Requires insurers terminating group health and accident insurance to provide 30 days prior notice of such termination

BILL NUMBER:A10653

Title of bill

An act to amend the insurance law, in relation to requiring insurance carriers to provide persons under a group health insurance policy with thirty days notice of the termination of such policy

Purpose

This bill would ensure that persons whose health insurance is provided by a group policy have actual notice of any termination of that policy so that alternate coverage may be secured and periods of noncov- erage caused by retroactive cancellation of group health insurance poli- cies eliminated.

Summary

This bill would add a new 5 3221(a)(16) to the Insurance Law to require that an insurance carrier directly notify certificate holders upon cancellation of their group health insurance policy. It would also provide that no termination of a group health insurance policy will become effective until thirty days after such notice. The notice of termination must set forth the rights of the certificate holder under the terminating policy as to coverage for illness, accident and treat- ment and such other rights as exist under 53221(e)(1) of the Insurance Law. This bill would also extend the conversion privilege to 45 days after notice of termination is received by the employee.

Justification

There is no existing requirement that an insurance carri- er notify covered workers of the termination of their health insurance coverage. Insurance regulations require that an insurance carrier provide notice of termination of a group health insurance policy to the policyholder (the employer), and the Labor Law requires the employer, whose default is likely to have been the cause of the termination, to notify the employee, or certificate holder. In fact, defaulting employ- ers usually do not notify their employees when they fail to make health insurance premium payments or when they fail to remit to the insurance company premiums which have been deducted from employees' wages, thus, the insured employees are unaware of the default until their claims for reimbursements are denied.

The problem is compounded by the insurance industry's practice of "carrying" policyholders who are experiencing temporary difficulties, for varying periods, depending upon the carrier's assessment of the policyholder's basic soundness and the likelihood that it will recover its financial footing. However, if the policy is eventually canceled for nonpayment, it is canceled retroactively to the last period of payment, and claims received during the so-called "grace" period are not honored.

This practice prevents the covered employees from timely exercising their statutory privilege to convert to an individual policy upon cancellation of their group coverage. By requiring thirty days prior notice of termination to certificate holders, this bill will eliminate retroactive cancellation and periods of noncoverage resulting therefrom, will permit certificate holders whose coverage has been canceled to exercise their conversion privilege, and will reduce the chances that

the costs of providing medical care to the affected persons will become a charge upon the public.

Prior legislative history

A.4913 - 2002-2004; A.10016 - 2006; A.5666 -2008; A. 2901 - 2009

Fiscal implications

None.

Effective date

Immediately.