This Office of General Counsel issued the following information on February 27, 2004, representing the position of the New York State Insurance Department.
Annual Restoration to Lifetime Maximum
Pursuant to N.Y. Ins. Law § 3221(h)(1)(A) (McKinney Supp. 2004), how should the annual restoration to the lifetime maximum be computed?
See examples discussed in the Analysis below.
You provided several examples and asked how the Department would compute the annual restoration to the lifetime maximum provided for in N.Y. Ins. Law § 3221(h)(1)(A) (McKinney Supp. 2004).
N.Y. Ins. Law § 3221(h)(1)(A) (McKinney Supp. 2004) provides:
The conversion privilege shall, if the group insurance policy insures the employee or member for major medical expense insurance, or if the group insurance policy insures the employee or member for comprehensive medical expense insurance, entitle the employee or member to obtain coverage under a converted policy providing major medical coverage under one of the following plans or one at least as favorable to the covered persons:
(1) A maximum conforming to subparagraph (A) or (B) hereof:
(A) A maximum payment of two hundred thousand dollars for all covered medical expenses combined during the covered person's lifetime, with an annual restoration on each January first while coverage is in force, up to five thousand dollars of the amount counted against the maximum benefit and not previously restored.
Only claims incurred during that calendar year may be counted toward the annual restoration and amounts restored in previous years may not be deducted from the maximum allowable annual restoration. Following are the correct answers for the examples that you provided:
Example 1: Policyholder A:
Year 1 - $250 in claims - $250 deducted from $200,000 maximum but restored. Maximum remains $200,000.
Year 2 - $500 in claims - $500 deducted from $200,000 maximum but restored. Maximum remains $200,000.
Year 3 - $6000 in claims - $6000 deducted from $200,000 maximum but $5000 restored. New maximum $199,000.
Example 2: Policyholder B:
Year 1 $10,000 in claims - $10,000 deducted from $200,000 maximum but $5000 restored. New maximum $195,000.
Year 2 - $10,000 in claims - $10,000 deducted from new maximum of $195,000 but $5000 restored. New maximum $190,000.
Year 3 $0 in claims. Maximum remains at $190,000.
For further information you may contact Supervisory Attorney Joan Siegel at the New York City Office.