Chapter 12 - Individual Policy Provisions

Emergency Services

A Managed Health Care service. Obtaining services in an emergency situation, which includes directives for the contact of an HMO before care is received, and what to do in case of life-threatening emergencies. Includes Non-Emergency Hospital Pre-Authorization Admissions and Out-of-Area Benefits and Services.

Change of Beneficiary

A Mandatory Uniform Provision. 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.

Waiver of Premium

Other Standard Provisions and Clauses. The insurer will waive the premiums if an insured becomes disabled and qualifies for the benefit. In order to qualify the benefits, the insured must be disabled for a specified time period, typically 90 days to 6 months. During the waiting period, premiums must continue to be paid. Once the qualifications have been met, the premiums are waived retroactively to the start of the disability and the insured receives a refund of any premiums paid during the waiting period. Premiums continue to be waived until the insured has recovered from the disability, at which time the premiums are resumed at the same amount and frequency.

Comprehensive Case Management

A Managed Health Care service. A case manager may be assigned to a case to determine the current 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 may provide assistance with a future course of action during recovery of the insured.

Alternatives to Hospital Services

A Managed Health Care service. Oftentimes, care may be provided in a setting other than the 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.

Preauthorization (or Prior Approval)

A Managed Health Care service. Requires the insured to notify his insurer in advance of certain procedures (not emergency) to receive prior approval of coverage. 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 out.

Utilization Review

A Managed Health Care service. The review that determines whether provided or proposed health care services were or are medically necessary. This does not apply to emergency services but involves "before, during, and after" medical services. This includes Prospective Review, Concurrent Review, and Retrospective Review.

Ambulatory Outpatient Care

A Managed Health Care service. These facilities monitor the cost effectiveness of outpatient services and provide, in addition to diagnosis and treatment, preventive care, health education, family planning, and dental/vision care.

Preventive Care

A Managed Health Care service. 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 include covering well child care visits, immunizations, mammography screenings, and nutrition and weight loss programs.

Mandatory Second Surgical Opinion

A Managed Health Care service. 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.

Time of Payment of Claims

A Mandatory Uniform Provision. 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

Reinstatement

A Mandatory Uniform Provision. 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. The insurer may also require an application to prove insurability. If the insurer does not reject the application within 45 days, coverage will be automatically reinstated. Accidents are covered immediately and sickness coverage begins 10 days after.

Payment of Claims

A Mandatory Uniform Provision. Claims are paid to the policyowner unless otherwise specified. Any death benefits are paid to the named beneficiary. Under this provision, assignment of benefits allows the person receiving medical benefits (the insured) to assign or transfer the payment of those benefits directly to the provider of services (a physician or hospital). Assignment of benefits makes the claims process easier by granting the health care provider permission to file the claim on behalf of the insured.

Physical Exam and Autopsy

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

Claim Form Provision

A Mandatory Uniform 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 the forms are not furnished, the insured may submit written proof of occurrence, character, and extent of the loss.

Legal Actions

A Mandatory Uniform Provision. Insured must wait 60 days, but no later than 3 to 5 years after proof of loss, before legal action can be brought against the insurer.

Proof of Loss

A Mandatory Uniform Provision. It is required within 90 days of loss or in the shortest period of time possible, but not to exceed 1 year unless the insured suffers legal incapacity.

Notice of Claim

A Mandatory Uniform Provision. 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. If the insured is receiving continuing disability benefits, the insurer can require notice of continuance of claim every 6 months.

Time Limit of Certain Defenses (Incontestable)

A Mandatory Uniform Provision. No statement or misstatement (except fraudulent misstatements) made in the application at the time of issue shall be used to deny a claim after the policy has been in force for 2 years. False statements on the application may exclude coverage for the first 2 years when material to the risk. The only exception to the time limit is fraud; fraudulent statements can be used to deny coverage without limitation. Also states that a pre-existing condition cannot be excluded beyond the 2 year time limit unless specifically excluded by name in the contract.

Entire Contract Clause

A Mandatory Uniform Provision. States that 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.

Grace Period

A Mandatory Uniform Provision. The period of time after the premium due date before the policy lapses for nonpayment of premium. It varies based on frequency or mode of premium. Must not be less than 7 days for weekly premiums, 10 days for monthly premiums, and 31 days for all other modes of premiums.

Noncancellable

A Policy Renewal Provision. Guaranteed renewable to age 65 with guaranteed premiums. This is the one most favorable for the insured, because only the owner can terminate the policy and rates never increase. The insurer cannot change the plan once issued.

Cancellable

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

Period of Time (Nonrenewable)

A Policy Renewal Provision. 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.

Conditionally Renewable

A Policy Renewal Provision. Policy is renewable unless a termination notice is given by the insurer or is nonrenewable for specified conditions that must be stated in the policy when issued.

Optionally Renewable

A Policy Renewal Provision. Renewable only at the option of insurer (on renewable or anniversary date).

Guaranteed Renewable

A Policy Renewal Provision. 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.

Impairment Rider

A temporary or permanent rider added to a policy that will exclude specific conditions that would normally cause a policy to be declined. The use of this rider allows an insured to qualify for a policy with the exclusion attached, where they would otherwise be declined altogether.

Non-Emergency Hospital Pre-Authorization Admissions

A type of Emergency Services. An insured who does not comply with the provision may have the normal benefit level reduced. This managed care provision reduces hospitalizations.

Out-of-Area Benefits and Services

A type of Emergency Services. Description of benefits and services available outside the HMO service area. Medically necessary emergency benefits must be made available when the insured is outside the service area.

Guaranteed Insurability Rider

Also 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. Typically the rider drops from the policy around the insured's age 50. This rider is added with an additional premium.

Managed Health Care

It has been implemented to contain or reduce costs associated with health care delivery. They usually include the following cost-saving services: Preventive Care, Alternatives to Hospital Services, Comprehensive Case Management, Mandatory Second Surgical Opinion, Utilization Review, Preauthorization or Prior Approval, Ambulatory Outpatient Care, and Emergency Services.

Conformity with State Statutes

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

Misstatement of Age

Optional Uniform Provision. Benefits 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.

Other Insurance with This Insurer

Optional Uniform Provision. If the insurance 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. This provision protects insurers against overpayment of claims.

Change of Occupation

Optional Uniform Provision. If the insured changes to a more hazardous occupation, 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.

Insurance with Other Insurers

Optional Uniform Provision. If the insured has duplicating coverage with other insurers, any one insurer's liability is limited to a proportion of the loss. This is referred to as the Coordination of Benefits for individual policies. This is calculated by determining each company's proportion of the total coverage and applying that same proportion to the loss. This concept applies to losses on a service or expense incurred basis.

Intoxicants and Narcotics

Optional Uniform Provision. Liability is denied if an injury is caused by the insured being intoxicated or under the influence of drugs unless administered on the advice of a physician.

Illegal Occupation/Act

Optional Uniform Provision. Liability is 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.

Relationship of Earnings to Insurance

Optional Uniform Provision. Loss of time benefits shall not exceed the monthly earnings of an insured at the time the disability commenced or his average earnings for the 2 years immediately preceding a disability, whichever is greater. The monthly benefit cannot be reduced to less than $200.

Cancellation

Optional Uniform Provision. The insurer may cancel with 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.

Unpaid Premiums

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

Probationary Period

Other Standard Provisions and Clauses. 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 immediately occurs after the policy is issued. Losses due to an accident are not preexisting and are covered immediately with no waiting period.

Elimination Period

Other Standard Provisions and Clauses. 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 period in the policy and the time period selected will affect the premium. The longer the period, the lower the cost of coverage.

Right to Examine (Free Look)

Other Standard Provisions and Clauses. Allows the insured, upon delivery of a policy, a specified number of days to look over the policy and if dissatisfied, return it for a full refund (usually 10-30 days). A policy cancelled during this period is void from the beginning, and no claims are payable.

Eligible Expense

Other Standard Provisions and Clauses. An expense actually incurred by, or on behalf of, an insured person for services and supplies that are administered or ordered by a physician and 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.

Preexisting Condition Provision

Other Standard Provisions and Clauses. Applies to prior conditions when the applicant received medical advice or treatment within a specified period before the effective date of the policy.

Consideration Clause

Other Standard Provisions and Clauses. By definition, it 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.

Coordination of Benefits

Other Standard Provisions and Clauses. 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.

Owner's Rights (Ownership Provision)

Other Standard Provisions and Clauses. The policyowner retains all rights in the policy. Unless the insured is also the policyowner, the insured does not have any rights. The policyowner has the right to name or change revocable beneficiaries, assign the policy, and make all decisions regarding the policy. It is also the owner's responsibility to pay premiums.

First Dollar Coverage

Other Standard Provisions and Clauses. This provides that the insured is eligible for coverage starting with the first dollar and no deductible or out-of-pocket expenses will apply.

Military Suspension Provision

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

Insuring Clause

Other Standard Provisions and Clauses. This provision states who is insured, the amount of coverage, the time period, and covered perils or losses. The premium or rate calculations are not part of this provision.

Multiple Indemnity Rider

Provides additional benefits to a health insurance policy for losses due to an accident. This rider can be written to provide double or triple the face amount if a death or dismemberment occurs within 90 days of an accident. This rider is added for a small additional premium.

Mandatory Uniform Provisions

Was developed by the NAIC and must, by law, be included in every individual accident and health insurance policy. No additional provisions may be included which otherwise restrict or modify a uniform provision. In total there are 12 of these which include: Entire Contract Clause, Time Limit of Certain Defenses, Grace Period, Reinstatement, Notice of Claim, Claim Form Provision, Proof of Loss, Time of Payment of Claims, Payment of Claims, Physical Exam and Autopsy, Legal Actions, and Change of Beneficiary.