The Office of General Counsel issued the following informal opinion on December 14, 2001, representing the position of the New York State Insurance Department.
Re: Cancellation of Long Term Care (LTC)- Type Insurance Policies.
Questions Presented:
1. Does N.Y. Ins. Law § 3216 (McKinney 2000), which applies to individual commercial accident and health insurance policies, specifically apply to LTC-type insurance policies?
2. What is the difference between N.Y. Ins. Law § 3216 (d)(1) (McKinney 2000) and N.Y. Ins. Law § 3216 (d)(2) (McKinney 2000)?
3. Pursuant to N.Y. Ins. Law § 3216 (d)(2)(H) (McKinney 2000), is an insurer required to give the insured the right to cancel the policy at any time, including the time period following the expiration of the original term of the policy?
4. Does the cancellation provision contained in N.Y. Ins. Law § 3216 (d)(2)(H) (McKinney 2000) conflict with the guaranteed renewability provision required in all individual LTC-type insurance policies?
Conclusions:
1. Yes, as long as the LTC-type insurance policies are written by a commercial insurer for use in the individual market.
2. N.Y. Ins. Law § 3216 (d)(1)(McKinney 2000) prescribes mandatory provisions that must be included in individual commercial accident and health insurance policies, while N.Y. Ins. Law § 3216 (d)(2)(McKinney 2000) contains "other provisions" that may be included in such policies.
3. No.
4. No, provided that such a cancellation provision is included in the policy at issuance.
Facts:
No specific facts were provided relative to the above questions.
Analysis:
The inquirer asked whether N.Y. Ins. Law § 3216 (McKinney 2000) is specifically applicable to LTC-type insurance policies.
N.Y. Ins. Law § 3216 (a)(1) (McKinney 2000) provides as follows:
(a)(1) "policy of accident and health insurance" includes any individual policy or contract covering the kind or kinds of insurance described in paragraph three of subsection (a) of section one thousand one hundred thirteen of this chapter.
N.Y. Ins. Law § 1113 (a)(3) (McKinney 2000) defines the term "accident and health insurance" as follows:
(a)(3) "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.
N.Y. Ins. Law § 1117 (a)(McKinney 2000) entitled "Health insurance plans for long term care" provides as follows:
(a) An authorized insurer subject to the provisions of this chapter and organized to write the kind of insurance specified in paragraph three of subsection (a) of section one thousand one hundred thirteen of this article, a corporation or health maintenance organization authorized pursuant to article forty-three of this chapter or article forty-four of the public health law and a fraternal benefit society organized under article forty-five of this chapter, may be authorized by the superintendent to issue contracts in connection with plans providing benefits for long term care, provided such plans satisfy the criteria set forth in subsection (b) of this section and the superintendent has made the determinations set forth in subsection (f) of this section.
Chapter 245 of the Laws of 1986 added a new § 1117 to the Insurance Law which provided that any licensed insurer authorized to write accident and health insurance and any health maintenance organization authorized under the Insurance Law and the Public Health Law would be permitted to issue "contracts in connection with plans providing benefits for long term care". The memorandum submitted by the Insurance Department in support of § 1117 recognized that such coverage would be a form of health insurance. Moreover, the sixteenth amendment to N.Y. Comp. Codes R. & Regs. tit. 11, § 52 (2001) (Regulation 62), established specific requirements relative to policies written pursuant to § 1117.
The Insurance Department has consistently treated LTC-type insurance as a form of accident and health insurance based upon the aforementioned statutes and regulation. Thus, LTC-type insurance is an authorized form of accident and health insurance, and commercial insurers that write individual LTC-type coverage are subject to the provisions of N.Y. Ins. Law § 3216 (McKinney 2000).
The inquirer also asked whether there is a difference between N.Y. Ins. Law § 3216 (d)(1) (2000) and N.Y. Ins. Law § 3216 (d)(2) (McKinney 2000).
N.Y. Ins. Law § 3216 (d)(1) (McKinney 2000) provides in pertinent part as follows:
(d) Each policy of accident and health insurance delivered or issued for delivery to any person in this state shall contain the provisions specified herein in the words in which the same appear in this subsection, except that the insurer may, at its option, substitute for one or more of such provisions corresponding provisions of different wording approved by the superintendent which are not less favorable in any respect to the insured or the beneficiary . . .
(1) Each policy shall, except with respect to designation by numbers or letters as used below, contain the following provisions . . . .
N.Y. Ins. Law § 3216 (d)(2)(McKinney 2000) provides in part as follows:
(d)(2) Other provisions. No such policy delivered or issued for delivery to any person in this state shall contain provisions respecting the matters set forth below unless such provisions are in words (not including the designation by number or letter) in which the same appear in this paragraph except that the insurer may, at its option, use in lieu of any such provision a corresponding provision of different wording approved by the superintendent which is not less favorable in any respect to the insured or the beneficiary. . . .(emphasis added).
Pursuant to the language of N.Y. Ins. Law § 3216 (d)(1) (McKinney 2000), the provisions contained therein are mandatory and must be in the language prescribed by the statute or the insurer may use other language that is approved by the superintendent and that is not less favorable to the insured. N.Y. Ins. Law § 3216 (d)(2) (McKinney 2000) contains "other provisions." It does not mandate the inclusion of these other provisions. However, if an insurer chooses to include such provisions, it must use the language provided in § 3216 (d)(2) or it may use other language that is approved by the superintendent and not less favorable to the insured.
N.Y. Ins. Law § 3216(d)(2)(H) (McKinney 2000) provides as follows:
(d)(2)(H) CANCELLATION: Within the first ninety days after the date of issue, the insurer may cancel this policy by written notice delivered to the insured, or sent by first class mail to his last address as shown by the records of the insurer, stating when, not less than ten days thereafter, such cancellation shall be effective. In the event of cancellation, the insurer will return promptly the pro-rata unearned portion of any premium paid. Cancellation shall be without prejudice to any claim originating prior to the effective date of cancellation.
(Nothing in this subsection shall be construed to prohibit an insurer from granting to the insured the right to cancel a policy at any time and to receive in such event a refund of the unearned portion of any premium paid, computed by the use of the short-rate table last filed with the state official having supervision of insurance in the state where the insured resided when the policy was issued).
The inquirer questioned whether this section requires that insurers must give the insured the right to cancel the policy at any time, including the time period following the expiration of the original term of the policy.
The parenthetic language in N.Y. Ins. Law § 3216 (d)(2)(H)(McKinney 2000) states that nothing prohibits an insurer from giving the insured the right to cancel the insurance policy at any time. It does not impose a mandatory requirement that the insurer must give the insured the right to do so. Thus, an insurer may, at its option, limit the insureds right to cancel the insurance policy to a specified period of time, or the insurer may allow the insured to cancel the policy at any time, which includes the time period following the expiration of the original term of the insurance policy, or the insurer may opt not to give the insured the right to cancel the policy.
If the insurer does not give the insured the right to cancel, and there are no other contractual, regulatory or statutory provisions giving the insured the right to cancel, the insurer is obligated to provide coverage for the time period that the insured has paid for. This includes premium modes shorter than one year offered by an insurer and chosen by the insured such as quarterly, semiannual, etc.
Lastly, the inquirer asked whether the cancellation provision contained in N.Y. Ins. Law § 3216 (d)(2)(H) (McKinney 2000) applicable to the insurer conflicts with the guaranteed renewability provision required in all individual LTC-type insurance policies.
N.Y. Comp. Codes R. & Regs. tit. 11, § 52.25 (b)(1)(2001)(Regulation 62) contains rules for the content and sale of forms for long term care insurance, nursing home insurance only, home care insurance only and nursing home and home care insurance and provides in pertinent part as follows:
(b)(1) An individual long term care insurance policy, a nursing home insurance only, home care insurance only, or nursing home and home care insurance policy must be "guaranteed renewable". The term guaranteed renewable as used in this section means that the insured has the right to continue the long term care insurance or nursing home insurance only, home care insurance only, or nursing home and home care insurance in force by the timely payment of premiums and the insurer has no unilateral right to make any change in any provision of the policy while the insurance is in force except, however, the premium rates may be revised by the insurer on a class basis.
Thus, pursuant to Reg. 62, guaranteed renewability means that an insurer may not make any unilateral changes to the LTC-type insurance policy while it is in force by the timely payment of the premiums, except that the premiums may be revised on a class basis. If the insurer placed a cancellation provision in the policy that adopts the language of § 3216 (d)(2)(H), the insurer could cancel the policy within the first 90 days and return the unearned portion of the premium to the insured. This would not conflict with the guaranteed renewability provision, as the insurer would be acting in conformity with the terms of the policy and would not be making a unilateral change after policy issuance.
For further information, you may contact Attorney Pascale Joasil at the New York City office.