PRINTER'S NO. 4180
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2730
Session of
2020
INTRODUCED BY THOMAS, DeLUCA, ZIMMERMAN AND FRANKEL,
JULY 30, 2020
REFERRED TO COMMITTEE ON INSURANCE, JULY 30, 2020
AN ACT
Providing for short-term limited duration insurance policies,
regulations, for fines and penalties and for repeals.
TABLE OF CONTENTS
Section 1. Short title.
Section 2. Definitions.
Section 3. Construction of terms.
Section 4. Disclosure requirements.
Section 5. Acknowledgment of disclosures.
Section 6. Supervision of disclosures.
Section 7. Underwriting requirements.
Section 8. Waiting period prohibition.
Section 9. Coverage term limitations.
Section 10. Free-look period.
Section 11. Minimum standards.
Section 12. Sales limitations.
Section 13. Compliance.
Section 14. Enforcement.
Section 15. Regulations.
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Section 16. Agency coordination.
Section 17. Applicability.
Section 18. Repeal.
Section 19. Effective date.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Short-Term
Limited Duration Insurance Minimum Requirements Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Commissioner." The Insurance Commissioner of the
Commonwealth.
"Department." The Insurance Department of the Commonwealth.
"Enrollee." A policyholder, subscriber, covered person or
other individual eligible to receive health care services under
a short-term limited duration insurance policy.
"Individual market policy." A policy, subscriber contract,
certificate or plan issued by an insurer that provides medical
or health care coverage for 12 consecutive months to an
individual other than in connection with a group plan.
"Insurance producer." As defined under section 601-A of the
act of May 17, 1921 (P.L.789, No.285), known as The Insurance
Department Act of 1921.
"Insurer." An entity licensed by the department with
accident and health authority to issue a policy, subscriber
contract, certificate or plan that provides medical or health
care coverage and is offered or governed under any of the
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following:
(1) The act of May 17, 1921 (P.L.682, No.284), known as
The Insurance Company Law of 1921, including section 630 and
Article XXIV of that act.
(2) The act of December 29, 1972 (P.L.1701, No.364),
known as the Health Maintenance Organization Act.
(3) 40 Pa.C.S. Ch. 61 (relating to hospital plan
corporations).
(4) 40 Pa.C.S. Ch. 63 (relating to professional health
services plan corporations).
"Medical loss ratio" or "MLR". The ratio of an insurer's
incurred claims to the insurer's earned premiums for a plan
year.
"Short-term limited duration insurance policy." A policy,
subscriber contract, certificate or plan issued by an insurer
that provides medical or health care coverage for less than 12
consecutive months. In addition to hospital and medical-surgical
coverages, the policy may include any of the following
coverages:
(1) Accident only coverage.
(2) Specified disease coverage.
(3) Fixed indemnity coverage.
The term does not include any of the following:
(1) Credit only coverage.
(2) Long-term care or disability income coverage.
(3) Medicare supplement coverage.
(4) A TRICARE policy, including a Civilian Health and
Medical Program of the Uniformed Services (CHAMPUS)
supplement policy.
(5) Dental only coverage.
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(6) Vision only coverage.
(7) Workers' compensation coverage.
(8) An automobile medical payment policy under 75
Pa.C.S. (relating to vehicles).
Section 3. Construction of terms.
On or after the effective date of this act, the terms
"limited benefit policy," "limited benefits" and "excepted
benefits," insofar as they may be used in the insurance laws of
the Commonwealth to refer to insurance policies, may not be
construed to apply to short-term limited duration insurance
policies.
Section 4. Disclosure requirements.
(a) Written disclosure.--In addition to any disclosure
requirements prescribed by Federal or State law or regulation,
an application and all accompanying materials for a short-term
limited duration insurance policy offered or issued or renewed
in this Commonwealth must include the following:
(1) A written disclosure on a page that contains no
other text which is included as the first and last pages of
each document, in no less than 14-point font, in the
following format, stating verbatim:
This is a LIMITED POLICY meant only TO FILL TEMPORARY
GAPS between comprehensive major medical health
insurance coverages.
This policy is NOT COMPREHENSIVE MAJOR MEDICAL HEALTH
INSURANCE COVERAGE and may only offer LIMITED
PROTECTION if you are deemed to have a pre-existing
condition, become sick or sustain an injury. It is
essential to READ THE TERMS AND CONDITIONS OF THIS
POLICY CAREFULLY to ensure that you understand what
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this policy does and does not cover.
Failure to fully understand the terms and conditions
of this policy may result in SIGNIFICANT MEDICAL CARE
EXPENSE FOR WHICH YOU ARE RESPONSIBLE.
This coverage SHOULD NOT BE PURCHASED AS A SUBSTITUTE
FOR COMPREHENSIVE MAJOR MEDICAL HEALTH INSURANCE
COVERAGE.
(2) A statement of the MLR for the insurer's short-term
limited duration insurance policy for the most recent
calendar year for which it is calculable, stating verbatim,
including values for the bracketed items, the following:
[Name of Insurer] had a [%] medical loss ratio on our
short-term limited duration insurance product in [year].
The medical loss ratio, or MLR, measures the amount of
each premium dollar that we spend on medical claims. The
amount that is not spent on medical claims is spent on
overhead expenses like marketing, salaries and profit.
For comparison, an individual plan that is compliant with
the Affordable Care Act must have at least an 80% MLR.
(3) An outline of coverage that satisfies the
requirements of the act of May 18, 1976 (P.L.123, No.54),
known as the Individual Accident and Sickness Insurance
Minimum Standards Act.
(4) Coverage examples, as specified by the department in
a notice posted on or before July 1 of each calendar year on
the department's publicly accessible Internet website and
published in the Pennsylvania Bulletin, that clearly
illustrate to an applicant of average intelligence and
education the benefits provided under the policy and the
policy's coverage for a minimum of six common benefits
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scenarios, including chronic medical conditions, in
accordance with the following:
(i) Each benefits scenario will be a hypothetical
situation, consisting of a sample treatment plan for a
specified medical condition during a specific period of
time, based on recognized clinical practice guidelines.
(ii) Each coverage example must illustrate benefits
and coverage for a particular benefits scenario to
provide an estimate of what an individual might expect to
pay under the policy. The illustration of benefits
provided must take into account any cost sharing,
excluded benefits and other limitations on coverage in
the policy.
(b) Verbal disclosure.--Prior to consummating a sale of a
short-term limited duration insurance policy, an insurer's
representative or an insurance producer shall verbally explain
the parameters and limitations of the coverage provided by the
short-term limited duration insurance policy.
Section 5. Acknowledgment of disclosures.
An insurer or insurance producer that sells a short-term
limited duration insurance policy shall maintain a record of a
written acknowledgment that contains the following:
(1) A description of the verbal disclosure required by
section 4(b), the name of the person who provided the verbal
disclosure and the date on which it was provided.
(2) A signed certification by the person who provided
the verbal disclosure required by section 4(b) attesting,
pursuant to 18 Pa.C.S. § 4904 (relating to unsworn
falsification to authorities), that the verbal disclosure was
timely provided to the consumer purchasing the policy.
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(3) A signed certification by the enrollee purchasing
the policy, attesting, pursuant to 18 Pa.C.S. § 4904, that an
insurer's representative or an insurance producer provided
the verbal disclosure prior to the consummation of the sale
of the policy as required by section 4(b).
Section 6. Supervision of disclosures.
(a) Insurer responsibility.--An insurer offering, issuing or
renewing a short-term limited duration insurance policy in this
Commonwealth shall establish a supervision system that is
reasonably designed to ensure that each sale, whether directly
or through a producer, to an enrollee in this Commonwealth
complies with the requirements of this act. The insurer's
supervision system shall include at least the following:
(1) Maintaining written supervision procedures.
(2) Conducting regular reviews of disclosure materials
used during the solicitation or sale of a short-term limited
duration insurance policy.
(3) Contacting an enrollee within 10 days of issuing an
enrollee's policy to verify that an enrollee's policy is
consistent with the representations made to an enrollee
during the sale of a policy and with the requirements of this
act.
(b) Independent agency responsibility.--A general agent or
independent agency shall adopt a supervision system established
by an insurer that meets the requirements under subsection (a)
to supervise sales and solicitations of the insurer's short-term
limited duration insurance policies to ensure that each sale of
a short-term limited duration insurance policy to an enrollee in
this Commonwealth complies with the requirements of this act.
Section 7. Underwriting requirements.
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(a) General rule.--Each request for information solicited
from an applicant in the course of underwriting short-term
limited duration insurance policy coverage must be in the form
of a single direct question that permits a direct response of
known fact in the form of a "Yes" or "No." A request for
information may not be a compound question or declaratory
statement. This information may be used for underwriting
purposes subject to the following:
(1) Specific questions. An application for a short-term
limited duration insurance policy may solicit information
through questions about a potential enrollee's medical
history only if it relates to a specific condition (whether
physical or behavioral), regardless of the cause of the
specific condition, for which medical advice, diagnosis, care
or treatment was recommended or received.
(2) Look-back period. Each question about a potential
enrollee's medical history on an application for a short-term
limited duration insurance policy may only solicit
information about specific conditions for which the enrollee
received or was recommended medical advice, diagnosis, care
or treatment within the five-year period ending on the date
that an application is completed.
(3) Post-claim submission. When determining whether a
submitted claim is payable under a short-term limited
duration insurance policy, an issuer may only rely on the
enrollee's answers to the issuer's questions included in the
application for the policy.
(b) Fraud and nondisclosure.--An issuer may not claim that
an enrollee has committed fraud or otherwise given ground for
the issuer to pursue rescission of the policy unless the issuer
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demonstrates that an enrollee made a false statement with the
intent to deceive the issuer and the false statement materially
affected the issuer's acceptance of the risk.
Section 8. Waiting period prohibition.
A short-term limited duration insurance policy may not
establish a waiting period after the enrollee has purchased the
policy before the enrollee is eligible to be covered for
benefits under the terms of the policy.
Section 9. Coverage term limitations.
(a) Policy period.--The policy period of a short-term
limited duration insurance policy may:
(1) be for up to 90 consecutive days, but in no event
may it extend beyond the last day of the calendar year in
which the policy takes effect;
(2) not begin in a different calendar year than the
calendar year in which it is offered or issued; and
(3) be renewed for consecutive policy periods during the
calendar year in which it is offered or issued.
(b) Renewability.-- A short-term limited duration insurance
policy may be renewed as follows:
(1) At the option of the policyholder.
(2) For consecutive policy periods consistent with the
requirements of subsection (a).
Section 10. Free-look period.
A short-term limited duration insurance policy must have a
notice prominently placed on the cover page of the policy
stating that the enrollee must be permitted to return the policy
within at least 20 days of the policy's delivery and to have any
premium paid refunded if the enrollee is not satisfied with the
policy for any reason. Upon return of the policy to the insurer
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or insurance producer who issued or sold the policy, the policy
shall be considered void and the parties shall be in the same
position as if no policy had been issued.
Section 11. Minimum standards.
Short-term limited duration insurance policies must comply
with the standards set forth for basic medical-surgical expense
coverage and basic hospital expense coverage in the act of May
18, 1976 (P.L.123, No.54), known as the Individual Accident and
Sickness Insurance Minimum Standards Act.
Section 12. Sales limitations.
(a) Prohibitions.--The following shall apply:
(1) An insurer may not issue more than one short-term
limited duration insurance policy per calendar year to an
enrollee.
(2) An insurance producer may not sell more than one
short-term limited duration insurance policy per calendar
year to an enrollee.
(b) Policy may be renewed.--Notwithstanding subsection (a),
a policy issued or sold may be renewed, consistent with section
9, during the same calendar year in which the policy is issued
or sold.
(c) Association or trust.--If a short-term limited duration
insurance policy is issued to, or offered through, an
association or a trust or trustees of a trust that is
established or participated in by one or more associations, to
insure association members or spouses or dependents of members,
the association must meet the bona fide association requirements
in section 621.2 of the act of May 17, 1921 (P.L.682, No.284),
known as The Insurance Company Law of 1921, and the coverage
provided by the policy must be in compliance with all
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requirements of the laws of this Commonwealth.
Section 13. Compliance.
An insurer or insurance producer may not advertise, market,
solicit, sell or otherwise represent to the public a short-term
limited duration insurance policy that does not comply with this
act.
Section 14. Enforcement.
(a) General rule.--Upon satisfactory evidence of a violation
of this act by an insurer, insurance producer or other person,
the commissioner may, in the commissioner's discretion, pursue
any of the following courses of action:
(1) Suspend, revoke or refuse to renew the license of
the offending insurer or insurance producer.
(2) Enter a cease and desist order.
(3) Impose a civil penalty of not more than $5,000 for
each action in violation of this act.
(4) Impose a civil penalty of not more than $10,000 for
each action in willful violation of this act.
(b) Responsibility for violation.--The following shall
apply:
(1) An insurer may be held independently responsible for
an insurance producer's violation of this act.
(2) A general agent or independent agency may be held
independently responsible for an insurance producer's
violation of this act.
(c) Limitation.--The following shall apply:
(1) Penalties imposed against an insurance producer for
actions in violation of this act shall not exceed $25,000 in
one calendar year.
(2) Penalties imposed against an insurer for actions in
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violation of this act shall not exceed $500,000 in one
calendar year.
(d) Remedies not exclusive.--The enforcement remedies
imposed under this section are in addition to any other remedies
or penalties that may be imposed under any other applicable law
of this Commonwealth, including:
(1) Article VI-A of the act of May 17, 1921 (P.L.789,
No.285), known as The Insurance Department Act of 1921.
(2) The act of July 22, 1974 (P.L.589, No.205), known as
the Unfair Insurance Practices Act. Violations of this act
shall be deemed to be an unfair method of competition and an
unfair or deceptive act or practice under the Unfair
Insurance Practices Act.
(3) The act of May 18, 1976 (P.L.123, No.54), known as
the Individual Accident and Sickness Insurance Minimum
Standards Act.
(4) The act of December 18, 1996 (P.L.1066, No.159),
known as the Accident and Health Filing Reform Act.
(e) Administrative procedure.--The administrative provisions
of this section shall be subject to 2 Pa.C.S. Ch. 5 Subch. A
(relating to practice and procedure of Commonwealth agencies). A
party against whom penalties are assessed in an administrative
action may appeal to Commonwealth Court as provided in 2 Pa.C.S.
Ch. 7 Subch. A (relating to judicial review of Commonwealth
agency action).
Section 15. Regulations.
The department may promulgate regulations as may be necessary
and appropriate to carry out the provisions of this act.
Section 16. Agency coordination.
(a) Investigative materials.--The department may provide to
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the Office of Attorney General any investigative materials it
receives pursuant to this act.
(b) Construction.--Nothing in this act shall be construed to
limit the ability of the department or the Office of Attorney
General from using information received under this act in the
course of their regulatory or law enforcement duties under any
other law.
Section 17. Applicability.
(a) General rule.--This act applies to all short-term
limited duration insurance policies offered, issued or renewed
in this Commonwealth on or after the effective date of this act.
(b) Compliance.--Notwithstanding any provision of law to the
contrary, and without regard to the entity that issues the
policy or is covered by the policy, a short-term limited
duration insurance policy offered, issued or renewed must comply
with all requirements of the act of May 17, 1921 (P.L.682,
No.284), known as The Insurance Company Law of 1921.
Section 18. Repeal.
All acts and parts of acts are repealed insofar as they are
inconsistent with this act.
Section 19. Effective date.
This act shall take effect immediately.
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