The Office of General Counsel issued the following opinion on July 5, 2005, representing the position of the New York State Insurance Department.
Re: Discount Vision Program.
May ABC Life Insurance Company of America (ABC) offer a discounted vision care program operated by another entity to selected insureds?
If the offer is set forth in the applicable policy, it would not be in violation of New York Insurance Law § 4224 (McKinney 2000 and 2005 Supplement).
ABC has contracted with DEF for DEF to administer the vision component of ABC's policies. In addition, DEF operates its own vision discount program whereby enrollees are given the name of participating vision care professionals who will render services to such enrollees at a discount from the usual charge. Some of the vision care professionals who have agreed to provide such discounts are also in the network that DEF has developed for the purpose of ABC's vision coverage.
ABC proposes to inform group insureds that have purchased ABC's dental coverage, but not the vision coverage, of the availability of the DEF discount program. Such group insureds will not be charged by either ABC or DEF for participation in the program, although ABC will pay DEF a fee of $.15 per insured individual per month. The inquirer has represented that the capitation payment of $.15 will not affect the loss ratio on the dental coverage.
The inquirer seeks confirmation that the program, as described, will not be in violation of any statute or regulation.
It has been the consistent position of the Insurance Department that an individual or entity may, without being deemed to be doing an insurance business as defined in new York Insurance Law § 1101 (McKinney 2000 and 2005 Supplement) offer a discount from the otherwise applicable charge for goods and services that are dependent upon the happening of a fortuitous event, provided that the discounted charge is sufficient to cover the cost of the goods or rendition of the services including reasonable overhead expenses. The inquirer has represented that, to the best of ABC's knowledge, the DEF vision care practitioners are in compliance with this rule. However, New York Insurance Law § 4224(c) provides:
No . . . life insurance company . . . and no . . . insurer doing in this state the business of accident and health insurance and . . . no employee or other representative of any such insurer . . . shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to any person to insure, or shall give, sell or purchase, or offer to give, sell or purchase, as such inducement, or interdependent with any policy of . . . accident and health insurance, any stocks, bonds, or other securities, or any dividends or profits accruing or to accrue thereon, or any valuable consideration or inducement whatever not specified in such policy or contract; nor shall any person in this state knowingly receive as such inducement, any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits to accrue on any such policy or contract, or knowingly receive any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever which is not specified in such policy or contract.
It is obvious that ABC is offering the vision discount program, which has a value, at no cost to the groups. Accordingly, the program may not be offered unless the applicable policy provides such discount program as a benefit. If this requirement is met, it is expected that ABC will require that DEF verify that the charge by the vision care professionals covers the cost of rendition of the service.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.