CH 18. Arizona Laws and Rules Pertinent to Insurance

In Arizona, an insurer discontinues offering a particular type of small group medical coverage. Participants must receive advance notice of at least

180 days if an insurer discontinues offering a particular type of small group medical coverage, participants must receive advance notice of at least 180 days

What is the minimum number of employees needed for a small employer medical expense plan in Arizona?

2 a small employer is one that employs between 2 and 50 employees on a typical business day during any one calendar year

An annuity becomes incontestable after it has been in force for

2 years

According to the Affordable Care Act (ACA), dependent children may remain on their parent's plan until what age?

26 under the ACA parents can insure their dependent adult children till age 26

A producer must maintain customer records for how many years following the completion date of the insurance transaction?

3 years

A licensee whose name or address changes must notify the Department of Insurance within

30 days

A terminated employee has how many days upon termination to convert group life insurance coverage to an individual policy?

31 days in the event of employment termination, a person covered by a group policy also has the right to convert such coverage to an individual policy within the conversion period (31 days) without proving insurability. if this right is exercised, the employee is responsible for the payment of premium

Under the Telemarketing Sales Rule, Telemarketing calls may NOT be recevived until

8 AM or after 9 PM

Under the Telemarketing Sales Rule, telemarketing calls may ONLY be received between the hours of

8AM and 9PM

Under the Telemarketing Sales Rule, telemarketing calls may NOT be received after

9PM

Prescription card plan

A prescription drug plan (PDP) is one option for individuals who want to enroll in the Medicare Part D prescription drug coverage, which subsidizes the costs of prescription drugs for enrollees. ... Enrollees pay a co-pay for each prescription, a monthly premium and an annual deductible.

Which plan offers coverage for nursing home (custodial) care without requiring any previous period of hospitalization?

AHCCCS

Mail-order pharmacy

An online pharmacy, Internet pharmacy, or mail-order pharmacy is a pharmacy that operates over the Internet and sends the orders to customers through the mail or shipping companies

Arizona Health Care Cost Containment System (AHCCCS)

Arizona calls its medicaid program this however, the Medicaid office that serves elderly and disabled individuals with long term care needs is the Arizona Long Term Care System (ALTCS), which is under AHCCCS. an individual MUST meet impairment requirements, monthly income limits, and asset limits to qualify for custodial care

Director of Insurance

Director of Insruance and the Department of Insurance are responsible for administering Arizona's insurance laws director serves at the pleasure of the governor director has the following duties: -enforce provisions of the insurance code -conduct examinations or investigations of any insurance matters -examine or investigate insurance companies, adjusters, and producers.

Defrauding an insurance company (insurance fraud)

Insurance fraud is any act committed with the intent to obtain a fraudulent outcome from an insurance process. This may occur when a claimant attempts to obtain some benefit or advantage to which they are not otherwise entitled, or when an insurer knowingly denies some benefit that is due

Certificate of Authority

No insurance company may transact business in Arizona without a Certificate of Authority which acknowledges that the requirements of the insurance laws have been met, and authorizes the company to transact insurance failure of an insurance company to obtain a Certificate of Authority will NOT impair the validity of any insurance contract

Under which circumstance can an insurer cancel a Medicare Supplement insurance policy without prior approval by the Arizona Department of Insurance?

Non payment of premium this is a circumstance in which an insurer may cancel a Medicare Supplement insurance policy without prior approval by the Arizona Department of Insurance

Non-Guaranteed Universal Life Insurance

Non-guaranteed universal life insurance is a type of permanent life insurance, meaning you are buying coverage for life. A non-guaranteed policy carries a death benefit like any other life insurance policy but with an investment component attached to it Understand that the cash value in your non-guaranteed universal life policy is not a death benefit. If you die before you withdraw the cash value in your policy, your insurance company keeps the money. It is NOT paid out to your beneficiary or beneficiaries, and is essentially lost. In other words, the extra money you pay into these types of policies is never really your money. When you buy a non-guaranteed policy, you will pay extra to build your cash value. Here's the zinger, though: when you die, that cash value is lost. It does not go to your family—only the death benefit does costs of coverage are not guaranteed and cost of insurance will increase as you age traditional Universal Life policies cost 3-5x more than a non-guaranteed policy investment values are dependent on the market. the vast majority of these polices under perform most policies are underfunded by the time the client reaches their 80s and the policy becomes UN-affordable

Replacement

Notice of Replacement: under Arizona law, the replacement of life insurance contracts with a new contract requires the producer to give the applicant a written comparison and summary statement at the request of the policyholder and to follow instructions regarding replacement as obtained from the appointing insurer Replacement: any transaction in which new life insurance or a new annuity is purchased and, as a result, the existing life insurance or annuities will be any of the following: -lapsed, forfeited, surrendered, or otherwise terminated -reissued with any reduction in cash value

In-house pharmacy

Pharmacy services which are housed within a covered entity's facility. The pharmacy must be part of the legal organization of the covered entity.

In Arizona, an attempt to defraud an insurance company is considered

a felony a person who attempts to defraud an insurance company is guilty of a class 6 felony and could be fined up to $5000 per violation

Payment of premiums

a premium is deemed to have been paid on time if a properly addressed and stamped envelope is deposited and postmarked on or before its due date

An individual currently owns a long-term care policy. At the time of application for similar coverage, which item must be signed by the applicant and retained by the insurer?

a replacement notice Long-term care insurance include certain questions designed to determine whether the applicant has another long-term care policy in force or whether the intention to replace any other health policy in force if so, a replacement notice must be signed by the applicant and retained by the insurer

Telemarketing Sales Rule

act prohibits deceptive telemarketing acts or practices, including failing to disclose or misrepresenting the following info before a customer pays for a good or service - total cost to purchase the goods or services that are subject of the sales offer -material restrictions, limitations or conditions to purchase, receive, or use the goods or services -statement informing the customer that the seller has a policy of no refunds, cancellations, exchanges or repurchases generally illegal to make telephone solicitation to any telephone number in AZ that is on the national Do-Not-Call registry established by the Federal Trade Comission. a fine of $1000 may be imposed for each violation attorney general of each state is authorized to bring an action in state court against any person who has violated this act

Continuing Education (CE)

all insurance producers must successfully complete 48 credit hours of continuing education every 4 years, pior to license renewal. six of those hours must be in ethics

Accelerated benefit

allows someone that a physician certifies as terminally ill to access the death benefit. the amount of benefit received will be tax free

Viatical settlement (Life settlements)

allows someone with a terminal illness to sell their existing life insurance policy to a third party for a percentage of the face value the new owner continues to make the premium payments and will eventually collect the entire death benefit viatical settlement brokers must be licensed before conducting any viatical transactions proceeds of viatical settlement contract could be subject to the claims of creditors Viator-- original policy owner Viatical (Viatee)-- new third party owner

All of the following are unfair claims settlement practices EXCEPT

an attempt to settle a claim by arbitration

When a company is licensed by the Department of Insurance to do business in this state, it becomes

an authorized company

Which of these pharmacy options is typically available to enrollees in a staff model HMO?

an in-house pharmacy

New Residents

an individual licensed in another state who moves to Arizona must apply for a license within 90 days of establishing legal residence

Cash surrender

an insurance company may delay the payment of the cash value of a surrendered whole life insurance policy for up to 6 months The cash surrender value is the sum of money an insurance company pays to a policyholder or an annuity contract owner in the event that his or her policy is voluntarily terminated before its maturity or an insured event occurs.

What must the insurer provide to certificate holders when a group Medicare Supplement insurance policy is terminated and not replaced?

an offer of conversion to individual coverage the insurer MUST provide an offer of conversion to individual coverage to certificate holders when a group Medicare Supplement Insurance Policy is terminated and NOT replaced

Rebating

any inducement offered to the insured in the sale of insurance products that is NOT specified in the policy Rebates may include, but not limited to the following: -rebates of premiums payable on the policy -special favors or services -advantages in the dividends or other benefits -stocks, bonds, securities, and their dividends or profits both the offer and acceptance of a rebate are illegal

Adjuster

any person who for compensation either: -adjusts, investigates, or negotiates setllemtn of claims arsing under insurance contracts on behalf of either the insurer or the insured -holds oneself out to perform those services

False or Fraudulent Statements

any producer who knowingly makes a false or fraudulent statement or representation on an insurance application is guilty of a Class 2 misdemeanor

How often must a notice of information practices be given to a policyholder?

at least once a year an insurer must give a notice of information practices to a policyholder at least once per year (annually)

Solicit

attempt to sell insurance for a particular kind of insurance from a particular company

Group health insurance: per-existing conditions

conditions for which medical advice, diagnosis, care or treatment was recommended or received in the 6 months prior to the effective date of enrollment may be excluded for a maximum of 12 months from the date of enrollment (18 months for late enrollees) creditable coverage from a previous employer will be used to reduce the exclusion period, unless the individual has a coverage gap of 63 days prior to enrollment in the group plan

Variable insurance contracts

contain both insurance and securities elements regulation for these contracts are set by groups such as Securities and Exchange Comission, FINRA, the department of insurance, and state securities authories

Payment of Claims

death benefits must be paid within 60 days of receipt of proof of death benefits payable under the policy for any loss (unless provided by periodic payment) will be paid immediately upon receipt of written proof of the loss

Under which marketing system do insurers solicit customers by mass media advertising and mail without the services of an agent?

direct response direct response marketing system involves an insurer soliciting customers by mass media advertising and mail without the services of an agent

Examination of Records

director or a designed examiner may conduct an examination of any domestic insurance company at the discretion of the director. every person or firm being examined must produce and make freely available to the Director all material relating to the subject of the examination

Unfair discrimination

discrimination in rates, premiums, or policy benefits for persons within the same risk classifcation or with the same life expectancy is illegal no discrimination may be made on the basis of an individuals marital status, race, national origin, gender identity, sexual orientation, creed, or ancestry unless the distinction is made for a business purpose or required by law

Group life insurance

eligible groups include: -employee groups must cover 2 insureds -debtors of a creditor -labor unions -members of a credit union (must cover at least 25 members at date of issue) in the event of employment termination, a person covered by a group policy also has the right to convert such coverage to an individual policy within the coversion period (31 days) without proving insurability. if this right is exercised, the employee is responsible for the payment of premium grace period for group life insurance is 31 days policy terms shall be incontestable after it has been in force for a period of 2 years the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which is entitled

Which provision makes the application part of the annuity contract?

entire contract clause required provision for life insurance and annuities contracts

Change of Address

every producer licensed in Arizona MUST notify the Director within 30 days of any change of address

Sell

exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurer

Affordable Care Act (ACA)

exchanges are created by the ACA health reform bill to help indivduals and small businesses purchase health insurance coverage. purpose of the exchange includes: - reduce the number of uninsured in the state - facilitate the purchase and sale of qualified health plans in the individual market -assist qualifed employers in the state in enrolling their employees in qualified health plans -assist individuals in accessing public programs, premium tax credits, and cost-sharing reductions under the ACA the health insurance exchange will perform all of the following roles: -certify health plans as qualified, based on per-determined criteria -utilize individual, unique formats for presenting health benefit plan options -verify and resolve inconsistent info provided to the exchange by applicants

Individual Health insurance

for individual health insurance: pre-exisitng conditions (conditions for which medical advice, diagnosis, care or treatment was recommended or received in the 12 months prior to the effective date of enrollment) may be excluded for a maximum of 12 months from the date of enrollment

An accident and health insurance policy covers the insured, the insured's spouse, and their child. If additional children are born to the family, the accident and health insurance policy must cover the children

from the date of birth if additional children are born to the family, the accident and health insurance policy MUST cover the children from the date of birth

Right to Examine Provision (Free-Look)

health insurance policies must provide a minimum free-look period of 10 days upon policy delivery. this allows the policy owner time to decider whether or not to keep it. if the policy owner decides NOT to keep the policy within the 10 days allowed, a full refund will be given a person who is eligible for Medicare has a free-look period of 30 days

Medicare Part A (Original Medicare)

hospital coverage. Part A (also called Original Medicare) is managed by Medicare and provides Medicare benefits and coverage for: -Inpatient hospital care. -Inpatient stays in most skilled nursing facilities. -Hospice -and home health services.

Sharing commissions

illegal for an insurer or producer to pay or a person to receive compensation for services as a producer if NOT properly licensed

Boycott, Coercion, and Intimidation

illegal to be involved in any activity of boycott, coercion, or intimidation that is intended to restrict fair trade or to create a monopoly

Misrepresentation

illegal to issue, publish or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, the payment of dividends, etc.. also refers to oral statements

False Financial statements

illegal to knowingly publish, circulate, or file false statements about the financial condtion of anyone involved in the insurance business

In Arizona, continuation of accident and health insurance plan coverage for a handicapped child beyond the age limit stated in the policy may require proof of the child's

incapacity and dependency upon reaching the age limit

Surplus lines brokers

insurance coverage designated as surplus lines may be produced from unauthorized insurers through a surplus lines broker licensed in Arizona

Record-keeping

insurance producer must keep usual and customary records that pertain to transactions under the producers license for a period of 3 years after the date of completion of the transaction

Claims payment

insurers that do NOT pay properly submitted and approved claims within 30 days must pay interest on the claims from the date they were submitted

Non-forfeiture Provision

life insurance policies must include this provision stating that in the event of nonpayment of premium, the insurer will grant, upon proper request, no later than 60 days after the premium due date, a paid-up non-forfeiture benefit as stipulated in the policy

How can a group dental insurer discourage adverse selection?

limit the duration of coverage

Policy Loan interest Rate

max fixed interest rate charged by insurers is 8% in Arizona

Temporary License

may be issued in cases where a producer has become disabled or dies, requriing a replacement (a surviving spouse or a court appointment personal represetntative) to servivce the producers business. can also be issued when the producer is actively serving in the military license valid for a max of 180 days

If a producer misleads or fails to adequately disclose the title and true nature of a policy offered to a potential insured, it may be considered

misrepresentation

Exclusions

no life policy can exclude or restrict liability for paying a death benefit caused in a specified manner. the exceptions to this include -suicide within two years of policy issue -result of war -aviation restrictions as outlined in the policy

Defamation

occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business. also applies to statements that are maliciously critical of the financial condition of any person or company

Vending Machines

only a licensed insurance producer who is authorized by the director may solicit applicants for an issue policies by means of mechanical vending machines

Fraternal Insurer

organization operating under a lodge system that provides social and insurance benefits to members and family dependents

Medicare Part B (Medical Insurance)

part of Original Medicare and covers medical services and supplies that are medically necessary to treat your health condition. This can include: -outpatient care, -preventive services, -ambulance services, -and durable medical equipment.

Reinstatement

permits the policy owner to reinstate a policy that has lapsed as long as the policy owner can provide proof of insurability and pays all back premiums, outstanding loans, and interest back premiums--An amount, equal to a fraction of the premium, which is given back to the insured in the case of a cancellation, an adjustment to the rate, or an overpayment of an advance premium. Upon cancellation of an insurance policy prior to the expiration date, the unused portion of the premium is returned to the insured. A return premium can also be made for an overpayment or as a result of reducing your coverage. a life policy can be reinstated at any time within 3 years from the date of default

Producer

person required to be licensed pursuant to the laws of this sate to sell, solicit or negotiate insurance producer licenses are issued for periods of 4 years and expire on the last day of the same month in which the license was issued no person is permitted to sell, solicit, or negotiate insurance in this state for any class or classes of insurance unless that person is licensed for that line of authority.

Nonresidents

person who is NOT a legal resident of Arizona may be licensed to act in this state as a nonresident insurance producer without taking a written examination, if all of the following conditions are met: -person is currently licensed as a resident and in good stnading in his or her home state - person has submitted the proper request for lincesure and has paid the fees precrisbed by the director -person has submitted to the director the application for licensure (or completed a uniform application) that the person submitted to his or her home state -nonresident producer licensed in another state who becomes a resident of arizona and continues to act as an insurance producer, must within 90 days, apply for and obtain a resident producers license if a nonresident fulfills the continuing education (CE) requirements in his/her home state, the prodcuer does NOT have to fulfill CE requirements in Arizona as long as the producers home state will do the same for Arizona producers

A life insurance illustration showing future premiums being paid out of nonguaranteed values must disclose that

policy owner may need to resume premium payments depending on actual results

Business Entity Producers

present to the applicant a notice regarding replacement that is signed by both the applicant and the producer. a copy MUST be life with the applicant. if applicant is a business entity as an insurance producer, the Director also will require the name and address of a licensed producer responsible for the business entity's compliance with Arizona's insurance laws obtain a list of all existing life insurance and or annuity polciies to be replaced including policy numbers and the names of all companies being replaced leave the applicant with the original or a copy of written or printed communications used for presentation to the applicant submit to the replacing insurance company a copy of the replacement notice with the application it is advisable to wait until the new policy is issued before cancelling an existing policy

Incontestability period

provision that the life policy or annuity terms shall be incontestable after it has been in force for a period of 2 years from its date of issue (unless purpose for taking out coverage was fraud) material misrepresentation, fraud, and material concealment are all reasons an insurer may contest a life insurance policy during the first 2 years a contract is in force material misrepresentation--a misstatement to a question asked during the application process that is so important that, had the truth been known, the insurance company would not have issued the policy or would have issued it with a higher premium

Entire Contract

provision that the policy and the application shall constitue the entire contract between the parties

Fair Credit Report Act (FCRA)

regulares the use and disclosure of consumer credit information. adverse info that has been removed from a consumers file can NOT be reinstated without notifying the customer within five days agencies can NOT store adverse info about a consumer for longer than a set period of time. for ex. info about late payments and final judgements can only stay on a credit report for up to 7 years, bankruptcies 10 years, and tax liens (government's claim on your property and is generally placed when a taxpayer, such as a business or individual, fails to pay taxes owed) --7 years from the date paid insurance companies are also subjected to the FCRA because they use consumer credit reports during underwriting and risk selection

Duties of the Replacing Insurnace Company

require from the producer a list of applicants life insurance or annuity contracts to be replaced and copy of the replacement notice provided to the applicant send each existing insurance comany a written communication advising of the propsed replacement within a specifed period of time of the date the the application is received in the replacing insurance companys home or regional office policy summary or ledger statement containing policy data on the proposed life insurance or annuity must be include replacing insurer must allow the owner of the life insurance policy to return the policy within 30 days after delivery for a full refund

Which of these situations would NOT potentially involve a prison sentence under Federal law?

selling insurance with a nonresident license is NOT a federal violation

Arizona Health Care Cost Containment System

state agency that administers a program to assure delivery of health care to eligible individuals who may otherwise not be able to obtain it program funded by country, state, and federal contributions and is intended mainly for low-income individuals

Federal estate tax

tax cost typically associated with death

Under the Fair Credit Reporting Act, which statement is true?

the consumer who was investigated must be advised that credit, insurance, or employment was denied because of an unfavorable report a consumer being investigated must be advised of any denial based on an unfavorable report The Fair Credit Reporting Act is a federal law that regulates credit reporting agencies and compels them to insure the information they gather and distribute is a fair and accurate summary of a consumer's credit history. ... The law is intended to protect consumers from misinformation being used against them.

An insurer may refuse to renew an individuals accident and health insurance coverage in all of the following circumstances EXCEPT

the insured (individual) developed a critical health condition an insurer can refuse to renew an individual accident and health insurance coverage for all of these reasons: -insured failed to pay required premium, -insured made a fraudulent claim statement, -insured made an misrepresentation on the application)

Guaranteed Life Insurance

the insured assumes no risk and is locked in for coverage up to a specific age. NOT a whole life insurance and does not build a cash value. No investment values. rate and coverage are guaranteed regardless of the market or interest rates It is more similar to term life insurance, with your term being defined by age rather than years. Your Cost of Insurance Will Not Change In a non-guaranteed policy, the cost of coverage will often increase every year or two. This can wreak havoc on an older adult's finances at a time in life when they do not have the capability to increase their income and afford a more expensive policy. With a guaranteed policy, even as you age, your premium is fixed. You can guarantee your premium to age 90, 95, 100, or even 121. Your Coverage Isn't Tied to an Investment In order for a non-guaranteed policy to hold at the same rate you were quoted, the investment has to perform well. Unfortunately, many policies don't perform as expected, especially with the way interest rates have plummeted over the past few decades.

In Arizona, an insurer providing small employer group medical plans may discontinue an employer's coverage if

the insurer no longer offers the plan to any employer

The Arizona Life and Disability Insurance Guaranty Fund protects an insured in the event of

the insurer's insolvency

Unless it is regarding fraud, which of the following statements about the contestability of a life insurance policy is true?

the policy can usually only be contested by the insurer during the first 2 years of the contract

Coercion

the practice of persuading someone to do something by using force or threats.

When a Medicare Supplement insurance policy is being replaced, who must sign the notice of replacement?

the producer and applicant

Grace Period

the time, usually 30 days, during which a policy remains in force after the premium is due but not paid. the policy lapses as of the day the premium was originally due unless the premium is paid before the end of the 30 days or the insured dies during the grace period for health and accident insurance, grace period is required to be no less than 7 days for weekly premium policies 10 days for monthly premium policies and 31 days for all other polices. if premium is paid within the grace period, coverage shall remain in effect

All of the following are typically covered under dental insurance EXCEPT

treatment which began before the eligibility date treatment started prior to the eligibility date is typically NOT covered under dental insurance

When an individual purchases insurance as a result of threats made by the producer, there has been a violation of

unfair trade practice laws

Life and Disability Insurance Guaranty Fund

used to rehabilitate insolvent (financially incapacitated) insurers. producers are prohibited from using the existence of the Arizona Guaranty Fund for selling, soliciting, or inducing purchase of an insurance policy

License Suspension, Revocation, Denial, and Cancellation

violator of an cease and desist order is subject to suspension or revocation of any insurance license or certificate of authority issued under the laws of Arizona director may suspend or revoke, refuse to issue or refuse to renew an insurance producer license for any one or more of the following: - intentionally providing materially incorrect, misleading, incomplete, or untrue info in the license application -violating any insurance laws, or violating any regulation, subpoena or order of the Director or of another insurance director in any other state -obtaining or attempting to obtain a license through material misrepresentation or fraud -improperly withholding, misappropriating or converting any moneys or properties received in the course of doing insurance business -intentionally misrepresenting the terms of an actual or proposed insurance contract or app for insurance -having been convicted of a felony or crime involving more turpitude -having admitted or been found to have committed any insurance unfair trade practices or fraud -using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or elsewhere -having an insurance producer license, or its equivalent, denied, suspended or revoked in any other state, province, distract or territory -signing the name of another to an application for insurance or to any document related to an insurance transaction without authorization

When replacing a life insurance policy, which of the following is advisable?

wait until the new policy is issued and delivered before surrendering existing policy in a replacement situation, the insured should never cash surrender the existing policy until the new policy is issued, delivered, and paid on. upon surrender of the existing policy, the insured will no longer be covered. should the underwriting of the new policies application show the proposed insured to be uninsurable, the individual will be unable to obtain new coverage and unable to reinstate the surrendered policy. also, state law requires that any loan of 25% of more of an existing polices cash value used to purchase the new policy constitutes a replacement and requires proper notification

Cease and Desist orders

whenever it appears that any person is violating an insurance law of Arizona or any rule or regulation made by the director, the director may issue a cease and desist order--which prohibits that specific practice

If an accident and health insurance claim form is NOT supplied to the insured within 15 days after the notice of claim, the insured may comply with the proof of loss provision by submitting

written proof of the occurrence and the extent of loss if a health insurance claim form is NOT supplied to the insured within 15 days after the notice of claim, the insured may comply with the proof of loss provision by submitting written proof of the occurrence and extent of loss