PRINTER'S NO. 318
No. 291 Session of 1993
INTRODUCED BY LESCOVITZ, BELFANTI, LaGROTTA AND OLASZ,
FEBRUARY 8, 1993
REFERRED TO COMMITTEE ON INSURANCE, FEBRUARY 8, 1993
AN ACT
1 Relating to group insurance; describing permitted policies and
2 restrictions thereon; prescribing standard policy provisions;
3 and making repeals.
4 TABLE OF CONTENTS
5 Chapter 1. Preliminary Provisions
6 Section 101. Short title.
7 Section 102. Definitions.
8 Chapter 3. Policy Provisions
9 Section 301. General limitation.
10 Section 302. Policies for employers or trustees.
11 Section 303. Policies for creditors or trustees.
12 Section 304. Policies for employee organizations.
13 Section 305. Policies for trusts for various organizations.
14 Section 306. Policies for associations.
15 Section 307. Policies for credit unions.
16 Section 308. Other groups.
17 Chapter 5. General Provisions
18 Section 501. Regulations.
1 Section 502. Conversion privileges.
2 Section 503. Group life standard policy provisions.
3 Section 504. Group accident and health standard policy
4 provisions.
5 Section 505. Provisions of group insurance policy.
6 Chapter 9. Miscellaneous Provisions
7 Section 901. Repeals.
8 Section 902. Effective date.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 CHAPTER 1
12 PRELIMINARY PROVISIONS
13 Section 101. Short title.
14 This act shall be known and may be cited as the Group
15 Insurance Act.
16 Section 102. Definitions.
17 The following words and phrases when used in this act shall
18 have the meanings given to them in this section unless the
19 context clearly indicates otherwise:
20 "Commissioner." The Insurance Commissioner of the
21 Commonwealth.
22 "Group insurance." Any policy of group life insurance, group
23 health and accident insurance, blanket accident and health
24 insurance or a combination thereof.
25 "Policy." Any policy of group insurance defined herein.
26 CHAPTER 3
27 POLICY PROVISIONS
28 Section 301. General limitation.
29 Except as provided in section 308, no policy of group
30 insurance shall be delivered in this Commonwealth unless it
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1 conforms to one of the descriptions set forth in sections 302
2 through 307.
3 Section 302. Policies for employers or trustees.
4 A policy issued to employers or to the trustees of a fund
5 established by an employer, which employer or trustees shall be
6 deemed the policyholder, to insure employees of the employer for
7 the benefit of persons other than the employer, shall be subject
8 to the following requirements:
9 (1) The employees eligible for insurance under the
10 policy shall be all of the employees of the employer or all
11 of any class or classes of those employees. The policy may
12 provide that the term "employees" shall include the employees
13 of one or more subsidiary corporations and the employees,
14 individual proprietors and partners of one or more affiliated
15 corporations, proprietorships or partnerships if the business
16 of the employer and of the affiliated corporations,
17 proprietorships or partnerships is under common control. The
18 policy may provide that the term "employees" shall include
19 the individual proprietor or partners if the employer is an
20 individual proprietorship or partnership. The policy may
21 provide that the term "employees" shall include retired
22 employees and directors of a corporate employer. A policy
23 issued to insure the employees of a public body may provide
24 that the term "employees" shall include elected or appointed
25 officials.
26 (2) The premium for the policy shall be paid either from
27 the employer's funds or from funds contributed by the insured
28 employees, or from both. A policy on which no part of the
29 premium is to be derived from funds contributed by the
30 insured employees must insure all eligible employees, except
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1 for those who reject that coverage in writing.
2 (3) An insurer may exclude from coverage any person as
3 to whom evidence of individual insurability is not
4 satisfactory to the insurer.
5 Section 303. Policies for creditors or trustees.
6 A policy issued to a creditor, which creditor shall be deemed
7 the policyholder, to insure debtors of the creditor or
8 creditors, to cover first real estate mortgages only, shall be
9 subject to the following requirements:
10 (1) The debtors eligible for insurance under the policy
11 shall be all of the debtors of the creditor or creditors or
12 all of any class or classes of debtors.
13 (2) The premium for the policy shall be paid either from
14 the creditor's funds or from charges collected from the
15 insured debtors, or both. A policy on which no part of the
16 premium is to be derived from funds contributed by insured
17 debtors specifically for their insurance must insure all
18 eligible debtors.
19 (3) The amount of the insurance on the life of any
20 debtor shall at no time exceed the greater of the scheduled
21 or actual amount of unpaid indebtedness to the creditor.
22 (4) The insurance may be payable to the creditor or any
23 successor to the right, title and interest of the creditor.
24 The payment shall reduce or extinguish the unpaid
25 indebtedness of the debtor to the extent of the payment.
26 (5) An insurer may exclude from coverage any person as
27 to whom evidence of individual insurability is not
28 satisfactory to the insurer.
29 Section 304. Policies for employee organizations.
30 A policy issued to a labor union or similar employee
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1 organization, which shall be deemed to be the policyholder, to
2 insure members of the union or organization for the benefit of
3 persons other than the union or organization or any of its
4 officials, representatives or agents, shall be subject to the
5 following requirements:
6 (1) The members eligible for insurance under the policy
7 shall be all of the members of the union or organization or
8 all of any class or classes of members of the union or
9 organization.
10 (2) The premium for the policy shall be paid either from
11 funds of the union or organization or from funds contributed
12 by the insured members specifically for their insurance, or
13 from both. A policy on which no part of the premium is to be
14 derived from funds contributed by the insured members
15 specifically for their insurance must insure all eligible
16 members, except those who reject the coverage in writing.
17 (3) An insurer may exclude from coverage any person as
18 to whom evidence of individual insurability is not
19 satisfactory to the insurer.
20 Section 305. Policies for trusts for various organizations.
21 A policy issued to a trust or to the trustees of a fund
22 established by two or more employers, by one or more labor
23 unions or similar employee organizations, or by one or more
24 employers and one or more labor unions or similar employee
25 organizations, where the trust or trustees are deemed the
26 policyholder, to insure employees of the employers or members of
27 the unions or organizations for the benefit of persons other
28 than the employers or the unions or organizations, shall be
29 subject to the following requirements:
30 (1) The persons eligible for insurance shall be all of
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1 the employees of the employers or all of the members of the
2 unions or organizations or all of any class or classes of
3 employees or members. The policy may provide that the term
4 "employees" shall include retired employees, the individual
5 proprietor or partners if an employer is an individual
6 proprietorship or a partnership, and directors of a corporate
7 employer. The policy may provide that the term "employees"
8 shall include the trustees or their employees, or both, if
9 their duties are principally connected with the trusteeship.
10 (2) The premium for the policy shall be paid from funds
11 contributed by the employer or employers of the insured
12 persons, by the union or unions or similar employee
13 organizations, or by both, or from funds contributed by the
14 insured persons or from both the insured persons and the
15 employer or union or similar employee organization. A policy
16 on which no part of the premium is to be derived from funds
17 contributed by the insured persons specifically for their
18 insurance must insure all eligible persons, except those who
19 reject the coverage in writing.
20 (3) An insurer may exclude from coverage any person as
21 to whom evidence of individual insurability is not
22 satisfactory to the insurer.
23 Section 306. Policies for associations.
24 (a) Policy issued.--A policy may be issued to an
25 association, a trust or to the trustees of a fund established,
26 created or maintained for the benefit of members of one or more
27 associations, where the association, trust or trustees shall be
28 deemed the policyholder, to insure the members of the
29 association or associations. The association or associations
30 shall:
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1 (1) Have a minimum of 100 persons.
2 (2) Have been organized and maintained in good faith for
3 purposes other than that of obtaining insurance.
4 (3) Have been in active existence for at least two
5 years.
6 (4) Have a constitution and bylaws which provide that
7 the association or associations hold regular meetings not
8 less than annually to further purposes of the members, the
9 association or associations.
10 (5) Collect dues or solicit contributions from members
11 and the members shall have voting privileges and
12 representation on the governing board and committees.
13 (b) Policy requirements.--The policy shall be subject to the
14 following requirements:
15 (1) The persons eligible for insurance shall be all of
16 the members of the association or associations, employees of
17 an association or associations or employees of members or one
18 or more of the preceding or all of any class or classes for
19 the benefit of persons other than the employees' employer.
20 (2) The premium for the policy shall be paid from funds
21 contributed by the association or associations, by employer
22 members or by both, or from funds contributed by the covered
23 persons or from both the covered persons and the association,
24 associations or employer members.
25 (3) A policy on which no part of the premium is to be
26 derived from funds contributed by the covered persons
27 specifically for their insurance must insure all eligible
28 persons, except those who reject such coverage in writing.
29 (4) An insurer may exclude from coverage any person as
30 to whom evidence of individual insurability is not
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1 satisfactory to the insurer.
2 Section 307. Policies for credit unions.
3 A policy issued to a credit union or to a trustee or trustees
4 designated by two or more credit unions, where the credit union,
5 trustee or trustees are deemed the policyholder, to insure
6 members of the credit union or credit unions for the benefit of
7 persons other than the credit union or credit unions, trustee or
8 trustees or any of their officials, shall be subject to the
9 following requirements:
10 (1) The members eligible for insurance shall be all of
11 the members of the credit union or credit unions or all of
12 any class or classes of members.
13 (2) The premium for the policy shall be paid by the
14 policyholder from the credit union's funds and must insure
15 all eligible members.
16 (3) An insurer may exclude from coverage any person as
17 to whom evidence of individual insurability is not
18 satisfactory to the insurer.
19 Section 308. Other groups.
20 Group life, accident and health insurance offered to a
21 resident of this Commonwealth under a group accident and health
22 insurance policy issued to a group other than one described in
23 sections 302 through 307 shall be subject to the following
24 requirements:
25 (1) No group accident and health insurance policy under
26 this section shall be delivered in this Commonwealth unless
27 the commissioner finds that:
28 (i) The issuance of the group policy is not contrary
29 to the best interest of the public.
30 (ii) The issuance of the group policy would result
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1 in economies of acquisition or administration.
2 (iii) The benefits are reasonable in relation to the
3 premiums charged.
4 (2) No group accident and health insurance under this
5 section may be offered in this Commonwealth by an insurer
6 under a policy issued in another state unless this
7 Commonwealth or another state, having requirements
8 substantially similar to those contained under paragraph (1),
9 has made a determination that the requirements have been met;
10 however, the commissioner may disapprove any certificate or
11 other evidence of coverage under any such group policy when
12 the commissioner has probable cause to believe that benefits
13 are not reasonable in relation to the premiums charged. Upon
14 any disapproval, the commissioner shall notify the insurer in
15 writing, and within 30 days from the date of mailing of
16 notice to the insurer, the insurer may make written
17 application to the commissioner for a hearing on the
18 disapproval and the hearing shall be held within 30 days
19 after receipt of the application. The procedure before the
20 commissioner shall be in accordance with the adjudication
21 procedure set forth in 2 Pa.C.S. § 103 (relating to
22 administrative agency law), and the insurer shall be entitled
23 to the judicial review as provided for by law.
24 (3) Any person, corporation, insurance company,
25 exchange, order or society that shall, either as principal or
26 agent, issue or cause to be issued any policy or contract of
27 insurance or certificate or other evidence of coverage within
28 this Commonwealth, contrary to this section, commits a
29 misdemeanor and shall, upon conviction, be sentenced to pay a
30 fine of not more than $500.
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1 (4) Upon satisfactory evidence of the violation of this
2 section by any person, corporation, insurance company,
3 exchange, order or society, the commissioner may, in the
4 commissioner's discretion, pursue any one or more of the
5 following courses of action:
6 (i) Suspend or revoke the license of the offending
7 person, corporation, insurance company, exchange, order
8 or society.
9 (ii) Refuse, for a period not to exceed one year
10 thereafter, to issue a new license to the person,
11 corporation, insurance company, exchange, order or
12 society.
13 (iii) Impose a fine of not more than $1,000 for each
14 and every act in violation of this act.
15 CHAPTER 5
16 GENERAL PROVISIONS
17 Section 501. Regulations.
18 The commissioner is hereby authorized to adopt such rules and
19 regulations as may be necessary to carry out the provisions of
20 this act.
21 Section 502. Conversion privileges.
22 (a) Group life conversion privilege.--If any individual
23 insured under a group life insurance policy in this Commonwealth
24 becomes entitled, under the terms of the policy, to have an
25 individual policy of life insurance issued without evidence of
26 insurability, subject to making of application and payment of
27 the first premium within the period specified, and if the
28 individual is not given notice of the existence of the right at
29 least 15 days prior to the expiration date of the specified
30 period, the individual shall have an additional period within
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1 which to exercise the right. Nothing in this section shall be
2 construed to continue any insurance beyond the period provided
3 in the policy. This additional period shall expire 15 days after
4 the individual is given notice, but in no event shall the
5 additional period extend beyond 60 days after the expiration
6 date of the period provided in the policy. Written notice
7 presented to the individual or mailed by the policyholder to the
8 last known address of the individual or mailed by the insurer to
9 the last known address of the individual, as furnished by the
10 policyholder, shall constitute notice for the purpose of this
11 section.
12 (b) Group accident and health conversion privilege.--A group
13 policy delivered or issued for delivery in this Commonwealth
14 which provides hospital, surgical or major medical expense
15 insurance or any combination of these coverages, on an expense-
16 incurred basis, but not a policy which provides indemnity
17 benefits or benefits for specific diseases or for accidental
18 injuries only, shall provide that an employee or member whose
19 insurance under the group policy has been terminated for any
20 reason, including discontinuance of the group policy in its
21 entirety or with respect to an insured class and who has been
22 continuously insured under the group policy (and under any group
23 policy providing similar benefits which it replaces) for at
24 least three months immediately prior to termination, shall be
25 entitled to have issued to him or her by the insurer a policy of
26 health insurance (hereafter referred to as the converted
27 policy). An employee or member shall not be entitled to issuance
28 of a converted policy if termination of insurance under the
29 group policy occurred because the employee or member failed to
30 pay any required contribution or any discontinued group coverage
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1 was replaced by similar group coverage within 31 days. Issuance
2 of a converted policy shall be subject to the following
3 conditions:
4 (1) Written application for the converted policy shall
5 be made and the first premium paid to the insurer not later
6 than 31 days after termination of insurance.
7 (2) The converted policy shall be issued without
8 evidence of insurability.
9 (3) The premium on the individual policy shall be at the
10 insurer's then customary rate applicable to the form and
11 amount of the individual policy, to the class of risk to
12 which that person then belongs and to that person's age
13 attained on the effective date of the individual policy.
14 (4) The effective date of the converted policy shall be
15 the day following the termination of insurance under the
16 group policy.
17 (5) The converted policy shall cover the employee or
18 member and dependents who were covered by the group policy on
19 the date of termination of insurance. At the option of the
20 insurer, a separate converted policy may be issued to cover
21 any dependent.
22 (6) The insurer shall not be required to issue a
23 converted policy covering any person if that person is or
24 could be covered by Medicare under Title XVIII of the Social
25 Security Act (Public Law 74-271, 42 U.S.C. Ch.7 Subch.
26 XVIII). Furthermore, the insurer shall not be required to
27 issue a converted policy covering any person if:
28 (i) (A) that person is covered for similar benefits
29 by another hospital, surgical, medical or major
30 medical expense insurance policy or hospital or
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1 medical service subscriber contract or medical
2 practice or other prepayment plan or by any other
3 plan or program;
4 (B) that person is eligible for similar benefits
5 (whether or not covered) under any arrangement of
6 coverage for individuals in a group, whether on an
7 insured or uninsured basis; or
8 (C) similar benefits are provided for or
9 available to that person, pursuant to or in
10 accordance with the requirements of any Federal or
11 State law; and
12 (ii) the benefits provided under the sources
13 referred to in subparagraph (i)(A) for the person or
14 benefits provided or available under the sources referred
15 to in subparagraph (i)(B) and (C) for the person,
16 together with the benefits provided by the converted
17 policy, would result in overinsurance according to the
18 insurer's standards. The insurer's standards must bear
19 some reasonable relationship to actual health care costs
20 in the area in which the insured lives at the time of
21 conversion and must be filed with the commissioner prior
22 to their use in denying coverage.
23 (7) A converted policy may include a provision whereby
24 the insurer may request information in advance of any premium
25 due date of the policy of any person covered as to whether:
26 (i) that person is covered for similar benefits by
27 another hospital, surgical, medical or major medical
28 expense insurance policy, or hospital or medical service
29 subscriber contract, or medical practice or other
30 prepayment plan or by any other plan or program;
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1 (ii) that person is covered for similar benefits
2 under any arrangement of coverage for individuals in a
3 group whether on an insured or uninsured basis; or
4 (iii) similar benefits are provided for or are
5 available to that person, pursuant to or in accordance
6 with the requirements of any Federal or State law. The
7 converted policy may provide that the insurer may refuse
8 to renew the policy or the coverage of any person insured
9 for the following reasons only:
10 (A) Either the benefits provided under the
11 sources referred to in subparagraphs (i) and (ii) for
12 that person or benefits provided or available under
13 the sources referred to in this subparagraph for the
14 person, together with the benefits provided by the
15 converted policy, would result in overinsurance
16 according to the insurer standards on file with the
17 commissioner or the converted policyholder fails to
18 provide the requested information.
19 (B) Fraud or material misrepresentation in
20 applying for any benefits under the converted policy.
21 (C) Eligibility of the insured person for
22 coverage by Medicare under Title XVIII of the Social
23 Security Act or under any other Federal or State law
24 providing for benefits similar to those provided by
25 the converted policy.
26 (D) Other reasons approved by the commissioner.
27 (8) An insurer shall not be required to issue a
28 converted policy which provides benefits in excess of those
29 provided under the group policy from which conversion is
30 made.
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1 (9) No converted policy shall exclude a preexisting
2 condition not excluded by the group policy. The converted
3 policy may provide that any hospital, surgical or medical
4 benefits payable may be reduced by the amount of any benefits
5 payable under the group policy after the termination of the
6 individual's insurance. The converted policy may also include
7 provisions so that during the first policy year the benefits
8 payable under the converted policy, together with the
9 benefits payable under the group policy, shall not exceed
10 those that would have been payable had the individual
11 insurance under the group policy remained in effect.
12 (10) If the group insurance policy from which conversion
13 is made insures the employee or member for basic hospital or
14 surgical expense insurance, the employee or member shall be
15 entitled to obtain a converted policy providing, at the
16 employee's or member's option, coverage on an expense-
17 incurred basis under any of the plans meeting the following
18 requirements:
19 (i) Plan A:
20 (A) Hospital room and board daily expense
21 benefits in a maximum dollar amount approximating the
22 average semiprivate rate charged in metropolitan
23 areas of this Commonwealth, for a maximum duration of
24 70 days.
25 (B) Miscellaneous hospital expense benefits of a
26 maximum amount of ten times the hospital room and
27 board daily expense benefits.
28 (C) Surgical operation expense benefits
29 according to a surgical schedule consistent with
30 those customarily offered by the insurer under group
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1 or individual health insurance policies and providing
2 a maximum benefit of $800.
3 (ii) Plan B:
4 (A) Hospital room and board daily expense
5 benefits in a maximum dollar amount equal to 75% of
6 the maximum dollar amount determined for Plan A, for
7 a maximum duration of 70 days.
8 (B) Miscellaneous hospital expense benefits of a
9 maximum amount of ten times the hospital room and
10 board daily expense benefits.
11 (C) Surgical operation expense benefits
12 according to a surgical schedule consistent with
13 those customarily offered by the insurer under group
14 or individual health insurance policies and providing
15 a maximum benefit of $600.
16 (iii) Plan C:
17 (A) Hospital room and board daily expense
18 benefits in a maximum dollar amount equal to 50% of
19 the maximum dollar amount determined for Plan A, for
20 a maximum duration of 70 days.
21 (B) Miscellaneous hospital benefits of a maximum
22 amount of ten times the hospital room and board daily
23 expense benefits.
24 (C) Surgical operation expense benefits
25 according to a surgical schedule consistent with
26 those customarily offered by the insurer under group
27 or individual health insurance policies and providing
28 a maximum benefit of $400.
29 The maximum dollar amounts in Plan A shall be determined by
30 the commissioner and may be redetermined by the commissioner,
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1 from time to time, as to converted policies issued subsequent
2 to a redetermination. Redetermination shall not be made more
3 often than once in three years. The maximum dollar amounts in
4 Plans A, B and C shall be rounded to the nearest multiple of
5 $10.
6 (11) Subject to the provisions and conditions of this
7 act, if the group insurance policy from which conversion is
8 made insures the employee or member for major medical expense
9 insurance, the employee or member shall be entitled to obtain
10 a converted policy providing catastrophic or major medical
11 coverage under a plan meeting the following requirements:
12 (i) A maximum benefit at least equal to either, at
13 the option of the insurer, clause (A) or (B):
14 (A) The smaller of the following amounts: the
15 maximum benefit provided under the group policy or a
16 maximum payment of $250,000 per covered person for
17 all covered medical expenses incurred during the
18 covered person's lifetime.
19 (B) The smaller of the following amounts: the
20 maximum benefit provided under the group policy or a
21 maximum payment of $250,000 for each unrelated injury
22 or sickness.
23 (ii) Payment of benefits at the rate of 80% of
24 covered medical expenses which are in excess of the
25 deductible, until 20% of the expenses in a benefit period
26 reaches $1,000, after which benefits will be paid at the
27 rate of 100% during the remainder of the benefit period.
28 Payment of benefits for outpatient treatment of mental
29 illness, if provided in the converted policy, may be at a
30 lesser rate but not less than 50%.
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1 (iii) A deductible for each benefit period which, at
2 the option of the insurer, shall be:
3 (A) the sum of the benefits deductible and $100;
4 (B) a cash deductible, not to exceed $1,000;
5 (C) the greater of the benefits deductible or
6 $500; or
7 (D) the corresponding deductible in the group
8 policy.
9 The term "benefits deductible" means the value of any
10 benefits provided on an expense-incurred basis which are
11 provided with respect to covered medical expenses by any
12 other hospital, surgical or medical insurance policy, or
13 hospital or medical service subscriber contract, or
14 medical practice or other prepayment plan, or any other
15 plan or program, whether on an insured or uninsured
16 basis, or in accordance with the requirements of any
17 Federal or State law and, if, pursuant to paragraph (12),
18 the converted policy provides both basic hospital or
19 surgical coverage and major medical coverage, the value
20 of the basic benefits.
21 (iv) If the maximum benefit is determined by
22 subparagraph (i)(B), the insurer may require that the
23 deductible be satisfied during a period of not less than
24 three months if the deductible is $100 or less, and not
25 less than six months if the deductible exceeds $100.
26 (v) The benefit period shall be each calendar year
27 when the maximum benefit is determined by subparagraph
28 (i)(A) or 24 months when the maximum benefit is
29 determined by subparagraph (i)(B).
30 (vi) The term "covered medical expenses," as used in
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1 this paragraph, shall include at least, in the case of
2 hospital room and board charges, the lesser of the dollar
3 amount in Plan A and the average semiprivate room and
4 board rate for the hospital in which the individual is
5 confined and twice that amount for charges in an
6 intensive care unit. Any surgical schedule shall be
7 consistent with those customarily offered by the insurer
8 under group or individual health insurance policies and
9 must provide at least a $1,200 maximum benefit.
10 (12) The conversion privilege required by this act
11 shall, if the group insurance policy insures the employee or
12 member for basic hospital or surgical expense insurance as
13 well as major medical expense insurance, make available the
14 plans of benefits set forth in paragraphs (10) and (11). At
15 the option of the insurer, the plans of benefits may be
16 provided under one policy. The insurer may also, in lieu of
17 the plans of benefits set forth in paragraphs (10) and (11),
18 provide a policy of comprehensive medical expense benefits
19 without first dollar coverage. The policy shall conform to
20 the requirements of paragraph (11); however, an insurer
21 electing to provide such a policy shall make available a low
22 deductible option, not to exceed $100, a high deductible
23 option between $500 and $1,000 and a third deductible option
24 midway between the high and low deductible options.
25 (13) The insurer may, at its option, also offer
26 alternative plans for group health conversion in addition to
27 those required by this act.
28 (14) In the event coverage would be continued under the
29 group policy on an employee following retirement prior to the
30 time the employee is or could be covered by Medicare, the
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1 employee may elect, in lieu of continuation of group
2 insurance, to have the same conversion rights as would apply
3 had insurance terminated at retirement by reason of
4 termination of employment or membership.
5 (15) The converted policy may provide for reduction of
6 coverage on any person upon eligibility for coverage by
7 Medicare under Title XVIII of the Social Security Act or
8 under any other Federal or State law providing for benefits
9 similar to those provided by the converted policy.
10 (16) The conversion privilege shall also be available:
11 (i) to the surviving spouse, if any, at the death of
12 the employee or member, with respect to the spouse and
13 such children whose coverage under the group policy
14 terminates by reason of death of the employee or member,
15 otherwise to each surviving child whose coverage under
16 the group policy terminates by reason of the death, or,
17 if the group policy provides for continuation of
18 dependents' coverage following the employee's or member's
19 death, at the end of continuation of coverage;
20 (ii) to the spouse of the employee or member upon
21 termination of coverage of the spouse, while the employee
22 or member remains insured under the group policy, by
23 reason of ceasing to be a qualified family member under
24 the group policy, with respect to the spouse and such
25 children whose coverage under the group policy terminates
26 at the same time; or
27 (iii) to a child solely with respect to himself or
28 herself upon termination of coverage by reason of ceasing
29 to be a qualified family member under the group policy,
30 if a conversion privilege is not otherwise provided with
19930H0291B0318 - 20 -
1 respect to termination of coverage.
2 (17) If the benefit levels required in paragraph (10)
3 exceed the benefit levels provided under the group policy,
4 the conversion policy may offer benefits which are
5 substantially similar to those provided under the group
6 policy in lieu of those required in paragraph (10).
7 (18) The insurer may elect to provide group insurance
8 coverage in lieu of the issuance of a converted individual
9 policy.
10 (19) A notification of the conversion privilege shall be
11 included in each certificate of coverage. Each certificate
12 holder in the insured group shall be given written notice of
13 the conversion privilege and its duration within 15 days
14 before or after the date of termination of group coverage;
15 however, if the notice is given more than 15 days but less
16 than 90 days after the date of termination of group coverage,
17 the time allowed for the exercise of the privilege of
18 conversion shall be extended for 15 days after the giving of
19 the notice. If notice is not given within 90 days after the
20 date of termination of group coverage, the time allowed for
21 the exercise of the conversion privilege shall expire at the
22 end of the 90 days. Written notice by the contract holder
23 given to the certificate holder or mailed to the certificate
24 holder at the certificate holder's last known address or
25 written notice by the insurer mailed to the certificate
26 holder at the last address furnished to the insurer by the
27 contract holder shall be deemed full compliance with the
28 provisions of this paragraph for the giving of notice. A
29 group contract issued by an insurer may contain a provision
30 to the effect that notice of the conversion privilege and its
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1 duration shall be given by the contract holder to each
2 certificate holder upon termination of group coverage.
3 (20) Where the contract holder is the employer of the
4 certificate holder, the insurer shall give written notice of
5 termination of the group contract to any organization or
6 organizations representing the certificate holder for the
7 purpose of collective bargaining, and the employer shall
8 provide to the insurer a written list of the organizations
9 within ten days after the date the policy is issued and,
10 thereafter, within ten days of the beginning or termination
11 of representation by any organization of any certificate
12 holder or holders. The list shall identify the collective
13 bargaining unit and the group insurance contract to which the
14 request relates. There shall be no liability on the part of,
15 and no cause of action shall arise against, any labor
16 organization representing the employees of a contract holder
17 for the purposes of collective bargaining due to any action
18 it takes or fails to take as to the written notice required
19 to be given by the insurer under this paragraph unless shown
20 to have been done in bad faith with malice in fact by an
21 organization. Compliance or noncompliance with the provisions
22 of this paragraph shall in no way affect the rights, duties
23 or obligations of the contract holder, insurer or certificate
24 holder.
25 Section 503. Group life standard policy provisions.
26 (a) Required policy provisions.--A policy of group life
27 insurance shall not be delivered or issued for delivery in this
28 Commonwealth unless it contains in substance the provisions
29 listed in subsections (a) through (k), or provisions which in
30 the opinion of the commissioner are more favorable to the
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1 persons insured, or at least as favorable to the persons insured
2 and more favorable to the policyholder, with the exception that:
3 (1) Subsections (g) through (k), inclusive, shall not
4 apply to policies issued to a creditor to insure debtors of
5 the creditor.
6 (2) The standard provisions required for individual life
7 insurance policies shall not apply to group life insurance
8 policies.
9 (3) If the group life insurance policy is on a plan of
10 insurance other than the term plan, it shall contain a
11 nonforfeiture provision or provisions which, in the opinion
12 of the commissioner is, or are, equitable to the insured
13 persons and to the policyholder, but nothing in this section
14 shall be construed to require that group life insurance
15 policies contain the same nonforfeiture provisions as are
16 required for individual life insurance policies.
17 (b) Grace period.--The contract shall contain a provision
18 that the policyholder is entitled to a grace period of 31 days
19 for the payment of any premium due except the first, during
20 which grace period the death benefit coverage shall continue in
21 force, unless the policyholder shall have given the insurer
22 written notice of discontinuance in advance of the date of
23 discontinuance and in accordance with the terms of the policy.
24 The policy may provide that the policyholder shall be liable to
25 the insurer for the payment of a pro rata premium for the time
26 the policy was in force during the grace period.
27 (c) Contest of policy.--The policy shall contain a provision
28 that:
29 (1) The validity of the policy shall not be contested,
30 except for nonpayment of premiums, after it has been in force
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1 for two years from its date of issue.
2 (2) No statement made by any person insured under the
3 policy relating to that person's insurability shall be used
4 in contesting the validity of the insurance with respect to
5 which such statement was made after the insurance has been in
6 force prior to the contest for a period of two years during
7 that person's lifetime nor unless it is contained in a
8 written instrument signed by that person.
9 (d) Copy of statements.--The policy shall contain a
10 provision that:
11 (1) A copy of the application, if any, of the
12 policyholder shall be attached to the policy when issued.
13 (2) All statements made by the policyholder or by the
14 persons insured shall be deemed representations and not
15 warranties.
16 (3) No statement made by any person insured shall be
17 used in any contest unless a copy of the instrument
18 containing the statement is or has been furnished to the
19 person or to that person's beneficiary.
20 (e) Evidence of insurability.--The policy shall contain a
21 provision setting forth the conditions, if any, under which the
22 insurer reserves the right to require a person eligible for
23 insurance to furnish evidence of individual insurability
24 satisfactory to the insurer as a condition to part or all of the
25 coverage.
26 (f) Equitable adjustment.--The contract shall contain a
27 provision specifying an equitable adjustment of premiums or of
28 benefits, or of both, to be made in the event the age of a
29 person insured has been misstated. The provision shall contain a
30 clear statement of the method of adjustment to be used.
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1 (g) Payment to beneficiaries.--The contract shall contain a
2 provision that any sum due by reason of the death of the person
3 insured shall be payable to the beneficiary designated by the
4 person insured. Payment may be subject to the provisions of the
5 policy, in the event there is no designated beneficiary living
6 at the death of the person insured, as to all or any part of the
7 sum due, and subject to any right reserved by the insurer in the
8 policy and set forth in the certificate authorizing the insurer
9 to pay at its option a part of the sum not exceeding $250 to any
10 person appearing to the insurer to be equitably entitled to a
11 part of the sum by reason of having incurred funeral or other
12 expenses incident to the last illness or death of the person
13 insured.
14 (h) Individual certificates.--The contract shall contain a
15 provision that the insurer will issue to the policyholder, for
16 delivery to each person insured, an individual certificate
17 setting forth a statement as to the insurance protection to
18 which the insured is entitled, to whom the insurance benefits
19 are payable, and the rights and conditions set forth in
20 subsections (i), (j) and (k).
21 (i) Individual policies.--The contract shall contain a
22 provision that if the insurance, or any portion of it, on a
23 person covered under the policy ceases because of termination of
24 employment or of membership in the class or classes eligible for
25 coverage under the policy, the person shall be entitled to have
26 issued to him or her by the insurer, without evidence of
27 insurability, an individual policy of life insurance without
28 disability or other supplementary benefits, if application for
29 the individual policy is made and the first premium paid to the
30 insurer, within 31 days after termination, and with the
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1 requirements that:
2 (1) The individual policy shall, at the option of the
3 person, be on any one of the forms, except term insurance,
4 then customarily issued by the insurer at the age and for the
5 amount applied for.
6 (2) The individual policy shall be in an amount not in
7 excess of the amount of life insurance which ceases because
8 of termination, less, in the case of a person whose
9 membership in the class or classes eligible for coverage
10 terminates but who continues in employment in another class,
11 the amount of any life insurance for which the person is or
12 becomes eligible under any other group policy within 31 days
13 after termination; however, any amount of insurance which
14 shall have matured on or before the date of termination as an
15 endowment payable to the person insured, whether in one sum
16 or in installments or in the form of an annuity, shall not,
17 for the purpose of this provision, be included in the amount
18 which is considered to cease because of termination.
19 (3) The premium on the individual policy shall be at the
20 insurer's then customary rate applicable to the form and
21 amount of the individual policy, to the class of risk to
22 which the person then belongs and to the person's age
23 attained on the effective date of the individual policy.
24 (j) Termination.--The policy shall contain a provision that
25 if the group policy terminates or is amended so as to terminate
26 the insurance of any class of insured persons, every person
27 insured under the policy at the date of termination whose
28 insurance terminates and who has been so insured for at least
29 five years prior to termination shall be entitled to have issued
30 to the insured by the insurer an individual policy of life
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1 insurance, subject to the same conditions and limitations as are
2 provided by subsection (i), except that the group policy may
3 provide that the amount of the individual policy shall not
4 exceed the smaller of:
5 (1) the amount of the person's life insurance protection
6 ceasing because of the termination or amendment of the group
7 policy, less the amount of any life insurance for which the
8 insured is or becomes eligible under any group policy issued
9 or reinstated by the same or another insurer within 31 days
10 after termination; or
11 (2) $2,000.
12 (k) Past group coverage.--The contract shall contain a
13 provision that if a person insured under the group policy dies
14 during the period within which that person would have been
15 entitled to have an individual policy issued in accordance with
16 subsection (i) or (j) and before such an individual policy shall
17 have become effective, the amount of life insurance to which
18 that person would have been entitled under the individual policy
19 shall be payable as a claim under the group policy, whether or
20 not application for the individual policy or the payment of the
21 first premium therefor has been made.
22 (l) Assignment.--Notwithstanding any provision of law, a
23 person whose life is insured under any policy of group life
24 insurance, whether or not the policy is otherwise subject to
25 this act, is permitted to make an assignment of all or any part
26 of the incidents of ownership in the insurance, including,
27 without limitation, any right to designate a beneficiary or
28 beneficiaries under the policy and any right to have an
29 individual policy issued upon termination either of employment
30 or of the policy or group life insurance; however, the insurer
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1 and the group policyholder may prohibit or restrict an
2 assignment by appropriate policy provisions. This section shall
3 be construed as declaring the law as it existed prior to its
4 enactment and not as modifying it.
5 Section 504. Group accident and health standard policy
6 provisions.
7 (a) Accident and health policies.--Each group accident and
8 health policy shall contain, in substance, the following
9 provisions:
10 (1) That, in the absence of fraud, all statements made
11 by any applicant or applicants or the policyholder or by an
12 insured person shall be deemed representations and not
13 warranties and that no statement made for the purpose of
14 effecting insurance shall avoid the insurance or reduce
15 benefits, unless contained in a written instrument signed by
16 the policyholder or the insured person, a copy of which has
17 been furnished to the policyholder or to an insured person or
18 the beneficiary.
19 (2) That the insurer will furnish to the policyholder,
20 for delivery to each employee or member of the insured group,
21 an individual certificate setting forth, in summary form, a
22 statement of the essential features of the insurance coverage
23 of the employee or member and to whom benefits under the
24 policy are payable. If dependents are included in the
25 coverage, only one certificate need be issued for each family
26 unit.
27 (3) That eligible new employees or members or
28 dependents, as the case may be, may be added from time to
29 time to the group originally insured in accordance with the
30 terms of the policy.
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1 (b) Direct payment to provider.--Any group accident and
2 health policy may provide that all or any portion of any
3 indemnities provided by the policy, on account of hospital,
4 nursing, medical or surgical services, may, at the insurer's
5 option, be paid directly to the hospital or person rendering the
6 services, but the policy may not require that the service be
7 rendered by a particular hospital or person. Payment so made
8 shall discharge the insurer's obligation with respect to the
9 amount of insurance so paid.
10 (c) Dependent coverage.--A policy delivered or issued for
11 delivery on or after January 1, 1968, under which coverage of a
12 dependent of an employee or other member of the insured group
13 terminates at a specified age shall, with respect to an
14 unmarried child covered by the policy prior to the attainment of
15 the age of 19 who is incapable of self-sustaining employment by
16 reason of mental retardation or physical handicap and who became
17 so incapable prior to attainment of age 19 and who is chiefly
18 dependent upon the employee or member for support and
19 maintenance, not terminate while the insurance of the employee
20 or member remains in force and the dependent remains incapable
21 of self-sustaining employment, if the insured employee or member
22 has, within 31 days of the dependent's attainment of the
23 termination age, submitted proof of the dependent's incapacity.
24 This subsection shall not require an insurer to insure an
25 employee's or member's dependent who is a child with mental
26 retardation or a physical handicap or other member of the
27 insured group where the dependent or member does not satisfy the
28 conditions of the group policy as to any requirements for
29 evidence of insurability or other provisions as may be required
30 in the group policy for coverage to take effect. In any such
19930H0291B0318 - 29 -
1 case, the terms of the policy shall apply with regard to the
2 coverage or exclusion from coverage of the dependent.
3 Section 505. Provisions of group insurance policy.
4 The commissioner shall have the power and duty to develop
5 appropriate regulations for a standard group insurance policy.
6 CHAPTER 9
7 MISCELLANEOUS PROVISIONS
8 Section 901. Repeals.
9 (a) Absolute.--The act of May 11, 1949 (P.L.1210, No.367),
10 referred to as the Group Life Insurance Policy Law, is repealed.
11 (b) Inconsistent.--The following acts and parts of acts are
12 repealed insofar as they are inconsistent with this act:
13 Act of May 17, 1921 (P.L.682, No.284), known as The Insurance
14 Company Law of 1921.
15 Act of May 17, 1921 (P.L.789, No.285), known as The Insurance
16 Department Act of one thousand nine hundred and twenty-one.
17 Act of December 14, 1992 (P.L. , No.134), known as the
18 Fraternal Benefit Societies Code.
19 Section 902. Effective date.
20 This act shall take effect in 180 days.
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