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

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on June 8, 2005 representing the position of the New York State Insurance Department.

RE: Chronic Health Conditions, Declination for Insurance

Questions Presented:

1. If an insurer, based upon a chronic medical condition, declines an individual’s application for disability income insurance, is the individual entitled to a copy of his physician’s report which probably formed the basis for the declination?

2. With respect to disability income insurance, may an insurer, in lieu of declining an application, exclude disabilities caused by the preexisting chronic condition?

3. With respect to life insurance, may an insurer either reject an application because of a preexisting chronic condition or, in lieu of declining the application, charge an additional premium?

Conclusions:

1. Unless a health care provider has determined that release of the information would be harmful, the insurer must release the medical information to the applicant.

2. With respect to a disability income policy, an insurer may exclude preexisting conditions.

3. An insurer in underwriting a life insurance policy which becomes aware of a chronic condition that increases the mortality risk may either decline the application or charge an additional premium.

Facts:

The inquirer's husband, who has a chronic cardiac condition, applied to ABC Life Insurance Company for an individual disability income insurance policy. The insurer declined the application. The inquirer and her husband surmise that the declination was based on medical information received from the husband's physician. Accordingly, the inquirer's husband requested that insurer furnish a copy of the information that had been furnished by his physician. The insurer replied:

We are in receipt of your letter for medical findings, however, the medical information provided belongs to the doctor(s) and because it is confidential, we are not allowed to release it without the doctor’s written permission. However, we would be pleased to explain the reasons for our underwriting decision to the doctor of your choice.

The inquirer finds the insurer’s denial of the request for the medical information unacceptable. In addition, she questions why, since her husband could be injured both on and off his job for reasons having nothing to do with his cardiac condition, the insurer does not just exclude disabilities caused by that condition.

Finally, the inquirer asked:

Is it true that a life insurance company can deny a person or place them in a very high risk paying category for life insurance based on a possible or probable or even a definite diagnosis of Multiple Sclerosis? MS does not affect life expectancy so why are they allowed to deny clients?

Analysis:

Release of Health Information

The release of personal health information is regulated by both Federal and New York requirements. In accordance with the Health Insurance Portability and Accountability Act (HIPAA), Pub. Law No. 104-191 (1996), the United States Department of Health and Human Services has promulgated a Privacy Rule, 45 C.F.R. § 160.101 et seq. (2002). Both the insurer and the inquirer's husband’s physicians are covered entities under the Rule. The HIPAA Privacy Rule establishes minimum standards and states are free to be more protective of health information privacy.

The HIPAA Privacy Rule provides, 45 CF.R. § 164.524(a) (2002):

Standard: Access to protected health information. (1) Right of access. Except as otherwise provided in paragraph (a)(2) or (a)(3) of this section, an individual has a right of access to inspect and obtain a copy of protected health information about the individual in a designated record set, for as long as the protected health information is maintained in the designated record set, except for: (i) Psychotherapy notes; (ii) Information compiled in reasonable anticipation of, or for use in, a civil, criminal, or administrative action or proceeding; . . . .

. .

(3) Reviewable grounds for denial. A covered entity may deny an individual access, provided that the individual is given a right to have such denials reviewed . . . in the following circumstances: (i) A licensed health care professional has determined, in the exercise of professional judgment, that the access requested is reasonably likely to endanger the life or physical safety of the individual or another person; (ii) The protected health information makes reference to another person (unless such other person is a health care provider) and a licensed health care professional has determined, in the exercise of professional judgment, that the access requested is reasonably likely to cause substantial harm to such other person; or (iii) The request for access is made by the individual's personal representative and a licensed health care professional has determined, in the exercise of professional judgment, that the provision of access to such personal representative is reasonably likely to cause substantial harm to the individual or another person.

. . .

New York Public Health Law § 18(1) (McKinney 2002) defines:

(e) ‘Patient information’ . . . means any information concerning or relating to the examination, health assessment including, but not limited to, a health assessment for insurance and employment purposes or treatment of an identifiable subject maintained or possessed by a . . . health care practitioner who has provided or is providing services for assessment of a health condition including, but not limited to, a health assessment for insurance and employment purposes or has treated or is treating such subject . . .

(g) ‘Qualified person’ means any properly identified subject . . .

(h) ‘Subject’ means an individual concerning whom patient information is maintained or possessed by a health care provider.

New York Public Health Law § 18(2)(a) provides:

Subject to the provisions of subdivision three of this section, upon the written request of any subject, a health care provider shall provide an opportunity, within ten days, for such subject to inspect any patient information concerning or relating to the examination or treatment of such subject in the possession of such health care provider.

New York Public Health Law § 18(3) provides:

Limitations on access. (a) Upon receipt of a written request by a qualified person to inspect or copy patient information, a practitioner may review the information requested. Unless the practitioner determines pursuant to paragraph (d) of this subdivision that (i) the requested review of the information can reasonably be expected to cause substantial and identifiable harm to the subject or others which would outweigh the qualified person's right to access to the information, . . . review of such patient information shall be permitted or copies provided.

. . .

(d) The provider may deny access to all or a part of the information and may grant access to a prepared summary of the information if, after consideration of all the attendant facts and circumstances, the provider determines that (i) the request to review all or a part of the patient information can reasonably be expected to cause substantial and identifiable harm to the subject or others which would outweigh the qualified person's right of access to the information, or would have a detrimental effect . . . . In conducting such review, the provider may consider, among other things, the following factors: (i) the need for, and the fact of, continuing care and treatment; (ii) the extent to which the knowledge of the information may be harmful to the health or safety of the subject or others; (iii) the extent to which the information contains sensitive material disclosed in confidence to the practitioner or treating practitioner by family members, friends and other persons; (iv) the extent to which the information contains sensitive materials disclosed to the practitioner or the treating practitioner by the subject which would be injurious to the subject's relationships with other persons, except when the subject is requesting information concerning himself or herself; . . . .

Since, except as provided in 45 C.F.R. § 164.524(a)(3)(i) and New York Public Health Law § 18(3)(d)(i), the health care provider would have to release the information to the inquirer's husband, the insurer has no greater right to deny access. Since the insurer did not assert such an exception, it appears that its denial was improper.

Preexisting Conditions

An insurer is free, subject to limitations imposed by a Regulation of the Insurance Department, to impose a preexisting condition restriction. N.Y. Comp. Codes R. & Regs. tit. 11, § 52.16 (1998) provides:

(c) No policy shall limit or exclude coverage by type of illness, accident, treatment or medical condition, except as follows: (1) preexisting conditions or diseases, as defined in section 52.2(u) of this Part. . .except for congenital anomalies of a covered dependent child . . . .

. . .

(e) Except with respect to Medicare supplement insurance, . . . nothing . . . shall preclude: . . . (2) unless otherwise provided by law, waivers to exclude, limit or reduce coverage or benefits for specifically named or described disease, physical condition . . . as an alternative to refusal to issue, renew or reinstate coverage. Where waivers are required as a condition of issuance, renewal or reinstatement, signed acceptance by the insured is required unless on initial issuance the full text of the exclusion is contained either on the first page or specification page of the policy. Waivers to exclude, limit or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions shall not be used in Medicare supplement insurance.

N.Y. Comp. Codes R. & Regs. tit. 11, § 52.2(v) (2002) defines:

Preexisting condition means . . . the existence of symptoms which would ordinarily cause a prudent person to seek diagnosis, care or treatment within a two-year period preceding the effective date of the coverage of the insured person, or a condition for which medical advice or treatment was recommended by a physician or received from a physician within a two-year period preceding the effective date of coverage of the insured person.

In addition, New York Insurance Law § 3216(d)(1) (McKinney 2000 and 2005 Supplement) provides:

Each policy shall. . . contain the following provisions: . . . B) . . . (ii) No claim for loss incurred or disability (as defined in the policy) commencing after two years from the date of issue of this policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date of coverage of this policy.

In summary, while an insurer may impose a preexisting condition exclusion in a disability income policy, it may decide in the exercise of its underwriting judgment that the increased morbidity from a particular preexisting condition is so much in excess of other causes of disability that the exclusion would swallow the coverage. In such situations, the insurer may decide to reject all applicants with that preexisting condition.

In the alternative, an insurer may validly decide that the cost of determining whether a disability was caused by a preexisting condition outweighs the premium being charged for a disability income policy and opt to reject all applicants with that preexisting condition.

Life Insurance Rating

Premium rates charged for individual life insurance policies are not regulated in New York. However, in establishing rates for individual life insurance, an insurer is subject to the standard established in New York Insurance Law § 4228(h) (McKinney 2000 and 2005 Supplement):

No company shall offer for sale any life insurance policy form . . . which shall not appear to be self-supporting on reasonable assumptions as to interest, mortality, persistency, taxes, agents' and brokers' survival and expenses resulting from the sale of the policy or contract form. . . .

In order to meet the requirement of New York Insurance Law § 4228(h), an insurer will consult a mortality table that lists the number of deaths by any cause in any one year among a large number of individuals. Such tables may also subdivide the causes of death among common causes. Where the mortality table does not so specify, statistics maintained by various governmental agencies provide information as to the mortality risk presented by specific diseases.

Insurers during the underwriting process will determine whether a particular condition presents an increased mortality risk and whether that increased risk can be offset by an increased premium or if the increased risk is so great that no additional premium would be sufficient. New York Insurance Law § 4224(a) (McKinney 2000 and 2005 Supplement) provides:

(a) No life insurance company doing business in this state . . . shall: . . . (2) refuse to insure, refuse to continue to insure or limit the amount, extent or kind of coverage available to an individual, or charge a different rate for the same coverage solely because of the physical or mental disability, impairment or disease, or prior history thereof, of the insured or potential insured, except where the refusal, limitation or rate differential is permitted by law or regulation and is based on sound actuarial principles or is related to actual or reasonably anticipated experience, in which case the insurer . . . shall notify the insured or potential insured of the right to receive, or to designate a medical professional to receive, the specific reason or reasons for such refusal, limitation or rate differential . . . .

In accordance with the last clause of New York Insurance Law § 4224(a)(2), the option to designate a health care professional to receive health information resides with the insured or applicant. The choice may not be made by the insurer.

Whether or not the possible, probable or definite diagnosis of a particular medical condition, such as multiple sclerosis, will result in a denial of coverage or the imposition of an additional premium charge will vary among companies according to their particular underwriting guidelines. Any such determination would have to be based on sound actuarial principles or actual or reasonably anticipated experience.

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