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

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on October 29, 2003 representing the position of the New York State Insurance Department.

RE: Group Health Insurance, Mandated Benefits

Question Presented:

Is New York an "extraterritorial" state with regard to mandated benefits for group health insurance policies and contracts?

Conclusion:

For most New York residents covered under group health insurance policies and contracts issued out of state, New York does not require that its mandated benefits apply to such insurance policies and contracts.

Facts:

Cobalt Corporation is an insurance holding company, none of whose insurers is licensed to transact an insurance business in New York. An inquirer is researching extraterritorial mandates and, as part of such review, became aware of New York Insurance Law §§ 3221(k)(1)(A) (McKinney 2000 and 2003 Supplement), requiring coverage for home health care, and 3221(k)(7)(C), requiring coverage for diabetes treatment supplies. Each of the above statutes contains the following provision:

This [provision or paragraph] shall not apply to a policy which covers persons employed in more than one state or the benefit structure of which was the subject of collective bargaining affecting persons employed in more than one state.

Since the inquirer was under the impression that New York is an extraterritorial jurisdiction, it was questioned whether the above provision means that "an employer’s policy that covers employees in several states would not be subject to these sections."

Analysis:

Historically, New York has required that group health insurance policies and contracts issued for delivery in New York provide mandated benefits to all insureds, regardless of where they were resident or domiciled. It is assumed that this is what is meant by the inquirer’s use of the term "extraterritoriality." As to those resident or domiciled in the State who were covered under a group policy validly issued in another jurisdiction, the New York Insurance Law (McKinney 1984) did not require that they be provided with New York mandated benefits.

In 1975, the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 et seq. (West 1995), took effect. ERISA provided, 29 U.S.C.A. § 1144(a) (West 1995), that state laws governing employee welfare benefit plans, as defined in ERISA, 29 U.S.C.A. § 1002(1) (West 1995), which encompasses most employer-employee group health insurance policies, are preempted. While a decision of the United States Supreme Court, Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985) (construing 29 U.S.C.A. § 1144(b)(2)(A)), has held that a state could still validly mandate benefits within a group health insurance policy, New York does not exercise that power where the policy is issued to a "traditional" group (i.e., an employer-employee, or labor, union).

When New York’s group insurance laws were liberalized, 1985 N.Y. Laws 369, New York Insurance Law § 3201(b)(1) (McKinney 2000) was amended:

No policy form shall be delivered or issued for delivery in this state unless it has been filed with and approved by the superintendent as conforming to the requirements of this chapter and not inconsistent with law. A . . . group accident and health . . . certificate evidencing insurance coverage on a resident of this state shall be deemed to have been delivered in this state, regardless of the place of actual delivery, unless the insured group is of the type described in: . . . (B) section four thousand two hundred thirty-five except subparagraph (D) where the group policy is issued to a trustee or trustees of a fund established or participated in by two or more employers not in the same industry with respect to an employer principally located within the state, subparagraph (K), (L) or (M) of paragraph one of subsection (c) thereof; . . . and where the master policies or contracts were lawfully issued without this state in a jurisdiction where the insurer was authorized to do an insurance business. With regard to any certificate deemed to have been delivered in this state by virtue of this paragraph, the superintendent shall (i) require that the premiums charged be reasonable in relation to the benefits provided, except in cases where the policyholder pays the entire premium; (ii) have power to issue regulations prescribing the required, optional and prohibited provisions in such certificates…

The exceptions listed in New York Insurance Law § 3201(b)(1) are those considered "traditional" groups.

In accordance with the authority of New York Insurance Law § 3201(b)(1), the Department has promulgated, N.Y. Comp. Codes R. & Regs. tit. 11, Part 59 (1995) (Regulation 123), which provides that New York mandated benefits must be provided for "non-traditional" groups.

Those portions of New York Insurance Law § 4235(c)(1) (McKinney 2000 & Supp. 2003) that authorize policies that could cover employees employed in more than one state, or the benefit structure of which was the subject of collective bargaining affecting persons employed in more than one state, are:

(1) policies issued to an employer (subparagraph (A)),

(2) policies issued to a trade association covering the employees of the association’s members (subparagraph (B)),

(3) policies issued to labor unions (subparagraph (C)),

(4) policies issued to joint employer-labor union trusts (i.e., Taft-Hartley Trusts) (subparagraph (D)), and

(5) policies issued to associations whose members have the same trade, occupation, or profession covering employees of the associations’ members (subparagraph (H)).

With the exception of policies issued to Taft-Hartley Trusts (covering employers in more than one industry and where an employer member is located in New York), all policies described in the above-cited subparagraphs are exempt from the requirement of New York Insurance Law § 3201(b)(1).

Since the insurers within the described corporate structure are not licensed in New York, New York Insurance Law § 1101(b) (McKinney 2000 & Supp. 2003), which specifies those acts that do and do not constitute the doing of an insurance business, should be reviewed.

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