OGC Opinion No. 04-03-11: Continuation of Coverage

OGC Op. No. 04-03-11

The Office of General Counsel issued the following opinion on March 12, 2004, representing the position of the New York State Insurance Department.

Re: Continuation of Coverage

Question Presented:

Is an employer obligated to offer continuation of coverage under either a group dental insurance policy or a group life insurance policy to a terminated employee?

Conclusion:

No, such continuation is not required.

Facts:

Since this was a general inquiry, no particular facts were furnished.

Analysis:

Federal Requirements

The provision of health care by an employer to employees and dependents constitutes an employee welfare benefit plan under the Employee Retirement Income Security Act (ERISA). 29 U.S.C.A. § 1002(1) (West 1999). The Comprehensive Omnibus Budget Reconciliation Act of 1986 (COBRA), Pub. L. No. 99-272, requires that specified group health plans provide continuation coverage upon the occurrence of specified qualifying events. This requirement, as to employee welfare benefit plans, has been codified as part of ERISA. 29 U.S.C.A. § 1161 et seq. (West 1999 and 2003 Supplement).

The general continuation requirement is set forth in 29 U.S.C.A. § 1161 (West 1999):

(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.

What constitutes a qualifying event is set forth in 29 U.S.C.A. § 1163 (West 1999):

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 employees gross misconduct) . . . of the covered employees employment. . .

The plans that must provide continuation coverage are specified in 29 U.S.C.A. § 1167 (West 1999 and 2003 Supplement):

For purposes of this part (1) Group health plan. The term group health plan means an employee welfare benefit plan providing medical care (as defined in section 213(d) of the Internal Revenue Code of 1986) to participants or beneficiaries directly or through insurance, reimbursement, or otherwise. Such term shall not include any plan substantially all of the coverage under which is for qualified long-term care services (as defined in section 7702B(c) of such Code.)

))

Internal Revenue Code § 213(d) (West 2002) provides:

Definitions. For purposes of this section--(1) The term "medical care" means amounts paid--(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body . . .

The Department is not in a position to opine as to the COBRA continuation requirements. Inquiries concerning the extent of COBRA coverage should be addressed to:

Office of Pension Welfare Benefit Administration
United States Department of Labor
201 Varick Street
New York, NY 10014.

Private Group Health Insurance

In addition to continuation requirements imposed under COBRA, New York Insurance Law § 3221(m) (McKinney 2000 and 2004 Supplement), regulating policies of commercial insurers, provides:

A group policy providing hospital, surgical or medical expense insurance for other than accident only shall provide that if all or any portion of the insurance on an employee or member insured under the policy ceases because of termination of employment or membership in the class or classes eligible for coverage under the policy, such employee or member shall be entitled without evidence of insurability upon application to continue his hospital, surgical or medical expense insurance for himself or herself and his or her eligible dependents, subject to all of the group policy's terms and conditions applicable to those forms of benefits and to the following conditions: . . . (6) 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.

New York Insurance Law § 4305(e) (McKinney 2000 and 2004 Supplement), regulating contracts of Not-For-Profit insurers and all Health Maintenance Organizations, has identical requirements.

Since dental insurance is not "hospital, surgical or medical expense insurance" the continuation requirements of New York Insurance Law § 3221(m) are not applicable.

Private Group Life Insurance

While New York Insurance Law § 3220(a)(6) (McKinney 2000) does impose a right of conversion when employment ceases, there is no statutory requirement for continuation of benefits.