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411Ratification Number: 197Act Number: 131Introducing Body: SenateSubject: Group accident and health insurance coverage
(A131, R197, S411)
AN ACT TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 38-35-941 SO AS TO PROVIDE FOR GROUP ACCIDENT AND HEALTH INSURANCE COVERAGE, DISCONTINUANCE, AND REPLACEMENT STANDARDS AND TO AMEND SECTION 38-35-944, RELATING TO ACCIDENT AND HEALTH INSURANCE COVERAGE EXTENDED TO RESIDENTS UNDER GROUP POLICIES ISSUED OUTSIDE THE STATE, SO AS TO PROVIDE THAT THESE GROUP POLICIES SUBSTANTIALLY CONFORM TO THE GROUP ACCIDENT AND HEALTH INSURANCE STATUTES OF THIS STATE.
Be it enacted by the General Assembly of the State of South Carolina:
Applicability of section
SECTION 1. The 1976 Code is amended by adding:
"Section 38-35-941. (A) This section applies to a group accident and health insurance policy or certificate that is delivered, issued for delivery, or renewed in this State which provides hospital, surgical, or major medical expense insurance, or any combination of these coverages, on an expense incurred basis. It specifically includes a certificate issued under a policy that was issued to a trust located out of the State but which includes participating employers located in the State. Renewal of these policies or certificates is presumed to occur on the anniversary date of the date that coverage was first effective on the employees of such employer unless another renewal date is specifically stated in the certificates.
(B) If a policy or contract subject to this article provides for automatic discontinuance of the policy or contract after a premium or subscription charge has remained unpaid through the grace period allowed for the payment, the carrier is liable for valid claims for covered losses incurred prior to the end of the grace period.
(C) If the actions of the carrier after the end of the grace period indicate that it considers the policy or contract as continuing in force beyond the end of the grace period such as by continuing to recognize claims subsequently incurred the carrier is liable for valid claims for losses beginning on or before the effective date of written notice of discontinuance to the policyholder or other entity responsible for making payments or submitting subscription charges to the carrier. The effective date of discontinuance must not be prior to midnight at the end of the third scheduled work day after the date upon which the notice is delivered.
(D) Any notice of discontinuance by the carrier shall include a request to the group policyholder or other entity involved to notify employees covered under the policy or subscriber contract of the date when the group policy or contract will discontinue and advise that, unless otherwise provided in the policy or contract, the carrier is not liable for claims for losses incurred after such date. The notice also shall advise, when the plan involves employee contributions, that if the policyholder or other entity continues to collect contributions for the coverage beyond the date of discontinuance, the policyholder or other entity may be held solely liable for the benefits for which the contributions are collected.
(E) The carrier shall prepare and furnish to the policyholder or other entity at the same time an appropriate sample notice form to be distributed to the employees or members concerned indicating the effective date of the discontinuance and urge the employees or members to refer to their certificates or contracts in order to determine what rights are available to them as a result of the discontinuance.
(F) Every group policy or other contract issued subject to this article or under which the level of benefits is modified or amended shall provide a reasonable provision for extension of benefits in the event of total disability at the date of discontinuance of the group policy or contract as required by the following subsections.
(G) In the case of a group life plan which contains a disability benefit extension of any type such as premium waiver extension, extended death benefit in event of total disability, or payment of income for a specified period during total disability, the discontinuance of the group policy does not operate to terminate the extension.
(H) In the case of a group plan providing benefits for loss of time from work or specific indemnity during hospital confinement, discontinuance of the policy during a disability has no effect on benefits payable for that disability or confinement.
(I) In the case of hospital or medical expense coverages other than dental expense, a reasonable extension of benefits or accrued liability provision is required. The provision is considered reasonable if it provides an extension of at least twelve months under major medical and comprehensive medical type coverages and under other types of hospital or medical expense coverages provides either an extension of at least ninety days or an accrued liability for expenses incurred during a period of disability or during a period of at least ninety days starting with a specific event which occurred while coverage was in force such as an accident.
(J) Any applicable extension of benefits or accrued liability must be described in any policy or contract involved as well as in group insurance certificates. The benefits payable during any period of extension or accrued liability may be subject to the policy's or contract's regular benefit limits such as benefits ceasing at exhaustion of a benefit period or of maximum benefits.
(K) The carrier responsible for liability in those instances in which one carrier's contract replaces a plan of similar benefits of another must be indicated.
(L) The prior carrier remains liable only to the extent of its accrued liabilities and extensions of benefits. The position of the prior carrier is the same whether the group policyholder or other entity secures replacement coverage from a new carrier, self-insurers, or foregoes the provision of coverage.
(M) This subsection applies to all groups with thirteen or more enrolled employees. It also applies to all groups with less than thirteen employees unless a prominent notice which has been filed with and approved by the Commissioner as to form is given to and signed by the policyholder which serves to warn the policyholder that the limitations, waiting periods, or restrictions referred to in this subsection do apply.
(1) Each person who is eligible for coverage in accordance with the succeeding carrier's plan of benefits with respect to classes eligible and activity at work and nonconfinement rules must be covered by that carrier's plan of benefits.
(2) Each person not covered under the succeeding carrier's plan of benefits in accordance with item (1) of this subsection nevertheless must be covered by the succeeding carrier in accordance with the following rules if the individual was validly covered, including benefit extension, under the prior plan on the date of discontinuance and if the individual is a member of the class of individuals eligible for coverage under the succeeding carrier's plan. Any reference in the following rules to an individual who was or was not totally disabled is a reference to the individual's status immediately prior to the date the succeeding carrier's coverage becomes effective.
(a) The minimum level of benefits to be provided by the succeeding carrier must be the applicable level of benefits of the succeeding carrier's plan reduced by any benefits payable by the prior plan.
(b) Coverage must be provided by the succeeding carrier until at least the earliest of the following dates:
(i) The date the individual becomes eligible under the succeeding carrier's plan as described in item (1) of this subsection.
(ii) For each type of coverage, the date the individual's coverage would terminate in accordance with the succeeding carrier's plan provisions applicable to individual termination of coverage, such as at termination of employment or ceasing to be an eligible dependent, as the case may be.
(iii) In the case of an individual who was totally disabled, and in the case of a type of coverage for which subsections (F) through (J) of this section require an extension of accrued liability, the end of any period of extension or accrued liability which is required of the prior carrier by those subsections or, if the prior carrier's policy or contract is not subject to that item, would have been required of that carrier had its policy or contract been subject to those subsections at the time the prior plan was discontinued and replaced by the succeeding carrier's plan.
(3) In the case of a preexisting conditions limitation included in the succeeding carrier's plan, the level of benefits applicable to preexisting conditions of persons becoming covered by the succeeding carrier's plan in accordance with this subsection during the period of time this limitation applies under the new plan must be the lessor of:
(a) The benefits of the new plan determined without application of the preexisting conditions limitation; and
(b) The benefits of the prior plan.
(4) The succeeding carrier, in applying any deductibles or waiting periods in its plan, must give credit for the satisfaction or partial satisfaction of the same or similar provisions under a prior plan providing similar benefits. In the case of deductible provisions, the credit shall apply for the same or overlapping benefit periods and must be given for expenses actually incurred and applied against the deductible provisions of the prior carrier's plan during the ninety days preceding the effective date of the succeeding carrier's plan but only to the extent these expenses are recognized under the terms of the succeeding carrier's plan and are subject to similar deductible provisions.
(5) In any situation where a determination of the prior carrier's benefit is required by the succeeding carrier, at the succeeding carrier's request the prior carrier shall furnish a statement of the benefits available or pertinent information sufficient to permit verification of the benefit determination or the determination itself by the succeeding carrier. For the purposes of this section, benefits of the prior plan are determined in accordance with all of the definitions, conditions, and covered expense provisions of the prior plan rather than those of the succeeding plan. The benefit determination must be made as if coverage had not been replaced by the succeeding carrier."
Coverage may not be extended
SECTION 2. Subsection (1) of Section 38-35-944 of the 1976 Code is amended to read:
"(1) No group accident, group health, or group accident and health insurance coverage may be extended to residents of this State under a policy issued outside this State which does not provide in substance the provisions of this article unless the Commissioner determines that certain provisions are not appropriate for the coverage provided."
SECTION 3. This act shall take effect January 1, 1986.