Massachusetts Accident and Health Sales, Underwriting and Replacement

Massachusetts writes much of the individual accident and sickness policy into its own statutes and regulations. This chapter covers what a producer must do when advertising and presenting an individual policy, what the insured must be given, how the insurer may underwrite the application, and the rules for replacing a policy. The next chapter covers the required and optional policy provisions Massachusetts prescribes, and the one after it covers who must have coverage and who must be covered.

Life and Health Insurance Guaranty Association Law (Mass. Gen. Laws ch. 175, § 146B)

The chapter on Massachusetts State Regulations covers the Massachusetts Life and Health Insurance Guaranty Association and its limits for any one life. One more rule in the same statute applies directly to producers: no one, including an insurer or its agent, may use the existence of the Massachusetts Life and Health Insurance Guaranty Association in any advertisement, announcement or statement, written or oral, to sell, solicit or induce the purchase of insurance the association covers (Mass. Gen. Laws ch. 175, § 146B). Telling a prospect “don’t worry about this insurer’s finances, the guaranty association has you covered” is exactly what the law forbids.

Producer responsibilities in individual accident, health or sickness insurance

Advertising (Mass. Gen. Laws ch. 175, § 110E)

Massachusetts requires the Commissioner to make rules for advertising of accident and sickness policies so that the advertising is truthful and not misleading, in fact or in implication (Mass. Gen. Laws ch. 175, § 110E). The statute itself lists the principles those rules must contain:

• Benefits and premiums. Words, phrases or illustrations may not be used in a way that misleads, or has the capacity and tendency to deceive, about the extent of any benefit, loss covered or premium.
• Exceptions and limitations. An advertisement that mentions a dollar amount, a benefit period, the cost of the policy or a specific benefit must also disclose the exceptions, reductions and limitations without which it would be misleading.
• Renewal and age. An advertisement that mentions the right to renew, cancel or terminate, or states time or age in connection with eligibility or the right to continue a policy, must disclose the renewal, cancellation and termination provisions and any change in benefits, losses covered or premium because of age or for other reasons.
• Testimonials. They must be genuine, represent the author’s current opinion, apply to the policy advertised and be accurately reproduced, and an insurer that uses one makes all of its statements its own.
• Statistics. Figures such as the dollar amount of claims paid or the number of persons insured may be used only if they accurately reflect all the relevant facts, and may not imply that they come from the advertised policy unless they do.
• Choices and combinations. When an advertisement offers a choice of benefit amounts, it must disclose that the benefits depend on the plan selected and that the premium varies with them. When it describes benefits found in two or more policies, it must disclose that they come only through a combination of those policies.
• Competitors and identity. An advertisement may not make unfair or incomplete comparisons or falsely disparage competitors, and it must make the identity of the insurer clear, without a trade name, slogan or symbol that could mislead as to who the insurer is.
• Group and special offers. An advertisement may not imply that buyers become group members with special rates or underwriting privileges, or that a policy is an introductory or special offer with advantages for accepting it, unless that is the fact.
• Endorsements. An advertisement may not claim approval or endorsement by an individual, group, society, association or other organization unless that is the fact.
• Claims and the insurer’s standing. An advertisement may not misstate how quickly claims are paid, imply that claim settlements will be more liberal than the policy terms, or mislead about the insurer’s assets, structure, financial standing, age or relative position.

One principle has no “unless it is true” exception. An advertisement may not state or imply that an insurer or policy has been approved, or that the insurer’s financial condition has been examined and found satisfactory, by a government agency, whether or not that is true (Mass. Gen. Laws ch. 175, § 110E(13)).

The Commissioner may order an insurer, agent or broker who violates the advertising rules to cease and desist, and to notify policyholders or applicants of the violation, and may suspend or revoke the license for repeated violations (Mass. Gen. Laws ch. 175, § 110E).

Sidenote

Know this...

Endorsement by a private organization may be mentioned if it is real. Approval by a government agency may never be claimed in an accident and sickness advertisement, even when the Division of Insurance has in fact approved the policy form.

Sales presentations (211 CMR 40.00)

The Division’s rule on marketing insured health plans reaches far beyond printed ads. It treats prepared sales talks, presentations and material, and all oral and written solicitations and presentations, as marketing methods, along with printed advertising and sales aids (211 CMR 40.03). It applies to any person marketing or advertising a policy, including agents, brokers and advisors (211 CMR 40.03), so a producer’s kitchen-table presentation is held to the same standard as a brochure.

Three rules follow:

• Disclose the essentials. It is misleading, and a misrepresentation, to solicit an application for a health plan without clearly and conspicuously disclosing the extent and nature of the coverage, the extent to which the coverage meets the potential risk, and the cost of the coverage (211 CMR 40.01(2)).
• Name the carrier. Marketing material that fails to clearly identify the name of the carrier (and, where practicable, the form number) is considered misleading and is prohibited (211 CMR 40.04(1)). Material that uses words, symbols or materials so similar to those of a government agency that prospects could believe the solicitation is connected with the government is also prohibited (211 CMR 40.04(2)).
• The carrier answers for it. Every carrier must keep a system of control over its marketing, and all marketing methods are the responsibility of the carrier whose plans are marketed (211 CMR 40.02(2)).

Outline of coverage (211 CMR 42.09)

Massachusetts calls the outline of coverage for an individual policy a disclosure form, or summary. An individual accident and sickness policy may not be delivered in Massachusetts unless the disclosure form is delivered with the policy or to the applicant when the application is made (211 CMR 42.09(3)(a)). The summary becomes part of the policy and must be printed in type no smaller than ten point.

The disclosure form must show, when applicable (211 CMR 42.09(3)(c)):

• The carrier, the policy type and the policy number
• The benefits, described without misrepresenting the coverage
• Deductibles, coinsurance and benefit maximums
• Whether the policy is renewable to Medicare eligibility
• Age limitations, and whether premiums can increase
• Pre-existing condition limitations and waiting periods
• Whether mental illness and pregnancy are covered
• The free look provision and how to return the policy for a refund
• Exclusions, limitations and reductions, listed without misrepresenting the coverage
• A notice to read your policy carefully, because the disclosure statement is only a very brief summary of it
• A complaint notice: call the agent and, if not satisfied, write or call the Massachusetts Division of Insurance

The same regulation sets other disclosure rules for the policy itself (211 CMR 42.09(1), (2)):

• Every policy must contain a renewability provision on its first page, in a highlighted section.
• A policy may not carry a misleading name, and may not be marketed or advertised as a group policy unless it qualifies as one.
• If a policy is issued on a basis other than the one applied for, a disclosure statement describing it must accompany the policy, with a notice that the coverage originally applied for has not been issued.
• A rider or endorsement that reduces or eliminates coverage at issue is ineffective without the policyholder’s signed acceptance.

Disclosure of information about individuals (Mass. Gen. Laws ch. 175, § 108E; 211 CMR 42.09)

The chapter on Massachusetts State Regulations covers the Massachusetts insurance privacy law (ch. 175I) and its authorization rules. Two further rules apply to health information:

• Mental health information. An insurer may not disclose information about the outpatient diagnosis or treatment of mental or nervous conditions of an insured or covered family member under different terms than the consent it requires for other medical conditions, without the person’s express and informed written consent (Mass. Gen. Laws ch. 175, § 108E). The consent must tell the person of the right not to give it, and giving it may not be made a condition of receiving benefits. The rule does not stop an insurer from disclosing aggregate data that identifies no one, or from using information for coordination of benefits, subrogation, peer review or utilization review. In the same way, an insurer may require consent to disclose information about mental health services only to the same or similar extent it requires consent for other medical conditions (Mass. Gen. Laws ch. 175, § 47B(h)).
• The Medical Information Bureau. When the carrier uses the Medical Information Bureau (MIB), the application or another notice must tell the applicant it may be used for medical information about the insured (211 CMR 42.09(2)).

Individual underwriting by the insurer

Medical examinations and lab tests, including HIV consent (211 CMR 36.03)

Massachusetts regulates HIV testing for life, health and disability insurance in 211 CMR 36.00. The core prohibitions are in 36.03:

• HIV-related information must be treated as highly confidential. No carrier, producer or employee may communicate it to anyone unless the communication is lawful and made with the written authorization of the person it concerns.
• A carrier may not request or require an HIV test unless it first obtains the individual’s prior written informed consent.
• A carrier may request or require an HIV test only on a basis that is not unfairly discriminatory.
• A carrier or producer that learns or suspects that an employee or agent has violated the rule must immediately investigate and take prompt corrective action, and keep a record of it for the Division.

The consent process has its own requirements:

Step	Massachusetts rule
Before the test	The carrier tells the person in writing the purpose of the test, including whether it is required to obtain coverage, and how the result may affect the application or risk classification (211 CMR 36.04(2)(a))
Time to decide	The person must be told that, absent changes in underwriting factors, waiting up to 21 days from the date the test was requested to sign the consent form will not prejudice the application (211 CMR 36.04(2)(a)7.)
The authorization	Valid for no longer than 90 days after the consent form is signed, or a shorter period the carrier selects (211 CMR 36.04(3)(a))
A positive result	The carrier notifies the person as soon as possible, and no later than 45 days after the blood sample is taken, either through a physician the person designates or directly, at the person’s option (211 CMR 36.05(1))

Carriers and producers may not request any information about counseling about HIV or AIDS, or about the sexual orientation of an applicant or insured, including proxy questions (211 CMR 36.07(1)). A carrier may ask whether the person has had a positive HIV test (other than an anonymous one at a counseling and testing site), or has been diagnosed with or treated for HIV infection or AIDS by a medical professional (211 CMR 36.07(2)).

Genetic information (Mass. Gen. Laws ch. 175, §§ 108H, 108I)

A genetic test is a test of human DNA, RNA, mitochondrial DNA, chromosomes or proteins to identify genes, genetic abnormalities, or inherited or acquired characteristics in genetic material (Mass. Gen. Laws ch. 175, § 108H). For disability and long-term care, § 108I limits the term to tests for characteristics associated with a predisposition to disease, and excludes tests for drugs, alcohol, cholesterol or HIV and tests to diagnose an existing disease (§ 108I(a)). Massachusetts treats medical expense coverage and disability or long-term care coverage differently:

	Medical expense coverage (§ 108H)	Disability and long-term care (§ 108I)
Use of genetic information	An insurer, agent or broker may not cancel, refuse to issue or renew, or vary the premium, length of coverage or other terms of an individual or group accident and sickness policy providing hospital and surgical expense insurance based on genetic information	The insurer may not unfairly discriminate because of a genetic test result or genetic information, meaning cancel, refuse, charge more or restrict coverage unless the action rests on reliable information about mortality or morbidity based on sound actuarial principles or actual or reasonably anticipated claim experience
Requiring a test	No one may require a genetic test or genetic information as a condition of issuing or renewing the policy	The insurer, agent or broker may not require an applicant to undergo a genetic test as a condition of issuing or renewing the policy
Asking about tests	Not addressed separately; see the row above	The application may ask whether the applicant has had a genetic test, but the applicant is not required to answer, and the application must say so and say that not answering may result in a higher rate or denial (§ 108I(c))

A violation of either section is an unfair method of competition or unfair or deceptive act or practice under chapters 93A and 176D (Mass. Gen. Laws ch. 175, §§ 108H, 108I(b)).

Replacement of accident, health or sickness insurance

Massachusetts replacement requirements (211 CMR 42.08, 42.11; Mass. Gen. Laws ch. 175, § 110(N))

Every individual accident and sickness application must ask whether the new insurance will replace accident and sickness insurance now in force (211 CMR 42.08(1)). An agent or carrier who determines that a sale involves replacement must give the applicant a replacement notice at the time of taking the application or before the policy is issued; the applicant keeps a copy and the carrier keeps a signed copy (211 CMR 42.08(2)).

The notice, set out in 211 CMR 42.11, warns the applicant that:

• Present health conditions may not be covered under the new policy, or may be subject to waiting periods
• Application questions must be answered truthfully and completely, or the policy and its benefits may be voided
• The applicant may want the advice of the present carrier or its agent about the replacement

Group coverage has a separate rule. A carrier that replaces a discontinued HMO group contract within 60 days must immediately cover everyone validly covered under the prior contract who is otherwise eligible, regardless of active-employment, hospital-confinement or pregnancy provisions (Mass. Gen. Laws ch. 175, § 110(N)(3)(a)). “Discontinuance” here means the end of the group’s contract because the HMO became insolvent.

Lesson summary

• No one may use the Massachusetts Life and Health Insurance Guaranty Association to sell insurance (ch. 175, § 146B).
• Accident and sickness advertising must be truthful and not misleading in fact or implication; it may never claim government approval, even if true (ch. 175, § 110E). Sales talks and presentations are marketing methods, and a solicitation must disclose the coverage, how it meets the risk, and its cost (211 CMR 40.00).
• The disclosure form (outline of coverage) is delivered with the policy or at application and becomes part of the policy (211 CMR 42.09).
• Information about outpatient mental health treatment may be disclosed only on the same consent terms as other medical information, and the consent may not be a condition of benefits (ch. 175, § 108E). An application must say when the carrier uses the MIB (211 CMR 42.09(2)).
• An HIV test needs prior written informed consent; the authorization lasts 90 days; the applicant may wait 21 days to sign; a positive result is reported within 45 days of the blood sample; no questions about HIV counseling or sexual orientation (211 CMR 36.00).
• Genetic information may not be used or required for medical expense coverage; for disability and long-term care it may be used only on an actuarial basis, and an applicant need not answer a genetic test question (ch. 175, §§ 108H, 108I).
• Replacement: the application asks about it, and a signed replacement notice is given at application or before issue (211 CMR 42.08, 42.11).