SENATE AMENDED PRIOR PRINTER'S NOS. 725, 2233 PRINTER'S NO. 2865
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
SENATOR HANKINS, INSURANCE, IN SENATE, AS AMENDED, MARCH 8, 1976
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 required 20 disclosures for their sale for individual policies of accident 21 and health insurance and subscriber contracts of health plan 22 corporations and nonprofit health service plans and certificates 23 issued by fraternal benefit societies and required disclosures 24 for their sale. These regulations shall be in addition to 25 applicable laws of this Commonwealth and may cover but shall not 26 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; 19750H0646B2865 - 2 -
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, SUBSCRIBER, any person insured under the <-- 20 policy, or 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; 19750H0646B2865 - 3 -
1 (4) major medical expense coverage; 2 (5) disability income protection coverage; 3 (6) accident only coverage; 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 (7) 11 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 THOSE categories of coverage listed in <-- 15 paragraphs (1) through (8) of subsection (a) which are contained 16 within the policy or contract unless the Insurance Commissioner 17 finds THAT 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. NOT BE UNJUST, <-- 20 UNFAIR OR UNFAIRLY DISCRIMINATORY TO THE POLICYHOLDER, 21 SUBSCRIBER, ANY PERSON INSURED UNDER THE POLICY, OR BENEFICIARY. 22 CHANGES TO A POLICY OR CONTRACT REQUIRED BY REGULATIONS 23 PROMULGATED PURSUANT TO THIS ACT, INCLUDING CHANGES TO PREMIUM 24 RATES APPLICABLE THERETO, SHALL BE PERMITTED BY ENDORSEMENT OR 25 RIDER UNLESS THE COMMISSIONER SHALL DETERMINE THAT SUCH CHANGE 26 OR CHANGES SUBSTANTIALLY ALTERS THE POLICY OR CONTRACT. 27 (D) NOTWITHSTANDING ANY OTHER PROVISION OF THIS ACT OR 28 REGULATIONS PROMULGATED HEREUNDER, ANY POLICY OR CONTRACT 29 SUBMITTED FOR APPROVAL WHICH DOES NOT MEET THE PRESCRIBED 30 MINIMUM STANDARDS FOR THOSE CATEGORIES OF COVERAGE LISTED IN 19750H0646B2865 - 4 -
1 PARAGRAPHS (1) THROUGH (8) OF SUBSECTION (A) WHICH ARE CONTAINED 2 WITHIN THE POLICY OR CONTRACT MAY BE APPROVED IF, IN THE OPINION 3 OF THE INSURANCE COMMISSIONER, SUCH POLICY OR CONTRACT IS NOT 4 UNJUST, UNFAIR, OR UNFAIRLY DISCRIMINATORY TO THE POLICYHOLDER, 5 SUBSCRIBER, ANY PERSON INSURED UNDER THE POLICY OR BENEFICIARY. 6 (d) (E) The Insurance Commissioner shall issue regulations <-- 7 prescribing the method of identification of policies and 8 contracts based upon coverages provided. 9 Section 5. Outline of Coverage.--(a) In order to provide for 10 full and fair disclosure in the sale of individual accident and 11 health insurance policies or subscriber contracts of a health 12 plan corporation or a nonprofit health service plan or 13 certificates issued by fraternal benefit societies, EXCEPT FOR <-- 14 SUPPLEMENTAL POLICIES SOLD ON THE DEBIT PLAN, AND EXCEPT FOR 15 RIDERS OR AMENDMENTS TO POLICIES OR CONTRACTS, no such policy or 16 contract shall be delivered or issued for delivery in this State 17 unless the outline of coverage described in subsection (b) 18 either accompanies the policy or is delivered to the applicant 19 at the time application is made. and an acknowledgment of <-- 20 receipt or certificate of delivery of such outline is provided 21 the insurer. In the event the policy is issued on a basis other 22 than that applied for, an amended outline of coverage properly 23 describing the policy or contract must accompany the policy or 24 contract when it is delivered. The amended outline of coverage 25 must prominently state that it is not the policy or contract for 26 which application was made. 27 (b) The Insurance Commissioner shall issue regulations 28 prescribing the format and contents of the outline of coverage 29 required by subsection (a). "Format" means style, arrangement, 30 and overall appearance, including such items as the size, color 19750H0646B2865 - 5 -
1 and prominence of type and the arrangement of text and captions. 2 The outline of coverage shall include, in a form understandable 3 to a person of average intelligence and education: 4 (1) a statement identifying the applicable category or 5 categories of coverage provided by the policy or contract as 6 prescribed in section 4; 7 (2) a description of the principal benefits and coverage 8 provided in the policy or contract; 9 (3) a statement of the exceptions, reductions and 10 limitations contained in the policy or contract; 11 (4) a statement of the renewal provisions including any 12 reservation by the insurer of a right to change premiums; and 13 (5) a statement that the outline is a summary of the policy 14 or contract issued or applied for and that the policy or 15 contract should be consulted to determine governing contractual 16 provisions. 17 Section 6. Pre-existing Conditions.--(a) Notwithstanding the 18 provisions of section 618(A)(2) of The Insurance Company Law of 19 1921, if an insurer elects to use a simplified application form, 20 with or without a question as to the applicant's health at the 21 time of application, but without any questions concerning the 22 insured's health history or medical treatment history, the 23 policy must cover any loss occurring after 12 months from any 24 pre-existing condition not specifically excluded from coverage 25 by terms of the policy, and, except as so provided, the policy 26 or contract shall not include wording that would permit a 27 defense based upon pre-existing conditions. CHANGES TO POLICIES <-- 28 OR CONTRACTS REQUIRED UNDER THIS SECTION, INCLUDING CHANGES TO 29 PREMIUM RATES APPLICABLE THERETO, SHALL BE PERMITTED BY 30 ENDORSEMENT OR RIDER. 19750H0646B2865 - 6 -
1 Section 7. Effective Dates of Regulations.--Regulations <-- 2 promulgated under the act shall specify an effective date 3 applicable to policy and benefit riders delivered or issued for 4 delivery in this Commonwealth on and after said effective date 5 which shall not be less than 180 days after the adoption or 6 promulgation. 7 SECTION 7. EFFECTIVE DATES OF REGULATIONS; HEARINGS.--ALL <-- 8 REGULATIONS PROMULGATED UNDER THIS ACT, INCLUDING THOSE RELATING 9 TO SECTION 4(C), SHALL SPECIFY AN EFFECTIVE DATE APPLICABLE TO 10 POLICIES OR BENEFIT RIDERS DELIVERED OR ISSUED FOR DELIVERY IN 11 THIS COMMONWEALTH ON OR AFTER SAID EFFECTIVE DATE WHICH SHALL 12 NOT BE LESS THAN 365 DAYS AFTER THEIR ADOPTION OR PROMULGATION. 13 ALL REGULATIONS PROMULGATED PURSUANT TO THIS ACT SHALL BE ISSUED 14 IN ACCORDANCE WITH THE APPLICABLE PROVISIONS OF THE ACT OF JULY 15 31, 1968 (P.L.769, NO.240), KNOWN AS THE "COMMONWEALTH DOCUMENTS 16 LAW." PUBLIC HEARINGS SHALL BE HELD PRIOR TO THE PROMULGATION OF 17 ANY SUCH REGULATION, INCLUDING A VERBATIM TRANSCRIPT AND CROSS- 18 EXAMINATION OF ALL WITNESSES IN ACCORDANCE WITH APPLICABLE RULES 19 OF PROCEDURE, UNLESS SUCH REGULATION OR AMENDMENT IS 20 INSUBSTANTIAL. THE ORDER PROMULGATING ANY SUCH REGULATION SHALL 21 CONTAIN FINDINGS AND THE REASONS FOR THE REGULATION; PROVIDED 22 THAT THIS SECTION SHALL NOT CREATE OR PERMIT ANY RIGHT OF ACTION 23 AT LAW OR EQUITY NOT OTHERWISE AUTHORIZED OR PERMITTED UNDER THE 24 LAW OF THE COMMONWEALTH. COPIES OF SUCH ORDERS SHALL BE MAILED 25 TO THOSE APPEARING OF RECORD AT THE HEARING. B5L37RC/19750H0646B2865 - 7 -