The Office of General Counsel issued the following opinion on April 3, 2006, representing the position of the New York State Insurance Department.
Re: Disabled Dependents Entitlement to Conversion Benefits after Exhaustion of Continuation Rights When Dependent is Covered by Medicare
After a disabled dependent child, whose deceased father was covered by a group health insurance contract, has exhausted his continuation benefits, is the insurer in question required to provide conversion benefits when such dependent child is covered by Medicare?
Under the facts of this case, the insurer would not be required to provide the dependent child, who is covered by Medicare, with conversion benefits. However, in compliance with its Overinsurance Rules, the insurer would have to make a Medicare Supplemental Insurance policy available to applicants who qualify.
The inquirer seeks an opinion from the Department that answers the question of whether an insurer is required to provide a disabled dependent child with conversion benefits after the expiration of his continuation benefits when such dependent child is covered by both Medicare and Medicaid.
This opinion will only address the issue raised, i.e., the dependent childs entitlement to conversion rights after exhaustion of his continuation benefits.1 N.Y. Ins. Law § 4305(d)(1) (McKinney Supp. 2006) governs conversion rights under group health insurance contracts issued by not-for-profit corporations and health maintenance organizations. That section provides in pertinent part, as follows:
(d)(1) A group contract issued pursuant to this section shall contain a provision to the effect that in case of termination of coverage under such contract of any member of the group because of (I) termination for any reason whatsoever of his employment or membership, if he has been covered under the group contract for at least three months he shall be entitled to have issued to him by the corporation, without evidence of insurability, upon application therefore and payment of the first premium made to the corporation within forty-five days after termination of the coverage, an individual direct payment contract, covering such member and his eligible dependents who were covered by the group contract, which provides coverage most nearly comparable to the type of coverage under the group contract, which coverage shall be no less than the minimum standards for basic hospital, basic medical, or major medical as provided for in insurance department regulation; provided, however, that if the corporation does not issue such a major medical contract, then to a comprehensive or comparable type of coverage which is most commonly being sold to group remitting agents. Notwithstanding the previous sentence, a corporation may elect to issue a standardized individual enrollee contract pursuant to section four thousand three hundred twenty two of this article in lieu of a major medical contract, comprehensive or comparable type of coverage required to be offered upon conversion from an indemnity contract. The conversion privilege afforded herein shall also be available: , (B) upon the death of the member, to the surviving spouse2 and other dependents covered under the contract, and (C) to a dependent if no longer within the definition in the contract.
N.Y. Ins. Law § 4305(e)(6) (McKinney Supp. 2006) provides, in pertinent part, as follows:
(6) The conversion privilege afforded by subsection (d) of this section shall be available upon termination of the continuation of benefits described herein.
After his fathers death, the dependent child was provided with three years of continuation coverage, which ended in April of 2005. As a result of a lawsuit, however, the dependent childs continuation coverage was extended for an additional year, until April of 2006. Pursuant to Section 4305(e)(6), conversion rights are available upon termination of the continuation of benefits. The issue here is whether the insurer is required to issue an individual direct payment conversion contract to the dependent child, in light of the fact that he is covered by Medicare.
N.Y. Ins. Law § 4305(d)(2) (McKinney Supp. 2006) provides, in pertinent part, as follows:
(2) [T]he corporation shall not be required to issue such individual direct payment converted contract covering any person if it appears that such person shall then be covered by another individual contract providing similar coverage or if it shall appear that such person is covered by or eligible to be covered by a group contract or policy providing similar benefits or is provided with similar benefits required by any statute or provided by any welfare plan or program, which together with the individual direct payment converted contract would result in over-insurance or duplication of benefits according to standards on file with the superintendent of insurance relating to individual contracts . (emphasis added).
Section 4305(d)(2) above provides that no conversion rights are available to a person if it appears that such person, among other things, is provided with similar benefits required by any statute, which together with the converted contract, would result in over-insurance or duplication of benefits according to standards on file with the Superintendent. Section 360.3(a)(5) of Regulation 145, N.Y. Comp. Codes R. & Regs. tit. 11, Pt. 360 (1998), provides in pertinent part, as follows:
(a) No insurer may restrict or limit eligibility for individual or small group policies except in the following ways:
(5) Overinsurance rules filed with the Health and Life Policy Bureau and approved by the superintendent subsequent to the adoption of this regulation for applicants actually covered under the same or other group or individual policies.
The insurers Overinsurance Rules provide, in pertinent part, as follows:
All applicants for direct payment health insurance contracts, including those converting from group coverage, are required to complete an application form. This application form requests essential information such as the applicants name and address, as well as information regarding the applicants current health insurance coverage and eligibility for health insurance coverage. Pursuant to the regulations of the New York State Insurance Department (11 N.Y.C.R.R. Part 360), we have established the following rules to determine if an applicant is overinsured. If the applicant is determined to be overinsured, we will deny the application for coverage.
Reasons For Denial of Coverage. We will not issue a given policy to an individual who:
7. Is eligible for or is covered by Medicare, and Medicare would be primary to the [insurers] policy being applied for, except we will issue the applicant a Medicare Supplemental Insurance policy.
8. Is entitled to benefits under Part A of Medicare or is enrolled under Part B of Medicare and the policy being applied for would duplicate benefits already covered by Medicare or benefits covered under any other health insurance or self-insured policy or plan.
Therefore, based on the fact that the dependent child is covered by Medicare, pursuant to Section 4305(d)(2) and the insurers Overinsurance Rules, the insurer is not required to offer him a conversion contract. However, in compliance with its Overinsurance Rules, the insurer would have to make a Medicare Supplemental Insurance policy available to applicants who qualify for such policy.
For further information please contact Associate Attorney D. Monica Marsh at the New York City Office.
1 There is no issue as to whether the dependent child was provided continuation coverage pursuant to N.Y. Ins. Law § 4305(e).
2 It appears that the insurer has offered this coverage to the wife.