Relates to pre-existing condition provisions for group and blanket disability policies which excludes coverage under the policy for a disability commencing during the twelve months following the effective date of coverage for the covered person.

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S2886-2013 Actions

• Jan 24, 2013: REFERRED TO INSURANCE

S2886-2013 Memo

BILL NUMBER:S2886

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 insur-
ers 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 insur-
ance 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 disabil-
ity  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 reinterpret-
ed  �  3234 (a) (2) of the insurance law, insurers and businesses in New
York were required to revise what was  previously  considered  to  be  a
preexisting  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-exist-
ing 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  far  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, wher-
eas those who cannot can purchase the contract with the  less  expensive
benefit option.

LEGISLATIVE HISTORY: S.2557 of 2011-12; S.4770 of 2009-10

FISCAL IMPLICATIONS: None to the State.

EFFECTIVE DATE: Immediately.

S2886-2013 Text

                      S T A T E   O F   N E W   Y O R K
  ________________________________________________________________________

                                    2886

                         2013-2014 Regular Sessions

                              I N  SENATE

                              January 24, 2013
                                 ___________

  Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
    printed to be committed to the Committee on Insurance

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

    THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
  BLY, DO ENACT AS FOLLOWS:


    Section  1.  Subsection  (b)  of section 3234 of the insurance law, as
  added by chapter 650 of the laws of 1993, is amended to read as follows:

    (b)  AN INSURER THAT OFFERS A POLICY IN CONFORMANCE WITH PARAGRAPH TWO
  OF SUBSECTION (A) OF THIS SECTION  MUST  ALSO  MAKE  AVAILABLE,  AND  IF
  REQUESTED  BY THE POLICYHOLDER, PROVIDE A GROUP OR BLANKET POLICY WITH A
  PRE-EXISTING CONDITION PROVISION WHICH EXCLUDES COVERAGE UNDER THE POLI-
  CY FOR A DISABILITY COMMENCING DURING THE TWELVE  MONTHS  FOLLOWING  THE
  EFFECTIVE DATE OF COVERAGE FOR THE COVERED PERSON.
    (C) Nothing [herein] IN THIS SECTION shall be construed to prohibit or
  restrict  an  insurer from utilizing other forms of underwriting for the
  members of the group in lieu of, or in  addition  to,  the  pre-existing
  condition provision described in subsection (a) OR (B) of this section.
    S 2. This act shall take effect immediately.





   EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                        [ ] is old law to be omitted.
                                                             LBD06548-01-3