OGC Op. No. 09-04-06
The Office of General Counsel issued the following opinion on April 15, 2009, representing the position of the New York State Insurance Department.
RE: Group Insurance Policies Community Rated vs. Large Group
Because community rating1 applies to insurance policies covering groups that have fifty or fewer members, which employees should be counted in determining whether community rating applies to the group health insurance policy?
Only employees who are eligible on the application date for coverage, or in subsequent years on the date of determination of renewal rates, are to be counted for purposes of deciding whether a group health insurance policy is subject to community rating.
The inquirer reports that the inquirer is an insurance broker that represents an employer who is the owner of a small business. The employer has a self-imposed time requirement whereby the employer waits a set period of time before covering employees under a group health insurance policy. In determining the size of the group for purposes of Regulation 145, the employer seeks to include new employees who had not been employed long enough to be covered under the employer’s group health coverage, because the employer claimed that these new employees would become eligible during the coverage period. The insurer has refused, because the new employees were not eligible for coverage on the date that the group health insurance coverage began. The employer asks whether the insurer’s refusal was proper.
Section 360.4(j) of Regulation 145 states that determination of whether a group is subject to community rating depends on whether a group has fifty or less eligible members:
The applicability of the provisions of chapter 501 of the Laws of 1992 should be based on “whether a group has 50 or less eligible members on the date of application for coverage or in subsequent years on the date of the determination of renewal rates. Fluctuation in the size of the group during the contract year shall not affect the applicability of such law.
Section 360.2(b) defines the term “community rated” as follows:
Community rated means a rating methodology in which the premium for all persons covered by a policy or contract form is the same based on the experience of the entire pool of risks covered by that policy or contract form without regard to age, sex, health status or occupation. Refunds, rebates, credits or dividends based on such factors are also prohibited.
Section 360.2(f) defines “small group” health insurance as follows:
Small group health insurance policy means a group remittance policy written by an insurer pursuant to section 4304 of the Insurance Law and a group health insurance policy covering from two to 50 employees or members, exclusive of dependents and spouses, and policies issued to or through association groups as defined in subdivision (a) of this section. In determining the size of a small group reference should be made to section 360.4(i) and (j) of this Part. Insurers may choose to classify individual proprietors within the small group category provided that any such classification is applied consistently to all individual proprietors. A small group health insurance policy does not include a policy covering only: long term care benefits, nursing home benefits, home care benefits, dental or vision care services, hospital or surgical indemnity benefits with specific dollar amounts unless the dollar amounts exceed the amounts required to meet the definitions of basic hospital and basic medical insurance in sections 52.5 and 52.6 of this Title, accident only indemnity benefits, accidental death and dismemberment benefits, prescription drug benefits, disability income benefits or specified disease benefits.
Section 360.4(j) of Regulation 145 states that each member of a group must be eligible for coverage on the date that the group applies for coverage, or in subsequent years on the date of determination of renewal rates. Thus, under the scenario presented, the fact that the new employees may subsequently become eligible members of the group health insurance policy has no bearing on the counting of eligible employees for community rating purposes. Accordingly, new employees who had not been on the payroll long enough to be eligible for coverage under the employer’s group health insurance may not be properly counted for purposes of determining whether the policy should be community rated.
For further information, you may contact Senior Attorney Susan A. Dess at the New York City office.
1 11 NYCRR § 360.2(b) defines community rating as a “rating methodology in which the premium for all persons covered by a policy or contract form is the same based on the experience of the entire pool of risks covered by that policy or contract form without regard to age, sex, health status or occupation.”