New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT

25 BEAVER STREET
NEW YORK, NEW YORK 10004

Eliot Spitzer
Governor
Eric R. Dinallo
Acting Superintendent

The Office of General Counsel issued the following opinion on February 16, 2007 representing the position of the New York State Insurance Department.

Re: Health Maintenance Organization Options

Question Presented

Under the New York Insurance Law (McKinney 2006 and 2007 Supplement), is a New York employer with more than 500 employees required to offer a choice of more than one health insurance plan?

Conclusion

No. There is no such requirement set forth in the New York Insurance Law. However, the New York Public Health Law (McKinney 2002 and 2007 Supplement) requires employers to offer to their employees a choice of more than one health maintenance organization (“HMO”).

Facts

The inquirer represents employees of a New York employer with more than 500 employees and believes that there is a requirement under the New York Insurance Law that an employer must offer to its employees a choice of more than one health plan.

Analysis

An employer-sponsored health plan constitutes an “employee welfare benefit plan” within the meaning of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.A. § 1002(1) (West 1999). 29 U.S.C.A. § 1144 (West 1999) provides:

(a) Supersedure; effective date. Except as provided in subsection (b) of this section, the provisions of this title . . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . . .

(b) Construction and application. . . . (2) (A) Except as provided in subparagraph (B), nothing in this title shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities. . . .

There are no provisions in the New York Insurance Law requiring employers to offer any type of employee benefit. However, special rules apply to the offering of HMO coverage by employers.

The federal HMO requirement is set forth in 42 U.S.C.A § 300e-9 (West 2003):

(a) In accordance with regulations which the Secretary shall prescribe--(1) each employer-- (A) which is required during any calendar quarter to pay its employees the minimum wage prescribed by section 6 of the Fair Labor Standards Act of 1938 . . . and (B) which during such calendar quarter employed an average number of employees of not less than 25, . . . which offers to its employees in the calendar year beginning after such calendar quarter the option of membership in a qualified health maintenance organization which is engaged in the provision of basic health services in a health maintenance organization service area in which at least 25 of such employees reside shall meet the requirements of subsection (b) with respect to any qualified health maintenance organization offered by the employer or State or political subdivision.

(b)(1) If a health benefits plan offered by an employer . . . includes contributions for services offered under the plan, the employer . . . shall make a contribution under the plan for services offered by a qualified health maintenance organization in an amount which does not financially discriminate against an employee who enrolls in such organization. . . .

. . .

New York’s HMO requirement is set forth in New York Public Health Law § 4407 (McKinney 2002), not the New York Insurance Law or the regulations promulgated thereunder:

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.

2. For those employees of an employer represented by a bargaining representative, the offer of the health maintenance organization alternative shall be subject only to the collective bargaining process; for those employees not represented by a bargaining representative, the offer of the health maintenance organization alternative shall be made directly to the employee.

3. (a) If there is more than one health maintenance organization engaged in the provision of health services in the area in which the employees of the employer reside, and if:(i) one or more of such organizations provides more than one-half of its comprehensive health services through physicians or other health professionals who are members of the staff of the organization or of a medical group (or groups) which contracts with the organization, and (ii) one or more of such organizations provides its comprehensive health services through contracts with an individual practice association (or associations), individual physicians and other health professionals under contract directly with the organization, or a combination of an individual practice association (or associations), medical group (or groups), physicians who are members of the staff of the organization, and individual physicians and other health professionals under contract directly with the organization, then . . . If the employer has two hundred or more employees and the employer's principal office in this state is located outside of the metropolitan region then the employer shall be required to offer the option of enrollment in at least two organizations described in subparagraph (i) of this paragraph and at least two organizations described in subparagraph (ii) of this paragraph. If the employer has two hundred or more employees and the employer's principal office in this state is located within the metropolitan region then the employer shall be required to offer the option of enrollment in at least two organizations described in subparagraph (i) of this paragraph and at least two organizations described in subparagraph (ii) of this paragraph and an additional organization from either subparagraph. For the purposes of this section the metropolitan region is defined as the counties of Westchester, Rockland, New York, Kings, Queens, Richmond, Bronx, Nassau and Suffolk.

. . .

Questions concerning New York Public Health Law § 4407(3) should be addressed to:

Counsel
New York State Health Department
Tower Building
Empire State Plaza
Albany, N.Y. 12237.

Moreover, given the strictures of 29 U.S.C.A. § 1144(a), questions concerning the possible preemption of New York Public Health Law § 4407(3) should be addressed to:

Employee Benefit Security Administration
United States Department of Labor
33 Whitehall Street
New York, NY 10004.

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