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. It maintains the requirement for coverage in effect for at least one year.

When an insurance producer helps a person complete an application and the producer knowingly omits or misrepresents information in it, the bill makes the producer liable, and holds the insured person harmless (not liable), for any insurance claims arising from a coverage rescission, cancellation, or limitation resulting from the omission or misrepresentation. This result occurs only if the insurer or HMO states in writing to the insurance commissioner, when it applies to rescind, cancel, or limit coverage as the law requires, that it would not have issued coverage had the omission or misrepresentation been known to it.

The bill requires the commissioner to develop “uniform and readable applications” for individual health insurance by December 31, 2009 and establish a process for an insurer or HMO to request approval for nonstandard applications. It sets requirements for an insurer or HMO that accepts coverage applications over the telephone.

EFFECTIVE DATE: July 1, 2009, except for the application provisions, which are effective upon passage.

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 conditions 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.

The 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 makes this prohibition apply only to a policy, contract, or certificate in effect for at least one year.

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.

By December 31, 2009, the bill requires the commissioner, in consultation with the healthcare advocate and attorney general offices, to develop “uniform and readable applications” for individual health insurance policies approved for sale in Connecticut. He must make the applications available to insurers and HMOs doing business in Connecticut. The companies must use them for all individual policies written on or after January 1, 2010, unless the commissioner approves the inclusion of nonstandard questions.

Nonstandard Application Questions. The bill requires the commissioner to establish a process through which an insurer or HMO may request approval to include nonstandard questions on an application. It specifies that, within seven days from receiving such a request, the commissioner must forward it to the healthcare advocate's office. The advocate's office must review it and recommend approval or rejection to the commissioner within 15 days. The commissioner must consider the recommendation, promptly notify the insurer or HMO in writing of his decision to approve or reject the request, and give a copy of his decision to the advocate's office.

The bill requires an insurer or HMO that accepts applications over the telephone to:

1. give the applicant, in writing and before the application process is complete, all terms and conditions of the policy or contract, including its maximum duration, an accurate description of preexisting conditions provisions, the exclusionary periods for preexisting conditions, and the monthly premium;

2. use an interactive voice response system or similar technology to complete the application;

3. retain, for the policy or contract duration plus one year and in a readily retrievable format, a recording of the applicant agreeing to each policy or contract term and condition;

4. mail the applicant a letter confirming his or her agreement to the terms and conditions that includes notice of a five-day rescission period; and

5. keep a copy of the letter and any applicable rescission for the policy or contract duration plus one year.

Rescission Notice. The rescission notice must inform the applicant that he or she is bound by the policy or contract terms and conditions unless he or she rescinds his or her agreement to them in writing within five business days after receiving the confirmation letter.

The bill defines a coverage rescission, cancellation, and limitation. A “rescission” is the retroactive termination of a policy, contract, evidence of coverage, or certificate to its inception date. As a result, an insurer or HMO refunds all premiums paid and recoups all claim payments made to providers. A “cancellation” is the prospective termination of a policy, contract, evidence of coverage, or certificate. A “limitation” is a coverage restriction or refusal for an existing 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.

Yea

Nay

(03/10/2009)