New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on December 26, 2001, representing the position of the New York State Insurance Department.

Re: Eligibility for Group Health Insurance

Issues:

1. Are employer-employee groups the only groups eligible to take delivery of a group health insurance policy or contract in New York?

2. Is an association formed in June 2001 presently eligible to take delivery of a group health insurance policy or contract issued in New York?

Conclusions:

1. No, there are other types of eligible groups, including associations.

2. No. The association, however, might presently be eligible to take delivery of a blanket health insurance policy issued in New York.

Facts:

The inquirer indicates that he is licensed as an insurance agent pursuant to New York Insurance Law § 2103(a) and he wishes to secure health insurance for an association. The association was incorporated under the New York Business Corporation Law on June 14, 2001. According to its Certificate of Incorporation, the association may engage in "any lawful act or activity".

The inquirer represents that the association’s members will be composed of "Waiters, Waitresses, Bartenders, Motion Picture and Television Production Staff, Stage Performers and Dancers".

He further represents that the association will hold periodic educational meetings and intends to secure discounts for its members on non-health items, such as cosmetics and legal services. Finally, the inquirer represents that the present membership of the association is in excess of 1,000, with a potential membership of 25,000, of which in excess of 80% will be residents of the New York City Metropolitan Area.

Analysis:

Eligibility to take delivery of a group health insurance policy or contract issued in New York is governed by the New York Insurance Law and Regulations. If a group is not specified therein, it may not legally take delivery of such policies or contracts in New York. New York Insurance Law § 4235(c)(1)(H) (McKinney 2000) authorizes the issuance of a group health insurance through:

A policy issued to an association, . . . all of whose eligible members have the same profession, trade or occupation, which association or associations have been organized and maintained in good faith for purposes principally other than that of obtaining insurance and have been in active existence for at least two years. The policy shall insure members, or employees of members, of such association . . . for the benefit of persons other than employers and the association . . . or any officials, representatives, trustees or agents thereof and shall provide for the issuance of a certificate to the persons insured or such beneficiary as evidence of such insurance. The members or employees eligible for the insurance under the policy shall be all the members, or all the members and their employees, or all of any class or classes thereof determined by conditions pertaining to their employment or to association membership or both. The premiums for the policy shall be paid from association or members' funds, or partly from such funds and partly from funds contributed by the insured individuals, or from funds wholly contributed by the insured individuals. A policy on which all or part of the premium is to be derived from funds contributed by the insured individuals specifically for their insurance must insure at least fifty percent of the then eligible individuals or a minimum of two hundred individuals, whichever is less, excluding any as to whom evidence of individual insurability is not satisfactory to the insurer. A policy on which no part of the premium is to be derived from funds contributed by the insured individuals specifically for their insurance must cover all eligible individuals, excluding any as to whom evidence of individual insurability is not satisfactory to the insurer. In every case the policy must cover at least one hundred individuals at date of issue. The insurance coverage on employees insured under the policy shall be based upon some plan precluding individual selection. However, with respect to such fund, or association or associations, such a plan may permit a number of selections by the fund, association . . . if the selections offered utilize consistent plans of coverage so that the resulting plans of coverage are reasonable. Furthermore, such a plan may permit a limited number of selections offered by . . . members if the selections offered utilize consistent plans of coverage for individual group members so that the resulting plans of coverage are reasonable. . . . (emphasis added)

Assuming the association’s members have the same profession, trade, or occupation, this Department would regard the members of the association as constituting a sufficiently homogeneous group as to be eligible under New York Insurance Law § 4235(c)(1)(H) after June 2003. However, since the association was only formed in June 2001, it would not presently be eligible under New York Insurance Law § 4235(c)(1)(H).

New York Insurance Law § 4235(c)(1)(K) authorizes issuance of a group health insurance policy to an association not based upon a common occupation through:

A policy issued to an association . . . to insure association members, subject to the following: (i) Each association shall have: (I) A minimum of two hundred insured members at the policy's date of issue; (II) Been organized and maintained in good faith for purposes principally other than that of obtaining insurance; (III) Been in active existence for at least two years; and (IV) A constitution and by-laws which provide that: (aa) The association hold regular meetings not less than annually to further the purposes of the association; (bb) The association collect dues or solicit contributions from members; and (cc) The members have voting privileges and representation on the governing board and committees. (ii) The premium for the policy shall be paid by the association or the trustees either wholly from funds contributed by the association or by the insured individuals, or from funds contributed jointly by the association and insured individuals. A policy on which no part of the premium is to be derived from funds contributed by the insured individuals specifically for their insurance must insure all eligible individuals excluding any as to whom evidence of individual insurability is not satisfactory to the insurer. (iii) The amount of insurance under the policy shall be based upon some plan precluding individual selection either by the insured members or by the association. However, with respect to an association, such a plan may permit a number of selections by the association if the selections offered utilize consistent plans of insurance so that the resulting plans of coverage are reasonable. Furthermore, such a plan may permit a limited number of selections by insured members if the selections offered utilize consistent plans of insurance for individual group members so that the resulting plans of coverage are reasonable. . . . (emphasis added)

Again, the formation of the association in June 2001 precludes its presently being eligible pursuant to New York Insurance Law § 4235(c)(1)(K).

Blanket health insurance policies are policies issued to an organization insuring the members of the organization. The members of the organization have no choice as to the benefits to be provided. The organization may require the insured individuals to contribute towards the premium. Presently, most blanket health insurance policies are issued with limited benefits to schools and colleges insuring their students.

Blanket health insurance coverage may be issued, inter alia, New York Insurance Law § 4237(a)(3)(E) (McKinney 2000):

Under a policy or contract issued to and in the name of an incorporated or unincorporated association of persons having a common interest or calling, which association shall be deemed the policyholder, having not less than fifty members, covering all the members of such association or if part or all of the premium is to be derived from funds contributed by the insured members and if the opportunity to take such insurance is offered to all eligible members, then such policy must cover not less than seventy-five percent of any class or classes of members determined by conditions pertaining to membership in the association.

Based upon the inquirer’s representations, it appears that the association members would presently be eligible to secure blanket health insurance coverage, if an insurer were willing to offer such coverage.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.