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 opinion on February 27, 2002, representing the position of the New York State Insurance Department.

RE: Health Insurance for Small Businesses.

Questions Presented:

1. May a holistic health care center ("the center") offer its employees health insurance coverage under contracts sold and issued by the center in which holistic treatment is provided by the center’s practitioners?

2. May the center offer health insurance coverage to the general public under contracts sold and issued by the center in which holistic treatment is provided by the center’s practitioners?

3. May the center offer its employees health insurance coverage under a standard group health insurance contract issued by an insurer licensed pursuant to Article 43 of the Insurance Law?

Conclusions:

1. No. The center may not offer health insurance coverage to its employees under contracts sold and issued by the center, unless licensed as an insurer or exempted from licensing.

2. No. The center may not offer health insurance coverage to the general public under contracts sold and issued by the center, unless licensed as an insurer. Although N.Y. Ins. Law § 1108 (McKinney 2000) provides certain exemptions from licensing, none of these exemptions apply to this inquiry, based upon the limited facts provided.

3. Yes.

Facts:

The inquirer is currently in the process of opening a small holistic health care center and would like to give its employees the option of having health insurance coverage under contracts sold and issued by the center in which holistic treatment is provided by the center’s practitioners. In the alternative, it would like to offer its employees the option of having health insurance coverage under a standard group health insurance contract issued by an insurer licensed pursuant to Article 43 of the Insurance Law. The center would pay the same amount irrespective of which option the employee chooses. Additionally, the center would like to offer health insurance coverage to the general public under contracts sold and issued by the center. The inquirer would like to know whether these activities are permissible under the New York Insurance Law.

Analysis:

The inquirer asked whether the center may offer its employees the option of having health insurance coverage under contracts sold and issued by the center in which holistic treatment is provided by the center’s practitioners.

N.Y. Ins. Law § 1102(a) (McKinney 2000) prohibits any person, firm, association, corporation or joint-stock company from doing an insurance business in this state, unless licensed as an insurer or exempted from licensing.

N.Y. Ins. Law § 1101(b)(1) (McKinney 2000) defines the term "doing an insurance business" in pertinent part as follows:

(A) making, or proposing to make, as an insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts; . . .

(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance; . .

(E) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter.

N.Y. Ins. Law § 1101(a)(1) (McKinney 2000) defines "insurance contract" as follows:

(a)(1) [A]ny 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.

N.Y. Ins. Law § 1101(a)(2) (McKinney 2000) defines "fortuitous event" as "any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party."

In accordance with the above, if the center promises its employees that it will pay for health care services that arise due to fortuitous events such as illness or accident, such activities would constitute doing an insurance business, for which licensing is required. However, under certain circumstances, the center may be exempt from the licensing provisions of the New York Insurance Law. For example, most employer-provided health insurance plans, other than Multiple Employer Welfare Arrangements (MEWAs), are governed by the federal Employee Retirement and Income Security Act (ERISA, 29 USC. §§ 1001-1461) which preempts state law, including the New York State Insurance Law. Thus, if the center offers an employee welfare benefit plan that is governed by the provisions of ERISA, it would be exempt from the Insurance law.

With respect to the inquirer’s second question, the center may not provide health insurance coverage to the general public without being appropriately licensed as an insurer. Such activities would constitute doing an insurance business without a license in violation of N.Y. Ins. Law §§ 1101 and 1102 (McKinney 2000). Although N.Y. Ins. Law § 1108 (McKinney 2000) provides certain exemptions from licensing, none of these exemptions apply to your inquiry, based upon the limited facts provided.

Lastly, the inquirer questioned whether the center may offer its employees the option of having health insurance coverage under a standard group health insurance policy issued by an insurer licensed pursuant to Article 43 of the Insurance Law.

N.Y. Ins. Law § 4305(a) (McKinney 2000) states, in pertinent part, as follows:

(a) A corporation subject to the provisions of this article may issue a group contract, provided the group of persons thereby covered conforms to the requirements of subsections (c) and (d) of section four thousand two hundred thirty-five or of subparagraph (C) of paragraph three of subsection (a) of section four thousand two hundred thirty-seven of this chapter, and provided such contract and the individual certificates issued to members of the group shall comply in substance with this article. . . .

N.Y. Ins. § 4317(a) (McKinney 2000) states, in pertinent part, as follows:

(a) [A]ny small group, including all employees or group members and dependents of employees or members, applying for individual or small group health insurance coverage must be accepted at all times throughout the year for any hospital and/or medical coverage, including Medicare supplemental insurance, offered by the corporation to individuals or small groups in this state. Once accepted for coverage, an individual or small group cannot be terminated by the insurer due to claims experience. Termination of coverage for individuals or small groups may be based only on one or more of the reasons set forth in subsection (c) of section four thousand three hundred four or subsection (j) of section four thousand three hundred five of this article. . . .

Thus, Article 43 corporations must provide health insurance coverage for all small groups that apply for health insurance. Consequently, the center may, at its option, offer its employees the choice of being covered under a health insurance plan issued by an Article 43 corporation. The center may also wish to consider other options such as offering its employees health insurance coverage from Health Maintenance Organizations (HMOs), many of which offer comprehensive coverage.

The inquirer was directed to consult with an attorney, a personnel management firm and/or a third party administrator regarding establishing a health insurance plan.

For further information, you may contact Attorney Pascale Joasil at the New York City office.