IL Accident and Health Only with Law - Handout v16.pdf

Illinois Accident & Health Only Classroom Handout v16  IL Accident and Health Only Illinois Accident and Health Only Insurance Class Overview of the Class This...

Illinois Accident & Health Only Classroom Handout v16  IL Accident and Health Only Illinois Accident and Health Only Insurance Class Overview of the Class This program lasts for eight hours:  The morning session will be split into two sessions with a 15-minute break  Lunch will be from 12:20 – 1:00pm  The afternoon session will also be split into two sessions with a 15-minute break This program is approved to satisfy your class requirement in Illinois  You must be logged in for the entire day. If you’re logged off for more than a cumulative period of 10 minutes, we cannot mark you as attended.  Do NOT minimize your window during class.  You must answer all poll questions within the allotted time to verify that you’re in attendance. The polls are not graded to satisfy compliance. A sample poll will be given shortly. This review class assumes that you have reviewed study material. All questions should be entered into the chat box. After confirming your attendance and completing the Certification Exam, you will be given the opportunity to print a Certificate of Attendance. © Copyright 2024. All Rights Reserved. v16 The following presentation is owned by Securities Training Corporation and is protected by the United States Copyright Law and applicable international, federal, state, and local laws and treaties. The presentation is made available to you for your personal, non-commercial use as a study tool to assist you in preparing for the related examination and no other purpose. ALL OTHER RIGHTS ARE EXPRESSLY RESERVED. Any other use by you, including but not limited to, the reproduction, distribution, transmission or sharing of all or any portion of the presentation, without the prior written permission of Securities Training Corporation in each instance, is strictly prohibited. The use of any Artificial Intelligence (AI) tools or services while attending or completing XCEL Solutions LLC webinar, livestream and or self-study courses is prohibited. Any violation of this policy will result in disciplinary action, up to and including course termination. 1 stcusa.com | 800.782.1223  IL Accident and Health Only Content Reviewed in this Session The class content coincides with the material you’re studying to satisfy the approved self-study portion. You must complete and pass a Certification Exam in order to receive credit. Topics # of Questions General Health Insurance Concepts and Policies 18 Social Insurance 3 Required Uniform and Optional Health Insurance Provisions 20 Health Insurance Riders Field and Home Office Underwriting of Health Insurance and Policy Issuance 9 General Insurance – 22 Illinois General Insurance and Accident & Health Specific Laws and Regulations A&H Specific – 17 Health General Knowledge has 50 scored questions plus 10 pretest. General Law and A&H Specific Law has 39 scored questions plus 8 pretest. Polling Question #1 Choose the correct answer for each question. (Submit your answers in the Chat box.) How many scored questions are on the General 1. Knowledge part of the exam? A. 39 How many scored questions are on the General B. 50 2. Law and Accident & Health Specific Law part of the exam? ANSWERS: 1. 2. You must answer all polling questions within the allotted time in order to receive credit for attending the class. 2 stcusa.com | 800.782.1223  IL Accident and Health Only Topic 1 – General Health Insurance Concepts and Policies Insurance: The Transfer of Risk Risk:  Defined as the uncertainty or chance of loss ‒ Pure Risk: Chance of loss only (e.g., loss of life) Only pure risk is insurable ‒ Speculative Risk: Chance of loss or gain (e.g., lottery ticket) Peril:  What caused the loss (e.g., life Insurance – death of insured) ‒ Insurance spreads the risk and reduces the financial uncertainty associated with loss Contract of Indemnity:  Provides a stated benefit of certainty, which helps reduce an uncertainty (i.e., financial loss associated with death)  “To make whole again” Transfer of risk may be accepted by underwriting  Known benefit to replace an unknown event (risk) Parties of the Contract  The owner is the insured Two-Party Contract ‒ Owner/Insured owns the policy, has contractual rights, pays the premium ‒ Insurer is the insurance company that provides the guarantee  The owner is NOT the insured ‒ For example, Rick buys an insurance policy on his six-year-old son Third-Party Contract Rick is the policyowner Son is the insured Insurer is the insurance company  In order to purchase insurance on a person, the owner must possess an insurable interest in that person  Typically based on a financial relationship ‒ Must exist at the time of application, or at time of policy issue Insurable Interest ‒ Not required to exist at time loss occurs ‒ Insured must be made aware of the purchase by signing the application ‒ An individual has an unrestricted/unlimited insurable interest in herself; however, the amount of insurance is limited by underwriting 3 stcusa.com | 800.782.1223  IL Accident and Health Only Four Essential Elements to a Valid Contract 1. Agreement: An “Offer and Acceptance;” a meeting of the minds  An offer is generally made by the applicant and accepted by the insurer  Must be genuine assent 2. Consideration: The lawful exchange of one value for another  Application Information + Premium = Insurance Coverage (promise to pay / warranty) 3. Competent Parties: Both parties must be legally competent to enter into contract  Party A = Insurer (authorized / licensed) and Party B = Policyholder (competent) ‒ Exceptions for those who are: Minors (special consideration for necessities of life) Insane Under the influence of drugs/intoxicants Note: Without all four Coerced into contract elements present, the Enemy aliens or convicts contract is null and void! 4. Legal Purpose: Sale cannot be contradictory to the good of public Characteristics of an Insurance Contract  One-sided contract; developed by the insurance company Unilateral  “A promise (payment of claim) in exchange for an act already performed (payment of premium)”  Policyowner must adhere to the terms of the contract and must accept terms of contract (i.e., payment of premium) Adhesion ‒ Insurer drafts contract ‒ Contract ambiguities are found in favor of insured ‒ “Reasonable Expectations”  One party may receive a value that’s greater than what was paid, Aleatory based on a possible future happening (“Uncertain Outcome” – e.g., death benefit) Characteristics of an Insurance Contract  Insurer’s promise to pay is conditioned on a certain event or events Conditional ‒ Example: Policy must be in force, loss must be covered, and/or acceptable proof of loss is submitted  Life insurance contracts are personal in nature since they benefit Personal individuals Utmost Good Faith  Both parties act with honesty and integrity  Financial responsibility; position of trust Fiduciary  Producer acts as a fiduciary when collecting premiums 4 stcusa.com | 800.782.1223  IL Accident and Health Only Statements on Insurance Applications Representations  Oral or written statements made by an applicant when completing an application for insurance  “True to the best of his knowledge and belief”  Made prior to policy issuance Can be changed or amended prior to policy issue, but NOT afterward The materiality of the statement is dependent on whether it holds influence in determining policy issue Statements on an application are considered representations, not warranties Statements on Insurance Applications Misrepresentation  A false statement that will not affect underwriting  Is not material; will not affect issue ‒ E.g., Mailing address error Whether the false statement or concealment affects the decision to enter into an agreement will determine materiality Material Misrepresentation  A false statement or concealment that’s important to the issuance of a policy and affects policy issue ‒ Generally, health statements, driving record, drug/alcohol abuse, hazardous activities ‒ Severity is determined by “materiality” ‒ Is considered false when the facts fail to correspond with its assertions or stipulations ‒ Upon discovery, it could be grounds for voiding the contract Statements on Insurance Applications Concealment  The failure to voluntarily disclose materials facts relevant to the underwriting process  “Failure to communicate that which a party knows and ought to communicate”  Regardless of whether it’s intentional, it may be grounds for rescission by either party Fraud represents intentional deception  In many cases, the objective is associated with filing a false claim  If determined to be fraudulent, either party may rescind or cancel the contract Warranty  A statement made by the insurer or its representative that’s guaranteed to be true  Past, present, or future Statements on a Life or A&H application are considered representations, NOT warranties!  A warranty is generally used when underwriting property and casualty insurance when there are no health questions asked of the applicant 5 stcusa.com | 800.782.1223  IL Accident and Health Only Polling Question #2 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) An insurable interest is required to purchase insurance on another 1. person. 2. A two-sided contract is referred to as unilateral. A material misrepresentation will likely result in an insurance contract 3. being voided. You must answer all polling questions within the allotted time in order to receive credit for attending the class. Disability Income Purpose of Disability Income Insurance – To offset loss of income due to accident or sickness  Under the “Own Occupation” clause, the disability applies to a person’s inability to perform duties of his own occupation (e.g., a person is unable to perform surgery, but becomes a radiologist) ‒ Can still draw benefits ‒ Most common and considered less restrictive  Under the “Any Occupation” clause, the disability applies to a person’s inability to perform the duties for any occupation for which she is trained, educated, or experienced ‒ Considered more restrictive Disability Concepts Presumptive Disability  A type of total and permanent disability based on loss of sight, hearing, speech, and loss of limb use  Paid despite the fact the insured is still working Loss of Earnings Test  Disability income based on “earned income,” NOT unearned Earned Income (CBS) Unearned Income Commissions Rental Income Bonuses Interest Salary/Wages Investment Income 6 stcusa.com | 800.782.1223  IL Accident and Health Only Disability Concepts Partial Disability  “The inability to perform some, but not all, of your daily duties”  Follows a period of total disability ‒ Added as a rider ‒ Pays 50% of total disability benefit for “up to” six months Residual Disability  Another form of partial disability; based on a percentage of lost income  Fluctuates monthly and may exceed 50%  Pays to the end of the benefit period Permanent versus Temporary  Total permanent versus partial permanent  Total temporary versus partial temporary Injury/Accident versus Sickness/Illness  Injury/Accident – an unexpected and unintended event that results in an injury  Sickness/Illness – a condition of being unhealthy in body or mind Disability Concepts Recurrent Disability  If the same disability reappears within six months after supposed recovery, the disability will be considered a recurrence or continuation of the original disability ‒ No new elimination (waiting) period ‒ If disability reappears after six months, a new disability and elimination (waiting) period is initiated Elimination (Waiting) Period  Period preceding each disability during which benefits are not paid; similar to a deductible (“time deductible”) ‒ Common elimination periods: 30, 60, 90, 180 and 365 days ‒ The longer the elimination period, the lower the premium ‒ The shorter the elimination period, the higher the premium DI Elimination Period – Example A client has a Total Disability policy that pays $3,000 per month with a 60-day elimination period and the client is disabled for 210 days 210 days – 60 days Elimination period 150 days of benefit, which is five months at $3,000 per month (or $15,000) Same policy with a 180-Day Elimination Period 210 days – 180 days Elimination period 30 days of benefit, which is one month at $3,000 per month (or $3,000) 7 stcusa.com | 800.782.1223  IL Accident and Health Only Additional Disability Income Principles DI policies are designed to protect a person’s earned income by paying a monthly benefit  “Living Death”  Coverage to age 65 ‒ Some pay for life (e.g., a surgeon who’s still working in her 80s) Premiums are based on:  Elimination period selected  Age, sex, health, occupation, and income  Monthly benefit  Acovations/hobbies  Duration of benefit  Other DI policies in force Waiver of Premium  Waives the insured’s obligation to pay premium once she’s disabled for 90 days (six months for life insurance)  Premiums paid during the first 90 days will be returned to the policyowner  Waives premium for the remainder of the disability, or to age 65 Occupational/Non-Occupational Occupational DI Policy Non-Occupational DI Policy  Coverage for BOTH “on and off” job  Coverage for ONLY “off” job  Pays in addition to Worker’s Compensation  Benefits are integrated with other benefits Example: Individual DI Policy  Worker’s Compensation pays only for “on the job” Example: Group Insurance Business Disability Insurance Pays for the usual and customary business expenses if a business owner becomes disabled Business  Does NOT pay the owner an income or salary Overhead Expense  Pays for rent, mortgage, utilities, phone, employee salaries (BOE)  Premiums are tax-deductible, but benefits are taxable  Small employers Compensates business due to disability of key employee  Who’s a key employee? Key Employee ‒ Provides funds to offset loss or hire a replacement ‒ Third-party contract ‒ Premiums are not deductible; however, benefits are tax-free Use disability benefits to buy out interest of disabled partner  May be lump-sum or periodic Disability Buy-Sell  Similar to Buy-Sell for Life Insurance  Premiums are not deductible; however, benefits are tax-free 8 stcusa.com | 800.782.1223  IL Accident and Health Only DI Tax Considerations Individual Policies  Premium is non-deductible  Benefit is received tax-free Group Policies  Non-Contributory: ‒ Employer paid premium (premium deductible to employer) ‒ Benefit taxable to employee  Contributory: ‒ Employee pays all or part of premium ‒ Premium is deductible to employer, not to employee ‒ Benefit is taxable to employee, but only the portion that’s based on employer contribution Polling Question #3 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) 1. A residual disability is considered a total and permanent disability. 2. Disability benefits are not paid during the elimination or waiting period. 3. Occupational DI Policies will provide coverage both “on and off” the job. You must answer all polling questions within the allotted time in order to receive credit for attending the class. 9 stcusa.com | 800.782.1223  IL Accident and Health Only Medical Expense Insurance Basic Plans – First dollar coverage, no deductible with three sections Hospital Expense Coverage Surgical Expenses Coverage  Daily Room and Board (DRB)  Requires an added premium ‒ Specific dollar amount for specific number  Schedule: Most common operation, maximum of days per surgery Example: $250 per day for 100 days  Relative Value Basis – pays benefits based on ‒ Additional/excess expenses paid by the a point system assigned to each procedure insured  Fee schedule (e.g., knee replacement =  Miscellaneous/Ancillary Expenses $6,000) ‒ Listed as a multiple of the Daily Room and Board (e.g., 100 times the DRB, or $25,000) Physician Expense (Optional) ‒ Used for miscellaneous expenses (e.g., x-rays, dressings, nursing, therapy,  Outpatient benefit lab tests, anesthesia, ambulance, costs,  Covers physician’s fees for non-surgical care medicines, etc.) in the hospital, doctor’s office, or in the home ‒ Additional/excess expenses paid by the  Stated dollar amount insured Major Medical Protects against catastrophic losses with much higher benefits  Characteristics: ‒ Comprehensive and high coverage limits (e.g., $1 million or unlimited) ‒ Deductibles: Front-end, pay first ‒ Co-Insurance (percent participation) 80/20% ‒ Blanket coverage ‒ Stop loss ‒ Inside limitations  Exclusions: ‒ War ‒ Intentionally self-inflicted injuries ‒ Elective cosmetic surgery ‒ Care at a government facility ‒ Routine dental ‒ LTC ‒ Claims covered by Workers’ Compensation ‒ Private nursing ‒ Any expenses covered by Medicare/Medicaid 10 stcusa.com | 800.782.1223  IL Accident and Health Only Major Medical Provisions that affect cost:  Deductibles: ‒ Higher the deductible, lower policy cost ‒ Lower the deductible, higher policy cost ‒ Eliminating small, unnecessary claims  Co-Insurance: After deductible is paid, insured pays 20%  Stop Loss: Once out-of-pocket expenses reach a certain dollar amount, insurer pays 100% Example:  Policy $500 deductible, 80/20 co-pay, $5,000 stop loss What would insured pay without  Claim = $80,500 the stop loss? Deductible Co-Insurance Stop Loss $500 deductible 20% of bill until Since insured has met stop loss, + $16,000 (20% of $80,000) Deductible $500 insured pays $5,000 insurer pays 100% of remaining bill $16,500 total without stop loss Coverage for Dependent Children Covered at the moment of birth, regardless of birth defects  Can remain on family Accident & Health plan until age 19, or age 23 if a full-time college student (not including Medical Plans)  Handicapped children can remain on family plan for as long as disability prevents them from being self-sufficient  If a child has multiple coverage through both parents, the parent whose birthday comes first in the calendar year is primary  If the parents are divorced, then the primary is the parent with custody  Federal Patient Protection and Affordable Care Act increased the age to 26 in medical plans, regardless of dependent or marital status Taxation of Medical Plans Employer paid group premiums are deductible to the employer Benefits are received tax-free by employee since they’re not considered income Individual premiums are not deductible  Reimbursements/benefits are not taxable since they’re not considered income  For individual plans, if premiums and other non-reimbursed medical expenses exceed 10% of adjusted gross income, the excess is deductible 11 stcusa.com | 800.782.1223  IL Accident and Health Only HMOs and PPOs Alternative health care providers that provide comprehensive health care  Combine health care delivery with prepaid financing (e.g., prepaid premiums)  Emphasize preventive care and provide emergency services Health Maintenance Organizations  Physicians are employed by the HMO ‒ Referral is needed by primary care physician (PCP) to see specialists ‒ PCP is the gatekeeper and insured subscriber needs permission to go outside of the network Similar to HMOs except participating physicians are not employees  Physicians are paid on fee for service basis Preferred Provider  Subscribers may seek treatment outside of the network without permission Organizations  Treatment outside of the network may result in reduced benefit  The provider (i.e., doctors) offers to discount medical service fees, while organizations promise to increase patient volume Health Savings Accounts Health Savings Accounts (HSAs)  Personal savings accounts that are designed to offset unreimbursed medical expenses  Must be used with High Deductible/Low Premium health insurance policies  Benefits are portable  Available to almost any person  Employers may contribute funds Medical/Health Savings Accounts Common Characteristics:  Contributions are tax-deductible to both employee and employer  Growth is tax-deferred  Contributions carry-over from year-to-year; subject to maximum limits  Earnings and “qualified” withdrawals are tax-free Medical Savings Account Health Savings Account  Qualified; tax-free  Qualified; tax-free  Non-qualified prior to age 65:  Non-qualified prior to age 65: ‒ Taxable as income with ‒ Taxable as income with additional 15% penalty tax additional 20% penalty tax  Non-qualified after age 65:  Non-qualified after age 65: ‒ Taxable as income ‒ Taxable as income 12 stcusa.com | 800.782.1223  IL Accident and Health Only Polling Question #4 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) 1. Long-term care is excluded from Major Medical coverage. 2. A Major Medical plan with a low deductible carries a lower policy cost. 3. Participating physicians are considered employees of a PPO. You must answer all polling questions within the allotted time in order to receive credit for attending the class. Long-Term Care (LTC) The purpose of LTC is to provide Medical and Personal Services for persons who need assistance with Activities of Daily Living (ADL) and/or Cognitive Care for an extended period – chronic conditions  Examples include eating, dressing, bathing, toileting/continence, walking/ambulation, transferring or taking medication  Sold as an Individual or Group plan, or as a rider to a Life Insurance policy  Normal underwriting requirements apply  Medicare and private insurance provide minimal coverage for this type of assistance Long-Term Care Four Major Levels of Care: Daily nursing and rehabilitation provided by a health care professional in an approved facility; Skilled Nursing based on physician order Care  24-hour service; highest level of care, with highest cost Occasional nursing and rehabilitation in an approved facility Intermediate Care  Based on physician order, provided by a skilled nursing professional Aids in Activities of Daily Living (ADL) such as bathing, dressing, toileting, eating, walking, Custodial Care and taking medication Can be each of the above, but done as an alternative to nursing home confinement Home Health Care  Can be received in patient’s home 13 stcusa.com | 800.782.1223  IL Accident and Health Only Long-Term Care LTC benefits are triggered when insured cannot perform two or more ADLs, or suffers a cognitive impairment (e.g., dementia, Alzheimer’s) Other Benefits:  Assisted Living Care  Respite Care – Provides breaks for major caregiver  Hospice Care – For terminally ill patients  Adult Day Care Note:  LTC does NOT pay hospital benefits  Medicare only pays a limited amount for Skilled Nursing Care Long-Term Care Requirements LTC Insurance Model Act requirements:  Minimum 12 months of consecutive coverage  Outline of Coverage must be provided at time of application  Free-look of 30 days  Cannot include benefits for Skilled Nursing that are substantially greater than those provided for Intermediate or Custodial Care  Must be issued as a Guaranteed Renewable contracts (or better) which states that the policy cannot be canceled, but premium can increase only on a class basis  Impairment riders are not allowed Dental Insurance Limited/specialized policy that’s designed to provide diagnostic and preventative treatment and care  Often no deductible for routine preventative care  Co-insurance and coverage limitations or exclusions apply  Expensive, due to high frequency of claims  May be offered as part of medical plan or “stand-alone” Categories of Treatment  Restorative (fillings and crowns)  Oral Surgery  Endodontics (root canals and treatment of pulp within teeth)  Periodontics (care of tissue surrounding teeth)  Prosthodontics (dentures and bridgework)  Orthodontics (corrective devices, such as braces) Group Plans  Concerned with adverse selection and may impose limitations/reduction of benefits for a probationary period  Generally, there’s no conversion plan for group dental; however, the insured may continue to utilize benefits via COBRA 14 stcusa.com | 800.782.1223  IL Accident and Health Only Polling Question #5 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) Eating, dressing, bathing, and walking are considered activities of daily 1. living (ADL). 2. An LTC policy has a 20-day free-look period. 3. An LTC policy is issued as a guaranteed renewable insurance contract. You must answer all polling questions within the allotted time in order to receive credit for attending the class. 15 stcusa.com | 800.782.1223  IL Accident and Health Only Topic 2 – Social Insurance Social Security Old Age Survivors Disability Health Insurance (OASDHI) Benefits Provided:  Medicare: Medical/physician’s benefits for those over the age of 65  Retirement Benefits – for those who are age 65 and older (if taken at age 62, a reduced amount)  Lump-Sum Death Benefit: $255  Disability Benefits  Survivors Benefits  Dependent Benefits – paid until child reaches the age of 18 Federal program financed by payroll taxes (FICA Tax)  7.65% employer (1.45% Medicare)  7.65% employee  Self-employed: 15.3% Disability Benefit Under Social Security Very restrictive definition of “disability”:  “Unable to engage in any gainful employment whether that employment exists in a person’s immediate area”  “Disability is expected to last 12 months or result in death” ‒ Five-month waiting period, benefit begins in the sixth month ‒ Not retroactive ‒ Benefit based on Primary Insurance Amount (PIA) Social Security Currently Insured: Fully Insured: 40 Fully and Disability Insured Status Six of the last 13 Quarters Quarters (10 years) Insurance: 20 of last 40 (Survivors and Death Benefit Only) Retirement and Retirement, Survivors, Benefits Survivors only Survivors and Disability Primary Insurance Amount (PIA)  Mathematical calculation that factors FICA contribution averages, and then determines the amount of retirement /survivorship or disability benefit  Benefit is based on contribution Blackout Period  Pertains to survivor benefits  Children receive benefit until the age of 18  Period following children’s Survivor Benefit and before Social Security benefits are payable 16 stcusa.com | 800.782.1223  IL Accident and Health Only Medicare Two-part federal health insurance program that’s designed for those who:  Are age 65 and older and eligible for Social Security benefits, or  Have certain disabilities, including End-Stage Renal Kidney disease which requires dialysis, and ALS (Lou Gehrig’s Disease) Administered by OASDHI; funded via payroll taxes Enrollment: An individual is entitled to receive Medicare benefits if:  He’s age 65 or older and legally entitled to receive Social Security benefits  He’s under the age of 65 and has: ‒ Been receiving Social Security disability benefits for more than 24 months; or ‒ End-stage chronic renal kidney disease that requires kidney dialysis or transplant, or ALS Medicare Parts A & B Part A: Primarily provides Hospital Insurance (HI)  Automatic at the age of 65 if FICA qualified; no premium Part B: Primarily provides Supplemental Medical Insurance (SMI)  E.g., doctor’s charges  Must enroll and pay monthly premium A person’s first chance to sign up is referred to as the initial enrollment period. This period lasts for seven months and starts three months before the person turns age 65, and ends three months after the month that the persons turns age 65 The date on which coverage begins is dependent on the month that the person signs up during the initial enrollment period. Coverage always starts on the first of the month. Alternatively, a person can sign up during the general enrollment period, which is January 1 through March 31, with coverage commencing on July 1. Medicare Parts C and D Medicare Part C – Medicare Modernization Act – Program again amended, now called Medicare Advantage  Offers expanded benefits through private carriers, as an alternative to Medicare A & B  Additional premium required  Must be enrolled in Medicare Parts A & B  No evidence of insurability required if enrollment begins within six months after turning age 65  Greater benefits may eliminate need for Medicare Supplement plan Medicare Part D – Private companies selling prescription drug plans, which include deductibles and co-payments  Must provide two plan options  Seven-month “Open Enrollment”  Medicaid beneficiaries automatically enrolled Those eligible include:  Age 65+ and SS-eligible  Clients with ALS  Age 65+ and permanently disabled  Medicaid beneficiaries  Clients with kidney failure/kidney transplant 17 stcusa.com | 800.782.1223  IL Accident and Health Only Medicaid Provides medical assistance for certain individuals and families with low incomes or limited assets Federally funded program; run by state  Aid to families with dependent children or Temporary Aid for Needy Families (TANF)  Public assistance / welfare  Based on need, not age  Spend down assets to qualify ‒ Hospital, doctor, lab/x-rays, early diagnosis for children under the age of 21, family planning, nursing home care for financially indigent, benefits provided by a Federal Health Center clinic, and certified midwives and nurse practitioners Medicare Supplement / Medigap Policies Purpose:  To provide benefits that are not provided by Medicare or Medicare cost sharing  Sold by private commercial insurers Examples: deductibles and co-payments National Association of Insurance Commissioners (NAIC)  Established 12 plans that are simply referred to as Plans A through L  Plan A is the Core Benefit, while the remaining plans include all of Plan A benefits, plus additional benefits Open Enrollment:  Upon enrollment in Medicare Part B, for six months, an individual has right to purchase Medicare Supplement without evidence of insurability Medicare Supplement Plan A is called the CORE benefit Plans B through L include the CORE, plus additional benefits Plan A is the least expensive plan Plan A (CORE) benefit minimums include:  Co-insurance amounts Part A (HI): Days 61-90 and 91-150 (Lifetime Reserve days)  Plan A includes 365 additional days of hospital confinement at 100% coverage  Plan A includes hospice co-insurance and co-pay  20% co-insurance on Part B (SMI)  Coverage for first three pints of blood 18 stcusa.com | 800.782.1223  IL Accident and Health Only Medicare Supplement A Buyer’s Guide must be provided at the time of Must provide a 30-day free-look period the application Cannot contain exclusions that are inconsistent Must be guaranteed renewable for life (cannot be with Medicare canceled but the premium can rise on a class basis only) Benefits must automatically increase in direct response with increases in Medicare’s deductible Pre-existing conditions cannot be excluded and and co-payments waiting periods cannot exceed six months During first six months, higher rates cannot be Selling duplicate coverage is prohibited and charged based on higher claims policy must be suitable Must include six-month open enrollment when New probationary periods cannot exist when a participant qualifies for Medicare Part B similar policy replaces another If replacement does occur, a signed Notice Minimum Loss Ratios: Regarding Replacement form must be signed by  Individual Plans – 65% both producer and policy owner and kept on file  Group Plans – 75% Polling Question #6 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) For disability benefits to be paid under Social Security, the disability must 1. be expected to last a minimum of six months. In order for a person without a disability to be permitted to enroll in 2. Medicare, she must be the age of 65 or older and eligible for Social Security benefits. To be eligible for Medicare Advantage (Part C), a person must be 3. enrolled in Parts A and B. 4. A Medicare Supplement policy need not be guaranteed renewable for life. You must answer all polling questions within the allotted time in order to receive credit for attending the class. 19 stcusa.com | 800.782.1223  IL Accident and Health Only Topic 3 – Required Uniform and Optional Health Insurance Provisions Required Uniform Provisions There are 12 mandatory uniform accident and health insurance policy provisions. Entire Contract:  Policyowner is entitled to the policy, application, and any riders, waivers, endorsements, etc. ‒ Mandatory provision which protects policyowner/consumer ‒ Photocopy of original application Grace Period:  Protects policyowner from unintentional lapse  31 days after premium due date  Covered during Grace Period  Premium owed is subtracted from benefits payable Reinstatement Provision: Applies to a lapsed policy  Within three to five years after lapse  Proof of insurability  After 45 days, coverage is automatic unless informed otherwise by insurer  If denied, premium is returned Required Uniform Provisions Time Limit on Certain Defenses:  Insurer may challenge misstatements on an application, but only during first two years of policy ‒ Must be material misrepresentations ‒ “Rescind” policy and return premium ‒ Protects insurer ‒ Identical to Incontestable Clause in Life Insurance Notice of Claim:  Policyowner must notify insurer of loss within 20 days (or as soon as reasonably possible) after loss occurred  May notify agent in writing, in person, or by phone Claim Forms:  Upon notice, insurer must provide claim forms within 15 days ‒ If not, an unfair claim practice has occurred ‒ May be referred to as “Proof of Loss” form Proof of Loss:  Policyowner has 90 days from date of loss to submit proof of loss to insurer ‒ 90 days if reasonably possible ‒ Loss verified by doctor statement, bills, etc. 20 stcusa.com | 800.782.1223  IL Accident and Health Only Required Uniform Provisions Time Payment of Claims:  Claim must be paid immediately upon proof of loss; subject to normal processing  Disability claims must be paid at least monthly Payment of Claims:  Unless assigned to hospital or doctor, claim is paid to insured Physical Exam and Autopsy:  Insurer has the right to conduct to determine validity of claim  Insurance company pays the cost Legal Action:  Can be brought against an insurer, but no sooner than 60 days after Proof of Loss has been provided  Must also take place no more than three years after Proof of Loss has been provided Change of Beneficiary:  Unless irrevocable, beneficiary may be changed at any time ‒ Change must be in writing ‒ If irrevocable, must obtain beneficiary’s written authorization Optional Uniform Provisions Change of Occupation:  A benefit or premium REDUCTION will occur if policy owner changes jobs and doesn’t notify insurer  Protects insurer; common on disability policies ‒ Change to a more hazardous job – benefit reduction ‒ Change to a less hazardous job – premium reduction Misstatement of Age/Sex:  Benefit will be “Adjusted” to reflect the benefit that the premium would have purchased had the correct age/sex been known  Typically, will not void the policy ‒ Understated age – lower benefit ‒ Overstated age – higher benefit Illegal Occupation  Claim will be denied if the policyowner was injured or became ill while committing a crime ‒ Payments previously paid may be recovered Relation of Earnings to Insurance – Disability policies  Eliminates possibility of purchasing too much DI coverage, in an attempt to profit from loss  DI policies will “coordinate” policy benefits 21 stcusa.com | 800.782.1223  IL Accident and Health Only Other A & H Provisions Free-Look  Upon delivery and after review, policyowner has the right to return policy for any reason and receive a full refund of premium ‒ The period is typically 10 days after delivery (receipt) of policy ‒ May be referred to as “Right to Examine” ‒ For Senior Needs policies, the Free-Look is 30 days Consideration Clause  An exchange of values must occur between policyowner and insurer for a lawful contract ‒ Policyowner – Application information plus premium ‒ Insurer – Promise to pay benefits Insuring Clause  Appears on first or face page and provides summary of contract ‒ Promise to pay; also referred to as “insuring agreement” ‒ Outline and scope of coverage ‒ Provides death benefit, mode of premium, beneficiaries, and exclusions Polling Question #7 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) There are 10 mandatory uniform accident and health provisions in the 1. insurance policy. An insurer must provide claim forms within 15 days of being notified of a 2. loss by the insured. The benefits of a policy remain unchanged if a policyowner changes to a 3. more hazardous job without notifying the insurer. There’s a 30-day free-look period for Senior Needs Accident and Health 4. policies. You must answer all polling questions within the allotted time in order to receive credit for attending the class. 22 stcusa.com | 800.782.1223  IL Accident and Health Only Topic 4 – Health Insurance Riders Guaranteed Insurability Rider Allows insured to purchase additional amounts of disability income insurance, at future dates, WITHOUT being required to take a physical exam or provide evidence of insurability  Automatic increase provision ‒ Future dates are policy anniversary dates ‒ Limited to specific age (e.g., age 40) ‒ No medical exam ‒ Added coverage based on attained (actual) age; must prove income increase ‒ Added premium ‒ Similar to G/I rider for life insurance ‒ May also be referred to as Additional Purchase or Future Increase Option Accidental Death and Dismemberment Rider Accidental loss only  Pays a death benefit (principal sum) or dismemberment benefit (capital sum) for accidental loss only ‒ Complete and total severance of limb at or above wrist or ankle Includes hands, feet, and irrevocable loss of sight ‒ Dismemberment benefit is 50% principal sum per loss  Loss must occur within 90 days of an accident  Two capital losses = Principal sum  Premium is not deductible; however, the benefit is tax-free  Least expensive death benefit due to limited nature 23 stcusa.com | 800.782.1223  IL Accident and Health Only Topic 5 – Field and Home Office Underwriting of Health Insurance and Policy Issuance Application and Field Underwriting The Application – The primary tool used to gather information (Sections 1 and 2  Section 1: General information about applicant become part of contract)  Section 2: Detailed health information  Agent Report: Section used by agents to list general observations; remains confidential Field Underwriting Duties – Complete application and collect premium; submit to home office  Agent/Producer doesn’t issue policy  Must also provide Notice Regarding Replacement, Life Insurance Buyer’s Guide, Outline of Coverage (Policy Summary) General Procedures  Applicant and Producer signatures  Third Party contract also requires third party’s (insured’s) signature  Application must be completed in its entirety (black or blue ink); no blank response (N/A acceptable)  An agent cannot make changes to an application; must correct error(s) and applicant must initial  An agent who makes unauthorized changes is guilty of FRAUD Statements made by applicant are representations, not warranties Application and Field Underwriting A printed booklet describing all aspects of AIDS/HIV, including a list of counseling services must be provided prior to testing  It’s not unfair to decline coverage due to the discovery of the applicant having this disease  Test results can only be provided to the applicant or their physician ‒ Cannot go to a third party ‒ With permission, may go to a physician, Department of Health, or approved HIV counseling center State law prohibits discrimination with regard to testing for AIDS/HIV for people of same class  Cannot consider marital status or known or suspected sexual orientation  Insurer pays for testing  Written authorization from applicant, which includes: 1. Purpose and use of test 2. Exam result notification procedures 3. Limitations 4. The rights of exam confidentiality 5. Interpretation of results 24 stcusa.com | 800.782.1223  IL Accident and Health Only Home Office Underwriting Underwriting involves the gathering and analysis of information relative to an applicant and insured who is/are applying for insurance coverage  The purpose is to determine whether to accept the risk (also referred to as Risk Selection) SELECTION CRITERIA ACCEPTED = Policy Issuance The Home Office completes the underwriting and the risk is accepted. The contract is sent to the Producer for delivery to the Owner ACCEPTED - Issued as applied for D ACCEPTED - Issued on a preferred rate E WITH ADJUSTMENTS - Issued on a rated basis (e.g., higher premium) N I Substandard Standard Smoker Standard Preferred Smoker Preferred E D Methods to insure less than satisfactory risks:  Exclusion rider – specific activity  Rate-up with higher premium  Step-up-in age rating  Tabular rating  Percentage of rate Home Office Underwriting Underwriting Sources of Information  Application, agent’s report, and personal interviews  Attending Physicians Statement (APS), medical/physical exams (paid by insurer), lab tests  Consumer reports and investigative consumer reports  Medical Information Bureau – attempt to eliminate high risk by revealing pre-existing conditions ‒ Medical information from previous applications ‒ Shared among “Member” insurance companies ‒ Health history, driving record, abnormal pap studies  Credit Review: Fair Credit Reporting Act of 1970 ‒ Provides consumers with certain rights if they’re denied insurance due to information gathered from reporting agencies. If denied, the consumer has the right to: Be provided with the source of information Challenge information in the report Be issued policy if the report is in error 25 stcusa.com | 800.782.1223  IL Accident and Health Only Home Office Underwriting Factors that affect the premium rate charged for an individual policy may include:  Age  Occupation  Gender/sex (females pay lower rates due  Personal activities or hobbies (e.g., scuba to longer life expectancy) diving, parachuting, etc.)  Personal health history  Family health history  Salary, earnings, wages (important for  Personal habits (e.g., smoking or drinking) disability policies)  Recent hospitalizations  Travel outside the country Home Office Underwriting There are Three Important Factors when determining Life Insurance Premiums 1. Morbidity: – probability of injury or illness 2. Interest: – “Investment Return” of insurance company 3. Expenses: also referred “Loading,” which includes:  Producer commissions/income  Company profits  Administrative costs Note: Factor 1 minus 2 = Net Premium Factor 1 minus 2 plus 3 = Gross Premium 26 stcusa.com | 800.782.1223  IL Accident and Health Only Contract Delivery Producer Responsibilities – Review:  Person insured  Beneficiaries  Policy provisions  Coverage amount  Premium and premium mode  Exclusions and riders  Effective date  Ownership rights An important time frame begins on the policy delivery date  10-day free-look (minimum can be longer)  For senior policies, the free-look may be 30 days Premiums Paid With The Application versus Premium Not Paid With the Application  Remember, an applicant’s consideration consists of two items—completed application and premium payment  Policy cannot be issued, and coverage will not be provided, until both elements of consideration are complete  An application that’s submitted without premium is referred to as a Trial Application or Request for Company to Make an Offer.  If approved, coverage will not be provided until premium is paid.  The agent must complete Statement of Continued Good Health and collect premium prior to delivery. In this case, the delivery date will be the effective date of coverage. Note: If client’s health has changed, it’s possible that the policy will not be issued Polling Question #8 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) The Guaranteed Insurability Rider allows the insured to increase the 1. amount of disability income insurance without an increase in premium. The Medical Information Bureau provides information in an attempt to 2. eliminate high risk due to pre-existing conditions. 3. Traveling outside of the country can influence the premium rate. You must answer all polling questions within the allotted time in order to receive credit for attending the class. 27 stcusa.com | 800.782.1223  IL Accident and Health Only Topic 6 – Illinois General Insurance and Accident and Health Specific Laws and Regulations Illinois Statutes and Regulations Common to Life, Accident, and Health Insurance Powers and Duties of Director The Insurance Director is responsible for enforcing and carrying out the State’s insurance laws, which includes:  Conducting any investigations, examinations, or hearings to determine whether a law has been broken ‒ Director must give 10 days’ written notice of hearing  Taking action to enforce the law, a rule, or a regulation  Subpoenaing witnesses and administering oaths during examinations  Issuing insurance licenses  Suspending licenses after a hearing (it does NOT prosecute licensees)  Approving and regulating premium rates and advertising  Issuing cease-and-desist orders Types of Licenses In order to sell any insurance product, an individual must secure an insurance license. Acting without a license is a Class A misdemeanor. Applicant must:  Be at least 18 years of age or older (or of full age)  Be competent, trustworthy, and of good business reputation  Complete an approved prelicensing course of study for the lines of authority for which the individual has applied  File or post a bond, unless exempt Producer  Pass a state examination  If working for one insurer, he must be sponsored by an insurer  Not have committed any act that’s ground for denial, suspension, or revocation of a license  Pay the appropriate fees A person whose license is suspended or revoked or whose application for a license is denied pursuant to Illinois law, is ineligible to apply for any license for three (3) years following the suspension, revocation or denial 28 stcusa.com | 800.782.1223  IL Accident and Health Only Types of Licenses May apply for a producer’s license if she holds a similar license in good standing in her home state. Additionally, the individual: Non-Resident  Must file an affidavit which states that the Director will be her agent for service of legal action (service of process) Any firm, corporation, partnership, or business entity that’s acting as a producer must Business Entity obtain an insurance producer license There are two types:  A person who intends to become a permanently licensed producer (good for Temporary License 90 days)  A person who becomes a producer for another who dies or is disabled (good for 180 days) Company officers and other employees are NOT required be licensed unless they’re Exemptions receiving commissions A producer who allows her license to lapse may, within 12 months after the due date of Reinstatement the renewal fee, be licensed without passing the examination. A penalty in the amount of double the unpaid renewal fee is required after the due date. Obtaining and Maintaining a License Prelicensing Requirement: 20 hours of study per line (20 for Life; 20 for Health).  For each line, 7.5 hours must be in class Continuing Education Requirement Controlled Business 24 credit hours every two years (biennial) on producer’s Exists when a disproportionate amount of insurance is birth month written on a producer’s own life, person, property, or  Three hours must be in classroom ethics risks; or those on a producer’s spouse, employer,  May be a combination of classroom and self-study employees, or partners as long as 2/3s of the hours are in class  A producer’s license will not be issued or renewed  Maximum of 12 credit hours may be carried over to if the Director believes that the individual has the next reporting/renewal period written more controlled business than non- controlled business in either of the last two  Courses cannot be taken for credit more than once calendar years, or will do so in the next year in a two-year period  Producers who are unable to comply with license renewal procedures due to military service may request a waiver The Director must be notified of a producer’s change in business, residence, or email address within 30 days of the change. 29 stcusa.com | 800.782.1223  IL Accident and Health Only License Suspension or Revocation  Making material misrepresentations on a license  Knowingly accepting insurance business from an application unlicensed individual  Obtaining or attempting to obtain an insurance  Committing any insurance unfair trade or marketing license through fraud or misrepresentation practice  Improperly withholding, stealing, misusing,  Using fraudulent, coercive, or dishonest practices misappropriating, commingling, converting, or failing  Failing to pay state income tax to properly remit premiums to insurance  Forging a name to an application for insurance or to transactions (i.e., larceny) a document related to an insurance transaction  Intentionally misrepresenting the terms of an actual  Cheating or improperly using notes or reference or proposed insurance contract material on a State insurance examination  Failing to appear in response to a subpoena without  Being convicted of a felony reasonable excuse  Having an insurance producer’s license denied,  Failing to comply with a court order imposing a child suspended, or revoked in any other state support obligation  Failing to make satisfactory repayment to the Illinois  Engaging in fraud, coercion, or dishonesty in any Student Assistance Commission for a delinquent or business practice, or demonstrating incompetence, defaulted student loan untrustworthiness, or financial irresponsibility License Suspension or Revocation In the event a license is suspended or revoked:  After a hearing, an individual may be subject to a civil penalty of up to $10,000 for each cause for denial, suspension, or revocation.  Once a license is suspended or revoked, the licensee must promptly deliver it to the Director in person or by mail. The Director will make such information public as it’s deemed necessary.  According to Illinois law, a person whose license is revoked or whose application is denied is ineligible to apply for any license for three years after the revocation or denial.  A person who has had a license suspended, revoked, or denied cannot be employed by or contracted with an insurer, or engaged in any insurance activities while the suspension or revocation is in effect. 30 stcusa.com | 800.782.1223  IL Accident and Health Only Fiduciary Duties A fiduciary is a person who must act with a high degree of trust when handling the monies of the public, and must consider these funds as being held in trust for another party (i.e., the insurer or client)  Any premiums being handled by an insurance producer, limited lines producer, temporary licensee, business entity, or surplus lines producer must be held in a fiduciary capacity  A Premium Fund Trust Account (PFTA) must be established when premiums are held for 15 days or more before they’re remitted to insurers  The funds collected or deposited in a premium trust account cannot be misappropriated, misused, or commingled with personal funds ‒ A single instance of doing so, or withholding $150 or less, is a Class A misdemeanor ‒ A repeat offense is a Class 4 felony ‒ The intentional misappropriation or conversion to personal use or illegal withholding of premiums in excess of $150 is a Class 3 felony  Licensees must maintain accurate books and records of accounts reflecting all insurance related operations  All transactions and amounts receivable must be posted no less than every 30 days  All books and records for a calendar or fiscal year must be maintained for at least seven years Additional Illinois Law Commissions Felony Convictions Disclosure Regulations  Individuals must be  Any licensee convicted of a  All insurance policies must identify licensed to receive felony must report it and the name of the producer, commissions, service or provide any relevant representative or firm brokerage fees, or other documents to the Director  An individual life or accident and considerations within 30 days of the health application and a master  No fees, payments or conviction policy application for life or commissions may be paid  Within 30 days the Director accident and health group to a producer by the public must receive a copy of the coverages must bear the name (e.g., rebating) judgment, the probation or and signature of the licensee who commitment order solicited and wrote the application 31 stcusa.com | 800.782.1223  IL Accident and Health Only Polling Question #9 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) The Director must provide no less than 10 days written notice to a 1. producer prior to a hearing for an investigation. A producer whose license has been revoked cannot reapply for any 2. license for three years. Every two years, a licensee is required to complete 12 hours of 3. continuing education credit. In order to apply for a non-resident license, an applicant must hold a 4. similar license in another state. You must answer all polling questions within the allotted time in order to receive credit for attending the class. Unfair Sales and Marketing Practices Involves an insurer or producer offering to an applicant any item of value that’s not specified in the policy as an inducement or incentive to purchase insurance  The most common form occurs when a producer offers a kick-back of commissions REBATING ‒ Considered a Class B misdemeanor  If a commission earned on a sale involves rebating, the insurer may attempt to reclaim it  Reductions of premiums to policyowners out of an accumulated surplus on non-participating policies or accepting as payment a client’s obligation to pay are NOT considered rebating The act of misrepresenting the terms, benefits, or dividends of a policy or circulating or allowing false representations  If insurers or producers compare policies unfairly in a misleading way MISREPRESENTATION in order to induce a policyholder to lapse existing coverage, they have engaged in twisting (a form of misrepresentation)  Any form of misrepresentation is illegal and may be punishable by a fine of not less than $200 and not more than $10,000 A false or malicious statement concerning the financial condition of an insurer in order to injure intentionally any authorized insurer’s business or DEFAMATION reputation  This is illegal and is punishable by a fine of not less than $200 and not more than $10,000 32 stcusa.com | 800.782.1223  IL Accident and Health Only Other Unfair Practices In addition to those previously mentioned, other unfair practices include:  Falsifying insurer records  False advertising of an insurer’s financial condition  Unfairly discriminating in favor of certain individuals within a class  Unfairly discriminating against physically challenged or disabled persons unless the basis for this treatment is actuarially sound (fair discrimination)  Refusing, limiting, or charging more for life or health insurance solely because a person is blind or partially blind  Attempting to boycott, coerce, or intimidate which would result in a restraint of trade in the insurance business  Unfairly discriminating against any person because of her race, creed, color, religion, or national origin Unfair Claim Practices Insurers are deemed to be engaging in unfair or improper claim practices if they:  Fail to provide claim forms and direction on how to complete them in a timely fashion  Knowingly misrepresent relevant policy provisions and coverages to claimants  Fail to promptly acknowledge relevant communications regarding claims  Fail to adopt reasonable standards for prompt investigations of claims  Engage in activity which results in a disproportionate number of valid complaints to the Department of Insurance or disproportionate number of lawsuits filed by claimants  Refuse to pay claims without conducting a reasonable investigation  Fail to affirm or deny coverage within a reasonable period after receiving a proof of loss form  Compel claimants to take legal action to recover amounts by offering substantially less than amounts ultimately recovered  Fail to make a good faith attempt at a prompt and fair claim settlement when the liability of the insurer is clear  Fail to provide a reasonable and prompt explanation when legitimately denying a claim Additional Claim Practice Rules  All insurers are required to maintained detailed records of claims paid and denied  Documentation must include: ‒ Claim number ‒ Date of loss ‒ Line of coverage ‒ Date of payment or denial, or date on which the claim file was closed without payment  Claim records must be kept for all open and closed claim files during the current year and for the previous two years  Claim records may be in paper type or electronic as long as all of the information is accessible  The insurer must also offer payment within 30 days after it has affirmed its liability  No claim may be denied based on information obtained in a telephone conversation or personal interview unless documented in the claim file  Insurers are not permitted to require a claimant or insured to submit to a polygraph or similar examination as a condition for receiving a claim payment 33 stcusa.com | 800.782.1223  IL Accident and Health Only Life and Health Insurance Guaranty Association The purpose is to protect the public against the failure of an insurer to pay claims due to insolvency  If a member suffers financial trouble, the Association will fulfill that member’s contractual obligations to: ‒ Policyowners who are Illinois residents ‒ Beneficiaries of Illinois policyowners regardless of where the beneficiaries reside  Funds needed to make payments are derived from assessments on member insurers  Protection is provided to individual and group life insurance policies, health insurance policies, annuity contracts, and various other supplemental life and health insurance contracts  The Association assists the Director of Insurance in detecting and preventing insolvencies among member insurers Life and Health Insurance Guaranty Association The Association’s protection does NOT apply to:  Any portion of a covered risk that’s borne by the policyowner  Obligations under any contract which is assumed by the impaired or insolvent insurer under a contract of reinsurance  Obligations for benefits to be provided by any burial, fraternal benefit society, or mutual benefit society  Obligations for benefits to be provided by any vision, dental or pharmaceutical services plans  Any non-guaranteed portion of a variable life or variable annuity contract The Association is responsible for a limited amount of coverage:  $100,000 in net cash surrender value  $250,000 in present value annuity  $300,000 for a life insurance death benefit  $300,000 for all disability and long-term care insurance  $500,000 for medical, hospital, and surgical policies Polling Question #10 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) A producer who falsely informs a potential client that a competing insurer 1. is in danger of falling into bankruptcy is guilty of defamation. The minimum fine for a producer who’s found guilty of misrepresentation 2. is $200. Claim records for open and closed claims must be kept for the previous 3. three years. The Life and Health Insurance Guarantee Association will not provide 4. protection for a failed HMO. You must answer all polling questions within the allotted time in order to receive credit for attending the class. 34 stcusa.com | 800.782.1223  IL Accident and Health Only Illinois Statutes and Requirements Pertinent to Accident and Health Insurance Only Medicare Supplement Illinois law identifies minimum standards which include:  Policies may not limit or exclude benefits for losses incurred more than six months from the effective date of coverage due to losses involving a pre-existing condition ‒ A pre-existing condition cannot be defined more restrictively than a condition for which medical advice was given or treatment recommended by a physician within six months before the effective date of the coverage  Coverage cannot be terminated except for non-payment of premium  Policies must be guaranteed renewable for life and include a 30-day free-look period  The insurer cannot cancel or non-renew the policy because of the health status of the individual Medicare Supplement Additional minimum standards with which all insurers selling Medicare Supplement policies must comply include:  Stating all of the initial and subsequent terms of  Ensuring that the policy doesn’t duplicate any eligibility coverage provided by Medicare  Providing consumers with literature that defines all  Identifying any probationary or elimination periods key terminology in the policy and how the policy included (usually no greater than 365 days) treats recurrent conditions  Establishing a process for approving or  Establishing standards for Medicare Select policies disapproving proposed premium increases Medicare Supplement Insurers that issue Medicare Supplement policies cannot deny coverage to an applicant who’s under 65 years of age and:  Becomes eligible for Medicare by reason of disability  Has Medicare and an employer group health plan (either primary or secondary to Medicare) that terminates or ceases to provide all such supplemental health benefits  Is insured by a Medicare Advantage plan that includes an HMO, a PPO, or Medicare Select plan and the applicant moves out of the plan’s service area  Is insured by a Medicare supplement policy and the insurer goes out of business, withdraws from the market, or the insurance company or agents misrepresent the plan and the applicant without coverage Other requirements include:  All applicants must be provided with a Buyer’s Guide and outline of coverage  If a replacement occurs, the insured must be given a Notice Regarding Replacement Any insurer or producer engaging in any unfair practices regarding these policies may be fined not less than $250 and not more than $2,500 for each offense 35 stcusa.com | 800.782.1223  IL Accident and Health Only Long-Term Care (LTC) Insurance One that provides coverage on an expense incurred, indemnity, prepaid, or other basis that covers one or more necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services. TRADITIONAL  Must be guaranteed renewable LTC POLICY  Must include a 30-day free-look period  Insurer must provide an outline of coverage, Shopper’s/Buyer’s Guide, and Policy Summary This care is provided in a setting other than an acute care unit of a hospital Policies that are offered primarily to provide:  Basic Medicare Supplement coverage POLICIES NOT  Basic hospital expense or surgical expense coverage CONSIDERED LTC  Hospital confinement indemnity or major medical expense coverage  Disability income or related asset protection coverage  Accident only specified disease or specified accident coverage  Pre-existing conditions or disease  Mental or nervous disorders (but not for Alzheimer’s Disease of senile dementia)  Alcoholism and drug addiction POLICY LIMITS OR  Illness, treatment, or medical condition arising out of war, participation in a EXCLUSIONS felony, service in the armed forces or any auxiliary units, or suicide, attempted suicide, or intentionally self-inflicted injury  Aviation  Treatment provided in a government facility Group LTC policies include a 31-day conversion period LTC Partnership Program The purpose of the Partnership for Long-Term Care Act is to:  Promote public interest and the availability of LTC partnership insurance coverage  Protect applicants for LTC from unfair or deceptive sales or enrollment practices  Facilitate public understanding and comparison of LTC insurance coverages The LTC Partnership Policy:  Is the result of a public-private partnership between the state, insurers, and consumers  Is designed to protect the assets of people and avert their need to impoverish themselves before Medicaid takes over their nursing home needs ‒ Before becoming eligible for Medicaid, an individual must spend down to certain limits  Protects policyowners’ assets to the extent the policy pays for their LTC expenses  Partnership policies must be approved by the Insurance Department and meet state requirements  Not all insurers may offer partnership policies since they may not be suitable for all individuals Producers who sell any type of LTC insurance must complete no less than four hours of LTC continuing education each renewal period. These hours may be applied toward the 24-credit hour CE requirement as well. 36 stcusa.com | 800.782.1223  IL Accident and Health Only Polling Question #11 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) A producer who’s engaging in an unfair practice regarding a Medicare 1. Supplement policy is subject to a fine not greater than $2,500 for each offense. LTC coverage does NOT include that which occurs in an acute care unit 2. at a hospital. Producers who sell LTC insurance must complete no less than six hours 3. of continuing education each renewal period. You must answer all polling questions within the allotted time in order to receive credit for attending the class. Advertising Advertising includes all media, but does not include:  Material in an insurer’s internal company communications  Material not intended for use with the public  Personal communications not intended to induce a sale  General announcements about eligibility for new group coverage Advertising for accident and health policies must avoid any type of misrepresentation or defamation Any type of false information, embellishment, deception, exaggeration, or minimization is prohibited Advertisements must be kept on file for four years or until the insurer’s next regular examination, whichever comes later 37 stcusa.com | 800.782.1223  IL Accident and Health Only Minimum Standards for Individual Policies The purpose of this is to establish standards for the benefits provided by an accident and health policy issued in this state. Prohibited provisions include:  Accident policies cannot contain a probationary period  A sickness policy may include a probationary period that generally does NOT exceed 30 days except for certain specified causes that are not treated on an emergency basis  Pre-existing conditions  Mental or emotional disorders or addictions  Pregnancy (complications of pregnancy will be covered) Exclusions or  Rehabilitative care, routine physical examinations, custodial care, or treatment in a Limitations May government hospital Be Included in an  Losses resulting from war or military service, participation in a felony or a riot, Accident & Health intentionally self-inflicted injury, or aviation Policy  Elective cosmetic surgery (if caused by accident, it’s covered)  Expenses related to eye glasses or hearing aids  Territorial limitations and specified complications  Foot or dental care Benefit Standards Coverage on a spouse cannot be terminated because the insurer has a reason to terminate coverage on the insured, except for non-payment of premium  Upon an insured’s death, a covered spouse automatically becomes the insured Pregnancy benefits must be extended after coverage terminates if the pregnancy began while the policy was in force Coverage must also apply to live donors of the insured’s receiving transplants Convalescent care benefits may be conditioned to the insured’s entering the convalescent facility within less than 14 days after being discharged from the hospital A recurrent disability provision cannot specify that recurrent disabilities be separated by more than six months Accidental death and dismemberment benefits (AD&D) must be payable if the loss occurs within 90 days of the accident Disability income benefits must be payable if the loss occurs within 30 days of the accident 38 stcusa.com | 800.782.1223  IL Accident and Health Only Disclosure and Replacement Requirements  Illinois law states that accident only or specified disease policies must contain a prominent notice on the face or first page that coverage or benefits are limited. In addition: ‒ A 10-day free-look provision must be stated on the first page of the policy ‒ An outline of coverage must be delivered with the policy DISCLOSURE ‒ Any riders or endorsements added after policy issuance must be accepted REQUIREMENTS in writing by the insured ‒ State law specifies that phrases such as “usual and customary” must be specifically defined in the policy ‒ Any limitations for pre-existing conditions must be described in a separate paragraph labeled “Pre-Existing Conditions Limitations”  Accident and health applications must include a question that asks whether the policy is intended to replace any existing coverage. If it is, a notice must be provided to, and signed by, the applicant, which urges the applicant to consider whether: ‒ Existing health conditions may not be immediately or fully covered by the new policy REPLACEMENT ‒ She has a right, and it may be in her best interest, to seek the advice of her REQUIREMENTS existing insurer or producer about the replacement ‒ Providing false or incomplete answers to medical history questions on the application may cause claims to be denied  A notice regarding replacement must also be provided by a producer who attempts to replace any accident and health policy  The new policy provides a free-look period of 10 days Group Insurance Discontinuance and Replacement – When one group plan is discontinued or replaced with another group carrier, the liability of the prior carrier and succeeding carrier is determined Liability of the Prior Carrier  The prior group carrier remains liable only to the extent of its accrued liabilities and extensions of benefits  An extension of benefits must be provided for employees and dependents who are totally disabled on the date of discontinuance ‒ The extension of benefits cannot be terminated because the totally disabled person becomes covered under the succeeding carrier’s contract Liability of Succeeding Carrier  Each person who’s eligible for coverage in accordance with the succeeding carrier’s plan of benefits must be covered  The succeeding carrier will not individually underwrite members within a group when determining coverage  The minimum level of benefits must be applicable to those of the prior carrier’s plan, less any benefits payable by the prior plan  A conversion privilege to an individual plan must be available to those individuals whose benefits cease if the individuals have not become eligible under the succeeding carrier’s plan  A credit must apply for the same or overlapping benefit periods for deductible expenses of the prior carrier’s plan during the first 90 days preceding the effective date of the succeeding carrier’s plan 39 stcusa.com | 800.782.1223  IL Accident and Health Only Polling Question #12 Determine whether the following statements are TRUE or FALSE. (Submit your answers in the Chat box.) 1. Advertisements must be kept on file for a minimum period of three years. For a sickness policy, the maximum probationary period typically cannot 2. exceed 30 days. When one accident and health policy replaces another, there’s a 10-day 3. free look period. You must answer all polling questions within the allotted time in order to receive credit for attending the class. Illinois HIPAA Portability  Applies to almost all group health plans that have at least two participants (i.e., employees) on the first day of the plan year  A creditable coverage certificate must be issued to qualified employees by employers upon request (this is proof of insurance) and is used to reduce a pre-existing waiting period  If an individual was previously covered by another group plan, with no gaps of 63 days or more, he’s qualified to receive a certificate when seeking coverage under a new plan  If an employee has 12 months of creditable coverage from a previous plan, that may be used to reduce the pre-existing condition exclusion waiting period under the new plan ‒ The 12 months of creditable coverage is not required to come from a single employer Example: George worked for an employer and had coverage under the employer’s health plan from March 1, 2020, until April 5, 2021. He then changed jobs. Since he was covered by the previous plan for more than 12 \ months (March 1, 2020, is his enrollment date), no pre-existing condition exclusion can be applied. 40 stcusa.com | 800.782.1223  IL Accident and Health Only Illinois HIPAA State law provides for the guaranteeing of health insurance coverage for all group health and individual plans unless the insured has:  Engaged in fraud  Terminated coverage  Failed to pay the premium  Moved beyond the service area  Terminated association membership If an employer elects to discontinue offering health insurance coverage in the small group market, it must provide the Insurance Department and all covered participants with at least 180 days advance notice HMO Affiliation Period – The period which, under the terms of the coverage offered by the HMO, must expire before the health insurance becomes effective (like a probationary period)  An HMO that offers health insurance coverage in connection with a group health plan and doesn’t impose any pre-existing condition exclusion with respect to any particular coverage, may impose an affiliation period, but only if it’s without regard to any health status-related factors. The period cannot exceed: ‒ Two months for a regular enrollee ‒ Three months for a late enrollee  The HMO is not required to provide services or benefits during this period and no premium may be charged  The affiliation period must begin on the enrollment date and run concurrently with any other waiting periods Unfair Health Insurance Practices No individual or group policy of health insurance may be cancelled or non-renewed for any individual based on that person’s participation in a qualified clinical cancer trial that meets the following criteria:  The effectiveness of the treatment has not been determined relative to established therapies  The trial is under clinical investigation  The trial is approved by the FDA or approved and funded by the Center for Disease Control (CDC), the National Institute of Health (NIH), or other federal progr