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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



Opinion No. 5645

February 5, 1980


Coordination of benefits clause in a health care insurance policy


Health care insurance benefits for school employees

A clause in an insurance policy which denies health care benefits to an employee of a school district because the spouse of the employee may have health care insurance with the same insurer or another insurer without coordinating benefits between the two insurance policies is void as against public policy.

Honorable Barbara-Rose Collins

State Representative

The Capitol

Lansing, Michigan

You have informed me that although many school districts provide health and/or dental insurance benefits to their employees in accordance with collective bargaining agreements, some of the agreements contain a clause which provides that if a teacher and his or her dependents have coverage through another policy, the school district is not required to provide health and/or dental insurance to that teacher and his or her dependents. As a result of this clause, married teachers whose spouses have insurance coverage, do not receive coverage through the school district. Based upon these facts you have requested my opinion on the following question:

Whether the withholding of insurance benefits pursuant to a coordination of benefits clause which denies benefits if the employee's spouse has insurance, constitutes marital status discrimination in violation of the Elliott-Larsen Civil Rights Act, 1976 PA 453, MCLA 37.2101; MSA 3.548(101) et seq?

Before addressing your question, it is first necessary to determine whether a coordination of benefits provision which denies insurance coverage is permissible in an insurance policy issued in this State.

The clause set forth in the insurance contract which was furnished in conjunction with your request, states as follows:

'All teachers within the district of the CONTRACTOR. Where two subscribers who are legally married to each other are enrolled under the same group or any other dental group of the CONTRACTOR and/or have dental coverage separately or jointly under any other CONTRACTOR, they shall be enrolled under one application card and shall receive benefits under a single contract without coordination of benefits under this contract.'

This contract clause was not submitted to the Insurance Bureau for approval. Therefore, there has been no prior consideration of the above quoted provision.

In determining the legality of an insurance policy provision or contract, the following principal is applicable:

'. . . The provisions and conditions of a contract or policy of insurance should not be in contravention of law or public policy. 32 CJ 1107. . . ." (emphasis added)

State Compensation Insurance Fund v Industrial Accident Commission, et al, 56 Cal App 2d 443, 450; 132 P 2nd 890, 894 (1942)

See also OAG 1967-1978, No 4584, p 180 (Feb. 12, 1968).

The Michigan Supreme Court considered the meaning of and defined the term 'public policy' as follows:

'. . . What is public policy? The term has frequently been used in a loose, vague, and inaccurate sense. We may, however, safely say that, when we speak of the public policy of this State, we mean the law of the State, whether found in its Constitution, the statutes, or the judicial records. People v Hawkins, 157 NY 1 (51 NE 257, 42 LRA 490, 68 Am St Rep 736); 32 Cyc p 1251. . . .' (emphasis added)

New York Life Ins Co v Hamburger, 174 Mich 254; 140 NW 510 (1913).

The Insurance Code of 1956, 1956 PA 218, Secs. 436, 438, and 440, MCLA 500.3436; MCLA 500.3438; MCLA 500.3440; MSA 24.13436; MSA 24.13438 and MSA 24.13440, provide for coordination of benefits with the same or another insurer. These sections provide that in instances of dual insurance coverage of an individual or family, the insurer or insurers may coordinate payment of benefits. Although these sections are not included in the dental care corporations act, 1963 PA 125, MCLA 550.351, et seq; MSA 24.650(1) et seq, they are nevertheless applicable to the issue raised in that they establish the public policy of this State with regard to duplicate coverage of insurance benefits.

It is also necessary to consider 1956 PA 218, Section 3430, MCLA 500.3430; MSA 24.13430, which provides as follows:

'Except as provided in subsection (2) of section 3406 (inapplicable or inconsistent provisions), no such policy delivered or issued for delivery to any person in this state shall contain provisions respecting the matters set forth in sections 3432 through 3454 unless such provisions are in the words in which the same appear in such sections: Provided, however, That the insurer may, at its option, use in lieu of any such provision a corresponding provision of different wording approved by the commissioner which is not less favorable in any respect to the insured or the beneficiary. . . .' (emphasis added)

Thus, 1956 PA 218, Section 430, supra, requires that the specific provisions set forth in 1956 PA 218, Sections 3436, 3438, and 3440, supra, appear in the insurance policy unless there is approval by the commissioner of a corresponding provision, 'which is not less favorable in any respect to the insured or the beneficiary'. Here, this coordination of benefits clause denying coverage is clearly less favorable to the insured and beneficiary than the provisions in 1956 PA 218, Sections 3436, 3438, and 3440, supra. Therefore, although it is statutorily permissible for insurers to provide for coordination of benefits when the insured has dual coverage, an insurer may not unilaterally provide in a group contract that an individual will be entirely denied coverage where he or she has coverage under the policy issued to the spouse of the individual. This legislative declaration of public policy is equally applicable to prepaid health care providers organized under 1963 PA 125, supra.

It is, therefore, my opinion that a coordination of benefits provision denying benefits is void as it contravenes the public policy of this state. In light of the above, it is not necessary to determine whether the provision is in violation of the Elliot-Larsen Civil Rights Act, supra.

Frank J. Kelley

Attorney General

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