Life, Health, & Law Outline - KY State Law (Chapter 15)

Standard Provisions (Continued) Two-Tiered Annuities

These were developed to recover marketing costs and to encourage purchasers to keep the annuity by imposing longer surrender periods. They use two different interest rates and the one paid depends on the owner's chosen distribution option. If the annuity is converted to a lump sum during its surrender period and after, a lower interest rate will be paid. A higher interest rate (the second tier) is used if the owner chooses to receive a series of payouts over a set period of time, once the maturity date is reached.

Standard Provisions (Continued) Doctrine of Economic Benefit

This doctrine is used in determining taxation of 'economic benefits' enjoyed by employees. Such benefits include gross income that is unconditionally and irrevocably transferred into a fund for the employee's dole benefit and in which the employee has a nonforfeitable vested interest. This entails retirement/compensation plans that are funded by life insurance. Under this doctrine, the employee will pay taxes on once he/she begins receiving economic benefits of the insurance-funded plan. However, this doctrine excludes death benefit proceeds paid to a beneficiary.

Medicare Supplements Benefit Standards

1. Cancellation of a Medicare supplement policy or certificate shall be without prejudice to any continuous loss which commenced while the policy was in force. 2. The free look period for a Medicare supplement policy is 30 days. 3. A Medicare supplement policy may not define a preexisting condition more restrictively than as a condition for which medical advice was given or treatment was recommended by or received from a physician within 90 days before the effective date of coverage. A preexisting condition may not be excluded for more than 90 days after the effective date of coverage. 4. If a Medicare supplement policy is canceled, the insurer must return the unearned portion of any premium paid beyond the month in which the cancellation is effective. 5. Except for nonpayment of premium, no Medicare supplement policy may cancel coverage on a spouse solely because coverage was cancelled on the insured. 6. Medicare supplement policies must allow the insured to request a suspension of the policy for up to 24 months, if he/she becomes eligible for Social Security benefits. However, the policyholder must notify the insurer and request the suspension within 90 days of becoming eligible for the federal assistance. If entitlement to the federal assistance is later lost, the Medicare supplement policy shall be automatically reinstated, if the insured notifies the insurer within 90 days of the entitlement's termination and pays any applicable premium. 7. Medicare Supplement policies cannot contain a probationary or elimination period. 8. Notification of Changes - If a Medicare benefit change will affect an existing Medicare Supplement policy, the insurer will notify the insured of any policy modifications at least 30 days before the change takes effect. 9. Extension of Benefits - If a policy ceases to be in force before the end of its normal policy period, its benefits shall continue for any continuous loss that began while it was in force. The extension shall continue until the end of the policy period or until the maximum benefits have been paid. Note: The extension of benefits also applies to Long Term Care Policies. Marketing/Advertising 1. Outline of Coverage - An Outline of Coverage and Buyers Guide must be provided at the time an application is presented and the applicant must acknowledge in writing that they were provided by the producer. If the policy issued requires a different Outline than the one presented at application, a substitute Outline must accompany the policy. 2. Appropriateness of Purchase/Excessive Insurance - In recommending the purchase or replacement of any Medicare supplement policy, the producer shall make reasonable efforts to determine the appropriateness of recommended purchase or replacement. a. Any sale of Medicare supplement or policy that will provide an individual more than 1 Medicare supplement policy or certificate shall be prohibited. b. An insurer shall not issue a Medicare supplement policy to a person enrolled in Medicare Part C, unless the coverage effective date is after the Part C coverage terminates. 3. Prohibited Practices - The following are prohibited in marketing, soliciting and selling Medicare Supplement policies. Note: This also applies to Long Term Care policies. a. Twisting - Inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance with another insurer. b. High Pressure Tactics - Using any marketing method that induces or even tends to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure. c. Cold Lead Advertising - Using any method of marketing that fails to clearly disclose that the reason for the advertisement is to solicit insurance and that contact will be made by an insurance agent or insurance company. 4. All advertisements used by insurers must be on file with the Commissioner. Advertisements do not have to be approved by the Commissioner before they can be used, but they cannot be used if specifically disapproved.

Workers' Compensation

Compensable Injuries 1. Kentucky statutes define a compensable injury as: Any work-related traumatic event or series of traumatic events, including cumulative trauma, arising out of and in the course of employment which is the proximate cause producing a harmful change in the human organism evidenced by objective medical findings. 2. When used generally, unless otherwise indicated, "injury" shall include an occupational disease and damage to a prosthetic appliance, but shall not include a psychological, psychiatric, or stress-related change in the human organism, unless it is a direct result of a physical injury. 3. "Injury" does not include the effects of the natural aging process, and does not include any communicable disease unless the risk of contracting the disease is increased by the nature of the employment. Occupational Diseases 1. Under Kentucky statute, "occupational disease" means a disease arising out of and in the course of the employment. The disease shall be deemed to arise out of the employment if: a. Upon consideration of all the circumstances, a reasonable person can logically conclude a causal connection between the conditions under which the work is performed and the occupational disease; and b. It can be seen to have followed as a natural incident to the work and its exposures, and be fairly traced to the employment as the proximate cause. 2. The occupational disease shall be incidental to the character of the business and not independent of the relationship of employer and employee. An occupational disease need not have been foreseen or expected but, after its contraction, it must appear to be a rational consequence of a risk related to the employment. Compulsory and Elective Compensation Laws 1. Compulsory - Employers are required to provide worker's compensation benefits to their employees. This can be done with state-sponsored coverage, through private insurers or through self-insurance. Kentucky is a compulsory state. 2. Elective - Employers have the choice to accept or reject worker's compensation laws. If the employer rejects the laws and an employee is injured, He/she may sue the employer. The employer will not be able to use common-law defenses such as "assumption of risk" or "contributory negligence." Extraterritorial Provisions 1. If an employee, while working outside the territorial limits of Kentucky, suffers a compensable injury or death, the employee or his dependents shall be entitled to Kentucky Worker's Compensation benefits, if at the time of the injury: a. His/ her employment is principally localized in Kentucky. b. He/she is working under a contract of hire made in Kentucky for employment not principally localized in any state. c. He/she is working under a contract of hire made in Kentucky for employment principally localized in another state whose Workers' Compensation law is not applicable to his or her employer. d. He/she is working under a contract of hire made in Kentucky for employment outside the United States and Canada. 2. Worker's Compensation payments or benefits paid by another state, territory, province, or foreign nation to an employee or his dependents shall not be a bar to a claim for benefits under Kentucky Worker's Compensation law if a claim is filed within 2 years after that injury or death. However, any benefits paid by another jurisdiction will be credited against the benefits to which the employee would have been entitled had the claim been made solely in Kentucky. Second Injury Funds 1. Second injury funds were established to encourage employers to hire workers already having a disability but still able to perform some types of work. The second injury fund will pay compensation to a disabled employee who suffers a subsequent or second injury which, combined with the previous injury results in a greater disability than the second injury would have created by itself. 2. The employer is responsible only for that compensation which would have been required had the second injury occurred without the existence of the prior injury. The fund pays the difference. For instance, if Jason was 15% disabled when hired and he suffered an injury that left him 25% disabled, his employer will be responsible only for the 10% caused by the second injury. The fund will pay for the 15% disability he already had.

Credit Life Insurance

Insurance on a debtor or debtors, pursuant to a specific loan or other credit transaction, to provide for satisfaction of a debt upon the death of an insured debtor.

Small Employer Medical Plans/Health Benefit Plans

1. Small Employer - An employer who employs during the preceding calendar year, at least 2 but not more than 50 eligible employees. 2. Health carriers shall actively market, issue, and renew a basic health benefit plan to all small employers. 3. For a class of small employer business, the premium rates charged to small employers may not vary by more than 35% of the index rate. 4. Any rate adjustment may not exceed 20% annually. 5. If a health insurer fails to issue a premium rate quote to an individual applicant within 30 days of receiving a properly completed application, it shall be required to issue coverage to that individual without any pre-existing conditions exclusion. Applicants who are denied coverage must receive a letter of denial within 20 days of the request for coverage. The letter shall include: a. The name and title of the person making the decision and the reason(s) for the decision. b. A description of Kentucky Access and the telephone number for a point-of-contact who can provide additional information about Kentucky Access. 6. Required Benefits a. Cochlear Implants b. Hearing Aids - This provides up to $1,400 per hearing aid, every 36 months, for every insured under age 18. c. Bone Density Testing - Under health benefit plans, this covers testing for woman aged 35 and older. d. Cancer Clinical Trials - This includes investigational drugs/devices not yet approved by the FDA. It also includes transportation, lodging, etc., for the patient or a family member associated with the clinical trial. e. Telehealth - This covers services provided through electronic means, rather than face-to-face consultation, as long as the telehealth service is established according to Kentucky law. f. Autism - Large group health benefit plans issued after January 1, 2011, must provide benefits for individuals from ages 1 to 21. 1) From ages 1 to 6, the maximum annual benefit is $50,000 per individual. 2) From ages 7 through 21, the maximum benefit shall be $1,000 per month, per individual. Note: Individual and small group health benefit plans have a maximum benefit of $1,000 per month, per individual. g. Anesthesia - This pays for anesthesia services in connection with dental services for children below age 9, persons with serious mental/physical conditions, or significant behavioral problems. It does not cover routine dental care. h. Therapeutic Foods - A health benefit plan that provides prescription drug coverage shall include coverage for therapeutic food, formulas, supplements, and low-protein modified food products used to treat inborn errors of metabolism or genetic conditions. Such foods must be proscribed by and used under the direction of a licensed physician. This benefit is capped at $25,000 per year for therapeutic foods, formulas and supplements and $4,000 per year for low-protein modified foods. 7. Eligibility Prohibitions - Health benefit plans may not base individual eligibility rules on: a. Health status b. Medical condition, including both physical and mental illness c. Claims experience d. Receipt of prior health care e. Medical history f. Genetic information g. Evidence of insurability, including conditions arising out of acts of domestic violence h. Disability Note: Insurers may establish premium discounts, rebates, or modify copayments/deductibles in return for adherence to programs of health promotion and disease prevention. 8. Nonprimary Care Specialist - Health benefit plans must cover care referred by the primary provider and provided by a nonprimary physician/specialist for up to 12 months or for a specific contract period, whichever is shorter.

Licensing Process

1. A person or entity may not sell, solicit, or negotiate insurance in this state for any line of insurance unless the person or entity is licensed for that line of insurance. 2. Anyone who wants to transact business as an insurance agent must: a. Be at least 18 years of age. b. Have not committed any act that is a ground for denial, suspension, or revocation. c. Pay the required fees. d. Have completed a prelicensing course, of at least 40 hours for life and health combined or property and casualty combined, or 20 hours for either one individually. e. Passed the examinations for the lines of authority for which the person has applied. The examination fee is nonrefundable and the applicant must correctly answer at least 70% of the exam questions. An application for an exam is valid for 120 days. If the applicant fails to take the exam within that time or fails the exam, he/she must reapply for a new examination. An applicant may take/retake an examination up to 3 times within 120 days. f. Be trustworthy, reliable, and of good reputation. g. Be competent to exercise the license. h. Be financially responsible to exercise the license and provide evidence of legal liability coverage for at least $20,000. This can be accomplished either by a cash deposit or bond of that amount or by an agreement that the insurer will assume the financial responsibility. The insurer must also provide a certificate that it has and will keep in effect a liability policy covering erroneous acts or failure to act committed by the licensee. The coverage must be at least $20,000 for any single occurrence and $100,000 in the aggregate for all occurrences within 1 year. 3. Any business entity that acts as an insurance agent, and holds a direct agency appointment from an insurance company, must obtain an insurance agent license. Business entities must also comply with these requirements: a. Provide the name and address of a licensed agent who will be responsible for the business entity's compliance with the insurance laws, rules and regulations of this state. b. Ensure that each officer, director, partner, and employee of the business entity who acts as an insurance agent is licensed as an insurance agent. c. Disclose to the Department all of its officers, directors, and partners whether or not such officers, directors, partners, and employees are licensed as insurance agents. d. The designated licensee must notify the Department within 30 days of any changes of members, directors, officers, etc., designated or registered as to the license. 4. Resident License - In determining the good faith of an applicant's claim that Kentucky is the applicant's principal place of residence, the Commissioner will consider: a. The amount of time the applicant actually spent within this state during the claimed residence period. b. The circumstances of the applicant's residence; that is, the type of home or residence, i.e., single or multiple family-type dwelling, leased apartment, hotel, resort, motel, mobile home, or other temporary type of dwelling or accommodation. c. The applicant's personal circumstances, past history and activities, and the probability that he/she will continue as a resident of this state indefinitely if the license were to be issued. d. All other pertinent factors. 5. Nonresident License - A nonresident licensed may be issued if: a. The applicant is currently licensed as a resident and in good standing in his/her home state. b. The applicant has submitted the proper request for license and has paid the required fees. c. The applicant's home state awards nonresident licenses to residents of this state on the same basis. 6. The following are exempt from prelicensing course requirements: a. An applicant is exempt from the prelicensing requirement if he/she has an insurance degree from an accredited college or university, or holds any of the following professional designations: Certified Employee Benefit Specialist (CEBS), Chartered Financial Consultant (ChFC), Certified Insurance Counselor (CIC), Certified Financial Planner (CFP), Chartered Life Underwriter (CLU), Fellow of the Life Management Institute (FLMI), or Life Underwriter Training Council Fellow (LUTCF), Registered Health Underwriter (RHU), Registered Employee Benefits Counselor (REBC), or Health Insurance Associate (HIA). b. An applicant applying for an original resident license for the property, casualty, or personal lines of authority who holds any of the following professional designations: Accredited Advisor in Insurance (AAI), or Associate in Risk Management (ARM). 7. Unless the Commissioner refuses to issue a license, he/she shall issue a license as an agent to a person who has satisfied the applicable requirements. An agent may qualify for a license in 1 or more of the lines of authority permitted by statute or regulation, including: a. Life insurance b. Health insurance c. Property insurance d. Casualty insurance e. Variable annuities and variable life insurance f. Limited lines insurance g. Personal lines h. Any other line of insurance permitted under state law

Long-Term Care Insurance (Continued) Marketing/Highlight Standards

Every entity marketing long-term care insurance in this state shall: 1. Ensure that policy comparisons are fair and accurate and that excessive insurance is not sold or issued. 2. Ensure that excessive insurance is not sold. 3. Include the following notice on the first page of the policy and outline of coverage: "Notice to buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations." 4. An LTC Shopper's Guide (Buyer's Guide) must be provided to the applicant prior to the application's presentation or enrollment form's presentation, in the case of a producer solicitation. 5. Insurers must file all long-term care policies and advertising materials with the Commissioner for review and approval prior to issuing such policies or using such advertising materials. An insurer must retain all advertisements for 3 years from the date it was first used. 6. The following acts and practices are prohibited: a. Twisting - Knowingly making any misleading representation, or any incomplete or fraudulent policy or insurer comparison, to induce a person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow against, or convert a policy or to get a policy with another insurer. b. High Pressure Tactics - Using any marketing method that tends to induce insurance purchase through force, fright, threat, or undue pressure. c. Cold Lead Advertising - Using any marketing method that fails to disclose that insurance is being solicited and an insurance producer or company will make contact. d. Misrepresentation - Knowingly and deliberately making false or even partially true statements about a policy's coverage or benefits to make it appear more beneficial than it truly is. 7. Outline of Coverage - An Outline of Coverage shall display prominently by type, stamp, or other appropriate means, on the first page of the outline of coverage and policy the following: "Notice to buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations." a. The Outline must be provided at the time of initial solicitation. b. The Outline must be a free-standing document and cannot contain any advertising material. 8. Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for currently has LTC insurance and the types and amounts of any such insurance. This is not required if the solicitation is for a tax-qualified contract. 9. Application Forms - Application forms shall include questions designed to determine whether: a. The applicant already has another LTC insurance policy in force; or b. An existing LTC insurance policy is intended to replace any other accident/sickness or LTC or certificate presently in force. Discontinuance and Replacement 1. If a group LTC policy is replaced by another group LTC policy issued to the same policyholder, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination. 2. The new policy coverage: a. Shall not result in an exclusion for preexisting conditions that would have been covered under the group policy being replaced. b. Shall not vary or otherwise depend on the individual's health or disability status, claim experience, or use of LTC services.

Licensing Process (Continued) Licensee Responsibilities

1. Every licensed individual and business entity must have and maintain in this state a place of business accessible to the public, which can include the licensee's residence. 2. The licenses of the licensee shall be conspicuously displayed in each of the places of business in a part customarily open to the public. 3. Record Retention - The licensee must keep complete records of transactions under the license. a. The records shall be kept available for inspection by the Commissioner for a period of at least 5 years after completion of the respective transactions. b. The record must show the names of the insurer and insured, the number and expiration date of, and premium payable as to, the policy or contract, and any other information as the Commissioner may reasonably require, for each insurance policy or contract placed by or through the licensee. 4. Fiduciary Responsibility - That portion of all premiums or moneys collected by a producer which is to be paid to an insurer, shall be held by the producer in a fiduciary capacity and shall not be misappropriated or converted to his/her own use or illegally withheld by the producer.

Long-Term Care Insurance Continuation of Coverage/Conversion

1. If a group policy is cancelled, nonrenewed or terminated by either the insurer or the policyholder, each insured is entitled to have coverage continued or issued an individual policy or replacement group certificate of insurance. 2. A conversion policy or certificate shall be issued without evidence of insurability, provided the certificate holder makes application for the policy and pays the monthly premium within 31 days after receiving written notice of such cancellation, nonrenewal, or termination. Premiums The premium charged to an insured shall not increase due to either of the following: 1. The increasing age of the insured at ages beyond 65. 2. The duration the insured has been covered under the policy. 3. The purchase of additional coverage shall not be considered a premium rate increase, the portion of the premium attributable to the additional coverage shall be added to and considered part of the initial annual premium. 4. A reduction in benefits shall not be considered a premium change, but the initial annual premium shall be based on the reduced benefits. Buyer's Guide 1. An LTC Shopper's Guide (Buyer's Guide) and policy summary must be provided to the applicant prior to the application's presentation or enrollment form's presentation, in the case of a producer solicitation. 2. In the case of insurance producer solicitations, an insurance producer must deliver the Shopper's Guide prior to the presentation of an application or enrollment form. 3. In the case of direct response solicitations, the Shopper's Guide must be presented in conjunction with any application or enrollment form. 4. Life insurance policies or riders containing accelerated LTC benefits are not required to furnish the Shopper's Guide, but shall furnish the policy summary required. Policy Standards 1. An LTC policy may not exclude losses incurred more than 6 months from the effective date of coverage for a preexisting condition. 2. The free look period for an LTC policy is 30 days. 3. If an LTC policy is canceled, the insurer must return the unearned portion of any premium paid beyond the month in which the cancellation is effective. Preexisting Conditions 1. An LTC policy may define a preexisting condition more restrictively than a condition for which the insured received medical advise or treatment within 6 months immediately prior to the effective date of coverage. 2. An LTC policy may not exclude losses incurred more than 6 months from the effective date of coverage for a preexisting condition. Minimum Standards For Home Health Care 1. Home health care benefits that are at least 50% of those provided for care in a nursing facility. The evaluation of the amount of coverage shall be based on aggregate days of care covered for home health care when compared to days of care covered for nursing home care. 2. Home health care benefits must meet the National Association of Insurance Commissioners' minimum standards for home health care benefits in LTC insurance policies. 3. Home health care benefits may not be excluded or limited by requiring: a. The insured to first receive care in an institutional setting. b. The insured to need institutional level of care. c. The home health care to be provided by a registered nurse or licensed practical nurse. d. That the insured have an acute condition. e. That benefits be limited to services provided by Medicare certified agencies or providers. 4. Home health care or adult day care services may not be excluded or limited for: a. Adult day care services. b. Maintenance or personal care services provided by a home health aide. Unintentional Lapse/Reinstatement 1. No individual LTC policy may be issued until the insurer has received from the applicant either a written designation of at least one person who is to receive notice of policy lapse or termination, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. 2. The designee is not liable as a third party for services provided to the insured. 3. A change of designee must be made within 2 years after the previous designee was selected. 4. Reinstatement - If lapse occurs, LTC policies must provide for reinstatement of coverage within 5 months after termination, if the policyholder was cognitively impaired or had a loss of functional capacity before the grace period ended. Proof of cognitive impairment or loss of functional capacity shall be the same as required for the initial benefits.

Standard Provisions (Continued) Reinstatement

1. In Kentucky, a policy may be reinstated within 3 years (2 years for industrial policies) after it has been lapsed or terminated for premium default, and not been surrendered for cash value or the cash value has not been exhausted. 2. The insured must apply in writing for reinstatement, provide evidence of insurability, and pay all premiums in arrears or any other indebtedness with interest at the rate specified.

Small Employer Medical Plans/Health Benefit Plans Taxation and Sole Proprietorships/Partnerships

1. Self-employed persons operating as a sole proprietorship, partnership or LLC, may deduct 100% of health insurance premiums. For partnerships, such premium payments are deducted as guaranteed payments to the partners. 2. The self-employment deduction for health insurance premiums is not allowed if the self employed person is covered by an employed spouse's health plan. But, if the spouse is employed by the self-employed person's company, then the health insurance premiums for both are 100% deductible. 3. In no case may a deduction for health insurance premiums exceed the earned income of the business.

Individual Health Insurance Policy General Provisions Required Provisions

1. Time Limit on Defenses - After a policy has been in force for 3 years from the issue date no misstatements, except fraudulent misstatements, made in the application may be used to void the policy or deny any claims. After a policy has been in for 2 years, a claim cannot be reduced or denied on the grounds that a disease or physical condition not specifically excluded from coverage, had existed before the policy's effective date of coverage. 2. Grace Period - The grace period is at least 7 days for weekly premiums, 10 days for monthly premiums; and 31 days for all other modes of payment. If the insurer decides not to renew the policy, insureds must be given at least 5 days' advance notice before the premium due date. 3. Legal Actions - The period for legal actions is 3 years. 4. Free Look - The free look period is 10 days. 5. Coverage For Newborn Children - All individual health policies issued in Kentucky must offer the option to purchase coverage for up to 5 days of hospital nursery care for a well newborn child. 6. Reinstatement - Any past due premiums paid with a reinstatement may not cover more than 60 days prior to the reinstatement date. 7. Notice of Claim - Written notice of claim must be given to the insurer within 60 days after the occurrence or commencement of any loss covered by the policy, or as soon as is reasonably possible. The notice may be given to any authorized agent of the insurer; it doesn't have to be mailed to the insurer's main office. 8. Proof of Loss/Payment of Claim - Once proof of loss is received, the claim must be paid within 30 days. If the claim will be paid in periodic payments, such payments must be made at least monthly. 9. Loss Payment to Minors/Other Relatives - If the only beneficiary is the insured's estate or a minor, the insurer may pay up to $5,000 to any relative by blood or marriage of the insured or beneficiary whom the insurer deems entitled to it. 10. Relation of Earnings to Insurance - In Kentucky, the minimum loss-of-time benefit amount is $300. 11. Reimbursement For Services a. An insured may be reimbursed for optometrist, podiatrist and chiropractic services, regardless of whether the services were performed by a licensed physician or osteopath rather than an optometrist, podiatrist or chiropractor. b. Dental - A dental policy must cover and reimburse the insured for dental services even if they are performed by a licensed physician rather than a licensed dentist. c. Psychologist/Clinical Social Worker Coverage - An insured must be reimbursed for the cost of psychological or clinical social worker services, not in excess of the coverage limits, regardless of provider's profession. 12. Mammogram Coverage - The benefit amount may be limited to $50 and the deductible/coinsurance factors must be as favorable as for other coverages. 13. Ambulatory Surgical Center Coverage - Individual health insurance policies issued in Kentucky, which provide coverage on an expense incurred basis, shall provide coverage for health care treatment or services rendered by ambulatory surgical centers. Such centers must be approved by the Kentucky Health Facilities and Health Services Certificate of Need and Licensure Board. The coverage shall be on the same basis as when the treatment or services is rendered by a hospital. 14. Jaw Disorders - All individual health policies that provide coverage on an expense-incurred basis for surgical or nonsurgical treatment of skeletal disorders shall provide coverage for medically necessary treatment of temporomandibular joint disorders and craniomandibular jaw disorders. Note: These provisions also apply to group policies

Insurance Fraud Regulation (Continued) Notification Requirements

1. Upon written request by an authorized agency to an insurer, the insurer or an agent authorized by the insurer may release any information that is considered important relating to any suspected insurance fraud. Certified copies of the information must be provided within 10 business days of receiving the request for it. Such information may include: a. The application for insurance. b. Policy premium payment records. c. History of previous claims made by the insured. d. Statements of any person. e. Proofs and notices of loss. 2. If an insurer knows the identity of a person who it has reason to believe committed a fraudulent insurance act, the insurer may notify an authorized agency of such knowledge. Note: Any agency receiving information concerning insurance fraud must report it to the Fraud Division, who then reports it to the State Attorney General or other agency having jurisdiction. Prosecution should begin within 60 days. If not, the prosecuting office will notify the Division as to the reasons for the delay. 3. Insurers, employees, producers, or other persons acting without malice, fraudulent intent, or bad faith, may not be subject to civil liability for libel, slander, or any other related action when information is given to law enforcement officials, the National Association of Insurance Commissioners (NAIC), the Department of Insurance, or a federal or state agency established to detect and prevent fraudulent insurance acts. Warning Statements 1. All insurance applications must contain a statement as follows: "Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance containing any materially false information or conceals, for the purpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act, which is a crime." 2. All claim forms must contain a statement as follows: "Any person who knowingly and with intent to defraud any insurance company or other person files a statement of claim containing any materially false information or conceals, for the purpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act, which is a crime." Fraud Offenses and Penalties 1. Misdemeanor - A person convicted of a fraud violation shall be guilty of a misdemeanor if the total amount fraudulently claimed/received is less than $500. This is punishable by no more than 1 year imprisonment, or a fine of no more than $1,000 per individual or, per corporation, the greater of $5,000 or twice the amount of fraudulent gain received, or both fine and imprisonment. 2. Class D Felony - A person commits a Class D felony if the total amount fraudulently claimed and/or received exceeds $500. This is punishable by at least 1, but no more than, 5 years imprisonment, a fine of not more than $10,000 per occurrence per individual or, per corporation, not more than the greater of $100,000 or twice the amount of fraudulent gain received, or both fine and imprisonment 3. Class B Felony - Any person, with the purpose to establish or maintain a criminal syndicate, or to facilitate any of its activities, shall be guilty of engaging in organized crime, a Class B felony. A "syndicate" is 5 or more persons collaborating to commit insurance fraud. This is punishable by imprisonment for not less than 10 nor more than 20 years, a fine of not more than $10,000 per occurrence, per individual, or, per corporation, the greater of $100,000 or twice the amount of gain received, or both fine and imprisonment. Note: The Class B Felony is not primarily about insurance fraud but rather, organized crime. Insurance fraud by itself is a Class D Felony. 4. Restitution - In addition to a fine, imprisonment, or both, the guilty person may be ordered to make restitution to any victim who suffered a monetary loss due to the illegal actions and to the Department for the cost of any investigation. The amount of restitution shall be the greater of the monetary value of the actual loss or twice the amount of gain received as a result of the violation. a. Any person damaged as a result of a violation where the violator is convicted, shall have a cause to recover compensatory damages, plus all reasonable investigation and litigation expenses, including attorneys' fees, at the trial and appellate courts. b. The provisions regarding fraud and its penalties shall also apply to any agent, unauthorized insurer or surplus lines carrier who intentionally injures, defrauds, or deceives any claimant with regard to any claim. The claimant shall have the right to recover the damages as described in subparagraph a above. Designation of a Contact Person 1. Every insurer shall designate at least 1 but not more than 4 primary contact persons who shall communicate with the Insurance Fraud Unit on matters relating to the reporting, investigation, and prosecution of suspected fraudulent insurance acts. 2. Every insurer shall notify the Insurance Fraud Unit in writing of the names, addresses, and telephone numbers of the insurer's primary contact person(s).

Health Insurance Common Exclusions From Coverage

1. Preexisting Conditions - If an insurer elects to use a simplified application form for a policy other than a Medicare supplement policy, without any questions concerning the insured's health history or medical treatment history, the policy must cover any loss occurring from any preexisting condition not specifically excluded from coverage 9 months after the date it is issued. 2. Intoxicants, Narcotics and Hallucinogenics - Insurers are not liable for any loss resulting from the insured's being intoxicated or under the influence of any narcotic or any hallucinogenic unless administered on the advice of a physician.

Producer Responsibilities in Individual Health Insurance Advertising

1. The name of the insurer must be clearly identified in all advertisements and, if any specific individual policy is advertised, it must be identified either by form number or other appropriate description. An advertisement shall not use a trade name, slogan, symbol, or other device which has the capacity and tendency to mislead or deceive as to the insurer's true identity. 2. An advertisement that is intended to be seen or heard beyond the limits of its jurisdiction in which the insurer is licensed must not imply licensing beyond such limits. a. Advertisements must not misrepresent policy terms, benefits, dividends or advantages. b. Advertisements shall not use names or titles which misrepresent the policy's true nature. 3. No advertisement may imply that a policy or insurer's financial condition has been approved by a governmental program or agency unless it is true. Advertisements must not misrepresent an insurer's financial condition or its reserve system. Neither can advertisements misrepresent any individual's conduct of his insurance business. 4. An advertisement may not make unfair or incomplete comparisons of policies or benefits of other insurers, and may not disparage competitors, their policies, services or business methods. 5. An advertisement may not imply that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy because of special advantages available in the policy, unless such is the fact. 6. No advertisement may contain descriptions of a policy limitation, exception or reduction, worded in a positive manner to imply that it is a benefit, such as, describing a waiting period as a "benefit builder," or stating "even preexisting conditions are covered after 2 years". 7. No advertisement of a benefit for which payment is conditional upon confinement in a hospital or similar facility shall use words or phrases such as "tax free," "extra cash," "extra income," "extra pay," or substantially similar words or phrases that tend to misleading the public into believing that the policy will enable them to profit from being hospitalized. 8. The words and phrases "all," "full," "complete," "comprehensive," "up to," "as high as," "this policy will pay your hospital and surgical bills," or "this policy will replace your income," or similar words and phrases shall not be used so as to exaggerate any benefit beyond the terms of the policy. 9. Phrases such as "this policy pays $1,800 for hospital room and board expenses" are incomplete without indicating the maximum daily benefit and the maximum time limit for hospital room and board expenses. 10. When an advertisement refers to any dollar amount, benefit period, cost of policy, specific policy benefit or the loss for which such benefit is payable, it shall also disclose any exceptions, reductions and limitations affecting the policy's basic provisions, without which the advertisement would have the capacity and tendency to mislead or deceive. 11. Advertisements must disclose any time period between a policy's effective date and the effective date of coverage or a time period between the date a loss occurs and the date benefits begin to accrue for such loss. 12. An advertisement shall disclose the extent to which any loss is not covered if the cause of such loss is traceable to a condition existing prior to the policy effective date. When a policy does not cover losses traceable to preexisting conditions, the advertisement cannot state or imply that the applicant's physical condition or medical history will not affect policy issue or subsequent claims. This limits the use of phrase "no medical examination required" and similar phrases. 13. Advertisements may not imply that prospective purchasers become a group of members who enjoy special rates or privileges ordinarily associated with group insurance. 14. All printed advertisements except general invitations to inquire about the details of policies shall carry a reference number for any contract form mentioned in the advertisement. 15. No advertisement of a policy covering only one disease or a list of specified diseases may imply coverage beyond the terms of the policy. 16. Direct mail advertisements shall indicate that the insurer is licensed in a specified state or states only, or is not licensed in a specified state or states. For example, "This company is licensed only in State A" or "This company is not licensed in State B." 17. Insurers must keep a file of all advertisements used, including notation as to the manner and extent of distribution and the form number of any policy advertised. This file shall be subject to regular and periodical inspection by the Department and shall be kept for at least 3 years. 18. Testimonials used in advertisements must: a. Be genuine b. Represent the current opinion of the author c. Be applicable to the policy advertised d. Be reproduced accurately

Group Health Policies Required Provisions

A group health insurance policy must the following provisions: 1. A provision that the insurer will furnish to the policyholder for delivery to each employee or member a statement in summary form of the essential features of the insurance coverage. 2. A provision that eligible new employees may be added from time to time to the group originally insured. 3. A provision that, in the absence of fraud, all statements made by applicants, the policyholder or an insured person shall be deemed representations and not warranties, and that no statement made shall avoid the insurance or reduce benefits unless contained in a written instrument signed by the policyholder or the insured person. 4. Group plans must cover an employee's dependents. 5. Employee - This includes officers, directors, managers and retired employees. If the policy covers a public entity, the term includes elected or appointed officers. If the business is a sole proprietorship or partnership, then "employee" includes the proprietor and partners. 6. Required Coverages - Group policies in Kentucky have the following coverages as are described for individual policies: a. Coverage for newborn children b. Newborn nursery care coverage c. Ambulatory surgical center coverage d. Reimbursement for dental, podiatry, chiropractic, psychological, optometry, psychology and clinical social services, regardless of the provider's type of medical license. e. Jaw disorder coverage f. Mammogram coverage g. Bone marrow and stem cell transplantation (breast cancer treatment) h. Alcoholism (See Alcoholism Section below)

Credit Health Insurance

Insurance on a debtor to provide indemnity for payments becoming due on a specific loan or other credit transaction while the debtor is disabled.

Group Health Policies (Continued)

Optional Coverage Group policies in Kentucky offer the following optional coverages as are described for individual policies: 1. Mental illness coverage. 2. Home health care. 3. Mastectomy, endometriosis, bone density testing coverage. Alcoholism 1. Group policies must offer minimum benefits for the treatment of alcoholism. Coverage for such treatment is divided into 3 phases: a. Emergency detoxification treatment. b. Residential treatment. c. Outpatient treatment. 2. Insurers are not required to pay benefits until the insured has completed a treatment phase, under the direction of a licensed physician or licensed treatment facility. 3. Required Provisions and Minimum Benefits - Group contracts providing major medical or outpatient care for treatment of alcoholism shall require: a. That the patient receives one of the 3 phases of treatment as specified in paragraph 2 above, under the supervision of a physician licensed to practice in Kentucky or by a licensed treatment facility. b. Minimum benefits per patient as follows: 1) Emergency Detoxification - 3 days, $40 per day. 2) Residential Treatment - 10 days, $50 per day. 3) Outpatient Treatment - 10 visits, $10 per visit. Conversion Privilege 1. Every group disability policy, must provide that an insured or covered dependent who has been continuously insured under the group policy for at least 3 months and whose insurance under the group policy has been terminated is entitled to have issued a conversion policy. 2. The insured must apply for the conversion policy and pay the first premium within 31 days after the termination of the group coverage. 3. The conversion privilege is provided to the insured without evidence of insurability, but it may contain a preexisting condition limitation in accordance with Kentucky statutes. 4. The converted policy must cover everyone who was covered under the group policy and provide benefits similar to those provided by the group policy. 5. Conversion from a group to an individual health policy need not be granted in the following situations: a. On the effective date of coverage, the applicant is or could be covered by Medicare. b. On the effective date of coverage, the applicant is or could be covered by another group coverage or, the applicant is covered by substantially similar benefits by another individual health policy. c. The issuance of conversion health policy would cause the applicant to be overinsured according to the insurer's standards. 6. Notice of Conversion Rights - Former group members covered under a group policy must be notified in writing of their conversion rights: a. When the group policyholder notifies the insurer that the group member has terminated membership in the group. b. When the former group member's continued group coverage under Kentucky law or COBRA terminates. c. When the group policy terminates for any reason. 7. Minimum Benefits - A converted policy providing hospital or surgical expense coverage may not impose a lifetime maximum benefit amount of less than $500,000. 8. Grace Period Claims - The insurer shall be liable to pay claims for covered losses incurred prior to the end of the grace period if the premium charge is paid prior to the end of the grace period. This section shall not eliminate the insurer's responsibility to notify persons of the right to continue or convert group health insurance coverage.

Licensing Process (Continued) Exemptions

The following are not required to be licensed as a producer: 1. An officer, director, or employee of an insurer or of an insurance producer, who does not receive any commission. 2. A person who secures and furnishes information for the purpose of group life insurance, group property and casualty insurance, group annuities, or group or blanket accident and health insurance or for the purpose of enrolling individuals under plans, and no commission is paid. 3. An employer or association or its officers, directors or employees, or the trustees of an employee trust plan, to the extent that the employers, officers, employees, director or trustees are engaged in the administration or operation of a program of employee benefits. 4. Employees of insurers who are engaging in the rating or classification of risks or in the supervision of the training of insurance producers and who are not individually engaged in the sale, solicitation or negotiation of insurance. 5. A person whose activities in this state are limited to advertising without the intent to solicit insurance in this State. 6. A salaried full-time employee who counsels or advises his/her employer relative to the insurance interests of the employer. 7. An individual or entity who is a nonresident and who sells commercial property and casualty risks located in more than one state. Prelicensing Examination Exemption No prelicensing education or examination is required of: 1. A licensee who allows his/her license to lapse if the license renewal fee is paid within 12 months from the due date of the license renewal fee. 2. Any applicant for license covering any line of authority to which the applicant was licensed under a similar license in Kentucky, other than a temporary license, within the 12 months next preceding date of application. 3. A licensed insurance agent operating as a viatical settlement broker. 4. An individual who applies for an insurance producer license in Kentucky who was previously licensed for the same lines of authority in another state if the licensing application is received within 90 days of the cancellation of the applicant's previous license. 5. An individual licensed as an insurance producer in another state within the last 12 months who moves to Kentucky who applies within 90 days of establishing legal residence in Kentucky. 6. Any applicant for license covering the same line of authority as to which that applicant previously held a license which was surrendered, provided the applicant applies for relicensing within 12 months of the date of termination.

Licensing Process (Continued) Types of Licenses

1. Agent - An individual or business entity that has been appointed by an insurer to sell or solicit applications for insurance or annuities or to negotiate insurance or annuities on its behalf. 2. Producer - A person or business entity required to be licensed under the laws of Kentucky to sell, solicit or negotiate insurance. 3. Adjuster - Any person who for compensation, adjusts, investigates or negotiates settlement of claims on behalf of either the insurer or the insured. a. Independent Adjuster - An adjuster who acts solely on behalf of insurers. b. Public Adjuster - An adjuster who acts sole on behalf of persons claiming benefits under insurance or annuity contracts. (See Producer Regulation Section) Note: An adjuster cannot represent both an insurer and a claimant at the same time for the same loss. 4. Managing General Agent - Any person or business entity that is licensed in property and casualty lines of authority or as a surplus lines broker and: a. Negotiates insurance contracts on behalf of an insurer. b. Solicits applications from agents for insurance contracts. c. Effectuate and countersign insurance contracts for an insurer. Note: A person or business entity in this state shall not act as a managing general agent of an insurer or underwriter's department unless the person is licensed by the Commissioner. 5. Limited Line Credit Insurance Producer - A person who sells, solicits, or negotiates 1 or more of the following forms of limited line credit insurance: a. Credit life and disability insurance. b. Credit property insurance. c. Credit unemployment insurance. d. Involuntary unemployment insurance. e. Mortgage life, disability and guaranty insurance. f. Guaranteed automobile protection gap insurance. g. Any other line of insurance that the Commissioner considers necessary to recognize as limited line credit insurance. 6. Insurance Consultant - An individual who for a fee examines, reviews, evaluates, makes recommendations, or gives advice regarding any insurance policy. Consultants must meet the same application and financial requirements as do producers. In addition, consultants must have at least 5 years of actual experience as a licensed agent in the lines of insurance the consulting license will cover. In lieu of that, a consultant must have special experience, education or training sufficient to make the applicant competent for the responsibilities of a consultant. 7. Business Entities - Any corporation, association, partnership, limited liability company, limited liability partnership or other legal entity. 8. Temporary License - The Commissioner of Insurance may issue a temporary insurance agent license for a period not exceeding 180 days, without requiring an examination, in the following circumstances: a. The surviving spouse or court-appointed personal representative of a licensed insurance agent who dies or becomes mentally or physically disabled: 1) For the sale of the insurance business owned by such insurance agent. 2) For the recovery or return of such insurance agent to the business; or 3) To provide for the training and licensing of new personnel to operate such insurance agent's business. b. Any member or employee of a business entity licensed as an insurance agent, upon the death or disability of an individual, designated in such business entity's application or the insurance agent's license. c. The designee of an individual licensed as an insurance agent who is entering active service in the armed forces of the United States. d. Any other circumstance where the Commissioner deems that issuing a temporary license will best serve the public interest. e. The Commissioner may require the temporary licensee to have a licensed agent or insurer as a suitable sponsor who assumes responsibility for all temporary licensee's acts. The Commissioner may also impose other similar requirements and the temporary license may be revoked if the insured's or public's interest is endangered. A temporary license shall not continue after the owner or the personal representative disposes of the business. f. The temporary license may cover only the same kinds of insurance for which the replaced agent and the licensee may represent all insurers last represented by the replaced agent, without new appointments. However, the licensee shall not receive any additional appointments under the temporary license. 1) This provision shall not prohibit termination of its appointment by any insurer. 2) A temporary license shall have the same license powers and duties as under a permanent license but shall not be obtained for the sole production of controlled business. 3) No sale of insurance of any kind shall be made upon the licensee's own life or the lives of any relative by blood or marriage. 9. Limited License - The Commissioner may issue a limited license for the following lines of authority: a. Surety b. Travel c. Limited line credit d. Crop e. Other limited lines, as specified by the Commissioner. Note: Limited lines licenses are no longer issued for motor vehicle physical damage or for mechanical breakdown insurance. However, any such licenses which were in effect on July 15, 2002, shall continue in effect until surrendered or otherwise terminated. 10. Financial Institution - A bank, savings bank, savings and loan association, trust company, credit union, or any depository institution which is authorized to take deposits and make loans from a place of business in the state. A financial institution and the employees of a financial institution conducting insurance sales are required to obtain a producer's license. a. A financial institution and the employees of a financial institution conducting insurance sales are required to obtain a producer's license. b. A financial institution must keep the books and records of transactions involving insurance products or annuities segregated from the books and records for noninsurance transactions. c. A financial institution must advise the consumer of his/her free choice of agent and insurer. d. Prior to the sale of any insurance, a financial institution must provide to the consumer a written statement that: 1) The insurance is not a deposit. 2) The insurance is not insured by the Federal Deposit Insurance Corporation or other government agency that insures deposits. 3) The insurance is not guaranteed by the financial institution or any affiliate. 4) The insurance may involve investment risk, including potential loss of principal. 11. Administrator - This is an individual or business entity who collects monies and adjusts or settles claims in connection with life/health insurance, health service contracts, and annuities. Remember, whereas applicants for other types of licenses must be at least age 18, applicant for an administrator's license must be at least age 21.

Group Life Policy to Individual Policy Prohibited Provisions

1. Backdating - A life policy may not be backdated more than one year. 2. A policy cannot be settled at maturity for less than its stated amount. The settlement must include any dividends and may be reduced by any indebtedness such as a policy loan or past due premiums.

Individual Health Insurance Policy General Provisions Family Expense Health Insurance

1. Family expense health insurance is issued to one family member, but covers any 2 or more eligible family members, including: a. A spouse. b. Unmarried dependent children, to age 19. c. Unmarried children from ages 19 to 25 who are full-time students enrolled in and attending an accredited educational institution and who are primarily dependent on the policyholder for maintenance and support. d. Any other person dependent upon the policyholder. Note: If Kentucky follows the Patient Protection and Affordable Care Act, children must be covered up to age 26. 2. A child reaching the limiting age will remain covered by the policy if he/she is: a. Incapable of self-sustaining employment due to intellectual or physical disability; and b. Chiefly dependent upon the policyholder or subscriber for support and maintenance. 3. Proof of such incapacity and dependency must be furnished to the insurer within 31 days of the child's reaching the limiting age. Two years after such child has attained the limiting age, the insurer may require subsequent proof of incapacity no more often than once a year.

Producer Regulation (Contined) Unfair Insurance Trade Practices Cease and Desist Order

1. If, after a hearing, the Commissioner finds that any person in this state has engaged or is engaging in any act or practice prohibited in this section, she/he shall order the person to desist from the act or practice. 2. A cease and desist order shall become final upon expiration of the time allowed for appeals of the Commissioner's order, or, in the event of an appeal, upon final decision of the court if the court affirms the Commissioner's order or dismisses the appeal. 3. No final order of the Commissioner or order of court to enforce it shall in any way relieve or absolve any person affected by the order from any other liability, penalty, or forfeiture under law.

Individual Health Insurance Policy General Provisions Scope of Provisions

The provisions required of individual health policies do not apply to: 1. Any policy of liability or Workers' Compensation insurance with or without supplementary expense coverage. 2. Any group or blanket policy. However, group/blanket policies can provide the same coverages as individual policies. 3. Life insurance, endowment or annuity contracts, or contracts supplemental to them which contain only such provisions relating to health insurance as: a. Providing additional benefits in case of death or dismemberment or loss of sight by accident or accidental means. b. Operating to safeguard such contracts against lapse. c. Giving a special surrender value or special benefit in the event that the insured or annuitant becomes totally and permanently disabled, as defined by the contract or supplemental contract. 4. Reinsurance. 5. Any contract made or issued prior to June 18, 1970, together with any extensions, renewals, reinstatements, modifications, or amendments whenever made. 6. Prohibited Policy Plans - No insurer shall issue in Kentucky any policy providing benefits or values for surviving or continuing policyholders that are contingent upon the lapse or termination of policies belonging to other policyholders. 7. Disclosure of Other Policies - Every application form used for individual policies shall include space for the applicant to list all other health insurance coverage currently in force. Such insurance need be identified only by the insurer's name and, if known, the amount of insurance. Executing Agreements 1. Execution of Policies - Every policy shall be executed in the name and on behalf of the insurer by its officer, attorney-in-fact, employee, or representative duly authorized by the insurer. A facsimile signature of such authorized personnel may be used in lieu of an original signature. A contract cannot be invalidated solely because it appears to be executed under a facsimile signature of a person not authorized by the insurer to so act. 2. Underwriters' and Combination Policies - Two or more authorized insurers may jointly issue and be jointly liable on an underwriters' policy bearing their names. Any one insurer may issue policies in the underwriter department's name and such policies shall plainly show the true name of the insurer. Two or more authorized insurers may, with the Commissioner's approval, issue a combination policy which shall contain provisions substantially as follows: a. That the insurers executing the policy shall be severally liable, according to the terms of the policy, for the full amount of any loss or damage, or for specified percentages or amounts. b. That a claim process, to include proof of loss required by such policy, upon any of the insurers executing the policy shall be binding upon all such insurers. The Americans with Disabilities Act (ADA) 1. While the ADA prohibits employers from discriminating against the disabled in hiring practices, it also requires employers to provide employees with dependents who have disabilities equal access to whatever health insurance coverage is offered to other employees. However, the ADA does not require an employer to provide additional health insurance coverage. For example, A state employer's health insurance plan will only pay for a certain number of days of inpatient care for employees' dependents each year. An employee informs the employer that his wife's disability will require more time in the hospital than the plan covers. The ADA does not require the employer to provide additional health insurance coverage to meet the wife's needs. 2. Currently, the courts have decided for and against employee's who sue an insurer for violating the ADA. The types or degree of disabilities an insurer may refuse to cover is still not perfectly settled. Generally, insurers are protected only when they use risk classifications that do not violate state law, are not intended to, and do not otherwise evade the ADA.

Licensing Process (Continued) Continuing Education

1. Each licensee whose birthday is in an even-numbered year must complete a minimum of 24 credit hours, 3 hours of which must be in ethics, biennially. The requirements must be met by the last day of the licensee's birth month in the even-numbered year. 2. Each licensee whose birthday is in an odd-numbered year must comply with the same requirements as a licensee whose birthday is in an even-numbered year, except that the licensee must meet the requirements by the last day of the licensee's birth month in the odd-numbered year. Note: As of July 31, 2012, independent and public adjusters, not otherwise exempted, must also complete 24 hours of continuing education courses biennially, 3 of which must be in ethics. 3. A licensee must submit proof of compliance to the Commissioner within 60 days after the continuing education biennial compliance date. 4. The following licensees are exempt from the continuing education requirements: a. Limited lines producers. b. Licensees not licensed for 1 full year prior to the end of the applicable continuing education biennium. c. Nonresident licensees who have met the continuing education requirements of their home state and whose home state gives credit to Kentucky resident licensees on the same basis. d. Licensees maintaining their licenses for the sole purpose of receiving renewals or deferred commissions. 5. Excess credit hours accumulated during any continuing education biennium may be carried forward. The Commissioner may limit the number of hours carried forward. 6. A license shall terminate if the licensee fails to comply with the continuing education requirements and has not been granted an extension of time to comply. For good cause, the Commissioner may extend the compliance period up to 2 years. If the license has terminated, the licensee must surrender his/her license to the Commissioner. 7. The license of any individual shall be suspended or revoked, a civil penalty imposed, or both, if the individual submits a false or fraudulent certificate of compliance with the continuing education requirement. 8. An individual teaching an approved continuing education course shall be credited the same number of hours as those being taught.

Licensing Process (Continued) Producer Appointment

1. A producer may not act as an agent unless he/she is appointed as an agent by the insurer. 2. An insurer must file a notice of appointment within 15 days after the contract is executed or the first application for insurance is submitted. 3. An insurer must pay an appointment fee and remit an annual renewal fee for each appointed producer. 4. An insurer who terminates an appointment, employment or other relationship of a producer must notify the Commissioner within 30 days after the effective date of the termination. 5. Within 15 days after notifying the Commissioner of termination of appointment, the insurer must mail a copy of the notification to the producer. 6. After termination of an appointment and subject to agreement between the agent and the insurer, the agent may continue to service, and receive commissions relative to, business written during the existence of the appointment, provided the agent continues to be licensed.

Licensing Process (Continued) Maintenance and Duration

1. Duration - Unless suspended, revoked or refused renewal, an insurance agent license will remain in effect as long as educational requirements are met. Licensees will be notified of renewal requirements at least 30 days before they are due. 2. Change of Address/Place of Business - Each agent must notify the Department of Insurance within 30 days of a change in residence or business address. 3. Reporting of Criminal/Administrative Actions - Within 30 days of occurrence, a licensed agent must report any disciplinary action by the insurance regulatory agency of any other state or territory of the United States: a. Each disciplinary action on an occupational license held by the licensee. b. Each judgment or injunction entered against the licensee involving fraud, deceit, misrepresentation, or violation of any insurance law. c. Such information is confidential by law and is privileged. 4. Assumed/Fictitious Business Name - An insurance producer doing business under any name other than the producer's legal name is required to notify the Commissioner prior to using the assumed name. Further, business names should not use words, titles, degrees, designations, etc., that imply or purport that the licensee possesses a greater skill, knowledge, experience or qualification than is actually a fact. This does not prohibit the use of degrees or designations from institutions or associations having authority to award them.

Converting Group Life Insurance to Individual Policy

1. A group life policy must contain a provision that, if the insurance for an insured terminates due to termination of employment, such person will be entitled to have issued to him/her, without evidence of insurability, an individual policy upon application within 31 days of the termination date. 2. A group life policy must contain a provision that, if the policy itself terminates, every person insured at the date of termination who has been insured for at least 5 years prior to the termination date will be entitled to have issued to him/her within 31 days of the termination date, and without evidence of insurability, an individual policy. 3. A group life policy must contain a provision that, if a person insured under the policy dies during the conversion period within which he/she would have been entitled to have an individual policy issued, the amount of life insurance which he/she would have been entitled to have issued under an individual policy must be payable as a claim under the group policy whether or not application for the individual policy has been made. 4. An individual policy converted from a terminating group policy will have a face amount the lesser of: a. The amount of coverage terminating, less any coverage amount for which the person becomes eligible under any group policy issued or reinstated by the same or another insurer within 31 days of termination; or b. $10,000.

Standard Provisions (Continued) Industrial Life Insurance

1. Industrial Life Insurance is written with a face amount of $3,000 or less and is issued on the basis of an industrial mortality table. Premiums are payable at least monthly but can be more often. 2. Wholesale Life Insurance is individual policies issued to any employer that covers at least 4 employees at the date of issue. Premiums are paid either totally by the employer or by both the employer and employees. This type of insurance does not include salary savings life insurance, pension trust insurance, or annuities. 3. College Life Insurance is sold to college students and the initial premiums are financed by a promissory note.

Producer Regulation Commissions

1. An insurer or producer may not pay a commission, service fee, brokerage, or other valuable consideration to a person for selling, soliciting, or negotiating insurance in this state if that person is required to be licensed and is not so licensed. 2. No person may accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting or negotiating insurance in this state if that person is required to be licensed and is not so licensed. Note: Such compensation may be paid or received if the person was licensed at the time of the transaction. 3. An unlicensed person may be compensated for referring a potential customer to a licensed producer, but the compensation must be paid even if the customer does not buy the insurance being solicited.

Life Standard Provisions

1. Grace Period - The grace period for individual life insurance policies is not less than 30 days, or 4 weeks in the case of industrial life insurance policies. The insurer may impose an interest charge during the grace period and, if a claim arises during that period, the past due premium and interest may be deducted from the proceeds. 2. Notice of Policy Owner's Rights - The Commissioner shall develop a notice of policy owner's rights and general information which includes: a. A statement that life insurance is a critical part of a broader financial plan. b. A statement that there are alternatives to lapse or surrender of the policy. c. A general description of life settlements and state that life settlements are a regulated transaction in Kentucky. d. A general description of other common products and services that may be available prior to a policy lapse or surrender. e. A statement that advises recipients of the notice that life insurance, life settlements, or any of the products or services may or may not be available to the recipient, depending on a number of circumstances, including but not limited to the insured's age and health. f. This notice must be provided with every policy issued when: 1) The insured is 60 or more years of age; or 2) The insurer has been notified that the insured is terminally or chronically ill. g. The Commissioner may establish that this notice be provided only with policies having a net death benefit of $100,000 or greater, as long as this does not discriminate against policy owners based on other factors such as race, religion, national origin, age, disability, marital status, or economic means. 3. Incontestability - An individual life insurance policy is incontestable after it has been in force during the lifetime of the insured for 2 years from its date of issue except for nonpayment of premiums. Any monthly disability income rider shall also contain an incontestability clause which states that after 3 years, no misstatements, except fraudulent misstatements, may be used to void a policy or deny a claim. 4. Free Look - In Kentucky, an insured has 10 days to examine a policy and, if dissatisfied for any reason, may return it for a full refund of any premiums paid. This does not apply to policies of credit life insurance or policies issued under tax-qualified pension plans.

Types of Providers and Plans Kentucky Access

1. Kentucky Access is established to ensure that health coverage is made available to each Kentucky individual resident applying and qualifying for coverage. 2. Any individual who is not an eligible individual who has been a resident of Kentucky for at least 12 months immediately preceding the application for Kentucky Access coverage is eligible for coverage under Kentucky Access if one of the following conditions is met: a. The individual has been rejected by at least one insurer for coverage of a health benefit plan that is substantially similar to Kentucky Access coverage. b. The individual has been offered coverage substantially similar to Kentucky Access coverage at a premium rate greater than the Kentucky Access premium rate at the time of enrollment or upon renewal. c. The individual has a high-cost condition. 3. An enrollee whose premium rates exceed claims for a 3-year period shall be issued a notice of insurability indicating that the enrollee has not had claims exceed premium rates for a 3-year period and may be used by the enrollee to obtain insurance in the regular individual market. 4. An individual is not eligible for coverage under Kentucky Access if: a. The individual has, or is eligible for, on the effective date of coverage under Kentucky Access, substantially similar coverage under another policy. b. The individual is eligible for coverage under Medicaid or Medicare. c. The individual previously terminated Kentucky Access coverage and 12 months have not elapsed since the coverage was terminated, unless the individual demonstrates a good faith reason for the termination. d. Except for covered benefits paid under the standard health benefit plan, Kentucky Access has paid $2,000,000 in covered benefits per individual. e. The individual is confined to a public institution or incarcerated in a federal, state, or local penal institution or in the custody of federal, state, or local law enforcement authorities, including work release programs. 5. Kentucky Access shall offer at least 3 health benefit plans to enrollees: a. Standard health benefit plan. b. Traditional fee-for-service plan. c. Managed-care plan. 6. Individuals who apply and are determined eligible for health benefit plans issued under Kentucky Access shall have coverage effective the first day of the month after the application month. 7. Health benefit plans issued under Kentucky Access shall not impose any preexisting condition exclusions. 8. Health benefit plans issued under Kentucky Access shall be guaranteed renewable. 9. All health benefit plans issued under Kentucky Access shall provide that, upon the death or divorce of the individual in whose name the contract was issued, every other person covered in the contract may elect within 63 days to continue under the same or a different contract. 10. Except for the standard health benefit plan, health benefit plans issued under Kentucky Access shall pay covered benefits up to a lifetime limit of $2,000,000 per covered individual.

Group Health Policies Continuation of Coverage

1. Persons covered by group policies have the right, upon termination of group membership, to continue group coverage for themselves and their dependents upon meeting the following conditions: a. The group member has been covered by the group policy or any group policy it replaced for at least 3 months; and b. Notice is given and the group rate is paid to the insurer by the group member, within 31 days after the member receives notice of the right to continue coverage. 2. Continued group health insurance coverage will terminate on the earlier of: a. 18 months after the group coverage would have terminated because the person terminates the group membership. b. The end of a grace period or payment period, if the premium is not paid. c. The date the group policy is terminated and is not replaced by another group policy within 31 days. 3. If a group policy is replaced by a succeeding insurer, persons under the continued group health insurance shall remain covered under the prior insurer's policy until it terminates as specified in paragraph 2. 4. The right to continue group health insurance coverage shall also be available: a. To a deceased group member's surviving spouse and any dependents. b. To a child upon termination of group membership or due to reaching the limiting age while covered as a dependent. c. To a former spouse and dependent children of whom he/she is awarded custody when group membership is terminated by the dissolution of marriage. 5. Denial of Continuation - Continuation of group health insurance coverage may be denied if: a. On the effective date of coverage continuation, the applicant is or could be covered by Medicare; or b. On the effective date of coverage continuation, the applicant is or could be covered by another group coverage. 6. Notice of Right to Continue - Notice of the right to continue group health insurance coverage shall be provided as follows: a. When the insurer receives notice from the policyholder that a person is no longer a member of the group, the insurer shall give written notice to the terminating group member, and the 31-day deadline to apply for continuation does not start until the member receives the notice. b. If an insurer fails to provide the notice as required, it must provide the notice as soon as is practical after its failure to notify is revealed. The terminated member shall then have 60 days to apply for continuation of coverage once he/she receives the belated notice. c. If 90 days elapses after a former group member's coverage terminates, insurers are not required to give notice of the right to continue or approve continuation of coverage.

Licensing Process (Continued) Controlled Business

1. Using a license chiefly to procure insurance on the life or property of one's own self, one's spouse, or one's employees or employer is controlled business. 2. An agent is deemed to be writing controlled business if the aggregate premiums from such business exceed the aggregate premiums for other business in any 12-month period. 3. A person may not be licensed solely for the purpose of controlled business. 4. This restriction does not apply to: a. Insurance covering a motor vehicle sales or financing agent's interest in a motor vehicle sold or financed by it. b. Insurance covering of real property mortgagee's interest in the mortgaged property, except title insurance. c. Limited line credit insurance; and d. Rental vehicle insurance.

Company Regulation Unfair Claim Settlement Practices

The following are considered acts constituting improper claim settlement practices: 1. Misrepresenting to claimants pertinent facts or provisions in the insurance policy that relate to any coverage at issue. 2. Failing to promptly acknowledge communications pertinent to a claim. 3. Failing to use reasonable standards in the prompt investigation of claims. 4. Failing to attempt to promptly and fairly settle claims in which liability is clear. 5. Compelling an insured to file suit by offering substantially less than what a lawsuit would award. 6. Refusing to pay claims without conducting a reasonable investigation. 7. Failing to affirm or deny coverage on a claim within a reasonable time after receiving a proof of loss. 8. Attempting to settle a claim for less than the amount to which the claimant believed he/she was entitled by reference to written or printed advertising material accompanying the application. 9. Attempting to settle a claim based on an application that was altered by the agent or company without notice to, or consent of, the insured. 10. Making claim payments that are not accompanied by statements indicating the coverage under which payments are being made. 11. Delaying the investigation or payment of a claim by requiring the claimant to submit both a formal proof of loss form and subsequent verification when both submissions contain the same information. 12. Failing to promptly explain the denial of a claim or an offer of compromise in relation to the facts and applicable law. 13. Making known to claimants a policy of appealing arbitration awards that favor claimants, for the purpose of compelling them to accept a lesser settlement than that awarded. 14. Failing to promptly settle claims (where liability is clear) under one section of the policy coverage in order to influence settlements under other sections. 15. Failing to comply with the decision of an independent review entity to provide coverage for a covered person as a result of an external review.

Long-Term Care Insurance (Continued) Policy Practices and Provisions

1. A long-term care policy must be at least guaranteed renewable. 2. Long-term care exclusions include: a. Preexisting conditions b. Mental or nervous disorders (except for Alzheimer's disease) c. Alcoholism or drug addiction d. Suicide e. Service in the armed forces or auxiliary units f. War or act of war, whether declared or undeclared g. Participation in a felony, riot or insurrection h. Aviation i. Treatment provided in a government facility j. Treatment provided outside of the U.S. 3. Benefit Triggers - Activities of daily living and cognitive impairment shall be used to measure an insured's need for long term care and shall be described in the policy or certificate in a separate paragraph labeled, "Eligibility for the Payment of Benefits." a. Any additional benefit triggers shall also be explained in this section. If these triggers differ for different benefits, explanation of the trigger shall accompany each benefit description. b. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too shall be specified. c. Nonqualified - A non tax-qualified LTC insurance policy shall condition the payment of benefits on a determination of the insured's inability or deficiency in performing at least 3 of the activities of daily living or the presence of cognitive impairment. d. Qualified - Tax-qualified LTC policy benefits will be paid for qualified services for "chronically ill" individuals. This means that rather than needing to be deficient in 3 activities of daily living, they need to be deficient in only 2 ADLs for at least 90 days. Nonforfeiture Benefit A nonforfeiture benefit for level premium, qualified long-term care insurance contract must be offered and provide at least one these requirements: 1. Reduced paid-up insurance 2. Extended term insurance 3. Shortened benefit period

Producer Regulation Exchange of Business

1. An agent licensed in life, health, property, casualty and limited lines of authority may: a. Occasionally place insurance coverage with an insurer with whom he/she is not then appointed as an agent, but such insurer may accept such business only when placed through one of its appointed agents. Both agents involved in this exchange of business must be licensed for all the kinds of insurance represented by the coverage; and b. Without limitation, place insurance coverage with an insurer with whom he/she is not then appointed as agent, but such insurer may accept such business only if placed through a licensed managing general agent. 2. The Commissioner shall establish the amount or volume of business that constitutes the occasional placement of business permitted. Such regulations may be based on a percentage or ratio of the agent's business or any other appropriate standard. 3. Generally, producers may place insurance with insurers with whom they are not appointed only if the premiums for such insurance do not exceed 20% of the agent's total premiums for the preceding calendar year.

Long-Term Care Insurance Inflation Protection

If an LTC policy is offered, the insurer must also offer the applicant, at the time of purchase, the option to buy an inflation protection feature no less favorable than one of the following: 1. Increases benefit levels annually so that the increases are compounded annually at a rate no less than 5%. 2. Guarantees that the insured may periodically increase benefit levels without providing evidence of insurability or health status, so long as the option for the previous period has not been declined. 3. Covers a specified percentage of actual or reasonable charges and does not include a maximum specified indemnity amount or limit. Disclosures 1. Renewability - Individual long-term care insurance policies must contain a renewability provision on the first page of the policy disclosing the duration of renewability and the duration of the term of coverage. 2. Riders and Endorsements - All riders or endorsements added to an individual long-term care insurance policy after date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage are subject to signed acceptance by the insured. After the date of policy issue, any rider or endorsement which increases benefits or coverage with an increase in premium must be agreed to in writing signed by the insured, except if the increased benefits or coverage are requested by the insured or required by law. 3. Payment of Benefits - A long-term care insurance policy that provides benefits based on "usual and customary," or "reasonable and customary" charges, must include a definition of such terms and an explanation of such terms in its accompanying outline of coverage. 4. Limitations - If a long-term care insurance policy contains any limitations with respect to preexisting conditions, such limitations must appear as a separate paragraph of the policy and must be labeled as "Preexisting Condition Limitations." 5. Other Limitations or Conditions - A long-term care insurance policy containing any limitations or conditions for eligibility must provide a description of such limitations or conditions in a separate paragraph of the policy and must be labeled as "Limitations or Conditions on Eligibility for Benefits." 6. Disclosure of Tax Consequences a. With regard to life insurance policies that provide an accelerated benefit for long-term care, a disclosure statement must be included that receipt of these accelerated benefits may be taxable, and that assistance should be sought from a personal tax advisor. b. The disclosure statement is required at the time of application for the policy or rider and shall be prominently displayed on the first page of the policy or rider and any other related documents. This paragraph shall not apply to qualified LTC insurance contracts. 7. Qualified Plans - A qualified LTC insurance contract shall include a disclosure statement in the policy and in the outline of that the policy is intended to be a qualified long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986. 8. Non-Qualified Plans - A nonqualified LTC insurance contract shall include a disclosure statement in the policy and in the outline of coverage that the policy is not intended to be a qualified long-term care insurance contract. 9. Chronically-Ill - This means any individual who has been certified by a licensed health care practitioner within the preceding 12 months period as: a. Being unable to perform (without substantial assistance from another individual) at least 2 activities of daily living for a period of at least 90 days due to a loss of functional capacity; or b. Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment. 10. Rating Practices - Except for a policy for which no premium rate or rate schedule increases may be made, an insurer shall provide the following information to an applicant: a. A statement that the policy may be subject to rate increases in the future. b. An explanation of potential future premium rate revisions and the policyholder's option if a premium rate is revised; and c. The premium rate or rate schedules which will apply to the applicant until a request for an increase is made.

Group Life Insurance Standard Provisions

1. A group life policy must contain a provision specifying the conditions, if any, under which the insurer may require evidence of insurability. 2. A group life policy must contain a provision that the insurer will issue individual certificates to the policyholder for delivery to each insured. 3. Information to Debtor - A policy issued to a creditor to insure debtors will furnish to the policyholder for delivery to each insured debtor, a form containing a statement that the debtor's life is insured under the policy and that any death benefit paid shall be applied to reduce or extinguish the indebtedness. 4. Application of Dividends/Rate Reductions - If a policy dividend is declared or a rate is reduced for the first or any subsequent policy year, the excess of the aggregate dividends or rate reductions over the aggregate expenditures shall be applied by the policyholder for the sole benefit of insured employees or members.

Group Life life Insurance Covers

1. An employer or trustees of a fund established by an employer for the benefit of employees. 2. An association, other than an association of public employees, or trustees of a fund established by one or more associations for the benefit of association members. The members are to be in the same industry, occupation or profession. The association must be in active existence for at least 2 years and must have at least 100 members at policy issue. 3. The trustees of a fund established by 2 or more employers in the same or related industry, or by one or more labor unions. 4. A creditor to insure debtors of the creditor concerning their indebtedness. 5. A credit union to insure members of the credit union for the benefit of persons other than the credit union, trustee, agent or any of their officials. 6. A group of public employees for the benefit of persons other than the government department or agency to whom the policy is issued.

Credit Life/Credit Health General Provisions

1. The initial amount of credit life or health insurance may not exceed the total amount repayable under the credit transaction. 2. Credit insurance becomes effective on the date when the debtor becomes obligated to the creditor. 3. The term of any credit insurance may not extend 15 days beyond the scheduled maturity date of the debt. 4. The following must be disclosed to the debtor before in any credit insurance policy: a. The name and principal office address of the insurer, and the identity of the person or persons insured. b. The rate or amount of payment, if any, by the debtor separately for credit life insurance and credit health insurance, a description of the amount, term and coverage including any exceptions, limitations and restrictions. c. State that the benefits will be paid to the creditor to reduce or extinguish the unpaid indebtedness and, wherever the amount of insurance may exceed the unpaid indebtedness, that any such excess shall be payable to a beneficiary, other than the creditor, named by the debtor or to his estate. 5. If the named insurer does not accept the risk, the debtor shall receive a refund of premium. 6. Credit life insurance and credit health insurance shall be issued only in a term plan. 7. Coverage shall be offered to all debtors regardless of age, or to all debtors not older than age 65 at the inception of the indebtedness or age at the transaction's scheduled maturity date. This does not prohibit an insurer from underwriting risks on an individual basis. Appropriate adjustments may be made with the Commissioner's approval if premium rates are determined according to the age of the insured debtor or by age brackets. 8. When credit life insurance or credit health insurance is required as additional security for any indebtedness, the debtor shall have the option of furnishing the required coverage through existing policies he/she owns or controls, or by procuring the coverage from an authorized insurer of his/her choice. 9. Suicide Clause - A credit life insurance policy may exclude or deny a claim for death in the event of suicide within 6 months or 12 months for contracts of more than 3 year's duration. 10. Joint Lives - When a husband and wife are insured together under a credit life/credit health policy, the premium rate charged shall not exceed 150% of the rate permissible under statute. Not more than one individual credit life insurance policy and one credit health insurance policy may be issued as security for a single indebtedness.

Insurance Fraud Regulation General

1. To assist in the detection, investigation and prosecution of insurance fraud, the Kentucky Department of Insurance has its own Division of Insurance Fraud Investigation. The Commissioner shall appoint qualified persons to serve as special investigators for the Division who shall have general police powers including the power to arrest. They shall possess all of the common law and statutory powers, privileges, and immunities of sheriffs, and their jurisdiction shall be coextensive with the state. 2. Further, every insurer admitted to do business in the Commonwealth shall maintain a unit having effective procedures and resources to deter and investigate fraudulent insurance acts. This does not include reinsurers. 3. Any insurer that knowingly allows a person who has been convicted of an offense involving dishonesty, breach of trust, or felony insurance fraud to participate in its business shall be guilty of a criminal violation. 4. Any person who has been convicted of any felony offense involving dishonesty or a breach of trust, or felony insurance fraud may not engage in the business of insurance in this Commonwealth without the Commissioner's written consent. Definition and Examples 1. It is a fraudulent and unlawful practice for a person to knowingly: a. Present a statement or document that contains untrue statements of material fact or that fails to state any material fact with respect to any of the following: 1) An application for the issuance or renewal of an insurance policy. 2) A claim for payment or benefit pursuant to an insurance policy. b. Solicit or accept new or renewal insurance risks by or for any insolvent insurer, reinsurer, or other entity licensed to transact insurance business in this state. c. Solicit or accept new or renewal insurance risks by or for any unauthorized insurer, reinsurer or other entity licensed to transact insurance business in this state. d. Conceal or remove from the home office of any insurer, reinsurer or other entity licensed to transact insurance business in this state part or all of the assets or records of the assets, transactions and affairs. e. Divert the monies of an insurer, reinsurer, entity licensed to transact insurance business in this state or other person. f. Issue or present fake or counterfeit insurance policies. g. Make any false or fraudulent representation as to the death or disability of a policyholder in any written statement or certificate for the purpose of fraudulently obtaining money or benefit from an insurer. h. Present any statement, knowing that the statement contains any false, incomplete, or misleading information concerning any material fact as part of, or in support of, one or more of the following: 1) The rating of an insurance policy. 2) The financial condition of an insurer. 3) The formation, acquisition, merger, reconsolidation, dissolution, or withdrawal from one or more lines of insurance in all or part of this Commonwealth by an insurer. 4) A document filed with the Commissioner. i. Assist, aid or abet another person to commit the fraudulent acts listed above.

Producer Regulation (Continued) Consultants

1. A consultant who is also licensed as an agent shall not receive or share in both a fee and other compensation from an insured or insurer with respect to any insurance or annuity contract transaction. If any fee or other compensation is paid by someone other than an insurer, it is presumed that the licensee was acting solely as a consultant under a written contract. 2. An individual or business entity dually licensed as a consultant and an agent shall not sell, solicit, or negotiate insurance, or otherwise act as an agent for anyone who is the subject of a written consulting contract: a. During the contract term. b. Within 12 months after the contract expires, but no less than 24 months from the contract's inception. 3. Consulting fees paid pursuant to a written contract may be shared between a business entity licensed as a consultant and an individual who is licensed as a consultant and is an owner, officer, partner, member, or employee of the business entity. 4. No consultant may receive any fee, commission or thing of value for any insurance transaction unless the compensation is specified in a written contract. The contract must be signed by the client and must specify: a. The services to be provided by the consultant. b. The beginning and ending date of the agreement. c. Any insurance to which the contract for consultant's services applies. d. The amount the consultant will be paid and by what method, i.e., flat, hourly etc. e. Whether the consultant is dually licensed as an agent. f. Whether the consultant has a financial interest in or affiliation with any business entity or insurer. 5. A copy of every contract shall be retained by the consultant for at least 5 years after the contract expires. 6. A consultant may not receive any compensation for any transactions with insurance, annuities, securities or trusts in connection with pensions for any person to whom the consultant has performed any paid consulting service within the preceding 12 months unless such compensation is specified in a written contract. 7. A consultant cannot be an executive in, or employee of, or own stock which gives him a majority interest in any authorized insurer. Additionally, no consultant may recommend or encourage the purchase of insurance, annuities, or securities from any authorized insurer in which any member of his immediate family holds an executive position or holds a majority interest. 8. A person dually licensed as a consultant and an agent shall not act as both a consultant and an agent with regards to any risk which is the subject of a consulting contract.

Company Regulation (Continued) Payment of Claims

1. A first party claim must be paid within 30 days after the receipt of proof of loss. If a claim is not paid within such 30-day period, the insurer is required to pay interest at a rate of 12% per annum from the date the claim is received by the insurer. 2. If an insurer fails to settle a claim within the time prescribed and the delay was without reasonable foundation, the insured or health care provider shall be entitled to reimbursement for reasonable attorney's fees incurred. No part of the fee for representing the claimant shall be charged against benefits otherwise due the claimant. 3. If a claim remains unresolved 30 days after receiving the proof of loss, the insurer shall provide a reasonable written explanation of the delay. Such notifications and explanations shall be provided every 45 days thereafter and will describe the availability of interest and attorney's fees. 4. The insurer shall acknowledge and respond within 15 calendar days to any written communications relating to a claim. When a claim is denied, written notice of denial shall be sent to the claimant within 15 calendar days of the determination. 5. Insurers shall not deny a claim based on information obtained in a telephone conversation or personal interview with any source unless the telephone conversation or personal interview is documented in the claim file. 6. Insurers shall not refuse to settle claims on the basis that responsibility for payment should be assumed by others except as provided by policy, certificate, or contract provisions. 7. No insurer shall indicate to a first party claimant on a payment draft, check, or in any accompanying letter that the payment is "final" or "a release" of any claim unless the policy limit has been paid or there has been a compromise settlement agreed to by the first party claimant and the insurer. 8. All documents regarding a claim must be retained for at least 5 years after the claim process is concluded.

Standard Provisions (Continued) Policy Loans

1. A loan may be taken from a policy after 3 full years' premiums have been paid and after the policy has a cash surrender value and while no premium is in default beyond the grace period. The interest will be specified by the company and the loan amount may be up to the policy cash value. a. The fixed loan interest rate for policies issued on or after July 13, 1984 shall not exceed 8% per year. b. A variable loan interest rate shall not exceed 18% nor the higher of the following: 1) The published monthly average for the calendar month ending 2 months before the date on which the rate is determined; or 2) The rate used to compute cash surrender values under the policy during the applicable period plus 1% per year. 2. The insurer may deduct, either from the loan value or from the loan proceeds: a. Any existing indebtedness not already deducted, including any interest then accrued but not due. b. Any unpaid balance of the premium for the current policy year; and c. Interest on the loan to the end of the current policy year. 3. Any indebtedness not paid when due shall then be added to the existing indebtedness and shall bear interest at the same rate. If and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the loan value amount, then the policy shall terminate and become void. The insurer must provide at least 30 days' advance notice to the insured. 4. The insurer may defer granting a loan for up to 6 months, unless the loan is to pay any due premiums. The policy, at the insurer's option, may provide for automatic premium loan.

Producer Regulation (Continued) Apprentice Adjusters

1. A person meeting the requirements for adjuster licensure except that he/she has not had experience or special education or training in loss claims may be issued a temporary license as an apprentice adjuster, without having to pass an examination, for up to 12 months. 2. A temporary license as an apprentice adjuster shall be subject to the following terms and conditions: a. The apprentice adjuster shall have all of the privileges and obligations of a licensed adjuster. b. The apprentice adjuster shall at all times be a full-time salaried employee of an insurer or an adjuster and subject to training, direction, and control by a licensed adjuster acting in the same capacity as that for which the applicant applied. c. The apprentice adjuster can adjust claims only in the state which issued the apprentice license. d. The apprentice adjuster's claim investigation, settlement, and negotiation must be subject to the review and final determination by the supervising licensed adjuster. e. The apprentice adjuster shall be subject to suspension, revocation, or other conditions as applicable to licensed adjusters. f. An individual may hold only 1 apprentice adjuster license at a time. Once an individual has held an adjuster license s/he may again be eligible to hold one apprentice adjuster license for a different line of authority.

Producer Regulation (Contined) The Adjuster Contract

1. A public adjuster shall ensure that all contracts with insureds are in writing and contain the following terms: a. The adjuster's full name as specified in the Department of Insurance licensing records. b. The permanent home state business address and phone number. c. The Department of Insurance license number. d. A title of "Public Adjuster Contract". e. The insured's full name, street address, insurer name, and policy number, if known or upon notification. f. A description of the loss and its location, if applicable. g. A description of services to be provided to the insured. h. The full compensation amount being paid to the adjuster. i. The signatures of the public adjuster and the insured. 2. If the insurer pays or commits to pay policy limits to the insured within 72 hours after a loss is reported to the insurer, the public adjuster shall be entitled only to reasonable compensation from the insured for services provided. 3. A public adjuster shall provide the insured with a written disclosure of any financial interest that the public adjuster has with any other party who is involved in any aspect of the claim. 4. A public adjuster contract may not contain any term that: a. Allows the public adjuster to collect any of his fee before the insurer pays or to collect his entire fee from the first check issued by an insurer, rather than as a percentage of each check issued by an insurer. b. Requires the insured to authorize an insurer to issue a check only in the adjuster's name. c. Imposes collection costs or late fees; or d. Prohibits a public adjuster from pursuing civil remedies. 5. Both the insured and the adjuster must be provided original copies of the contract. The insured has the right to rescind the contract, in writing, within 3 business days after the date the contract was signed. If the insured rescinds the contract, the adjuster must remit any compensation within 15 business days.

Producer Regulation (Contined) Adjusters

1. Adjusters must be at least 18 years of age, complete the required training and pass a written examination. He/she cannot have committed any act that would be grounds for suspension, revocation or refusal of a license. Additionally, the applicant must establish financial responsibility by posting a $20,000 bond or providing an irrevocable letter of credit from a qualified institution for that amount. 2. A business entity may be licensed as an adjuster as long as it designates at least one licensed independent adjuster to be responsible for its compliance with the insurance laws and regulations of Kentucky. 3. An independent or staff adjuster may qualify for a license in 1 or more of the following lines of authority: a. Property and Casualty b. Workers' Compensation c. Crop Note: A public adjuster may qualify for a license in either Property/Casualty or Crop. 4. A license as an independent adjuster shall not be required of the following: a. An individual who is sent into Kentucky on behalf of an insurer to investigate and make adjustments for a particular loss or series of losses resulting from a catastrophe, such as a tornado, flood, etc. Temporary registrations for out-of-state adjusters shall be issued for no more than 90 days, unless extended by the Commissioner. b. An attorney licensed to practice law in Kentucky, when acting in his or her professional capacity as an attorney. c. A person employed solely to obtain facts surrounding a claim or to furnish technical assistance to a licensed independent adjuster. d. An individual who is employed to investigate suspected fraudulent insurance claims, but who does not adjust losses or determine claims payments. e. A person who solely performs executive, administrative, managerial, or clerical duties, or any combination thereof, and who does not investigate, negotiate, or settle claims. f. A licensed health care provider or its employees who provide managed care services as long as the services do not include the determination of compensability. g. A person who settles only reinsurance or subrogation claims. h. An officer, director, manager, or employee of an authorized insurer, surplus lines insurer, or risk retention group, or an attorney-in-fact of a reciprocal insurer. i. A United States manager of the United States branch of an alien insurer. j. A person who investigates, negotiates, or settles claims arising under a life, accident and health, or disability insurance policy or annuity contract. k. An individual employee, under a self-insured arrangement, who adjusts claims on behalf of his or her employer. l. Employees of licensed adjusters as long as that adjuster supervises no more than 25 persons. 5. Authorized insurers in Kentucky shall not do business with an unlicensed adjuster or unlicensed administrator. 6. Public adjusters must keep records of all completed transactions for at least 5 years.

Medicare Supplements (Continued) Medicare Select Policies

1. All Medicare Select policies must be approved by the Commissioner before being offered for sale. 2. Medicare Select policies must cover emergency care 24 hours a day, 7 days a week. 3. Changes to Medicare Select policies must be filed with the Commissioner and will be considered approved after 60 days, unless specifically disapproved. This does not include changes to the list of network providers. 4. A Medicare Select policy or certificate shall not restrict payment for covered services provided by non-network providers if: a. The services are for symptoms requiring emergency care or are immediately required for an unforeseen illness, injury or a condition. b. It is not reasonable to obtain services through a network provider; or c. There are no network providers available within 60 miles of the insured's place of residence. 5. Prior to the sale of a Medicare Select policy the insurer shall obtain from the applicant a signed and dated form stating that he/she has received: a. An Outline of Coverage. b. A list of network providers, primary care physicians, specialists, hospitals and other providers, to include addresses, phone numbers and hours of operation. c. A list of restricted network provisions, including applicable coinsurance and deductibles when out-of-network providers are used. 6. When a Medicare Select policy is purchased, the insurer shall provide the opportunity to also purchase any Medicare supplement policy offered by the insurer. 7. If a particular Medicare Select policy form is to be discontinued, its coverage will continue for those insureds whose policies will not have expired at the time of discontinuance. Reporting of Multiple Policies In Kentucky, insurers must report to the Department of Insurance by each March 1 the number of persons having multiple Medicare Supplement policies.

Long-Term Care Insurance Prohibition Against Post-Claims Underwriting

1. All applications for LTC insurance policies except those that are guaranteed issue shall contain clear and unambiguous questions designed to ascertain the applicant's health. 2. If a condition listed in the application, or medications being taken were known or should have been known at the time of application, to be directly related to a medical condition for which coverage would otherwise be denied, the policy may not be rescinded for that condition. 3. Before issuance of a LTC policy to an applicant age 80 or older, the insurer must obtain one of the following: a. A report of a physical examination. b. An assessment of functional capacity. c. An attending physician's statement. d. Copies of medical records. Suitability 1. Every provider of LTC insurance must develop and use suitability standards to determine whether the purchase or replacement of LTC insurance is appropriate for the needs of the applicant. 2. A completed 'Long Term Care Insurance Personal Worksheet' must be returned by the applicant to the insurer prior to being considered for coverage. 3. It is prohibited for the insurer or producer to sell or disseminate information obtained through the personal worksheet. 4. If the insurer determines that the applicant does meet its financial suitability standards, the insurer must send the applicant a LTC insurance suitability letter. 5. The issuer must use the suitability standards it has developed in determining whether issuing LTC insurance coverage to an applicant is appropriate. Producers must use the suitability standards developed by the issuer in marketing LTC insurance. At the same time as the personal worksheet is provided to the applicant, the disclosure form entitled "Things You Should Know Before You Buy Long-Term Care Insurance" must be provided. 6. If the insurer determines that the applicant does not meet its financial suitability standards, or if the applicant has declined to provide the information, the insurer may reject the application. 7. If the insurer determines that the applicant does meet its financial suitability standards, the insurer must send the applicant a long-term care insurance suitability letter. 8. This does not apply to life insurance policies providing accelerated benefits for long term care. Reporting Requirements 1. Every insurer must maintain records for each agent's amount of replacement sales as a percent of the agent's total annual sales and the amount of lapses of long-term care insurance policies sold by the agent as a percent of the agent's total annual sales. 2. Every insurer must report annually by June 30 the 10% of its agents with the greatest percentages of lapses and replacements. Reported replacement and lapse rates alone do not constitute a violation of insurance laws or necessarily imply wrongdoing. These reports shall be for the sole purpose of more closely reviewing agent activities regarding the sale of LTC insurance. 3. Every insurer must report annually by June 30 the number of lapsed policies as a percentage of its total annual sales and as a percentage of its total number of policies in force as of the end of the preceding calendar year. 4. Every insurer must report annually by June 30 the number of replacement policies sold as a percent of its total annual sales and as a percent of its total number of policies in force as of the preceding calendar year. 5. Every insurer must report annually by June 30, for qualified long-term care insurance contracts, the number of claims denied for each class of business, expressed as a percentage of claims denied.

Commissioner's General Duties and Powers

1. Commissioner of Insurance - The Commissioner is the head of the Department of Insurance. 2. The Commissioner of Insurance is appointed by the Governor for a term of 4 years by and with the consent of the Senate. 3. The Commissioner personally supervises the operations of the Office. 4. The Commissioner examines and inquires into violations of the Insurance Code, enforces the provisions of the Code and executes the duties imposed by the Code. 5. The Commissioner may conduct examinations and investigations of insurance matters, in addition to examinations and investigations expressly authorized, as he/she may deem proper to determine whether any person has violated any provisions of the Code or to obtain information useful in the administration of any such provision. 6. The Commissioner may establish and maintain branch offices in this state as may be reasonably required for the efficient administration of the Code. 7. The Commissioner has additional powers and duties as may be provided by other laws of this state. 8. The Commissioner promulgates rules and regulations as he/she may deem necessary to effectuate the purposes and to execute and enforce the provisions of the insurance laws of this state. 9. Prohibited Interest/Rewards - The Commissioner or any deputy, examiner, actuary, assistant or employee of the Department, cannot have any financial interest in any insurer, agency, broker or insurance transaction (except as a policyholder). a. This does not prohibit the Commissioner from employing or retaining insurance actuaries, examiners, accountants, attorneys, or other technicians who are independently practicing their profession. b. No person may pay or give to the Commissioner or any authorized representative any financial consideration in addition to his authorized salary and expenses. Neither the Commissioner nor any authorized representative may accept such financial consideration. 10. Orders and Notices - The Commissioner's orders and notices shall be effective only when in writing signed by the Commissioner or by his authority. Every order shall state its effective date and shall concisely state: a. Its intent or purpose. b. The grounds on which it is based. c. The Code provisions under which action is taken or proposed to be taken; and d. All other matters required by law. 11. Complaints - Each written and signed complaint received by the Department of Insurance shall be recorded, to include its subsequent disposition, and maintained for at least 5 years. The records of such complaints shall be indexed whenever applicable by the name of the insurer and the name of the producer or employee. The Commissioner shall consider such complaints before issuing or renewing any Certificate of Authority or license.

Individual Health Insurance Policy General Provisions Optional Coverages

1. Optional Home Health Care a. All insurers issuing individual health insurance policies in Kentucky that provide coverage on an expense incurred basis shall offer coverage for home health care. b. The coverage may limit the number of home health care visits for which benefits are payable, but it must allow at least 60 visits during any calendar year or in any continuous period of 12 months for each covered person. Each visit by an authorized representative of a home health agency shall be considered as 1 home health care visit, except that at least 4 hours of home health aide service shall be considered as 1 home health visit. c. Home health care coverage shall be subject to the same deductible and coinsurance provisions as are other services covered by the policy. d. Home health care shall not be reimbursed unless an attending physician certifies that hospitalization or confinement in a skilled nursing facility would be required if home health care was not provided. e. Medicare beneficiaries may receive home health care benefits under this coverage if the services are not paid for by Medicare and the number of allowed visits has not been exceeded. 2. Mastectomy, Endometriosis, Bone Density Testing a. All insurers issuing individual health insurance policies in Kentucky that provide coverage on an expense-incurred basis, shall offer coverage for: 1) All stages of breast reconstruction surgery on the breast in which a mastectomy has been performed. 2) Surgery and reconstruction of the other breast to produce a symmetrical appearance. 3) Prostheses and physical complications of all stages of mastectomy, including lymphedemas. Note: Mastectomy services cannot be required to be performed on an outpatient basis. b. If the policy covers hysterectomies, insurers must also offer coverage for the diagnosis and treatment of endometriosis and endometritis. c. Insurers must also offer coverage for bone density testing for women age 35 and older, for the early detection of osteoporosis. d. An insurer shall not: 1) Deny eligibility or continued eligibility to an individual to enroll or to renew coverage just to avoid federal requirements; or 2) Penalize, reduce, or limit a provider's reimbursement or try to induce the provider to render care in a manner inconsistent with federal requirements. 3. Mental Illness Coverage - Psychosis, neurosis or an emotional disorder. Individual health policies issued in Kentucky must offer coverage for the inpatient and outpatient treatment of mental illness, at least to the same extent and degree as is provided for the treatment of physical illnesses. Note: These optional coverages may also apply to group policies.

Standard Provisions (Continued) Replacement

1. Replacement - Any transaction in which new life insurance or an annuity is to be purchased, and it is known, or should be known to the agent, that the existing contract(s) will be: a. Lapsed, forfeited, surrendered or terminated. b. Converted to effect a reduction in the amount of existing insurance, or term of which the coverage would remain in force. c. Reissued with a reduction in amount so that substantial cash values are released. d. Assigned as collateral for a loan or subjected to substantial borrowing of loan values in single or multiple transactions. e. Converted into paid-up insurance, continued as extended term insurance or another form of nonforfeiture benefit. 2. The following types of policies are exempt from state replacement regulations: a. Credit life insurance administered by group-type methods. b. Group life insurance policies. c. A change or conversion privilege is honored by the same insurer that issued the existing policy. d. Transactions where the replacing insurer and existing insurer are the same. e. Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same insurer. f. A policy issued in connection with a pension, profit sharing, individual retirement account or other benefit plan qualifying for an income tax deduction of premiums. g. A nonconvertible term policy which cannot be renewed and which would expire within 5 years. h. Immediate annuities. i. Structured settlement. j. Policies used to fund employee benefit plans covered by ERISA, or government/church benefit and deferred compensation plans. 3. Twisting - No person may make any misrepresentation for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy. 4. All records pertaining to a replacement must be maintained for at least 5 years or until the insurer's next regular inspection, whichever is later. This applies to both the existing and replacing insurers. 5. The replacing insurer must provide a notice to the insured of the right to return the policy or contract within 30 days of delivery and receive an unconditional full refund of all premiums or considerations paid. 6. Any waiting, elimination or probationary period must be credited to the replacing policy to the extent they were satisfied under the replaced policy. 7. The insurer being replaced must send a letter to the policyowner of his/her right to receive information regarding the existing policy or contract values including: a. An in-force illustration, if available; or b. A policy summary if an in-force illustration cannot be produced within 5 business days of receiving the notice of replacement. 8. Direct-response Solicitation - If an application is initiated as a result of a direct-response solicitation, the insurer shall require a statement asking whether the applicant intends to replace, discontinue, or change an existing policy or contract.

Commissioner's General Duties and Powers (Continued) Examination of Books and Records

1. The Commissioner may examine, as often as he/she deems advisable, the accounts, and records of any insurance agent, solicitor, broker, general agent, or adjuster. Factors in determining the nature, scope, and frequency of the examinations include: a. Results of financial statement analyses and ratios. b. Changes in management or ownership. c. Actuarial opinions, reports of independent certified public accountants. d. Other criteria as set forth in the Examiner's Handbook. 2. The Commissioner must examine an insurer at least once every 5 years. 3. Conduct of the Examination - The Commissioner shall conduct examination in an expeditious, fair and impartial manner. a. The examiner shall have power to issue subpoenas, administer oaths, and to examine under oath any individual concerning any matter relevant to the examination. b. The examinee shall make freely available to the examiner all documents relating to the examination. c. Neither the Commissioner nor any examiner shall remove any document or other property of the examinee without such examinee's advance written consent or pursuant to a court order. This does not prohibit making and removing copies or abstracts of such documents. d. Any individual who refuses, without just cause, to be examined under oath or who willfully obstructs or interferes with the examiner's performance of duty, is in violation of the Code. The Commissioner may terminate or suspend an examination in order to pursue other legal or regulatory actions, as he/she deems appropriate. e. Findings of fact and conclusions made pursuant to an examination shall be prima facie evidence in any legal or regulatory action. The Commissioner may use and, if appropriate, may make public any final or preliminary examination report or other documents, or any other information discovered or developed during the course of the examination, as he/she deems necessary. f. The Commissioner shall deliver a copy of the examination report to the examinee with a notice allowing 20 days for review and recommendation of any changes. Additional reasonable time may be allowed for good cause. 1) If so requested by the examinee or if deemed advisable by the Commissioner without a request, a hearing shall be held relative to the report. In such cases, the report will not be filed, but a copy may be furnished to the Governor or Attorney General. 2) If no hearing has been requested or held, the Commissioner shall fully consider and review the report, together with any written submissions or rebuttals from the examinee and enter an order within 60 days. 4. In lieu of an examination, the Commissioner may accept the most recent examination prepared by the insurance regulatory authority of another state on any foreign insurer. 5. The expense of an examination shall be borne by the entity/person examined.

Commissioner - Hearings

1. The Commissioner may hold a hearing for any purpose within the scope of the Code. 2. The Commissioner will hold a hearing if required by any other provision of the Code. 3. Any party aggrieved by an order of the Commissioner may apply for a hearing on within 60 days of the date of the order. a. Any application for a hearing shall briefly state the manner in which the applicant believes they've been harmed and the grounds used as the basis for relief being sought. b. If the Commissioner finds that the application is made in good faith and that the applicant would be harmed if his/her grounds are established, a hearing shall be granted. c. Pending the hearing and issue of a final order resulting from the hearing, the Commissioner shall suspend or postpone the effective date of the previous action. 4. Witnesses and Evidence - Witnesses may be subpoenaed and their attendance compelled for hearings. A subpoena issued pursuant to this section shall have the same force and effect as if issued from a court of record. a. If any individual or licensee refuses to comply with a subpoena or to testify as to any matter about which he/she may be lawfully interrogated: 1) The Circuit Court of the county where the examination, investigation, or hearing is being conducted or of the county where the person resides may issue an order requiring the person to comply with the subpoena and to testify. Failure to comply is punishable as contempt of court. 2) The Commissioner may suspend or revoke the Certificate of Authority of an insurer or the license of any licensee or impose an administrative fine, or both, for failure to comply. b. Witness fees and mileage, if claimed, shall be allowed the same as for testimony in a Circuit Court. However, no officer, director, agent or employee of an insurer or person being examined or investigated shall be entitled to witness or mileage fees. c. Any individual willfully testifying falsely under oath may be found guilty of and convicted for perjury. d. A person subpoenaed to provide testimony or evidence for a hearing cannot refuse on the grounds of self incrimination; the testimony or evidence can still be compelled. However, he/she cannot later be prosecuted or subjected to criminal penalty or forfeiture on account of the testimony or evidence provided. If such testimony or evidence is later found to be willfully and knowingly false, the person may then be prosecuted for perjury. 5. Restitution - A final order may require that restitution be made to any person found to be aggrieved by a violation of any provisions of the Code or any statute or regulations administered by the Commissioner.

Licensing Process (Continued) Denial, Renewal, Suspension, or Revocation of License

1. The Commissioner may suspend, revoke or refuse renewal of any license issued for any 1 of the following causes: a. The licensee provided incorrect, incomplete or materially untrue information in the license application. b. The licensee has violated any insurance law, regulation, subpoena or order of the Commissioner, or of another state's insurance Commissioner. c. The license was obtained through fraud or misrepresentation. d. The licensee improperly withheld, misappropriated or converted any monies or properties received in the course of doing business. e. The licensee misrepresented the provisions, terms and conditions of an insurance policy. f. The licensee has been convicted having pled no contest to a felony. g. The licensee admitted to or was found to have committed any insurance unfair trade practice. h. The licensee had an insurance agent license denial, suspension or revocation in any other state. i. The licensee forged another person's name in an application or document related to insurance. j. The licensee improperly used notes or reference material to complete an examination. k. The licensee knowingly accepts business from a producer who is not licensed. l. The licensee failed to comply with an administrative order for child support. m. The licensee failed to pay state income tax. 2. The Commissioner will not again issue a license to any individual or business entity whose license has been revoked, until after expiration of 1 year and not until the individual or business entity again qualifies in accordance with the applicable provisions of the Code. 3. An individual or business entity whose license has been revoked twice is not again be eligible for any license. 4. Upon suspension or revocation of a license, the licensee must return his/her license to the Commissioner. Penalties Any person who willfully violates any rule, regulation, subpoena, or order of the Commissioner or any provision of the Code is subject to suspension or revocation of certificate of authority or license, or administrative fine or both.

Kentucky Life and Health Insurance Guaranty Association

1. The Kentucky Life and Health Insurance Guaranty Association provides protection to policyowners and beneficiaries in the event of insurer impairment or insolvency. 2. All insurers authorized to transact life and health insurance in Kentucky are required to be members of the Association. 3. If a member insurer becomes impaired or insolvent, an assessment will be made against the other members to provide money for the claims of the insolvent insurer. 4. The Association's liability is limited to the lesser of the following: a. The insurer's contractual obligation had it not become impaired or insolvent; or b. For one life (regardless of the number of policies written): 1) $300,000 in life insurance death benefits and $100,000 in net cash surrender and withdrawal values. 2) $100,000 for health insurance, not defined as disability, basic hospital, surgical, major medical or LTC insurance. 3) $300,000 for disability and LTC insurance. 4) $500,000 for basic hospital, medical, surgical and major medical insurance. 5) $250,000 in annuity benefits, including net cash surrender and net cash withdrawal values. 6) $5 million for an owner of multiple non-group life policies. 5. The Association is not liable to pay more than $300,000 in the aggregate for any one life, except that medical benefits can be paid up to $500,000. 6. No person or insurer may make any advertisement or statement which uses the existence of the Insurance Guaranty Association of this state for the purpose of sales, solicitation or inducement to purchase any form of insurance. 7. Early Warning Analyst - To aid in prevention of and protection against insurer insolvency or impairment, the Kentucky Dept. of Insurance employs an Early Warning Analyst. This person will work with other states' detection programs to identify insurers who are, or appear to be, in a financially hazardous condition. Indications the analyst will consider as evidence of insolvency or impairment include: a. An insurer fails to file a timely financial statement as established by Kentucky insurance law. b. An insurer files financial information which is false or misleading. c. An insurer fails to adequately maintain books and records in a manner that permits examiners to determine its financial condition. d. An insurer's management does not have the experience, competence, or trustworthiness to operate the insurer in a safe and sound manner. e. An insurer's management engages in unlawful transactions. f. An insurer has a pattern of refusing to settle valid claims within a reasonable time after due proof of the loss has been received. g. An insurer fails to follow a policy on rating and underwriting standards appropriate to the risk. h. An insurer violates a final administrative or judicial order issued against an insurer. i. An insurer is in any condition that the Commissioner finds is a hazard to policyholders, creditors, or the general public.

Individual Health Insurance Policy General Provisions 501(c)(9) Trusts

1. These trusts exempt from federal income tax, voluntary employees' beneficiary associations (VEDAs) that provide payment for life, sickness, accident, or other benefits to their members and their members' dependents or designated beneficiaries. The exemption applies as long as no part of the association's net earnings is used to benefit any private shareholder or individual, other than through such coverage payments. 2. Contributions can be made to the trust and can be deducted for federal income tax purposes at that time, just as if the trust were an insurance company. Appreciation in the value of the trust assets or investment income earned on the trust assets is also free of taxation. This type of trust is best suited for an employer who wishes to establish either a fund for claims that have been incurred but not paid or a fund for possible claim fluctuations. If such a fund is not established with a 501(c)(9), contributions cannot be deducted until they are paid in the form of benefits to employees. In addition, earnings on these funds are subject to taxation. Disability Income Delayed Disability - A delayed disability is one that does not occur immediately after an accident but develops days or weeks later. Generally, disability income policies allow a stated specified time during which the insured will still be eligible for benefits. The most common time allowed for a compensable disability to reveal itself after an accident or injury is 30, 60, or 90 days.

Government Programs

Dual Benefit Liability 1. A long-standing principle of Social Security is that a worker cannot qualify for both full retirement benefits and full spousal benefits. Although a married worker theoretically qualifies for both retirement benefits from his or her own earnings and a spousal benefit equal to 50% of the spouse's retirement benefit, the dual entitlement rule limits the spousal benefit. 2. The dual entitlement rule reduces the spousal benefit dollar for dollar by the amount of the worker's personal retirement benefits. Thus, if two spouses each qualify for $1,200 per month from their own earnings and for spousal benefits of $600 per month (50% of the basic retirement benefit), they would still receive a total benefit of only $2,400. Both spouses are ineligible for the $600 spousal benefit because their individual retirement benefits are greater. 3. However, if one spouse received $1,200 per month and the other received $400 per month from Social Security, the lower-earning spouse would qualify for a $200 spousal benefit. In this case, the $600 spousal benefit from the higher-earning spouse would be reduced by the lower-earning spouse's benefit ($600-$400), leaving a $200 spousal benefit. Retirement Earning Limit 1. Recipients of Social Security retirement benefits are limited as to how much income may be earned without affecting benefit amounts. If the person is under full retirement age for the entire year, then $1 of benefits will be deducted for every $2 earned above the annual limit. 2. Once full retirement age is reached, Social Security will deduct $1 in benefits for every $3 earned above the annual limit. If full retirement age is reached during a calendar year, there will be a limit on unaffected earnings before reaching full retirement age. For example, if you will reach full retirement age in 2012, the limit on your earnings for the months before full retirement age is $38,880. Servicemembers' Group Life Insurance (SGLI) 1. This is insurance coverage for: a. Active duty member of the Army, Navy, Air Force, Marines, or Coast Guard. b. Commissioned member of the National Oceanic and Atmospheric Administration or the U.S. Public Health Service. c. Cadet or midshipman of the U.S. military academies. d. Member, cadet, or midshipman of the Reserve Officers Training Corps engaged in authorized training and practice cruises. e. Member of the Ready Reserve or National Guard and are scheduled to perform at least 12 periods of inactive training per year. f. Service members who volunteer for a mobilization category in the Individual Ready Reserve (IRR). 2. SGLI coverage is available in $50,000 increments up to the maximum of $400,000. Covered members receive 120 days of free coverage from their date of separation. Coverage can be extended for up to 2 years if the service member is totally disabled at separation. Part-time coverage is also provided to Reserve members who do not qualify for full-time coverage (members covered part-time do not receive 120 days of free coverage). 3. The monthly premium is 6.5 cents per $1,000 of insurance. This includes an additional $1 per month for traumatic injury protection coverage.

Company Regulation (Continued) HIV Testing

HIV Testing 1. In the underwriting insurance regarding HIV infection and health conditions derived from such infection, the insurer shall use only medical tests that are recommended by the Centers for Disease Control (CDC) or by the Food and Drug Administration (FDA). 2. If a test indicates the existence or possible existence of HIV, the insurer shall follow the applicable CDC or FDA-recommended follow-up tests or series of tests to confirm the indication before denying coverage. 3. Prior to testing, the insurer shall disclose in writing its intent to test the applicant for HIV and shall obtain the applicant's written informed consent to administer the test. An applicant shall be notified of a positive test result by a physician designated by the applicant, or, in the absence of such designation, by the Cabinet for Health and Family Services. 4. A medical test for HIV infection or for a health condition derived from the infection shall only be required or given to an applicant for an insurance contract on the basis of the applicant's health condition or health history, on the basis of the amount of insurance applied for, or if the test is required of all applicants. 5. An insurer may ask whether an applicant for an insurance contract has been tested positive for HIV infection or other health conditions derived from such infection. However, insurers shall not inquire whether the applicant has been tested for or has received a negative result from a specific test for HIV infection or for a health condition derived from such infection. Permitted: "Have you ever tested positive for HIV infection?" Not Permitted: "Have you ever been tested for HIV infection?" 6. Insurers may disclose HIV test results only as required by law or pursuant to a written request or authorization by the applicant. Disclosure by written request may be provided only to or for: a. The applicant. b. A licensed physician or other person designated by the applicant. c. An insurance medical-information exchange under procedures that are used to assure confidentiality. d. The preparation of statistical reports that do not disclose any applicant's identity. e. Reinsurers, contractually retained medical personnel, and insurer affiliates if these entities are involved solely in the underwriting process and under procedures that are designed to assure confidentiality. f. To insurer personnel who have the responsibility to make underwriting decisions. g. To outside legal counsel who needs the information to represent the insurer effectively in regard to matters concerning the applicant. 7. An insurance contract shall not exclude coverage for HIV infection. Neither can the contract apply policy provisions, terms, or conditions in a different manner to HIV infection than to any other health condition. 8. A health insurance contract shall not be canceled or nonrenewed solely because an insured has been diagnosed as having or has been treated for HIV infection. Sexual orientation shall not be used in the underwriting process or in the determination of which applicants shall be tested for HIV exposure. Note: This does not prohibit the issuance of accident only or specified disease insurance contracts.

Group Health Policies (Continued) Blanket Policies

1. Blanket insurance covers groups of people who are a group under a specific service or purpose, which may nor may not include employees, such as: a. Passengers of a common carrier. b. Students, teachers and employees of a college, school or other institution of learning, including a school district or districts. c. Members or participants of a religious, charitable, recreational, educational or civic organization. d. Members, employees, officials and supervisors of a sports team, camp, or sponsor thereof. e. Members and participants of a volunteer fire department, first aid, emergency management agency, or other such volunteer organization. f. Carriers for a newspaper. g. Members and participants of an association, including a labor union that has a constitution and by laws and has been organized and is maintained in good faith for purposes other than that of obtaining insurance. Members/participants are defined by reference to specified hazards particular to an activity or operations sponsored or supervised by the policyholder. h. Any other person or group covering any other risk or class of risks which, in the discretion of the Commissioner, may be properly eligible for blanket health insurance. 2. Unlike group policies, application is not required from those whom the blanket policy covers, unless the insured pays any part or all of the premium. 3. Generally, claim proceeds are paid to the insureds but may be paid directly to care providers, if the insurer so chooses and the insured doesn't request otherwise.

Long-Term Care Insurance (Continued) Permitted Compensation

1. Compensation for policy replacement cannot be greater than 200% of the compensation for policy renewal. 2. The commission or other compensation provided in subsequent renewal years by the replacing insurer shall be the same as that provided in the second year, and shall be provided for a reasonable number of renewal years. 3. If LTC insurance is provided under annuities or life insurance policies or riders, this section shall apply only to the commissions or other compensation attributable to the long-term care provided by these policies or riders. Penalties In addition to any other penalties provided by the laws of this state, any insurer and/or any agent found in violation of any requirements relating to LTC insurance or the marketing of such insurance shall be subject to a fine of up to 3 times the amount of any commissions paid for each policy involved in the violation(s) or up to $10,000 whichever is greater. Licensing 1. An agent is not authorized to market, sell, solicit, or otherwise contact a person for the purpose of marketing long-term care insurance unless the agent has demonstrated his/her knowledge of long-term care insurance and the appropriateness of the insurance by passing the required test and maintaining appropriate licenses. 2. Producers must complete an initial, one time training course of at least 8 hours and at least 4 hours of continuing education during each 24-month period. 3. Training shall cover the following topics: a. LTC insurance. b. LTC services. c. Qualified Partnerships, and the relationship between Qualified Partnerships and other public and private coverage of long-term care. 4. Insurers must keep records which verify that producers have received required training. Such record must: a. Be available to the Commissioner upon request. b. Be kept on file for at least 5 years. Long Term Care Partnership Program 1. This is a partnership between a state's authorized health insurers and its Medicaid agency, with the goal of reducing Medicaid costs by getting more middle-income earners to purchase LTC insurance policies. The more LTC expenses being paid by insurance policies, then the less will have to be paid by Medicaid. Kentucky enacted its Partnership Program on April 9, 2008. 2. Ordinarily, a person cannot have more than $2,000 in assets/resources to qualify for Medicaid long term care. So, most middle-income earners find themselves in a Catch-22 because they don't have enough assets to pay for their long term care, and they have too much to qualify for Medicaid. The result is, they have to spend down the assets they've built up over their lifetime, leaving themselves virtually broke. 3. Partnership policies help solve this problem with the "asset disregard" provision. Under this feature, Medicaid will disregard, dollar-for-dollar, from a person's assets the amount a Partnership policy paid in benefits. For instance, if Jane's Partnership policy paid $200,000 in healthcare benefits, Medicaid will disregard that amount from her total financial assets should she later apply for Medicaid coverage for long term care. This will be in addition to the $2,000 Medicaid already allows. On the other end of the spectrum, Medicaid will also disregard that benefit amount from Jane's estate should it seek cost recovery upon her death. 4. LTC Partnership Policies are virtually identical to non-partnership policies, except they must be tax qualified, and their inflation protection is somewhat different. Kentucky LTC Partnership Policies must provide inflation protection as follows: a. For ages 60 or younger - Provide at least 3% compound annual inflation protection. b. For ages 61 to 75 - Provide at least 3% simple interest inflation protection. c. For ages 76 and older - No purchase of inflation protection is required, but a policyholder may purchase inflation protection at any level offered by the company

Producer Regulation (Contined) Unfair Insurance Trade Practices

The following acts are defined by statute as unfair methods of competition and unfair or deceptive acts or practices: 1. Boycott, Coercion, Intimidation - Entering into action resulting in an unreasonable restraint of, or monopoly in, the business of insurance. 2. Defamation - Making any false or maliciously critical statement regarding the financial condition of any person, with the intent to injure such person. 3. False Information and Advertising - Publishing or disseminating in any fashion, or through any media, any untrue, deceptive, or misleading statement about the business of insurance or, with respect to any person, in the conduct of such person's insurance business, or misrepresents the identity of the insurer. 4. False Financial Statements - Filing a false financial statement with public officials, or presenting it to someone with the intent to deceive. No person shall make any false entry in any document relating to an insurance transaction with intent to deceive, or omit a true entry of any material fact with like intent to deceive. 5. Rebating - Offering any rebate of premiums payable, any special favor in dividends or other benefits, or any valuable consideration or inducement not specified in the policy. The following does not constitute rebating are therefore not prohibited: a. Paying bonuses to policyholders or abating their premiums out of surplus funds accumulated from nonparticipating insurance, as long as such bonuses are fair and equitable to policyholders and in the company's best interest. b. For industrial policies, making some kind of allowance to policyholders who regularly send premium payments to the insurer's office, thereby saving collection expenses. c. Adjusting a group policy's premiums based on loss experience at the end of a policy year, retroactive for that policy year. d. An insurer waiving, in whole or in part, a policyholder's deductible for food spoilage in a county declared to be a federal disaster area. 6. Unfair Discrimination - Permitting individuals of the same class and equal life expectancy to be charged different rates for life insurance or annuities. Permitting individuals of the same class and essentially the same hazard to be charged different rates for accident or health insurance. Refusing to insure or charging a different rate to an individual based solely on blindness or partial blindness. 7. Unfair Sex/Race Discrimination - Denying availability of any insurance contract on the basis of sex or marital status of the insured. Restricting, modifying, limiting, reducing or excluding the amount of benefits payable on the basis of sex or marital status of the insured except to the extent the amount of benefits, term, conditions, or type of coverage vary as a result of the application of rate differentials. Basing eligibility for insurance on the applicant's age, sex, race, creed, national origin or marital status. 8. Unfair Genetic Testing/Domestic Violence Discrimination - Restricting, modifying, limiting, reducing or excluding the amount of benefits payable on the basis of a genetic test for which symptoms have not manifested, or on the basis that the insured has requested or received genetic services. Coverage may also not be denied because an injury is the result of domestic violence or abuse. Domestic violence shall not be considered a preexisting condition. 9. Illegal Inducements - Providing, as an inducement to insurance or in connection with any insurance transaction, the following: a. Any employment. b. Any shares of stock or other securities issued or at any time to be issued. c. Any advisory board contract, or any similar contract, agreement or understanding, offering, providing for or promising any special profits. d. Any prizes, goods, wares, merchandise or tangible property of an aggregate value of more than $10. e. Free Insurance - Insurance for which no identifiable or additional charge is made to the purchaser or lessee of consumer goods or for services connected with those goods. 10. Selection Rights - Restricting the choice of an insurer or agent when insurance coverage is required for a contract or other transaction.

Group Health Policies Extension of Benefits

Extension of Benefits Health insurers shall provide for an extension of benefits in the event of a member's total disability when a group policy is discontinued. Benefits payable under an extension of benefits shall be limited to the member's hospital confinement or period of total disability for a specific condition, injury, or illness that resulted in the member's total disability. 1. Hospital Expense - In the case of hospital or medical expense coverages, a reasonable extension of benefits or accrued liability shall be required. "Reasonable extension" includes: a. Discharge from the hospital confinement. b. Until maximum policy benefits are received; or c. At least 12 months. 2. Major Medical - Under major medical policies, benefits shall be extended until the earlier of: a. Coverage for the total disability has been obtained under another group policy. b. The total disability ceases. c. Until maximum policy benefits are received; or d. At least 12 months. 3. Other Health Policies - Benefits must be extended under other types of hospital or medical expense policies for at least 90 days, for expenses incurred: a. During the period of total disability or hospital confinement; or b. Within a period of at least 90 days starting with a specific event, such as an accident, which occurred while coverage was in force, such as an accident. 4. Coverage for a total disability is not considered to have been obtained under a succeeding plan, if such plan excludes total disability benefits covered under the prior plan's extension of benefits provision. Transfer of Liability When one insurer's group policy is replaced by another insurer's group policy, the liability of each insurer for any claims is established as follows: 1. The prior insurer shall be liable only to the extent of its accrued liabilities, extension of benefits, and persons under a continuation of coverage when the coverage terminates. This liability will be the same whether the group policyholder secures replacement coverage from a new insurer, self insures, or forgoes group coverage altogether. 2. The succeeding insurer's liability shall be as follows: a. Each person who is eligible for coverage shall be covered by that insurer's plan on the effective date of coverage. b. If an eligible person is confined as of the succeeding plan's effective date of coverage, and the succeeding insurer has a nonconfinement rule, the succeeding insurer is not liable for the person's confinement costs to the extent that such cost is covered by a prior insurer's extension of benefits provision. c. The succeeding insurer shall credit deductibles or waiting periods to the extent they were satisfied under the prior group policy. In the case of deductibles, the credit shall apply for the same or overlapping benefit periods. Credit shall be given for deductibles paid as required by the prior policy during the 90 days before the succeeding insurer's policy takes effect. Credit shall be applied only to the extent these deductible expenses are recognized under the succeeding insurer's policy. d. If the succeeding insurer requires clarification of a benefit under the prior policy, such benefits shall be determined by the definitions, conditions, and provisions of the prior insurer's group policy rather than those of the succeeding insurer's group policy.