OGC Op. No. 08-06-09
The Office of General Counsel issued the following opinion on June 17, 2008, representing the position of the New York State Insurance Department.
RE: Domestic Partner Coverage
An employer with fewer than fifty employees provides health insurance to its employees through a group health insurance policy, which covers the domestic partners of employees. The employer pays a large percentage of the insurance premium.
1) May the employer re-define the insurer’s eligibility requirements for domestic partner coverage so as to make the qualifications for coverage more stringent?
2) May the employer contribute a smaller percentage of the insurance premium for an employee who has a domestic partner than it contributes for all other employees?
3) If the employer offers its employees a choice of health insurer plans, must all of the plans provide domestic partner coverage?
4) Is the domestic partner of an employee eligible to receive continuation-of-coverage benefits under the federal Consolidated Omnibus Reconciliation Act (“COBRA”) or N.Y. Ins. Law §§ 3221(m) and 4305(e) (McKinney 2007)?
It should be noted from the outset that neither the New York Insurance Law nor the regulations promulgated thereunder directly address the obligations of an employer to its employees. Where possible, this opinion addresses the responsibilities of insurers or other licensees involved in the situations that you present.
1) No. A small group health insurer that offers domestic partner coverage must provide the same coverage to all of the small groups that it insures.1 Thus, an insurer may be unable to accept the employer’s re-defined eligibility requirements for domestic partner coverage. Moreover, an insurer’s eligibility requirements for domestic partner coverage must meet the “chiefly dependent upon” standard set forth in Insurance Law §§ 4235(f) and 4305(c).
2) The Insurance Department cannot answer this question because it implicates the federal Employee Retirement and Income Security Act of 1974 ("ERISA"), which is codified at 29 U.S.C. § 101 et seq. That statute sets minimum standards for health plans established by private industry employers, and may contain provisions responsive to your inquiry.
3) Because domestic partner coverage is permissive rather than mandatory under the Insurance Law, an employer may choose to offer some plans (or even none) that provide for domestic partner coverage.
4) The domestic partner of an employee is not eligible to receive continuation-of-coverage benefits under COBRA, but is eligible to receive benefits under Insurance Law §§ 3221(m) and 4305(e).
A licensed insurance broker specializing in employee benefits reported that several health insurers that insure small groups have begun offering domestic partner coverage for same and opposite sex partners. The broker asked a number of questions, set forth above, regarding an employer’s legal obligations in providing such coverage.
Insurance Law § 4235 (regulating commercial health insurers) and § 4305 (regulating not-for-profit health insurers and health maintenance organizations (“HMOs”)) authorize an employer to obtain group health coverage for its employees. Insurance Law § 4235(c)(1)(A) reads in pertinent part:
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.
Insurance Law § 4305(a) reads in relevant part: “A corporation subject to the provisions of this article may issue a group contract, provided the group of persons thereby covered conforms to the requirements of subsections (c) and (d) of section four thousand two hundred thirty-five[.]”
Domestic Partner Eligibility Requirements
Pursuant to Insurance Law §§ 4235(f) and 4305(c), a group health insurance policy issued to an employer may provide coverage for an employee’s spouse, children, and “other persons chiefly dependent upon [the employee] for support and maintenance.” The Department has opined that “dependence includes both unilateral dependency and mutual interdependence, which may be evidenced by a nexus of factors, such as common ownership of property, common householding, shared budgeting or length of relationship.” See Opinions of the Office of General Counsel (“OGC”) dated September 25, 2000; August 24, 2001; September 7, 2001; November 19, 2001; May 19, 2004; January 8, 2004; October 12, 2005; and September 26, 2007. Thus, a domestic partner may be covered by a group health insurance policy upon a showing of economic (as opposed to emotional_ dependence.
The Department also has opined that Section 360.3 of New York Compilation of Codes, Rules and Regulations, title 11, part 360 (Regulation 145) requires a group health insurer that provides domestic partner coverage to a small group to provide such coverage to any other eligible small group that applies for it. See OGC Opinions dated October 12, 2005 and May 19, 2004. Thus, to the extent that an employer seeks to impose more stringent qualifications for coverage than those provided by the insurer – such as by lengthening the duration of a relationship necessary to qualify for domestic partner coverage – the insurer may be unable to acquiesce as a legal matter to the employer’s re-defined eligibility requirements for domestic partner coverage.
Employer’s Insurance Premium Contribution
Your inquiry as to whether an employer may contribute a smaller percentage of the health insurance premium for an employee who has a domestic partner than it contributes for all other employees is governed not by the Insurance Law, but by ERISA, a federal law that sets minimum standards for health plans established by private industry employers. That statute may contain provisions responsive to your inquiry. The Employee Benefits Security Administration (“EBSA”), a division of the U.S. Department of Labor, is responsible for administering and enforcing the ERISA provisions. You may wish to pursue your inquiry by contacting EBSA at the following address:
U.S. Department of Labor
Employee Benefits Security Administration
New York Regional Office
33 Whitehall Street, Suite 1200
New York, NY 10004
More information about ERISA may be found at the U.S. Department of Labor’s website at http://www.dol.gov/ebsa.
Additionally, other state and/or federal laws regarding sexual orientation, discrimination in the workplace, and fair wages may apply. You may wish to consult the following websites for more information: U.S. Equal Employment Opportunity Commission (EEOC) at http://www.eeoc.gov; New York State Department of Labor at http://www.labor.state.ny.us; New York State Division of Human Rights (SDHR) at http://www.dhr.state.ny.us.
Contracting with Insurers that Provide Coverage for Domestic Partners
Neither Insurance Law § 4235 nor § 4305 requires a health insurance policy or contract to provide coverage for the spouses, children, or dependents of covered employees. Because domestic partner coverage is thus permissive rather than mandatory under the Insurance Law, an employer may choose to offer some plans (or even none) that provide for domestic partner coverage.
COBRA and New York State Continuation-of-Coverage Benefits
Your final inquiry asks about continuation-of-coverage benefits. The federal COBRA statute requires a plan sponsor (i.e., an employer) of a group health plan to provide qualified beneficiaries who would lose coverage under the plan because of a “qualifying event” continuation of coverage under the plan if the employee elects to continue such coverage.2 29 U.S.C. § 1163 defines a “qualifying event” as follows:
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:
(1) The death of the covered employee.
(2) The termination (other than by reason of such employee's gross misconduct), or reduction of hours, of the covered employee's employment.
(3) The divorce or legal separation of the covered employee from the employee's spouse.
(4) The covered employee becoming entitled to benefits under title XVIII of the Social Security Act [42 U.S.C.A. § 1395 et seq.].
(5) A dependent child ceasing to be a dependent child under the generally applicable requirements of the plan.
(6) A proceeding in a case under title 11, commencing on or after July 1, 1986, with respect to the employer from whose employment the covered employee retired at any time.
In the case of an event described in paragraph (6), a loss of coverage includes a substantial elimination of coverage with respect to a qualified beneficiary described in section 1167(3) of this title within one year before or after the date of commencement of the proceeding.
COBRA’s definition of “qualified beneficiary” includes only the covered person’s spouse and certain dependent children. The definition of “spouse” does not include a domestic partner because
1 U.S.C. § 7 states:
§ 7. Definition of "marriage" and "spouse"
In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word "marriage" means only a legal union between one man and one woman as husband and wife, and the word "spouse" refers only to a person of the opposite sex who is a husband or a wife.
Therefore, it does not appear that the domestic partner of an employee covered under an employer-issued group health insurance policy is eligible to receive COBRA benefits.
When COBRA does not apply, Insurance Law §§ 3221(m) and 4305(e)3 operate to provide continuation of health care coverage upon termination of employment.4 These nearly identical provisions set forth the continuation-of-coverage limits under New York law. Insurance Law § 3221(m) reads in relevant part:
(m) 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:
* * *
(4) Subject to paragraph one of this subsection, continuation of benefits under the group policy for any person shall terminate at the first to occur of the following:
* * *
(C) In the case of an eligible dependent of an employee or member, the date thirty-six months after the date such person’s benefits under the policy would otherwise have terminated by reason of:
(i) the death of the employee or member;
(ii) the divorce or legal separation of the employee or member from his or her spouse;
(iii) the employee or member becoming entitled to benefits under title XVIII of the United States Social Security Act (Medicare); or
(iv) a dependent child ceasing to be a dependent child under the generally applicable requirements of the policy
Under Insurance Law § 3221(m)(4)(C), eligible dependents of an insured employee are granted extended coverage for 36 months upon the happening of certain events. A domestic partner of an insured employee who is covered under a health insurance policy or contract that provides domestic partner coverage is thus eligible to receive continuation-of-coverage benefits under Insurance Law §§ 3221(m) and 4305(e). However, if the employee and domestic partner were to separate, the domestic partner no longer would be deemed financially dependent upon the employee, and thus would be ineligible for continuation-of-coverage benefits.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.
1 A group health insurance policy or contract covering between two and fifty employees is defined as a “small group” by Insurance Law § 3231 (regulating policies of commercial health insurers) and § 4317 (regulating contracts of not-for-profit health insurers and health maintenance organizations).
2 COBRA does 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.” See 29 U.S.C. § 1161.
3 Insurance Law § 3221 governs commercial insurance policies, while Insurance Law § 4305 addresses contracts issued by not-for-profit insurers and HMOs.
4 Pursuant to Insurance Law §§ 3221(m)(6) and 4305(e)(7), continuation of coverage under Insurance Law §§ 3221(m) and 4305(e) is not available if coverage is available under COBRA.