New York State Insurance Law Allows for Disparity Between Coverage for Mental and Physical Disabilities if Same Policy Is Offered to Everyone
December, 2004
New York State Insurance Law § 4224(b)(2) prohibits an insurer from limiting the amount of coverage available to an individual due to a physical or mental disability unless permitted by law or empirically justified. The New York State Court of Appeals recently held that as long as an insurer offered the same policy to all insureds, it did not violate § 4224(b)(2), even though the policy offered less coverage for mental disabilities than it did for physical disabilities.
In The Matter of Charlene Polan v State of New York Insurance Department, 3 N.Y.3d 54, 814 N.E.2d 789, 781 N.Y.S.2d 482 (2004), Plaintiff-employee suffered from a chronic psychiatric disability and was not able to work. She was covered by a group disability insurance policy through her employer, which only offered 24 months of disability coverage for mental and nervous disorders or diseases, but offered coverage for physical disabilities until the employee reached age 65 or the disability ceased. As a result of the mental disability limitation, Plaintiff’s disability coverage was terminated after two years, and she brought suit against the employer and the insurer alleging that the disability policy violated New York State Insurance Law § 4224(b)(2) in that it offered more coverage for physical disabilities than it did for psychiatric disabilities, and was discriminatory because it treated mental disability differently from other disability without actuarial or experiential basis. The Court disagreed.
Insurance Law § 4224(b)(2) provides, in pertinent part, that “no insurer doing in this state the business of accident and health insurance . . . shall . . . refuse to insure, refuse to continue to insure or limit the amount, extent or kind of coverage available to an individual, or charge a different rate for the same coverage solely because of the physical or mental disability, impairment or disease, or prior history thereof, of the insured or potential insured, except where the refusal, limitation or rate differential is permitted by law or regulation and is based on sound actuarial principles or is related to actual or reasonably anticipated experience.”
The Court of Appeals examined industry practice, other jurisdictions and the legislative intent behind Insurance Law § 4224, and concluded that nothing in this anti-discrimination provision requires an insurer to offer the same benefits for all disabilities unless statistically or empirically justified, as alleged by Plaintiff. The Court reasoned that in order to discriminate against an individual and to do so “solely because of” a disability, the insurer must somehow limit an individual’s coverage by reason of that individual’s disability. Polan, 3 N.Y.3d at 58-59, 814 N.E.2d at 791, 781 N.Y.S.2d at 484. Here, the Court found that the insurer did not adopt the 24-month limitation “solely because of” Plaintiff’s mental disability but that the limitation preceded her disability and, therefore, did not violate Insurance Law § 4224(b)(2). Id. Further, Plaintiff was eligible for the same long-term disability coverage at the same premium as were all other employees participating in her employer’s group plan (citing McNeil v Time Ins. Co., 205 F.3d 179, 184 (“As long as [the insurer] offered [the plaintiff] the same policy it offered everyone else, [the insurer] has not violated [the anti-discrimination statute], even assuming it knew [the plaintiff] had AIDS”)). Id.
Learning Point:
A disability insurance policy may offer limited mental disability coverage to employees while at the same time offering extended coverage for physical disabilities without violating New York Insurance Law § 4224(b)(2). An insurer can protect itself from violating the anti-discrimination statute by offering the same policy to all individuals for the same rate, with equal access and eligibility to all disabled and non-disabled persons for the same benefits, regardless of parity of benefits for mental and physical disabilities. •
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