Relates to pre-existing condition provisions for group and blanket disability policies

BILL NUMBER:S1268

Title of bill

An act to amend the insurance law, in relation to pre-existing condition provisions for group and blanket disability policies

Purpose

This bill would amend § 3234 of the insurance law to require disability income insurers to make available to employers who purchase group or blanket disability insurance the option of a contract with a preexisting condition exclusion provision. This bill would require insurers to offer employers a group disability contract with a provision that establishes that a pre-existing condition that occurs prior to an employee's effective date of coverage, and results in the disability of that employee within the first twelve months after the effective date of coverage, would be excluded from coverage. Insurers would also be required to offer to employers a contract that would limit but not exclude disability coverage for pre-existing conditions. Employers could choose which of these options they want in their contract.

Summary of provisions

Section 1 of the bill amends § 3234 of the insurance law by adding a new subsection (b) to require that insurers must make available to employers a pre-existing condition exclusion provision in all group and blanket disability contracts being offered. Such exclusion would provide that a pre-existing condition that occurs prior to an employee's effective date of coverage, and results in the disability of that employee within the first twelve months after the effective date of coverage, would be excluded from coverage for loss of income. Section 1 also re-letters current subsection (b) as new subsection (c) and makes conforming changes to the new subsection.

Justification

Due to a recent Court of Appeals decision (Benesowitz v. Metropolitan Life Insurance Company, 8 NY3d 661 2007) which reinterpreted § 3234 (a) (2) of the insurance law, insurers and businesses in New York were required to revise what was previously considered to be a pre-existing condition exclusion provision in group disability income insurance contracts and instead apply it as a limitation on coverage only for up to twelve months following the employee's effective date of coverage. As a result, employees who become disabled due to a pre-existing condition are no longer excluded from coverage for the life of that claim. This decision permits some seriously ill employees to obtain coverage and then almost immediately file a claim and will result, in some cases, in an increase in the premiums charged for group disability income policies in New York. These increased rates would be for a type of coverage that can already be quite costly for businesses/employees to afford and any increase in rates might preclude this coverage from being purchased or continued altogether.

Giving employers the choice of which option to purchase will result in more New Yorkers being offered disability coverage. Those companies

that can afford the more expensive benefit could elect to provide that, whereas those who cannot can purchase the contract with the less expensive benefit option.

Legislative history

S.2886 of 2013-14; S.2557 of 2011-12; S.4770 of 2009-10

Fiscal implications

None to the State.

Effective date

Immediately.