Life and Health Laws Life and Health Laws Life Laws Retention Question Answer Key Key Word Index... 66

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1 TABLE OF CONTENTS Maryland State Laws Life & Health Students Life and Health Laws... 3 Life Laws Health Laws Retention Question Answer Key Key Word Index Maryland Candidate Demographic Form Life Students (Students studying for the Life Only exam must read pages 3-38) Life and Health Laws... 3 Life Laws Retention Question Answer Key Key Word Index Maryland Candidate Demographic Form Health Students (Students studying for the Health Only exam must read pages 3-30 and 41-62) Life and Health Laws... 3 Health Laws Retention Question Answer Key Key Word Index Maryland Candidate Demographic Form This edition is valid starting July

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3 Life and Health Laws OVERVIEW The purpose of this chapter is to acquaint the student with the insurance regulatory and licensing process in the state of Maryland. This chapter includes ethical standards and practices expected of the insurance professional. Take Note Information in this chapter modifies or amends information from previous content. Life and Health Laws Licensing Before you may act as an insurance producer in Maryland, you must obtain a license in the line(s) of insurance for which you intend to act as an insurance producer. To obtain a license as an insurance producer, you must: Be at least 18 years of age Be of good character and trustworthy Not have committed any act that the Commissioner finds would warrant denial of a license Have the education or experience discussed below Pass a licensing exam To become reasonably familiar with the lines of business for which you intend to be licensed, you also are required to do one of the following: Successfully complete a program of studies established or approved by the Commissioner. Have at least 1 years experience (in the last 3 years) as an employee of the Maryland Insurance Administration or an insurer or a producer with responsible duties related to the kinds of insurance covered by the license. Have at least 1 years experience (during the 3 years immediately before military service or 3 year immediately after discharge) as an employee insurer s or producer s employee with responsible duties related to the kinds of insurance covered by the license. Examination To get a Life and Accident & Health Insurance producer s license you must pass an examination to determine your competency regarding: Life insurance Health insurance Annuities Contracts for nonprofit health service plans, vision plans, dental plan organizations, and HMOs Familiarity with applicable Maryland state laws If you fail an examination, you may not take another until at least 14 days after the date of the last failed exam. 3

4 MARYLAND STATE INSURANCE LAWS Life insurance applicants are not required to take the course for life insurance if the applicant has earned any of the following professional designations: Chartered Life Underwriter (CLU) (and is a member in good standing of the American Society of Charted Life Underwriters) Fellow of the Society of Actuaries (FSA) Certified Employee Benefit Specialist (CEBS) Chartered Financial Consultant (ChFC) Certified Insurance Counselor (CIC) Certified Financial Planner (CFP) Fellow, Life Management Institute (FLMI) Life Underwriter Training Council Fellow (LUTCF) While the prelicensing course is waived, the applicants must take the exam. Health insurance applicants are not required to take the course for health insurance if the applicant has earned any of the following designations: Registered Health Underwriter (RHU) Certified Employee Benefit Specialist (CEBS) Registered Employee Benefit Consultant (REBC) Health Insurance Associate (HIA) While the prelicensing course is waived, the applicants must take the exam. License Fee & Application Before taking a written exam, an applicant must pay the application fee. The fee for the insurance producer license is $54 for the initial license and the renewal license. An applicant must submit a uniform application to the Commissioner and declare that the statements made are true, correct, and complete to the best of the applicant s knowledge and belief. Retention Question 1 Choose the statement that is NOT required of a person to obtain an insurance producer license? a. Person must be at least 18 years of age b. Person must not have committed an act for which the Commissioner would deny the license c. Person with 6 months insurance administrative experience is exempt from prelicensing course d. Person must be of good character and trustworthy 4

5 LIFE AND HEALTH LAWS Types of Licenses Producers To act as an insurance producer in Maryland, a person must get a license for the kinds of insurance he/she intends to sell and, if acting for an insurer, an appointment from the insurer. An insurance producer is a person who, for compensation sells, solicits, or negotiates insurance contracts. It also includes renewing or continuing these contracts for issuing insurers, or for insureds or prospective insureds other than the insurance producer. The term insurance producer does not include: An individual who performs clerical or similar office duties while employed by an insurance producer or insurer. A regular salaried officer or employee of an insurer, if the officer or employee is not paid a commission or other compensation that depends directly on the amount of business obtained. If not paid a commission, a person that obtains and forwards information for: Group insurance coverage Enrolling individuals under group insurance coverage Issuing certificates under group insurance coverage, or Assisting in administering group plans An insurance producer may qualify for a license in one or more of the following kinds of insurance: Life Accident, health, or sickness Property Casualty Variable life and annuity products Personal Lines of property and casualty Limited lines (motor vehicle, credit, travel, title, motor vehicle rental company, HMO, and portable electronics) Any other kind of insurance permitted by Maryland insurance laws Advisers An adviser is a person who, for compensation: Examines or offers to examine a policy, annuity contract, or pure endowment contract for the purpose of giving advice or information about its terms, conditions, benefits, coverage, or premium. Gives or offers to give advice or information about a policy s or contract s terms, conditions, benefits, coverage, or premium; or the advisability of changing, exchanging, converting, replacing, surrendering, continuing, rejecting, accepting, or procuring such a policy or contract. In Maryland, a person must obtain a license before acting as an insurance adviser. 5

6 MARYLAND STATE INSURANCE LAWS The Commissioner may issue an insurance adviser license to any competent and trustworthy person who is a resident of Maryland. The person must either pass a written examination, or be exempt from such examination because he/she: Holds at least one of the following professional designations and is a member in good standing of such professional organization: Chartered Life Underwriter (CLU), Chartered Property and Casualty Underwriter (CPCU), Certified Employee Benefit Specialist (CEBS), or Certified Financial Planner (CFP). Is a member in good standing of the Society of Actuaries, the Casualty Actuarial Society, or the Conference of Actuaries in Public Practice. Successfully completes a course of study equivalent to that required for any of the above designations or societies and holds a Certified Insurance Counselor (CIC) designation. The Commissioner may issue an adviser license to a nonresident who is competent and trustworthy and licensed as an insurance adviser in his/her home state. A nonresident must take and pass the Maryland Adviser exam if the state of residence does not issue an Adviser License or the equivalent. A person applying for an insurance adviser license must pay appropriate application and license fees and must have a $1,000 surety bond for the state (to protect against the applicant engaging in dishonest or fraudulent practices while acting as an insurance adviser), and complete the licensing application. The adviser license does not authorize the licensee to: Adjust losses Receive compensation from an insurer or producer for the sale or placement of insurance The adviser licensee may conduct an insurance advisory business as a sole proprietorship, partnership, association, or corporation if each individual who acts as an adviser is also licensed as an adviser, and the trade name of the business is registered with the Commissioner. The license of an insurance adviser expires every other year on June 30th, unless renewed for a 2-year term. An agreement between an insurance adviser and another person that relates to the providing of insurance advice or information is not enforceable by or for the adviser unless all of the following conditions are met: The agreement is in writing, in a form approved by the Commissioner The agreement is executed by the person to be charged (or by the person s legal representative) A copy of the agreement is delivered to the person when he/she signs it The agreement plainly states the required fee and the services the adviser is to perform Nonresidents To get a nonresident producer license, a person must be currently licensed as a resident producer, and in good standing, in his/her home state. The Commissioner may verify this through the NAIC s producer database. Home state, under Maryland law, means the state in which a person resides or has a primary place of business. The person s home state must award nonresident licenses to Maryland residents on the same basis that nonresident licenses are awarded to nonresidents of Maryland, also known as reciprocity. A resident producer applicant previously licensed for the same kind of insurance in his/her former state is exempt from education, experience, and exam requirements if the producer is in good standing in his/her former state and the application is received within 90 days after the cancellation of the license in the former state. 6

7 LIFE AND HEALTH LAWS A producer moving to a different state must file a change of address with the Administration and provide certification from that state within 30 days. No fee or license application is required to file a change of address. Business Entities A business entity is a corporation, professional association, partnership, limited liability company, limited liability partnership, or other legal entity. To qualify for a producer s license, a business entity must designate a licensed insurance producer as its principal contact with the Maryland Insurance Administration. The designated producer must: Provide the Administration with the producer s name, business and addresses, and business and fax telephone numbers. Any changes to this information must be provided to the Administration within 10 days after the change. Compile and maintain a list of locations where the entity s records are maintained. Submit any trade name to be used by the applicant and name and address of producers doing business under the trade name. Cooperate with any investigation by the Administration unless doing so would violate a legal privilege asserted by the producer or business entity. This does not apply to a motor vehicle rental company applying for a limited lines license to sell insurance in connection with, and incidental to, the motor vehicle rental. Temporary Licenses The Commissioner may issue a temporary license, which is valid for 15 months, without regard to the education, experience or examination requirements in the following instances: To the surviving spouse, next of kin, personal representative, or appointed personal representative of a deceased insurance producer. To the spouse, next of kin, employee, or legal guardian of a producer who is physically or mentally disabled. To an employee of a firm or officer or employee of a corporation, on the death or disability of a producer. A person may not act as a producer until he/she pays the required fee and secures a temporary license in the kinds of insurance that he/she desires to write and, if applicable, an insurer appointment. Within 30 days, the Commissioner must issue the license or state the reasons for refusing to do so. In order to handle the business temporarily, the temporary applicant must refer to the initial licensing instructions and follow the application procedures. Maryland Administrative Notice. Retention Question 2 In order for a nonresident of Maryland to qualify to transact insurance business in Maryland, the nonresident s home state must do which of the following? a. Pay the nonresident s fee for the Maryland nonresident license b. Award nonresident licenses for Maryland producers c. Write a letter of recommendation d. Submit the producer licensing requirements to the Maryland Commissioner 7

8 MARYLAND STATE INSURANCE LAWS v Retention Question 3 A temporary license may NOT be issued in which of the following situations? a. The next of kin of a recently deceased producer b. The employee of a producer who became physically disabled when injured at work c. Corporation officer acting in the absence of the deceased producer d. An applicant is retaking the exam within 60 days from the date the first exam was failed Maintaining a License Address and/or Name Changes When an insurance producer changes, adds to, or deletes information from a license, the insurance producer must file the proper form with the Commissioner. An insurance producer must notify the Commissioner within 30 days of any change in legal or trade name or address. Failing to do so is a violation of Maryland insurance laws punishable by possible license denial, suspension, revocation, or nonrenewal. Assumed Names/Trade Names A person that is not an insurer may not assume or use a name that deceptively implies or suggests that it is an insurer. The holder of a license may not use any name other than the name in which the license is issued or a trade name filed with the Commissioner to engage in any activity for which a license is required, including the execution of any document related to marketing, negotiation, selling, or issuance of insurance. Requirement to Report Adverse Administrative Actions or Crimes An insurance producer must report being the subject of any adverse administrative action in another jurisdiction or by another governmental unit in this state within 30 days after the matter s disposition. The report must include a copy of the order, consent order, and any other applicable legal documents. An insurance producer must report being prosecuted for a crime, other than a misdemeanor traffic violation, in any jurisdiction, to the Commissioner within 30 days after first appearing in court. This report must also include a copy of all relevant documents. Retention Question 4 The Commissioner must be notified of a change in a producer s address within days of the change. a. 45 b. 30 c. 15 d. 10 8

9 LIFE AND HEALTH LAWS Renewal Retention Question 5 A producer must report to the Commissioner within days after first appearing in court for a crime. a. 10 b. 15 c. 30 d. 45 Insurance producer licenses expire every other year on the last day of the producer s birth month, unless suspended, revoked, or terminated. Any insurer appointments a producer holds are terminated as of the date his/her license expires. Before the license expires, the producer may renew it for an additional 2-year term if the producer files a renewal application, pays any appropriate fees, and completes his/her continuing education requirements prior to the expiration date. If the producer files an application for renewal before the license expires, the license remains in effect until: The Commissioner issues a renewal license. 5 days after the Commissioner refuses to renew the license and gives notice of the refusal to the holder. At least 1 month before a license expires, the Commissioner will mail to the licensee a renewal application form and a notice that states the required return date and renewal fee. A license is considered renewed if it s issued for the period immediately following a period for which the person previously possessed the same or a substantially similar license. Reinstatement An insurance producer whose license lapses may apply for reinstatement for up to 1 year by filing a reinstatement application, paying the renewal and reinstatement fees (if any), and submitting proof of completion of continuing education requirements. An insurance producer whose license has expired may not conduct any insurance business until the effective date of reinstatement. An insurance producer applying within 60 days after his/her license expires will have his/her license effectively reinstated on the date the license expired. Applications for reinstatement more than 60 days, but within 1 year after expiration are effective on the date of reinstatement. A licensee who does not apply for reinstatement within 1 year of expiration must apply for a license in the manner required for an initial license. The Commissioner may waive the reinstatement procedures of this section for a producer who is unable to comply with the renewal and reinstatement procedures due to military service or other extenuating circumstances, including a long-term medical disability. Continuing Education Requirements A licensed insurance producer is required to take 24 hours of continuing education per renewal period (including 3 hours related to ethics). If a producer has held a license for 25 or more consecutive years, only 8 hours of continuing education per renewal period is required. 9

10 MARYLAND STATE INSURANCE LAWS An insurance producer may satisfy the continuing education requirements by submitting to the Commissioner proof that he/she has completed the required 24 hours of continuing education for the applicable renewal period. An individual who has been licensed for 25 years can meet the requirement by submitting proof that he/she has completed 8 hours of continuing education for the renewal period and an affidavit that, over the past 25 consecutive years, he/she has held a license, and has been employed in selling insurance, in the state. To increase the level of education of insurance producers, an insurance producer must obtain continuing education in the type of insurance for which the insurance producer is licensed. An insurer may not prohibit its insurance producers from obtaining continuing education credits from any course approved by the Commissioner. The following individuals are exempt from the continuing education requirements: Employees of a HMO who are employed solely to solicit membership in the HMO under a contract between the HMO and the Department of Health and Mental Hygiene. Attorneys at law of the state who are qualified as title insurance producers and who do not hold a license in any other kind of insurance. Individuals who hold only a limited lines license to act as an insurance producer for limited line credit insurance. Insurance producers who hold only a limited lines license in any type of insurance designated by the Commissioner. Anyone obtaining a waiver from the Commissioner for reasons that the Commissioner determines warrant the waiver. A nonresident insurance producer has met the continuing education requirements of Maryland if he/she satisfies the continuing education requirements of his/her home state, and his/her home state allows insurance producers from Maryland to satisfy their continuing education requirements on the same basis. Each insurance producer who possesses a license to sell health insurance and who sells Long- Term Care insurance must take continuing education that directly relates to Long-Term Care insurance. Each licensed producer selling health insurance and marketing senior prescription drug assistance program must receive continuing education that directly relates to the senior prescription drug assistance program. Retention Question 6 The producer s insurance license expiration date is: a. July 1 every other year after first obtaining the license b. December 31 every year c. The first day of the licensee s birth month every other year d. The last day of the licensee s birth month every other year Retention Question 7 An insurance producer must complete continuing education every renewal period including: a. 16 hours of general insurance and 8 hours of license-specific insurance b. 24 hours, including 3 hours related to ethics c. 8 hours, plus 3 hours for a health license related to Long-Term Care insurance d. 12 hours if the producer has held a license for 25 or more consecutive years 10

11 Appointment Procedures LIFE AND HEALTH LAWS An Appointment is an agreement between an insurance producer and insurer under which the insurance producer, for compensation, may sell, solicit, or negotiate policies issued by the insurer. A Producer Register is a register of appointed insurance producers authorized to sell, solicit, or negotiate contracts of insurance on behalf of an insurer. An insurer is required to keep a Producer Register of its appointed agents. Within 30 days after appointing a producer, the insurer must add the following information to its producer register: Producer s name and license number. Date the producer was appointed. Any additional information that the Commissioner might require. Individual vs. Business Entity A licensed insurance producer appointed by an insurer must maintain documentation of the insurer s appointment and a list of the insurers that have appointed the producer. Before a business entity may accept compensation for acting in its own name as an insurance producer in the State, the business entity must obtain: A license in the kind of insurance for which the business entity intends to act as an insurance producer, and An appointment for the kind of insurance for which it intends to act as an insurance producer on behalf of an insurer. An insurer may initially accept an application for life insurance, health insurance, or an annuity from an insurance producer who is not appointed by the insurer and is not on the insurer s producer register if, within 30 days of accepting the application, the insurer: Rejects the application. Appoints the insurance producer and enters in the insurer s producer register the required information. The producer must receive written documentation of the appointment from the insurer. Termination of Appointment/Notice to Producer When there is any termination of the appointment, employment, contract, or other insurance business relationship with an insurance producer, the insurer must, within 30 days following the effective date of the termination, update its insurer s producer register by entering the effective date of the termination. Within 15 days after providing notice to the Commissioner the insurer must mail a copy of the notice to the producer to the last known address and by certified mail. The insurer must notify the Commissioner of the termination of appointment and include any additional information, documents, records, or data pertaining to the termination or activities: Any activities that could result in the denial, suspension, revocation, refusal to renew, or reinstate the insurance license. Any findings by a court, government unit, or self-regulatory organization authorized by law. The producer may file comments with the Commissioner. If so, a copy must be sent to the insurer. The Commissioner must make the comments part of the producer s file. The comments must be included with every copy of the report about the producer that is distributed or disclosed for any reason by the Commissioner. 11

12 MARYLAND STATE INSURANCE LAWS If the termination is due to a failure to renew the insurance producer license, and the license is reinstated, the insurer may reappoint the producer retroactively effective the date the license expired. Disciplinary Actions Retention Question 8 Which of the following is NOT true about the appointment process? a. An insurer may not accept an application for life insurance until the appointment is finalized b. The producer must receive written documentation of the insurer s appointment c. The Commissioner must be notified within 30 days following the date a producer s appointment is terminated d. The insurer must mail a copy of the notice to the Commissioner to the producer Probation, Denial, Suspension, Revocation or Refusal to Renew Following notice and opportunity for a hearing, the Commissioner may deny, suspend, revoke, or refuse to renew or reinstate an insurance producer license for any of the following reasons: Willfully violating regulations or orders of the Commissioner or any Maryland insurance law. Intentionally misrepresenting or concealing a material fact in a licensing application. Obtaining or attempting to obtain a license through misrepresentation, concealment, or fraud. Misappropriating, converting, or unlawfully withholding money belonging to an insurer, insurance producer, beneficiary, or an insured. Willfully misrepresenting the provisions of an insurance policy. Committing dishonest or fraudulent practices in the insurance business. Being convicted of a felony or crime of moral turpitude. Intentionally writing or issuing substantial overinsurance on property insurance risks. Showing a lack of trustworthiness or lack of competence to act as an insurance producer. Conducting the business of insurance in a manner other than good faith. Failing an insurance examination. Having been refused a license or certificate in another state, or having a license suspended or revoked in another state. Failing or refusing, on demand, to pay any money that belongs to an insurer, producer or other person who is entitled to it. Willfully failing to comply with or violating an order, subpoena, or regulation of the Commissioner or the insurance regulatory authority of another state. Soliciting or negotiating insurance contracts for an unauthorized insurer. Forging another s name on an insurance application or any document related to an insurance transaction. Improperly using notes or any reference material to complete a licensing examination. Intentionally making a statement misrepresenting the terms or conditions of any policy issued by an authorized insurer to induce the owner to forfeit or surrender the policy or allow it to lapse for the purpose of replacing it with another. Failing to pay income taxes or related interest or penalty under a final order or assessment of Maryland s tax laws or tax courts. 12

13 LIFE AND HEALTH LAWS Knowingly employing an individual who has been convicted of a felony or crime of moral turpitude within the past 10 years to act in a fiduciary capacity. Making an inaccurate statement with actual malice in providing information regarding the termination of an appointment with an insurer. Transacting insurance business that was directed to the producer by another licensee whose license was suspended or revoked, and the producer knew or should have known of the suspension or revocation. Child Support Arrears or Subpoena A person s license may be denied or suspended for being over 120 days in arrears in paying child support or for failing to comply with a subpoena issued by the Child Support Enforcement Administration. Retention Question 9 The Commissioner may suspend a producer s license for which of the following reasons? a. Transacting insurance business without a license for a disabled licensed producer b. Producer employs a financial administrator who was convicted of a misdemeanor 15 years ago c. Producer is 6 months behind in paying child support d. Accidently misstating the terms of a life insurance policy Cease and Desist Orders Against Insurers Without notice and before hearing, the Commissioner may issue and serve on an insurer an order requiring the insurer immediately cease and desist from writing insurance in Maryland if it appears that: The insurer is conducting business that threatens to cause insolvency or is hazardous to its policyholders, creditors, or the public. The insurer is engaged in an act, practice, or transaction that is grounds to cause insurer conservation or liquidation proceedings. Irreparable loss and injury to the insurer s property and business or the public may occur unless the Commissioner acts immediately. When an order is served on an insurer, the Commissioner will issue and serve on the insurer a notice of hearing within 5 days of the order. If the 5-day requirement is waived by the insurer, the hearing will be held within 30 days of the order. Cease and Desist Orders Against Producers If the Commissioner finds that a producer has engaged or is engaging in prohibited acts or practices, the Commissioner will order the person to cease and desist from the act or practice. If the producer continues the practice after the order is issued, he/she may face penalties as prescribed by the Commissioner. Prior to issuing a Cease and Desist Order, the Commissioner will hold a hearing. The Commissioner will give the person notice of the hearing and the charges against the person. The Cease and Desist Order is final when the time allowed for taking an appeal expires. If an appeal is taken, the cease and desist order is affirmed or dismissed when the final court decision is made. 13

14 MARYLAND STATE INSURANCE LAWS Penalties Retention Question 10 A cease and desist order may be issued by the Commissioner in which of the following situations? a. Immediately to a producer before a hearing is held b. After a required hearing to an insurer causing the public irreparable harm c. A producer has not yet been appointed d. An insurer is conducting business that threatens its solvency Any party who willfully violates any provision of Maryland insurance law or code for which a greater penalty is not specifically provided by other state laws is guilty of a misdemeanor and, upon conviction, may be fined not less than $100 but not exceeding $50,000 for each violation. This fine is in addition to any administrative penalty otherwise applicable such as loss of authority or license to conduct business, orders to pay restitution to injured parties, and administrative fines. Instead of, or in addition to suspending or revoking the license, the Commissioner may: Impose on licensee a penalty of $100 to $500 for each violation. Require the licensee to pass an examination and file a new application before the suspension is lifted. Hearings/Notice of Hearings The Commissioner may hold a hearing for any purpose at any time as allowed under Maryland s insurance laws. In holding a hearing the Commissioner sits in a quasi-judicial capacity. The Commissioner must hold a hearing when required by law, or when demanded, in writing, by any person aggrieved by any of the Commissioner s acts, reports, regulations, or orders (other than an order for, or resulting from, a hearing). Such a demand must state the grounds on which relief will be sought at the hearing. If the Commissioner determines that the demand is justified, the hearing must be held within 30 days. If the Commissioner receives such a demand before an order s effective date or within 10 days after its delivery, the demand will stay the order pending the hearing (unless action is ordered, including action about an insurer s financial impairment). The Commissioner must give all interested parties at least 10 days notice of the time and place of the hearing and the matters to be addressed. Most hearings are open to the public. Exceptions, as determined by the Commissioner, include: Not in the public s interest. Determine whether an insurer s operation is hazardous and could result in impairment. Request by an insurer to hold a private hearing. The Commissioner must allow all parties to a hearing to inspect documentary evidence, present evidence, examine witnesses, and have the Commissioner issue subpoenas to compel attendance of witnesses and production of evidence. Within 30 days after a hearing, the Commissioner issues an order on the hearing and gives each party a copy of the order that was given a notice of the hearing. The order affirms, modifies, or nullifies previous action, or precipitates new action. 14

15 An order of the Commissioner will include: LIFE AND HEALTH LAWS Statement of facts found by the Commissioner Commissioner s conclusions from the facts The grounds on which it is based, and The provisions of this statute under which action is or proposed to be taken The Commissioner s order on the hearing or on a matter on which the Commissioner refused to grant a hearing may be appealed to the appropriate Maryland circuit court within 30 days after the order is served or the refusal is given. Appeals may be taken by a party to the hearing or by an aggrieved person whose financial interests are directly affected by the order resulting from the hearing or refusal to grant a hearing. The appeal must be based on this order or refusal to hear. Fraud Retention Question 11 Choose the FALSE statement about hearings conducted by the Commissioner. a. Most hearings are open to the public with exceptions determined by the Commissioner b. Within 30 days after a hearing, the Commissioner will issue an order to affirm, modify, nullify, or precipitate new action c. The Commissioner s hearing will be judged by a circuit court judge d. The Commissioner s order may be appealed before a Maryland circuit court An authorized insurer and any of its employees, fund producers, or insurance producers must report suspected insurance fraud in writing to the Commissioner, the Fraud Division, or the appropriate federal, state, or local law enforcement authorities. Any evidence provided to these authorities is not public for as long as necessary to complete an investigation or to protect the person being investigated from unwarranted injury. No one may be subject to civil liability for reporting suspected insurance fraud if: The report was made to the Commissioner, the Fraud Division, or an appropriate federal, state, local law enforcement authority, and The person that reported the suspected insurance fraud acted in good faith when making the report. All applications for insurance and all claim forms must contain the following statement or a substantially similar statement: Any person who knowingly or willfully presents a false or fraudulent claim for payment of a loss or benefit or who knowingly or willfully presents false information in an application for insurance is guilty of a crime and may be subject to fines and confinement in prison. Insurance Fraud Division, established under the Maryland Insurance Administration, includes the following powers and duties: Authority to investigate each person suspected of engaging in insurance fraud. After an investigation, refer suspected cases of fraud to the Office of the Attorney General or local State s Attorney to criminally prosecute the suspected offender. Compile and abstract information regarding the confirmed acts of fraud. Cooperate with the Department of State Police, Attorney General, and State s Attorney. Provide a toll-free hot line to receive and record information about alleged acts of insurance fraud. 15

16 MARYLAND STATE INSURANCE LAWS Conduct public outreach and awareness programs on the costs of insurance fraud to the public. Investigate allegations of civil fraud, and, if appropriate, impose administrative penalties and order restitution. It is a fraudulent act to: Commit a fraudulent act in obtaining a license. Commit a fraudulent act in the transaction of insurance. Have a license suspended or revoked for having committed a fraudulent act. Maryland Fraudulent Insurance Acts specify the following as crimes of insurance fraud: Failing to return premiums due to the insured. False or misleading information with respect to a claim. Misappropriation of benefits. Except for the prepayment of premiums or excess contributions allowed under the policy, to willfully collect a premium in excess of those approved by the Commissioner or set by the insurer. Supporting an application for a viatical settlement contract with knowledge that it contains false and misleading information. Penalties for these violations are as follows: Felony If the monetary value involved is $300 or more, it is punishable by a fine of $10,000 or 3 times the fraudulent amount, whichever is greater (but must be at least $500), or up to 15 years imprisonment or both. Misdemeanor If the monetary value involved is less than $300, the violator must restore either the property or pay the monetary value of the fraud. Additional crimes of fraud are: An insurer transacting insurance business with a person not having required certification. A producer conducting insurance transactions without a license. Failing to report the exact amount of premium charged, if different from the policy premium, and failing to maintain records showing that information. Making false and fraudulent statements in an application and placing insurance with an unauthorized insurer not regulated by the Commissioner. Refusing to obey the Commissioner s order to produce documentation of premiums paid for insurance. Making false sworn statements that the person does not believe to be true regarding an examination, investigation, or hearing conducted by the Commissioner. Knowingly exhibiting a false account, document, or advertisement about an insurer s affairs. Having a lawyer or health care practitioner to employ or in any way compensate a person for the purpose of having that person solicit or attempt to solicit clients for the lawyer or health care practitioner. Each act of solicitation is a separate violation. Penalties for these violations are as follows: Felony If the monetary amount is $300 or more, it is punishable by a fine of up to $10,000, 15 years imprisonment or both. Misdemeanor If the monetary amount is less than $300, the violator must restore either the property or pay the monetary value of the fraud. The penalties may be imposed separately, consecutively, or concurrently with other violations. A fine imposed under this section is mandatory and not subject to suspension. 16

17 LIFE AND HEALTH LAWS State Regulation Retention Question 12 Which of the following is TRUE about insurance fraud? a. An insurance company employee must report suspected fraud to the Commissioner b. The Insurance Fraud Division must cooperate with the FBI in investigating fraud c. A producer who fails to return $500 in premium to the insured is punishable by a fine of $1,000 d. No action is taken if the misdemeanor monetary amount is less than $100 State Insurance Commissioner General Duties and Powers The Governor appoints the Commissioner, subject to Senate confirmation, to head the Maryland Insurance Administration, an independent unit of Maryland State government, for a 4-year term. The Commissioner is directly responsible to the Governor, and will advise and counsel the Governor on all matters assigned to the Insurance Administration. The Commissioner must be covered by a surety bond in the form and amount required by law. The Commissioner is responsible for organizing, administering, and carrying out the general duties and broad powers of the Administration. The Commissioner s primary duties include: The issuance, refusal, suspension, or revocation of Certificates of Authority to insurers and licenses to producers involved in the insurance business. Establishing rules and regulations necessary to conduct and fulfill Maryland insurance laws. Conducting investigations, examinations, and hearings associated with administering Maryland insurance laws. Preparing an annual report to the Governor detailing the activities of the Maryland Insurance Administration for the previous fiscal year. Preparing a report when required, but at least once every 5 years, concerning recommended changes to financial requirements for insurers. The Commissioner shall establish divisions or sections in the Administration, along the following lines of responsibility: Life insurance and health insurance Property insurance and casualty insurance Audit and examination Insurance professions Consumer affairs Insurance fraud Examinations The Commissioner must examine the transactions, accounts, records, and assets of each insurer (including management companies and subsidiaries), rating organization, and HMO when it applies for a Certificate of Authority and as often as deemed necessary thereafter. The periodic examination must occur at least once every 5 years for domestic insurers and HMOs. The Commissioner may, instead of examining a foreign or alien insurer, accept its most recent certified report from another state s supervisory insurance official. An alien insurer s examination may be limited to its affairs and transactions in the United States. 17

18 MARYLAND STATE INSURANCE LAWS The Commissioner, as often as advisable, may examine the accounts, records, documents, and transactions relating to the insurance business of the following: Insurance producers, surplus lines brokers, general agents, adjusters, public adjusters, and advisers. Anyone who has the exclusive or dominant right to manage or control an insurer. Anyone holding enough shares of voting stock or policyholder proxies to control a domestic insurer. Anyone who is engaged in helping promote or form a domestic insurer, an insurance holding corporation, or a corporation to finance a domestic insurer. The examinee must: Provide and make freely available all records, documents, files, accounts, and information related to the examination. Pay the examination expenses, including the expense of an actuary, accountant, or other expert who is not otherwise a part of the Commissioner s staff, if the expert is necessary to conduct the examination. Receive a copy of the examination report at least 30 days before it is filed with the Commissioner s office. The examinee may, within the 30-day period before filing, request, in writing, a hearing on its examination report. Such request delays the report s filing until after the hearing. The Commissioner shall conduct an examination of a domestic and foreign insurer at their home office and the U.S. branch office of an alien insurer. The Commissioner shall conduct an examination of a person other than an insurer, HMO, or private review agent at that person s place of business or any place where the person s records are kept. An order of the Commissioner shall state: Its effective date and purpose The grounds on which it is based, and The provisions of the Insurance Code under which action is or proposed to be taken Failure to designate a particular provision of the Code does not prohibit the Commissioner of the right to rely on that provision. Retention Question 13 Which of the following is NOT a general duty or power of the State Insurance Commissioner? a. Establish rules and regulations to fulfill insurance laws b. Create and provide insurance laws to the Maryland legislature c. Establish administrative sections for life and health insurance, property and casualty insurance, and insurance fraud d. Issue Certificates of Authority to insurers 18

19 Insurer Regulation Forms Filings LIFE AND HEALTH LAWS Each form for a policy, certificate of insurance, notice of proposed insurance, application for insurance, endorsement, or rider delivered or issued for delivery in Maryland must be filed with the Commissioner for approval. Any standard certificate of insurance form required by a federal agency or adopted by the Association for Cooperative Operations Research and Development (ACORD) or the Insurance Services Office (ISO) that otherwise complies with these requirements is deemed approved by the Commissioner. The Commissioner must approve the filing, disapprove the filing, or withdraw the approval within 60 days after the form is filed. An insurer may not issue or use a form filed with the Commissioner until the end of the 60-day waiting period unless the Commissioner approves the filing in writing before the end of the period. The Commissioner will not approve a form if it contains provisions that: Are unjust, unfair, inequitable, misleading, or deceptive Encourage misrepresentation of the coverage, Are contrary to a regulation If the Commissioner disapproves a form, the Commissioner will notify the insurer of the disapproval and specify in the notice the reason for disapproval and state that a hearing on the disapproval will be held within 20 days after receipt of a written request by the insurer. After notification of disapproval, an insurer may not issue or use the disapproved form or premium rate. The Commissioner may withdraw approval of a form if the Commissioner notifies the insurer in writing of the proposed withdrawal, specifies in the notice the reason for withdrawal, and states that a hearing on the withdrawal will be held not less than 20 days after the date of the notice. An insurer may not issue or use a form after the effective date of withdrawal of approval by the Commissioner. Rates Filings Every schedule of premium rates must be filed with the Commissioner for approval. The Commissioner must, within 60 days after a premium rate is filed, approve the rates or disapprove them if the table of premium rates appears by reasonable assumptions to be excessive in relation to the benefits. In reviewing the rate filing the Commissioner will consider: Past and prospective loss experience in and outside Maryland Underwriting practice and judgment to the extent appropriate A reasonable margin for underwriting profit and contingencies Past and prospective expenses, whether countrywide or specially applicable in Maryland Any other relevant factors in and outside Maryland The Commissioner will notify the insurer if the rate schedule is disapproved and provide the reason. After notification of disapproval, an insurer may not issue or use the disapproved form or premium rates. A hearing will be held within 20 days after receipt of a written request by the insurer. 19

20 MARYLAND STATE INSURANCE LAWS A person may not willfully collect a premium or charge for insurance if the insurance is not then provided or is not in due course to be provided subject to the insurer s acceptance of the risk. The premium charged cannot exceed or be less than those applicable to the rates approved by the Commissioner or, if premiums/rates are not required to be approved by the Commissioner, exceeds or is less than those specified in the policy. Surplus Lines Brokers may charge State and federal taxes in addition to required premiums. Life insurers may charge the amount expended for a reinstatement medical examination. Authorized insurers may charge installment fees or reasonable fees for late payment of premiums, if approved by the Commissioner. Such fee will not exceed $10. A late fee may not be imposed during any grace period or, if no grace period is required, until 2 business days after the payment due date. A policy may not be canceled for failing to pay a single late fee or single installment fee. An insurer may not raise the policy limits of coverage if the effect could be a premium increase without the insured s prior consent. Retention Question 14 An insurer may not use a form that is filed with the Commissioner until the end of the waiting period. a. 3-month b. 4-week c. 10-day d. 60-day Unfair Claims Settlement Practices The following are considered acts constituting improper claim settlement practices: Misrepresenting pertinent facts or policy provisions that relate to the claim or coverage at issue. Refusing to pay a claim for an arbitrary or capricious reason in light of all available information. Attempting to settle a claim based on an application that is altered without notice to, or the knowledge or consent of, the insured. Failing to include, with each claim paid, a statement of the coverage under which payment is being made. Failing to settle a claim promptly under one part of a policy, whenever liability is reasonably clear, in order to influence settlements under other parts of the policy. Failing to provide prompt, reasonable explanations, on request, of the basis for a claim denial. Failing to acknowledge and act with reasonable promptness on communications about claims. Failing to adopt and implement reasonable standards for the prompt investigation of claims. Refusing to pay a claim without conducting a reasonable investigation based on all available information. Failing to accept or deny claims within a reasonable time after proof of loss statements have been completed. Failing to make a prompt, fair, and equitable good faith attempt, to settle claims for which liability has become reasonably clear. Compelling insureds to institute litigation to recover due amounts due by offering substantially less than the amounts ultimately recovered in lawsuits brought by the insureds. 20

21 LIFE AND HEALTH LAWS Attempting to settle a claim for less than the amount to which a reasonable person would expect to be entitled. Making known to insureds or claimants a policy of appealing from arbitration awards in order to compel insureds or claimants to accept a settlement or compromise less than the amount awarded in arbitration. Failing, upon receipt of notification of claims, to acknowledge receipt of the notification within 15 working days, unless payment is made within that period of time. Complaint Records Retention Question 15 Which of the following is NOT an unfair claim settlement practice? a. Refusing to pay a claim without conducting a reasonable investigation b. Failure to acknowledge receipt of notification of an unpaid claim within 10 days c. Offer substantially less than deserved in order to force the insured to file a lawsuit d. Refuse to pay a claim for an arbitrary reason Insurers must maintain a complaint system to provide reasonable procedures for the resolution of written complaints initiated by policyholders. A record of all written complaints must be maintained by the insurer. The Commissioner may examine the complaint record at any time. Certificates of Authority An insurer may not engage in the insurance business in Maryland without first obtaining Certificate of Authority from the Commissioner. To qualify for a Certificate of Authority the insurer must: Be in compliance with its charter policies and Maryland insurance statutes. Be an incorporated stock insurer, incorporated mutual insurer, or reciprocal insurer. Have and maintain capital stock and surplus required by statute for the type of insurer. Have assets and surplus that is reasonable in relation to the insurer s outstanding liabilities and adequate to its financial needs. Provide: articles of incorporation including all amendments, certified copies of bylaws and all amendments, and the annual statement as of the preceding December 31. A Certificate of Authority expires on the first June 30 after its effective date unless it is renewed by the insurer. The insurer must file a renewal application and pay the appropriate renewal fee. Failure to renew on or before June 30 may incur a monetary penalty and the Commissioner may issue a cease and desist order directing the company to stop writing insurance. The Commissioner is required (mandatory grounds) to deny, refuse to renew, suspend, or revoke a Certificate of Authority if the insurer: No longer meets the requirements for a Certificate of authority because of a deficiency in assets or other reason. Conducts its business fraudulently. Is insolvent or its assets are not sufficient for the business. Fails to pay premium taxes. Operates contrary to public interest. Is managed by individuals who are untrustworthy, not of good character, or so lacking in insurer managerial experience that the Commissioner finds their operation of the company would be hazardous to the public or stockholders. 21

22 MARYLAND STATE INSURANCE LAWS Is affiliated with anyone whose business operations are marked by manipulation or bad faith to the detriment of insureds, stockholders, or creditors. Violates other laws requiring mandatory denial, refusal to renew, suspension, or revocation. The Commissioner may deny a Certificate of Authority to an applicant or, subject to a hearing, refuse to renew, suspend, or revoke a certificate of authority if the applicant or holder of the certificate of authority (discretionary grounds) if the insurer: Violates insurance laws (beyond those that require mandatory denial, refusal to renew, suspension, or revocation). Knowingly fails to comply with a regulation or order of the Commissioner. Is found by the Commissioner to be in unsound condition or in a condition that renders further transaction of insurance business hazardous to the insurer s policyholders or the public. Is engaged in writing policies on a premium basis that the Commissioner finds to be insufficient, insecure, or impracticable so as to endanger the solvency of the insurer. Refuses or delays payment of amounts due claimants without just cause. Refuses to be examined or to produce its accounts, records, or files for examination by the Commissioner when required. Refuses to provide additional information that the Commissioner considers advisable in considering an application for renewal of the certificate of authority. Fails to pay a final judgment against it in the State within 30 days after the judgment becomes final. Is affiliated with and under the same general management or interlocking directorate or ownership as another insurer that transacts direct insurance without having a certificate of authority to do so, except as a surplus lines insurer. Is found by the Commissioner to have participated, with or without the knowledge of an insurance producer, in selling motor vehicle insurance without an actual intent to sell the insurance. Is found by the Commissioner to have a general business practice of accepting insurance contracts that the person has sold, solicited, or negotiated when that person does not have an appointment from the insurer. Has had a certificate of authority revoked or suspended by the insurance regulatory authority of another state. Fails to provide to the Commissioner or an insurance producer any information regarding the termination of an appointment of the insurance producer or makes an inaccurate statement regarding a terminated producer with actual malice. The Commissioner may publish notice of the revocation of a certificate of authority in a newspaper published in Maryland. Penalty Instead of or in addition to suspending or revoking a certificate of authority, the Commissioner may: Impose on the holder a penalty of not less than $ 100 but not more than $125,000 for each violation. Require the holder to make restitution to any person who has suffered financial injury because of the violation. 22

23 LIFE AND HEALTH LAWS Retention Question 16 In order to obtain a Certificate of Authority, an insurer must: a. Provide annual statements for the preceding 5 years b. Be an incorporated stock or mutual insurer, or reciprocal insurer c. Provide certified copy of the financial summary for current year d. File a renewal application on or before December 31 every other year Producer Regulation Record Retention An independent insurance producer is required to maintain records of insurance transactions. A producer must maintain a copy of signed disclosure forms for a period of 5 years. Activities of Unlicensed Individuals It is a fraudulent insurance act to represent yourself to the public as an insurance producer if you don t have the appropriate insurance license. This means you cannot solicit or take an application for, procure, or place for others insurance for which you have not obtained an appropriate license, even if you are licensed for another line of insurance. Payment and Sharing of Commissions Commission or other consideration for selling, soliciting, or negotiating insurance may only be paid to licensed insurance producers. Renewal or other deferred commissions on life and health insurance may be paid to a person who formerly held a license and, if applicable, an appointment. Promotional or referral fees are also permitted to nonlicensed individuals if the amount is no more than $25 and the payment is made regardless of whether a policy is sold. Resident and nonresident producers may share commissions on policies signed and countersigned by each other. Penalty A person violating Maryland insurance laws concerning licensing, appointments, termination of appointments, and payment of commissions is guilty of a misdemeanor and will be fined up to $500, imprisoned for up to 6 months, or both for each violation. Charging of Fees Insurance Advisors An agreement between an adviser and another person must be in writing and specifically state the fee amount paid or is to be paid by the person for the advisor s services. A person may not pay any part of an initial service fee or any other fee or charge to an insurance producer, employee of an insurance producer, or to any other person as an inducement to financing an insurance contract with a premium financing company. An insurance producer, employee of an insurance producer, or any other person may not accept, directly or indirectly, any valuable consideration as an inducement to facilitate an agreement to finance an insurance premium that contains an assignment of or is otherwise secured by the unearned premium or refund obtainable from an insurer on cancellation of an insurance contract. 23

24 MARYLAND STATE INSURANCE LAWS Surplus Lines Brokers A surplus lines broker may charge a reasonable policy fee on a policy issued by a surplus lines insurer not exceeding: Up to $100 on each personal lines policy procured by a licensed insurance producer not affiliated with or controlled by the surplus lines broker and to whom the surplus lines broker pays a commission. Up to $250 on each commercial lines policy procured by a licensed insurance producer not affiliated with or controlled by the surplus lines broker and to whom the surplus lines broker pays a commission. The policy fee charged must be reasonably related to the cost of underwriting, issuing, processing, and servicing the policy by the surplus lines broker for the surplus lines insurer or the authorized insurer. A surplus lines broker may recoup from the prospective insured the actual cost of an inspection required for the placement of insurance with an authorized insurer if: The inspection is required by the authorized insurer. The cost of the inspection is actually incurred by the surplus lines broker and not retained by the surplus lines broker, and The cost of the inspection is documented and verifiable. Regardless of the number of insurers participating on a risk, only one inspection fee may be charged to recoup the actual cost of an inspection for each policy, and only one policy fee may be charged for each policy. Producers may charge a fee, not exceeding 15% of the premium, for services rendered in replacing insurance with an existing insurer if commissions are not payable by the insurer. Retention Question 17 An unlicensed person may: a. Receive a reward for soliciting applicants under the supervision of a licensed producer b. Place an insurance policy for a licensed producer c. Be fined up to $1,500 for violating insurance transaction regulations d. Receive a referral consideration up to $25 in value Fiduciary Duties and Trust Accounts Every producer is a fiduciary as to all premiums, return premiums, or other money that the producer received from any person in connection with a policy. Every producer must deposit as trust money into a separate account for premiums, and all money received must be accounted for and paid as the law requires. A trust agreement must create a trust account into which assets will be deposited. The assets in the trust account will be held by the trustee at the trustee s office in the United States. These deposits are held at the expense of the insurer. Commingling of Funds Every producer must keep personal funds separate from premium monies unless he/she has the express written consent of the insurer to commingle them. Funds not promptly or immediately remitted to the insurer s principal office must be deposited and kept in appropriately identified bank accounts. 24

25 LIFE AND HEALTH LAWS If insurance producers do not remit payments to principals and insureds by the close of the 5th business day following their receipt, they must deposit the payments in a premium account in an authorized Maryland bank. An insurance producer may make voluntary deposits to this account in order to maintain a minimum balance, guarantee the account s adequacy, or pay premiums due but not collected. An insurance producer may not make withdrawals from the premium account except for the following reasons: Payment of premiums to principals Transfer of interest to an operating account if the principals have consented in writing Transfer of average or actual commissions to an operating account Withdrawal of voluntary deposits Payment of return deposits to insureds Payment of return premiums to insureds in the ordinary course of business when the principal authorizes the practice by written agreement A withdrawal may not be made if the balance remaining in the premium account is less than aggregate net premiums, return premiums, and deposits received but not remitted. The deposit of a premium in a premium account is not considered commingling solely because the deposit includes both the net premium and the commission portion of the premium. An insurance producer using an account current system must: Maintain at least the net balance of premiums, return premiums, and deposits received but not remitted. Be able to determine each principal s funds from his/her records. Commingling of funds is prohibited. Separate accounts must be maintained, where officers, directors, or principal management of an insurer have a substantial interest in an agency s or brokerage business s conduct or operation, or vice versa. A principal must give an insurance producer at least 30 days written notice before canceling his/her written consent to commingle funds. The principal must give the Administration a copy of the notice, unless the principal s account with the agency or brokerage firm is being terminated. Retention Question 18 Given money for the renewal premium due by a policyholder, the producer must: a. Return the money to the policyholder within 30 days b. Deposit the money into an account that is separate from his personal or operating funds c. Use the money until the renewal date of the policy d. Pay the premium when the insurer pays the producer commission 25

26 MARYLAND STATE INSURANCE LAWS Advertising Advertisements must be truthful and not misleading in fact or in implication. Technical insurance terminology may not be used if the meaning is not clear to people not familiar with insurance jargon. An advertisement must disclose exceptions, reductions and limitations, without which the advertisement would have the tendency to mislead, when it refers to: Any dollar amount Period of time for which any benefit is payable Policy cost or specific benefit, or Loss for which the benefit is payable An exception, which must be disclosed, is defined as any policy provision whereby coverage for a specified hazard is entirely eliminated. It is a statement of a risk not assumed under the policy. A reduction, which must be disclosed, is defined as any provision that reduces the benefit amount. A risk of loss is assumed but payment upon the occurrence of the loss is limited to some amount or period less than would be otherwise payable had the reduction clause not been used. A limitation, which must be disclosed is any provision that restricts coverage under the policy other than an exception or a reduction. An advertisement must disclose waiting, elimination, probationary, or similar periods. When a policy contains a time period between the policy s effective date and the coverage effective date or a time period between the date a loss occurs and the date benefits begin to accrue, an advertisement must disclose these periods. An advertisement shall disclose the extent to which any loss is not covered if the cause of the loss is traceable to a preexisting condition. When a policy does not cover losses traceable to preexisting conditions, an advertisement may not state or imply that the applicant s physical condition or medical history will not affect the policy issuance or a claim payment. This limits the use of the phrase no medical examination required and similar phrases. The insurer s identity shall be made clear in all of its advertisements. An advertisement may not use a trade name, service mark, slogan, symbol, or other device that has the tendency to mislead or deceive as to the insurer s true identity. Every insurer shall maintain at its home or principal office a complete file containing a copy of every advertisement used. Each advertisement must have a notation indicating the manner and extent of distribution and the form number of any policy advertised. The file shall be subject to regular and periodical inspection and shall be maintained for at least 3 years. Before a carrier advertises, on television or radio or in writing, the carrier must submit a copy of the advertisement to the Commissioner for review. Retention Question 19 An advertisement must disclose exceptions, reductions, and limitations when it refers to: a. A dollar amount over $1,000 b. The effective date of the policy c. Policy exclusions d. Loss for which the benefit is payable 26

27 Unfair Trade Practices LIFE AND HEALTH LAWS The following acts are prohibited because they are unfair methods of competition and unfair and deceptive acts in the business of insurance: Misrepresentation Misrepresentation is prohibited as an unfair and deceptive act. Misrepresentation includes the following acts: Making misleading representations or fraudulent comparisons of insurance policies or misrepresenting the terms or benefits of an insurance policy. Making misleading representations as to the financial condition of an insurer. Making a false or misleading statement about the dividends or share of the surplus previously paid on similar policies. Using a name or title of a policy or class of policies that misrepresents the policy s or class s true nature. False Advertising False advertising is the Presentation of any information or advertisement that is false or misleading about the insurance business or any person in the conduct of his/her insurance business. Defamation Defamation is the making of any false oral or written statement that is maliciously critical or derogatory of any insurer s financial condition with intent to injure someone in the business of insurance. Boycott, Coercion and Intimidation No person may enter into an agreement to commit, or by concerted action commit, an act of boycott, coercion, or intimidation that results in or even tends to result in unreasonable restraint of trade or a monopoly in the business of insurance. An insurance producer or insurer may not participate in a combination plan or require another person to buy insurance through a particular insurance producer or insurer as a condition, agreement, or understanding with respect to selling or providing a loan, credit, sale, goods, property, contract, lease, or service to the other person. False Financial Statements No person may knowingly make a false statement of an insurer s financial condition. This includes making known false entries in a book, report, or statement with intent to deceive an agent or examiner lawfully appointed to examine an insurer. It also includes willfully omitting entries or material facts about the insurer s business from books, reports or statements with intent to deceive. Prohibited Inducements No person may issue, deliver, or allow the issue or delivery of agency company stock, other capital stock, benefit certificates, shares in a corporation, an advisory board contract, or other similar contract that promises returns and profits as an inducement to purchase insurance. In reverse, an insurer may not use the purchase of insurance as an inducement to obtain goods, securities, commodities, services, or periodical subscriptions. 27

28 MARYLAND STATE INSURANCE LAWS Unfair Discrimination The following are prohibited acts of unfair discrimination that apply to life insurance and annuity contracts: No person may make or allow unfair discrimination between individuals of the same class and equal expectation of life in: The rates charged for a contract of life insurance or an annuity contract. The dividends or other benefits payable on a contract of life insurance or an annuity contract. Any of the other terms or conditions of a contract of life insurance or an annuity contract. Insurers may not make or allow a differential in ratings, premium payments, or dividends for contracts of life insurance or annuity contracts for a reason based on the blindness or other physical handicap or disability of an applicant or policyholder. A differential in ratings, premium payments, or dividends in connection with life insurance and annuity contracts for a physical handicap or disability other than blindness or hearing impairment must be based on actuarial justification. Similarly, any differential solely because the applicant or policyholder has the sickle-cell trait, thalassemia-minor trait, hemoglobin C trait, Tay-Sachs trait, or a genetic trait that is harmless in itself must be based on actuarial justification. An insurer may not refuse to insure, refuse to continue to insure, limit the amount or extent or kind of coverage available to an individual, or charge an individual a different rate for the same coverage solely for reasons associated with an applicant s or insured s past lawful travel experiences. The following are prohibited acts of unfair discrimination that apply to health insurance: No person may make or allow unfair discrimination between individuals of the same class and of essentially the same hazard in: The amount of premium, policy fees, or rates charged for a policy or contract of health insurance. The benefits payable under a policy or contract of health insurance. Any of the terms or conditions of a policy or contract of health insurance. Any other manner. An insurer may not make or allow a differential in ratings, premium payments, or dividends for a reason based on the: Sex of an applicant or policyholder unless there is actuarial justification for the differential. Blindness or other physical handicap or disability of an applicant or policyholder unless there is actuarial justification for the differential (but actuarial justification is not considered for blindness or hearing impairment). Rebating No person may knowingly offer or allow to be offered any advantage or consideration, financial or otherwise, as an inducement to buy life or health insurance or an annuity contract, unless such consideration is specified in the contract. Prohibitions against rebating extend to Health Maintenance Organizations as well as insurers and insurance producers. Examples of rebating include: A rebate or return of premiums. A special favor or advantage in the policy dividends or other benefits. Paid employment or a contract for services of any kind. Promise of returns and profits. Educational or promotional materials or merchandise with a value of more than $25. 28

29 LIFE AND HEALTH LAWS Offering any interest in or ownership of any stocks, bonds, or other securities, whether or not specified in the policy. Twisting Twisting is a prohibited unfair trade practice. Twisting is Misrepresenting or using incomplete comparisons about the policy terms, conditions, or benefits with the purpose of inducing a person to lapse, cease, or forfeit an existing policy for a new policy to the person s detriment. Retention Question 20 Charging different rates to two policyholders of the same class and equal expectation of life is: a. Misrepresentation b. Defamation c. Prohibited inducements d. Unfair discrimination Retention Question 21 An insurance agency was guilty of when the local paper printed an article, written by the agency producers that included misleading information about the policy described in the article. a. Misrepresentation b. False advertising c. Defamation d. False financial statements Insurance Information and Privacy Protection An insurer that takes a consumer s nonpublic personal financial information or nonpublic personal health information must: Notify consumers about its privacy practices. Give consumers a reasonable opportunity to opt out of any disclosure of this personal information. Opt out means a direction by the consumer that the licensee not disclose nonpublic personal financial information about that consumer to a nonaffiliated third party, other than as permitted by statute. An insurer may not unfairly discriminate against any consumer for opting out. Instead of meeting these requirements, a surplus lines broker or insurer may notify a consumer, when establishing a customer relationship, that personal information will be disclosed only as allowed by law. An insurer must annually notify its customers of its privacy practices. A customer relationship is established when a consumer becomes a licensee s policyholder or agrees to pay for financial advice about insurance. 29

30 MARYLAND STATE INSURANCE LAWS Limits on the Use of Personal Financial Information Disclosure is allowed to affiliates and, unless legally prohibited, to any other person. The only nonaffiliated third party to which a licensee may disclose a policy number for marketing purposes is a consumer reporting agency. Exceptions The Commissioner may exempt an insolvent licensee from notice requirements that could impose a financial burden on the licensee or decrease the ability to pay claims. Authorization Requirement for Disclosure of Health Information A licensee must have a consumer s authorization before disclosing his/her personal health information, except: For underwriting, actuarial work, and claims handling For investigations of criminal behavior To control losses To guaranty funds and reinsurers To manage a risk, case, or disease; assure or improve quality of care; and review utilization of health services or evaluate peers To evaluate licensee or policy performance To verify credentials For any other actions where disclosure is not required by law or where the Commissioner determines that disclosure is both necessary to do business and in consumers interest Any authorization to disclose personal health information must: Identify, and be signed by, the consumer. Describe the information disclosed, the parties receiving the information, and how the information will be used. State the period, which may be up to 24 months, for which the authorization is valid. The consumer may revoke authorization at any time. A licensee is not subject to authorization rules when complying with HIPAA requirements. Retention Question 22 Which of the following is NOT true about privacy protection? a. An insurer must notify consumers about its privacy practices b. Opt out means the consumer will not allow the insurer to obtain consumer information c. The insurer can disclose a policy number to a consumer reporting agency d. A licensee can disclose an applicant s personal information to evaluate policy performance 30

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33 Life Laws Policy Replacement A replacement occurs if the purchase, or financed purchase, of a policy involves discontinuing or changing an existing life insurance policy or annuity contract. A policy is discontinued if the premium is no longer paid; the policy is surrendered, forfeited, assigned to the replacing insurer; the policy is used in a financed purchase; or the policy is otherwise terminated. A financed purchase occurs when the purchase of a new life insurance policy involves the use of funds obtained by the withdrawal or surrender of, or by borrowing some or all of, the existing life insurance policy values. This includes accumulated dividends. In a financed purchase, these funds from the old policy are used to pay all or part of any premium or payment due on the new life insurance policy. A financed purchase of this type is a replacement. In a replacement transaction, the insured pays acquisition costs for the new policy and, if applicable, surrender costs for the old policy. These costs are deducted from the old life insurance policy or annuity contract. Changes to the existing life insurance policy or annuity contract may meet the insured s insurance needs at less cost, but they may not. A financed purchase will reduce the value of the existing life insurance policy and may reduce the amount paid upon the death of the insured. The purpose of the replacement rules is to make sure that the insured understands the transaction and is making an informed choice. In a replacement transaction, a document called IMPORTANT NOTICE: REPLACEMENT OF LIFE INSURANCE OR ANNUITIES must be signed by the applicant and producer, if there is one, and a copy left with the applicant. To confirm that the applicant understands the effects of replacements before the final purchase decision, the applicant must answer the following questions: Are you considering discontinuing premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing life insurance policy or annuity contract? Are you considering using funds from your existing policies or annuity contracts to pay premiums due on the new life insurance policy or annuity contract? If the applicant answered yes to either of the above questions, each existing life insurance policy or annuity contract contemplating replacement must be listed. The applicant must be advised to contact the existing company or agent for information (and copies) about the existing life insurance policy or annuity contract, such as an in-force illustration, policy summary or available disclosure documents. All sales material used by the producer must be available to the applicant. The applicant must document in writing on the disclosure form the reason for replacing the existing policy or contract. 33

34 MARYLAND STATE INSURANCE LAWS Retention Question 23 Choose the FALSE statement about a replacement policy: a. A replacement involves the discontinuance of an existing life insurance policy b. A financed purchase is not considered a replacement transaction c. Discontinuance means that the existing premium will not be paid d. The insured will pay the new life insurance policy acquisition costs Group Life Insurance Eligibility The employees eligible for insurance under the policy will be all of the employees of an employer or all of any class or classes of employees. The policy may provide that the term employees includes: The employees of one or more subsidiary corporations, proprietorships, or partnerships if they are under common control. Individual proprietor or partners if the employer is an individual proprietorship or partnership. Retired employees, former employees, and directors of a corporate employer. Elected or appointed officials, if the policy is covering a political body. In Maryland, a group life policy may be issued to: An employer/employee group A labor union or similar employee organization A trust or to the trustees of a fund A professional association that has at least 100 members and that has been in existence for at least 2 years A public employer or a public employees association Debtor groups Credit union groups A volunteer fire, rescue squad, or ambulance service organization The policy premium will be paid either by the employer, the employees or both. If the employer pays the entire premium, all employees must be covered unless they cannot meet the insurer s evidence of insurability. Dependent coverage under a group life policy may extend to cover the insured s spouse, domestic partner, and dependent children. Dependent children include: Children under 18 years of age. Children over 18 years of age who attend an educational institution and are dependent upon the insured for financial support. The term domestic partner has the meaning stated in the policy. The amount of coverage on a spouse, partner, or child may not exceed the amount of coverage on the insured. Retention Question 24 Dependent coverage is NOT available to which of the following? a. Domestic partner b. Spouse c. 22-year-old resident son who works for a bank d. 16-year-old daughter in high school 34

35 Standard Provisions Group life policies in Maryland must contain the following standard provisions: Grace period of 31 days Incontestability after 2 years Application attached to policy Evidence of insurability requirement described Adjustment method for misstatement of age Provision for payment of benefits Individual certificates These points are described as follows: LIFE LAWS Grace Period The grace period must be 31 days for payment of any premium except the first premium. Death benefits continue in force during the grace period unless the policyholder has given the insurer written notice of discontinuance prior to the end of the grace period. The policy may provide that the insured is liable to the insurer for paying a pro rata premium for the time in force during the grace period. Incontestability Clause The incontestability clause must provide that the policy is incontestable, except for nonpayment of premiums, after the policy has been in force for 2 years after its date of issue. A statement made by an insured about insurability may not be used to contest coverage unless the insurance has been in force before the contest for less than 2 years and the statement is in writing and signed by the insured. Application Copy Attached to Policy A copy of the application must be attached to the policy when issued. Statements made by the policyholder are representations and not warranties. Statements made by an insured may not be used in a contest unless the statement is provided to the insured or beneficiary. Evidence of Individual Insurability Evidence of individual insurability may or may not be required of all insureds. A description of the conditions under which the insurer reserves the right to require an individual to provide evidence of individual insurability in order to be covered must be provided. Misstatement of Age In the event of a misstatement of age, the policy must provide a description of the adjustment method used to equitably determine benefits, premiums, or both. Payment of Benefits The policy must provide that any sum due because of the death of the insured is payable to the beneficiary designated by the insured, subject to the death of the beneficiary. If no beneficiary is living when the insured dies, the insurer has the right to pay up to $2,500 to any person the insurer considers equitably entitled to payment because the person sustained expenses related to the insured s death or last illness. Individual Certificates Individual certificates must be issued to the policyholder for delivery to each insured. The individual certificate must state who is entitled to the insurance protection, each person to whom the benefits are payable, and the rights and conditions of the policy. Retention Question 25 Choose the TRUE statement about the group life insurance provisions: a. A policy is incontestable after the policy has been in force 5 years b. If a policy has no beneficiary, the insurer can pay up to $2,500 to any person who paid the burial expenses c. The group certificate is given solely to the named insured on the policy d. The premium grace period allows 30 days to pay the premium 35

36 MARYLAND STATE INSURANCE LAWS Conversions A group life insurance policy must provide that if an insured individual becomes ineligible for coverage because of termination of employment or membership in the class eligible for coverage, the insured is entitled to convert to an individual policy for up to the same amount without evidence of insurability by paying the first premium within 31 days after such termination. An insured is entitled to receive a written notice of his/her right of conversion at least 15 days before the conversion period expires. If notice is not provided, the insured has an additional 15 days from the date he/she receives written notice in which to apply for an individual policy and pay the first premium. The additional period may not extend more than 60 days after the end of the 31-day conversion period. Every person insured for at least 5 years under a group policy being terminated, or being amended to terminate the insurance of a class of insureds, is entitled to have an individual policy with the same conditions and limitations. The group policy may provide that the amount of an individual policy not exceed the lesser of the insured s terminated group coverage, minus the amount of any group insurance he/she becomes eligible for within 31 days of the termination, or $10,000. If an insured under a group policy dies during the conversion period, the amount of coverage to which he/she would have been entitled is payable as a claim under the group policy, regardless of whether he/she applied for an individual policy. An insured s spouse and dependent children covered under a group policy are entitled to conversion to an individual policy: If the group coverage is terminated because of the insured s termination of employment or membership in a class eligible for coverage, the insured is entitled to convert to and individual policy. The same is available if the group coverage is terminated or amended to terminate coverage for the spouse or dependent child. Retention Question 26 A person insured for at least under a group policy that is being terminated, is entitled to an individual policy. a. 90 days b. 6 months c. 2 years d. 5 years Assignment of Proceeds An insured under a group life policy may assign to any person any or all of the policy s rights and benefits, including: The right to have the group policy converted to an individual policy, and The right to name a beneficiary. An assignment vests in the assignee all rights and benefits that are assigned and entitles the insurer to deal with the assignee as the owner of all rights and benefits conferred on the insured. 36

37 Maryland Life and Health Insurance Guaranty Corporation LIFE LAWS The Maryland Life and Health Insurance Guaranty Corporation is a private, nonprofit, nonstock corporation that protects resident policy and contract owners, certificate holders, beneficiaries, payees, and assignees of life insurance policies, health insurance policies, annuity contracts, and supplemental contracts against failure in the performance of contractual obligations due to the impairment or insolvency of the insurer that issued the policies or contracts. As a condition of its authority to transact insurance business in Maryland, each member must become and remain a member of the Corporation. A member insurer is an authorized insurer that writes life and health insurance and annuities, but is not a(n): HMO Fraternal benefit society Mandatory State pooling plan Mutual assessment company Insurance exchange An insolvent insurer is a member insurer that is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. Member insurers each pay an assessment to fund the Corporation. When a member insurer fails to pay a due assessment or abide by the Corporation s plan of operation, the Commissioner, after notice and hearing, may suspend/revoke the insurer s Certificate of Authority or impose a penalty. The Corporation may help the Commissioner in detecting and preventing insurer impairments by examining member insurers that may be unable or potentially unable to fulfill its contractual obligations. The benefits for which the Corporation may become liable generally will not exceed the contractual obligations for which an insurer would have been liable if it were not impaired or insolvent. The Corporation s obligation for a covered claim cannot exceed the lesser of the following amounts for any one life, regardless of the number of policies in effect: $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance. $500,000 for basic hospital, medical, and surgical insurance or major medical insurance provided by health benefit plans. $300,000 for disability insurance and $300,000 for long-term care insurance. $100,000 for coverages not included as basic hospital, medical, and surgical insurance, or major medical, disability, or LTC insurance, including any net cash surrender and net cash withdrawal values. $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values. The Commissioner must notify the Board of Directors of an impaired insurer not later than 3 days after a determination of impairment is made or the Commissioner receives notice of impairment. When an impairment is declared and the amount of the impairment is determined, the Commissioner will direct the impaired insurer to make good the impairment within a reasonable time. Notice to the impaired insurer is deemed notice to its shareholders. 37

38 MARYLAND STATE INSURANCE LAWS Retention Question 27 The Maryland Life and Health Insurance Guaranty Corporation is obligated to pay up to for disability insurance. a. $100,000 b. $200,000 c. $300,000 d. $500,000 38

39 Health Laws 39

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41 Health Laws Types of Providers Insurers An insurer is any person engaged as indemnitor, surety, or contractor in the business of entering into insurance contracts. Health insurers sell health insurance that includes accident insurance, disability insurance, but does not include workers compensation insurance. Health insurance means insurance of human beings against: Bodily injury, disablement, or death by accident or accidental means, and the related expenses Disablement or expenses resulting from sickness or childbirth Expenses incurred in prevention of sickness or dental care Non Profit Health Service Plans Health care providers in nonprofit health service plans include: Chiropractors Dental Hospital Optometrist Pharmaacist Physician Podiatrist Psychologist These plans: Are committed to a nonprofit corporate structure. Seek to provide individuals, businesses, and other groups with affordable and accessible health insurance. Recognize a responsibility to contribute to the improvement of the overall health status of the residents of the jurisdictions in which the nonprofit health service plans operate, and Are public benefit corporations exempt from taxation. The mission of the nonprofit health service plans, in accordance with the charter, is to: Provide affordable and accessible health insurance to the plan s insureds and those persons insured or issued health benefit plans by affiliates or subsidiaries of the plan. Assist and support public and private health care initiatives for individuals without health insurance, and Promote the integration of a health care system that meets the health care needs of all the residents of the jurisdictions in which the nonprofit health service plan operates. A Certificate of Authority is issued to an insurer of HMO wholly owned or controlled by a nonprofit health service plan doing business in Maryland. A corporation without capital stock organized for the purpose of establishing, maintaining and operating a nonprofit health service plan to provide health care services to subscribers is subject to the nonprofit health service plan statutes. 41

42 MARYLAND STATE INSURANCE LAWS Dental Plan Organization Act Dental plans/dental plan organizations may not be established or operated without a specific Certificate of Authority issued by the Commissioner. Retention Question 28 Which of the following is TRUE about Non Profit Health Service Plans? a. Health care providers include chiropractors b. The health service plans are not exempt from taxation c. A corporation with capital stock can be organized for the purpose of operating a nonprofit health service plan d. An optometrist is not an eligible health care provider for the nonprofit health service plans Health Maintenance Organizations (HMOs) An HMO is a health maintenance organization. An HMO can be a profit or nonprofit corporation that provides members the following health care services: Physician Hospitalization Laboratory X-ray Emergency Preventive services Out-of-area coverage Services are provided on an insured or prepaid basis in the area serviced by the HMO. The HMO is compensated by a predetermined periodic rate for providing minimum services, except for any copayment or deductible arrangement. An HMO provides the availability, accessibility, quality, and effective use of comprehensive health care services by physicians who are either HMO employees or partners in group or individual practice paid on either an aggregate fixed sum or on a per capita basis. Definitions Benefit Package A set of health care services, called covered services, provided to a member of an HMO under a contract that entitles the member to the health care services. Emergency Services Provided in a hospital emergency facility after the sudden onset of medical condition that manifests itself by symptoms of sufficient severity, including severe pain, that the absence of immediate medical attention could reasonably be expected by a prudent layperson, who possesses an average knowledge of health and medicine, to result in: Placing the patient s health in serious jeopardy Serious impairment to bodily functions Serious dysfunction of any bodily organ or part Health care services include: Ambulance services Appliances, drugs, medicines, and supplies Chiropractic care and services Convalescent institutional care Dental care and services 42

43 Extended care Family planning or infertility services Health education services Home health care or medical social services Inpatient hospital services Laboratory, radiological, or other diagnostic services Medical care and services Mental health services Nursing care and services Nursing home care Optical care and services Optometric care and services Osteopathic care and services Outpatient services Pharmaceutical services Physical therapy care and services Podiatric care and services Preventive medical services Psychological care and services Rehabilitative services Surgical care and services Treatment for alcoholism or drug abuse; and Any other care, service, or treatment of disease or injury, the correction of defects, or the maintenance of the physical and mental well-being of human beings Member A person who makes a contract or on whose behalf a contract is made with an HMO for health care services. Provider Any person, including a physician or hospital, which is licensed or otherwise authorized in Maryland to provide health care services. Subscriber A person who makes a contract with an HMO, either directly or through an insurer or marketing organization, under which the person or other designated persons, are entitled to the health care services. Retention Question 29 A is a person who only makes a contract with an HMO for health care services. a. Subscriber b. Provider c. Carrier d. Member HEALTH LAWS 43

44 MARYLAND STATE INSURANCE LAWS Maryland Health Insurance Plan (MHIP) The Maryland Health Insurance Plan (MHIP) is an independent unit the of Maryland state government. The purpose of the MHIP is to decrease uncompensated care costs by providing access to affordable, comprehensive health benefit for medically uninsurable Maryland residents. A medically uninsurable individual is a resident of Maryland who: Provides evidence that, for health reasons, a carrier has refused to issue substantially similar coverage to the individual. Provides evidence that, for health reasons, a carrier has refused to issue substantially similar coverage to the individual, except at a rate that exceeds the Plan rate. Satisfies the definition of eligible individual : Person has 18 or more months of creditable coverage under an employer sponsored plan, government plan, church plan, or health benefit plan. Person is not eligible under an employer sponsored plan, Medicare Parts A or B, or State Medicaid. Person s creditable coverage was not terminated for nonpayment of premium or fraud. Person was offered a state or federal continuation provision that was elected and exhausted. Person does not have coverage under a health benefit plan. Has a history of or suffers from a medical or health condition that is included on a list promulgated in regulation by the Board. Is eligible for the tax credit for health insurance costs under 35 of the Internal Revenue Code. Is a dependent of an individual who is eligible for coverage. Satisfies the eligibility requirements established by federal law to enroll in a national temporary high risk pool program that is established by the Secretary of Health and Human Services and administered by the Plan for the State. Is NOT eligible for coverage under the federal Medicaid program: Unless the individual is eligible for a subsidy of Plan costs provided by the Department of Health and Mental Hygiene under a Medicaid waiver program, the Maryland Medical Assistance Program. The Maryland Children s Health Program. An employer-sponsored group health insurance plan that includes benefits comparable to Plan benefits, unless the individual is eligible for the tax credit for health insurance costs. The MHIP operates as a nonprofit entity and the Fund revenue, to the extent consistent with good business practices, is used to subsidize health insurance coverage for medically uninsurable individuals and bridge eligible individuals and fund the State Reinsurance Program. Members receive notice that they may not be denied health insurance because of a preexisting health condition and that they may be eligible to: Enroll in the Maryland Medical Assistance Program. Purchase a health benefit plan offered in the Maryland Health Benefit Exchange or outside the Exchange. Receive federal premium and cost-sharing assistance for the purchase of a health benefit plan in the Maryland Health Benefit Exchange. The MHIP will provide coverage until January 1,

45 HEALTH LAWS Retention Question 30 Which person is not eligible for coverage under the Maryland Health Insurance Plan? a. Uninsurable b. Also eligible for Maryland Medicaid coverage c. Creditable coverage was not cancelled for nonpayment of premium d. Dependent of eligible individual Medical Plans Requirements Eligibility Requirements Dependent Child Age Limit Under the Patient Protection and Affordable Care Act, an unmarried child must be covered on his/her parent s health insurance until age 26. Coverage for Adopted Children Adoption coverage begins when the child is placed in the home even though the adoption process is not yet finalized. Coverage may not be required to be extended to a child if the insured is appointed custody for less than 12 months. Newborn Child Coverage Hospitalization For Childbirth Health policies must provide coverage for hospitalization after childbirth to the same extent as for any covered illness, if necessary. Whenever a mother is required to remain hospitalized after childbirth for medical reasons and she requests that the newborn remain in the hospital, the insurer or nonprofit health service plan must pay the cost of additional hospitalization for the newborn for up to 4 days. In patient hospitalization for a mother and newborn must be covered at least 48 hours for an uncomplicated, vaginal delivery or up to 96 hours for an uncomplicated cesarean delivery. A mother may request a shorter length of stay if she and the provider agree that less time is needed. When a mother and newborn stay in the hospital for less time than the policy allows, the policy must cover one home visit within 24 hours of discharge and an additional home visit if prescribed by her physician. If the mother and newborn stay for at least the length of time allowed by the policy, then one home visit must be covered if prescribed by her physician. Unmarried Dependent Incapacitated Child Coverage Notwithstanding any limiting age stated in a policy or contract, a child, grandchild, or individual for whom guardianship is granted by court must continue to be covered under the policy as a dependent when the person reaches the limiting age if the person is unmarried and is incapable of self-support because of mental or physical incapacity that started before he/she attained the limiting age. Retention Question 31 Under what circumstances is coverage not required to be extended to an adopted child? a. Child is placed in the home before the adoption is finalized b. Insurance is granted temporary custody for 2 years c. Up to 10 days after the birth of the child d. Insured is appointed custody for 9 months 45

46 MARYLAND STATE INSURANCE LAWS Mandated or Required Offers Continuation Coverage Surviving Spouses and Dependent Children A spouse of a deceased insured under group coverage and any dependent children of the insured may elect to continue coverage. To qualify for continuation coverage, the spouse must have been married to the insured for at least 30 days immediately preceding the insured s death. Divorced Spouses and Dependent Children A divorced spouse of an individual insured under a group contract may elect to continue coverage. Coverage must be identical to the coverage offered under the group contract to similarly situated beneficiaries for whom there has not been a change in status. Employees Terminated Other Than for Cause An individual who becomes ineligible for a group health plan through termination of employment may elect continuation of coverage. Continuation coverage elected under the group contract must begin on the date of the triggering event (death, termination) and end on the earliest of the following: 18 months after the date of the triggering event. The date on which the beneficiary fails to make timely payment of an amount due plus a fee. The date on which the beneficiary becomes eligible for hospital, medical, or surgical benefits under an insured or self-insured group health benefit program or plan, other than the group contract, that is written on an expense-incurred basis or is with an HMO. The date on which the beneficiary becomes entitled for Social Security benefits. The date on which the beneficiary accepts hospital, medical, or surgical coverage under a nongroup contract or policy that is written on an expense-incurred basis or is with an HMO. The date on which the beneficiary elects to terminate coverage under the group contract. The date on which the employer ceases to provide benefits to its employees under a group contract. For an individual who is a beneficiary by reason of having been a dependent child, the date on which the individual would no longer be covered under the group contract if the insured had not died. For an individual who is a beneficiary by reason of having been the insured s spouse, the date on which the individual remarries. Coverage must be available to the spouse and dependent children of the insured if the group contract provides benefits for spouses and dependent children and the insured s spouse and dependent children were covered under the group contract before the change in status. To elect continuation coverage, a beneficiary or authorized representative must submit a signed election notification form to the insured s employer during the election period. The election period begins on the date of the triggering event (death, divorce, termination) and ends at least 45 days after that date. Within 14 days after receipt of a request for an election notification form, the employer must deliver or send by first-class mail the election notification form to the qualified beneficiary or authorized representative. Continuation coverage must be provided without evidence of insurability or additional waiting periods. The payment for the coverage may not exceed the sum of the employer contribution and any contribution that the insured would have been required to pay plus a reasonable administrative fee that is subject to review and approval by the Commissioner. Payments must be allowed in monthly installments if the beneficiary elects to do so. Coverage must be identical 46

47 to the coverage offered under the group contract to similarly situated individuals for whom there has not been a triggering event. Each certificate issued to an insured under a group contract must include a statement, in a manner and form approved by the Commissioner that advises the insured of the following: The availability of continuation coverage under this section. A summary of the eligibility for and duration of the continuation coverage, and The procedure for making an election to receive continuation coverage. Benefits for Alzheimer s Disease and Care of Elderly Individuals Applicable for group or blanket health insurance policies written on an expense-incurred basis or nonprofit health service plans issuing/delivering medical or major medical contracts, an entity must offer the policyholder the option of providing benefits for expenses arising from the care, including nursing home care and intermediate or custodial nursing care, of: Individuals who have Alzheimer s disease. Elderly individuals who have any disease, other than Alzheimer s disease, that are designated in regulations by the Commissioner. An entity may establish reasonable limits on the offered benefits, including copayment and deductible provisions and maximum annual and lifetime dollar limits. Benefits for Treatment of Mental Illnesses, Emotional Disorders, and Drug and Alcohol Abuse The following terms apply to the requirement of benefits for treatment of mental illnesses, emotional disorders, and drug and alcohol abuse: A health benefit plan includes a: Hospital or medical policy, including those issued under multiple employer trusts or associations located in Maryland or any other state covering Maryland residents. Policy or contract issued by a nonprofit health service plan that covers Maryland residents. HMO subscriber or group master contract. A large employer has more than 50 employees. A managed care system is a system of cost containment that a carrier uses to review and preauthorize a treatment plan developed by a health care provider for a covered individual in order to control utilization, quality, and claims. Partial hospitalization is the provision of medically directed intensive or intermediate short-term treatment: To an insured, subscriber, or member. In a licensed or certified facility or program. For mental illness, emotional disorders, drug abuse, or alcohol abuse, and For a period of less than 24 hours but more than 4 hours in a day. HEALTH LAWS A small employer employed an average of at 2-50 employees on business days during the preceding calendar year, and employs at least 2 employees on the first day of the plan year. These requirements are applicable to health insurance individual or group policies or contracts, delivered or issued in Maryland, that provide coverage on an expense-incurred basis. 47

48 MARYLAND STATE INSURANCE LAWS Policies or contracts may not discriminate against an individual with a mental illness, emotional disorder, drug abuse disorder, or alcohol abuse disorder by failing to provide benefits for the diagnosis and treatment of these illnesses under the same terms and conditions that apply under the policy or contract for the diagnosis and treatment of physical illnesses. Coverage is not considered discriminatory if at least the following benefits are provided: Inpatient services are provided for the same number of days and upon the same terms as physical conditions. At least 60 days of partial hospitalization are covered. Outpatient coverage, including psychological and neuropsychological testing for diagnostic purposes, provided to treat mental illnesses, emotional disorders, drug abuse, or alcohol abuse are covered at a rate that, after the applicable deductible, is not less than: 80% for the first five visits in a calendar year or benefit period of not more than 12 months. 65% for the 6th through 30th visit in a calendar year or benefit period of not more than 12 months. 50% for the 31st visit and any subsequent visit in a calendar year or benefit period of not more than 12 months. For group contracts covering employees of one or more large employers, benefits for covered outpatient expenses arising from services, including all office visits and psychological and neuropsychological testing for diagnostic purposes, provided to treat mental illnesses, emotional disorders, drug abuse, or alcohol abuse are covered on a similar basis as for physical conditions. These benefits are required only for expenses arising from the treatment of mental illnesses, emotional disorders, drug abuse, or alcohol abuse if, in the professional judgment of health care providers the mental illness, emotional disorder, drug abuse, or alcohol abuse is treatable the treatment is medically necessary. These benefits may be delivered under a managed care system only if the benefits for physical illnesses are delivered under a managed care system. For group contracts for large employers, the processes, strategies, evidentiary standards, or other factors used to manage benefits must be comparable to those used to manage physical illnesses. For these illnesses and physical illnesses, a policy may not have separate: Lifetime maximums Deductibles and coinsurance amounts (except those for outpatient coverage) Out-of-pocket limits in a benefit period of not more than 12 months Copayments must be actuarially equivalent to any coinsurance requirements, or if none, not greater than a copayment required for physical illnesses. An office visit to a physician or health care provider for medication management may not be counted against the number of covered visits and must be reimbursed under the same terms and conditions as a physical illness. Benefits for In Vitro Fertilization These benefits are applicable to those entities that provide hospital, medical, or surgical benefits to individuals or groups that are issued or delivered in Maryland on an expense-incurred basis under health insurance policies of insurers and nonprofit health service plans or under HMO contracts that are issued or delivered in Maryland. 48

49 An applicable entity that provides pregnancy-related benefits may not exclude benefits for any outpatient expenses arising from in vitro fertilization procedures performed on the policyholder or subscriber or dependent spouse of the policyholder or subscriber. The benefits must be provided to the same extent as the benefits provided for other pregnancy-related procedures, in the case of an insurer or nonprofit health service plan, or for other infertility services, in the case of an HMO. In vitro fertilization benefits must be available if: The patient s oocytes are fertilized with the patient s spouse s sperm. The patient and the patient s spouse have a history of infertility of at least 2 years duration and infertility is associated with any of the following medical conditions: Endometriosis Exposure in utero to diethylstilbestrol, commonly known as DES Blockage of, or surgical removal of, one or both fallopian tubes (lateral or bilateral salpingectomy) Abnormal male factors, including oligospermia, contributing to the infertility The patient has been unable to attain a successful pregnancy through a less costly infertility treatment for which coverage is available under the policy or contract. In vitro fertilization procedures are performed at medical facilities that conform to the American College of Obstetricians and Gynecologists guidelines for in vitro fertilization clinics or to the American Fertility Society minimal standards for programs of in vitro fertilization. An entity may limit coverage of the benefits to 3 in vitro fertilization attempts per live birth, not to exceed a maximum lifetime benefit of $100,000. If this coverage conflicts with the bona fide religious beliefs and practices of a religious organization, on request of the religious organization, an entity must exclude the coverage in a policy or contract with the religious organization. Coverage for Treatment of Morbid Obesity These requirements apply to insurers and nonprofit health service plans that provide hospital, medical, or surgical benefits to individuals or groups on an expense-incurred basis under health insurance policies or contracts that are issued or delivered in Maryland, HMOs that provide hospital, medical, or surgical benefits to individuals or groups under contracts that are issued or delivered in Maryland, and Managed care organizations. An eligible entity must provide coverage for the surgical treatment of morbid obesity that is recognized by the National Institutes of Health as effective for the long-term reversal of morbid obesity, and consistent with guidelines approved by the National Institutes of Health. An eligible entity must provide the required benefits to the same extent as for other medically necessary surgical procedures under the enrollee s or insured s contract or policy with the entity. Retention Question 32 Choose the FALSE statement about the required offers: HEALTH LAWS a. Continuation coverage applies to surviving spouses, dependent children, and an involuntarily terminated employee due to a reason other than for cause b. An insurer must offer an insured the benefits for expenses for the care, such as nursing home car, intermediate or custodial nursing care to individuals who have Alzheimer s disease c. Policy treatment of a mental illness has different terms and conditions than a policy for the treatment of a physical illness d. An entity may limit coverage to 3 in vitro fertilization attempts per live birth, not to exceed a maximum lifetime benefit of $100,000 49

50 MARYLAND STATE INSURANCE LAWS Mandated or Required Benefits Suspension of Benefits Required Standard for 1990 Standardized Medicare Supplement Benefit Plans. A Medicare supplement policy must provide that benefits and premiums must be suspended at the request of the policyholder for a period not to exceed 24 months in which the policyholder has applied for and is determined to be entitled to medical assistance under Medicaid, Title XIX of the Social Security Act. This applies only if the policyholder notifies the issuer of the policy or certificate within 90 days after the date entitled to medical assistance. If the suspension occurs and if the policyholder loses entitlement to Medicaid, the policy must be automatically reinstituted effective as of the date of termination of entitlement if the policyholder provides notice of loss of entitlement within 90 days after the date of loss of entitlement and pays the premium attributable to the period, effective as of the date of termination of entitlement. A Medicare supplement policy must provide that benefits and premiums under the policy be suspended, for any federally statutory period, at the request of the policyholder, if the policyholder is entitled to benefits under the Social Security Act and covered under a group health plan as defined by the Social Security Act. If the suspension occurs and if the policyholder loses coverage under the group health plan, the Medicare supplement policy must be reinstituted automatically, effective as of the date of the loss of coverage under the group health plan, if the policyholder provides notice of loss of coverage within 90 days after the date of the loss of group coverage and pays the premium attributable to the period, effective as of the date of termination of enrollment in the group health plan. Upon reinstitution of coverage, the insured may not be subject to any waiting period with respect to treatment of preexisting conditions, and the policy must provide for resumption of coverage that is substantially equivalent to coverage in effect before the date of suspension. If the suspended Medicare supplement policy provided coverage for outpatient prescription drugs, it must provide for the reinstitution of the policy for Medicare Part D enrollees without coverage for outpatient prescription drugs and otherwise provide substantially equivalent coverage to the coverage in effect before the date of suspension. The policy must also provide for classification of premiums on terms at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage not been suspended. Coverage for Off-Label Use of Drugs This requirement applies to each health insurance policy or contract that is delivered or issued for delivery in Maryland to an employer or individual on a group or individual basis, including a contract issued by an HMO. A policy or contract that provides coverage for drugs may not exclude coverage of a drug for an off-label use of the drug if the drug is recognized for treatment in any of the standard reference compendia or in the medical literature. Coverage of a drug also includes medically necessary services associated with the administration of the drug. Hearing Aid Coverage for a Minor Child This benefit applies to insurers and nonprofit health service plans that provide hospital, medical, or surgical benefits to individuals or groups on an expense-incurred basis under health insurance policies that are issued or delivered in Maryland and HMOs that provide hospital, medical, or surgical benefits to individuals or groups under contracts that are issued or delivered in Maryland. 50

51 An eligible entity must provide coverage for hearing aids for a minor child who is covered under a policy if the hearing aids are prescribed, fitted, and dispensed by a licensed audiologist. An entity may limit the benefit to $1,400 per hearing aid for each hearing-impaired ear every 36 months. An insured or enrolled individual may choose a hearing aid that is priced higher than the benefit and may pay the difference between the price of the hearing aid and the benefit, without financial or contractual penalty to the provider of the hearing aid. An entity is not prohibited from providing coverage that is greater or more favorable to an insured or enrolled individual than the required coverage. If an entity provides coverage for hearing aids to an insured or enrolled individual who is not a minor child, and if the policy or contract of the insured or enrolled individual has a dollar limit on the hearing aid benefit, the entity must allow the individual to choose a hearing aid that is priced higher than the benefit payable under the policy and pay the difference between the price of the hearing aid and the dollar limit on the hearing aid benefit. Coverage for Smoking Cessation Treatment This requirement applies to Insurers and nonprofit health service plans that provide coverage for prescription drugs to individuals or groups under health insurance policies or contracts that are issued or delivered in Maryland and to HMOs that provide coverage for prescription drugs to individuals or groups under contracts that are issued or delivered in Maryland. An entity must provide coverage for any drug, except for a drug that may be obtained overthe-counter without a prescription, that is approved by the United States Food and Drug Administration as an aid for the cessation of the use of tobacco products and obtained under a prescription written by an authorized prescriber. Two 90-day courses of nicotine replacement therapy are covered during each policy year. It is not permitted to impose a different copayment or coinsurance requirement for a drug or nicotine replacement therapy than is imposed for any other comparable prescription. Other Requirements Retention Question 33 Which of the following is NOT true regarding Maryland s mandated benefits? a A Medicare supplement policy must provide that benefits and premiums under the policy be suspended, for any federally statutory period, at the request of the policyholder, if the policyholder is entitled to Social Security benefits and is covered by a group health plan b. Off-label use occurs when prescription of a drug is changed to a generic drug c. An insurer may limit the benefit for hearing aids to every 36 months d. A covered person is entitled to two 90-day courses of nicotine replacement therapy during each policy year Advertisements of Benefits Payable, Losses Covered, or Premiums Payable No deceptive words, phrases, or illustrations may be used in a manner that misleads or has the tendency to deceive regarding any: Payable policy benefit Covered loss Payable premium HEALTH LAWS An advertisement relating to any policy benefit payable, loss covered, or premium payable must be sufficiently complete and clear as to avoid deception or the tendency to deceive. 51

52 MARYLAND STATE INSURANCE LAWS Advertisements must be truthful and not misleading in fact or in implication. Words or phrases, the meaning of which is clear only by implication or by familiarity with insurance terminology, may not be used. Identity of Carrier or Producer The identity of the carrier or producer must be made clear in all of its advertisements. An advertisement may not use a trade name, service mark, slogan, symbol, or other device which has the tendency to mislead or deceive as to the true identity of the carrier or producer. Advertising File Each carrier or producer must maintain at its home or principal office a complete file containing every printed, published, or prepared advertisement of individual policies and typical printed, published, or prepared advertisements of blanket, franchise, and group policies hereafter disseminated in this or any other state whether or not licensed in the other state. A notation must be attached to each advertisement which must indicate the manner and extent of distribution and the form number of any policy advertised. The file must be subject to regular and periodical inspection by the Commissioner. These advertisements must be maintained in this file for a period of not less than 3 years. Evidence of Insurability If the insured person was individually rated less favorably than standard under the group policy, or if all persons in the group policy were rated less favorably than standard, the converted policy may be issued with a corresponding rating. Preexisting Conditions An individual or group contract may not include a limitation or exclusion for a preexisting condition. Employer as Payee If the employer has paid the entire cost of a policy of blanket health insurance, benefits under the policy may be made payable to the employer. Governmental Plans Defined A governmental plan is: Established or maintained for employees or any agency or instrumentality of the government of the United States or the government of any State or its political subdivisions. Any plan to which the Railroad Retirement Act applies. Any plan of an international organization which is exempt from taxation under the provisions of the International Organizations Immunities Act. A plan which is established and maintained by an Indian tribal government or a subdivision of an Indian tribal government, or an agency or instrumentality of either. All of the participants of which are employees of such entity substantially all of whose services as such an employee are in the performance of essential governmental functions but not in the performance of commercial activities (whether or not an essential government function). 52

53 HEALTH LAWS Retention Question 34 An advertising file must be maintained for a period of not less than. a. 18 months b. 2 years c. 3 years d. 5 years Small Employer Health Insurance The following terms are used in connection with Small Employer Health Insurance. An eligible employee is: An employee, partner of a partnership, or independent contractor who is included as an employee under a health benefit plan and works on a full-time basis and has a normal workweek of at least 30 hours. A sole employee of an exempt nonprofit organization who has a normal workweek of at least 20 hours and is not covered under a public or private plan for health insurance or other health benefit arrangement. An individual who works on a temporary or substitute basis or for less than 30 hours in a normal workweek is not an eligible employee. A late enrollee is a member, subscriber, or dependent who enrolls in a group health benefit plan other than during the first period in which the individual is eligible to enroll under the plan or a special enrollment period. Retention Question 35 Which of the following is NOT an eligible employee of a small employer? a. A part-time employee who works at least 30 hours per week b. Partner c. Full-time employee who works at least 30 hours per week d. A substitute worker for an employee who is out on disability Small Business Rating Community Rate In establishing a community rate for a health benefit plan, a carrier must use a rating methodology that is based on the experience of all risks covered by that health benefit plan without regard to any factor not specifically authorized by statute. Risk Adjustment Factors A carrier may adjust the community rate only for the following risk adjustment factors: age, health status, and geography based on the following contiguous areas: Baltimore metropolitan area District of Columbia metropolitan area Western Maryland Eastern and Southern Maryland After applying the risk adjustment factors, a carrier may offer a discount not to exceed 20% to a small employer for participation in a wellness program, which must be: Applied to reduce the rate otherwise payable by the small employer Actuarially justified Offered uniformly to all small employers Approved by the Commissioner 53

54 MARYLAND STATE INSURANCE LAWS A carrier must apply all risk adjustment factors consistently with respect to all health benefit plans that are issued, delivered, or renewed in Maryland. Based on the adjustments, a carrier may charge a rate that is up to 50% above or 50% below the community rate. Based on the adjustment allowed, and in addition to the adjustments, a carrier may charge in the: 1st year of enrollment, a rate that is 10% above or below the community rate 2nd year of enrollment, a rate that is 5% above or below the community rate 3rd year of enrollment, a rate that is 2% above or below the community rate A carrier may not make any adjustment for health status in the community rate of a health benefit plan issued after the third year of enrollment of a small employer in the health benefit plan. Rates for a health benefit plan may vary based on family composition as approved by the Commissioner. A carrier must base its rating methods and practices on commonly accepted actuarial assumptions and sound actuarial principles. An HMO that includes a subrogation provision in its contract must use in its rating methodology an adjustment that reflects the subrogation and identify in its rate filing, and annually in a form approved by the Commissioner, all amounts recovered through subrogation. An administrative discount may be offered to a small employer if it elects to purchase, for its employees, an annuity, dental insurance, disability insurance, life insurance, long-term care insurance, vision insurance, or, with the approval of the Commissioner, any other insurance sold by the carrier. This discount must be offered under the same terms and conditions for all qualifying small employers. A carrier may adjust the community rate for a health benefit plan for health status only if a small employer has not offered a health benefit plan to its employees in the 12 months prior to the initial enrollment of the small employer in the health benefit plan. A carrier may use health statements, in a form approved by the Commissioner, and health screenings to establish an adjustment to the community rate for health status. A carrier may not limit coverage or refuse to issue a health benefit plan to any small employer that meets these requirements, based on a health status-related factor. Retention Question 36 Choose the factor that is NOT considered a community rate risk adjustment factor: a. Age b. Health status c. Credit rating d. Location Small Business Carrier Responsibilities A small business carrier must: Demonstrate capacity to administer the health benefit plan. Have a satisfactory grievance procedure and responds to enrollee s calls, questions, and complaints. Provide coordination of coverage of all plans, if applicable. Have designed policies to help ensure adequate access to providers of health care. Offer at least the Standard Plan. 54

55 HEALTH LAWS A carrier must NOT offer a health benefit plan that has fewer benefits than those in the Standard Plan or condition the sale of a wellness benefit to a small employer on participation of the eligible employees in wellness programs or activities. To be considered a prominent carrier, a carrier must insures at least 10% of the total lives insured in the small group market, and must offer a wellness benefit for a health benefit plan. Carriers that are not prominent carriers may offer a wellness benefit for a health benefit plan. Except relating to pregnancy, a carrier may impose a preexisting condition provision only if it: Relates to a condition, regardless of the cause of the condition, for which medical advice, diagnosis, care, or treatment was recommended or received within the 6-month period ending on the enrollment date. Extends for a period of not more than 12 months after the enrollment date or 18 months in the case of a late enrollee. Is reduced by the aggregate of the periods of creditable coverage. Other than to an individual after the end of the first 63-day period during all of which the individual was not covered under any creditable coverage, a carrier may not impose any preexisting condition provision on an individual who as of the last day of the 30-day period beginning with the date of birth, is covered under creditable coverage on a child who: Is adopted or placed for adoption before attaining 18 years of age. As of the last day of the 30-day period beginning on the date of adoption or placement for adoption, is covered under creditable coverage. It is an unfair trade practice for a carrier knowingly to provide coverage to a small employer that discriminates against an employee or applicant for employment, based on the health status of the employee, applicant, or dependent of the employee or applicant, with respect to participation in a health benefit plan sponsored by the small employer. Retention Question 37 To be a prominent carrier in the small employer group market, a carrier must insure at least of the total lives insured in the market. a. 3% b. 5% c. 10% d. 15% Medicare Supplement Insurance Purpose Medicare supplement insurance is regulated to provide the minimum benefits required by federal law in order to cover deductibles or coinsurance amounts under Medicare. Minimum Standards and Provisions A Medicare supplement policy may provide for an automatic change in deductible or coinsurance amounts coinciding with the applicable Medicare changes. The Commissioner may approve a premium change to correspond with the changes. Unless otherwise authorized, coverage under the Medicare supplement policy may not be subject to any exclusion, limitation, or reduction that is inconsistent with Medicare. 55

56 MARYLAND STATE INSURANCE LAWS To the extent a benefit is insured under Medicare, a supplement policy must not duplicate the policy benefits. If the insured is receiving medical assistance under Medicaid, a Medicare supplement policy must provide for the suspension of policy benefits and premiums for a maximum of 24 months. Unless approved by the Commissioner, a Medicare supplement policy may not be offered at an introductory premium rate. If an application for a Medicare supplement policy or certificate is submitted during the 6-month period beginning with the first month in which an individual who is at least 65 years old first enrolls for benefits under Medicare Part B, a carrier may not: Deny or condition the issuance or effective date of the Medicare supplement policy or certificate. Discriminate in the pricing of the Medicare supplement policy or certificate because of the health status, claims experience, receipt of health care or medical condition of the applicant. Deny, reduce, or condition coverage or apply an increased premium rating to an applicant for a Medicare supplement policy because of the health status, claims experience, or medical condition of the applicant or the use of medical care by the applicant. A carrier may not deny, reduce, or condition coverage or apply an increased premium rating to an applicant for a Medicare supplement policy because of the health status, claims experience, or medical condition of the applicant or the use of medical care by the applicant. However, it still it may not exclude or limit benefits for losses incurred more than 6 months after the effective date of coverage because the losses involved a preexisting condition. A Medicare supplement policy may not define a preexisting condition more restrictively than a condition for which a physician gave medical advice or recommended or gave treatment within 6 months before the effective date of coverage. A carrier may not deny or condition the issuance or effectiveness of a Medicare supplement policy plan A or C because of the health status, claims experience, receipt of health care or medical condition of the applicant. A carrier is not required to offer a Medicare supplement policy plan to individuals who are under the age of 65 years, but are eligible for Medicare due to a disability, if the plan is not offered to individuals who are eligible for Medicare due to age. A Medicare supplement policy or certificate may not exclude or limit benefits for losses incurred more than 6 months after the effective date of coverage because the losses involved a preexisting condition. A Medicare supplement policy or certificate may not define a preexisting condition more restrictively than a condition for which a physician gave medical advice or recommended or gave treatment within 6 months before the effective date of coverage. If a Medicare supplement policy replaces another Medicare supplement policy, the succeeding carrier must waive the time periods for similar benefits to the extent the time was spent under the original Medicare supplement policy. The applicable time periods include: Preexisting conditions Waiting periods Elimination periods Probationary periods A carrier may only cancel or nonrenew a Medicare supplement policy or certificate for nonpayment of premium or material misrepresentation. 56

57 If a group policyholder terminates a group Medicare supplement policy without replacing the group Medicare supplement policy, the carrier must offer each certificate holder an individual Medicare supplement policy at least the following conversion options: An individual Medicare supplement policy that provides for continuation of the benefits contained in the group policy, or An individual Medicare supplement policy that provides only the minimum benefits that are required by federal law. If membership in a group is terminated, the carrier must offer the certificate holder the conversion options and, at the option of the group policyholder, must offer the certificate holder a continuation of coverage under the group Medicare supplement policy. If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the succeeding carrier must offer coverage to each individual who was covered under the old group Medicare supplement policy on its date of termination. Under the new group Medicare supplement policy, coverage may not be excluded for a preexisting condition that would have been covered under the group Medicare supplement policy being replaced. Eligibility A carrier must make Medicare supplement policy plans A and C available to an individual who is under the age of 65 years but is eligible for Medicare due to a disability, if an application for a Medicare supplement policy or certificate is submitted: During the 6-month period following the applicant s enrollment in Part B of Medicare. For an individual terminated from the Maryland Health Insurance Plan as a result of enrollment in Part B of Medicare, during the 6-month period after the individual s termination. For a Medicare supplement policy plan A, a carrier may not charge individuals who are under the age of 65 years, but are eligible for Medicare due to a disability, a rate higher than the average of the premiums paid by all policyholders age 65 and older in Maryland who are covered under that plan A policy form. A carrier may elect to offer Medicare supplement policy plans to individuals who are under the age of 65 years, but eligible for Medicare due to a disability, in addition to the Medicare supplement policy plans A and C that are required to be offered. Regardless of the applicant s age, each Medicare supplement policy or applicable certificate that a carrier currently has available must be made available to each applicant who qualifies. Retention Question 38 During the following an applicant s enrollment in Part B of Medicare, a carrier must make Plans A and C available to a disabled individual under age 65. a. 30 days b. 90 days c. 3 months d. 6 months HEALTH LAWS 57

58 MARYLAND STATE INSURANCE LAWS Disclosure and Marketing Each Medicare supplement policy or certificate must have prominently printed on the first page of the policy or certificate or attached to it, a notice that states that the applicant may: Return the Medicare supplement policy or certificate within 30 days after its delivery. Receive a refund of the premium if after examination of the Medicare supplement policy or certificate, the applicant is not satisfied for any reason. The carrier must pay a refund made directly to the applicant in a timely manner. Retention Question 39 An applicant may return a Medicare supplement policy within how many days after the delivery of the policy? a. 10 b. 30 c. 45 d. 60 Maryland Health Benefit Exchanges Small Business Health Options Program (SHOP) vs. Individual Exchange SHOP is the Small Business Health Options Program. The SHOP Exchange must be a separate insurance market within the Exchange for small employers with 50 employees (100 employees after January 1, 2016) and self-insureds. The Individual Exchange assists qualified employers of any size in the enrollment of their employees in qualified health plans and self-insured employers. Both exchanges are state-based. The SHOP Exchange is for group health policies. The Individual Exchange is for individual and group health policies. The SHOP Exchange does not offer tax credits. The Individual Exchange offers tax credits. The SHOP Exchange navigator program must focus outreach efforts and provide health insurance enrollment and eligibility services to small employers that do not offer health insurance to their employees. The SHOP Exchange navigator must hold a SHOP navigator license and may not be required to hold an insurance producer license. The Individual Exchange provides authorization to sell qualified plans to a licensed insurance producer. The SHOP Exchange navigator cannot be affiliated with a carrier, insurance producer, third-party administrator, and be compensated only through the SHOP Exchange. The Individual Exchange will not compensate the insurance producer for a qualified plan offered by the Individual Exchange, but instead the insurance producer is compensated by the carrier. Open Enrollment Period Any carrier that sells health benefit plans to individuals in the State must have an annual open enrollment period that begins on October 15 and extends through December 7 each year. During the annual open enrollment period, an individual shall be permitted to: Enroll in a health benefit plan offered by the carrier. Discontinue enrollment in a health benefit plan offered by the carrier. Change enrollment in a health benefit plan offered by the carrier to a different health benefit plan offered by the carrier. 58

59 If an individual enrolls in a health benefit plan offered by the carrier during the annual open enrollment period, the effective date of coverage will be January 1 of the following calendar year. Special Enrollment Period A carrier must provide a special open enrollment period for each individual who experiences a triggering event. The special open enrollment period must be for at least 60 days, beginning on the date of the triggering event. During the special open enrollment period, a carrier must permit an individual who experiences a triggering event to enroll in or change from one health benefit plan offered by the carrier to another health benefit plan offered by the carrier. A triggering event occurs when an individual or dependent: Loses minimum essential coverage that does not include loss of coverage due to failure to pay premiums on a timely basis, including COBRA premiums prior to expiration of COBRA coverage or a rescission. Gains a dependent or becomes a dependent through marriage, birth, adoption, or placement for adoption. Enrolled or nonenrolled in a qualified health plan erroneously, unintentionally, inadvertently or the result of the error, misrepresentation, or inaction of an officer, employee, or agent of the Individual Exchange or the U.S. Department of Health and Human Services or its instrumentalities as evaluated and determined by the Individual Exchange (note: the Individual Exchange may take action as may be necessary to correct or eliminate the effects of the error, misrepresentation, or inaction). Is enrolled in a qualified health plan in the Individual Exchange and adequately demonstrates to the Individual Exchange that the qualified health plan in which the individual or dependent is enrolled substantially violated a material provision of the qualified health plan s contract in relation to the individual or dependent. Enrolls in the same health benefit plan and determined newly eligible or newly ineligible for advance payments of federal premium tax credits or has a change in eligibility for federal cost-sharing reductions (note: a carrier must permit an individual or a dependent, whose existing coverage through an employer-sponsored plan will no longer be affordable or provide minimum value for the upcoming plan year of the individual s employer, to access the special open enrollment period before the end of the individual s coverage through the employer-sponsored plan). Gains access to a new health benefit plan as a result of a permanent move. Enrolls in an employer-sponsored health benefit plan that is not qualifying coverage in an eligible employer-sponsored plan and is allowed to terminate existing coverage. The special open enrollment period shall begin at least 60 days before the end of the individual s or dependent s coverage under the employer-sponsored plan. Eligible Individuals HEALTH LAWS All small employer health benefit plans shall provide a special enrollment period during which the following individuals may be enrolled under the health benefit plan: An individual who was not previously a citizen, national, or lawfully present individual becomes a citizen, national, or lawfully present individual. An individual or a dependent demonstrates to the Individual Exchange, in accordance with guidelines issued by the U.S. Department of Health and Human Services, that the individual or dependent meets other exceptional circumstances as the Individual Exchange may provide. 59

60 MARYLAND STATE INSURANCE LAWS A carrier must provide a limited open enrollment period for an individual who is enrolled in a non-calendar year individual health benefit plan to enroll in a health benefit plan issued by the carrier. The limited enrollment period must begin on the date that is at least 30 calendar days before the date the non-calendar year health benefit plan s policy year ends in 2014, and last at least 60 days. Retention Question 40 Which of the following is TRUE about the Maryland Health Benefit Exchange? a. The SHOP Exchange is for individual health policies b. The Individual Exchange is for group-only health policies c. A carrier must permit an individual who has a triggering event to enroll within 30 days d. A limited enrollment period must last at least 45 days Employer Choice Options in SHOP Exchange The SHOP Exchange must allow qualified employers to: Designate a coverage level within which their employees may choose any qualified health plan. Designate a carrier or an insurance holding company system and a menu of qualified health plans in the SHOP Exchange from which their employees may choose. Designate one or more qualified dental and vision plans to be made available to their employees. On or after January 1, 2016, in order to continue to promote the SHOP Exchange s principles of accessibility, choice, affordability, and sustainability, and as it obtains more data on adverse selection, cost, enrollment, and other factors, the SHOP Exchange may reassess and modify the manner in which the SHOP Exchange allows qualified employers to offer, and their employees to choose, qualified health plans and coverage levels. In reassessing employer and employee choice, the SHOP Exchange may consider options that would promote the additional objective of increasing the portability of employees health insurance as employees move from employer to employer or transition in and out of employment and must implement any modification of offerings and choice through regulations adopted by the SHOP Exchange. Mandated Referrals A SHOP navigator must refer any inquiries about health benefit plans or other products not offered in the Exchange to any resources that may be maintained by the Exchange or to carriers and licensed insurance producers. An insurance producer who is licensed in Maryland and authorized to sell, solicit, or negotiate health insurance may sell any qualified plan offered in the Individual Exchange without being separately certified as an Individual Exchange Navigator. To sell qualified plans in the Individual Exchange, an insurance producer must refer individuals seeking insurance who may be eligible for the Maryland Medical Assistance Program or the Maryland Children s Health Program to the Navigator Program for the Individual Exchange. With respect to the insurance market outside the Exchange, an Individual Exchange Navigator may not provide any information or services related to health benefit plans or other products not offered in the Exchange, except for general information about the insurance market. The navigator must refer any inquiries about health benefit plans or other products not offered in the Exchange to the appropriate carriers and licensed insurance producers. An individual who acknowledges having 60

61 existing health insurance coverage obtained through an insurance producer must be referred back to that producer for information and services unless: Cost sharing assistance is available only through the Individual Exchange. The insurance producer is not authorized to sell qualified plans in the Individual Exchange. The individual would prefer not to seek further assistance from his/her insurance producer. Long-Term Care Tax Credits Deductibility of Premiums for LTC Insurance for State Income Tax Purposes The application must contain clear and unambiguous questions to ascertain the health condition of the applicant. If the application asks questions about prescribed medication, all prescribed medications must be listed. If the medication listed at the time of application is directly related to a medical condition for which coverage would otherwise be denied, the long-term care insurance policy may not be rescinded for that condition. At the time of application for an applicant who is at least 80 years old, unless for guaranteed issue, the carrier must obtain at least one of the following: A report of a physical examination An assessment of functional capacity Copies of medical records An individual or corporation may apply the credit against the State income tax. Employer Tax Credits An employer may claim a tax credit against State income tax in an amount equal to 5% of the costs incurred by the employer during the taxable year to provide long-term care insurance as part of an employee benefit package. The credit allowed may not exceed the lesser of $5,000 or $100 for each employee in the State covered by long-term care insurance provided under the employee benefit package. An exempt organization may apply the credit against State income tax due on unrelated business taxable income. If the employer is subject to more than one tax against which the allowed credit may be applied, the same credit may not be applied more than once against different taxes. If the allowed credit in any taxable year exceeds the total tax otherwise payable by the employer for that taxable year, the employer may apply the excess as a credit for succeeding taxable years for 5 tax years until the full amount of the excess is used. Individual Tax Credits Premiums for a long-term care insurance contract covering an individual who is a Maryland are eligible for the Maryland tax credit if not deductible on an individual s federal return to the extent the amount does not exceed the following limitations: Attained age before close of taxable year Limitation 40 or less $200 More than 40 up to 50 $375 More than 50 up to 60 $375 More than 60 up to 70 $2,000 More than 70 $2,500 HEALTH LAWS 61

62 MARYLAND STATE INSURANCE LAWS An individual may claim a credit against the State income tax in an amount equal to 100% of the eligible long-term care premiums paid by the individual during the taxable year for long-term care insurance covering the individual or the individual s spouse, parent, stepparent, child, or stepchild. The credit allowed may not: Exceed $500 for each insured covered by long-term care insurance for which the individual pays the premiums. Be claimed by more than one taxpayer with respect to the same insured individual, and Be claimed with respect to an insured individual if the insured individual was covered by long-term care insurance at any time before July 1, 2000, or the credit has been claimed with respect to that insured individual by any taxpayer for any prior taxable year. The total amount of the allowed credit for any taxable year may not exceed the State income tax for that taxable year, calculated before application of other credits but after application of these allowable credits. The unused amount of the credit for any taxable year may not be carried over to any other taxable year. This credit does not affect the treatment of any deduction or exclusion allowed for federal income tax purposes for the eligible long-term care premiums paid by the individual. Retention Question 41 A businessowner may claim a long-term care insurance tax credit of. a. 3% b. 5% c. 7% d. 10% 62