The Office of General Counsel issued the following opinion on March 22, 2005 representing the position of the New York State Insurance Department.
Re: Domestic Partner Benefits
May an insurer refuse to provide domestic partner benefits in a group contract issued to an insured with less than 50 employees?
Yes, an insurer may choose not to provide domestic partner benefits to an employer-employee group with less than 50 employees.
The inquirer's employer, which has less than 50 employees, provides health benefits through a contract issued by a not-for-profit health insurer. In response to the inquirer's inquiry, the insurer indicated that it does not provide domestic partner benefits to groups of less than 50 and would not do unless and until the Insurance Department mandated that it provide such benefits in its contracts.
The inquirer asks "what would have to be done to give employers of less than 50 employees the option of offering domestic partner benefits?"
New York Insurance Law § 4305(c)(1) (McKinney 2000 and 2005 Supplement) provides:
Any such contract may provide that benefits will be furnished to a member of a covered group, for himself, his spouse, his child or children, or other persons chiefly dependent upon him for support and maintenance . . . .
The Insurance Department has interpreted the terms "dependent" and "chiefly dependent", as utilized in New York Insurance Law § 4305(c)(1), to include not only financial dependence, but also mutual inter-dependence, which could be demonstrated in a number of ways. However, as indicated in New York Insurance Law § 4305(c)(1), coverage of domestic partners, who are "dependent" on one another, is not mandatory.
Insurers were also informed that while they were free to cover domestic partners, such coverage was not required. The Insurance Department has also indicated that coverage of domestic partners was discretionary on the part of employers.
As part of a major reform of health insurance, 1992 N.Y. Laws 501, New York Insurance Law § 4317(a) (McKinney 2000 and 2005 Supplement) provides:
No . . . group health insurance contract covering between two and fifty employees . . . exclusive of spouses and dependents . . . hereinafter referred to as a small group, providing hospital and/or medical benefits . . . shall be issued in this state unless such contract is community rated and, notwithstanding any other provisions of law, the underwriting of such contract involves no more than the imposition of a pre-existing condition limitation as permitted by this article. Any . . . small group, including all employees . . . and dependents of employees . . . applying for . . . small group health insurance coverage must be accepted at all times throughout the year for any hospital and/or medical coverage . . . offered by the corporation to . . . small groups in this state. Once accepted for coverage, an individual or small group cannot be terminated by the insurer due to claims experience. . . . For the purposes of this section, 'community rated' means a rating methodology in which the premium for all persons covered by a policy or contract form is the same, based on the experience of the entire pool of risks covered by that policy or contract form without regard to age, sex, health status or occupation.
Accordingly, no group of between 2 and 50 employees may be denied coverage by an insurer.
When Congress enacted the Health Insurance Accessibility and Accountability Act (HIPAA), Public Law No. 104-191 (1996) to regulate health insurance, it drew a distinction between the small group market, 42 U.S.C.A. § 300gg-91(e)(5) (West 2003) and the large group market, 42 U.S.C.A. § 300-gg(e)(3). A small employer, 42 U.S.C.A. § 300-gg(e)(4) is defined as one with between 2 and 50 employers.
However, if an insurer opts to permit domestic partner coverage for any small group, it must permit domestic partnership coverage for all small groups, N.Y. Comp. Codes R. & Regs, tit. 11, § 360.3 (1998), there is no requirement that it offer domestic partnership coverage at all.
Accordingly, the insurer providing coverage to the inquirer's employer did not act improperly in refusing to recognize domestic partners among those who would be recognized as dependents.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.