OGC Opinion No. 05-12-20

The Office of General Counsel issued the following opinion on December 27, 2005 representing the position of the New York State Insurance Department.

Re: Group Health Insurance, Employee Eligibility

Question Presented:

May an employer limit eligibility for health insurance to those employees who commenced employment before a specified date?


Such a limitation would not be in compliance with the New York Insurance Law (McKinney 2000 and 2005 Supplement) or the regulations promulgated thereunder. The health insurance program would constitute an employee welfare benefit plan under the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 et seq. (West 1999 and 2005 Supplement) and the United States Department of Labor may be contacted for additional information.


An insurance agent licensed pursuant to New York Insurance Law § 2103(a) (McKinney 2000 and 2006 supplement), has been requested to develop a benefit package by a prospective client, an employer. This employer desires to limit eligibility for health benefits to those individuals who were employed prior to January 1, 2004.


New York Insurance Law § 4235(c)(1)(A) (McKinney 2000 and 2005 Supplement) authorizes:

A policy issued to an employer . . . which employer . . . 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.

The Insurance Department has promulgated a regulation, N.Y. Comp. Codes R. & Regs. tit. 11, Part 52 (2005) (Regulation 62) establishing requirements for health insurance in New York. N.Y. Comp. Codes R. & Regs. tit. 11, § 52.18(f) (2004) provides:

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.

While those items listed in N.Y. Comp. Codes R. & Regs. tit. 11, § 52.18(f) are not exhaustive and an employer may impose other eligibility conditions, the Insurance Department does not believe that the distinction being drawn is within the intent of N.Y. Comp. Codes R. & Regs. tit. 11, § 52.18(f). In addition, the insurer has an obligation not to issue a policy that is not in compliance with New York Insurance Law § 4235(c)(1).

The provision of health benefits to employees constitutes an employee welfare benefit plan within the meaning of ERISA. In accordance with ERISA, 29 U.S.C.A. § 1144(a) (West 1999), state laws affecting employee welfare benefit plans are preempted. However, under 29 U. S.C.A. § 1144(b)(2)(A) the State may validly impose requirements affecting eligibility for insurance.

The United States Department of Labor may be consulted for additional information. Questions concerning the effect of ERISA on eligibility decisions should be addressed to:

Employee Benefit Security 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.