New York Senate Bill S6667, introduced in early January, would establish a health insurance guaranty fund for New York policyholders, in the wake of the insolvency of Health Republic Insurance of New York, a co-op created under the Affordable Care Act. Governor Cuomo, however, does not support the bill and views guaranty funds as “insurance for insurers.” Insurers are regulated by the state, not insured by it. The governor does not address that there are New York state guaranty funds to provide protection in the event of life/annuity insolvency or property casualty insurance insolvency. Why isn’t this also “insurance for insurers”?

Guaranty funds provide a safety net to protect policyholders and providers who render necessary health care services to those policyholders. State guaranty funds are generally established through assessment of insurers which write in the particular state, and the assessment monies are used to pay for claims arising out of future insolvencies.

Health insurers are also opposed to the proposed health guaranty fund, claiming that they already pay $4.6 billion a year in various taxes incurred in state tax collections after income tax and sales tax. See Journal News (Westchester/Putnam), Thursday, March 17, 2016.

In stark contrast to New York, in the neighboring state of New Jersey, there is a guaranty fund applicable to health insurers. Unlike the guaranty fund created in 48 other jurisdictions, the New Jersey guaranty fund provides an unlimited health insurance benefit. See, N.J.S.A. 17B:32A-3(d)(4). Moreover, the New Jersey Guaranty Association Act also provides protection to a provider of health care services and requires, in order to receive payment directly from the Association upon a claim of a provider against an insured, that the provider forgive 20% of the obligation which would otherwise be paid by the insurer had it not been insolvent.

Whether a New York guaranty association for health insurance will be created is unclear. However, given opposition from the insurance industry and the governor, it seems unlikely at this juncture.