A.D. Banker Chapter 12 Individual Policy Provisions

The grace period for an individual health insurance policy being paid on a quarterly basis is ___ days.

31 days: 7 days for weekly; 10 days for monthly; and 31 days for all other payment modes (quarterly, semi-annual, and annual).

The "time limit on certain defenses" generally terminates the insurance company's right to avoid a claim more than __ years from the date of policy issue.

2 years

Proof of loss is required within _____ days of loss.

90 days: The Proof of Loss Provision (a Mandatory Uniform Provision) stipulates that the insured must generally provide proof of the loss within 90 days of the loss, or within the shortest time possible, but not exceeding 1 year unless the insured suffers legal incapacity.

Comprehensive Case Management

A case manager may be assigned to determine the appropriate course of action for an insured. The case manager may require a referral or a second opinion before approving a procedure. The case manager will also manage the utilization review of a subscriber's stay in the hospital or may provide assistance with a future course of action during recovery of the insured.

How may the premium in a guaranteed renewable policy be increased? a) It may not be increased at all b) It may be increased according to the increased risk of the insured's health status c) It may be increased only in relation to the number of claims paid in the past year d) It may be increased for all insureds in the same age group and risk classification

A guaranteed renewable policy must be renewed upon payment of the current premium. If the insurer wants to raise the premium for an individual insured, it must increase the premium for all insureds that are "similarly situated"—persons who are the same age, all persons in the same state, all persons who own the same policy by "form number". Premium increases cannot be the result of an individual's claims history or a change health status.

Retrospective Review

A review of claims for services already received. Retrospective review may be used to confirm medical necessity of services, identify coordination of benefits opportunities, and to determine if a non-precertification penalty applies.

Probationary Period (Other)

A specified period of time before coverage goes into effect for preexisting conditions. This is designed to protect the insurer for losses due to a sickness that occur immediately (10-30 days)after the policy is issued. Losses due to an accident are not preexisting and are covered immediately with no waiting period.

Prospective Review

A utilization review conducted prior to the delivery of the requested medical service. Prospective reviews include the initial review conducted before treatment starts, and the initial review for treatment to a different body part. During prospective (or concurrent) review, copies of medical records may be required only when necessary to verify that the health care services being considered are medically necessary.

Concurrent Review

A utilization review conducted while services are being provided. The insurer monitors the insured's hospital stay to make certain that everything is proceeding according to schedule. The length of hospital stay is monitored.

Conformity with State Statutes (optional)

Any provision on the policy effective date that is in conflict with statutes of the state is automatically amended to meet state requirements.

Elimination Period (Other)

A waiting period found in disability insurance policies before benefits are payable after a loss occurs. This acts as a time deductible and eliminates claims for losses that do not last a minimum period of time. The policyowner can choose the elimination period in the policy and the time period selected will affect the premium. The longer the elimination period chosen, the lower the cost of coverage.

Time of Payment of Claims

All claims are to be paid immediately upon written proof of loss. Loss of time benefits (disability income) will be paid not less frequently than monthly.

Right to Examine (Free Look) (Other)

Allows the insured, upon delivery of the policy, 10-30 days to look over the policy and if dissatisfied, return it for a full refund. A free look period of 30 days is required for Medicare Supplement and Long-Term Care policies.

Eligible Expense (other)

An expense actually incurred by, or on behalf of, an insured person for services and supplies that are: - Administered or ordered by a physician - Medically necessary to the diagnosis and treatment of an injury or sickness - Are not excluded by any provision of the policy; and incurred while the insured person's insurance is in force

Impairment Rider

An impairment rider is a temporary or permanent rider added to a policy that will exclude specific conditions that would normally cause a policy to be declined or rated substandard. The use of this rider allows an insured to qualify for a policy with the exclusion attached, generally at standard rates.

Misstatement of Age (Optional)

Benefits paid will be based on what the premium paid would have purchased at the correct age. If the misstatement leads the insurer to provide coverage beyond the age limit, liability is limited to a refund of premiums.

Payment of Claims

Claims are paid to the policyowner unless otherwise specified. Any death benefits are paid to the named beneficiary. Assignment of Benefits - A method where the person receiving medical benefits (the insured) assigns the payment of those benefits to the provider of services (a physician or hospital). Assignment of benefits makes the claims process easier for the insured.

Change of Beneficiary

Consent of beneficiary is not required unless the beneficiary is irrevocable. The change becomes effective on owner's signature date upon the insurer's recording the change.

Consideration Clause (Other)

Consideration by definition is the exchange of value in a contract. This clause states the amount and frequency of the premium, including statements in the application that determine the premium. This is the insured's consideration in exchange for the insurer's promise to pay benefits within the contract terms.

Relationship of Earnings to Insurance (optional)

Disability income (loss of time) benefits cannot exceed the greater of the insured's monthly earnings at the time the disability began or the insured's average earnings for the 2 years immediately preceding a disability. The monthly benefit cannot be reduced to less than $200.

Physical Exam and Autopsy

Gives the insurer the right to examine the insured or require an autopsy at insurer's expense, where not prohibited by law.

Noncancellable (Policy Renewal Provisions)

Guaranteed renewable and the premiums cannot be altered. This is most favorable for the insured because only the owner can terminate the policy and rates never increase. The insurer cannot change the policy terms or provisions, except to make them more favorable for the insured, once issued.

Intoxicants and Narcotics (optional)

If an injury is caused by the insured being intoxicated or under the influence of drugs unless administered in accordance with the advice of a physician, a claim will be denied.

Change of Occupation (Optional)

If the insured changes to a more hazardous occupation without notifying the insurer prior to submitting a claim, the benefits will be reduced to that benefit which premiums paid would have purchased at the more hazardous occupation. If the insured changes to a less hazardous occupation, the benefits will pay as stated in the policy and the insured may apply for a rate reduction. If the insured works at two occupations, rates for the most hazardous occupation will be charged.

Other Insurance with This Insurer (Optional)

If the insured has more than 1 policy with the same company, the insured may decide which policy to use. Excess premiums for the excess coverage will be returned. The provision protects insurers against overpayment of claims.

Claim Form Provision

If the insurer requires a claim form, it must be received by the insured from the company within 15 days after notice of claim. If forms are not furnished, the insured may submit written proof of occurrence, character, and extent of the loss.

Legal Actions

Insured must wait 60 days, but no later than 3 years after providing proof of loss, before legal action can be brought against the insurer.

Cancellable Policy Renewal Provisions

Insurer or insured may cancel at any time (has lowest premium). This is the least favorable to the insured.

Notice of Claim

It is the insured's responsibility to notify the insurer of a claim. It must be given in writing and is required within 20 days of loss or as soon as reasonably possible. A notice to the agent is the same as notice to the insurer. If the insured is receiving continuing disability benefits, the insurer can require notice of continuance of claim every 6 months.

Period of time (NONrenewable) Policy Renewal Provisions

Life of the policy is expressed and cannot be renewed. If the covered medical services were provided while the policy was in force and just before policy termination, the insurance company must pay the claim as any other claim.

Preventive Care

Managed care plans are known for stressing preventive care. This is care designed to prevent illness or disease. The basic premise is that it is more cost effective to prevent losses than to treat losses after they occur. Examples of preventive care include covering well child care visits, immunizations, mammography screenings, as well as nutrition and weight loss programs.

Time Limit on Certain Defenses (Incontestable)

No statement or misstatement made in the application at the time of issue can be used to deny a claim after the policy has been in force for 2 years. False statements on the application may lead to rescission of the policy by the insurer during the first 2 years of the contract The only exception to the time limit is for fraud. Fraudulent statements can be used to deny coverage with no time limitation. Fraud is a crime of intent, and the insurer would have to prove that the insured knew the information was false and was intended to obtain benefits which would be denied if the true information were known. This provision also provides that a pre-existing condition cannot be excluded beyond the 2-year time limit unless specifically excluded by name in the contract.

Alternatives to Hospital Services

Oftentimes, care may be provided in a setting other than a hospital. Many procedures can now be performed in a surgical center on an outpatient basis as opposed to a hospital admission. Treatment may also be provided by a visiting nurse in one's home, or hospice for the terminally ill.

Optional uniform provisions found in health insurance policies are designed to protect who?

Optional Uniform Provisions are designed to protect the insurer.

Conditionally Renewable Policy Renewal Provisions

Policy is renewable unless a termination notice is given by the insurer or is nonrenewable for specified conditions (such as the insured must still live in California, or the insured has not changed occupations) that must be stated in the policy when issued.

Waiver of Premium (Other)

Premiums are waived by the insurer after a stated time period (usually 3-6 months). Premiums are not paid by the insured until such time he/she has recovered from the disability; then premiums are resumed at the same mode and amount.

Coordination of Benefits (other)

Provides that if more than one plan covers a loss, the plans will coordinate so the insured does not get paid more than the entire loss. For example, if a disability occurs on the job, Workers' Compensation will be the primary payor and will coordinate benefits with Social Security disability and any other private disability insurance.

Reinstatement

Reinstatement allows the insured, at the insurer's discretion, to put back in force a policy that has lapsed for nonpayment of premium by paying past due premiums plus interest. A reinstatement application to prove insurability may also be required. If the insurer does not reject the reinstatement application within 45 days, coverage will be automatically reinstated. Accidents are covered immediately and sickness coverage begins 10 days after reinstatement.

Guaranteed Renewable Policy Renewal Provisions

Renewable without proof of insurability, at insured's option, to age 65 or for the insured's lifetime. Premiums are not guaranteed, and may be changed on a class basis only, not an individual basis.

Precertifiation

Requires the insured to notify his/her insurer in advance of certain non-emergency procedures. The physician may submit claim information prior to treatment to know in advance if the procedure is covered and at what rate benefits will be paid.

Beth has a contract stating she must be disabled for 3 months before benefits will begin to be paid. This 3-month period is known as the ____ period?

The Elimination Period is a period of time that must elapse after onset of a disability before benefits begin to be paid.

Entire Contract Clause

The entire contract includes the policy and provisions, a copy of the application and any riders, waivers or endorsements. Changes to the policy must be requested in writing, signed by the insurer, and attached to the contract in the form of an amendment. The agent does not have the authority to directly make changes to the policy or waive any policy provisions.

Grace Period

The grace period is the time after the premium due date before the policy lapses for nonpayment of premium. The grace period varies with mode of premium. The grace period must not be less than 7 days (weekly premiums), 10 days (monthly premiums) and 31 days for all other modes of premium.

Cancellation (optional)

The insurer may cancel with 5-day written notice to the insured. Unearned premium is refunded on a pro rata basis if cancelled by the insurer. The insured may cancel after the initial policy term with written notice to the insurer at any time. The unearned premium is returned on the short rate basis, which includes a cancellation fee. The insured's cancellation will become effective not later than five days after receipt of the cancellation request by the insurer.

Optionally Renewable Policy Renewal Provisions

The policy may be cancelled at the option of the insurer (but only on a premium due date or policy anniversary).

The renewability provisions in order from lowest to highest in terms of benefit to an insured/policyowner are: cancellable, optionally renewable, conditionally renewable, guaranteed renewable, and noncancellable.

The renewability provisions in order from lowest to highest in terms of benefit to an insured/policyowner are: cancellable, optionally renewable, conditionally renewable, guaranteed renewable, and noncancellable.

Ambulatory Outpatient Care

These facilities monitor the cost effectiveness of outpatient services and provide, in addition to diagnosis and treatment: - Preventive care - Health education - Family planning - Dental/vision care

First Dollar Coverage (Other)

This provides that coverage will begin paying for a covered loss starting with the first dollar and no deductible will apply.

Unpaid Premiums (Optional)

This provision allows an insurer to deduct unpaid premiums from a claim that has occurred during a grace period.

Preexisting Condition Provision (Other)

This provision defines conditions that the applicant received, or should have received, medical advice or treatment prior to the effective date of the policy.

Military Suspension (other)

This provision is designed to protect active duty and reserve members of the armed forces. Individual plans may suspend coverage (and premium) during active military service. When no longer serving, these individuals will be permitted to resume coverage and premiums without any waiting periods.

Proof of Loss

This provision limits the amount of time the insured has to submit proof of a loss to the insurer. Proof of loss is required within 90 days of loss or in the shortest time possible, but not to exceed 1 year unless the insured suffers legal incapacity.

Insuring Clause (Other)

This provision states who is insured, the insurer, the amount of coverage, the time period and the insurer's promise to pay benefits according to the terms and provisions found in the policy.

Mandatory Second Surgical Opinion

This requirement may be included in policies that offer surgical expense benefits, requiring the insured to consult a physician, other than the attending physician, to determine the necessity of surgery and/or alternate methods of treatment. If the insured should fail to obtain the second opinion, benefits are greatly reduced. The provision also permits the insured to request a second opinion if he/she disagrees with the recommendation of the treating physician or healthcare provider.

Guaranteed Insurability Rider

This rider, which may also be referred to as the Future Insurability Option, is commonly found in disability income and long-term care policies. It will allow an insured to increase limited benefits at specified intervals in a policy without evidence of insurability. This rider is added to the policy for an additional premium.

Insurance with Other Insurers (Optional)

When an insured is covered by more than one policy, claims will be paid according to the policy with the largest benefit, but claims will be apportioned between the various insurers in relation to the amount of premiums paid as a percentage of the total premium the insured has paid for all such policies. The form of this optional provision may vary slightly based on whether the benefits are "expense incurred" or simply "other benefits" which are not expense incurred.

Illegal Occupation/Act (Optional)

When this provision is included, a claim will be denied if the insured is injured while committing an illegal occupation/act. Also, an illegal occupation will result in an application being declined for coverage.

In which ONE of the following situations would an insurance company most likely use an impairment rider? a) G is looking to obtain a health insurance policy, but is concerned about a current heart condition b) T, age 70, wants to buy an individual disability income policy but is retired and receiving home health care c) S is looking to buy a disability income policy, but is unemployed d) F has cancer and is looking to buy a cancer only policy to help with the cost of treatment

a) An impairment rider excludes coverage for a specific ailment or condition that otherwise would be covered, so the applicant is still able to obtain coverage for other health care needs.

Managed Health Care attempts to contain health care costs by controlling the behavior of participants through all of the following, except: a) Unlimited access to providers b) Risk-sharing c) Preventive care d) Comprehensive case management

a) Managed Health Care attempts to contain health care costs by controlled access to providers, not unlimited access.

Which of the following is not an example of a cost containment measure? a) Replacement b) Mandatory second opinion c) Utilization review d) Precertification for cancer therapy

a) Mandatory second opinions, utilization review and precertification are all considered cost containment measures. Replacement can apply to any policy that is cancelled when a new policy is issued and is not specific to managed care plans.

Managed Health Care attempts to contain costs by controlling the behavior of participants in all of the following ways, except: a) Partial Case Management b) Preventive Care c) Copayments and/or coinsurance d) Controlled Provider Access

a) Partial Case Management Comprehensive Case Management is employed as opposed to partial.

Which statement concerning individual A&H policy renewal provisions is most correct from the perspective of the insured? a) The more favorable the renewal provision to the insured, the higher the cost b) The more favorable the renewal provision to the insured, the lower the cost c) The renewal provision has no impact on the cost of the policy to the insured d) Renewal provisions only apply to property and casualty contracts and are not included under individual A&H policies

a) The more favorable a renewal provision is to the insured, the higher the premium will be. A Noncancellable policy will cost the most because its premium may not be changed in the future.

When an insured is discharged from the military, what happens to health insurance coverage that was in place prior to being called up for active military service? a) The insured will be permitted to resume coverage and premiums without any waiting periods b) The insured will be subject to service-related pre-existing condition exclusions c) The insured will have to apply for new coverage, but can obtain a military discount d) The insured will have to go through the normal waiting period as if it were a reinstatement

a) Under the military suspension provision, individual plans may suspend coverage (and premium) during active military service. When the insured is no longer serving, these individuals will be permitted to resume coverage and premiums without any waiting periods.

Under the Uniform Individual Accident and Sickness Policy Provisions, what happens when a health policy contains provisions that have gone out of compliance because of changes in state law? a) The policy is invalid b) The policy will be construed as if it conformed to the law c) The policy may be voided by the insurer d) The insurer will be fined and the policy reissued

b) According to the Conformity with State Statutes Provision (an Optional Uniform Provision), any provision on the policy effective date that is in conflict with state statutes is automatically amended to meet state requirements.

According to the Proof of Loss provision, how long does an insured have under normal circumstances to furnish the insurer with evidence of a claim? a) Within 45 days of the loss b) Within 90 days of the loss c) Within 60 days of the loss d) Within 30 days of the loss

b) Proof of loss is required within 90 days of the loss.

What is the insured's responsibility with regard to notifying the insurance company of a loss under a disability policy? a) It is up to the insured's doctor or the hospital to notify the insurance company of a claim b) Notice of a claim may be filed at any time within one year of the loss c) Notice of claim must be filed within 20 days of the loss, or as soon as possible d) Notice of claim must be filed not less than 60 days nor more than 1 year following the loss

c) Notice of claim must be filed within 20 days of the loss, or as soon as possible: Unless reasonably prevented from doing so, an insured must notify the insurance company of a claim in writing within 20 days of the loss. In practice, the insured's physician or the hospital makes the notification for the insured, but it remains the responsibility of the insured.

Does the insured have the right to change the beneficiary designation of a health insurance policy? a) No, only the insurer has that right in health policies b) Yes, the beneficiary designation is always revocable in health policies c) Yes, unless the beneficiary is designated as irrevocable d) No, the beneficiary designation in health policies is always irrevocable

c) The Change of Beneficiary Provision (a Mandatory Uniform Provision) establishes the insured's right to change the beneficiary, unless it is designated as irrevocable.

What is the purpose of a probationary period in a disability income policy? a) It allows the employer to fire the employee up to 90 days after being hired without liability for any disability which may have occurred b) It allows the insurance company to avoid any claims due to accidental causes in the first few days of the policy c) It allows the insurance company to avoid illness claims made in the first 10-30 days of the policy d) It allows the insurance company to avoid all claims made in the first 10-30 days of the policy

c) The purpose of the probationary period is to limit the insurance company's claims liability to sickness that occur immediately (10-30 days) after the policy is issued. Losses due to illness in the probationary period are considered as being caused by a preexisting condition.

If an insured changes occupations and the new occupation is in a higher risk class than the former occupation, what does the change of occupation provision allow the insurance company to do in the event a disability claim is presented but the insured failed to inform the insurer of the change? a) The insurer may deny the claim due to misrepresentation b) The insurer may first collect the past due higher premium before approving the claim c) The insurer will reduce the benefit proportionally in relation to the actual premium paid based on the higher risk classification d) The insurer must pay the claim according to the contract, as stated in the insuring clause

c) When an insured fails to notify the insurance company of a change in occupational to a higher risk classification and suffers a covered loss, the insurance company's only course of action is to reduce the benefit payable in relation to the premiums actually paid compared to the higher premium which should have been paid.

An individual is approved for a health insurance policy effective March 1. On March 4, the insured breaks his arm playing basketball with some friends, is treated at the local emergency room, and submits a bill for $2500 to his insurance company. On March 9, the insured decides to cancel the insurance and requests a refund of the $3000 annual premium he has paid. What will the insurance company do? a) The company will send a short rate refund because the insured requested the cancellation b) The company will only refund $500 because it is liable for his $2,500 claim c) The insurer will not cancel the policy because the insured has already filed a claim d) The insurer will refund the insured's $3,000, and has no responsibility to pay his claim

d) A policy cancelled during the free look period is void from the beginning, and no claims are payable. The insured must receive a full refund of the premium he paid, and must also retain liability for 100% of the expense for his broken arm.

The Guaranteed Renewable Provision states that the policy is: a) Renewable only at the option of the insurer b) Renewable with no increase in premium c) Renewable with adjustable premiums determined by frequency of claims d) Renewable with premiums that may be increased for entire classes of insureds

d) The Guaranteed Renewable Provision allows the insurer to adjust premiums upon renewal, but by classification only, not for particular individuals.