The Office of General Counsel issued the following opinion on August 18, 2004 representing the position of the New York State Insurance Department.
Re: Employer Sponsored Group Insurance, Waiver of Coverage
1. Where an employer requires no contribution to employees to cover themselves or their dependents, may an employee waive employer sponsored long-term disability insurance?
2. Would the same answer obtain for group life insurance?
3. Would the same answer obtain if the benefits were provided under a self-funded plan?
1. Such a waiver is not permissible.
2. Such a waiver is not permissible.
3. Employer sponsored self-funded employee welfare benefit plans are governed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 et seq. (West 1999 and 2003 Supplement), not the New York Insurance Law (McKinney 2000 and 2004 Supplement).
By letter of May 7, 2004, in response to an April 21, 2004 inquiry, I indicated that New York Insurance Law § 4235(c)(1)(A) (McKinney 2000 and 2004 Supplement) precluded a waiver of coverage under an employer sponsored/employer pay all policy of group health insurance. The inquirer now asks if the same answer would obtain for a group long-term disability policy, a group life insurance policy, or a self-funded plan.
Group Long Term Disability Policy
New York Insurance Law § 1113(a)(3) (McKinney 2000 and 2004 Supplement) defines accident & health insurance:
"Accident and health insurance," means (i) insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workers' compensation law, except as specified in item (ii) hereof; and (ii) non-cancellable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but excluding insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective date or renewal date.
A group long term disability insurance policy would be encompassed within the definition of accident & health insurance as set forth in New York Insurance Law § 1113(a)(3) and is similarly encompassed within the authorization of New York Insurance Law § 4235(c)(1)(A). Accordingly, the language of New York Insurance Law § 4235(c)(1)(A), quoted in my May 4, 2004 opinion, would also preclude such a waiver.
Group Life Insurance Policy
The statute authorizing employer sponsored group life insurance, New York Insurance Law § 4216(b)(1) (McKinney 2000 and 2004 Supplement), has operative language that is identical to New York Insurance Law § 4235(c)(1)(A):
A policy issued to an employer . . . which employer . . . shall be deemed the policyholder, insuring with or without evidence of individual insurability satisfactory to the insurer, employees of such employer, and insuring . . . all of such employees or all of any class or classes thereof determined by conditions pertaining to the employment, or by a combination of such conditions and conditions pertaining to the family status of the employee, for amounts of insurance 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 wholly from the employer's funds or funds contributed by him 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, such policy must insure not less than fifty percent of such eligible employees or, if less, fifty or more of such employees. . . .
Accordingly, for the same reason as would obtain with respect to a policy of group health insurance, a waiver of employer pay all group life insurance is precluded by the authorizing statute.
Self-funded Employee Welfare Benefit Plans
Both employer sponsored health and life benefits fall within the ERISA definition of "employee welfare benefit plan", 29 U.S.C.A. § 1002(1) (West 1999):
The terms "employee welfare benefit plan" . . . mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer . . . to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death . . . .
ERISA provides, 29 U.S.C.A. § 1144(b)(2)(B) (West 1999) that a self-funded employee welfare benefit plan shall not be deemed to be an insurer and that, 29 U.S.C.A. § 1144(a), except as otherwise specified, state laws purporting to regulate such plan are superseded. Accordingly, the Insurance Department has no jurisdiction over an employee's waivers of coverage provided by such self-funded plans. Inquiries concerning such plans should be addressed to:
Employee Security Benefit Administration
United States Department of Labor
33 Whitehall Street
New York, NY 10004.
For further information you may contact Principal Attorney Alan Rachlin at the New York City office.