AN ACT CLARIFYING POSTCLAIMS UNDERWRITING.

This bill limits a health insurer's or HMO's claim investigation for the purpose of discovering preexisting conditions to those that directly relate to the condition specified in the claim.

It removes the requirement that, in order to rescind, cancel, or limit coverage in certain circumstances, an insurer or HMO must have conducted a thorough medical underwriting process for a policy, contract, or certificate that is in effect for less than one year, including short-term health insurance issued on a non-renewable basis with a duration of six months or less, on the basis of written information submitted on, with, or omitted from an insurance application by the insured. It maintains the requirement for coverage in effect for at least one year.

The bill makes (1) an insurance producer or agent who completes or helps to complete an insurance application or does not object to information submitted on, with, or omitted from it and (2) an insured who signs the application jointly and severally liable for any claims that result from any information knowingly omitted or misrepresented by the producer or agent in the application.

The bill establishes certain notice, deadline, and rescission requirements for an insurer or HMO that accepts coverage applications over the telephone for individual health insurance coverage. It specifies that these requirements do not apply to Medicare supplement policies.

*House Amendment “A” (1) eliminates the requirement that the insurance commissioner develop uniform and readable applications for certain individual health insurance and establish a process for an insurer or HMO to request approval for nonstandard applications, (2) makes the insured and producer and agent jointly and severally liable for omissions and misrepresentations under certain circumstances; and (3) changes certain requirements for telephonic applications.

The bill limits a health insurer's or HMO's claim investigation for the purpose of discovering preexisting conditions to (1) preexisting conditions having a direct relationship to the condition specified in the claim and (2) the period before the coverage effective date permitted under the applicable preexisting conditions provision.

By law, a preexisting condition provision must relate to physical or mental conditions for which medical advice, diagnosis, care, or treatment was recommended or received during the six months (group policy), 12 months (individual policy), or 24 months (short-term policy) immediately before the coverage effective date. The law prohibits health insurance policies from excluding coverage for preexisting conditions for more than 12 months from the insured's policy effective date.

Current law prohibits health insurers and HMOs, without the insurance commissioner's approval, from rescinding, canceling, or limiting coverage based on information a person submitted with or omitted from an insurance application if, before issuing the policy, contract, or certificate, the insurer or HMO did not perform a thorough medical underwriting process, including resolving all reasonable medical questions based on the written application. The bill limits this prohibition to a policy, contract, or certificate in effect for at least one year, including short-term health insurance issued on a non-renewable basis for six months or less.

For a policy, contract, or certificate in effect for less than one year, the bill prohibits an insurer or HMO, without the commissioner's approval, from rescinding, canceling, or limiting coverage based on information a person submitted with or omitted from an insurance application.

The law allows the commissioner to approve the coverage rescission, cancellation, or limitation if the enrollee, or his or her representative, knew or should have known that information material to the insurer's or HMO's risk assumption was (1) false when included with the application or (2) omitted from the application. By law, an insurer or HMO cannot rescind, cancel, or limit coverage that has been effective for more than two years.

The law applies its rescission, cancellation, and limitation requirements to insurers and HMOs issuing policies or contracts that cover:

1. basic hospital expenses,

2. basic medical-surgical expenses,

3. major medical expenses,

4. accidents,

5. limited benefits, and

6. hospital or medical services.

The bill requires an insurer or HMO that accepts applications for its individual health insurance coverage over the phone to disclose to the applicant, before the application process is completed:

1. the maximum duration of the policy or contract,

2. an accurate description of, and the relevant exclusionary period for, any preexisting condition provisions, and

3. the amount of the monthly premium.

The bill also requires them to keep for two years after the policy's or contract's effective date, in a readily retrievable format, a recording of the applicant's complete telephonic application process.

In addition, the bill requires them to mail the applicant a letter that contains a copy of the completed application and must include a notice that the applicant is bound to the agreement unless he or she rescinds the agreement in writing within 10 days after receiving the letter. The bill specifies that the letter may include confirmation of the applicant's agreement to the policy's or contract's (1) maximum duration, (2) pre- existing condition provisions and exclusionary periods for them, and (3) the monthly premium. The insurer or HMO must keep the letter and rescission for two years after the policy's or contract's effective date.

It defines “rescission” as the termination of an insurance policy, contract, evidence of coverage, or certificate by the insurer or HMO to the date of its inception on the basis of a:

1. the discovery of a preexisting condition pursuant to an investigation conducted in accordance with the bill or

2. a material misstatement, omission, or material misrepresentation of fact on an insurance application by the insured that the insurer or HMO relied upon to its detriment.

A “cancellation” is the unilateral termination of a policy, contract, evidence of coverage, or certificate.

A “limitation” is a coverage restriction or refusal for an existing or preexisting medical condition.

The bill defines a “preexisting conditions provision” as a policy provision that limits or excludes benefits relating to a condition that was present and for which medical advice, diagnosis, care, or treatment was recommended or received before the coverage effective date. A preexisting condition does not include:

1. routine follow-up care to determine whether a breast cancer has reoccurred in a person who has been previously determined to be breast cancer free, unless evidence of breast cancer is found during or as a result of the follow-up;

2. genetic information, unless there is a diagnosis related to such information; or

3. pregnancy.

Joint and several liability is a form of liability used in civil cases where two or more people are found liable for damages. The winning plaintiff in such a case may collect the entire judgment from any one of the parties, or from any and all of the parties in various amounts until the judgment is paid in full. In other words, if any of the defendants do not have enough money or assets to pay an equal share of the award, the other defendants must make up the difference.

Yea

Nay

(03/10/2009)