17- Health Insurance Policy Provisons

A health insurance policy that allows an insurer to change the policyowner's premiums, but NOT cancel the policy is called a(n) guaranteed renewable policy conditionally renewable policy optionally renewable policy noncancelable policy

guaranteed renewable policy

Renewability Provisions

Generally speaking, the more favorable the renewability provision is to the insured policyholder, the higher the premium.

The legal action provision in a health contract is limited to no more than ___ years. 2 3 4 5

5

Conditionally Renewable Policies

A conditionally 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

Noncancellable Policies

A noncancellable or "noncan" policy cannot be cancelled nor can its premium rates be increased under any circumstances Noncancellable provisions are most commonly found in disability income policies. They are rarely used in medical expense policie

What amount will be paid under a policy where the insured misstated his/her age? The amount stated in the policy, only if the insured pays an additional premium No adjustments will be made An amount the premium would have purchased at the correct age No amount will be paid because the insured misstated his/her age

An amount the premium would have purchased at the correct age

The entire contract includes the actual policy and the inspection report warranty statements provisions application

Application

Common Exclusions or Restrictions

Health insurance policies frequently cite a number of exclusions or conditions that are not covered. The common ones are 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 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 committing a felony, or attempting to do so, also may be excluded Foreign travel may not be excluded in every instance, but extended stays overseas or foreign residence may cause a loss of benefits

Relation of Earnings to Insurance

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.

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.

12 Mandatory Policy Provisions

In accordance with the NAIC model law, there are 12 mandatory provisions that are required to be in all health insurance contracts. These are as follows: entire contract, time limit on certain defenses, grace period, reinstatement, notice of claim, claim forms, proof of loss, time of payment of claims, payment of claims, physical exam & autopsy, legal actions, change of beneficiary.

Insurance with Other Insurer

In attempting to deal with the potential problem of overinsurance, 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.

Claim Forms

It is the company's responsibility to supply a claim form to an insured within 15 days after receiving notice of claim If it fails to do so within the time limit, the claimant may submit proof of loss in any form, explaining the occurrence, the character, and the extent of the loss for which the claim is submitted

The time limit for filing claim disputes is addressed in which provision of an accident and health policy? Legal actions Entire contract Time of payment of claims Payment of claims

Legal Actions

Entire Contract

Like its counterpart in a life insurance policy, the entire contract provision in a health insurance policy protects the policy owner in two ways. It states that nothing outside of the contract (the contract includes the signed application and any attached policy riders) can be considered part of the contract It also assures the policy owner that no changes will be made to the contract after it has been issued, even if the insurer makes policy changes that affect all policy sales in the future.

Consideration Clause

The consideration clause states the amount and frequency of premium payments. The initial full minimum premium required. The statements made in the application.

Illegal Occupation

The illegal occupation provision specifies that the insurer is not liable for losses attributed to the insured's being connected with a felony or participation in any illegal occupation.

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 time limit for a legal action provision in a contract is limited to no more than 5 years

In which of the following situations would the insurer be liable for a loss? The insured skipped a payment beyond the 31 day grace period The insured was injured while participating in an illegal occupation The insured was given a notice of cancellation from the insurer The insured suffered an injury as an innocent bystander during a bank robbery

The insured suffered an injury as an innocent bystander during a bank robbery

Change of Beneficiary

The insured, as policyowner, may change the beneficiary designation at any time unless a beneficiary has been named irrevocably.

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.

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. Specify the scope and limits of the coverage provided.

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.

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.

Reinstatement

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. If it takes 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 reinstatement

Time Limit on Certain Defenses

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. This is 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.

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.

Craig submits a $500 claim for medical expenses. With a past due premium of $100, the insurer pays $400. Which of the Uniform Optional Provisions covers this situation? Payment of claims Legal actions Unpaid premium Time of payment of claims

Unpaid Premium

States that have "no loss no gain" laws require a replacing policy to keep the same type of coverage as the policy it replaces not charge a different premium from the policy it replaces pay for half of any ongoing claims under the policy it replaces pay for ongoing claims under the policy it replaces

pay for ongoing claims under the policy it replaces

Waiver of Premium

Waives the payments of premiums after the insured has been totally disabled for the specified period of time.

Waiver 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. If the insured's condition improves, the company may be willing to remove the waiver.

NAIC Model Health Policy Provisions

Years ago, the National Association of lnsurance 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

Which of the following is NOT a required provision in an accident and health insurance policy? legal actions grace period change of occupation reinstatement

change of occupation

All of the following are included as part of a contract in the entire contract provision EXCEPT the riders application changes made by the producer policy

changes made by the producer

A health insurance policy where the insurer has the right to terminate the policy for reasons other than the insured's health is called limited renewable conditionally renewable guaranteed renewable conditionally cancelable

conditionally renewable

According to the Affordable Care Act, a grandfathered group health plan MUST cover pediatric oral and vision care preventative services at no cost to the insured essential health benefits with no lifetime dollar limits emergency services provided by a non-participating provider

essential health benefits with no lifetime dollar limits

This MANDATORY health policy provision states that the policy, including endorsements and attached papers, constitutes the partial insurance contract between the parties the entire insurance contract between the parties the conformity of state statutes the legal purpose of the contract

the partial insurance contract between the parties

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 As long as a policy is in force, coverage for a child generally continues until the child marries or reaches the limiting age

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.

The type of policy where the insurer can send a notice to the insured that the policy has been cancelled in the middle of the term is called noncancelable conditionally renewable optionally renewable cancelable

Cancelable

When an insured changes to a more hazardous occupation, which disability policy provision allows an insurer to adjust policy benefits and rates? Relation of earnings to insurance provision Change of occupation provision Conformity of state statutes provision Modified occupation provision

Change of occupation provision

In group health care, what is the purpose of the coordination of benefits provision? Determines where an insured goes to receive treatment Determines what is paid by the primary and secondary insurers in the event of a claim Ensures that a health provider receives the proper benefit amount owed Determines which parent's plan covers a dependent child

Determines what is paid by the primary and secondary insurers in the event of a claim

After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms? File a lawsuit Contact the insurer again requesting forms Nothing File written proof of loss

File written proof of loss

Which of the following actions may an insurance company NOT do in a health policy that contains a guaranteed renewable premium benefit? Stop renewing policy when the insured reaches a specified age Cancel policy if premiums are not paid Increase the premiums on an individual basis Increase the premiums on the basis of an entire classification

Increase the premiums on an individual basis

The reinstatement provision in a health insurance policy is mandatory optional voluntary discretionary

Mandatory

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, if it is, the condition is named specifically in an excluding waiver or rider.

Nonrenewable Policies

Normally associated with short term health insurance. These are policies that are for established policy lengths of a year or less and are considered temp

All of the following are functions of an insuring clause EXCEPT States the conditions under which the policy will pay Outlines the kind of benefits provided Primarily describes the free-look period Provides the policy's scope and limits of coverage

Primarily describes the free-look period

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

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 If the 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

Notice of Claim

The notice of claim provision describes the policyowner's obligation to the insurer to provide notification of loss within a reasonable period of time Typically, the period is 20 days after the occurrence or a commencement of the loss, or as soon thereafter as is reasonably possible

Grace Period

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 seven days for policies with weekly premium payments (i.e., industrial policies), 10 days for policies with premiums payable on a monthly basis, and 31 days for other policies

Cancellable Policies

The renewability provision in a cancellable policy allows the insurer to cancel or terminate the policy at anytime Cancellable policies also allow the insurer to increase premiums

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.

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.

Proof of Loss

The statement that an insured must give an insurance company to show that a loss actually occurred. 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.

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. If the claim involves disability income payments, they must be paid at least monthly if not at more frequent intervals specified in the policy

11 Optional Provisions

There are 11 optional health policy provisions. Companies may ignore them or use only those that are needed in their policy forms. Change of occupation, misstatement of age, other insurance with this insurer, insurance of other insurer, insurance with other insurers, relation of earnings to insurance, unpaid premiums, cancellation, conformity with state statutes, illegal occupation, intoxicants and narcotics.

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

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 If the 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

A clause that allows an insurer the right to terminate coverage at any anniversary date is called a(n) conditionally renewability clause optional renewability clause selective renewability clause cancelable clause

optional renewability clause

Richard owns an insurance policy that is renewable only at the option of the insurance company. His policy is considered to be cancelable guaranteed renewable conditionally renewable optionally renewable

optionally renewable