PRIOR PRINT'S NO. 725                         PRINTER'S NO. 2233

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 646 Session of 1975


        INTRODUCED BY MESSRS. A. K. HUTCHINSON, STAHL, SCHMITT,
           MRS. GILLETTE, MESSRS. BARBER, TRELLO, MRS. TOLL, AND
           MR. COHEN, MARCH 4, 1975

        AS REPORTED FROM COMMITTEE ON CONSUMER PROTECTION, AS AMENDED,
           SEPTEMBER 25, 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

     1  1921 and 40 Pa. C.S. § 6526, other than credit accident and
     2  health insurance.
     3     "Forms" means policies, contracts, riders, endorsements, and
     4  applications subject to approval by the Insurance Commissioner,
     5  under section 354 of The Insurance Company Law of 1921 or
     6  section 11 of the Voluntary Nonprofit Health Service Act of
     7  1972, or 40 Pa. C.S. §§ 6124 and 6329.
     8     "Policy" means the entire contract between the insurer and
     9  the insured, including the policy, riders, endorsements and the
    10  application, if attached, and also includes subscriber contracts
    11  issued by health plan corporations, nonprofit health service
    12  plans and certificates issued by fraternal benefit societies.
    13     (b) Health plan corporations, nonprofit health service plans
    14  and fraternal benefit societies shall be deemed to be engaged in
    15  the business of insurance.
    16     Section 3.  Standards for Policy Provisions.--(a) The
    17  Insurance Commissioner shall issue regulations to establish
    18  specific standards, including standards of full and fair
    19  disclosure, that set forth the manner, content and format         <--
    20  REQUIRED DISCLOSURES FOR THEIR SALE for individual policies of    <--
    21  accident and health insurance and subscriber contracts of health
    22  plan corporations and nonprofit health service plans and
    23  certificates issued by fraternal benefit societies and required
    24  disclosures for their sale. These regulations shall be in
    25  addition to applicable laws of this Commonwealth and may cover
    26  but shall not be limited to:
    27      (1)  terms of renewability;
    28      (2)  initial and subsequent conditions of eligibility;
    29      (3)  non-duplication of coverage provisions;
    30      (4)  coverage of dependents;
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     1      (5)  pre-existing conditions;
     2      (6)  termination of insurance;
     3      (7)  probationary periods;
     4      (8) limitations;
     5      (9) exceptions;
     6     (10) reductions;
     7     (11) elimination periods;
     8     (12)  requirements for replacement;
     9     (13)  recurrent conditions; and
    10     (14)  the definition of terms, including but not limited to,
    11  the following:  "hospital," "accident," "sickness," "injury,"
    12  "physician," "accidental means," "total disability," partial
    13  disability," "nervous disorder," "guaranteed renewable," and
    14  "non-cancellable."
    15     (b)  The Insurance Commissioner may issue regulations that
    16  specify prohibited policy provisions not otherwise specifically
    17  prohibited by statute which in the opinion of the Insurance
    18  Commissioner are unjust, unfair, or unfairly discriminatory to
    19  the policyholder, any person insured under the policy, or
    20  beneficiary.
    21     Section 4.  Minimum Standards for Benefits.--(a) The
    22  Insurance Commissioner shall issue regulations to establish
    23  minimum standards for benefits under each of the following
    24  categories of coverage in individual policies of accident and
    25  health insurance and subscriber contracts of health plan
    26  corporations and nonprofit health service plans and certificates
    27  issued by fraternal benefit societies:
    28     (1)  basic hospital expense coverage;
    29     (2)  basic medical-surgical expense coverage;
    30     (3)  hospital confinement indemnity coverage;
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     1     (4)  major medical expense coverage;
     2     (5)  disability income protection coverage;
     3     (6)  accident only coverage; and                               <--
     4     (7)  specified disease or specified accident coverage; AND     <--
     5     (8)  SUPPLEMENTAL COVERAGE SHALL BE PERMITTED FOR ALL
     6  PRECEDING CATEGORIES OF COVERAGES WITH THE EXCEPTION OF
     7  PARAGRAPH (7).
     8     (b)  Nothing in this section shall preclude the issuance of
     9  any policy or contract which combines two or more of the
    10  categories of coverage enumerated in paragraphs (1) through (6)   <--
    11  (7) of subsection (a).
    12     (c)  No policy or contract shall be delivered or issued for
    13  delivery in this State which does not meet the prescribed
    14  minimum standards for the categories of coverage listed in
    15  paragraphs (1) through (7) (8) of subsection (a) which are        <--
    16  contained within the policy or contract unless the Insurance
    17  Commissioner finds such policy or contract will be in the public
    18  interest and such policy or contract provides benefits that are
    19  reasonable in relation to the premium charged.
    20     (d)  The Insurance Commissioner shall issue regulations
    21  prescribing the method of identification of policies and
    22  contracts based upon coverages provided.
    23     Section 5.  Outline of Coverage.--(a) In order to provide for
    24  full and fair disclosure in the sale of individual accident and
    25  health insurance policies or subscriber contracts of a health
    26  plan corporation or a nonprofit health service plan or
    27  certificates issued by fraternal benefit societies, no such
    28  policy or contract shall be delivered or issued for delivery in
    29  this State unless (i) in the case of a direct response insurance  <--
    30  product, the outline of coverage described in subsection (b)
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     1  EITHER accompanies the policy; (ii) in all other cases, the       <--
     2  outline of coverage described in subsection (b) OR is delivered   <--
     3  to the applicant at the time application is made and an
     4  acknowledgment of receipt or certificate of delivery of such
     5  outline is provided the insurer. with the application. In the     <--
     6  event the policy is issued on a basis other than that applied
     7  for, an amended outline of coverage properly describing the
     8  policy or contract must accompany the policy or contract when it
     9  is delivered. The amended outline of coverage must prominently
    10  state that it is not the policy or contract for which
    11  application was made.
    12     (b)  The Insurance Commissioner shall issue regulations
    13  prescribing the format of all policies and forms as well as AND   <--
    14  CONTENTS of the outline of coverage required by subsection (a).
    15  "Format" means style, arrangement, and overall appearance,
    16  including such items as the size, color and prominence of type
    17  and the arrangement of text and captions. The outline of
    18  coverage shall include, in a form understandable to a person of
    19  average intelligence and education:
    20     (1) a statement identifying the applicable category or
    21  categories of coverage provided by the policy or contract as
    22  prescribed in section 4;
    23     (2)  a description of the principal benefits and coverage
    24  provided in the policy or contract;
    25     (3)  a statement of the exceptions, reductions and
    26  limitations contained in the policy or contract;
    27     (4)  a statement of the renewal provisions including any
    28  reservation by the insurer of a right to change premiums; and
    29     (5)  a statement that the outline is a summary of the policy
    30  or contract issued or applied for and that the policy or
    19750H0646B2233                  - 5 -

     1  contract should be consulted to determine governing contractual
     2  provisions.
     3     Section 6.  Pre-existing Conditions.--(a) Notwithstanding the
     4  provisions of section 618(A)(2) of The Insurance Company Law of
     5  1921, if an insurer elects to use a simplified application form,
     6  with or without a question as to the applicant's health at the
     7  time of application, but without any questions concerning the
     8  insured's health history or medical treatment history, the
     9  policy must cover any loss occurring after 12 months from any
    10  pre-existing condition not specifically excluded from coverage
    11  by terms of the policy, and, except as so provided, the policy
    12  or contract shall not include wording that would permit a
    13  defense based upon pre-existing conditions.
    14     Section 7.  Effect of Regulations on Policies.--(a)            <--
    15  Notwithstanding any other provision of law, when a regulation
    16  has been adopted pursuant to this act, all policies of accident
    17  and health insurance which are not in compliance with such
    18  regulation, may no longer be issued as of the date specified in
    19  such regulation, not less than 60 days following its effective
    20  date.
    21     (b)  When a regulation adopted pursuant to this act so
    22  provides, a policy of accident and health insurance which does
    23  not comply with the regulation shall be construed, and the
    24  insurer of such policy shall be liable, as if the policy did
    25  comply with the regulation. This subsection shall apply as of
    26  the date specified in the regulation to all such policies
    27  issued, amended, renewed, or converted thereafter.
    28     Section 8.  Effective Date.--This act shall take effect in
    29  180 days.
    30     SECTION 7.  EFFECTIVE DATES OF REGULATIONS.--REGULATIONS       <--
    19750H0646B2233                  - 6 -

     1  PROMULGATED UNDER THE ACT SHALL SPECIFY AN EFFECTIVE DATE
     2  APPLICABLE TO POLICY AND BENEFIT RIDERS DELIVERED OR ISSUED FOR
     3  DELIVERY IN THIS COMMONWEALTH ON AND AFTER SAID EFFECTIVE DATE
     4  WHICH SHALL NOT BE LESS THAN 180 DAYS AFTER THE ADOPTION OR
     5  PROMULGATION.

















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