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TJ, Esq.
TJ, Esq., Attorney
Category: Business Law
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Experience:  JD, MBA
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Let's say that AARP or COSTCO decides as an additional

Customer Question

Let's say that AARP or COSTCO decides as an additional "perk" included in their monthly or yearlly membership, to also provide for a health insurance plan, to its membership, say e.g. Blue Shield. AARP or COSTCO pays Blue Shield for each members coverage, at no additional charge to the member, but offered as just part of the membership. Now, neither organization is selling this insurance coverage, its giving it away to all its members and is paying for the insurance for all its members. There is no "selling" involved, the insurance coverage is just paid for the members by the orgaization.
Under what authority could an individual State demand that AARP or COSTCO be "licensed" to "sell" insurance?
If one works for a company that provides pre-paid health insurance for its employees, by what authority can the State demand the company have a license to "sell" insurance?
Submitted: 2 months ago.
Category: Business Law
Expert:  TJ, Esq. replied 2 months ago.

Hello and thank you for the opportunity to assist you. My name is ***** ***** I will do my very best to answer your legal questions.

Q: Under what authority could an individual State demand that AARP or COSTCO be "licensed" to "sell" insurance?
If one works for a company that provides pre-paid health insurance for its employees, by what authority can the State demand the company have a license to "sell" insurance?

A: The 10th Amendment to the Constitution is the legal authority. It states:

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

In a nutshell, the above means that the states have the power to create laws, so long as they don't step on the toes of the Federal government. Accordingly, if a state wants to require AARP or Costco or an employer to obtain a license to sell insurance under the facts that you describe, then it may do so. The law would be constitutional so long as it is rationally related to a legitimate government interest (which is a very low threshold).

Does that answer your question? Please let me know if you need clarification, as I am happy to continue helping you until you are satisfied. Also, please remember to provide a positive rating via the stars (and note that your positive rating is the only way that I'll get credit for helping you, so it is much appreciated!). Thank you. :)

Customer: replied 2 months ago.
Hi TJ, "selling"is one thing, as it is business, therefore a "privilege". But giving something away with no cost to the user cannot in any way be described or interpreted as "selling". Your comment?
Expert:  TJ, Esq. replied 2 months ago.

Hi again.

You wrote: Hi TJ, "selling"is one thing, as it is business, therefore a "privilege". But giving something away with no cost to the user cannot in any way be described or interpreted as "selling". Your comment?

My comment: First and foremost, a law could be written such that it defines the word "selling" to include giving away insurance. Per my prior answer, the state government would certainly have the legal authority to do so. But you should also bear in mind that what you described is not really free insurance. It wasn't given away. Rather, it was paid for with the membership fees. As an analogy, when McDonald's says that they are giving me "free refills" for the soda, it's not really free. I paid for unlimited refills when I bought the soda. If I can walk into a McDonald's and get a free soda without paying anything, then that is truly free. Similarly, if AARP or Costco gives a non-member the insurance for nothing in return, then that is free. What you described is not free.

I hope that helps. Please let me know if you need further clarification, andplease remember to provide a positive rating via the stars(and note that your positive rating is the only way that I'll get credit for helping you, so it is much appreciated!). Thank you. :)

Expert:  TJ, Esq. replied 2 months ago.

Hello again. I didn't hear back from you, so I'm just checking in to make sure that you don't need more help on this issue.

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