Insurance License: Laws and Rules Pertinent to Insurance

Backdating

Policies cannot be backdated more than 6 months from the date of issue. The point of backdating a policy is to make it effective at an earlier date to preserve a slightly lower premium at that reduced age.

Exemption from Creditors

Proceeds from a life insurance policy are protected from any claims by a creditor of the insured as long as there is a named beneficiary.

ERISA (Employee Retirement Income Security Act)

insurance producers are prohibited from holding all of the following positions with respect to a benefit plan: -Trustee -Fiduciary -Administrator also requires that a Summary Plan Description must be provided within 90 days following a new plan member's eligibility date. A Summary Plan Description describes an employee's rights, benefits, and responsibilities under the plan in understandable language.

Controlled Businesses

can be defined as policies written on people that the licensed producer has direct influence over: including family, employers, and/or any company to which the producer has stock control.

Small Employer

defined as one that employs between 2-50 employees.

General Account

designated for an insurer who deposits premiums from policies it underwrites and from which it funds day-to-day operations of the business. -does not dedicate collateral to a specific policy and instead treats all funds in aggregate.

Twisting

involves the deceptive act of inducing a policyowner to lapse, forfeit, or surrender a life insurance policy for the purpose of replacing it with another policy with a different company. This action is not in the insured's best interest.

Illegal inducement

It is an illegal practice to offer anything of value (e.g. stocks, bonds, securities, property, dividends, profits, money), other than as explicitly stated in the policy, as an inducement to purchase a contract of insurance.

Rebating

It is illegal to offer a premium rebate or a special advantage of any kind to consumers as an inducement to purchase a contract of insurance.

False Financial Statements

It is illegal to publish any false financial statement regarding a person or entity.

Policy forms

It is illegal to use policy forms until they have been submitted to, and formally approved by, the Commissioner. Once submitted, the Commissioner has 30 days to approve or disapprove the policy forms.

Address Change

Licensees must report a change of address to the Insurance Department within 30 days.

100% and 400%

Low-income individuals and families whose incomes are between____________of the federal poverty level will receive federal subsidies on a sliding scale if they purchase insurance via an exchange

Agency Termination

No insurer may terminate an agency contract without providing least 90 days prior written notice stating the reason for the action, to both the agent and the Commissioner of Insurance. An agent has 30 days from the receipt of the termination notice to request in writing that the Commissioner review the insurer's actions and determine whether the insurer's action complies with the law. Insurers must make a reasonable attempt to rehabilitate agents before terminating them.

50%

On or after January 1, 2014, employers with no more than 25 full time equivalent (FTE's) with average annual wages of less than $50,000 may be eligible for a tax credit of up to ____ of the premiums paid by the employer

DEPENDENT CHILD AGE LIMIT (31 PA. CODE CH. 88.32)

Only medical expense coverage is covered according to this law. Accident, income/indemnity, dental, and vision-only benefits are excluded, and self-funded plans are exempt from the requirements of this law. This state law is broader than and in turn, supersedes the Patient Protection Affordable Care Act (also known as PPACA, or ACA), which is age 26. -However, in Pennsylvania, a child up to age 30 (i.e., age 29 or younger) may retain coverage through a parent's healthcare plan (or HMO) if certain eligibility requirements are met. To be eligible for coverage, the dependent must be age 29 or younger and must meet the following requirements: (1) is unmarried; (2) has no dependents; (3) is a resident of Pennsylvania or is enrolled as a full-time student at an accredited institution of higher education; (4) is not covered under another group health plan or individual health insurance plan; or (5) is not enrolled in or entitled to benefits under any government health care benefits program.

30 days

Pennsylvania free-look period for Long-Term Care policies

-information from a consumer report -account balance information and payment history -information a consumer provides to a licensee in an insurance application -information the licensee collects through an Internet cookie (an information-collecting device from a web server)

Personally identifiable information is a term that includes any of the following:

Dental Plans

-A pre-treatment estimate of the cost of dental services may be required whenever the patient requires dental treatment -are typically indemnity plans, which pay benefits based on a predetermined, fixed rate set for the services provided- regardless of the actual expenses incurred. -To prevent adverse selection in a group dental expense plan, the plan may require any of the following: probationary periods, waiting periods, evidence of insurability, or limits on annual benefits -With prepaid dental plans, coverage is limited to a closed panel of dentists and must provide the following dental services: emergency dental services, diagnostic services, preventative services, and restorative services -The absence of deductibles on routine examinations encourages preventive care in dental insurance -Dental treatment expenses required to repair an injury would normally be covered under a hospital or medical expense policy. -Some hospital and medical expense plans will provide coverage for some dental related services related to the jaw or facial bones. Some of these include: reduction of any facial bone fractures; removal of tumors; treatment of dislocations, facial and oral wounds/lacerations in order to repair an injury; and the removal of cysts or tumors of the jaws or facial bones. -Comprehensive dental plans usually provide routine dental care services without deductibles or coinsurance to encourage preventative care (such as teeth cleanings, fluoride treatments etc)

Advertisements

-All advertisements for health insurance shall make clear the identity of the insurer -Insurance companies are responsible for the accuracy of testimonials -Statistics relating to dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to an insurer or policy may not be used in an advertisement unless it is accurate and relevant -A.M. best rating = not a form of advertising

Pennsylvania Mandated Benefits (individual and group)

-Physically handicapped/mentally retarded children -Orally administered chemotherapy medication -Treatment for alcohol abuse and dependency -Mental health parity and addiction equity -Annual gynecological examinations -Coverage of adopted children -Childhood immunizations -Serious mental illness -Cancer therapy -Medical foods

Federal Estate Tax

A tax cost typically associated with death

5% inflation protection rider

A Long-Term Care plan must make a ________________ available for purchase at the request of the insured.

180 days

A Pennsylvania temporary producer license may not be issued for a period not to exceed...

Solvency

A life insurance company is financially impaired (insolvent) if does not have the minimum reserves, referred to as "net value," plus 50% company capital on hand. When this happens, the company is prohibited from issuing new policies until funds equal liabilities.

Suitability of annuities (Act 48 of 2018)

A producer may not recommend to any person the purchase, sale or exchange of any annuity contract unless the producer has reasonable grounds to believe that the transaction or recommendation is not unsuitable for the person. -Suitability is based upon the producer conducting a reasonable inquiry regarding the applicant's insurance objectives, current financial situation and insurance needs.

Shared Commissions

A producer may share a commission with another producer when the other producer is licensed in the same line of business.

Assumed name

A producer must report to the Commissioner if he/she will be conducting business under an assumed name.

-The contract is not a deposit. -The contract is not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency or instrumentality of the Federal Government. -The contract is not guaranteed by the financial institution or an affiliated insured depository institution. -The contract is subject to investment risk, including potential loss of principal, when appropriate.

A producer who sells insurance on the premises of a financial institution, such as a bank, must provide the following disclosures at or before a consumer submits an application for insurance:

hearing given to the producer

A producer's License CANNOT be revoked without a what?

Entire Contract

A provision that the policy and the application shall constitute the entire contract between the parties.

Incontestability

A provision that the policy terms shall be incontestable after it has been in force for a period of two years from its date of issue (unless the purpose for taking out the coverage was fraud). 1035 Exchange: When an existing life insurance policy is assigned to another insurer for a new contract, the transaction may be treated for tax purposes as 1035 Exchange.

Right to Examine (Free Look)

A required provision in a life insurance policy stating that the policyowner is permitted 10 days from the date the policy is delivered to examine the policy and return it for a refund of all premiums paid. In health insurance, this provision is optional but is usually included.

Postnatal Care

According to Pennsylvania law, postnatal care must be delivered within 48 hours of discharge.

$2,000 by the number of full time employees minus 30

According to the Affordable Care Act, if a large employer does NOT provide health insurance and owes an employer mandate penalty, the annual penalty is calculated by multiplying

NEWBORN CHILD COVERAGE (40 P.S. §§ 771-775.2; 31 PA. CODE CH. 89.201-.209)

All individual and group health plans which provide coverage to family members of the insured must provide coverage for the insured's newborn child at the moment of birth. If a premium is required to continue the newborn's coverage, it must be paid within the first 31 days to continue coverage. Coverage includes injury and sickness, including medical care for diagnosed congenital defects and birth abnormalities.

-Ambulatory patient services -Emergency services -Hospitalization -Maternity and newborn care -Mental health and substance use disorder services, including behavioral health treatment -Prescription drugs -Rehabilitative services and devices -Laboratory services -Preventative and wellness services and chronic disease management -Pediatric services, including oral and vision care

All plans must include the following:

25%

An accelerated death benefit in Pennsylvania must be at least what percentage of the total death benefit?

Stranger-originated life insurance (STOLI)

An agreement to initiate a life insurance policy by a third-party investor who, at the time of policy origination, has no insurable interest in the insured.

Producer

An individual appointed by an insurance company that represents the company and presents policies on its behalf

Admitted insurer (Authorized Insurance Company)

An insurance company that has qualified and received a Certificate of Authority from the Insurance Department to sell insurance in this state.

50%

An insurer may provide commission to a producer for the sale of a long-term care insurance policy only if the first year commission is not greater than _____ of the first year premium.

gynecological exams, mammograms, and routine pap smears (cervical cancer testing). -One baseline mammogram per year for women 40 and older -Mammogram for those under the age of 40 as recommended by physician

Any individual or group health insurance policy must provide coverage for annual what?

$10,000

Any person who violates a cease and desist order, or other order issued by the Commissioner, will be subject to a penalty up to what?

$2,500

As defined by the Affordable Care Act, the MAXIMUM amount an individual can contribute to a Flexible Savings Account is what?

The open enrollment period for Medicare Supplements

begins with the month in which enrollment in Part B Medicare occurred, typically at age 65, and lasts for 6 months

Misrepresentation

It is an illegal practice to mislead or misrepresent any fact about an insurance policy- such as policy terms, benefits, value, cost, effective date, or existence of a contract of insurance.

-The maximum age a dependent can be covered under their parent's medical plan in Pennsylvania is 29 (or until age 30). -The maximum age for dependents covered under an accident and health plan (not specifying medical) in Pennsylvania is 18 (or until age 19). -According to the Affordable Care Act, the maximum age for a dependent to be covered under a parent's medical plan is 26. -Individual health insurance policies must cover mentally and physically handicapped dependent children until they become self-supportive, regardless of age.

Exam tip: Watch out for tricky questions regarding dependent coverage. Read the question and all options carefully before answering a question about age limits.

-Loss sustained while on active duty as a member of the armed forces as a result of an act of war -Suicide -Sickness or injury covered by workers compensation -Mental disorders -Involved in an act of riot -Elective cosmetic surgery -Specified and named hazardous sport or hobby -Injured in the attempt to commit a felony

Examples of general exclusions:

HIV test

For underwriting an individual policy, insurers may require proposed insureds to undergo an ___________, but only in conjunction with other medical tests. The basis for requiring an ________ cannot be the proposed insured's sexual orientation. The insurer must obtain written consent from the proposed insured in order to conduct the this.

-group policy number -description of the insurance protection -names of the insured, beneficiaries, and dependents -rights and conditions

Group life Certificates must contain the following:

19

Health plans cannot limit or deny benefits or deny coverage for a child younger than age ____ because of preexisting conditions.

1035 exchange

IRS allows tax-free transfer of cash values between 2 LIKE policies (i.e. Life to Life, Annuity to Annuity, or Life to Annuity).

Representations

If the application is made part of the policy, the policy shall contain a provision that the statements in the application, in the absence of fraud, are considered representations.

$1,000 per violation, but no more than $10,000 in a 6-month period

If the person did not know or reasonably should not have known, the penalty is up to...

60 days

In Pennsylvania, an employee must reques spousal coverage under a group sponsored accident and health plan within _____ days of marriage.

A guardian must be appointed

In Pennsylvania, what's the requirement for a minor to receive proceeds from a death benefit?

$5,000 per violation, but no more than $50,000 total over a 6-month period

In addition to possible actions taken against a person's license, any person who commits an unfair method of competition, act, or practice in violation of insurance laws, and knew or should have known that such act was a violation, will be subject to a penalty up to...

period (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 __________ without proving insurability. If this right is exercised, the employee is responsible for the payment of premium.

Rates

Insurance companies are required by law to charge premium rates that are not excessive, inadequate, or unfairly discriminatory. Insurers must file their rates with the Insurance Department. A rate filing is subject to a 30-day waiting period before it becomes effective.

False Advertising

It is an illegal practice to falsely advertise insurance products or services in any way. This includes making false statements about the financial condition of an insurer.

Defamation

It is an illegal practice to make any public statement or advertisement that contains false information or unsubstantiated criticisms about an insurance company.

-Be at least 18 years old -Complete a 24 hour prelicensing course in the pertinent line of authority -Pass the Pennsylvania state licensing exam. After passing, a license application must be submitted to the Insurance Department within 1 year -Not have committed any act that is ground for denial, suspension, or revocation of a license -Submit appropriate forms, application, fingerprints, and fees

Producer Requirements

fiduciary responsibility

Producers have a __________________ for all funds collected from clients. Producers must not mingle these funds with their own personal funds. However, producers are not required by law to open a separate bank account for such funds.

-Determine if transaction will involve the replacement of existing life insurance -Obtaining a signed statement from applicant verifying that the applicant understands a replacement is taking place -Secure a list of all existing policies being replaced -Provide to applicant a Notice Regarding Replacement of Life Insurance signed by both producer and applicant -Provide comparison forms when requested by applicant -Leave copies of all sales proposals

Producers have several duties if a replacement of a life insurance policy is involved. These include:

Continuing Education

Producers must complete 24 hours of continuing education every two years in order to renew their licenses. In Pennsylvania, the Commissioner is responsible for Continuing Education (CE) course content approval.

Examination of Books and Records

The Commissioner may examine the business affairs, books, records, documents, and computer files of any producer to determine the producer's financial condition and whether the producer is abiding by insurance laws. The Commissioner must conduct a financial examination of each insurer licensed in Pennsylvania at least once every five years.

-Provided incorrect, misleading, incomplete or untrue information in the license application -Violated any insurance laws, regulations, subpoena, or orders from the Insurance Commissioner -Obtained or attempted to obtain a license through fraud or misrepresentation -Intentionally misrepresented the terms of an insurance contract -Been convicted of a felony

The Insurance Commissioner may place on probation, suspend, revoke, refuse to renew, or deny a license to any person who has:

Outline of Coverage.

The document that describes policy features, benefits, exclusions and riders in a Long-Term Care policy

-Age • Annual income • Financial situation and needs • Financial experience • Financial objectives • Intended use of the annuity • Financial time horizon • Existing assets • Liquidity needs • Liquid net worth • Risk tolerance • Tax status

The following list is information that should be taken into consideration when making suitable recommendations concerning the purchase, exchange, or replacement of an annuity:

8%; 3 full

The maximum fixed interest rate charged by insurers is ______ in Pennsylvania. A policyowner cannot borrow against the cash value unless policy has been in force for _______ years. If policyowner fails to repay loan, the policy will not be voided. The company has the right to deduct from the death benefit any outstanding loan balances when an insured dies. -policy loans

Commissioner

The primary duty of the Insurance ________________ is to see that laws are properly executed and enforced. -is appointed insurance by the governor to a four-year term.

Personal Liability

The producer of an insurer can be ________________ for committing acts which are prohibited in the agency contract.

-Suspend or revoke the violator's license -Refuse to issue or renew a violator's license for up to one year -Impose a civil penalty of up to $500 per violation

Under a separate administrative action, the Insurance Commissioner may:

26th

Under the Affordable Care Act (ACA), parents can insure their dependent adult children up to their _____ birthday, even if they are married or not living with their parents

-Certify health plans as qualified, based on pre-determined criteria -Utilize individual, unique formats for presenting health benefit plan options -Verify and resolve inconsistent information provided to the exchange by applicants

Under the Affordable Care Act (ACA), the health insurance exchange will perform all of the following roles:

Commissions and Fee

Unlicensed persons may not receive commissions, with the following exceptions: renewal or deferred commissions to retired producers, and referrals.

notify commisioner

What is the required action to be taken by a Pennsylvania licensee before operating under an assumed business name?

cease and desist order

When the Commissioner believes a producer or entity has broken an insurance law, the Commissioner has the authority to issue a ___________________ at a hearing. Any person or entity found to be in violation of an insurance law will be notified by the Insurance Department. The notice will specify the nature of the violation and a hearing date at least 10 days later.

Prosthodontics

a branch of dentistry dealing with the replacement of missing parts using biocompatible substitutes such as bridgework or dentures

Periodontics

a dental specialty that involves the prevention, diagnosis and treatment of disease of the supporting and surrounding tissues of the teeth or their substitutes. It also involves the maintenance of the health, function, and esthetics of these structures or tissues.

COBRA (Consolidated Omnibus Budget Reconciliation Act)

a federal law that requires employers with 20 or more employees to include a continuation of benefits provision for former employees and their dependents -guarantees that the participant can continue the group coverage (at their own expense) at group rates if their participation in the group plans terminated because of a qualifying event

Long-Term Care Partnership Policy

a long-term care insurance product that pays for some or all of the expenses associated with a spectrum of personal-care services, ranging from home care to skilled nursing facility care. These new polices are part of a nationwide effort that consists of private/public partnerships that encourage people to purchase long-term care insurance by allowing them to keep their assets if they ever exhaust their insurance and have to turn to Medical Assistance -Protected assets are not considered in determining eligibility for Medical Assistance (Medicaid) or estate recovery. -has beneficial tax treatment and requires inflation protection features that protect younger purchasers from an increase in expenses caused by inflation. -are "tax-qualified", meaning if you itemize your taxes and your total medical and dental expenses exceeds 7.5% of your adjusted gross income, you may be able to claim a portion of your premium as a medical deduction. -Also, benefits received from a Partnership program are NOT considered taxable income.

Separate Account

a privately managed investment account owned by an investor seeking to manage a pool of individual assets. -are typically opened through a brokerage or financial advisor. They may also be held at a bank or opened with an insurance company. -are typically used for variable life or variable annuity products.

"Exchanges"

are created by the Affordable Care Act (ACA) health reform bill to help individuals and small businesses purchase health insurance coverage. The purposes of the exchange include: -Reduce the number of uninsured in the state -Facilitate the purchase and sale of qualified health plans in the individual market -Assist qualified employers in the state in enrolling their employees in qualified health plans -Assists individuals in accessing public programs, premium tax credits, and cost-sharing reductions

Grandfathered Plans

are plans that were purchased before March 23, 2010. These plans do not have to follow the ACA's rules and regulations or offer the same benefits, rights and protections as new plans. -cannot impose lifetime limits on how much health care coverage people may receive -may lose their grandfathered status if the insurer significantly raises co-insurance charges, deductibles, or co-payment charges.

Fraud and False Statements (Section 1033)

makes it illegal to lie, falsify, or conceal information (orally or in writing) from a federal official. -As it applies to insurance, any person engaged in interstate insurance business who engages in intentional unfair or deceptive insurance practices or overvalues an insurance product in a financial report or document presented to a regulatory official, will be in violation of federal law. Other violations include but are not limited to: embezzling money from an insurance company, misappropriating insurance premiums, and writing threatening letters to insurance offices. -The punishment for violation is a fine up to $50,000, imprisonment up to 15 years, and/or license revocation -An individual convicted of a felony involving dishonesty may engage in the business of insurance ONLY after receiving written consent from the state insurance regulatory agency and a 1033 waiver

Inactivity due to Military or Extenuating Circumstances

may request the department to waive the requirements of having to complete continuing education for the period in which the license had lapsed and payment of the lapsed license fee.

10 days

minimum free look period of life insurance policy

10 days

minimum free-look period

Group Health Certificates

must contain a summary of policy features and benefits.

Producers

must report any bankruptcy, felony conviction, or any other administrative action that occurs in Pennsylvania or another jurisdiction to the Insurance Department within 30 days.

Managers and exclusive general agents

produce and underwrite insurance business. -act directly or indirectly as an insurance producer for a domestic insurer for a specific portion of the insurer's business or within a specific territory

coordination of benefits (COB) provision

states that benefits will not be paid for medical expense amounts reimbursed by other policies. An insured is not permitted to collect in claim benefits more than 100% of total covered medical expenses, no matter how many policies he owns. In addition, it also designates the order by which the policies will pay (i.e., which policy pays first or is primary).

Oral and maxillofacial surgery

surgery to treat many diseases, injuries and defects in the head, neck, face, jaws and the hard and soft tissues of the oral and maxillofacial region.

Endodontics

the branch of dentistry dealing with diseases of the dental pulp. Root canals would be an example. - is commonly excluded or limited from a dental policy.

Restorative

the procedure for restoring the function and integrity of a missing tooth structure. Examples include fillings, crowns, and dental bridges.

the treatment of irregularities in the teeth (esp. of alignment and occlusion) and jaws, including the use of braces.

the treatment of irregularities in the teeth (esp. of alignment and occlusion) and jaws, including the use of braces.

Federal Privacy (Gramm-Leach-Bliley) - Financial Services Modernization Act of 1999

this federal law repealed part of the Glass-Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. -The law allowed commercial banks, investment banks, securities firms, and insurance companies to consolidate. -The Act includes a Financial Privacy Rule which requires financial institutions to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter. -The privacy notice must explain the information collected about the consumer, where that information is shared, how that information is used, and how that information is protected. The customer has a right to opt-out.

Pennsylvania Life and Health Guaranty Association

used to rehabilitate insolvent (financially incapacitated) insurers. Producers are prohibited from using the existence of the Pennsylvania Guaranty Association for selling, soliciting, or inducing purchase of an insurance policy. -will provide: $300,000 in life insurance death benefits $100,000 in cash surrender value $300,000 in health insurance claims $300,000 in present value annuity benefits -funded by insurance companies through assessments.