Required health insurance policy provisions (from chapter 22) A Good Review (MUST KNOW)

All health insurance policies issued in Florida must have the following required provisions. Remember that the word "provisions" means rules. This is a direct review of the G BENT CLIPPER acronym we gave you in chapter 22, as well as a quick look at the free-look provision.  It's also important to remember that an insurer can change the provisions to different wording if it is approved by the Commissioner, and the wording is not less favorable (which means more favorable) to the insured or the beneficiary.

Free-look *****

The free-look allows the policyowner to return the policy within 10 days of delivery and to have a full refund of the premium paid if the purchaser is not satisfied with it for any reason. Long Term Care and Medigap policies have a free-look minimum of 30 days.

Entire contract clause *****

The clause states that the policy, its endorsements, riders and any attached materials, including the application, constitute (or make up) the entire contract of the insurance and that nothing may be "incorporated by reference".  This ensures that no other documents that are not actually a part of the contract can be used to deny claims or coverage.  No change in the policy will be effective until approved by an officer of the insurer.  No agent may change the policy or waive any of its provisions without at least the initials of the applicant.

Time limit on defenses *****

This is the contestable period or the incontestable clause provision, which states in general that after two years, no misstatements except fraudulent ones, made by the applicant on the application, shall be used to void the policy or to deny a claim for loss incurred commencing after the end of the two-year period.  It also provides that no claims for loss incurred from a pre-existing condition may be denied after two years from the date of issue.

Grace period *****

The grace period allows the insured to be late on the premium payment without the policy lapsing, and so the policy remains in force even though the premium has not been paid.  The grace period applies to premiums other than the initial premium.  The length of time allowed for the grace period is always based on the mode of the premium payment, which is the frequency at which premiums are paid. The law provides that there must be a grace period of not less than

• seven days for weekly premium policies,
• 10 days for monthly premium policies, and
• 31 days for any other frequency.

Reinstatement *****

Obviously, the only time a policy would be reinstated is if it first lapsed due to nonpayment of premium. A policy lapses and insurance ceases when the premium is not paid within the grace period.  When the insured wants to reinstate a policy it is being put back as if it never lapsed, which means the individual would have to pay all past-due premiums. Think about this from the insurance company's perspective - if an individual is willing to pay all of that instead of pay a single premium to buy a new health policy, then it looks like something must be wrong with the person's health. "Why else would someone do that," the company may be thinking.

So the insurer will require a reinstatement application to be completed and the applicant will have to answer health questions to prove insurability. Once a conditional receipt is issued for the reinstatement application and premium submitted, the policy will be reinstated upon approval of such application by the insurer, or on the 45th day following the date of the conditional receipt if no action is taken on the application. The reinstated policy will cover loss resulting from accidental injury immediately after reinstatement.  To protect against adverse selection, losses due to sickness will not be covered until 10 days after the reinstatement date.

In all other respects, the insured and insurer will have the same rights as they had under the policy immediately prior to lapse.  Any premium accepted in connection with a reinstatement will be applied to a period for which premium has not been previously paid, but not to any period more than 60 days prior to the date of reinstatement.

Notice of Claim *****

The insured must provide written notice of a claim within 20 days of the claim, giving the name of the insured and policy number. If it is not reasonably possible to give notice within this time, notice must be given as soon as is reasonably possible.

Claim forms *****

The insurance company must provide the claimant with claims forms (sometimes called proof of loss forms) within 15 days.  If forms are not furnished to the insured by the insurance company within this time, the claimant may present proof in any reasonably written manner showing the nature and extent of loss.

Proof of loss *****

The insured has 90 days from the date of the loss to submit written proof of loss to the insurance company. If  it was not reasonably possible to give written proof of loss within that time, the insurer must still honor the claim if the proof is filed as soon as reasonably possible.  In any event, the proof of loss required must be given to the insurance company no later than one year from the time specified unless the claimant was legally incapacitated.

Time of payment of claims

This provision outlines how long the insurance company has to pay out the claim if the company is going to pay. Benefits payable under the policy for any loss will be paid as soon as the insurer received written proof of loss.  For losses providing periodic payment (disability payments), payments will be paid at least monthly if not more frequently.

Payment of claims *****

Benefits are to be paid to the insured unless the insured assigns rights of the benefits to the health care provider(s), as discussed in chapter 17.  Death benefits are payable in accordance with the beneficiary designation in effect at the time of payment. Remember that beneficiaries are listed as primary, secondary and tertiary (first, second and third), and that secondary and tertiary beneficiary designations are also called contingent beneficiary.  If there is no living beneficiary or if none is in effect at the time of the death, then the death benefits will be paid to the insured's estate.

Physical examinations and autopsy *****

The insurer may, at the company's own expense, have the insured physically examined as often as reasonably necessary while a claim is pending.  In the event of a death, the insurer may also have an autopsy made unless prohibited by law.

Legal actions *****

This provision outlines when an insured may sue the insurance company, which is usually following denial of a claim. No legal action may be taken on a health insurance policy within 60 days after written proof of loss has been given, and no such action may be brought after five years of furnishing proof of loss to the insurance company. So the insured may sue as early as 60 days and as late as five years from the original proof of loss date.

Change of beneficiary *****

The insured has the right to change the beneficiary at any time by giving the insurer written notice.  This works the same as it did for life insurance, where the beneficiary's consent is not required for this or any other change in the policy, unless the designation of the beneficiary is irrevocable.