Chapter 12 - Individual Policy Provisions
Ways of Cost Containment in Health Care Delivery: Comprehensive Case Management
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.
Types of Mandatory Uniform Provisions: 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
Types of Utilization Reviews: 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.
Other Types of Standard Provisions and Clauses: Probationary Clause (Period)
A specified period of time before coverage goes into effect for specified conditions (preexisting conditions). This is designed to protect the insurer for losses due to a sickness that immediately occur after the policy is issued. Losses due to an accident are covered immediately.
Other Types of Standard Provisions and Clauses: Elimination Period Provision
A type of (time) deductible. A period of days that must expire after onset of an illness or occurrence of an accident before benefits will be payable. The longer the elimination period chosen, the lower the cost of coverage.
Types of Utilization Reviews: 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 shall be required only when necessary to verify that the health care services being considered are medically necessary.
Types of Utilization Reviews: 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.
Types of Mandatory Uniform Provisions: 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.
Other Types of Standard Provisions and Clauses: Right to Examine (Free Look)
Allows the insured, upon delivery of the policy, a specified number of days to look over the policy and if dissatisfied, return it for a full refund (usually 10 days; 30 days for Medicare Supplement and Long-Term Care); however, it may vary from state to state.
Policy Riders: 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. The use of this rider allows an insured to qualify for a policy with the exclusion attached, where they would otherwise be declined altogether.
Types of Emergency Services: Non-Emergency Hospital Pre-authorization Admissions
An insured who does not comply with the provision may have the normal benefit level reduced. This managed care provision reduces hospitalizations.
Types of Mandatory Uniform Provisions: Payment of Claims
Any death benefits are paid to the beneficiary; other benefits may be paid directly to the provider of services or the insured.
Types of Optional Uniform Provisions: Conformity with State Statutes
Any provision on the policy effective date that is in conflict with statutes of the state is automatically amended to meet state requirements.
Other Types of Standard Provisions and Clauses: Preexisting Condition Provision
Applies to prior conditions when the applicant received (or should have received) medical advice or treatment within a specified period before the effective date of the policy.
Types of Optional Uniform Provisions: Misstatement of Age
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.
Types of Mandatory Uniform Provisions: 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.
Types of Emergency Services: Out-of-Area Benefits and 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.
Policy Renewal Provisions
Each health policy must express conditions and provisions for coverage continuation. Effective and termination dates must be expressed in the policy. Insurers may cancel under any of the renewal provisions when premium payments are discontinued.
Other Types of Standard Provisions and Clauses: Eligible Expense
Eligible expenses are 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
Types of Mandatory Uniform Provisions: 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.
Types of Policy Renewal Provisions: Noncancellable
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.
Types of Optional Uniform Provisions: Change of Occupation
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. If the insured works at two occupations, rates for the most hazardous occupation will be charged.
Types of Optional Uniform Provisions: Insurance with Other Insurers
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. Only those policies written on the insured are considered as applicable. Third party liability is never primary and not included. This concept applies to losses on an expense incurred as well as losses covered by a policy that pays specific benefits.
Types of Optional Uniform Provisions: Other Insurance with This Insurer
If the insured has more than 1 policy with the same company, the insured may elect the policy to be used. Excess premiums for the excess coverage will be returned. The provision protects insurers against overpayment of claims.
Types of Mandatory Uniform Provisions: 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.
Types of Mandatory Uniform Provisions: Legal Actions
Insured must wait 60 days, but no later than 3 to 5 years (differs from state to state) after proof of loss, before legal action can be brought against the insurer.
Types of Policy Renewal Provisions: Cancellable
Insurer or insured may cancel at any time (has lowest premium). This is the least favorable to the insured.
Types of Mandatory Uniform Provisions: 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.
Types of Optional Uniform Provisions: Intoxicants and Narcotics
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. When insurers underwrite alcohol abuse, they may be increasing their exposure to risk.
Types of Optional Uniform Provisions: Illegal Occupation/Act
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.
Types of Policy Renewal Provisions: Period of Time (Nonrenewable)
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.
Types of Optional Uniform Provisions: Relationship of Earnings to Insurance
Loss of time benefits shall not exceed the monthly earnings of an insured at the time the disability commenced or his/her average earnings for the 2 years immediately preceding a disability, whichever is greater. The monthly benefit cannot be reduced to less than $200.
Cost Containment in Health Care Delivery
Managed Health Care has been implemented by HMO's and PPO's to contain or reduce costs associated with health care delivery. Managed health care plans usually include the following cost-saving services: Preventive Care, Alternatives to Hospital Services, Comprehensive Case Management, Mandatory Second Surgical Opinion, Utilization Review, Precertification, Ambulatory Outpatient Care, and Emergency Services
Ways of Cost Containment in Health Care Delivery: 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.
Types of Mandatory Uniform Provisions: Time Limit on Certain Defenses (Incontestable)
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 (usually for 2 years). False statements on the application may exclude coverage for the first 2 years when material to the risk. In other words, if the insurer had the correct information at the time of application, they would not have issued the policy in the first place. Fraudulent statements can be used to deny coverage with no time limitation.
Ways of Cost Containment in Health Care Delivery: Emergency Services
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.
Ways of Cost Containment in Health Care Delivery: 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.
Other Types of Standard Provisions and Clauses: Consideration Clause
Payment of the first premium (including the stated frequency) and statements in the application are the applicant's consideration. The insurer's consideration is the promise to pay within the contract terms.
Types of Policy Renewal Provisions: Conditionally Renewable
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.
Other Types of Standard Provisions and Clauses: Waiver of Premium Provision
Premiums are waived by the insurer after a stated time period (usually 3 to 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.
Types of Mandatory Uniform Provisions: Proof of Loss
Proof of loss 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.
Other Types of Standard Provisions and Clauses: Coordination of Benefits
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.
Types of Mandatory Uniform Provisions: 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. The insurer may also require a reinstatement application to prove insurability. If the insurer does not reject the reinstatement application within 45 days coverage will be automatically reinstated. Accidents are covered immediately and sickness coverage generally begins 10 days after reinstatement.
Types of Policy Renewal Provisions: Optionally Renewable
Renewable only at the option of insurer (on renewal or anniversary date).
Types of Policy Renewal Provisions: Guaranteed Renewable
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. The renewal provision used in group health conversions.
Ways of Cost Containment in Health Care Delivery: Precertification
Requires the insured to notify his/her insurer in advance of certain procedures (not emergency). 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.
Types of Optional Uniform Provisions: Cancellation
The INSURER may cancel with written notice to the insured. Notice of 5 to 31 days may be required. Unearned premium is refunded on a pro rata basis. 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.
Policy Riders: Multiple Indemnity Rider
The Multiple Indemnity Rider provides additional benefits to a health insurance policy for losses due to an accident. This rider can provide double (Double Indemnity) or triple (Triple Indemnity) the amount of benefits if death or dismemberment occur within 90 days of an accident. This rider is added for a small additional premium.
Types of Mandatory Uniform Provisions: Grace Period
The grace period is the period of 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.
Types of Mandatory Uniform Provisions: Entire Contract Clause
The policy, a copy of the application and any riders (or endorsements) constitute the entire contract. Only the applicant may alter statements on the application. Only an executive officer of the insurer, not an agent, can make changes to the policy.
Ways of Cost Containment in Health Care Delivery: Utilization Review
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.
Mandatory Uniform Provisions
These 12 provisions must, by law, be in every individual policy. Wording may be changed, but any variation must be at least as favorable as the original wording and no provision may be deleted (unless it has no applicability to the policy). No additional provisions may be included which otherwise restrict or modify a uniform provision. These provisions are designed to protect the insured's interests.
Ways of Cost Containment in Health Care Delivery: 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, and Dental/vision care
Optional Uniform Provisions
These provisions are included at the insurer's option; however, if used they must conform to the state's insurance code. These provisions are designed to protect the insurer.
Other Types of Standard Provisions and Clauses: First Dollar Coverage
This provides that coverage will begin paying for a covered loss starting with the first dollar and no deductible will apply.
Types of Optional Uniform Provisions: Unpaid Premiums
This provision allows an insurer to deduct unpaid premiums from a claim that has occurred during a grace period.
Other Types of Standard Provisions and Clauses: Military Suspension Provision
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.
Other Types of Standard Provisions and Clauses: Insuring Clause
This provision states who is insured, the insurer, the amount of coverage, the time period and covered perils or losses. The premium or rate calculations are not part of this provision.
Ways of Cost Containment in Health Care Delivery: 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.
Policy Riders: Guaranteed Insurability Rider (or Future Insurability Option)
This rider 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 to the policy for an additional premium.
