BILL NUMBER:  S4770

 TITLE OF BILL :

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


 PURPOSE OR GENERAL IDEA OF BILL :

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
pre-existing 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 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-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.

 PRIOR LEGISLATIVE HISTORY :

S.7470 (2008)

 FISCAL IMPLICATIONS :

No known costs to the State are associated with this bill.

 EFFECTIVE DATE :
This act shall take effect immediately.