372723, 11:39 AM Page to pint Health Insurance Policy Provisions XCel an STC Company NAIC MODEL HEALTH INSURANCE POLICY PROVISIONS + Years ago, the National Association of insurance Commissioners (NAIC) developed a model Uniform Individual Accident and Sickness Policy Provisions Law + Almost all states have adopted this model law or similar legislation or regulations ‘+ The purpose of the NAIC law was to establish uniform or model terms, provisions, and wording standards for inclusion in all individual health insurance contracts Twelve Mandatory Policy Provisions [Link] Contract, ‘+ The entire contract includes the actual policy and the application + Itstates that nothing outside of the contract (the contract includes the signed application and any attached policy riders) can be considered part of the contract + Italso assures the policyowner that no changes will be made to the contract or waive any of the provisions after it has been issued, even if the insurer makes policy changes that affect all policy sales in the future. This, however, does not prevent a mutually agreeable change or modifying the contract after it has been issued. + Any change to a policy must be made with the approval of an executive officer of the insurance company whose approval must be endorsed on the policy or attached in a rider * This mandatory health policy provision states that the policy, including endorsements and attached papers, constitutes the entire insurance contract between the parties * We can't send you additional paperwork later. THE ENTIRE POLICY AND APPLICATION is sent to you and that makes up your ENTIRE CONTRACT. Py ime Limit on Certain Defenses ‘+ The Time Limit on Certain Defenses provision limits the time during which the insurance company may challenge the validity of an insurance claim based on a misstatement made on the insured's application about blank a0siz, 1:39AM Page opt + Under the time limit on certain defenses provision, the policy is incontestable after it has been in force a certain period of time, usually two years. * Thisis similar to the incontestable clause in a life insurance policy. Unlike life policies, a fraudulent statement on a health insurance application is grounds for contest at any time, unless the policy is guaranteed renewable. * An insurance company can usually contest the information contained in an accident and health application starting on the date the insurance company dates the policy «There is a TIME LIMIT for which you must DEFEND yourself. This applies to the contestable period (application), preexisting conditions, and new claims (conditions that must be met while a claim is pending. * Ifyou file a claim that you broke your leg yesterday, and the insurance company sees you moving a grand piano up 5 flights of stairs, you will probably have to DEFEND your claim. However, at some point, it is expected your leg will heal. [Link] Period * The purpose of the Grace Period is to give the policyowner additional time to pay overdue premiums. * The policyowner is given a number of days after the premium due date during which time the premium payment may be delayed without penalty and the policy continues in force * Depending on the state, the minimum grace periods typically specified are 7 days for policies with weekly premium payments (ie, industrial policies), 10 days for policies with premiums payable on a monthly basis, and 31 days for policies payable on an annual basis * The effect of nonpayment of premium before the expiration of a grace period will cause a policy lapse. * fan insurer pays an individual accident and health insurance claim during a policy's grace period, the amount of unpaid premium may be subtracted from the reimbursement * Grace period is the same definition for your insurance bill as itis for all of your other bills. Don't pick itas an answer if the question isn't talking about paying your bill late and keeping your insurance. * Remember Aunt Grace's Birthday 7 (makes payments more than once a month, weekly) - 10 (makes premium payments once a month) - 31 (makes Premium payments less than monthly (quarterly, semiannually, etc). 7-10-31 4, Reinstatement * The Reinstatement provision specifies that if an insured fails to pay a renewal premium within the time granted but the insurer subsequently accepts the premium, coverage may be restored * Under certain conditions, a policy that has lapsed may be reinstated. * Reinstatement is automatic if the delinquent premium is accepted by the company or its authorized agent and the company does not require an application for reinstatement. * Ifittakes no action on the application for 45 days, the policy is reinstated automatically. * To protect the company against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date * Accidents are covered immediately upon reinstatement * To reinstate any policy, you need: A reinstatement application, statement of good health, all back premiums 5, Notice of Claim * The notice of claim provision describes the policyowner's obligation to notify the insurance company of a claim in a reasonable period of time about lank 2110siz, 1:39AM Page opt + Typically, the period is 20 days after the occurrence or a commencement of the loss, or as soon thereafter as is reasonably possible * You need to let the insurance company know that you are going to be filing a claim, so they are expecting your claim forms. [Link] Forms + Itis the company's responsibility to supply a claim form to an insured within 15 days after receiving notice of claim * If the insurance company fails to send out the claim forms within the time period required by the provision, the insured should submit the claim in any form, which must be accepted by the company as adequate proof of loss * You can submit your claim using a napkin and crayon as long as you provide all the necessary information. 7. Proof of Loss «The statement that an insured must give an insurance company to show that a loss actually occurred is a Proof of Loss * After a loss occurs, or after the company becomes liable for periodic payments (e.g, disability income benefits), the claimant has 90 days in which to submit proof of loss. * Insurance company can't pay you if you don't prove there is a loss. 8. Time of Payment of Claims * The time of payment of claims provision provides for immediate payment of the claim after the insurer receives notification and proof of loss. * Ifthe claim involves disability income payments, they must be paid at least monthly if not at more frequent intervals specified in the policy * The purpose of the Time of Payment of Claims provision is to prevent the insurance company from delaying claim payments * You did your part (Paid your bill and got injured/sick/ etc) now the insurance company has to immediately do our part (Pay you) and it can't be less often than monthly, or you wouldn't be able to pay your bills. 9. Payment of Claims * The payment of claims provision in a health insurance contract specifies how and to whom claim payments are to be made. * Payments for loss of life are to be made to the designated beneficiary * If no beneficiary has been named, death proceeds are to be paid to the deceased insured's estate. Claims other than death benefits are to be paid to the insured + Should the insurance company pay you, or the doctor, or someone else? 10, Physical Exam and Autopsy * The physical exam and autopsy provision entitles a company, at its own expense, to make physical examinations of the insured at reasonable intervals during the period of a claim, unless it's forbidden by state law. * Forget everything you learned on "Law and Order," only the state can for up your (and your families) rights to refuse when you applied for insurance. an autopsy. You gave about lank sitosiz, 1:39AM Page opt 11. Legal Actions * The insured cannot take legal action against the company in a claim dispute until after 60 days from the time the insured submits proof of loss. * The legal action provision in a health contract is limited to no more than 5 years. * The Legal Action provision provides the insurer adequate time to research a claim * Atleast give the insurance company 2 months to take care of you before you take them to court. 12, Change of Beneficiary The insured, as policyowner, may change the beneficiary designation at any time unless a beneficiary has been named irrevocably. Eleven Optional Provisions 1. Change of Occupation This provision also allows the insurer to reduce the maximum benefit payable under the policy if the insured switches to a more hazardous occupation or to reduce the premium rate charged if the insured changes to a less hazardous occupation 2. Misstatement of Age + The misstatement of age provision allows the insurer to adjust the benefit payable if the age of the insured was misstated when application for the policy was made + The insurer can adjust the benefit to what the premiums paid would have purchased at the insured's actual age * Ifthe insured was older at the time of application than is shown in the policy, benefits would be reduced accordingly + The reverse would be true if the insured were younger than listed in the application 3. Other Insurance with This Insurer Under this provision, the total amount of coverage to be underwritten by a company for one person is restricted to a specified maximum amount, regardless of the number of policies issued, This provision is designed to protect the insurer by controlling over insurance through its own policies. 4, Insurance with Other Insurer In attempting to deal with the potential problem of over insurance, the insurance with other insurer provision states that benefits payable for expenses incurred will be prorated in cases where the company accepted the risk without being notified of other existing coverage for the same risk. 5. Insurance with Other Insurers Similar to the previous, the insurance with other insurers provision allows an insurer to pay benefits to the insured on a pro-rata basis when the insurer was not notified prior to the claim that the insured has other health coverage 6. Relation of Eamings to Insurance about lank 40siz, 1:39AM Page opt If disability income benefits from all disability income policies for the same loss exceed the insured's monthly earnings at the time of disability, the relation of earnings provision states that the insurer is liable only for that proportionate amount of benefits as the insured's earnings bear to the total benefits under all such coverage. 7. Unpaid Premiums If there is an unpaid premium at the time a claim becomes payable, the amount of the premium is to be deducted from the sum payable to the insured or beneficiary. 8, Cancellation + Though prohibited in a number of states, the provision for cancellation gives the company the right to cancel the policy at any time with 45 days' written notice to the insured * This notice must also be given when the insurer refuses to renew a policy or change the premium rates + Ifthe cancellation is for nonpayment of premium, the insurer must give 10 days' written notice to the insured, unless the premiums are due monthly or more frequently * The cancellation provision also allows the insured to cancel the policy any time after the policy's original term has expired by notifying the insurer in writing 9. Conformity with State Statutes Any policy provision that is in conflict with state statutes in the state where the insured lives at the time the policy is issued is automatically amended to conform with the minimum statutory requirements 10. Illegal Occupation The illegal occupation provision specifies that the insurer is not liable for losses attributed to the insureds being connected with a felony or participation in any illegal occupation. 11. Intoxicants and Narcotics * The insurer is not liable for any loss attributed to the insured while intoxicated or under the influence of narcotics * Losses due to injuries sustained while committing a felony, or attempting to do so, also may be excluded OTHER HEALTH INSURANCE POLICY PROVISIONS and RIDERS Filing and Approval of Policy Forms * Accident and Health insurance policies must be issued and approved by the commissioner * Ifthe commissioner does not reject the policy within 90 days it is considered approved as is * Insurers may request a hearing within 20 days if their policy is rejected + The Policy Face The Policy face contains a summary of the type of policy and the coverage provided by the policy. It Identifies the insured, the term of the policy (the effective date and termination date), and how the policy can be renewed. about lank si10sian, 1199 06 Paget print Insuring Clause «The insuring clause is the part of the health insurance policy that states the kind of benefits provided and the circumstances under which they will be paid. * The purpose of the insuring clause in a Health and Accident policy is to specify the scope and limits of the coverage provided. * The insuring clause is the part of the health insurance policy that identifies the specific type of benefits or health care services that are covered by that policy and the circumstances under which they will be paid. * Any promises the INSURER makes will be in the INSURING clause. Consideration Clause * In health insurance, the insurance company exchanges the promises in the policy for a two-part consideration from the insured. (Consideration is an exchange of something of value on which a contract is based). A health insurance contract is valid only if the insured provides consideration in the form of: + The initial full minimum premium required * The statements made in the application * The applicant begs, "Please CONSIDER me for insurance. Here is my completed application, my initial premium, and how much money/how often | agree to pay. Please CONSIDER me!" Probationary Period * Specified number of days after an insurance policy's issue date during which coverage is not afforded for sickness. * A Probationary Period provision in a health insurance contract becomes effective at the inception of the policy Owner's Rights Provision * Defines the person who may name and change beneficiaries, select options available under the policy, and receive any financial benefits from the policy. Types of Beneficiaries * Abeneficiary can be either specific (a person identified by name and relationship), or a class designation (a group of individuals such as the “children of the insured’) * If no one named, or if all beneficiaries die before the insured dies, death benefit will go to insured's estate. By Order of Succession: * Primary: First in line to receive death benefit proceeds * Secondary (contingent): Second in line to receive death benefit proceeds + Tertiary: Third in line to receive death benefit proceeds. If no one is named, death benefit will go to insured’s estate Dependent Children Benefits Dependent children must be covered by their parents health insurance plan until a certain age. Coverage may also continue for children who are incapable of earning their own living due to a mental or physical disability. about lank B10siz, 1:39AM Page opt Conversion Privilege for Dependents * Beginning October 1, 2010, the Affordable Health Care Act mandated that all policies and plans must provide dependent coverage up to age 26 * Adopted children, stepchildren, and foster children usually are eligible for coverage * Aslong as a policy is in force, coverage for a child generally continues until the child marries or reaches the limiting age ‘Mandatory Second Surgical Opinion Provision Amandatory second surgical opinion provision typically requires the insured to seek a second opinion for surgeries that are on a list of elective surgeries ‘Waiver of Premium The Waiver of Premium provision waives the payment of premiums after the insured has been totally disabled for the specified period of time, The following disabling acts are usually excluded from this. provision: self-inflicted injuries, wartime or military service injuries, and injuries received during the commission of a crime. Owner's Rights Provision Defines the person who may name and change beneficiaries, select options available under the policy, and receive any financial benefits from the policy. Free-Look Provision Gives the policyowner the right to return the policy for a full premium refund within a limited period of time after the delivery of the policy. Assignment Provision The transfer of ownership in alife insurance policy. The new owner is known as the assignee. * Absolute assignment: Under an absolute assignment, the transfer is complete and irrevocable, and the assignee receives full control over the policy and full rights to its benefits * Collateral assignment: A collateral assignment is one in which the policy is assigned to a creditor as security, or collateral, for a debt. Ifthe insured dies (or sometimes becomes totally\permanently disabled), the creditor is entitled to be reimbursed out of the benefit proceeds for the amount owed. The insured’s beneficiary is then entitled to any excess of policy proceeds over the amount, due to the creditor. Beneficiary designation Where the policyowner indicates who is to receive the proceeds. Settlement options Where the ways in which the proceeds can be paid out or settled are explained Discretionary Provision about lank m0372723, 11:39 AM Page to pint Limits the way a court can review a claim denial and makes it difficult for the court to conduct a fair review of the claim. Some states have enacted laws that prohibit Discretionary provision because they are designed to protect the insurance company. Maternity Benefits + Amaternity provision may provide a fixed amount for childbirth or a benefit based upon a specified multiple of the daily hospital room benefit * Frequently, the maternity benefit is available only as an added benefit for an additional premium States that have "no loss no gain" provision laws require a replacing policy to pay for ongoing claims under the policy it replaces Guaranteed Insurability Option Rider Allows a policyowner to purchase additional life insurance coverage at specified dates without providing evidence of insurability. Payor Provision (Rider) Provides waiver of premiums if the adult premium-payor should die or, with some policies, become totally disabled, Accidental Death Benefit Rider (Double Indemnity) Provides an additional amount of insurance usually equal to the face amount of the base policy if the cause of death was an accident. Return of Premium Ride Provides that in the event of the death of the insured within a specified period of time, the policy will pay, in addition to the face amount, and amount equal to the sum of all premiums paid to date. Cost of Living Rider Gives applicants the ability to guard against the eroding effects of inflation. Long-Term Care Rider Help safequard against the financial burden of long-term care. In addition to that, it provides an acceleration of the death benefit to help pay for costs involved with long-term care. COMMON EXCLUSIONS OR RESTRICTIONS Medical Expense, Disability, Accident, Health, and Sickness insurance policies frequently cite a number of exclusions or conditions that are not covered, such as: Injuries due to war or an act of war, self-inflicted injuries, and those incurred while the insured is serving as.a pilot or crew member of an aircraft + Military service since the insured is covered by the government while in its service; Some insurers also include a military suspension provision which limits or suspends disability income protection when the insured serves in the arm about lank anosiz, 1:39AM Page opt + Foreign travel may not be excluded in every instance, but extended stays overseas or foreign residence may cause a loss of benefits + Noncommercial air travel + Other exclusions are losses resulting from suicide, hernia (as an accidental injury), riots, or the use of drugs or narcotics * Losses due to injuries sustained while com excluded * Medical necessities: Even if an insured has a benefit for a particular service, if they do not have a medical need for that benef, it will not be covered by their insurance * Occupational injuries and illnesses that are covered by Workers’ Compensation or care paid by the Veterans Administration are typically excluded * Cosmetic Surgery, Experimental Surgery, and vision correction (i.e eye exams) may also be excluded ing a felony, or attempting to do so, also may be Preexisting Conditions * Medical expense and disability income policies usually exclude paying benefits for losses due to preexisting conditions pertaining to illness, disease, or other physical impairments * Such exclusions are subject to the "time limit on certain defenses" provision. Any preexisting condition that the insured has disclosed clearly in the application usually is not excluded or, ifitis, the condition is named specifically in an excluding waiver or rider. Waivers for Impairments + When an insurance company does not cover a loss due to a specific condition the insured has. This is usually called an impairment rider. * Ifthe insured's condition improves, the company may be willing to remove the waiver. RENEWABILITY PROVISIONS Health insurance is not permanent in nature, unlike life insurance and annuities. Hence, health insurance policies contain a wide range of renewability provisions, which allows the insurer to cancel health insurance at different points during the life of the policy. Generally speaking, the more favorable the renewability provision is to the insured policyholder, the higher the premium. The insured, can typically cancel the policy at any time, and the policy can always we canceled by the insurer if premium is not paid within the grace period There are five principal renewability classifications: Cancelable Policies + May be terminated by either the insured or the insurer * The renewability provision in a cancelable policy allows the insurer to cancel or terminate the policy at anytime * Cancelable policies also allow the insurer to increase premiums * This is the ONLY type of renewability where the insurer can cancel at any time. This type of renewability is illegal in most states. Optionally Renewable Policies The renewability provision in an optionally renewable policy gives the insurer the option to terminate the policy on a date specified in the contract. about lank eno372723, 11:39 AM Page to pint Conditionally Renewable Policies * Aconditionally renewable policy allows an insurer to terminate the coverage but only in the event of one or more conditions stated in the contract * They typically are related to the insured reaching a certain age or losing gainful employment * Aconditionally renewable policy can increase premiums at time of renewal Guaranteed Renewable Policies + The renewal provision in a guaranteed renewable policy specifies that the policy must be renewed (as long as premiums are paid) until the insured reaches a specified age, such as 60 or 65. * Guaranteed renewable policies normally have increasing premiums + Ifrates are increased on a guaranteed renewable policy, the must be increased for an entire rate class * "We're definitely going to renew you, but we may raise the premiums so high you won't want to keep the insurance” * Thisis the common renewability for Medicare Supplement and Long-term care policies. Nonrenewable Policies + Nonrenewable policies are normally associated with short-term health insurance. These are policies that are for established policy lengths of a year or less and are considered temporary. Noncancelable Policies * Anoncancelable policy cannot be cancelled nor can its premium rates be increased under any circumstances (other than reaching a specific age or non-payment of premiums) + Noncancelable provisions are most commonly found in disability income policies. They are rarely used in medical expense policies + Noncancelable policies may not be changed in anyway by the insurer (sometimes up to a specified age), so long as the premiums are paid + "We're stuck with you. We can't cancel you, we can't raise the premiums or do anything else to entice you to cancel” * This is common for disability policies. about lank 0110