COORDINATION OF BENEFITS
Coordination of Benefits (“COB") limits the benefits for services under a Major Medical policy because of duplication or possible duplication of benefits by another insurer. These provisions may vary by state, company and policy, but in most cases is standardized in providing coverage.
Coordination of Benefits applies when an Insured is covered under other plans, programs, or policies providing benefits for health care services and supplies which contain a COB provision or are required by law to contain a COB provision. Such other plans, programs, or policies may include, but are not limited to:
• Any group or individual insurance, group self-insurance, Health Maintenance Organization, or other plan, program, or policy; or
• Any group or individual plan, program, or policy underwritten or administered by YOUR INSURANCE COMPANY;
YOUR INSURANCE COMPANY's payment for covered services depends on whether YOUR INSURANCE COMPANY is the primary payor, as determined in accordance with the provisions set forth below. In the event YOUR INSURANCE COMPANY is the primary payor, YOUR INSURANCE COMPANY's payment for covered services, if any, will not be reduced due to the existence of other coverage and will be made without regard to the Insured's other plans, programs, or policies.
In those instances where COB applies and YOUR INSURANCE COMPANY is not the primary payor, services, if any, will be reduced to that when such payment is combined with Insured's other health care plans, programs, or policies, the total payment will be “reasonable expenses" actually incurred by the Insured. In the event an Insured is treated by a PPO or a Participating Provider, "total reasonable expenses" shall equal the pay to the Provider pursuant to the applicable agreement YOUR INSURANCE COMPANY has with such YOUR INSURANCE COMPANY's shall not exceed 100% of the "total received” covered services from the amount YOUR INSURANCE COMPANY is obligated to provide.
The following rules shall be used by YOUR INSURANCE COMPANY to determine if YOUR INSURANCE COMPANY is the primary payor:
(a) The benefits of a policy, plan, or program which covers the person as an employee, member, or Insured, other than as a dependent, are determined before those of the policy, plan, or program which covers the person as a dependent.
However, if the person is also a Medicare beneficiary, and if the rule established under the Social Security Act of 1965, as amended, makes Medicare secondary to the plan covering the person as a dependent of an active employee, the order of benefit determination is:
1. First, benefits of a plan covering persons as an employee, member, or subscriber.
2. Second, benefits of a plan of an active worker covering persons as a dependent.
3. Third, Medicare benefits.
(b) Except as stated in paragraph (c), when two or more policies, plans, or programs cover the same child as a dependent of different parents:
1. The benefits of the policy, plan, or program of the parent whose birthday, excluding the year of birth, falls earlier in a year are determined before those of the policy, plan, or program of the parent whose birthday, excluding year of birth, falls later in that year; but
2. If both parents have the same birthday, the benefits of the policy, plan, or program which covered the parent for a longer period of time are determined before those of the policy, plan, or program which covered the parent for a shorter period of time.
However, if a policy, plan, or program subject to the rule based on the birthday of the parents, as stated above, coordinates with an out-of-state policy, plan, or program which contains provisions under which the benefits of a policy, plan, or program covers a person as a dependent of a male are determined before those of a policy, plan, or program which covers the person as a dependent of a female and if, as a result, the policies, plans, or programs do not agree on the order of benefits, the provisions of the other policy, plan, or program shall determine the order of benefits.
(Note: In some jurisdictions, the dependents of the male is primary)
(c) If two or more policies, plans, or programs cover a dependent child of divorced or separated parents, benefits for the child are determined in this order:
1. First, the policy, plan, or program of the parent with custody of the child;
2. Second, the policy, plan, or program of the spouse of the parent with custody of the
child; and
3. Third, the policy, plan, or program of the parent not having custody of the child.
However, if the specific terms of a court decree state that one of the parents is responsible for the health care expenses of the child and if the entity obliged to pay or provide the benefits of the policy, plan, or program of that parent has actual knowledge of those terms, the benefits of that policy, plan, or program are determined first. This does not apply with respect to any claim determination period or plan, policy, or program year during which any benefits are actually paid or provided before that entity has the actual knowledge.
(d) The benefits of a policy, plan, or program which covers a person as an employee who is neither laid off nor retired, or as that employee's dependent, are determined before those of a policy, plan, or program which covers that person as a laid off or retired employee or as that employee's dependent. If the other policy, plan, or program is not subject to this rule, and it, as a result, the policies, plans, or programs do not agree on the order of benefits, this paragraph shall not apply.
(e) If none of the rules in paragraph (a), paragraph (b), paragraph (c), or paragraph (d) determine the order of benefits, the benefits of the policy, plan, or program which covered an employee, member, or Insured for a longer period of time are determined before those of the policy, plan, or program which covered that person for the shorter period of time. (In effect, if all fails, the one who has a policy that has been in force the longest will be designated as primary).
If an individual is covered under a COBRA continuation plan as a result of the purchase of coverage as provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended, and also under another group plan, the following order of benefits applies:
1 . First, the plan covering the person as an employee, or as the
employee's dependent.
2. Second, the coverage purchased under the plan covering the person as a former employee, or as the former employee's dependent provided according to the provisions of COBRA.
Coordination of Benefits shall not be permitted against an indemnity-type policy, an excess insurance policy with coverage limited to specified illnesses, (such as Cancer, Accident only, etc.), or accidents, or a Medicare supplement policy.
C.A.
Dwayne was self-employed, and purchased an individual major medical insurance policy which he kept for several years. He has worked for the Tensteel Corporation for the past two years, and after 90 days, became eligible for their employee benefit package, which includes a Major Medical plan. Since the employer pays for the majority of the premiums, Dwayne decided to keep it also so that his deductible and coinsurance could be covered under his individual plan.
When Dwayne became ill, he filed claims under both insurers. Since the benefits were nearly the same with both policies, according to the provisions of his individual plan, the plan that he has had the longest period of time will be determined to be the primary insurer and the benefits will be paid from the individual policy first. Thereafter, the employee benefit plan insurer will pay for its remaining part of any medical bill.
Another example of Coordination of Benefits may arise where a child may be covered under the mothers employee health insurance plan, and also under the fathers plan with a different employer. In those cases, coordination of benefits is frequently determined by either (1) the parent whose birthday falls earlier in the year, e.g. the mothers birthday in April 2, and the Fathers birthday is June 30. In this case, the mothers insurance would be primary (2) in some jurisdictions, the fathers policy would always be primary.
SUBROGATION
This “legal-sounding” word simply applies to situations where one insurer pays for medical services even though further investigation or circumstances reveal that another insurer or source of medical service, should have been primary. The insurer that has paid has the legal right to look to the primary insurer for payment.
In the event any payment for benefits provided to an Insured under this contract is made to or on behalf of an Insured, on account of a Condition resulting from the negligence or fault of or from a third party, YOUR INSURANCE COMPANY, to the extent of such payment, shall be subrogated to all causes of action and all rights of recovery such Insured has against any person or organization. Such subrogation rights shall extend and apply to any settlement of a claim, irrespective of whether litigation has been initiated. The Insured shall execute and deliver such instruments and papers pertaining to such settlement of claims, settlement negotiations, or litigation as may be requested by YOUR INSURANCE COMPANY, and shall do whatever is necessary to enable us to exercise our rights of subrogation and shall do nothing to prejudice such rights. Further, the Insured or the lnsured's legal representative shall promptly notify us of any settlement negotiations prior to entering into any settlement agreement, shall disclose to us any amount recovered from any person or organization that may be liable for bodily injuries and shall not make any settlements without our written consent. No waiver, release of liability, or other documents executed by you without such notice to us and cooperation by you, if requested, shall be binding upon YOUR INSURANCE COMPANY.
Any such right of subrogation or reimbursement provided to YOUR INSURANCE COMPANY under this Contract shall not apply or shall be limited to the extent that the State Statutes or the courts of State eliminate or restrict such rights.
C.A.
Sam had been responsible for an automobile accident and the driver of the other car, Brett, suffered injuries and spent several days in the hospital. If Brett's health insurance carrier covered the medical bills, then Brett's health insurance company could look to Sam's automobile insurer for reimbursement of the bills that were Sam's responsibility. This is “subrogation.”
PRE-EXISTING CONDITIONS LIMITATIONS
There are many versions of pre-existing conditions, and it is tightly regulated by various states. For group insurance, the Federal HIPA Act of 1996 creates a severe limitation or abolition of any pre-existing condition. In a few jurisdictions, with certain policies, if an individual has stated a medical condition on the application, and the policy is issued on a basis obviously ignoring such condition, the insurer cannot later consider the condition as “pre-existing.” It is particularly important to note that if wording in the policy is similar to that stated in the below-illustrated provision, prescription drugs are also included in the pre-existing condition limitations.
This Contract does not provide any benefits for the treatment of a Pre-Existing Condition, for any Insured, until the Insured has been continuously covered under this Contract for a 24-month period. Without limitation, this provision applies to any Prescription Drug, which was prescribed for the treatment of a Pre-Existing Condition.
C.A.
Priscilla’s son, Danny, has asthma which is kept under control by medication. This was disclosed to the insurance agent and appeared on the application. The insurer issued the policy on a standard basis with no riders or other notations. Sixty days after the effective date of the policy, Danny needed his prescription refilled. His refills would not be covered if the policy had a (typical) 2-year pre-existing clause, until the policy has been in force for two years.
Note: All newly added family members will be subject to the Pre-Existing Condition Limitation waiting period, which will begin on the Effective Date of their coverage. EXCEPTION: A Newborn child is not subject to the Pre-Existing Condition waiting period if the Contract Holder had dependent coverage in effect prior to the birth of the Newborn.
C.A.
The Pre-Existing Condition provision of the policy always raises interesting questions, such as if an applicant for health insurance has not been to see a doctor for several years, but after receiving a policy, he is treated for a heart condition because he thought the little chest pains he had been having was caused by intestinal gas, or in some cases, by muscle strain as his job was rather strenuous. Policies generally read that if a person had symptoms which would cause a “reasonable” person to seek diagnosis or treatment....” it would be considered a pre-existing condition. In this situation, and many other similar situations, the claims department and the medical department of the insurance company would have to determine the validity of the defense of not knowing of the condition.
LIMITATION OF COVERAGE FOR COVERED SERVICES AND SUPPLIES
There are certain limitations to coverages because of cost – effectiveness, medically necessary determinations, and which relates to principally prosthetic and orthotic devises and durable medical equipment.
QUALIFIED EXCLUSION FOR AIDS AND ARC
Because of the possible liabilities involved in AIDS and ARC patients, and because of the legal and political problems in restricting medical care for these conditions, they must be addressed separately. Wording may vary considerably depending upon the company, policy and jurisdiction.
If, in the opinion of a Physician, an Insured either first exhibited objective manifestations of Acquired Immune Deficiency Syndrome (AIDS) or AIDS Related Syndrome (ARC) which are not attributable to another cause or tested HIV positive, or was diagnosed as having AIDS or ARC, at any time prior to that lnsured's first Anniversary Date, there is no coverage under this Contract for any expense related, directly or indirectly, to AIDS or ARC. This exclusion is in addition to any other rights we have, including but not limited to, enforcement of the Pre-Existing Condition limitation provision, and rescission or cancellation of this Contract for fraud or Material Misrepresentation.
This exclusion shall not apply:
• if we fail to assert this provision within the first two years of that lnsured's coverage under this Contract; or
• if we fail to notify the Insured, in writing, of the applicability of this provision within ninety (90) days of our determination that the Insured is subject to this Provision.
C.A.
Watson was a young single and “swinging” bachelor. He was self-employed and did not have health insurance. He heard a rumor that one of his casual girl friends had tested HIV positive, so he immediately applied for a Major Medical policy in case he had contracted AIDS. He had had a complete physical about 6 months prior, and the insurer accepted the results for their underwriting purposes and the policy was issued on a standard basis with no riders or exclusions.
He did not get any tests to see if he was HIV positive, as he was afraid that if he was, it would become known and his single swinging life would be over. However, after the policy had been in effect for 8 months, he became ill and tests showed that indeed he had AIDS.
His policy had a provision that is common in the industry, that states that if he exhibited any manifestations of AIDS within one year after the effective date of the policy, there would be no coverage for any AIDS or ARC related illnesses, whether the expenses were related directly or
(Continued from previous page) indirectly to AIDS or ARC. Further, the insurance company started an investigation into whether he knew that he had AIDS prior to taking out the policy, however this would not be possible to prove, so this was dropped. But since Watson's purpose in taking out the policy was to cover any AIDS expenses, he dropped the policy after they refused to pay for the medical costs already borne.
GENERAL EXCLUSIONS
All policies have exclusions and are listed in separate sections. Logically, and because of tight regulations, these exclusions must be carefully constructed, worded and presented. The following exclusions are worded well for those who are not technically educated in insurance, and most wording now follows this pattern.
This Contract does not provide benefits for:
• services or supplies which are, in our opinion, not Medically Necessary; services and supplies not specifically covered by this Contract; services and supplies which are, in our opinion, Experimental or Investigational in nature;
• services or supplies provided to you as either an Inpatient or Outpatient in a Hospital or free standing facility, primarily to provide Rehabilitative Services;
• training and educational programs primarily for pain management or vocational rehabilitation; Speech Therapy -- except as provided under Home Health Care Services;
• services rendered or supplies furnished, either prior to the Effective Date, or subsequent to the termination date;
• Occupational Therapy -- except as provided under Home Health Care; admissions to a Hospital primarily for Physical Therapy; services for which there is no charge;
• personal comfort articles such as beauty and barber services, radio, television; services by a Physician or other professional related to you by blood or marriage;
• services and supplies to diagnose or treat any Condition arising out of or in the course of employment or self-employment. Benefits will not be provided under this Contract to an individual who elects exemption from the Workers Compensation coverage or who waives entitlement to Workers Compensation coverage for which he may be eligible;
Note: This particular section may or may not appear in a policy, as some policies have “24-hour” coverage, others are tightly regulated because of Workers Compensation.
C.A.
Ben is a partner with his brother in a cabinet making and installation company. His sister-in-law works for a large law firm that has excellent benefits and her husband is covered under her policy. Therefore, Ben purchases a Major Medical policy for he and his family.
According to the laws of the state where Ben lives and works, it is permissible for a partner in a 2-man operation to claim exemption from Workers Compensation laws until they have at least two other employees. They do not purchase Workers Compensation for their firm.
Ben is injured on the job when overhead cabinet fell on him, breaking an arm and injuring his back. He was hospitalized and a claim was made by the hospital to his insurer. Ben's policy had a clause that is used frequently in individual Major Medical policies that states that if a person could get Workers Compensation insurance, and elected not to do so, who requires medical services that would otherwise be covered by Workers Compensation.
In some jurisdictions, policies are available that offer “24-hour” coverage and they would provide benefits for on-the-job injuries. In addition, some insurers allow a rider to be added to the policy at an additional cost, that covers 24-hour injuries and illnesses, whether job-related or not.
• treatment and/or drugs received in a Veterans Hospital or government facility due to a service connected disability;
C.A.
Bill is a member of the National Guard. While on duty, he contracted Lymes Disease and was admitted to the Army Hospital at Fort Bragg, the closest hospital to where he was on maneuvers. When he was discharged from the hospital, he returned home but had a relapse and entered his regular hospital at home. Bill thought that maybe the insurer would pay for his time in the Army Hospital, in addition to his regular hospital. However, the policy does not cover any treatment in a government hospital and they paid for only treatment in his local hospital.
• a condition resulting from war or an act of war, whether declared or not;
• a Condition resulting from your participation in a felony, riot, or rebellion;
• a Condition resulting from your engaging in an illegal occupation;
• a Condition resulting from your service in the armed forces;
• intentionally self-inflicted injuries, suicide or attempted suicide, whether sane or insane;
• a Condition resulting from you being drunk or under the influence of any narcotic unless taken on the advice of a Physician;
• services associated with autopsy or postmortem examination, including the autopsy;
• blood and blood plasma;
• Cosmetic Surgery -- defined as surgery primarily to improve the appearance of the individual but not to restore bodily function or to correct deformity. However, we do pay for the surgery needed to restore or correct a part of the body that has been altered by injury, disease, or surgery that occurred while you were covered under this Contract;
• bypass procedures performed for morbid obesity -- except if Medically Necessary;
• nicotine withdrawal programs, facilities and supplies;
• custodial care such as that provided at health resorts, rest homes, nursing homes, and health spas. Custodial Care is care comprised of services and supplies, including room and board and other institutional or home services, which are provided to an individual, whether disabled or not, primarily to assist him or her in the activities of daily living;
C.A.
Sarah had a stroke and was hospitalized. It was determined that she would eventually recover the facilities that were lost due to the stroke. Since she could not care for herself and was bed-bound she went to a skilled nursing facility for 2 weeks, and then upon the advice of the doctor and the concurrence of the insurer, she went into a rehabilitation hospital. Upon release from the rehabilitation hospital, she felt that she needed help with preparing food, cleaning, dressing on occasion, and transportation. She was not home-bound, and she could move around slowly, but she felt that she would recover better in a special facility since she had no family or relatives to help her, so she went to the Sunnyview Nursing Home where she would receive assistance as needed.
While she was in the hospital and in rehabilitation, her Major Medical policy covered the medical expenses. However, the policy specifically excluded custodial care and they would not pay for her stay at Sunnyview Nursing Home.
• Diagnostic Admissions -- meaning admissions that are not Medically Necessary because the diagnostic service could have been provided in a Physician's office, the Outpatient department of a Hospital, or some other setting without adversely affecting the Insured's condition or the quality of medical care.
• If a Hospital admission is primarily for observation, evaluation or diagnostic studies; we will only cover the charges for laboratory, x-ray and supplies. Room and board and Inpatient Physician care will be excluded.
• biofeedback and other forms of self-care or self-help training and any related diagnostic testing;
• private duty nursing by an RN or LPN whether in an Inpatient Hospital setting or Skilled Nursing Facility;
• human Organ Transplant services for which the cost is covered/funded by governmental, foundation or charitable grants. This includes services performed on potential or actual living donors, recipients and cadavers;
• any organs or combination of organs other than those specifically listed as covered; any organ or tissue which is sold rather than donated to the Insured;
• any surgical procedure, including, but not limited to, Radial Keratotomy, performed primarily to correct or improve myopia or other refractive disorders not a consequence of trauma or prior ophthalmic surgery;
• partial hospitalization for Mental and Nervous Disorders (partial hospitalization is a concept of psychiatric treatment where the patient receives institutional care during the daytime or the night-time and returns home during the portion of the 24 hour period when treatment is not scheduled. A Hospital shall not be considered a "home" for the purposes of this definition);
• all services and supplies in connection with hospice care, treatment, or programs;
• eye glasses, contact lens, hearing aids, or examinations for their Prescription or fitting;
• eye exercise, visual training or orthoptics;
• dental care -- unless needed to repair an accidental injury as determined by YOUR INSURANCE COMPANY to natural (not artificial) teeth and jaws, mouth or face which was initiated within 90 days of the accidental injury or unless needed for medical conditions caused by temporomandibular joint dysfunction (TMJ);
• dental appliances;
• foot care not related to the diagnosis or treatment of a Condition; therapeutic devices or appliances, regardless of the intended use (i.e., arch supports, orthopedic shoes, or support hose);
• all obstetrical benefits in connection with or as the result of a normal delivery, except as specified in the section "Complications of Pregnancy"; (unless maternity benefits are covered, and then these restrictions would not apply)
• birth control pills when used as contraception;
• contraceptive devices or appliances;
• all services and supplies in connection with infertility, including but not limited to artificial insemination or in-vitro fertilization;
• elective abortions;
• reversal procedures of previous sterilization to allow fertilization; services or supplies related to sexual reassignment (sex transformations) or modifications; immunizations (injections to prevent contagious disease) - except as those covered for Well Child Care;
• non-Prescription drugs;
• vitamins, mineral supplements, fluoride drugs or appetite suppressants;
• exercise programs of any kind;
• Transplant -- Any services or supplies in connection with any transplant, other than those transplants listed herein are excluded. This exclusion applies to:
a. Any service or supply in connection with the implant of an artificial organ, including the
implant of the artificial organ;
b. Any organ, tissue, marrow or stem cells which is sold rather than donated to the Insured;
c. Any Bone Marrow Transplant, as defined herein, which is not specifically listed in State
Administrative Code, or covered by Medicare pursuant to a national coverage decision
made by the Health Care Financing Administration as evidenced in the most recently
published Medicare Coverage Issues Manual;
d. Any service or supply in connection with identification of a donor from a local, state or
national listing;
e. Transportation costs for the Insured to and from the approved facility; and
f. Direct, non-medical costs for immediate family for (a) transportation to and from the
approved facility; and (b) temporary lodging.
• travel expenses -- even if prescribed by your Physician; physical examinations (annual or routine), not related to a diagnosis or treatment of a Condition; except for Well Child Care;
• services associated with home health aid (sitter), home maker or domestic maid; and
• services or supplies rendered by any mental health professional in connection with or as a result of any Mental and Nervous Disorders, including but not limited to a psychiatric social worker, mental health technician, psychiatric nurse, or Occupational Therapist.
CONDITIONS EXCLUDED BY RIDER
A Rider is a statement attached to a policy that eliminates treatment for certain stated conditions or diseases. The provision that the Rider may be reviewed after a period of time differs by policy, company and jurisdiction.
You will not be eligible to receive benefits for treatment of any Condition that we excluded from coverage by a Rider when you accepted coverage under this Contract.
After two (2) years following the Effective Date of your coverage, you may request that we remove the Rider(s) limiting your coverage. If we approve your request, we will advise you when the Rider(s) will no longer be in effect.
C.A.
Mike slipped on ice on his driveway and injured his back. It was diagnosed as muscle sprain, but a later x-ray indicated that there may be damage to a disc also, but not serious enough to require surgery. Other than that, Mike was in excellent health. He applied for a Major Medical policy and after the company had completed the underwriting, they offered a standard policy to Mike that excluded any medical expense arising from his back strain, and excluding any treatment that could be related to that injury. This company allowed a review after the policy had been in force for two years. Mike accepted the policy, as his agent had informed him that most insurance companies wont accept anyone with any kind of a back problem.
Two years after the effective date of the policy Mike requested that the rider be removed. He presented medical evidence that showed that he had not had any back problems or medical expenses related to his back condition. He also produced a recent x-ray which showed that there was no damage to the disc as feared previously. The rider was removed from the policy.
TERMINATION AND REINSTATEMENT
Obviously provisions must be made for termination of the policy and for reinstatement. These provisions may vary somewhat, but are rather standard among Major Medical policies.
Your Contract will be terminated if:
• you fail to pay your Premium within the stated thirty-one (31) day Grace Period; or we cancel all Contracts with this same form number; or
• on the first day of the month in which you or your spouse attains sixty-five (65) years of age. Your spouse, if under sixty-five (65) years of age, may request separate coverage;
C.A.
Ron, age 63 and Brenda, age 60, are insured under a Major Medical policy. Ron reaches age 65 and his policy automatically terminates for his coverage. Some companies allow Brenda to continue coverage by simply changing the insured, and by contract there is no evidence of insurability required.
On a rare occasion, a company may require evidence of insurability on the remaining spouse. This is important if either spouse develops a medical condition that may make them uninsurable, such as high blood pressure or diabetes. There have been so many complaints about this that few, if any companies, still have this restriction.
Or,
• in applying for any benefits under this Contract, there is fraud or Material Misrepresentation provided to us by you; or
• you are Eligible under any other state or federal law for benefits similar to those provided by this Contract.
Also, coverage will terminate:
• for your Covered Dependents if your Contract is terminated for any reason; or
• for your Eligible dependents when they obtain the limiting age, as specified in this Contract; or
• for your spouse, in the case of divorce or legal separation.
Cancellation provisions vary by the type of policy, whether non-cancelable, guaranteed renewable, renewable at the option of the company, or non-cancelable & guaranteed renewable. In most cases, the policy may be cancelled for fraud or misstatement, as shown above, or they may be cancelled if all policies of the same type within a state are cancelled simultaneously, and appropriate notice is given. Premiums may be modified if necessary, but this would require approval of the Department of Insurance in most cases. Premium adjustments and cancellation may vary also with those policies issued by out-of-state trusts (ERISA trusts).
YOUR INSURANCE COMPANY may cancel, or not renew the Contract, or modify rates at any time without the consent of any Insured or any other person upon giving at least forty-five (45) days advance written notice to the Contract Holder. If we fail to provide the Contract Holder with such notice, the coverage shall remain in effect at the existing rates until forty-five (45) days after the notice has been given. However, notwithstanding the above, if the reason for termination is non-payment of Premium, the Contract may be canceled following ten (10) days written notice. If we do cancel your Contract in this manner, you will still be entitled to benefits for any claim for covered services which were rendered before the cancellation date. We will not cancel your Contract in any event solely because of the amount of claims paid under your individual Contract.
C.A.
Manny purchased a Major Medical policy containing the usual cancellation clause. Manny paid his premiums when due and was happy with the policy until the insurance company notified all of its Major Medical policyholders, that it was going to cancel all of its Major Medical Policies in the state because of claims experience. The notice also stated that all policies would be canceled at the end of 45 days after receiving the notice.
Manny was very upset as he had been diagnosed as a diabetic and could not get any other insurance. He had not made any claims except for the recent checkup, which led to the diabetes diagnosis. However, according to the provisions of the policy, the insurer could terminate coverage by giving 45 days notice.
In accordance with State Statutes, if the renewal Premium is not paid before the Grace Period ends, this Contract will lapse. Later acceptance of the Premium by YOUR INSURANCE COMPANY, or by an Agent authorized to accept payment, without requiring an application for reinstatement, will reinstate this Contract.
When YOUR INSURANCE COMPANY or its Agent requires an application, you will be given a Conditional Receipt for the Premium. If the application is approved and Premium is paid, the Contract will be reinstated as of the approval date. Lacking such approval, the Contract will be reinstated on the 45th day after the date of the Conditional Receipt unless YOUR INSURANCE COMPANY has previously written and advised you of its disapproval. The reinstated Contract will cover only loss that results from an accidental injury sustained after the date of reinstatement or a Condition that starts more than 10 days after such date
(Note the difference – if losses are caused by accident, there is no waiting period,
if caused by sickness, there is a 10 day waiting period).
In all other respects, your rights and our rights remain the same, subject to any provisions noted on or attached to the reinstated Contract. Any Premiums YOUR INSURANCE COMPANY accepts for reinstatement will be applied to a period for which Premiums have not been paid. No Premiums will be applied to any period more than 60 days before the reinstatement date.
EXTENSION OF BENEFITS
Extending payment of claims vary by policy, company and state regulations. This is usually tightly regulated by the Department of Insurance.
The termination of this Contract by us shall be without prejudice to any continuous loss which commenced while this Contract was in force, but the extension of benefits beyond the period this Contract was in force will be predicated upon the continuous Total Disability of the Insured person, and the extension of benefits is limited to a maximum period of 90 days, beginning on the termination date. This extension of benefits is only for the Condition which caused the disability for that Insured. YOUR INSURANCE COMPANY will determine Total Disability.
Written documentation from your Physician regarding the extent of your disability will be required.
C.A.
According to the definition of Total Disability under a Major Medical policy, if Bruce, who is a student at UCLA and covered under his parents family policy, suffers a spinal injury playing pick-up football with friends, and cannot continue his education or his normal activities, would nevertheless be Totally Disabled. He would not be entitled to coverage under a Disability Income policy, as he had no income.
C.A.
Pam was covered under her father’s Major Medical policy while attending college. Upon graduation she was no longer eligible for coverage under his policy, so she applied for her own coverage. The policy contained a popular provision that would offer her a continuation contract without asking for evidence of insurability. However the premiums were rather substantial and she felt that she could not afford them. She was in good health, so she applied for a new policy that would be underwritten, but which would be much lower in premium.
Note: In some states, legislation has been introduced which would allow a person who becomes ineligible for continuation of coverage, to be issued a similar policy at underwritten rates.
CONVERSION
Conversion privileges vary by company, and by regulation. The following closely follows the NAIC Model.
If coverage ceases because of termination of eligibility prior to becoming eligible for Medicare or Medicaid, you shall be entitled to a Contract without evidence of insurability, provided that application is made and Premiums are paid within thirty-one (31) days after termination. There will be continuous coverage during the thirty-one (31) day period, if such coverage is selected and the Premiums are paid.
GENERAL PROVISIONS
The General Provisions as shown, are basically for a PPO organization, however much of the administration procedure is typical of any Major Medical policy. The big difference is, as stated before, is that a PPO Provider will handle all claims in most cases, and the insured is not liable for any extra costs covered under the plan, other than the usual deductible and coinsurance provisions.
HOW TO FILE A CLAIM
In all cases, the Preferred Patient Provider will file the necessary claim for you. You will only be responsible for any Deductible, Coinsurance amount and non-covered charges when you use a Preferred Patient Care Provider. Our payment for eligible services will go directly to the Provider. They will bill you directly for any balance.
In most cases, the Non-Preferred Patient Hospital will file claims on your behalf for both Inpatient and Outpatient services. Simply present your identification card at the time of service. Our payment for eligible services will be made directly to the Hospital. The Hospital will bill you directly for any balance.
If you elect to use a Non-Preferred Patient physician, present your identification card at the time of service and ask if the Physician's office will file a claim for you. If the Physician's office will not file the claim for you, ask for an itemized statement which should include the following information: the date, the description of service, the amount charged for each service, the patient's name. Attach the itemized statement to a completed claim form and send both to our home office.
WRITTEN NOTICE OF CLAIM
Written notice of a claim for benefits must be given to us within twenty (20) days after the service has been rendered to you, or as soon after that as is reasonably possible. Notice to us at our Home Office, or to any of our authorized agents, along with enough information to enable us to identify you (the name and Contract number of the Insured), is sufficient. Presentation to a participating Hospital or participating Physician of the identification card we have issued to you is sufficient notice of a claim.
CLAIM FORMS
In many instances, your health care Provider will file your claim for you. When we receive the notice of claim, we will send you the claim forms for filing proof of loss. If these forms are not given to you within 15 days, you must meet the proof of loss requirement by giving us a written statement of the nature and extent of the loss within the time stated in the "Proof of Claim" Section.
PROOF OF CLAIM
State laws and regulations closely regulate the time elements between the time a claim is filed and the time it is paid and reviewed if necessary. The time limits contained in this provision example applies to one particular state, but is rather typical of most states. These time limits should be carefully noted when marketing these plans and the insured should be aware of these provisions.
The complete claim for benefits (a proof of claim) must be returned to us at our Home Office within ninety (90) days of the date services were rendered.
An admission and billing notice from a Hospital and/or health claim form from a Physician for services rendered to an Insured will be sufficient to serve as proof of claim.
If you fail to file a proof of claim within 90 days after the date services were rendered, you will not be eligible for benefits, unless it was not reasonably possible to give us proof of claim within that time period. You must still furnish YOUR INSURANCE COMPANY, with proof of your claim as soon as reasonably possible, and under no circumstances later than fifteen (15) months after the service was rendered to you, unless you are unable to do so by reason of legal incompetence.
TIME OF PAYMENT OF CLAIMS
(Again, this is regulated by the various states. Check your policies)
YOUR INSURANCE COMPANY shall process all claims for which we have all of the necessary information, as determined by YOUR INSURANCE COMPANY, within forty-five (45) days of receipt of a complete claim for benefits (proof of claim). In the event YOUR INSURANCE COMPANY contests or denies the claim or a portion of the claim, or needs additional information, YOUR INSURANCE COMPANY shall so notify you, or your assignee, if an assignment of benefits is required to be honored by YOUR INSURANCE COMPANY under this Contract, within forty-five (45) days of receipt of the initial proof of claim. The notice will identify the contested or denied portion of the claim and the reason(s) for contesting or denying the claim or portion of the claim. YOUR INSURANCE COMPANY will then complete processing of the claim within sixty (60) days of receipt of the necessary additional information. YOUR INSURANCE COMPANY will either pay or deny the claim or portion of the claim no later than one hundred twenty (120) days after receiving the claim. Consequently, it is the Insured's responsibility to ensure that YOUR INSURANCE COMPANY receives all necessary information required to properly adjudicate claims submitted for processing. If YOUR INSURANCE COMPANY does not receive all necessary information, a claim or portion of a claim may be denied. Any claims payment not made by YOUR INSURANCE COMPANY within the applicable time frame is subject to the payment of simple interest at the rate of ten percent (10%) per annum. Claims payments are deemed to have been made as of the date placed in the United States Mail by YOUR INSURANCE COMPANY.
C.A.
Ron and Brenda went on a trip and while out of state, Ron suffered a mild heart attack and was admitted to the local hospital in a small town in Arizona. They are insured under a PPO Major Medical plan, and there are no preferred Providers outside of their home state.
When Ron was seen by a doctor at the doctor’s office, he gave his Major Medical card to the office manager but was informed that they do not participate with their insurer, and they must file the claim.
Ron asked for an itemized statement which was later furnished to them. They also asked for their credit card so that it could be billed for the doctor’s charges.
When we was admitted to the hospital, the hospital agreed to accept their insurance card, but again asked for their credit card so that it could be billed for any services not covered by the insurance company.
After a brief stay at the hotel, Ron and Brenda continued their vacation, but at a much slower pace. They returned to their home 2 weeks after the heart attack, and called their agent. The agent promptly notified the insurance company so that they had received notice within the required 20 days. The agent did not have the necessary claims forms, so he requested that the forms be sent directly to Ron. Upon receipt of the forms, Ron had to contact the doctor in Arizona for information required by the insurer. The doctor was on vacation and his office was closed. Therefore, Ron was not able to file the claims forms within the time required in the policy. They notified the agent, who notified the claims department, who then asked for a written statement of exactly what the nature and extent of the illness was.
The policy also stated that the Proof of Claim must be submitted within 90 days after the date the services were rendered. Even though the doctor in Arizona was in no hurry to send the necessary papers, by staying in continual contact with the claims department of the insurance company, the insurance company extended the time and the claim was eventually paid. It had already been paid when the credit card bill was received, so the amount was payable to the insured.
PAYMENT OF CLAIMS
Any benefit(s) unpaid at the death of the Insured will be paid at our option, either to the Insured's beneficiary or estate.
PHYSICAL EXAMINATION AND AUTOPSY
We reserve the right, at our expense, to have you submit to a physical examination, as often as is reasonably necessary while a claim is pending. We also reserve the right, if the law permits, to make an autopsy in case of death.
LEGAL ACTION
No action may be brought to recover on this Contract within 60 days after written statute of proof of loss has been given as required under this Contract. No such action may be brought after the expiration of the applicable limitations from the time written proof of loss is required to be given. All provisions in this Contract will be interpreted according to the laws of the State. Any legal dispute involving this Contract shall be brought to court in the State of domicile of the insurance company.
SURVIVOR RIGHTS
In the event the Contract Holder dies, the covered family members may continue the Contract by timely payment of Premiums, or any of the Contract Holder's surviving Covered Dependent(s) can purchase a new Contract. The Eligible Dependent(s) should contact us with thirty-one (31) days after the death of the Contract Holder.
TIME LIMIT ON CERTAIN DEFENSES
We will not void your Contract or deny a claim for benefits for a Condition which occurs after two (2) years from the Effective Date of your Contract, solely on account of misstatements on your application for coverage. If those misstatements were fraudulent, however, we may raise that defense at any time. In addition, after two (2) years from the Effective Date of this contract, we will not deny a claim for benefits for any covered service rendered to you for a Condition that existed before you became covered under this Contract. This does not apply, however, to any Condition that we specifically identified and excluded from coverage at the time your coverage took effect.
C.A.
Martin applied for a Major Medical policy that contained a 2-year Pre-existing clause. On the application Martin had forgotten to mention that he had been to a doctor 18 months previously for excess stomach gas pains, but he believed at that time that it was not important and it “slipped his mind.”
3 years after the effective date of the policy, he suffered another similar attack, and his doctor told him that he needed surgery for a perforated ulcer, and then berated him because he had not treated his ulcer over the past 4 years. The original doctor was the present doctor’s former partner, and noted in Martin’s file was a notation to the effect that the doctor had deliberately not told Martin that he had an ulcer under the belief that Martin would worry about it and would make it worse. He had told Martin to see a doctor if he had any more intestinal distress.
The insurer questioned the medical records in anticipation of raising a defense of fraudulent misstatements, even though after 2 years the policy was incontestable. However, their legal department felt that since Martin had not been told directly that he had an ulcer, it would be too difficult to try to prove fraudulent misstatements.
NOTICE
Any notice which is required or permitted by this Contract shall be deemed given if hand-delivered or if mailed by United States Mail, postage prepaid, and addressed as indicated in our files. Such notice shall be deemed given and effective as of the date delivered or so deposited in the mail to the Contract Holder.
FRAUDULENT SUBMISSION OF CLAIMS
If, in the opinion of YOUR INSURANCE COMPANY, any Insured commits fraud, or misrepresents or omits material information in requesting the receipt of benefits, that Insured's coverage may be canceled or rescinded at any time by YOUR INSURANCE COMPANY. This remedy is available in addition to any other remedies which may be available to YOUR INSURANCE COMPANY.
C.A.
Jerome applies for a Major Medical policy. In completing the application, he told the agent that his income was $50,000 a year derived from his shoe repair business. In actuality, his income from the shoe repair business was less than $15,000 a year, but he had a large, but undisclosed, income, from the illegal bookmaking that he ran from the back room of his shop.
13 months after the policy effective date, he was `shot by an irritated gambler. The police report indicated that it was a “mob hit” as a result of his gambling establishment. When this information was relayed to the insurance company, they refused to pay for any of his medical bills as a result of the shooting. Further, the policy was voided (not canceled) as if there had never been any coverage.
THE PROCESSING OF YOUR CLAIM
The section on claims processing is required in most states, but can vary as to procedure. The illustration below is typical of a Major Medical policy issued by a major Provider of health insurance and would suffice in the majority of states.
This section is an explanation of how your claim is handled after it is received at YOUR INSURANCE COMPANY.
Claims Processing
In order to process your claim, we may need information from the Provider that supplied the service. As an Insured accepting this Contract, you agree to authorize the Provider to release any necessary information and records to us. The Provider is authorized to give this information to us even if it is considered confidential.
In addition, we may require you to be examined by a Physician we choose, at our expense. We have the right to require this as often as is reasonably necessary while a claim is pending.
If we need more than the usual maximum of 60 days to decide your claim because of special circumstances, we will send you a notice within 60 days after we receive your claim explaining why we need more time.
After your claim has been processed, we will send you an Explanation of Benefits (EOB) indicating the amount we have paid on your behalf. If you have paid the bill and are seeking reimbursement, payment will be made directly to you.
When A Claim Is Not Paid
If your claim includes charges that we consider not eligible for payment, in whole or in part, because we either need more information or because we consider the charge not payable under this Contract, we will send you an Explanation of Benefits that shows:
• The reason(s) your claim was not paid,
• A description of additional information which may be necessary to make your claim eligible; An explanation of why more information is necessary; and
• An explanation of how you may have the claim reviewed if you do not agree with our decision.
C.A.
Lupe purchased a Major Medical policy and at time of application, signed the release form that was on the application, which authorized any Provider to release any medical records in their possession, to the insurance company. On the application, Lupe provided the name and address of a doctor that had treated him for chest pains. The insurance company sent the release form to the doctor, and in error, did not make a copy of the form.
The doctor revealed that Lupe had been referred by another doctor, and also that the doctor had called in a cardiologist for consultation. The insurance company notified Lupe that they needed another signed release form in order to complete their underwriting. Lupe refused to sign another form, saying that the original doctor worked for a walk-in clinic, and when he discovered that Lupe had seen another doctor years before, he immediately sent him to this doctor. Lupe insisted that since he had never seen the cardiologist, he was not going to sign another release.
As provided in the policy, the insured agrees to cooperate fully with the insurance company in any claims processing, including the signing of any forms that the insurer feels necessary. Because Lupe refused to cooperate, the insurance company canceled the policy, refused to pay the claim, and returned the unearned premium to Lupe.
CLAIMS REVIEW
The following section explains how you may have your claim reviewed if you do not agree with our decision to deny all or part of your claim.
Filing Your Request For A Review
Within 60 days after you receive the Explanation of Benefits notifying you that your claim has been denied, write or come in person to YOUR INSURANCE COMPANY office. At that time, you should be prepared to tell us why you do not agree with our decision not to pay the claim. A Request for Review will then be filed for you.
Your Right To Representation And Document Review
If you prefer, you may designate a representative to act for you in the review procedure. Simply give that person a written statement designating him/her to represent you in review of your claim.
You or your authorized representative will have up to 45 days after we receive your request for review to review pertinent documents at a YOUR INSURANCE COMPANY office during regular office hours. Written releases permitting disclosure of information will be required from both the patient and the particular health care Provider if the information is considered sensitive or confidential.
Review Procedures
You also have 60 days to submit issues and comments and any pertinent, additional medical information.
In unusual situations when you are unable to submit written issues and comments within 60 days, and you advise us within that 60 day period that you need more time, we will grant the request provided we have sufficient time to give you the extension notice that is required by law.
Final Decision
We will provide you with a written decision within 60 days after we receive your request for review. That written decision will indicate the reasons for the decision and refer to the section or sections of your Contract on which the decision was based.
In unusual situations, we may need additional time to make a decision. In that case, before the 60 day period has expired, we will send you a written notice that more time is necessary, extending our time for a written decision to a total of 120 days from the date we received your request for review. We are precluded by law from delaying the decision beyond the 120 day period even at your request.
C.A.
Ben was insured under a Major Medical :PPO policy which had been in force for a year when he suffered a stroke and was admitted to the hospital. After discharge, and after a stay at a rehabilitation center, he was sent home. Ben contacted the Ideal Home Health Service Co., which provided him with excellent care for 2 months, after which he was able to take care of his needs without the home health care nurse. However, the doctor had recommended home health care, but the insurance company felt that it was not needed in this case, and furthermore, the home health care company was not a Provider under the contract.
Ben immediately contested this claims denial by gathering the medical files of his doctor where the doctor had recommended this service, and the files from the home health agency which outlined the services that he received and the reasons thereof. Further, he offered documentation that the Ideal Home Health Service was the only home health service within 50 miles of his home, with the exception of Central Home Health, which had recently lost their Medicare certification, so he would not feel comfortable with them. While Central was shown as a Preferred Provider of the insurance company, he was told by Central that they no longer represented his insurer. Ben then took the file to a well-known specialist that served in the local hospital, and requested a written recommendation from him as to whether he needed home health care.
These papers were then taken to Harold Lansgston & Sons, a local attorney who specialized in mal-practice and cases of this type, who reviewed the file, agreed with the assessments of the doctor, and then sent the file to the insurance company.
The insurance company had 60 days to respond. In 10 days they agreed to compensate Ideal Home Health Care at the full Provider rate and since Ben had met his deductible and out-of-pocket, Ben had no further bills to pay to Ideal.
ENDORSEMENTS
Because of the continual changing and liberalizing of benefits an insurer could submit new policy forms to be approved once [or more] a year, adding to the workload of the Department of Insurance, which would, in turn, create intolerable delays in policy approval. It is much simpler and more cost-effective to use an “Endorsement” on a policy to add or change existing provisions to meet new or changing regulations.
Following are sample Endorsements that appear in some policies in some states. It is very important that the agent be aware of the Endorsements, as they supercede and replace important policy provisions. Unfortunately, many companies are lax in informing their agents of any changes and Endorsements to their policies. In most jurisdictions, when there is a change in regulations affecting existing policies, the advertising material that addresses or refers to the provisions changes, must also be changed. Too frequently old and outdated advertising or sales material is used which does not reflect the change in the provisions. It is the responsibility of the agent to use the proper sales and advertising material and severe consequences can result if the agent provides an applicant with incorrect material when the proper information is available to the agent.
ENDORSEMENT - DIABETES
This Endorsement is to be attached to and made a part of your current Contract and any Endorsements or Riders attached thereto. The Contract is hereby amended by adding the following provisions:
Diabetes Outpatient Self-Management
Covered Services include Diabetes Outpatient Self-Management Training and
Educational Services and Nutrition Counseling, including all medically appropriate and necessary equipment and supplies, when used to treat diabetes, if the Insured's treating Physician or a Physician who specializes in the treatment of diabetes certifies that such services are necessary. Diabetes outpatient self-management training and educational services must be provided under the direct supervision of a certified Diabetes Educator or a board-certified Physician specializing in endocrinology. In order to be covered under this Contract, nutrition counseling must be provided by a licensed Dietitian.
EXCLUSIONS Any training or EDUCATION PROGRAMS or materials, including, but not limited to programs or materials for: pain management, the management of diabetes, except as provided in the Diabetes Outpatient Self-Management section; or vocational rehabilitation.
DEFINITIONS Diabetes Educator
A person who is properly certified pursuant to State law to supervise diabetes outpatient self-management training and educational services.
Dietitian:
A person who is properly licensed pursuant to State law to provide nutrition counseling for diabetes outpatient self-management services.
ENDORSEMENT - PRESCRIPTION DRUGS
This Endorsement is to be attached to and made a part of your current Contract and any Endorsements or Riders attached thereto. The Contract is hereby amended by amending or revising any applicable provisions:
Prescription and Non-Prescription Enteral Formulas
The Contract is amended by adding the following provision for the coverage of
prescription and non-prescription enteral formulas for home use:
Prescription and non-Prescription enteral formulas for home use which are prescribed by a Physician as Medically Necessary for the expenses to treat inherited diseases of amino acid, organic acid, carbohydrate or fat metabolism as well as malabsorption originating from congenital defects present at birth or acquired during the neonatal period. Coverage for expenses to treat inherited diseases of amino acid and organic acids shall include food products modified to be low protein, in an amount not to exceed $2,500 annually for any Insured, through the age of 24. This section applies to any Insured notwithstanding the existence of any Pre-existing Condition.
This Endorsement shall not extend, vary, alter, replace, or waive any of the provisions, benefits, exclusions, limitations, or conditions contained in the Contract, other than as specifically stated in this Endorsement. In the event of any inconsistencies between the provisions contained in this Endorsement and the provisions contained in your Contract, the provisions contained in this Endorsement shall control to the extent necessary to effectuate the intent of Your Insurance Company, Inc. as expressed herein.
ENDORSEMENT - REGISTERED NURSE FIRST ASSISTANT
This Endorsement is to be attached to and made a part of your current Contract and any Endorsements or Riders attached thereto. The Contract is hereby amended by adding or revising any applicable provisions:
DEFINITIONS Registered Nurse First Assistant (RNF)
A person properly licensed to perform surgical first assisting services pursuant to State Statutes,
Registered Nurse Surgical services rendered by a Registered Nurse First Assistant (herein RNFA)
First Assistant when acting as a Surgical Assistant when the assistance is Medically Necessary, may be covered services, subject to the applicable Allowed Amount. YOUR INSURANCE COMPANY's reimbursement level for surgical assistance performed by an RNFA is 20% of the Physician's surgical allowance. YOUR INSURANCE COMPANY's reimbursement for these covered services if any, will be made directly to the Insured. However, in the event the Insured properly assigned the benefits to the RNFA, YOUR INSURANCE COMPANY's payment will be made directly to the RNFA.
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