Wisconsin Health Policy Provisions

You already know the standard health policy provisions: free look, time limit on certain defenses, grace period and pre-existing conditions. Wisconsin writes its own versions into ch. 632, Wis. Stat., and adds rules in ch. Ins 3, Wis. Adm. Code, on how an application is taken. Where Wisconsin’s rule differs from the model provision, Wisconsin’s rule controls.

The Right of Return (s. 632.73)

A policyholder may return an individual or franchise disability policy within 10 days after receipt (s. 632.73 (1), Wis. Stat.). The contract is then void, and every payment made under it must be refunded. The notice of this right must be conspicuously printed on, or attached to, the first page of the policy (s. 632.73 (2)).

Medicare supplement, Medicare replacement and long-term care policies get a longer window: the policyholder may return the policy within 30 days of its delivery and have the premium refunded if not satisfied for any reason (s. 632.73 (2m)). The right does not apply to single premium nonrenewable policies issued for terms not greater than 6 months, or to accident-only policies (s. 632.73 (3) (a)).

The right is unrestricted. Under s. Ins 3.13 (2) (j), Wis. Adm. Code, the policyholder may send the policy back to the insurer’s home or branch office or to the agent who sold it. The policy may not require written reasons, a consultation with an agent first, or any limit on the reasons for return. So when a client calls on day eight to cancel, accept the policy and get it to the insurer. You may answer questions about the coverage, but you may not make the refund depend on a meeting with you.

The Insurer’s Right to Contest (s. 632.76 (1))

Wisconsin’s version of the “time limit on certain defenses” is its incontestability statute. No statement an applicant makes in an application for individual coverage, and no statement about insurability by a person insured under a group policy, can be used to void the policy or deny a claim for a loss or disability that begins after the coverage has been in force for 2 years (s. 632.76 (1)). The exception is fraudulent misrepresentation, and the policy may waive even that.

Inside those two years, the rescission limits of s. 631.11, Wis. Stat., taught in the Wisconsin lesson on representations and warranties, still apply. For individual and franchise policies, the underwriting rule in s. Ins 3.28 (5) adds three more:

• Underwrite first. An insurer may not void coverage for misrepresentation, or deny a claim as pre-existing, unless it resolved patently conflicting or incomplete answers on the application and considered the information it had or would have found through reasonable inquiry (s. Ins 3.28 (5) (c)).
• Act on what you learn. An insurer that learns facts after issue that would justify voiding or reforming coverage must act under s. 631.11 (4), or it waives that right (s. Ins 3.28 (5) (f)).
• Give the application notice. An insurer may use application statements as a defense only if it gave the notice described below (s. Ins 3.28 (5) (g)).

Pre-existing Conditions (s. 632.76 (2); s. Ins 3.28 (6))

Federal law now bars pre-existing condition exclusions in most major medical coverage (42 U.S.C. 300gg-3 (a)), as the Affordable Care Act lesson explains. Wisconsin’s limits still govern every policy that can lawfully carry an exclusion:

The 12-month rule covers surgical, medical, hospital, major medical or other health service coverage, but not hospital indemnity or ancillary coverage such as income continuation (s. 632.895 (1) (a)). Under the 12-month and 2-year rules, a condition excluded “by name or specific description” in a provision in effect on the date of loss stays excluded. Under the 6-month rule, even a named exclusion based on the application must end no later than 6 months after issue (s. 632.76 (2) (b)).

Section Ins 3.28 (6) adds protections that turn on the application:

• Disclosed conditions. If the applicant disclosed a condition in answer to the application’s questions, the insurer cannot deny a claim for it as pre-existing unless the policy excludes it by name or specific description.
• No health questions. If the application asked nothing about health history or treatment, the pre-existence defense reaches only losses within 12 months of the effective date (unless the condition is excluded by name or specific description), and a recurrence after those 12 months cannot be denied as pre-existing. A condition is treated as not having recurred once a disability income insured has performed all the important duties of their occupation, as before, for at least 6 months, or, under other policies, once 6 months pass with no expenses for it.
• Manifestation. A claim may be denied as pre-existing only if the condition itself, not merely its cause, had manifested before coverage began, through diagnosis, treatment or symptoms that would lead an ordinarily prudent person to seek care.

Application Responsibilities (s. Ins 3.28 (3)–(5); s. Ins 3.33)

The form. Questions about general health that call for opinion or judgment are answered to the best of the applicant’s knowledge and belief. The form may not make the applicant swear they withheld nothing (s. Ins 3.28 (3)).

You. A producer must review carefully with the applicant every question on each application the producer prepares, and must record all material information the applicant discloses (s. Ins 3.28 (4)). Checking “no” because the client looks healthy, or leaving out a medication the client mentioned, breaks this rule.

The insurer’s notice. When the application asks about medical history and is part of the contract, the insurer must give an “Important Notice Concerning Statements in the Application for Your Insurance.” It appears on the policy’s first page in contrasting color, in an attachment to that page, or in a letter mailed within 10 days after issue, and it tells the insured to write to the insurer within 10 days if anything on the application is incorrect or incomplete (s. Ins 3.28 (5) (d)). When you deliver the policy, go through the notice and the attached application with the client.

Individual major medical. Insurers must use Wisconsin’s uniform application, form OCI 26-503 (s. Ins 3.33 (2) (a)), and must accept a paper application as an original if they receive it within 45 days of signing (s. Ins 3.33 (2) (c)), so submit signed applications promptly. By telephone, the producer must ask every question, including each health question. Information the applicant volunteers that the form did not ask for may not be used for underwriting or rescission (s. Ins 3.33 (4)).

Grace Periods (s. 632.78)

Every disability insurance policy must give a grace period for each premium after the first, during which the policy stays in force (s. 632.78):

The first premium has no grace period. A group or blanket policy may charge a proportional premium for coverage during the grace period.

Lesson summary

• A policyholder may return an individual health policy within 10 days of receipt for a full refund; Medicare supplement, Medicare replacement and long-term care policies allow 30 days (s. 632.73).
• The return right is unrestricted: no written reason, no required meeting, and the policy may go back to the selling agent (s. Ins 3.13 (2) (j)).
• After 2 years in force, application statements other than fraudulent ones cannot void a health policy or defeat a claim (s. 632.76 (1)).
• Pre-existing limits are 12 months for individual medical expense policies, 2 years for other individual disability policies and 6 months for Medicare supplement and long-term care (s. 632.76 (2)).
• A disclosed condition cannot later be denied as pre-existing unless excluded by name or specific description (s. Ins 3.28 (6) (a)).
• You must review every application question with the applicant and record everything material they disclose (s. Ins 3.28 (4)).
• Grace periods run at least 7 days for weekly, 10 days for monthly and 31 days for other premium modes and group policies (s. 632.78).