New York eligible groups, blanket insurance, and group marketing jurisdiction (Ins. Law 4235)

Group, blanket, or individual?

New York sorts accident and health coverage that insures more than one person into separate legal boxes, and the box decides which rules apply.

• A group accident policy is any accident policy covering more than one person. A group health policy is the same idea for sickness and disease, and a policy combining both is a group accident and health policy.
• Two kinds of multi-person policy are carved out of the group definitions: blanket policies, which are defined separately in Insurance Law section 4237, and family-type individual policies written under section 3216.

Blanket insurance

A blanket policy covers a group whose membership keeps changing, so the people insured are not named and are covered simply by belonging to the described class at the time of a loss. Classic examples are passengers of a common carrier, students of a school or college, members of a sports team or camp, and volunteer firefighters or ambulance workers. The policyholder (the carrier, school or organization) pays the premium, and individual applications and certificates are generally not needed. Section 3221's standard provisions still apply, because they govern "group or blanket" accident and health policies.

Eligible groups

A group policy cannot be sold to just any collection of people. Section 4235(c)(1) says no group accident and health policy may be delivered or issued for delivery in New York unless it fits one of the descriptions the law lists. The first, and the one the exam leans on, is the employer group:

• The employer, or the trustees of a fund the employer set up, is the policyholder.
• It insures all the employees, or all of a class defined by conditions of employment (such as full-time status or job title), alone or combined with family status.
• Benefits follow a plan that precludes individual selection, so no one picks their own benefit amount.
• Section 4235 lets the group be insured with or without evidence of insurability, but for hospital, medical and surgical expense coverage section 3221(q) forbids using evidence of insurability, or any other health factor, to decide who may enroll.

The rest of the list covers other true groups: labor unions, trusts set up by several employers or by unions (a trust that employers and a union set up jointly and run with trustees from both sides is commonly called a Taft-Hartley trust), associations, and creditor groups that insure debtors. The common thread is that each group must exist for a purpose other than buying insurance, which keeps the pool from being formed by people who expect to claim. Section 3221 treats several of the listed association-type descriptions as association groups.

Standard provisions for group and blanket policies

Section 3221(a) requires group and blanket policies delivered or issued for delivery in New York to contain certain standard provisions in substance. The section sets out limited exceptions, such as omissions or modifications the Superintendent approves under subsection (d), and two of its paragraphs do not apply to policies issued under section 4235(c)(1)(E). The required provisions include:

• Statements by an insured cannot void coverage unless they are in a signed written instrument, and they are representations, not warranties.
• No agent can change the policy or waive a provision.
• New employees or members in an eligible class must be added.
• The employer or a designated person remits premiums to the insurer.
• The insurer issues certificates summarizing the coverage, delivered to each insured member through the policyholder.

Health-status eligibility rules are banned for hospital, medical and surgical expense coverage: an insurer cannot base enrollment, waiting periods, or premium on health status, medical condition, claims experience, medical history, genetic information, evidence of insurability or disability.

Which state's law governs

New York's group requirements attach to policies "delivered or issued for delivery in this state." As a general rule, a group master policy is governed by the law of the state where it is delivered to the policyholder (the situs state). New York also reaches further for its own insurers: once the Superintendent sets a schedule of minimum group premium rates, no insurer doing business in New York may issue a group policy within or without the state below those rates.

Exam tip: "Formed for a purpose other than obtaining insurance" and "no individual selection of benefits" are the two phrases that separate a legitimate group from an ineligible one.