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 January 9, 2002, representing the position of the New York State Insurance Department.

Employee Group Health Insurance Coverage

Questions Presented:

1. Does the New York Insurance Law permit the issuance of an employee group health insurance policy where each of the two classes of employees that the policy insures is determined by date of hire?

2. If yes, does the New York Insurance Law permit the employer to require that only employees who are members of the most recently hired class must contribute funds towards payment of coverage for family members under the policy?

Conclusions:

1. Yes. The issuance of such a policy is permissible. Based upon the provisions set forth in N.Y. Ins. Law § 4235(c)(1)(A) (McKinney 2001) and N.Y. Comp. Codes, R. & Regs., tit. 11, § 52.18(f) (1999) (Regulation 62), date of hire, or seniority, is a permissible basis upon which to differentiate eligibility for employee group health insurance coverage.

2. Yes. Such an employee premium contribution requirement is permissible. Based upon the provisions set forth in N.Y. Ins. Law § 4235(c)(1)(A) (McKinney 2001) and N.Y. Comp. Codes, R. & Regs., tit. 11, § 52.18(f) (1999) (Regulation 62), date of hire, or seniority, is a permissible basis upon which to differentiate employee premium contribution levels for employee group health insurance coverage.

Facts:

Mr. A, an employee of Insurance Brokerage Company B, has a client, an employer, who wishes to create a new class of employees for the purpose of establishing employee contributions toward group family health coverage. Presently, the employer pays one hundred percent of premium for both single and family health coverage for all of its employees. Commencing January 1, 2002, the employer wants to identify a "Class I", comprised of all employees hired prior to January 1, 2002, with respect to which the employer will continue to pay one hundred percent of premium for both single and family health coverage. The employer also wishes to create a new "Class II" commencing January 1, 2002, which will be comprised of all employees hired after January 1, 2002, and with respect to which the employer will pay one hundred percent of premium for single coverage but will require employees wishing to obtain family coverage to contribute the amount of premium totaling the difference between the charge for single coverage and the charge for family coverage.

The Department is assuming that the employer’s health coverage is effected pursuant to a policy of insurance and that the policy has been issued to the employer or to a trustee or trustees of a fund established by the employer.

Analysis:

N.Y. Ins. Law § 4235 (McKinney 2001) contains the general provisions relating to group accident and health insurance. N.Y. Ins. Law § 4235(c)(1)(A) (McKinney 2001) states as follows:

(c)(1) No policy of group accident, group health or group accident and health insurance shall be delivered or issued for delivery in this state unless it conforms to one of the following descriptions:

(A) A policy issued to an employer or to a trustee or trustees of a fund established by an employer, which employer or trustee or trustees shall be deemed the policyholder, insuring with or without evidence of insurability satisfactory to the insurer, employees of such employer, and insuring, except as hereinafter provided, all of such employees or all of any class or classes thereof determined by conditions pertaining to the employment or a combination of such conditions and conditions pertaining to the family status of the employee, for insurance coverage on each person insured based upon some plan which will preclude individual selection. However, such a plan may permit a limited number of selections by employees if the selections offered utilize consistent plans of coverage for individual group members so that the resulting plans of coverage are reasonable. The premium for the policy shall be paid by the policyholder, either from the employer’s funds, or from funds contributed by the insured employees, or from funds contributed jointly by the employer and employees. If all or part of the premium is to be derived from funds contributed by the insured employees, then such policy must insure not less than fifty percent of such eligible employees or, if less, fifty or more of such employees.

N.Y. Comp. Codes, R. & Regs., tit. 11, § 52.18 (1999) (Regulation 62) sets out the rules relating to the content of forms for group insurance. N.Y. Comp. Codes, R. & Regs., tit. 11, § 52.18(f) (1999) (Regulation 62) states in pertinent part as follows:

(f) Conditions of eligibility. Conditions pertaining to employment…includes geographic situs of employment, earnings, method of compensation, hours, and occupational duties.

Based upon the provisions set forth in N.Y. Ins. Law § 4235(c)(1)(A) (McKinney 2001) and N.Y. Comp. Codes, R. & Regs., tit. 11, § 52.18(f) (1999) (Regulation 62), date of hire, or seniority, is a permissible basis upon which to differentiate eligibility for employee group health insurance coverage, and is a permissible basis upon which to differentiate employee premium contribution levels for such coverage. Therefore, the issuance of the group health insurance policy that Mr. A has described would be permitted under the New York Insurance Law, notwithstanding the fact that eligibility for the new "Class I" established by Mr. A’s client will be limited to employees who were hired prior to January 1, 2002, and that eligibility for the new "Class II" established by Mr. A’s client will be limited to employees who will be hired after such date. Additionally, the employee premium contribution requirement that is contemplated by Mr. A’s client would also be permitted by the New York Insurance Law, notwithstanding the fact that members of "Class I" under the policy will not be required to contribute anything towards premium for either family or single coverage and that members of "Class II" who want family coverage will be required to contribute an amount towards premium totaling the difference between the charge for family coverage and the charge for single coverage, as long as the policy insures at least fifty percent of the eligible employees or, if less than fifty percent of such employees, at least fifty of such employees.

It is suggested that Mr. A refer to opinions issued by the United States Department of Labor and the New York Department of Labor in order to determine whether his client would be engaging in illegal employment practices in violation of federal or New York State laws, rules or regulations by effecting the group health insurance coverage that he has described. It is also suggested that Mr. A refer to opinions issued by the Internal Revenue Service, as the situation that he has presented may involve Internal Revenue Code issues relating to highly compensated or key employees.

For further information you may contact Senior Attorney Ethan G. Wolfe at the New York City Office.