The Office of General Counsel issued the following opinion on April 5, 2005 representing the position of the New York State Insurance Department.
Re: Employer Sponsored Group Health Insurance, Waiver of Coverage
Issue
Where an employer requires no contribution by employees to cover themselves, may an employee waive employer sponsored health insurance?
Conclusion
Such a waiver is not permissible.
Facts
The inquirer's client, which employs in excess of 100 employees in New York, presently offers health insurance to all its employees at no cost to the employees and desires to institute a program whereby it will offer a financial incentive to employees to waive coverage under the employer's policy. The inquirer inquires whether such a waiver is permissible under the New York Insurance Law (McKinney 20000 and 2005 Supplement) and the regulations promulgated thereunder.
Analysis
The provision of health insurance by an employer constitutes a welfare benefit plan as that term is defined under the Employee Retirement Income Security Act (ERISA). 29 U.S.C.A. § 1002(1) (West 1999). While ERISA generally preempts state laws, 29 U.S.C.A. 1144(a) (West 1999), insurance laws are excepted from the preemption. 29 U.S.C.A. § 1144(b)(2)(A). This provision has been construed to allow state insurance laws to apply to insured plans, notwithstanding that they may affect an ERISA welfare benefit plan. Metropolitan Life v. Massachusetts, 471 U.S. 724 (1985).
New York Insurance Law § 4235(c)(1)(A) (McKinney 2000 and 2004 Supplement) authorizes the issuance of group accident & health insurance through:
A policy issued to an employer . . . which employer . . . shall be deemed the policyholder, insuring with or without evidence of insurability satisfactory to the insurer, employees of such employer, and insuring, except as hereinafter provided, all of such employees or all of any class or classes thereof determined by conditions pertaining to the employment or a combination of such conditions and conditions pertaining to the family status of the employee, for insurance coverage on each person insured based upon some plan which will preclude individual selection. . . . The premium for the policy shall be paid by the policyholder, either from the employer's funds, or from funds contributed by the insured employees, or from funds contributed jointly by the employer and employees. If all or part of the premium is to be derived from funds contributed by the insured employees, then such policy must insure not less than fifty percent of such eligible employees or, if less, fifty or more of such employees. (emphasis added)
New York Insurance Law § 4235(c) has been clarified by the Departments Regulation 62, N.Y. Comp. Codes R. & Regs. tit. 11, § 52.18(f) (2002):
Conditions of eligibility. Conditions pertaining to employment under section 4235(c) of the Insurance Law include geographic situs of employment, earnings, method of compensation, hours, and occupational duties.
It is the position of this Department that where the employer requires any contribution by the employee towards his or her coverage, the employee may waive coverage. Under the circumstances of the inquirers clients program, since the plan is non-contributory as to employee coverage, a waiver by employees as to their own coverage would be prohibited by New York Insurance Law § 4235(c)(1)(A).
For further information one may contact Principal Attorney Alan Rachlin at the New York City Office.