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ALBANY, N.Y.-The nation's largest group health care benefit program is exempt from hefty New York-mandated surcharges on hospital and other medical bills in the state.

New York Department of Health officials say health insurance plans that participate in the Federal Employees Health Benefits Program do not have to pay surcharges on hospital and other health care bills for services provided to federal employees in the program. The program covers nearly 9 million federal employees, dependents and retirees through about 385 health maintenance organizations and fee-for-service plans.

The surcharges, which range from 8.18% to 57.27%, are included in a 1996 New York law. Other employers have been liable for the surcharges since Jan. 1.

The actual amount of the surcharge depends on whether an employer has agreed to pay the surcharges directly to a New York state pool administrator and the location of a hospital where an employee is treated. The highest surcharges and certain other fees apply on bills incurred in hospitals in New York City.

The exemption from the surcharges was confirmed in an exchange of letters between the New York Department of Health and the U.S. Office of Personnel Management, the federal agency that administers the health care benefits program for federal employees.

An attorney representing insurers in the federal program provided the letters as part of an effort to reduce the likelihood that New York hospitals would erroneously try to collect surcharges on bills that federal employees incur.

In a letter sent to the New York Department of Health, Lucretia F. Myers, the OPM assistant director for insurance programs, said a provision in the Federal Employees Health Benefits Act exempts health benefits plans participating in the federal program from state taxes.

Under that act, "No tax, fee, or other monetary payment may be imposed, directly or indirectly, on a carrier or an underwriting or plan administration subcontractor of an approved health benefits plan by any state...with respect to any payment made from the" plans in the program.

Last month, New York Department of Health General Counsel Henry M. Greenberg said the department elected "not to dispute" OPM's determination that the New York surcharges are pre-empted by the federal law and that the New York surcharges cannot be assessed on participants in the federal program.

While the federal health benefits program is exempt from the surcharges, a comparable exemption does not exist for health care benefits programs provided by other employers, including state and local governments as well as private employers.

However, the New York law is the target of at least two lawsuits.

They charge that the law conflicts with a provision in the federal Employee Retirement Income Security Act that pre-empts state laws and rules that "relate" to employee benefit plans provided by employers (BI, Jan. 20). Those suits are pending.