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

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following opinion on March 23, 2005, representing the position of the New York State Insurance Department.

Re: Group Accident & Health Insurance Policy for Non-Union Members

Questions Presented:

1. May an employer purchase a group accident and health insurance policy that will provide coverage for its non-union member employees, but not its union member employees?

2. May a group accident and health insurance policy be issued to a parent company of several companies (of which the parent company holds common ownership) for the purpose of providing coverage to the non-union member employees, but not the union member employees, of the parent company and its commonly held companies?

Conclusions:

1. Yes. Under the New York Insurance Law, the employer may purchase a group accident and health insurance policy that will provide coverage for its non-union member employees, but not its union member employees. Please see the analysis below.

2. Yes. Under the New York Insurance Law, the group accident and health insurance policy may be issued to a parent company of several companies (of which the parent company holds common ownership) for the purpose of providing coverage to the non-union member employees, but not the union member employees, of the parent company and its commonly held companies.

Facts:

None.

Analysis:

New York Insurance Law § 4235(c)(1)(A) (McKinney 2000) provides:

No policy of group accident, group health or group accident and health insurance shall be delivered or issued for delivery in this state unless it conforms to one of the following descriptions:

(A) 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.

N.Y. Comp. Codes R. & Regs. tit. 11, § 52.18(f) (2004) (Regulation 62) provides an illustrative, non-exhaustive list of valid group member eligibility conditions: "Conditions pertaining to employment under section 4235(c) of the Insurance Law include geographic situs of employment, earnings, method of compensation, hours, and occupational duties."

Based upon the provisions set forth in N.Y. Ins. Law § 4235(c)(1)(A) and N.Y. Comp. Codes, R. & Regs., tit. 11, § 52.18(f), non-membership in a labor union is a permissible basis upon which to differentiate eligibility for employee group accident and health insurance coverage. Therefore, the issuance of a group accident and health insurance policy whose coverage is limited to an employer’s non-union member employees is permissible under the Insurance Law.

With reference to question number 2 above, N.Y. Ins. Law § 4235(d)(1) (McKinney Supp. 2005) provides a definition of "employees" that includes the employees of a subsidiary or affiliated corporation of a corporate employer:

In this section, for the purpose of insurance hereunder: "employees" includes the officers, managers, employees and retired employees of the employer and of subsidiary or affiliated corporations of a corporate employer, and the individual proprietors, partners, employees and retired employees of affiliated individuals and firms controlled by the insured employer through stock ownership, contract or otherwise; "employees" may be deemed to include the individual proprietor or partners if the employer is an individual proprietor or a partnership; and "employees" as used in subparagraph (A) of paragraph one of subsection (c) hereof may also include the directors of the employer and of subsidiary or affiliated corporations of a corporate employer.

Therefore, a group accident and health insurance policy may be issued to a parent company of several companies (of which the parent company holds common ownership) for the purpose of providing coverage to the non-union member employees, but not the union member employees, of the parent company and its commonly held companies.

Most employer sponsored group accident & health programs are regulated by the Employee Retirement Income Security Act, 29 U.S.C.A. § 1001, et seq. (ERISA). Accordingly, this Department will express no opinion as to the employer’s obligation with respect to ERISA.

For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.