PRINTER'S NO. 725
No. 646 Session of 1975
INTRODUCED BY A. K. HUTCHINSON, STAHL, SCHMITT, GILLETTE,
BARBER, TRELLO, TOLL AND COHEN, MARCH 4, 1975
REFERRED TO COMMITTEE ON CONSUMER PROTECTION, MARCH 5, 1975
AN ACT
1 To provide reasonable standardization and simplification of
2 terms and coverages of individual accident and health
3 insurance policies and subscriber contracts of health plan
4 corporations, nonprofit health service plans and certificates
5 issued by fraternal benefit societies to facilitate public
6 understanding and comparison, to eliminate provisions
7 contained in individual accident and health insurance
8 policies and subscriber contracts of health plan corporations
9 and nonprofit health service plans and certificates issued by
10 fraternal benefit societies which may be misleading or
11 unreasonably confusing in connection either with the purchase
12 of such coverages or with the settlement of claims, and to
13 provide for full disclosure in the sale of accident and
14 health coverages.
15 The General Assembly of the Commonwealth of Pennsylvania
16 hereby enacts as follows:
17 Section 1. Short Title.--This act shall be known and may be
18 cited as the "Individual Accident and Sickness Insurance Minimum
19 Standards Act."
20 Section 2. Definitions.--(a) As used in this act:
21 "Accident and health insurance" means insurance written under
22 section 202(a)(1) and (2) (other than life insurance and
23 annuities) and section 202(c)(2) of The Insurance Company Law of
24 1921 and 40 Pa. C.S. § 6526, other than credit accident and
1 health insurance.
2 "Forms" means policies, contracts, riders, endorsements, and
3 applications subject to approval by the Insurance Commissioner,
4 under section 354 of The Insurance Company Law of 1921 or
5 section 11 of the Voluntary Nonprofit Health Service Act of
6 1972, or 40 Pa. C.S. §§ 6124 and 6329.
7 "Policy" means the entire contract between the insurer and
8 the insured, including the policy, riders, endorsements and the
9 application, if attached, and also includes subscriber contracts
10 issued by health plan corporations, nonprofit health service
11 plans and certificates issued by fraternal benefit societies.
12 (b) Health plan corporations, nonprofit health service plans
13 and fraternal benefit societies shall be deemed to be engaged in
14 the business of insurance.
15 Section 3. Standards for Policy Provisions.--(a) The
16 Insurance Commissioner shall issue regulations to establish
17 specific standards, including standards of full and fair
18 disclosure, that set forth the manner, content and format for
19 individual policies of accident and health insurance and
20 subscriber contracts of health plan corporations and nonprofit
21 health service plans and certificates issued by fraternal
22 benefit societies and required disclosures for their sale. These
23 regulations shall be in addition to applicable laws of this
24 Commonwealth and may cover but shall not be limited to:
25 (1) terms of renewability;
26 (2) initial and subsequent conditions of eligibility;
27 (3) non-duplication of coverage provisions;
28 (4) coverage of dependents;
29 (5) pre-existing conditions;
30 (6) termination of insurance;
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1 (7) probationary periods;
2 (8) limitations;
3 (9) exceptions;
4 (10) reductions;
5 (11) elimination periods;
6 (12) requirements for replacement;
7 (13) recurrent conditions; and
8 (14) the definition of terms, including but not limited to,
9 the following: "hospital," "accident," "sickness," "injury,"
10 "physician," "accidental means," "total disability," partial
11 disability," "nervous disorder," "guaranteed renewable," and
12 "non-cancellable."
13 (b) The Insurance Commissioner may issue regulations that
14 specify prohibited policy provisions not otherwise specifically
15 prohibited by statute which in the opinion of the Insurance
16 Commissioner are unjust, unfair, or unfairly discriminatory to
17 the policyholder, any person insured under the policy, or
18 beneficiary.
19 Section 4. Minimum Standards for Benefits.--(a) The
20 Insurance Commissioner shall issue regulations to establish
21 minimum standards for benefits under each of the following
22 categories of coverage in individual policies of accident and
23 health insurance and subscriber contracts of health plan
24 corporations and nonprofit health service plans and certificates
25 issued by fraternal benefit societies:
26 (1) basic hospital expense coverage;
27 (2) basic medical-surgical expense coverage;
28 (3) hospital confinement indemnity coverage;
29 (4) major medical expense coverage;
30 (5) disability income protection coverage;
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1 (6) accident only coverage; and
2 (7) specified disease or specified accident coverage.
3 (b) Nothing in this section shall preclude the issuance of
4 any policy or contract which combines two or more of the
5 categories of coverage enumerated in paragraphs (1) through (6)
6 of subsection (a).
7 (c) No policy or contract shall be delivered or issued for
8 delivery in this State which does not meet the prescribed
9 minimum standards for the categories of coverage listed in
10 paragraphs (1) through (7) of subsection (a) which are contained
11 within the policy or contract unless the Insurance Commissioner
12 finds such policy or contract will be in the public interest and
13 such policy or contract provides benefits that are reasonable in
14 relation to the premium charged.
15 (d) The Insurance Commissioner shall issue regulations
16 prescribing the method of identification of policies and
17 contracts based upon coverages provided.
18 Section 5. Outline of Coverage.--(a) In order to provide for
19 full and fair disclosure in the sale of individual accident and
20 health insurance policies or subscriber contracts of a health
21 plan corporation or a nonprofit health service plan or
22 certificates issued by fraternal benefit societies, no such
23 policy or contract shall be delivered or issued for delivery in
24 this State unless (i) in the case of a direct response insurance
25 product, the outline of coverage described in subsection (b)
26 accompanies the policy; (ii) in all other cases, the outline of
27 coverage described in subsection (b) is delivered to the
28 applicant at the time application is made and an acknowledgment
29 of receipt or certificate of delivery of such outline is
30 provided the insurer with the application. In the event the
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1 policy is issued on a basis other than that applied for, an
2 amended outline of coverage properly describing the policy or
3 contract must accompany the policy or contract when it is
4 delivered. The amended outline of coverage must prominently
5 state that it is not the policy or contract for which
6 application was made.
7 (b) The Insurance Commissioner shall issue regulations
8 prescribing the format of all policies and forms as well as of
9 the outline of coverage required by subsection (a). "Format"
10 means style, arrangement, and overall appearance, including such
11 items as the size, color and prominence of type and the
12 arrangement of text and captions. The outline of coverage shall
13 include, in a form understandable to a person of average
14 intelligence and education:
15 (1) a statement identifying the applicable category or
16 categories of coverage provided by the policy or contract as
17 prescribed in section 4;
18 (2) a description of the principal benefits and coverage
19 provided in the policy or contract;
20 (3) a statement of the exceptions, reductions and
21 limitations contained in the policy or contract;
22 (4) a statement of the renewal provisions including any
23 reservation by the insurer of a right to change premiums; and
24 (5) a statement that the outline is a summary of the policy
25 or contract issued or applied for and that the policy or
26 contract should be consulted to determine governing contractual
27 provisions.
28 Section 6. Pre-existing Conditions.--(a) Notwithstanding the
29 provisions of section 618(A)(2) of The Insurance Company Law of
30 1921, if an insurer elects to use a simplified application form,
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1 with or without a question as to the applicant's health at the
2 time of application, but without any questions concerning the
3 insured's health history or medical treatment history, the
4 policy must cover any loss occurring after 12 months from any
5 pre-existing condition not specifically excluded from coverage
6 by terms of the policy, and, except as so provided, the policy
7 or contract shall not include wording that would permit a
8 defense based upon pre-existing conditions.
9 Section 7. Effect of Regulations on Policies.--(a)
10 Notwithstanding any other provision of law, when a regulation
11 has been adopted pursuant to this act, all policies of accident
12 and health insurance which are not in compliance with such
13 regulation, may no longer be issued as of the date specified in
14 such regulation, not less than 60 days following its effective
15 date.
16 (b) When a regulation adopted pursuant to this act so
17 provides, a policy of accident and health insurance which does
18 not comply with the regulation shall be construed, and the
19 insurer of such policy shall be liable, as if the policy did
20 comply with the regulation. This subsection shall apply as of
21 the date specified in the regulation to all such policies
22 issued, amended, renewed, or converted thereafter.
23 Section 8. Effective Date.--This act shall take effect in
24 180 days.
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