The Office of General Counsel issued the following opinion on March 7, 2005, representing the position of the New York State Insurance Department.
Re: Group Health Insurance/Employee Waiver of Coverage
1. If an employer only provides Health Maintenance Organization coverage for its employees and pays the entire cost, may an employee opt out of the coverage?
2. If an employer only provides HMO coverage for its employees under two separate contracts, with employee contribution being required for one contract and the employer paying the full cost of the other contract, may an employee opt out of either contract?
3. If an employer requires employee contributions for all plans that it provides, both indemnity and HMO, are there any restrictions on employees opting out of coverage?
1. An employee may opt out of such coverage.
2. An employee may opt out of either contract.
3. The New York Insurance Law (McKinney 2000 and 2005 Supplement) does not impose any restrictions other than those set forth in New York Insurance Law § 44235(c)(1)(A) (McKinney 2000 and 2005 Supplement) on a waiver.
By letter of December 28, 2004, in response to an inquiry, after reviewing the relevant provisions of New York Insurance Law §§ 1109 (McKinney 2000 and 2004 Supplement) and 4235, as well as New York Public Health Law § 4407 (McKinney 2002), I concluded that, when an employer requires employee contributions for an indemnity policy and no employee contributions for an HMO contract, an employee may opt out of either coverage.
On behalf of the inquirers employer, which is licensed as an insurance agent pursuant to New York Insurance Law § 2103(a) (McKinney 2000 and 2005 Supplement), the inquirer has requested clarification of the Departments position upon specified hypothetical situations.
New York Insurance Law § 4235(c)1(A) permits the issuance of:
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. . . . 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.
New York Insurance Law § 4235(c)(1)(A) precludes a waiver of dependent coverage where the employer does not require any contribution by the employee towards either his or her coverage or that of dependents. If, however, the employer requires any contribution towards dependent coverage, a waiver is permitted.
Employer requirements with respect to HMOs are set forth in New York Public Health Law § 4407, which provides in pertinent part:
(1) All employers subject to the provisions of the unemployment insurance law, except for those employers with fewer than twenty-five employees, shall include in any health benefits plan offered to their employees, the option of membership in a health maintenance organization which provides or offers a comprehensive health services plan in accordance with the provisions of this article, but only if such plan serves an area in which twenty-five of such employer's employees reside and the organization has been issued a certificate of authority by the commissioner.
. . .
A similar requirement for an employer to offer HMO coverage exists under Federal law. 42 U.S.C.A. § 300e-9 (West 2003).
In accordance with New York Public Health Law § 4406(1) (McKinney 2002) the subscriber contracts of an HMO are regulated by the Insurance Department as if they were contracts of not-for-profit health insurers. In addition, New York Insurance Law § 1109(a) provides:
An organization complying with the provisions of article forty-four of the public health law may operate without being licensed under this chapter and without being subject to any provisions of this chapter, except: (1) to the extent that such organization must comply with the provisions of this chapter by virtue of such article, and (2) the provisions of sections three hundred eight, three hundred thirteen, three hundred thirty-two, one thousand three hundred one, one thousand three hundred two, one thousand three hundred seven, two thousand one hundred three, two thousand one hundred twelve, two thousand one hundred fourteen, two thousand one hundred fifteen, two thousand one hundred seventeen, two thousand one hundred twenty-three, two thousand six hundred eight-a, three thousand two hundred twenty-four-a, four thousand three hundred eight, four thousand three hundred seventeen, four thousand three hundred eighteen, four thousand three hundred twenty, four thousand three hundred twenty-one, four thousand three hundred twenty-two and four thousand three hundred twenty-three of this chapter.
While a group purchasing group coverage in a HMO must comply with the general requirements of New York Insurance Law § 4235(c), denominating those groups that are qualified to take delivery of a group contract, if the participation requirements of New York Insurance Law§ 4235(c)(1)(A) were made applicable to HMO coverage, such coverage would be mandatory, not an employees option, in contravention of New York Public Health Law § 4407. In addition, because the participation requirements of New York Insurance Law § 4235(c)(1)(A) have not been made applicable to HMOs by New York Insurance Law § 1109(a), that coverage may be waived.
In the first two hypothetical situations, since the only coverage being offered is in an HMO, because of both New York Insurance Law § 1109 and New York Public Health Law § 4407, there may be an employee waiver.
As to the third hypothetical situation, if New York Insurance Law § 4235(c)(1)(A) is applicable and the employer requires any contribution by employees towards coverage, the New York Insurance Law does not impose any additional requirements before coverage may be waived. No opinion is expressed as to any requirements that may be imposed by the Employee Retirement Income Security Act, 29 U.S.C.A. § 1001 et seq. (West 1999), any other relevant statute, or a collective bargaining agreement.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.