Health Care Lesson 3

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A person in a position of financial trust is known as a(n):

Fiduciary

All of the following statements are true regarding the Time Limit on Certain Defenses in a health insurance policy EXCEPT:

Fraudulent statements made on a health insurance application can be contested at any time.

Renewable Provisions

Health insurance policies contain certain renewable provisions that allow the insurer to continue or discontinue coverage.

Unearned Premium

Health insurance premiums are always paid at the beginning of the month in which it is about to provide insurance coverage. This prepayment to the insurer is considered Unearned by the insurer until the period in which the premium was paid has ended

Premium

Health insurance premiums rates normally do not change throughout the calendar year; however, insurance companies regularly increase policy premiums in response to increasing medical costs. Policyholders are made aware of any premium increases before the beginning of the new year to allow for changes in the plan, if necessary.

10. Illegal Occupation

If loss is the result of a commission of, or in connection with, an illegal act or occupation, the insurer is not liable and at no time will benefits be paid.

With the exception for policies that pay the insured periodically, such as a disability income policy, how soon after receiving a claim notification and proof of loss must an insured pay a claim?

Immediately

Initial Premium and Policy Fees

In addition to the initial premium, a few insurers require a one-time fee to cover administrative work and underwriting costs associated with the issuance of the policy.

If an insurance company allows a policyholder to reinstate his or her health insurance policy, how many days after reinstatement must pass before claims due to illness are covered?

10 days

Kelly pays her health insurance annually on January 1st in the amount of $2,400. If she cancels her policy in May, approximately how much unearned premium does the insurer need to return to her?

$1,400 A pro-rated amount of $200 per month for each month unearned by the insurer is refunded back to Kelly ($2,400 / 12 months). Since she canceled her policy in May, which is the 5th month of the year, she is refunded $200 for the remaining 7 months of the year, or $200 x 7 = $1,400.

According to the NAIC Model for Health Policy Provisions, if an insured does not pay his or her MONTHLY premium, the grace period provision will allow how many additional days beyond the payment date to make such payment before the policy is cancelled by the insurer for lack of premium payment?

10 days

How many days after receiving notice of claim is an insurance company required to provide the insured with claims forms?

15 days

A policyholder is responsible to provide the insurer with a 'written notification of claim' within how many days of an event in which the policyholder intends to file a medical claim?

20 days

ccording to the Notice of Claim provision, what is the common time in which an insured must notify an insurance company of loss?

20 days

Usually, after what period of time can a health insurance policyholder no longer bring legal action against an insurance company if the policyholder provided a written proof of loss?

3-5 years

How many days before cancelling a health insurance policy must an insurance company provide written notice to the insured?

45 days

Regarding Proof of Loss, within what amount of time must proof of loss be furnished to the insurer?

A claimant has 90 days in which he or she is required to submit written proof of loss. In an extenuating situation, if 90 days is not realistic to submit for the claimant, he or she is allowed a maximum of one (1) year to submit Proof of Loss and still be accepted by the insurer.

Written proof of loss must be filed with the insurance carrier within what amount of time from the date of loss?

A claimant has 90 days in which he or she is required to submit written proof of loss. In an extenuating situation, if 90 days is not realistic to submit for the claimant, he or she is allowed a maximum of one (1) year to submit Proof of Loss and still be accepted by the insurer.

Second Surgical Opinion

A cost-management strategy that encourages or requires patients to obtain the opinion of another doctor after a physician has recommended that a non-emergency or elective surgery be performed. Programs may be voluntary or mandatory in that reimbursement is reduced or denied if the participant does not obtain the second opinion. Plans usually require that such opinions be obtained from board-certified specialists with no personal or financial interest in the outcome.

5. Notice of Claim

A policyholder is responsible to provide the insurer with a 'written notification of claim' within 20 days of an event in which the policyholder intends to file a medical claim.

All of the following statements are true in regards to the 'time limit on certain defenses' in a health insurance policy EXCEPT

As with a life insurance policy, fraudulent statements made on a health insurance application cannot be contested after 2 or 3 years.

7. Unpaid Premiums

At the time a benefit is paid, either to the insured or beneficiary, any unpaid premiums will be deducted from this benefit.

All of the following are considered optional provisions and are not required under the Uniform Individual Accident and Sickness Policy Provisions Act EXCEPT

Change of beneficiary

All of the following provisions are considered mandatory under the Uniform Individual Accident and Sickness Policy Provisions Act EXCEPT

Misstatement of Age Provision

Common Exclusions and Reductions

Provisions that limit an insurer's obligation to pay by either eliminating the risk or reducing benefits associated with the risk. Typical exclusions all insurers follow include acts of war, self-inflicted injuries (suicide), aviation, military services, or overseas travel (coverage temporarily stops while in military service or over seas, and resumes when discharged or back in the U.S.

Which type of beneficiary designation allows a policyholder the ability to change beneficiaries at his or her request?

Revocable

What is the BEST response an agent can give to an insured when questioning the policy's effective date?

The policy takes effect on the date specified in the policy as the effective date

According to the NAIC Reinstatement provision, what is the common time in which an insurance company must automatically reinstate a health insurance policy if an application for reinstatement is neither denied or additional information requested?

45 days

How many days does an insurance company have from the time a policyholder submits a proof of loss before legal actions can be taken against them by a policyholder?

60 days

Regarding Proof of Loss, within what amount of time must proof of loss be furnished to the insurer?

90 days

Upon receiving claims forms from an insurance company, how many days does an insured have to submit proof of loss?

90 days

Written proof of loss must be filed with the insurance carrier within what amount of time from the date of loss?

90 days

7. Proof of Loss

A claimant has 90 days in which he or she is required to submit written documents showing 'proof of loss.' An insurer relies on receiving doctors records, accident reports and all other relevant information pertaining to the loss. In an extenuating situation, if 90 days is not realistic to submit for the claimant, he or she is allowed a maximum of one (1) year to submit proof of loss and still be accepted by the insurer.

Waiver of Premium

Allows a policyholder to cease paying premiums during the period in which they are disabled. However, in order for this to occur, a period usually of three to six months of disability must pass before payments can cease. After this time, if the insured is still disabled, one of two outcomes will transpire: Premium payments will no longer be required as long as disability continues Premium payments are no longer required as long as disability continues, as well as all premiums paid during the three to six month period being returned to the policyholder.

Conditionally Renewable Policies

Although it can be terminated by an insurer, conditionally renewable policies are only cancelled in the event of an expressed condition, such as age or the loss of gainful employment.

Pre-Admission Certification

An authorization for hospital admission given by a health care provider to a group member prior to his or her admission to a hospital. Failure to obtain a pre-admission certification in non-emergency situations reduces or eliminates the health care provider's obligation to pay for services rendered.

Which Mandatory Provision under the Uniform Individual Accident and Sickness Policy Provisions Law protects a policyholder stating that nothing outside of the insurance contract can be considered part of the contract and that no changes will be made to the contract after it has been issued?

Entire contract

Which provision prevents both the insurer and insured from making any changes to the contract whether by outside documents or by oral statements?

Entire contract provision

In the event that an individual decides to reinstate their health insurance policy and then 8 days later he or she falls ill and is hospitalized for 3 days, what benefits would the insurance company most likely provide?

No benefits since sickness is not covered for the first 10 days after the reinstatement of a policy

To provide an insurer time to investigate a claim, an insured cannot take legal action against the insurer for at least how many days after furnishing written proof of loss?

Solution: An insurance company has 60 days from the time a policyowner submits a proof of loss before legal actions can be taken against them by a policyowner. In addition, legal action cannot be brought against an insurer usually after 3-5 years from the date written proof of loss is furnished to the insurer.

9. Payment of Claims

Stipulates how and to whom claim payments are to be made by the insurer. Death benefits for a life policy or rider are paid to the policy's specified beneficiary, while medical and living benefits are paid to the insured or to the healthcare provider for services rendered.

1. Entire Contract

The entirety of an insurance contract includes the policy, itself, a copy of the original application, and any attached written riders to the original policy. Anything in addition to this, including spoken word or other implied policy details by the insurance agent and not found in the contract, are not considered part of the contract. This first provision protects a policyholder in two ways; no changes can be made to an issued contract unless approved by an executive officer of the insurer and nothing outside the contract (signed application including any attached riders) can be considered part of the contract.

Consideration Clause

The exchange of premium for insurance coverage. Applicants provide consideration in the form of the initial premium and statements made in the application. In an insurance policy, the consideration clause states the date that coverage begins and the length of the initial coverage period.

6. Claims Forms

The insurer is required to furnish 'claims forms' to the insured within 15 days from the time the insurer was notified of a claim. If the insurer fails to furnish claims forms within 15 days, the insured can submit a 'proof of loss' in any form, explaining the occurrence and extent of loss for which the claim is submitted. It is always the responsibility of the insured to clearly communicate to the insurance company, even when the company fails to provide claims forms.

Insuring Clause

The insurer's promise is set forth in the policy regarding contractual obligation to provide the insured with insurance coverage. It describes the scope of the coverage, provides any required definitions, and sets forth the conditions under which benefits will be paid.

Earned Premium

The prepayment of Premium is considered earned by the insurer on'ce the period in which the premium was paid has ended If a policyholder were to cancel his or her health insurance during the middle of any prepaid period (based on premium mode), he or she would be refunded at a pro-rated amount of premium for any days remaining in the period in which the premium was prepaid.

Utilization Review

The process of reviewing the appropriateness and quality of care provided to patients. Utilization review may take place before, during, or after the services are rendered.

Cancellable Policies

The renewable provision in a cancellable policy allows an insurance company to not only increase premiums at specified intervals, but also to terminate the policy 'at will' as long as they provide the insured with written notification and refund any advance premiums.

Non-Cancellable Policies

These policies can never be terminated nor can premiums ever increase. Only upon an insured reaching a certain age (65) will the policy cancel. Although rare for this provision to be found in medical expense policies, they are common in disability income insurance.

11. Intoxicants and Narcotics

This final optional provision prevents an insurer from being held liable for any loss as a result of a policyholder while intoxicated or under the influence of narcotics.

State and Federal Health Exchanges

To provide a fair and affordable selection of insurance plans from which to choose, the PPACA also mandates each state to provide an insurance 'exchange,' or marketplace, in which multiple private insurance plans are offered U.S. citizens who are not currently enrolled in an individual or employer-based insurance policy, Medicare, Medicaid or other government-sponsored plan. If a state does not offer its own exchange, residents of such state must purchase insurance through the federal exchange by enrolling online through healthcare.gov. Tax credits and insurance subsidies are provided to low-income individuals who are not eligible for state Medicaid or other government-sponsored coverage to purchase insurance through the exchange.

At what point in time does illness coverage typically begin in a health insurance contract?

Typically 15 days after the policy's effective date

8. Time of Payment of Claims

Typically, all claims must be paid immediately after receiving notification and proof of loss from the claimant, except for policies that pay the insured periodically, such as a disability income policy.

Free Look

Usually a 10-20 day period where the insured can inspect the policy and cancel, if necessary, for a full refund. Any claims on a refunded policy are voided.

Policy Effective Date

While accident coverage begins on the date chosen by the policyholder, coverage against illness often has a 15-day waiting period before becoming effective. A policy's effective date is the date printed on the first page of the insurance policy.

Optionally Renewable Policies

allows an insurer to terminate a policy on a specific date specified in the contract. Premium increases will only affect an individual's policy when it is applied to an entire class of insured individuals, such as a particular age class or a group of people in a geographical area. Both termination dates and premium increases take place on a policy's anniversary date.

Patient Protection and Affordable Care Act (PPACA)

federal government has reformed both the private health insurance industry and government-sponsored health programs such as Medicaid and Medicare to provide U.S. citizens with more comprehensive healthcare coverage by eliminating the current exclusions of pre-existing conditions, as well as expanding the availability of Medicaid. All health plans issued after January 1, 2014 must provide coverage for pre-existing conditions, and insurers cannot deny coverage for applicants with pre-existing conditions. Also as of January 1, 2014, all U.S. citizens are required to purchase and maintain health coverage if not qualified under an employer plan, Medicare, Medicaid, or will face an annual tax penalty.

Flat Cancellation

one that cancels on the effective date so that no unearned premium is received by the insurer and is usually on the date that the policy's premium is due.

Policy Term

A policy will remain in force as long as premium payments are received on time by the insurer. Depending on the frequency (mode) of premium payment, a policy's term is extended each time a premium is paid. If paid annually, coverage extends through the following year, if paid monthly, coverage extends through the end of the month. As long as premium is continually paid, the policy will remain in force.

Non-Emergency (Weekend) Admission Restriction

A requirement that imposes limits on reimbursement to patients for non-emergency weekend hospital admissions.

11. Legal Actions

An insurance company has 60 days from the time a policyholder submits a proof of loss before legal actions can be taken against them by a policyholder. In addition, legal action cannot be brought against an insurer usually after 3-5 years from the date written proof of loss is furnished to the insurer.

3. Other Insurance with this (Within the Same) Insurer

Considering insurers will only underwrite an individual for a specified sum, if an individual has more than one policy with an insurer, this specified maximum amount cannot be exceed.

Mailing an issued policy either directly to the insured, or to the agent who then mails or delivers the policy to the insured is a process known as:

Constructive delivery

While attempting to commit a crime, a health insurance policyholder slips and breaks his leg. As a result of the Illegal Occupation provision, what action will his insurer most likely complete?

Deny benefit payment for the loss

Restoration of Benefits Clause

Many insurers include a restoration of benefits clause providing a restoration of lifetime benefits after a major medical claim has been made by the insured; although, many insurers now provide for much larger or unlimited lifetime benefits in which such restoration is not needed since benefits will not be exhausted.

Guaranteed Renewable Policies

Most medical expense policies are guaranteed renewable as long as premiums are paid an insurer is prevented from canceling an individual's insurance policy. If a premium increase occurs, it will only be due to an increase to an entire class.

Benefit Payment Clause

Part of the policy that states how benefits are paid. Benefits can be paid as periodic income or as a lump sum depending on the loss.

8. Cancellation

Policy cancellation rights provide the insurance company the freedom to cancel a policy at any time, as long as written notice is sent to the insured at least 45 days before cancellation of the policy. Unearned premium must be returned to the policyholder or policyholder at a Pro Rata Return, meaning a return of unused days only.

Case Management Provisions

Provisions in managed care that help lower claim costs. Second surgical opinion, utilization review, pre-certification, concurrent review, and ambulatory outpatient care are all methods used to reduce costs and better manage a health policy.

Grandfathered Health Plan

health plans that were issued prior to January 1, 2014. Although all health plans going forward are mandated under the PPACA to cover pre-exisiting conditions, currently in 2014, individuals may remain on pre-PPACA plans which may still exclude pre-existing conditions.

Managed Care Provisions

specific features within a health plan that provides the insurer with a way to manage the cost and quality of health care services received by group members.

Pre-Admission Testing

A requirement designed to encourage patients to obtain necessary diagnostic services on an outpatient basis prior to non-emergency hospital admission. The testing is designed to reduce the length of a hospital stay. Diagnostic tests done 1 to 3 days before a patient is admitted to a hospital

Pro-rata Return

A return of unused days only.

The Policy Face

The first page of the policy that includes important information such as the name of the insurer, the insured's name, effective date, premium, renewal information, as well as a summary of coverage. Some insurers include the policy benefits, but a separate benefits provision is also listed in the policy.

5. Insurance with (Multiple) Other Insurers

This provision is similar to the previous provision, however, this provision extends to multiple insurers. Optional provisions 3 - 5 serve as a 'coordination of benefits,' which is designed to prevent a duplication of benefits or over-insurance of the insured.

At what point can a policyholder file suit against a health insurance company for failure to pay a claim?

An insurance company has 60 days from the time a policyowner submits a proof of loss before legal actions can be taken against them by a policyowner. In addition, legal action cannot be brought against an insurer usually after 3-5 years from the date written proof of loss is furnished to the insurer.

Pre-Existing Conditions

Defined as any condition for which the insured sought treatment or advice before the effective date of the policy. It can also be considered a symptom that would cause a reasonable and prudent person to seek diagnosis and treatment, thus preventing an applicant who suspects an illness from purchasing a health policy to cover potential costs. Preexisting conditions can, and often are, excluded from coverage on a temporary or permanent basis, but if listed on the application, some preexisting conditions are either fully or partially covered, based on the insurer's underwriting standards.

4. (Identical) Insurance with Other Insurer

In the event a person has identical coverage from two different insurance policies, and only one is notified when an expense is incurred, this provision protects an insurance company against 'over-insurance.' This simply means that an insured cannot receive more than 100% of benefits from any combination of insurance or from multiple insurers. If a medical expense were to occur, benefits would be pro-rated, and any excess premiums would be refunded to the insured.

Constructive Delivery

Occurs when an insurer mails a policy to a customer directly or to the agent, who then delivers the policy to the customer. Either way a policy is delivered, it is important to communicate with the customer to reinforce the relationship and review the policy to ensure the customer's understanding of their benefits and rights of ownership. As with any successful business, ongoing commitment to customer satisfaction is the key to business growth. It is even more important in the insurance industry. Clients are more likely to renew or continue to use a service if they are comfortable with the agent.

11 Optional Individual Health Policy Provisions

The following optional provisions, which are at the discretion of the insurance company, can be used if they are needed in a specific policy form, or can be disregarded altogether.

12. Change of Beneficiary

This final mandatory provision allows for a change in beneficiaries as long as the original policy's beneficiary designation is not considered to be 'irrevocable.' Revocable - Policyholder can change beneficiary designations at a later date Irrevocable - Policyholder cannot change beneficiary designations at a later date

9. Conformity with State Statutes

Though this provision is considered to be optional, many states require this provision to be included as mandatory, thus, some states require 13 mandatory provisions. This provision states that if any of the insurance policy's provisions conflict with the state's statutes in which the insured resides, the provisions are automatically amended to conform to the minimum statutory conditions of that state

Fiduciary Responsibility

An agent, acting as a 'fiduciary', must always perform in the interest of the insured, as well as the company. Maintaining good communication throughout the industry will help an agent keep abreast on the newest laws and regulations. Continuing education requirements are designed to continually educate a producer, which leads to better performance and increased business. Knowledge and compliance with state and federal law is required as well as an ethical business practice, focusing on the consumer's needs. As a 'key person' in the marketing, underwriting, and delivery of an insurance policy, it is the responsibility of the agent to be truthful to the consumer in marketing the benefits and truthful to the company regarding underwriting the applicant. If an applicant is underwritten as substandard, it is the agent's responsibility to review the policy's limitations and/or premium increases.

Uniform Individual Accident and Sickness Policy Provisions Act

An insurance contract includes several provisions intended to protect the insurer and the consumer, as well as to provide uniformity throughout the industry. In an effort to provide such uniformity, the Uniform Individual Accident and Sickness Policy Provisions Act, developed by the National Association of Insurance Commissioners (NAIC), was introduced and incorporated, with some modification, into each state's insurance code. The following 12 mandatory and 11 optional individual health policy provisions were developed by the National Association of Insurance Commissioners (NAIC). Although this act has been accepted by each state, some states recognize 12 mandatory policy provisions and 11 optional provisions, while other states recognize 13 mandatory and 10 or more optional provisions. The final lessons of your course will review your state's specific provision requirements.

10. Physical Exam and Autopsy

During the period of claims, insurers have the right to make physician examinations of the claimant on the company's own expense. In the event of an insured's death, insurance companies have the right to conduct an autopsy as long as it does not conflict with state law or the deceased's religion.

Summary of a Producer's Responsibilities

Effectively communicate on behalf of the insurer Ethically market insurance products Understand pertinent insurance laws Accurately complete the application process Thoroughly review the policy with the client

1. Change of Occupation

In the event a policyholder changes their occupation, the insurer has the ability to make adjustments to their policy, whether it is an increase in premiums or reduced maximum benefits. This is possible if a policyholder's new occupation is considered hazardous and poses a risk to the insured. Also, if a newly obtained occupation involves a modification in earnings, disability income benefits will adjust accordingly.

6. Relation of Earnings to Insurance

In the event an individual has multiple disability income policies and these benefits exceed their monthly earnings at the time disability occurs, this provision will ensure that the insurance company will only be liable for a proportional amount of benefits to what the insured's earnings bear to the total benefits under all such coverage.

2. Misstatement of Age

In the event that a misstatement of age occurs, benefits payable to the insured will be adjusted to reflect his or her actual age. This provision is considered mandatory in some states, while other states consider it to be optional. The final lessons of your course will review your state's specific provision requirements.

3. Grace Period

Individual health insurance policies must provide a grace period for a specified period of time after a policy's premium is due in which the insured can still submit payment to the insurer. Although some states provide for no less than a 31 day grace period, most states define a policy's grace period based on the mode of premium in which it is paid: 7 days for policyholders whose premiums are paid weekly 10 days for policyholders whose premiums are paid monthly 31 days for policyholders whose premiums are paid quarterly, semi-annually or annually

Non-Occupational Coverage

Insurance that excludes coverage from work related illness or injury. Due to the nature of risk associated with some professions, insurers put limits or exclusions on certain high risk professions from receiving on-the-job coverage. Low risk professions are generally not limited or excluded and are considered to have occupational coverage, providing 24 hour on- and off-the-job coverage.

2. Time Limit on Certain Defenses

This mandatory provision protects a health policy from being contestable after a specific period of time (usually 2 years, but in some states 3 years). However, unlike life insurance, if fraudulent statements are made on a health insurance application, the contract can be contestable at any time unless the policy is guaranteed renewable. In addition, any pre-existing conditions discovered after this period ends, other than those specifically stated in the policy, cannot be contested by the insurer.

Unless stated in the insurance contract, which provision requires an insurance company to provide coverage for an insured's preexisting condition after a specific time?

Time Limit on Certain Defenses

4. Reinstatement

ndividual health insurance policies must also include a reinstatement provision that further protects an individual in the event that he or she fails to submit his or her policy's premium within the policy's grace period. Policy reinstatement is largely dependent on the length of time that has lapsed after the policy's grace period has ended, and can require proof of continued insurability. Generally, the sooner the missed premium is paid by the individual, the less likely the insurer will require proof of continued insurability. If proof of insurability is not required, a lapsed policy is reinstated on the date the insurer receives the missed premium. If proof of insurability is required, a conditional receipt is provided to the individual upon payment of the missed premium along with the submission of an application for reinstatement. The insurer will notify the individual of its acceptance or denial of such reinstatement; however, if notification is not provided by the insurer, the policy will be automatically reinstated on the 45th day after receipt of the missed premium by the insurer.

Non-Grandfathered Health Plan

plans that comply with the pre-existing condition inclusion legislation set forth by the PPACA. Any health plan issued after January 1, 2014 is considered to be 'non-grandfathered.' For purposes of the state licensing exam, if a health plan excludes pre-existing conditions, it is considered to be a 'grandfathered' plan. By 2015, such grandfathered plans will be eliminated, or modified by insurers to include pre-existing conditions in order to be compliant with the PPACA.

No Loss/No Gain Legislation

requiring that a replacement policy must provide continual coverage, or continue to pay ongoing claims under the policy it replaces without any exclusion of preexisting conditions. A 'transfer of benefits' statement is given to the customer to ensure benefits provided under the old policy will continue under the new policy. The main goal of replacement is to better benefit the insured than what is currently in force. Due to possible additional waiting periods, substandard risk applicants should not consider replacement.

Policy Replacement

the act of replacing one insurance policy with another in order to better benefit the consumer. Due to the many factors involved with issuing a policy based on new waiting periods or the benefit advantages of one plan over another plan, an insurance agent should closely exam the advantages and disadvantages of replacing a policy. New waiting periods Limitations of the new policy vs. current policy Risk differences between separate insurance companies Intra-company policy replacement is almost never recommended


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