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

Eliot Spitzer
Governor

Eric R. Dinallo
Superintendent

The Office of General Counsel issued the following opinion on November 5, 2007 representing the position of the New York State Insurance Department.

Re: Group Health Insurance, Continuation Benefits

Question Presented:

May an employer offer to continue COBRA coverage beyond eighteen months under a fully insured plan, where there is otherwise no Qualifying Event?

Conclusion:

The Insurance Department does not opine on requirements imposed by federal law. As to continuation benefits for insured plans under the New York Insurance Law where COBRA is not applicable, a “Qualifying Event” is required in order to receive the eighteen months of mandated continuation of coverage. However, there is no prohibition under New York law that forbids an employer from permitting a former employee to remain on the policy for a reasonably short period beyond the mandated eighteen month period. Continuation of the former employee for a more extended period would result in the group no longer qualifying for coverage under N.Y. Ins. Law § 4235(c)(1) (McKinney 2007).

Facts:

The inquiry, by a benefits administrator, is of a general nature, without reference to particular facts.

Analysis:

As part of the Comprehensive Omnibus Budget Reconciliation Act of 1986 (“COBRA”), Pub. Law No. 99-272, Congress required that group health plans provide a continuation benefit. The requirement for private employers was codified as part of the Employee Retirement Income Security Act, 29 U.S.C.A. § 1161, et seq. For those insured health plans not subject to COBRA, Insurance Law §§ 3221(m), which regulates policies of commercial health insurers, and 4305(e), which regulates contracts of not-for-profit health insurers and all health maintenance organizations, impose a similar continuation requirement. Both statutes require a “Qualifying Event”, and provide for a general eighteen month continuation period.

Questions about the parameters for the continuation period under COBRA should be directed to:

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

With respect to New York’s continuation requirement, the definition of “employee” is relevant. Insurance Law § 4235(d)(1) defines an employee for the purpose of group health insurance as follows:

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; . . . .

Although Insurance Law §§ 3221(m) and 4305(e) require an eighteen month continuation period after a “Qualifying Event,” that period is the minimum required continuation period. While an employer may not continue a former employee on the insured health plan indefinitely, the former employee may still satisfy being the definition of “employee” found in Insurance Law § 4235(d(1) for a period finite ending on the first renewal date after the expiration of the 18 month statutory continuation period1. Continuation of a former employee for a longer period would result in the group no longer qualifying for coverage under Insurance Law § 4235(c)(1), and, since the insurer must police eligibility of groups, require termination of the group.

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

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1 This is consistent with Insurance Law § 3221(p)(2)(E), which authorizes non-renewal of a group health insurance policy when the group no longer qualifies under the Insurance Law, as well as the rule for determining when a group becomes or ceases to be a “small group”, see within the meaning of the law N.Y. Comp. R. & Regs. tit. 11, § 360.4(j) (1998) (Regulation 145).