CID: Consumer Information 9/28/2007

Consumer Information About Protections Against Post-Claims Underwriting For Pre-Existing Conditions

Effective October 1, 2007, a new insurance law goes into effect that strengthens certain consumer protections dealing with pre-existing conditions for short-term, nonrenewable health policies and policy rescissions, cancellations, and policy limitations for certain categories of health insurance policies. Public Act No. 07- 113, An Act Concerning Postclaims Underwriting (“Act”) is a collaboration of our state legislators, the State of Connecticut Insurance Department, the Attorney Generals Office, and the Office of the Healthcare Advocate.

The following is a summary of the new law and what it means for consumers.

A Summary of the Law

The law addresses two kinds of consumer protections:

  • Insurance companies and HMOs will be required to obtain approval from the Insurance Commissioner before rescinding, canceling, or limiting individual or group health insurance coverage based on information you include, or intentionally leave out of your insurance application if the insurer or HMO did not perform a thorough medical underwriting process before issuing the policy, contract, or certificate.

  • Individual short-term non-renewable health insurance policies that typically only provide insurance coverage for six months or less, will now have some of the consumer protections that longer term individual policies have.

The complete law can be found by clicking on this link:

What Does Post-Claims Underwriting Mean and Why Do We Need This Law?

Let’s start by explaining some of the terms and the process the law deals with.

  • Underwriting – Underwriting is the practice of determining, based on your application and other information the insurance company or HMO may obtain regarding your health and background, whether the insurance company should make you an offer of insurance and, if so, on what terms and for what premium.
  • Risk – Potential amount insurance company or HMO will have to pay in claims versus what they receive from you in premium.
  • Post-claim underwriting – Post-claim underwriting is when the insurance company or HMO waits until you file a claim to determine whether you meet the underwriting criteria for the insurance to have been sold to you.
  • Pre-existing condition – a medical condition that was present before the effective date of coverage, for which any medical advice, diagnosis, care or treatment was received before the effective date of the insurance
  • Pre-existing condition exclusion – a policy provision which limits or excludes benefits relating to a condition based on the fact that the condition was present before the effective date of coverage, for which any medical advice, diagnosis, care or treatment was recommended or received before the effective date of the policy. Short-term policies usually contain this provision.
  • Rescission – the insurance company or HMO’s decision to take back your insurance policy and act as if it never was issued. The insurer will refund all your premiums and will recover any claim payments they made.
  • Cancellation – the insurance company or HMO terminates your insurance policy before the planned termination date. They will not ask for you to repay any claims they have paid or refund your premiums.
  • Limitation – the insurance company or HMO agrees to provide you with insurance coverage but places restrictions or limits on what they will pay for certain benefits and/or diagnoses.
  • Exclusionary Rider – an amendment, attachment, endorsement, or rider to a health benefit plan policy that excludes or limits coverage for one or more conditions.

When you apply for insurance, your application should be underwritten by the insurance company. The Connecticut Insurance Department encourages, but cannot require, insurance companies to complete all reasonable underwriting work before your insurance policy is issued. Post-claim underwriting is a practice where an insurance company or HMO waits until you file a claim before performing its underwriting review and then tries to rescind, cancel or limit the coverage that was issued to you based on this “after the fact” review.

The underwriting review, whether done before or after the policy is issued, should only include resolving all reasonable medical questions based on the written application. In undertaking this review, the company may ask you for more details about certain health conditions, or even ask you for copies of your medical records. You should answer these questions completely and honestly. If the insurance company or HMO does not underwrite the policy before it’s issued to you, the new law requires that the insurance company or HMO obtain the prior approval of the Insurance Commissioner before rescinding, canceling, or limiting your policy on a post-claim underwriting basis for such rescission, cancellation, or limitation.

Nothing in this new law requires that the insurance company or HMO accept your application and issue you a policy. The company can turn you down and refuse to issue a policy at all or may issue the policy with an exclusionary rider for a medical condition that you have. The law also permits the company or HMO to refuse to renew or issue you a second short-term policy even if they issued you a first policy. If your policy has a pre-existing condition limitation provision, the company may not pay claims for up to 12 months for a condition that was present before the effective date of coverage for which any medical advice, diagnosis, care or treatment was recommended or received before such effective date.

What Does This Mean For Me?

When you apply for health insurance, you need to answer all the questions on the health insurance application in a complete and truthful way. If you don’t understand a question, ask the agent you are working with, or if you are applying for the insurance by mail or over the internet, call the insurance company or HMO and ask them to explain the question until you understand it. Make sure that you write down the name of the person to whom you spoke, the date and time of the call, the phone number, the question you asked and the answers you received. That way you have a record of what happened if the insurance company or HMO tries to rescind, cancel or limit your policy because of the way you completed your application for insurance. You should also attach to the application a note explaining your understanding of the advice given to you and how you interpreted the question.

If you need help completing the application, you can ask a family member or friend to assist and act as your representative, and you should note that person’s name on the application. If your primary language is not English, you should ask for an application in your language. Most companies have applications in Spanish, and some have translation services to assist in filling out the application.

What Does This Mean For The Insurance Company or HMO?

If an insurance company or HMO completes full underwriting before it issues your policy, the company or HMO can decide not to issue the policy or it can limit the kinds of benefits and services it will pay for. For example, if you indicate on your application for insurance that you are currently undergoing treatment for stomach problems, the company can lawfully issue the policy but can add an exclusionary rider for any medical services related to the pre-existing condition specified in the rider --- your stomach problems. The company does not have to seek the permission of the Insurance Commissioner to limit policies based on complete presale underwriting.

If however, the insurance company does not complete full medical underwriting and resolve all reasonable medical questions related to your application before they issue your policy, the insurance company or HMO must seek the approval of the Insurance Commissioner before they can rescind, cancel or limit your policy.

The law lets the Insurance Commissioner approve a rescission, cancellation, or limitation when he finds that: you or your representative knew, or should have known, that information important to the insurance company or HMO's underwriting and risk evaluation was;

  • Intentionally false as stated in the application, or
  • was intentionally not included in the application.

Please note that the new law also limits the amount of time an insurer has to rescind a renewable policy to two (2) years. According to the new law, no policy or certificate may be rescinded more than two (2) years after the effective date of the policy or certificate.

How Does the Prior Approval Process Work?

As of October 1, 2007, an insurance company or HMO that wants to rescind, cancel or limit a policy because of a post-claims underwriting determination must submit an Application for Rescission to the Insurance Commissioner. This Application must include all information that the company is using to make their decision to rescind, cancel or limit the policy.

The insurance company or HMO is required to send you or your representative a copy of the Application by registered, return receipt mail. You have seven (7) business days from your receipt of the Application (the day you receive the copy of the Application) to contact the Commissioner and provide a comment or additional information. The Insurance Commissioner will not act on the insurance company or HMO’s Application until the seven-day comment period has expired unless he receives a comment from you before seven days have passed. If the comment period ends on a non-business day, the period will be extended to the next business day.

The Commissioner must issue a determination on the Application not later than fifteen (15) business days after submission of any information by you or your representative. The Department will start counting the fifteen day period on the first day following receipt of the comments from you or the expiration of the comment period, whichever occurs first.

The Commissioner’s decision to approve or deny the Application will be issued in writing, along with a rationale for the decision, and sent by first class mail to the insurance company or HMO. You will get a copy, too. If the insurance company, HMO or you are not satisfied with the Commissioner’s decision, any of you can appeal the decision to the Superior Court.

What Are The Changes Specifically Aimed At Short-Term Health Insurance?

Again, let’s start by defining the terms.

  • Short-term non-renewable health insurance – Health insurance that is for 6 months or less. Each short-term policy is considered to be separate and distinct from any successive short-term health insurance policies that you may buy.
  • Consecutive policies - policies which are issued with a lapse in coverage of no more than 30 days between an earlier policy and a subsequent policy being issued to you by the same insurance company or HMO.

Prior to the passage of this new law, short-term non-renewable health insurance plans have not been required to meet federal and state laws about pre-existing coverage requirements as long as they make it clear in their policies that pre-existing conditions are not covered. This new law creates new pre-existing coverage standard for these types of policies.

Under the new law:

  • Short-term nonrenewable health policies are now covered under specific requirements dealing with pre-existing conditions and policy rescissions, cancellations and limitations.
  • Pre-existing condition limitations are only permitted for the first 12 months following the policy effective date.
  • Pre-existing conditions can only be defined as conditions for which medical advice, diagnosis, care or treatment was recommended or received during the 24 months immediately preceding the coverage effective date.
  • The bill gives you credit against your pre-existing condition for time covered under previous short-term health insurance policies if you buy consecutive short-term policies from the same insurance company or HMO. The pre-existing conditions exclusion period in the second policy is required to be reduced by the period of time you were covered under the first policy. If the same insurance company or HMO issues a third or successive policy to you, the preexisting conditions exclusion period must be reduced by the cumulative time covered under the prior policies for all conditions.
  • Insurance companies and HMOs are required to print specific disclosure notices on marketing materials, application and policy forms for short-term policies that alert you when you apply for the insurance that pre-existing conditions are not covered.

None of these changes mandate that companies will be required to issue or renew short-term policies on a guaranteed issue or guaranteed renewal basis. The companies can continue to make their underwriting decisions to accept the applicant or renew the policy as per company underwriting policies.

Where Do I Go for Help or Questions?

The Connecticut Insurance Department is responsible for enforcing these new laws. If you have questions or think a company is not meeting the requirements of the law, you can contact the Insurance Department’s Consumer Affairs Unit at the following:

Phone: (860) 297-3900 or toll-free at1-800-203-3447
Fax: (860) 297-3872

Mail: P.O. Box 816, Hartford, CT 06142-0816

Additional Sources of Information

The Office of the HealthCare Advocate and the Attorney General’s Office can also provide general information about the new law. You can contact them at:

Office of the Healthcare Advocate 1-866-HMO-4446 (nationwide toll-free number) or 860-287-3980
Office of the Attorney General 860-808-5355

Content Last Modified on 1/3/2017 4:05:51 PM