Senate Bill 0312c1

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    Florida Senate - 1999                            CS for SB 312

    By the Committee on Banking and Insurance; and Senator Lee





    311-1729A-99

  1                      A bill to be entitled

  2         An act relating to health insurance; amending

  3         s. 627.6645, F.S.; revising the notice

  4         requirements for cancellation or nonrenewal of

  5         a group health insurance policy; specifying

  6         conditions under which the insurer may

  7         retroactively cancel coverage due to nonpayment

  8         of premium; amending s. 627.6675, F.S.;

  9         revising the time limits for an employee or

10         group member to apply for an individual

11         converted policy when termination of group

12         coverage is due to failure of the employer to

13         pay the premium; revising the requirements for

14         the premium for the converted policy; allowing

15         a group insurer to contract with another

16         insurer to issue an individual converted policy

17         under certain conditions; amending s. 641.3108,

18         F.S.; revising the notice requirements for

19         cancellation or nonrenewal of a health

20         maintenance organization contract; specifying

21         conditions under which the organization may

22         retroactively cancel coverage due to nonpayment

23         of premium; amending s. 641.3922, F.S.;

24         revising the time limits for an employee or

25         group member to apply for a converted contract

26         from a health maintenance organization when

27         termination of group coverage is due to failure

28         of the employer to pay the premium; revising

29         the requirements for the premium for the

30         converted contract; providing an effective

31         date.

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    Florida Senate - 1999                            CS for SB 312
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  1  Be It Enacted by the Legislature of the State of Florida:

  2

  3         Section 1.  Subsection (1) of section 627.6645, Florida

  4  Statutes, is amended and subsection (5) is added to that

  5  section to read:

  6         627.6645  Notification of cancellation, expiration,

  7  nonrenewal, or change in rates.--

  8         (1)  Every insurer delivering or issuing for delivery a

  9  group health insurance policy under the provisions of this

10  part shall give the policyholder at least 45 days' advance

11  notice of cancellation, expiration, nonrenewal, or a change in

12  rates.  Such notice shall be mailed to the policyholder's last

13  address as shown by the records of the insurer.  However, if

14  cancellation is for nonpayment of premium, only the

15  requirements of subsection (5) this section shall not apply.

16  Upon receipt of such notice, the policyholder shall forward,

17  as soon as practicable, the notice of expiration,

18  cancellation, or nonrenewal to each certificateholder covered

19  under the policy.

20         (5)  If cancellation is due to nonpayment of premium,

21  the insurer may not retroactively cancel the policy to a date

22  prior to the date that notice of cancellation was provided to

23  the policyholder unless the insurer mails notice of

24  cancellation to the policyholder prior to 45 days after the

25  date the premium was due. Such notice must be mailed to the

26  policyholder's last address as shown by the records of the

27  insurer.

28         Section 2.  Section 627.6675, Florida Statutes, 1998

29  Supplement, is amended to read:

30         627.6675  Conversion on termination of

31  eligibility.--Subject to all of the provisions of this

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    Florida Senate - 1999                            CS for SB 312
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  1  section, a group policy delivered or issued for delivery in

  2  this state by an insurer or nonprofit health care services

  3  plan that provides, on an expense-incurred basis, hospital,

  4  surgical, or major medical expense insurance, or any

  5  combination of these coverages, shall provide that an employee

  6  or member whose insurance under the group policy has been

  7  terminated for any reason, including discontinuance of the

  8  group policy in its entirety or with respect to an insured

  9  class, and who has been continuously insured under the group

10  policy, and under any group policy providing similar benefits

11  that the terminated group policy replaced, for at least 3

12  months immediately prior to termination, shall be entitled to

13  have issued to him or her by the insurer a policy or

14  certificate of health insurance, referred to in this section

15  as a "converted policy." A group insurer may meet the

16  requirements of this section by contracting with another

17  insurer, authorized in this state, to issue an individual

18  converted policy, which policy has been approved by the

19  department under s. 627.410. An employee or member shall not

20  be entitled to a converted policy if termination of his or her

21  insurance under the group policy occurred because he or she

22  failed to pay any required contribution, or because any

23  discontinued group coverage was replaced by similar group

24  coverage within 31 days after discontinuance.

25         (1)  TIME LIMIT.--Written application for the converted

26  policy shall be made and the first premium must be paid to the

27  insurer, not later than 63 days after termination of the group

28  policy. However, if termination was the result of failure to

29  pay any required premium or contribution and such nonpayment

30  of premium was due to acts of an employer or policyholder

31  other than the employee or certificateholder and written

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    Florida Senate - 1999                            CS for SB 312
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  1  notice of cancellation was not provided to the employee or

  2  certificateholder by the employer or policyholder, written

  3  application for the converted policy must be made and the

  4  first premium must be paid to the insurer not later than 63

  5  days after notice of termination is mailed by the insurer to

  6  the employee's or certificateholder's last address as shown by

  7  the records of the insurer. In such case of termination due to

  8  nonpayment of premium by the employer or policyholder, the

  9  premium for the converted policy may not exceed the rate for

10  the prior group coverage for the period of coverage under the

11  converted policy prior to the date notice of termination is

12  mailed by the insurer to the employee or certificateholder.

13  For the period of coverage after such date, the premium for

14  the converted policy is subject to the requirements of

15  subsection (3).

16         (2)  EVIDENCE OF INSURABILITY.--The converted policy

17  shall be issued without evidence of insurability.

18         (3)  CONVERSION PREMIUM; EFFECT ON PREMIUM RATES FOR

19  GROUP COVERAGE.--

20         (a)  The premium for the converted policy shall be

21  determined in accordance with premium rates applicable to the

22  age and class of risk of each person to be covered under the

23  converted policy and to the type and amount of insurance

24  provided.  However, the premium for the converted policy may

25  not exceed 200 percent of the standard risk rate as

26  established by the department, pursuant to this subsection.

27         (b)  Actual or expected experience under converted

28  policies may be combined with such experience under group

29  policies for the purposes of determining premium and loss

30  experience and establishing premium rate levels for group

31  coverage.

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    Florida Senate - 1999                            CS for SB 312
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  1         (c)  The department shall annually determine standard

  2  risk rates, using reasonable actuarial techniques and

  3  standards adopted by the department by rule. The standard risk

  4  rates must be determined as follows:

  5         1.  Standard risk rates for individual coverage must be

  6  determined separately for indemnity policies, preferred

  7  provider/exclusive provider policies, and health maintenance

  8  organization contracts.

  9         2.  The department shall survey insurers and health

10  maintenance organizations representing at least an 80 percent

11  market share, based on premiums earned in the state for the

12  most recent calendar year, for each of the categories

13  specified in subparagraph 1.

14         3.  Standard risk rate schedules must be determined,

15  computed as the average rates charged by the carriers

16  surveyed, giving appropriate weight to each carrier's

17  statewide market share of earned premiums.

18         4.  The rate schedule shall be determined from analysis

19  of the one county with the largest market share in the state

20  of all such carriers.

21         5.  The rate for other counties must be determined by

22  using the weighted average of each carrier's county factor

23  relationship to the county determined in subparagraph 4.

24         6.  The rate schedule must be determined for different

25  age brackets and family size brackets.

26         (4)  EFFECTIVE DATE OF COVERAGE.--The effective date of

27  the converted policy shall be the day following the

28  termination of insurance under the group policy.

29         (5)  SCOPE OF COVERAGE.--The converted policy shall

30  cover the employee or member and his or her dependents who

31  were covered by the group policy on the date of termination of

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    Florida Senate - 1999                            CS for SB 312
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  1  insurance.  At the option of the insurer, a separate converted

  2  policy may be issued to cover any dependent.

  3         (6)  OPTIONAL COVERAGE.--The insurer shall not be

  4  required to issue a converted policy covering any person who

  5  is or could be covered by Medicare.  The insurer shall not be

  6  required to issue a converted policy covering a person if

  7  paragraphs (a) and (b) apply to the person:

  8         (a)  If any of the following apply to the person:

  9         1.  The person is covered for similar benefits by

10  another hospital, surgical, medical, or major medical expense

11  insurance policy or hospital or medical service subscriber

12  contract or medical practice or other prepayment plan, or by

13  any other plan or program.

14         2.  The person is eligible for similar benefits,

15  whether or not actually provided coverage, under any

16  arrangement of coverage for individuals in a group, whether on

17  an insured or uninsured basis.

18         3.  Similar benefits are provided for or are available

19  to the person under any state or federal law.

20         (b)  If the benefits provided under the sources

21  referred to in subparagraph (a)1. or the benefits provided or

22  available under the sources referred to in subparagraphs (a)2.

23  and 3., together with the benefits provided by the converted

24  policy, would result in overinsurance according to the

25  insurer's standards.  The insurer's standards must bear some

26  reasonable relationship to actual health care costs in the

27  area in which the insured lives at the time of conversion and

28  must be filed with the department prior to their use in

29  denying coverage.

30         (7)  INFORMATION REQUESTED BY INSURER.--

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    Florida Senate - 1999                            CS for SB 312
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  1         (a)  A converted policy may include a provision under

  2  which the insurer may request information, in advance of any

  3  premium due date, of any person covered thereunder as to

  4  whether:

  5         1.  The person is covered for similar benefits by

  6  another hospital, surgical, medical, or major medical expense

  7  insurance policy or hospital or medical service subscriber

  8  contract or medical practice or other prepayment plan or by

  9  any other plan or program.

10         2.  The person is covered for similar benefits under

11  any arrangement of coverage for individuals in a group,

12  whether on an insured or uninsured basis.

13         3.  Similar benefits are provided for or are available

14  to the person under any state or federal law.

15         (b)  The converted policy may provide that the insurer

16  may refuse to renew the policy or the coverage of any person

17  only for one or more of the following reasons:

18         1.  Either the benefits provided under the sources

19  referred to in subparagraphs (a)1. and 2. for the person or

20  the benefits provided or available under the sources referred

21  to in subparagraph (a)3. for the person, together with the

22  benefits provided by the converted policy, would result in

23  overinsurance according to the insurer's standards on file

24  with the department.

25         2.  The converted policyholder fails to provide the

26  information requested pursuant to paragraph (a).

27         3.  Fraud or intentional misrepresentation in applying

28  for any benefits under the converted policy.

29         4.  Other reasons approved by the department.

30         (8)  BENEFITS OFFERED.--

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    Florida Senate - 1999                            CS for SB 312
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  1         (a)  An insurer shall not be required to issue a

  2  converted policy that provides benefits in excess of those

  3  provided under the group policy from which conversion is made.

  4         (b)  An insurer shall offer the benefits specified in

  5  s. 627.668 and the benefits specified in s. 627.669 if those

  6  benefits were provided in the group plan.

  7         (c)  An insurer shall offer maternity benefits and

  8  dental benefits if those benefits were provided in the group

  9  plan.

10         (9)  PREEXISTING CONDITION PROVISION.--The converted

11  policy shall not exclude a preexisting condition not excluded

12  by the group policy. However, the converted policy may provide

13  that any hospital, surgical, or medical benefits payable under

14  the converted policy may be reduced by the amount of any such

15  benefits payable under the group policy after the termination

16  of covered under the group policy. The converted policy may

17  also provide that during the first policy year the benefits

18  payable under the converted policy, together with the benefits

19  payable under the group policy, shall not exceed those that

20  would have been payable had the individual's insurance under

21  the group policy remained in force.

22         (10)  REQUIRED OPTION FOR MAJOR MEDICAL

23  COVERAGE.--Subject to the provisions and conditions of this

24  part, the employee or member shall be entitled to obtain a

25  converted policy providing major medical coverage under a plan

26  meeting the following requirements:

27         (a)  A maximum benefit equal to the lesser of the

28  policy limit of the group policy from which the individual

29  converted or $500,000 per covered person for all covered

30  medical expenses incurred during the covered person's

31  lifetime.

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    Florida Senate - 1999                            CS for SB 312
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  1         (b)  Payment of benefits at the rate of 80 percent of

  2  covered medical expenses which are in excess of the

  3  deductible, until 20 percent of such expenses in a benefit

  4  period reaches $2,000, after which benefits will be paid at

  5  the rate of 90 percent during the remainder of the contract

  6  year unless the insured is in the insurer's case management

  7  program, in which case benefits shall be paid at the rate of

  8  100 percent during the remainder of the contract year.  For

  9  the purposes of this paragraph, "case management program"

10  means the specific supervision and management of the medical

11  care provided or prescribed for a specific individual, which

12  may include the use of health care providers designated by the

13  insurer.  Payment of benefits for outpatient treatment of

14  mental illness, if provided in the converted policy, may be at

15  a lesser rate but not less than 50 percent.

16         (c)  A deductible for each calendar year that must be

17  $500, $1,000, or $2,000, at the option of the policyholder.

18         (d)  The term "covered medical expenses," as used in

19  this subsection, shall be consistent with those customarily

20  offered by the insurer under group or individual health

21  insurance policies but is not required to be identical to the

22  covered medical expenses provided in the group policy from

23  which the individual converted.

24         (11)  ALTERNATIVE PLANS.--The insurer shall, in

25  addition to the option required by subsection (10), offer the

26  standard health benefit plan, as established pursuant to s.

27  627.6699(12). The insurer may, at its option, also offer

28  alternative plans for group health conversion in addition to

29  the plans required by this section.

30         (12)  RETIREMENT COVERAGE.--If coverage would be

31  continued under the group policy on an employee following the

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  1  employee's retirement prior to the time he or she is or could

  2  be covered by Medicare, the employee may elect, instead of

  3  such continuation of group insurance, to have the same

  4  conversion rights as would apply had his or her insurance

  5  terminated at retirement by reason or termination of

  6  employment or membership.

  7         (13)  REDUCTION OF COVERAGE DUE TO MEDICARE.--The

  8  converted policy may provide for reduction of coverage on any

  9  person upon his or her eligibility for coverage under Medicare

10  or under any other state or federal law providing for benefits

11  similar to those provided by the converted policy.

12         (14)  CONVERSION PRIVILEGE ALLOWED.--The conversion

13  privilege shall also be available to any of the following:

14         (a)  The surviving spouse, if any, at the death of the

15  employee or member, with respect to the spouse and the

16  children whose coverages under the group policy terminate by

17  reason of the death, otherwise to each surviving child whose

18  coverage under the group policy terminates by reason of such

19  death, or, if the group policy provides for continuation of

20  dependents' coverages following the employee's or member's

21  death, at the end of such continuation.

22         (b)  The former spouse whose coverage would otherwise

23  terminate because of annulment or dissolution of marriage, if

24  the former spouse is dependent for financial support.

25         (c)  The spouse of the employee or member upon

26  termination of coverage of the spouse, while the employee or

27  member remains insured under the group policy, by reason of

28  ceasing to be a qualified family member under the group

29  policy, with respect to the spouse and the children whose

30  coverages under the group policy terminate at the same time.

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  1         (d)  A child solely with respect to himself or herself

  2  upon termination of his or her coverage by reason of ceasing

  3  to be a qualified family member under the group policy, if a

  4  conversion privilege is not otherwise provided in this

  5  subsection with respect to such termination.

  6         (15)  BENEFIT LEVELS.--If the benefit levels required

  7  in subsection (10) exceed the benefit levels provided under

  8  the group policy, the conversion policy may offer benefits

  9  which are substantially similar to those provided under the

10  group policy in lieu of those required in subsection (10).

11         (16)  GROUP COVERAGE INSTEAD OF INDIVIDUAL

12  COVERAGE.--The insurer may elect to provide group insurance

13  coverage instead of issuing a converted individual policy.

14         (17)  NOTIFICATION.--A notification of the conversion

15  privilege shall be included in each certificate of coverage.

16  The insurer shall mail an election and premium notice form,

17  including an outline of coverage, on a form approved by the

18  department, within 14 days after an individual who is eligible

19  for a converted policy gives notice to the insurer that the

20  individual is considering applying for the converted policy or

21  otherwise requests such information. The outline of coverage

22  must contain a description of the principal benefits and

23  coverage provided by the policy and its principal exclusions

24  and limitations, including, but not limited to, deductibles

25  and coinsurance.

26         (18)  OUTSIDE CONVERSIONS.--A converted policy that is

27  delivered outside of this state must be on a form that could

28  be delivered in the other jurisdiction as a converted policy

29  had the group policy been issued in that jurisdiction.

30         (19)  APPLICABILITY.--This section does not require

31  conversion on termination of eligibility for a policy or

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  1  contract that provides benefits for specified diseases, or for

  2  accidental injuries only, disability income, Medicare

  3  supplement, hospital indemnity, limited benefit,

  4  nonconventional, or excess policies.

  5         (20)  Nothing in this section or in the incorporation

  6  of it into insurance policies shall be construed to require

  7  insurers to provide benefits equal to those provided in the

  8  group policy from which the individual converted, provided,

  9  however, that comprehensive benefits are offered which shall

10  be subject to approval by the Insurance Commissioner.

11         Section 3.  Section 641.3108, Florida Statutes, is

12  amended to read:

13         641.3108  Notice of cancellation of contract.--

14         (1)  Except for nonpayment of premium or termination of

15  eligibility, no health maintenance organization may cancel or

16  otherwise terminate or fail to renew a health maintenance

17  contract without giving the subscriber at least 45 days'

18  notice in writing of the cancellation, termination, or

19  nonrenewal of the contract. The written notice shall state the

20  reason or reasons for the cancellation, termination, or

21  nonrenewal.  All health maintenance contracts shall contain a

22  clause which requires that this notice be given.

23         (2)  If cancellation is due to nonpayment of premium,

24  the health maintenance organization may not retroactively

25  cancel the contract to a date prior to the date that notice of

26  cancellation was provided to the subscriber unless the

27  organization mails notice of cancellation to the subscriber

28  prior to 45 days after the date the premium was due. Such

29  notice must be mailed to the subscriber's last address as

30  shown by the records of the organization.

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  1         (3)  In the case of a health maintenance contract

  2  issued to an employer or person holding the contract on behalf

  3  of the subscriber group, the health maintenance organization

  4  may make the notification through the employer or group

  5  contract holder, and, if the health maintenance organization

  6  elects to take this action through the employer or group

  7  contract holder, the organization shall be deemed to have

  8  complied with the provisions of this section upon notifying

  9  the employer or group contract holder of the requirements of

10  this section and requesting the employer or group contract

11  holder to forward to all subscribers the notice required

12  herein.

13         Section 4.  Subsection (1) of section 641.3922, Florida

14  Statutes, 1998 Supplement, is amended to read:

15         641.3922  Conversion contracts; conditions.--Issuance

16  of a converted contract shall be subject to the following

17  conditions:

18         (1)  TIME LIMIT.--Written application for the converted

19  contract shall be made and the first premium paid to the

20  health maintenance organization not later than 63 days after

21  such termination. However, if termination was the result of

22  failure to pay any required premium or contribution and such

23  nonpayment of premium was due to acts of an employer or group

24  contract holder other than the employee or individual

25  subscriber and written notice of cancellation was not provided

26  to the employee or individual by the employer or group

27  contract holder, written application for the contract must be

28  made and the first premium paid not later than 63 days after

29  notice of termination is mailed by the organization to the

30  employee's or individual's last address as shown by the

31  records of the health maintenance organization. In such case

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  1  of termination due to nonpayment of premium by the employer or

  2  group contract holder, the premium for the converted contract

  3  shall not exceed the rate for the prior group coverage for the

  4  period of coverage under the converted contract prior to the

  5  date notice of termination is mailed by the health maintenance

  6  organization to the employee or individual subscriber. For the

  7  period of coverage after such date, the premium for the

  8  converted contract is subject to the requirements of

  9  subsection (3).

10         Section 5.  This act shall take effect October 1, 1999,

11  and shall apply to policies and contracts issued or renewed on

12  or after that date.

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  1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
  2                         Senate Bill 312

  3

  4  Prohibits an insurance company or a health maintenance
    organization (HMO) from retroactively canceling a group health
  5  insurance contract, due to nonpayment of premium, prior to the
    date the notice of cancellation is mailed by the insurer or
  6  HMO to the employer, unless the notice is mailed within 45
    days after the date the premium was due.
  7
    If the termination of an employee's health insurance coverage
  8  is due to nonpayment of premium by the employer and written
    notice of cancellation was not provided to the employee by the
  9  employer, the following requirements apply:

10  -     The 63-day time period within which the employee must
          apply for an individual conversion policy would not
11        begin to run until the date the insurer or HMO mails the
          notice of cancellation to the employee.
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    -     The premium for the conversion policy would be at the
13        previous group rate for the time period prior to the
          date the insurer or HMO mails notice to the employee.
14        For the period of coverage after such date, the premium
          for the converted policy would be subject to the
15        requirements of current law which provides that such
          premium may not exceed 200 percent of the standard risk
16        rate as established by the Department of Insurance.

17  The committee substitute clarifies the current law to allow
    group insurers to contract with another insurer to issue
18  conversion contracts on its behalf, provided that the other
    insurer is authorized in Florida and the policy has been
19  approved by the Department of Insurance.

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