percent for individual direct pay insurance contracts.

In November 2001 Excellus submitted rate increases under the file- and-use provision for 45 counties. In January 2002 Serio rejected two of the rate increases and reduced several others.

Excellus then sued to nullify his rate changes. The insurer argued that his actions ran counter to the file-and-use statutory scheme “by improperly conditioning a premium rate change on his review and approval.”

Serio maintained that he acted properly because, he said, the law authorizes him to disapprove any premium that is “excessive, inadequate or unfairly discriminatory.”

The Supreme Court annulled Serio’s findings and determined that Excellus’s filed rates were approved as a matter of law. The appellate division unanimously affirmed.

Now the highest court has also affirmed, with Justice Susan Phillips Read writing that the “clear wording” of the statute “unambiguously states” that a rate filing or application “shall be deemed approved provided that the anticipated loss ratios fall within the statutorily prescribed range. Thus once the Superintendent receives a new premium rate filing, accompanied by the requisite actuarial certification, the rates specified in the filing are approved by operation of law.”

“We are clearly disappointed as this ruling today leaves New York’s health insurance consumers without adequate protection against unreasonable rate increases,” Serio said in a written statement.

He added that he hopes a health rating authority bill he has filed will be passed by the legislature. “We’re hopeful the legislature will quickly take up the department’s health insurance rating legislation, which would restore appropriate regulatory oversight to the rate-setting process and protect all New Yorkers from the high cost of health insurance,” Serio said.

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