OGC Opinion No. 07-09-05
The Office of General Counsel issued the following opinion on September 6, 2007 representing the position of the New York State Insurance Department.
Re: Continuation of Group Health Insurance
Question Presented:
Is an employee who is terminated for "gross misconduct" entitled to continuation of group health insurance under New York law?
Conclusion:
Not necessarily. The continuation right under applicable federal law allows the exclusion of employees found guilty of "gross misconduct", but N.Y. Ins. Law §§ 3221(m) (McKinney 2007) and 4305(e) (McKinney 2007) does not provide for a similar exclusion.
Facts:
Where an employee has been terminated by an employer with more than 20 employees and been denied continuation of group health insurance because of "gross misconduct," the inquirer asks inquire whether the employee is entitled to continuation under New York Law.
Analysis:
At the request of the Insurance Department, the Legislature in 1985 enacted 1985 N.Y. Sess. Laws 999 (McKinney), which added a subsection (m) to Insurance Law § 3221. That provision regulates group health insurance policies of commercial insurers. At the same time, the Legislature also added a subsection (e) to Insurance Law § 4305, which regulates group health insurance policies of not-for-profit health insurers and all health maintenance organizations. Among the specified events that qualify an individual to continue a group health insurance policy or contract is termination of employment. See Insurance Law §§ 3221(m) and 4305(e). In requesting a continuation requirement for group health insurance, the Department stated:
A continuation right for group accident and health insurance is necessary to provide an additional option to an insured who finds himself/herself without group health insurance due to a termination of employment or termination of membership in a class eligible for coverage under the group health policy. Currently mandated conversion policies offer benefit levels which are often inferior to the group health coverage being terminated. . . . This option of continuation will permit an insured a reasonable period (i.e., up to six months1) to locate health coverage with better benefit levels than a conversion policy, or to elect to purchase the conversion policy.
The following year, Congress enacted a continuation requirement as part of the Comprehensive Omnibus Budget Reconciliation Act ("COBRA"), Pub. L. No. 99-272 (1986). The continuation requirement for employment situations was codified as part of the Employee Retirement Income Security Act as 29 U.S.C.A. § 1001 et seq. The general continuation requirement for loss of employment from private employers is set forth in 29 U.S.C.A. § 1161:
(a) In general. The plan sponsor of each group health plan shall provide, in accordance with this part, that each qualified beneficiary who would lose coverage under the plan as a result of a qualifying event is entitled, under the plan, to elect, within the election period, continuation coverage under the plan.
(b) Exception for certain plans. Subsection (a) shall not apply to any group health plan for any calendar year if all employers maintaining such plan normally employed fewer than 20 employees on a typical business day during the preceding calendar year.
The qualifying events for continuation under COBRA are set forth in 29 U.S.C.A. § 1163:
For purposes of this part, the term "qualifying event" means, with respect to any covered employee, any of the following events which, but for the continuation coverage required under this part would result in the loss of coverage of a qualified beneficiary: . . . (2) The termination (other than by reason of such employee's gross misconduct), or reduction of hours, of the covered employee's employment . . . .
In 19872, the Legislature, again at the request of the Insurance Department, added paragraph (6) to Insurance Law § 3221(m) and paragraph (7) to Insurance Law § 4305(e), to read:
This subsection shall not be applicable where a continuation benefit is available to the employee or member pursuant to Chapter 18 of the Employee Retirement Income Security Act or Chapter 6A of the Public Health Service Act [which covers public employees].
In requesting the exception from New York's continuation requirements for those eligible for COBRA continuation, the Department stated:
At the time that the New York Legislature considered and passed legislation in 1985 requiring insurers to offer temporary continuation of group health coverage to employees and members and their covered dependents, no similar legislation existed at either the State or Federal level. However, less than four months after the January 1, 1986 effective date of the New York legislation, the Federal government enacted its own group health continuation benefits legislation. . . .
The co-existence of these generally duplicative but sometimes inconsistent laws has resulted in confusion among policyholders, consumers, employers, insurance carriers and insureds regarding the group health continuation benefit which must actually be provided at the insured's election. . . . Where the Federal statute does not provide an extension . . . where dismissal is for gross misconduct, Sections 3221(m) and 4305(e) of the Insurance Law will still require that New York's six month benefit extension be provided at the insured's election.
Accordingly, an employee who is dismissed for gross misconduct is, pursuant to Insurance Law § 3221(m) or 4305(e), still entitled under New York law to continuation of group health benefits for an 18-month period.
For further information you may contact Principal Attorney Alan Rachlin at the New York City office.
1 The continuation period was subsequently extended to 18 months. See 1992 N.Y. Sess. Laws 1420(McKinney).
2 1987 N.Y. Sess. Laws 343 (McKinney)