PRIOR PRINT'S NO. 725 PRINTER'S NO. 2233
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; 19750H0646B2233 - 3 -
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) 19750H0646B2233 - 4 -
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. B5L37RC/19750H0646B2233 - 7 -