OGC Op. No. 03-01-12

The Office of General Counsel issued the following opinion on January 6, 2003, representing the position of the New York State Insurance Department.

Re: Employer Sponsored Group Health Insurance


Must an employer sponsored group accident & health insurance policy cover all employees?


Coverage of all employees is required where there is no contribution by the employee. If there is an employee contribution, an employee may opt out of the employer sponsored coverage.


An employer distributed an "opt-out" form to employees that offered, if the employee had health coverage elsewhere and opted to decline the health insurance offered through the employer, to make a cash payment to the employee. This inquiry concerns the legality of the offer.


New York Insurance Law § 4235(c)(1) (McKinney 2000) provides, in pertinent part:

No policy of group accident, group health or group accident and health insurance shall be delivered or issued for delivery in this state unless it conforms to one of the following descriptions: (A) A policy issued to an employer or to a trustee or trustees of a fund established by an employer, which employer or trustee or trustees shall be deemed the policyholder, insuring with or without evidence of insurability satisfactory to the insurer, employees of such employer, and insuring, except as hereinafter provided, all of such employees or all of any class or classes thereof determined by conditions pertaining to the employment or a combination of such conditions and conditions pertaining to the family status of the employee, for insurance coverage on each person insured based upon some plan which will preclude individual selection. . . . The premium for the policy shall be paid by the policyholder, either from the employer's funds, or from funds contributed by the insured employees, or from funds contributed jointly by the employer and employees. If all or part of the premium is to be derived from funds contributed by the insured employees, then such policy must insure not less than fifty percent of such eligible employees or, if less, fifty or more of such employees. . . . (emphasis added)

The regulation effecting this requirement, N.Y. Comp. Codes R. & Regs. tit. 11, § 52.18(f) (1999), provides:

Conditions pertaining to employment under section [4235] of the Insurance Law includes geographic situs of employment, earnings, method of compensation, hours, and occupational duties.

The above listing is illustrative and is not intended to be an exhaustive compilation of all valid conditions pertaining to employment.

If an employer purchases a group accident & health insurance policy intending to cover all employees, or a subset thereof based on a valid condition of employment, in which the employer pays the entire premium without any contribution by employees, then pursuant to New York Insurance Law § 4235(c)(1)(A) it is not possible for an employee to opt out of coverage. If, however, there was a requirement for contribution by employees, an opt out would be permitted.

Most employer sponsored group accident & health programs are regulated by the Employee Retirement Income Security Act, 29 U.S.C.A. § 1001 et seq (ERISA). Accordingly, this Department will express no opinion as to the employer’s obligation with respect to ERISA with relation to employee opt outs.

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