OGC Opinion No. 09-04-05
The Office of General Counsel issued the following opinion on April 13, 2009, representing the position of the New York State Insurance Department.
RE: Consolidated Omnibus Reconciliation Act (“COBRA”) Services and Third-Party Wellness Programs
Questions Presented:
1. Must a licensed insurance agent or broker charge an insured for providing certain COBRA services?
2. May an employer lawfully contract with a third-party vendor for wellness programs?
3. May a licensed insurance agent or broker review, evaluate, and recommend third-party wellness programs for or to an insured at no additional charge?
Conclusions:
1. No. A licensed insurance agent or broker may provide COBRA services at no additional charge if offered in connection with the provision of accident and health insurance, and provided in a fair and nondiscriminatory manner to like insureds or potential insureds.
2. The New York State Insurance Department (the “Department”) does not regulate employers. The inquirer was directed to contact the New York State Department of Labor for further information as to whether an employer may lawfully contract with a third-party vendor for wellness programs.
3. No. A licensed insurance agent or broker may not review, evaluate, and recommend third-party wellness programs for or to an insured at no additional charge, because this service does not directly relate to the sale or servicing of the insurance policy or contract, or provide general information about insurance or risk reduction.
Facts:
The inquiry is of a general nature, without reference to particular facts.
Analysis:
As a general matter, a licensed insurance agent or broker may not provide or offer to provide an insured or potential insured with any special benefit or discount, including any rebate from the insurance premium, or any service or other incentive in conjunction with the sale of insurance, that is not specified in the insurance policy or contract, or vice versa. Indeed, N.Y. Ins. Law § 4224(c) (McKinney 2009), which applies to life insurance, accident and health insurance, and annuities, reads as follows:
(c) Except as permitted by section three thousand two hundred thirty-nine of this chapter, no such life insurance company and no such savings and insurance bank and no officer, agent, solicitor or representative thereof and no such insurer doing in this state the business of accident and health insurance and no officer, agent, solicitor or representative thereof, and no licensed insurance broker and no employee or other representative of any such insurer, agent or broker, shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to any person to insure, or shall give, sell or purchase, or offer to give, sell or purchase, as such inducement, or interdependent with any policy of life insurance or annuity contract or policy of accident and health insurance, any stocks, bonds, or other securities, or any dividends or profits accruing or to accrue thereon, or any valuable consideration or inducement whatever not specified in such policy or contract; nor shall any person in this state knowingly receive as such inducement, any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits to accrue on any such policy or contract, or knowingly receive any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever which is not specified in such policy or contract. (Emphasis added.)1
However, an insurance agent or broker may provide a free service not specified in the insurance policy or contract to an insured or potential insured without violating the anti-rebating and inducement provisions of Insurance Law § 4224(c) if:
1. the service directly relates to the sale or servicing of the policy or contract or provides general information about insurance or risk reduction; and
2. the insurer or insurance producer provides the service in a fair and nondiscriminatory manner to like insureds or potential insureds.
See Circular Letter No. 9 (2009).
The inquirer asks whether an insurance agent or broker must charge an insured for providing certain COBRA services. The answer to that question turns on whether the COBRA services directly relate to the sale or servicing of an insurance policy or contract. COBRA “gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.” See Continuation of Health Coverage – COBRA, Health Plans & Benefits, United States Department of Labor, at http://www.dol.gov/dol/topic/health-plans/cobra.htm. Generally, an insurance agent or broker may provide certain free COBRA services, including billing former employees, collecting the insurance premiums, and forwarding the aggregate premiums to the employer policy or contract holder or to the insurer, if offered in connection with the provision of accident and health insurance. See Circular Letter No. 9 (2009).
Specifically, the inquirer asks whether an insurance agent or broker must charge a fee to: send a former employee a COBRA eligibility packet; enroll the former employee in COBRA; bill the former employee; collect the insurance premiums; and forward the premiums to the insurer. An insurance agent or broker may provide these services at no additional charge if offered in connection with the provision of accident and health insurance, because the services directly relate to the sale or servicing of the accident and health insurance policy. However, an insurance agent or broker must provide these COBRA services in a fair and nondiscriminatory manner to like insureds or potential insureds.
The inquirer also asks whether an employer may lawfully contract with a third-party vendor for wellness programs. Generally, a wellness program is one designed to promote health and prevent disease, and which provides rewards or incentives for participation. See Circular Letter No. 9 (2009). While sometimes offered by insurers, there are also third-party vendors with which employers contract to receive these types of programs. For example, ABC offers “integrated wellness and disease management programs” that include health education materials, custom technology, consulting, and complete population management strategy and programming. However, the Department does not regulate employers. Therefore, the inquirer was directed to contact the New York State Department of Labor for further information as to whether an employer may lawfully contract with a third-party vendor for wellness programs.
Finally, the inquirer asks whether a licensed insurance agent or broker may review, evaluate, and recommend third-party wellness programs for or to an insured at no additional charge. A licensed insurance agent or broker may not provide this service at no additional charge, because it does not directly relate to the sale or servicing of the insurance policy or contract, or provide general information about insurance or risk reduction.
For further information, you may contact Senior Attorney Joana Lucashuk at the New York City office.
1 Insurance Law § 2324(a) sets forth similar language with regard to property/casualty insurance.