PA 07-113—sSB 1214

Insurance and Real Estate Committee

Judiciary Committee

AN ACT CONCERNING POSTCLAIMS UNDERWRITING

SUMMARY: This act prohibits certain health insurers and HMOs 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. This includes resolving all reasonable medical questions based on the written application.

However, the act allows a rescission, cancellation, or limitation based on the application when the insurance commissioner approves it. It requires insurers and HMOs to apply for approval using a process it specifies. It permits the commissioner to approve the action if the enrollee, or the enrollee's 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. Regardless, it prohibits an insurer or HMO from rescinding, canceling, or limiting any coverage that has been effective for more than two years. The act permits the commissioner to adopt implementing regulations.

The act exempts the commissioner's decision from the administrative procedure law that permits a person aggrieved by the decision to request a hearing. Instead, it permits an aggrieved person to file an appeal with Hartford Superior Court within 30 days of when the decision is mailed to the affected parties. The court may grant equitable relief.

The act removes from the preexisting condition definition that applies to individual health insurance policies, excluding short-term policies, a physical or mental condition that manifested itself during the 12 months before coverage became effective. Thus, it defines a preexisting condition as a physical or mental condition for which medical advice, diagnosis, care, or treatment was recommended or received during the 12 months before coverage became effective.

Under prior law, a short-term health insurance policy issued on a nonrenewable basis for six months or less was exempt from preexisting condition coverage requirements if it disclosed in plan materials that preexisting conditions are not covered. The act imposes preexisting condition exclusion limitations on these short-term policies and requires insurers and HMOs to use specific disclosure language.

EFFECTIVE DATE: October 1, 2007

APPROVAL PROCESS

The act requires an insurer or HMO to apply for the insurance commissioner's approval to rescind, cancel, or limit benefits under a health insurance policy, contract, or certificate based on information the enrollee provided or omitted from the insurance application. The commissioner must prescribe the approval application form.

The insurer or HMO must provide a copy of the completed approval application to the enrollee, or enrollee's representative, who then has seven business days to submit relevant information to the commissioner. Within 15 days of receiving the enrollee's submission, the commissioner must mail a written decision to the enrollee; the enrollee's representative, if any; and the insurer or HMO.

APPLICATION OF REQUIREMENTS

The rescission, cancellation, and limitation requirements apply to health 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.

SHORT-TERM POLICY PREEXISTING CONDITION EXCLUSION

The act prohibits a short-term health insurance policy issued on a nonrenewable basis for six months or less from excluding coverage of a preexisting condition for more than 12 months from the policy effective date. It defines “preexisting condition” as a physical or mental condition for which medical advice, diagnosis, care, or treatment was recommended or received during the 24 months before coverage became effective.

The act requires the policy, coverage application, and sales brochure for the short-term coverage to conspicuously include the following statement in at least 14-point bold face type:

THIS POLICY EXCLUDES COVERAGE FOR CONDITIONS FOR WHICH MEDICAL ADVICE, DIAGNOSIS, CARE, OR TREATMENT WAS RECOMMENDED OR RECEIVED DURING THE TWENTY-FOUR MONTHS IMMEDIATELY PRECEDING THE EFFECTIVE DATE OF COVERAGE.

If an insurer or HMO issues consecutive short-term policies to the same person, it must subtract the time the person was covered by the former policy or policies from any subsequent policy's preexisting condition exclusion period. The act specifies that it does not require a short-term policy to be issued or renewed.

BACKGROUND

Preexisting Condition Coverage Requirement

State law prohibits health insurance policies from excluding coverage for preexisting conditions for more than 12 months from the insured's policy effective date. It requires policies (excluding short-term policies) to provide coverage for preexisting conditions to a newly insured individual previously covered for the condition under a former plan if the former plan terminated no more than 120 days before the new policy's effective date. In the case of a new group member, coverage for a preexisting condition is required if (1) the former plan terminated because of an involuntary loss of employment within 150 days before the effective date of the new plan and (2) the member applies for the succeeding policy within 30 days of initial eligibility. If the person was not covered for the preexisting condition under the former policy, the new policy must subtract from the subsequent policy's preexisting condition exclusion period the time the person was covered by the former policy.

RELATED LAW

Insurance Fraud

A person is guilty of insurance fraud when he or she, with the intent to injure, defraud, or deceive any insurance company, knowingly gives, or assists in giving, the insurer any false, incomplete, or misleading written or oral statement as part of, or in support of, any insurance application or claim, that is material to the application or claim. Insurance fraud is a class D felony (see Table on Penalties).

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