The Office of General Counsel issued the following informal opinion on October 29, 2002, representing the position of the New York State Insurance Department.
Re: Charitable Grants for Mental and Physical Health Programs
Question Presented:
By making charitable payments toward the cost of mental and physical health treatment for certain individuals (the "Programs"), would the ABC Organization be doing an insurance business within the meaning of N.Y. Ins. Law § 1101 (McKinney & Supp. 2000-2001)?
Conclusion:
No. As a charitable undertaking, the Programs would not come within the N.Y. Ins. Law § 1101 definition of an "insurance contract". Accordingly, the ABC Organization would not be doing an insurance business by providing the Program benefits.
Facts:
The ABC Organization is a social organization chartered by Congress and has the status of a charitable organization as set forth in Section 501(c)(3) of the Internal Revenue Code. The ABC Compnay established a Fund following September 11, 2001 to provide disaster-related services and financial assistance to certain individuals who were affected by the terrorist attacks. As part of its mission, the ABC Organization has developed the Programs to provide financial assistance for uncovered health and mental health services for conditions directly related to the events of September 11. The Mental Health Program is designed to provide financial assistance for uncovered expenses to individuals who require mental health services for conditions directly related to the events of September 11, 2001. The Physical Health Program is designed to provide financial assistance to individuals in the same affected population who have unreimbursed costs related to health care for their injuries.
To meet these treatment and medication needs, the ABC Organization is proposing to make payments up to a specified cap toward the cost of mental and/or physical health treatment for eligible persons. Reimbursement will be limited to the lesser of (i) the providers actual charges for services, reduced by amounts reimbursed by other sources; or (ii) the maximum fee payment specified by the ABC Organization. Where there is insurance or other sources of benefits available, the ABC Organization will be a secondary payer and provide reimbursement for amounts not covered.
Reimbursements will be made either directly to the physical health provider or to the eligible individual submitting the request for reimbursement. The ABC Organization will process all requests for reimbursement. The payments will be voluntary and the ABC Organization will not be obligated to confer a benefit upon any particular individual.
Analysis:
The term "insurance contract" is defined in N.Y. Ins. Law § 1101(a)(1) as meaning:
any agreement or other transaction whereby one party, the "insurer" is obligated to confer benefit of pecuniary value upon another party, the "insured" or "beneficiary", dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.
The benefit being offered by the ABC Organization does not come within the N.Y. Ins. Law § 1101(a)(1) definition of an "insurance contract". As is the case for any other type of charity, the ABC Organization is making charitable payments to eligible persons. Although the ABC Organization may have a moral or legal obligation to use the contributions that it received to aid persons impacted by the terrorist attacks, it is not obligated to confer a benefit on any particular person. The ABC Organization will not receive either direct or indirect payment of consideration from such persons for the promise of the benefit. Thus, an essential element in the formation of an insurance contract is missing. Because an insurance contract has not been formed, the ABC Organization is not doing an insurance business and, accordingly, a license is not required.
For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.