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WASHINGTON-New York officials think the state's controversial 1996 law that imposes large surcharges on hospital and other medical care bills will survive court challenges.
The New York law, which applies to group health care plans nationwide, already is the target of two suits that say the law violates an Employee Retirement Income Security Act provision that pre-empts state laws and regulations that relate to employee benefit plans.
But Richard Pellegrini, director of the New York Department of Health in Albany, thinks the law will pass court muster because it is no different from an earlier New York surcharge law that the U.S. Supreme Court ruled ERISA did not pre-empt.
"The state believes it has a strong case," Mr. Pellegrini said in Washington last month at a conference sponsored by the Self-Insurance Institute of America.
"We believe (the 1996 law) is no different than Travelers," Mr. Pellegrini said, referring to the 1995 Supreme Court decision rejecting a challenge-on ERISA pre-emption grounds-to the earlier New York law that imposed a 13% surcharge on hospital rates but exempted Blue Cross & Blue Shield plans from the surcharge.
The new law, which went into effect Jan. 1, dismantled the old system under which the state set hospital rates. Employers and insurers are free to negotiate rates directly with hospitals.
In place of the prior 13% surcharge is a new system of surcharges and fees.
The basic surcharge is 8.18% for those plans that agree to directly pay the surcharge to a state health care pool administrator; employers with workers living in New York are liable for an additional assessment, with the amounts varying by where in New York their employees live.
Employers that missed a Dec. 2 deadline to elect to pay the surcharges directly to the pool administrator have been liable since Jan. 1 for surcharges that can be as much as 57.27% of hospital and laboratory bills their employees incur in New York.
Employers that missed the deadline and wanted to qualify for the lower surcharge rates had until March 3 to file the necessary application agreeing to pay the lower surcharges directly to the pool administrator. The next filing deadline is June 2 and would apply for bills incurred on or after July 1.
About 30,000 employers, insurers and other health care payers have filed applications to pay surcharges directly to the pool administrator, Mr. Pellegrini said. About 19,000 of those applications have been validated with the names of those payers now listed on the Department of Health's World Wide Web site.
Mr. Pellegrini said the state has tried to be "magnanimous" in dealing with employers and insurers in trying to correct mistakes on applications so their plans can qualify for the Jan. 1 deadline for the lower surcharge.