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H.B. 38





Sponsor: Brian R. Allen

8    This act affects sections of Utah Code Annotated 1953 as follows:
9    AMENDS:
10         31A-22-605, as last amended by Chapter 224, Laws of Utah 1992
11    Be it enacted by the Legislature of the state of Utah:
12        Section 1. Section 31A-22-605 is amended to read:
13         31A-22-605. Disability insurance standards.
14        (1) The purposes of this section include:
15        (a) reasonable standardization and simplification of terms and coverages of individual and
16    franchise disability insurance policies, including disability insurance contracts of insurers licensed
17    under Chapters 7 and 8, to facilitate public understanding and comparison in purchasing;
18        (b) elimination of provisions contained in individual and franchise disability insurance
19    contracts which may be misleading or confusing in connection with either the purchase of those
20    types of coverages or the settlement of claims; and
21        (c) full disclosure in the sale of individual and franchise disability insurance contracts.
22        (2) As used in this section:
23        (a) "Direct response insurance policy" means an individual insurance policy solicited and
24    sold without the policyholder having direct contact with a natural person intermediary.
25        (b) "Medicare" is defined in Subsection 31A-22-620(1)(e).
26        (c) "Medicare supplement policy" is defined in Subsection 31A-22-620(1)(f).
27        (3) This section applies to all individual and franchise disability policies.

1        (4) The commissioner shall adopt rules relating to the following matters:
2        (a) standards for the manner and content of policy provisions, and disclosures to be made
3    in connection with the sale of policies covered by this section, dealing with at least the following
4    matters:
5        (i) terms of renewability;
6        (ii) initial and subsequent conditions of eligibility;
7        (iii) nonduplication of coverage provisions;
8        (iv) coverage of dependents;
9        (v) preexisting conditions;
10        (vi) termination of insurance;
11        (vii) probationary periods;
12        (viii) limitations;
13        (ix) exceptions;
14        (x) reductions;
15        (xi) elimination periods;
16        (xii) requirements for replacement;
17        (xiii) recurrent conditions;
18        (xiv) coverage of persons eligible for Medicare; and
19        (xv) definition of terms;
20        (b) minimum standards for benefits under each of the following categories of coverage in
21    policies covered in this section:
22        (i) basic hospital expense coverage;
23        (ii) basic medical-surgical expense coverage;
24        (iii) hospital confinement indemnity coverage;
25        (iv) major medical expense coverage;
26        (v) disability income protection coverage;
27        (vi) accident only coverage;
28        (vii) specified disease or specified accident coverage;
29        (viii) limited benefit health coverage; [and]
30        (ix) nursing home and long-term care coverage; and
31        (x) mental health coverage;

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1        (c) the content and format of the outline of coverage, in addition to that required under
2    Subsection (6); and
3        (d) the method of identification of policies and contracts based upon coverages provided.
4        (5) Nothing in Subsection (4)(b) precludes the issuance of policies that combine categories
5    of coverage in that subsection provided that any combination of categories meets the standards of
6    a component category of coverage.
7        (6) The commissioner may adopt rules relating to the following matters:
8        (a) establishing disclosure requirements for insurance policies covered in this section,
9    designed to adequately inform the prospective insured of the need for and extent of the coverage
10    offered, and requiring that this disclosure be furnished to the prospective insured with the
11    application form, unless it is a direct response insurance policy;
12        (b) (i) prescribing caption or notice requirements designed to inform prospective insureds
13    that particular insurance coverages are not Medicare Supplement coverages;
14        (ii) the requirements of Subsection (6)(b)(i) apply to all disability insurance policies and
15    certificates sold to persons eligible for Medicare; and
16        (c) requiring the disclosures or information brochures to be furnished to the prospective
17    insured on direct response insurance policies, upon his request or, in any event, no later than the
18    time of the policy delivery.
19        (7) A policy covered by this section may be issued only if it meets the minimum standards
20    established by the commissioner under Subsection (4), an outline of coverage accompanies the
21    policy or is delivered to the applicant at the time of the application, and, except with respect to
22    direct response insurance policies, an acknowledged receipt is provided to the insurer. The outline
23    of coverage shall include:
24        (a) a statement identifying the applicable categories of coverage provided by the policy
25    as prescribed under Subsection (4);
26        (b) a description of the principal benefits and coverage;
27        (c) a statement of the exceptions, reductions, and limitations contained in the policy;
28        (d) a statement of the renewal provisions, including any reservation by the insurer of a
29    right to change premiums;
30        (e) a statement that the outline is a summary of the policy issued or applied for and that
31    the policy should be consulted to determine governing contractual provisions; and

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1        (f) any other contents the commissioner prescribes.
2        (8) If a policy is issued on a basis other than that applied for, the outline of coverage shall
3    accompany the policy when it is delivered and it shall clearly state that it is not the policy for
4    which application was made.
5        (9) (a) Notwithstanding Subsection 31A-22-609(2), and except as provided under
6    Subsection (9)(b), an insurer that elects to use an application form without questions concerning
7    the insured's health history or medical treatment history, shall provide coverage under the policy
8    for any loss which occurs more than 12 months after the effective date of the policy due to a
9    preexisting condition which is not specifically excluded from coverage.
10        (b) (i) An insurer that issues a specified disease policy, regardless of whether the basis of
11    issuance is a detailed application form, a simplified application form, or an enrollment form, may
12    not deny a claim for loss due to a preexisting condition which occurs more than six months after
13    the effective date of coverage.
14        (ii) A specified disease policy may not define a preexisting condition more restrictively
15    than a condition which first manifested itself within six months prior to the effective date of
16    coverage or which was diagnosed by a physician at any time prior to the effective date of coverage.
17        (iii) A specified disease policy may not include wording that provides a defense based
18    upon a preexisting condition except as allowed under this subsection.
19        (10) Notwithstanding Subsection 31A-22-606(1), limited accident and health policies or
20    certificates issued to persons eligible for Medicare shall contain a notice prominently printed on
21    or attached to the cover or front page which states that the policyholder or certificate holder has
22    the right to return the policy for any reason within 30 days after its delivery and to have the
23    premium refunded.
24        (11) (a) In making the rules under Subsection (4)(b)(x), the commissioner shall require
25    rules with durational limits, amount limits, deductibles, and coinsurance factors for serious mental
26    illness equitable or identical to coverage provided for other illnesses or diseases.
27        (b) (i) For purposes of Subsection (11)(a), "serious mental illness" means a mental disorder
28    that:
29        (A) medical science affirms is a biological disorder of the brain; and
30        (B) that substantially limits the life activities of the person with the illness.
31        (ii) "Serious mental illness" includes:

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1        (A) schizophrenia;
2        (B) schizo affective disorder;
3        (C) delusional disorder;
4        (D) bipolar affective disorders;
5        (E) major depression;
6        (F) obsessive compulsive disorder; or
7        (G) anxiety, panic disorders.

Legislative Review Note
    as of 12-1-97 1:34 PM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

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