State RegulationsNY specificDifficulty 3/5
An association of licensed electricians has been in active existence for two years and was formed primarily to obtain inexpensive health coverage for its members. A New York insurer is asked to issue the association a group health policy. Under N.Y. Ins. Law §4235, may it do so?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under N.Y. Ins. Law §4235(c)(1)(H), a group health policy may be issued to an association, or to a trustee of a fund for its members, only where the association has been organized and maintained in good faith for purposes principally other than that of obtaining insurance, among other requirements. An association formed primarily to buy coverage fails this definitional test, so the insurer may not issue the policy.
Why the other options are wrong
- A) Sharing a common profession is one requirement for association groups, but it does not cure a formation purpose of obtaining insurance.
- B) Collecting dues from members does not change the purpose for which the association was organized.
- D) The two-year active existence requirement is separate from, and cannot replace, the good-faith purpose requirement.
Memory hook
Association test: born for the trade, not born for the bargain.