Health Insurance
Broad term used to describe policies that cover loss of income due to accident or sickness and health care expenses.
Perils of Health Insurance
1. Accidental injury is an unforeseen and unintentional bodily injury resulting from an accident.
2. Sickness is a medical condition, disease or illness.
Disability Income Insurance
Pays periodic benefits when an insured cannot work because of accident or injury.
Medical Expense Insurance
Covers the cost of medical treatments, physician's fees, hospitalization and other medical costs that ensue when the insured incurs an accidental injury or sickness.
Medicare
Government health insurance coverage for individuals over the age of 65, and special needs individuals.
Medicaid
State and federally-funded medical assistance program for financially disadvantaged individuals.
TRICARE
Health insurance coverage for active duty and retired members of the uniformed services and their dependents.
Morbidity
The rate at which accident, sickness or disability will occur.
Reserves
Funds insurance companies set aside to pay future claims. Two types of reserves:
1. premium reserves
2. loss reserves (claims reserves)
Reserves are considered a liability for insurance companies, not an asset.
Reimbursement Basis
The insured pays the medical providers for services, and the insurer reimburses the insured. Commercial insurers use this payment method.
Limited Policies
Health insurance policies that provide specialized limited coverage, such as AD&D and dread disease.
Usual, Reasonable and Customary charges
The insurer pays an amount for each procedure or treatment based on the average charges in that geographic area. Payment method for nonscheduled plans.
Scheduled Plan
Medical expense plans may pay benefits based on the type of procedure, or a fixed amount.
Franchise Insurance
Health plans that cover a small group of individuals; however, unlike group insurance each individual is issued an individual policy.
Government Insurance
Provides protection against fundamental risks by redistributing income to help people who cannot afford to pay the cost of incurring such losses themselves.
Commercial Insurers
Insurers who sell insurance to make a profit including stock and mutual insurers.
Service Providers
Such as Blue Cross and Blue Shield. They differ from commercial insurers in that they pay benefits on a service basis, which means that the insurer pays benefits directly to the medical providers instead of the insured.
Furthermore, service providers cont
Producer Cooperatives (aka Service Providers)
The doctors and hospitals that sponsor Blue Cross and Blue Shield also supply the insurance coverage. Blue Cross provides hospital service and Blue Shield provides doctor's service.
Dual-eligible
People that qualify for both Medicaid and Medicare. Medicaid provides coverage for medical care and services that Medicare only partially covers.
Workers Compensation
Insurance to cover accidental injury and sickness employees incur as a result of employment.
If the disability extends beyond the elimination period, then disability income benefits will be paid in an amount of 66 2/3 % of weekly wages for a permanent tot
Self-Funded Plans
Self-Funded
the employer provides funding for claims payments for its employees and their dependents.
An employer may create a self-funded plan through an administrative services only (ASO) contract. In this scenario, the employer provides the funding, an
501(c)(9) Trusts
Can be used by charitable organizations to fund employee health benefit plans. Unlike traditional self-funded plans, contributions to a 501(c)(9) trust are immediately tax deductible, and earnings grow tax-deferred.
Cafeteria Plans
Allow employees to choose which health care benefits and coverages they want from a list of options. Best utilized by larger employers since they are more costly to operate.
Worksite Plans
Employer-sponsored plans, such as wellness plans which foster healthier lifestyles for employees. Such wellness plans focus on healthy diets and physical exercise (e.g. Weight Watchers or Biggest Loser). Some worksite plans ban tobacco usage on site, whil
Blanket Plans
Health plans that insure a group of individuals participating in the same activity, such as a group of high school seniors going on a class trip, or a soccer team.
Fiduciary
A person in a position of financial trust and responsibility. Producers are fiduciaries.
Uniform Individual Accident and Sickness Policy Provisions Law
Provides standardization for all individual health insurance policy provisions and identify the rights of the insurer and policyowner. There are 12 mandatory provisions and 11 optional provisions.
Required Provision 1: Entire Contract; Changes
The entire contract between the parties consists of the policy, any endorsements and the application, if attached.
Required Provision 2: Time Limit; Incontestability
The policy becomes incontestable and cannot be voided or claims denied after two years (three years in some states) except in the case of fraud.
Required Provision 3: Grace Period
A grace period of at least seven days for weekly premium policies, 10 days for monthly premium policies and 31 days for all other policies, will be granted for the payment of each premium falling due after the first premium, during which grace period the
Required Provision 4: Reinstatement
If a policy lapses for failure to pay premiums and the insurer does not require an application to reinstate the policy, the insurer will reinstate the policy upon payment of a subsequent premium.
Required Provision 5: Notice of Claim
Written notice of claim must be given to the insurer within 20 days of the loss, or as soon as reasonably possible.
Required Provision 6: Claim Forms
The insurer, upon receipt of the notice, must furnish the forms for filing proofs of loss within 15 days.
Required Provision 7: Proof of Loss
Written proof of loss must be provided to the insurer within 90 days after the date of loss.
Required Provision 8: Time of Payment of Claims
Claims other than those providing periodic payment are payable immediately upon receipt of written proof of loss.
Required Provision 9: Payment of Claims
Death benefits are payable to the designated beneficiary according to the policy provisions.
Required Provision 10: Physical Exam and Autopsy
The insurer at its own expense has the right and opportunity to examine the person or autopsy of the insured when reasonably required while a claim is pending.
Required Provision 11: Legal Actions
A required provision which places a limit on the period in which a claimant can file suit against an insurer, usually 60 days since the insurer received proof of loss and within 2 years from the date proof of loss was submitted to the insurer.
Required Provision 12: Change of Beneficiary
The right to change a beneficiary is reserved to the policyowner and does not require the consent of the beneficiary.
Optional Provision 1: Change of Occupation
If the insured is injured or contracts sickness after having changed occupations to one classified as more hazardous than that stated in the policy, the insurer must pay only the portion of the indemnities provided in the policy as the premium paid would
Optional Provision 2: Misstatement of Age
If the age of the insured has been misstated, all amounts payable under the policy will be modified to that which the premiums would have purchased at the correct age. A misstatement of age does not void the policy. The benefits are adjusted accordingly.
Optional Provision 3: Other Insurance in this Insurer
If an insured has accident or sickness policies with one insurer in which the total indemnity for certain type(s) of coverage exceeds the policy's maximum, the excess insurance will be void and all premiums paid for such excess coverage will be returned t
Optional Provision 4: Insurance with Other Insurers - Expense-Incurred
If the insured has other valid coverage providing benefits for the same loss on an expense-incurred basis and the insurer was not given written notice prior to the loss, each insurer is only liable for the proportionate share of the loss, and the insurer
Optional Provision 5: Insurance with Other Insurers - Not Expense-Incurred
If the insured has other valid coverage providing benefits for the same loss on a basis other than expense-incurred and the insurer was not given written notice prior to the loss, each insurer is only liable for the proportionate share of the loss, and th
Optional Provision 6: Relation of Earnings to Insurance - Average Earnings Clause
The total monthly amount of loss of time benefits may not exceed the amount of monthly earnings of the insured at the time the disability began or the average amount of monthly earnings for the previous two years, whichever is greater. The average earning
Optional Provision 7: Unpaid Premium
Any premium due and unpaid may be deducted from the payment of a claim.
Optional Provision 8: Cancelation
The insurer may cancel the policy at any time by written notice delivered to the insured stating cancelation is not effective until at least five days later. After the policy has continued beyond its original term, the insured may cancel the policy at any
Optional Provision 9: Conformity with State Statutes
Any provision of the policy in conflict with the statutes of the state or territory in which the insured resides will be amended to conform to the minimum requirements of such statutes.
Optional Provision 10: Illegal Occupation
The insurer is not liable for any loss to which a contributing cause was the insured's commission of or attempt to commit a felony or to which a contributing cause was the insured's being engaged in an illegal occupation.
Optional Provision 11: Intoxicants and Narcotics
The insurer is not liable for any loss or injury in consequence of the insured's being intoxicated or under the influence of any narcotic unless administered on the advice of a physician.
Insuring Clause
The insurer's promise to pay covered losses as long as the insured pays the premiums and abides by the terms and conditions.
Consideration Clause
A required provision in a life insurance policy stating that a policyowner must pay a premium in exchange for the insurer's promise to pay benefits.
Benefit Payment Clause
Optional provision in health insurance policies which describes how and when benefits are paid.
Right to Examine (Free Look)
Each insurance policy must provide notice that during the period of 10 days from the date of delivery to the policyowner, such policy may be returned for cancelation to the insurer, the insurer will refund all premiums paid, including any policy fees or o
Policy Face
The policy face provides the name of the insurer and insured, a summary of the policy coverage, conditions and exclusions, and the term of the policy with expiration date. The face also states whether or not and how the policy may be renewed.
Military Suspense Provision
Policies containing a military service exclusion or provision for suspension of coverage must state whether premiums are reduced or refunded or coverage is suspended for the period of service.
Probationary Period
The waiting period, prior to being eligible for coverage under a group plan, that individuals must undergo when they join a group with existing group coverage. For non-group policies, the time between the effective date of the policy and the date coverage
Elimination Period
Optional provision in health insurance policies which states the length of time between when sickness, accident, or disability begins and when benefits become payable. Often referred to as a "time deductible." Common in disability income and long-term car
Waiver of Premium
Optional provision in health insurance allowing continuation of coverage without payment of premium in the event of permanent and total disability.
Recurrent Disability
If the insured becomes disabled from the same or related event or condition caused from a prior disability.
Coordination of Benefits
Claims payment process in which a person is insured under multiple health plans providing coverage for the same loss.
Assignment
In medical expense insurance, the term assignment does not mean a transfer of ownership, instead it is a transfer of benefits from the policyowner to the medical provider. Under this arrangement, the insurer pays benefits directly to the medical providers
Occupational Coverage
Health insurance coverage that pays benefits for sickness or injury occurring only while on the job. Example: Workman's Compensation.
Nonoccupational Coverage
Health insurance coverage that pays benefits for sickness or injury occurring only while not on the job.
Preexisting Conditions
Existing medical conditions for which the insured sought medical treatment or advice prior to policy issuance. Most states prohibit insurers from excluding preexisting conditions for a period exceeding six month to two years, depending on the state and po
Renewability
Provision of policy specifying the insured's and insurer's rights to renew or terminate a policy during or after the expiration of the original policy term.
Noncancellable Renewability Provision
The same as the guaranteed renewable provision except that premiums cannot be increased. A disability policy can be written as noncancellable because the benefits are not affected by inflation (i.e. the benefit amount will not change).
Guaranteed Renewable
A policy that guarantees continuation of coverage for the insured until the insured reaches a specified age, as specified in the policy, but provides the insurer the right, at the time of renewal of a policy, to make changes in premium rates by classes of
Conditionally Renewable
Conditionally renewable policies allow the insurer the right not to renew the contract for a reason specified in the policy. Policy premiums can be increased.
Optionally Renewable
Optionally renewable policies provide the insurer the right not to renew the contract for any reason.
Cancellable Policies
Cancellable policies allow the insurer to cancel the policy at any time (some states require notice of at least 30 days), provided the insurer returns all unearned premiums.
Term Policies
Only effective for a short period after which period the insurer cancels the policy. Term health coverages include travel accident policies and short term medical plans.
Impairment Riders
Rider that exclude coverage for a specific condition that would otherwise be covered under the policy.
Guaranteed Insurability Rider
Rider that permits the insured to purchase additional disability income coverage at future dates. Synonymous with future increase option.
Multiple Indemnity Rider (Double, Triple)
Some policies may contain riders that provide for payment of double or triple the accidental death or dismemberment benefits based on the cause of death or specific type of dismemberment.