The Office of General Counsel issued the following opinion on July 30, 2004 representing the position of the New York State Insurance Department.
Re: Accident & Health Insurance, Waiting Periods
Would either an insurer or employer/policyholder be in violation of anti-discrimination statutes if it waived waiting periods for a specified group of employees?
Under the facts as presented, such a waiver would not be violative of the New York Insurance Law (McKinney 2000 and 2004 Supplement). The Department can not express any opinion as to any other statutes that may be applicable to the employer/policyholder.
The inquirer's firm is a licensed life insurance agent and frequently advises employers as to health insurance for employees. When an application is submitted to an insurer for a group health insurance policy, the insurer usually requests that the employer/applicant designate a waiting period for new employees. Frequently, the insurer also asks the employer/applicant whether it desires to waive the prospective waiting period for those individuals hired prior to the effective date of the plan, but who would not have met the waiting period by the effective date of the plan.
In the particular matter impelling this request for an opinion, the employer is switching insurance carriers for an existing plan and the new insurer has inquired whether the employer desires that the waiting period under the new policy be waived for existing employees who would not otherwise be eligible for coverage.
The inquirer would like to know whether such a waiver would be legal, especially in view of anti-discrimination statutes.
The provision of health insurance to employees 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). While most state laws affecting ERISA plans are preempted, 29 U.S.C.A. § 1144(a) (West 1999), state laws regulating insurance are not preempted. 29 U.S.C.A. § 1144(b)(1).
In a major regulation of health insurance, the United States Congress enacted the Health Insurance Portability and Accountability Act (HIPAA), Public Law No. 104-191 (1996). One of the reforms effected by HIPAA was a restriction on waiting periods where the new employee had previous creditable coverage. This HIPAA requirement, as it affects employee welfare benefit plans, is codified in ERISA. 29 U.S.C.A. § 1181 (West 1999). In conformance with HIPAA, New York Insurance Law §§ 3232 (McKinney 2000 and 2004 Supplement), regulating policies of commercial insurers, and 4318 (McKinney 2000 and 2004 Supplement), regulating contracts of non-for-profit health insurers and all Health Maintenance Organizations, as well as the Departments Regulation 62, N.Y. Comp. Codes R. & Regs. tit. 11, § 52.20(c) (2002), have been modified.
In so far as ERISA and HIPAA are concerned, it is the understanding of the Department that, so long as the requirements affecting creditable coverage are met, a waiver of the waiting period would not be in violation of Federal statutes.
New York Insurance Law §§ 3232(b) and 4318(b) provide:
No pre-existing condition provision shall exclude coverage for a period in excess of twelve months following the enrollment date of coverage for the covered person and may only relate to a condition (whether physical or mental), regardless of the cause of the condition, for which medical advice, diagnosis, care or treatment was recommended or received within the six-month period ending on the enrollment date. For purposes of this section enrollment date means the first day of coverage of the individual under the policy or, if earlier, the first day of the waiting period that must pass with respect to an individual before such individual is eligible to be covered for benefits. . . . No pre-existing condition limitation provision shall exclude coverage in the case of: (1) an individual who, as of the last day of the thirty-day period beginning with the date of birth, is covered under creditable coverage as defined in subsection (c) of this section . . . . (emphasis added)
In addition, N.Y. Comp. Codes R. & Regs. tit. 11, § 52.70(e)(1) (2002) provides:
No group policy replacing a plan of similar benefits of another insurer or self-insurer shall be written unless all persons of the same class insured under the prior plan are eligible without evidence of individual insurability or restrictions as to preexisting conditions, except those contained in the policy from which transfer is made to the extent of the lesser of the prior coverage or the coverage provided under the replacing plan.
The groups to which health insurance policies and contracts may be issued for delivery in New York is regulated by New York Insurance Law § 4235(c)(1) (McKinney 2000 and 2004 Supplement). New York Insurance Law § 4235(c)(1)(A) provides:
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. . . . . (emphasis added)
In effectuating the requirements of New York Insurance Law § 4235(c)(1)(A), the Department has promulgated a regulation (Regulation 62) that provides, in pertinent part, N.Y. Comp. Codes R. & Regs. tit. 11, § 52.18(f) (2002):
Conditions of eligibility. Conditions pertaining to employment under section 4235(c) of the Insurance Law includes geographic situs of employment, earnings, method of compensation, hours, and occupational duties.
The list in N.Y. Comp. Codes . & Regs. tit. 11, § 52.18(f) is not exhaustive and an acceptable condition pertaining to employment would be length of employment. Accordingly, if the employer, for ease of administration, decides to treat all employees on staff as of the date of the change in plan as a discrete group, no statute would be violated.
The New York Insurance Law only regulates insurers and other licensees of the Department. The Department is not in a position to express an opinion as to the obligations of the employer/policyholder under other applicable statutes.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.