The Office of General Counsel issued the following opinion on April 25, 2008 representing the position of the New York State Insurance Department.
Re: Individual Health Insurance, Replacement
If an individual who has an in-force individual health insurance policy intends to replace that policy with another type of individual health insurance policy, must the insured answer in the affirmative to a question concerning replacement of coverage?
Although there is no requirement regulating the subject transactions, an applicant is obliged to answer accurately and truthfully with respect to any question on the application.
The inquirer’s firm is licensed as an insurance agent in accordance with N.Y. Ins. Law § 2103(a) (McKinney 2006), and the inquirer is individually licensed as an insurance agent in accordance with Insurance Law § 2103(a), and as an insurance broker in accordance with Insurance Law § 2104.
Some employees of the firm’s employer clients have purchased various health insurance policies, and pay the premiums through deductions from their salaries by their employers. Some of the employees, for reasons of their own desire to surrender their policies, and purchase individual health insurance policies of a different type. For example, an individual with an accident indemnity or hospital indemnity policy wishes to replace it with an individual short term disability policy.
The applications for the new policies may ask the applicant, “[I]s there any other coverage in force” or “[W]ill this policy replace any existing coverage?” Since the intended new coverage is not of the same type as the existing coverage, the inquirer asks how such questions should be answered.
Unlike life insurance, see N.Y. Comp. Codes R. & Regs. tit. 11, Part 51 (Regulation 60) (2003), the replacement of health insurance is not comprehensively regulated. The only regulation of the replacement of health insurance is in connection with the sale of either Medicare supplement policies, see § 52.22 of 11 NYCRR Part 52 (Regulation 62), or long term care and similar policies, see 11 NYCRR §§ 52.5 and 52.29. Since the new policies in question fit into neither category, there are no specific statutory or regulatory rules that govern the subject transactions.
However, notwithstanding the lack of affirmative regulation, all applicants for individual health insurance policies are obliged to respond accurately and truthfully to questions on insurance applications. Where applicable, full explanations should be provided.
For further information you may contact Principal Attorney Alan Rachlin at the New York City office.