The Office of General Counsel issued the following opinion on August 23, 2004, representing the position of the New York State Insurance Department.
Re: Blanket Insurance Program, Unauthorized Insurer
May ABC Care offer one of its programs to New York residents?
The offering of certain aspects of the program, as proposed, to New York residents would be violative of the New York Insurance Law (McKinney 2000 and 2004 Supplement).
ABC Care was originally incorporated pursuant to D.C. Code Ann. § 29-531 (1981) under the name American Tax Reform Committee and assumed its present name in 1988. According to the latest Certificate of Incorporation, as filed with the District of Columbia Department of Consumer and Regulatory Affairs in November 1992, the purposes of ABC Care are:
(1) To promote the adoption of equitable health care policies in the United States;
(2) To engage in nonpartisan research, study and analysis of the health care system of the United States . . .; (3) To prepare educational materials and conduct educational activities in support of the general purposes of the Corporation; (4) To sponsor programs, including health care benefit plans, for the benefit of the Corporations members; (5) To conduct and sponsor forums, lectures, debates, and similar programs . . . .
The membership of ABC Care is composed as follows:
The Corporation shall have as its members small business employers (including persons who are self-employed), who are interested in and supportive of the purposes for which the Corporation was organized, all of whom shall have voting rights as determined under the Bylaws of the Corporation.
According to ABC Cares web site, ABC Care "is a well established association providing health and consumer benefits. Membership in ABC Care allows access to these benefits. This is NOT an insurance policy." There is no indication in the web site or any other furnished materials that ABC Care engages in any activities other than offering the benefits described below.
ABC Care offers four categories of benefits: (1) Classic, (2) Bronze, (3) Gold, and (4) Platinum. The Classic package, a variant of which ABC Care desires to offer in New York, provides: (1) Discounts for visits to physicians; (2) Discounts for the services of alternative health care practitioners, including chiropractors and acupuncturists; (3) Payment of an accident benefit; (4) 24 hour access to a nurseline for health advice; (5) Discounts from pharmacies; (6) Discounts on dental care; and (7) free eye examinations and discounts on eyeglasses. The accident benefit and the eye examinations are insured under policies issued to ABC Care and covering ABC Care members, by insurers not licensed to transact an insurance business in New York.
By letter to a marketing agent for ABC Care, this Office of General Counsel indicated that the direct offering of ABC Cares programs in New York would be violative of the New York Insurance Law.
An athletic group with team players in a number of jurisdictions, including New York, has approached ABC Care to purchase the Classic package. ABC Care proposes to remove the vision services from the package and inquire whether solicitation in New York for the modified package could be done by licensed insurance agents.
New York Insurance Law § 1101(a) (McKinney 2000 and 2004 Supplement) defines doing an insurance business:
(1) Insurance contract means 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.
(2) Fortuitous event means 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.
New York Insurance Law § 1102(a) (McKinney 2000 and 2004 Supplement) proscribes the doing of an insurance business unless one is either licensed or exempt from the requirement to secure a license.
The Department has opined that a party may agree to provide goods or services dependent upon fortuitous events for a discounted fee for service, so long as the discounted fee covers the cost of rendition of the goods or service (e.g. cost of labor, material, and reasonable overhead expenses). Accordingly, under such circumstances, the discounts for various health related services would not require a license from the Department.
The nurseline, on the other hand, does provide a benefit of pecuniary value, the advice, which is dependent upon need for the advice, a fortuitous event. A review of the types of organization that are exempt from securing a license from the Department, New York Insurance Law § 1108 (McKinney 2000) and 4522 (McKinney 2000), indicates that ABC Care will not fit into any of the exempt categories. Accordingly, unless the nurseline benefit is offered by a New York authorized insurer, it may not be offered in New York.
While the accident benefit is provided through an insurance policy, the insurer providing the benefit is not licensed in New York. New York Insurance Law § 1101(b)(1) provides:
Except as provided in paragraph two . . . of this subsection, any of the following acts in this state, effected by mail from outside this state or otherwise, by any person, firm, association, corporation or joint-stock company shall constitute doing an insurance business in this state and shall constitute doing business in the state within the meaning of section three hundred two of the civil practice law and rules:
(A) making, or proposing to make, as 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.
Accordingly, the direct solicitation in New York for the accident policy issued by the unauthorized insurer would not be permitted. Whether, in accordance with New York Insurance Law § 1101(b)(2), there could be solicitation by mail for the policy depends on whether ABC Care would qualify as a group under the New York Insurance Law.
New York Insurance Law § 4237(a)(3) (McKinney 2000) set forth the groups that are eligible to purchase a blanket accident policy in New York. New York Insurance Law § 4237(a)(3)(E) authorizes the issuance of a policy to:
Under a policy or contract issued to and in the name of an incorporated or unincorporated association of persons having a common interest or calling, which association shall be deemed the policyholder, having not less than fifty members, covering all the members of such association or if part or all of the premium is to be derived from funds contributed by the insured members and if the opportunity to take such insurance is offered to all eligible members, then such policy must cover not less than seventy-five percent of any class or classes of members determined by conditions pertaining to membership in the association.
While the athletic group might qualify under New York Insurance Law § 4237(a)(3)(E), if the policy were issued to it, the policy in fact is issued to ABC Care as a whole, which does not qualify under any of the categories set forth in New York Insurance Law § 4237(a)(3).
In addition to the groups specifically qualified to purchase a blanket accident policy, New York Insurance Law § 4237(a)(3)(F) authorizes:
a policy or contract issued to insure; (i) any other substantially similar group approved by the superintendent as eligible for insurance under a blanket accident and health insurance policy or contract; or (ii) any other group approved by the superintendent upon a finding that: (I) there is a common enterprise or economic or social affinity or relationship; (II) the premiums charged are reasonable in relation to the benefits provided; and (III) the issuance of the policy would result in economies of acquisition or administration, would be actuarially sound, and would not be contrary to the best interest of the public. The superintendent shall promulgate regulations setting forth any such groups that have been accepted as qualifying pursuant to this subparagraph.
If ABC Care desires to be recognized as a "discretionary" group in accordance with New York Insurance Law § 4237(a)(3)(F), an application for such recognition indicating how it meets the requirements thereunder should be submitted to the Department.
In addition to New York Insurance Law § 4237, dealing with blanket insurance policies, New York Insurance Law § 4235(c)(1)(K) (McKinney 2000 and 2004 Supplement) authorizes the issuance of:
A policy issued to an association or the trustee or trustees of a trust established, or participated in, by one or more associations, to insure association members, subject to the following: (i) Each association shall have:(I) A minimum of two hundred insured members at the policy's date of issue; (II) Been organized and maintained in good faith for purposes principally other than that of obtaining insurance; (III) Been in active existence for at least two years; and (IV) A constitution and by-laws which provide that: (aa) The association hold regular meetings not less than annually to further the purposes of the association; (bb) The association collect dues or solicit contributions from members; and (cc) The members have voting privileges and representation on the governing board and committees. (ii) The premium for the policy shall be paid by the association or the trustees either wholly from funds contributed by the association or by the insured individuals, or from funds contributed jointly by the association and insured individuals. . . .
While, based upon a review of ABC Cares web site and the applicable District of Columbia statutes, it appears that ABC Care would qualify under New York Insurance Law § 4235(c)(1)(K)(i)(I), (III), and (IV), but ABC Care would not meet the requirements of New York Insurance Law § 4235(c)(1)(K)(i)(II).
New York Insurance Law § 4235(c)(1)(M) also allows "discretionary" groups. If ABC Care desires to be recognized as a "discretionary" group in accordance with New York Insurance Law § 4235(c)(1)(M), an application for such recognition indicating how it meets the requirements thereunder should be submitted to the Department.
The Office of General Counsels prior letter to an ABC Care marketing agent presumed that the insurer, which was underwriting some of the benefits provided by ABC Care, was authorized in New York. Since, based upon the policy you provided, it is clear that the insurer insuring the accident benefit is not authorized, this Offices prior indication that solicitation by mail was permissible is incorrect. Therefore, since none of the exemptions that appear in New York Insurance Law § 1101(b)(2), which allow transactions by mail from without the State in support of an existing policy issued by an unauthorized insurer, are applicable, there could be no solicitation into New York with regard to this policy.
Accordingly, so long as the nurseline and accident benefit are part of the package being offered, there may be no solicitation in New York for ABC Cares package to the athletic group.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.