Where Michigan Law Changes the National Health Rule

In a few places Michigan law differs from the national rule usually taught, and in a Michigan sale the Michigan statute governs. Each section below states the rule that applies here.

Preexisting Conditions

National discussions of health insurance describe a look-back of 6 months and a maximum exclusion of 12 months, reduced by creditable coverage. In Michigan, an insurer that delivers, issues or renews a health insurance policy “shall not limit or exclude coverage for an individual by imposing a preexisting condition exclusion.” The ban covers a condition that was present before coverage began “whether or not any medical advice, diagnosis, care, or treatment was recommended or received” (MCL 500.3406ii(1), (3)).

The ban has exceptions. It does not apply to grandfathered plans or to coverage for hospital confinement indemnity, disability income, accident only, long-term care, Medicare supplement, limited benefit, specified disease and several other limited products (MCL 500.3406ii(2)). Outside guaranteed issue and any creditable coverage credit, a Medicare supplement policy may exclude, for the first 6 months, a condition treated or diagnosed in the 6 months before coverage (MCL 500.3829(3)), and a long-term care policy may have a limitation period of up to 6 months (MCL 500.3911(1)).

Canceling a Health Policy

The optional “cancellation” provision of the national model lets an insurer cancel with notice and a refund of unearned premium. A Michigan health insurance policy is different. The insurer must renew or continue it at the option of the individual or, for a group plan, the plan sponsor. It may decline only for fraud or intentional misrepresentation of material fact, nonpayment, noncompliance with minimum contribution or participation requirements, because it no longer offers that type of coverage, or because the individual or group moves outside the service area (MCL 500.2213b(1), (4)). A short-term policy of not longer than 6 months is outside this rule (MCL 500.2213b(8)).

Small Group Waiting Periods

National discussions give a 90-day federal cap on waiting periods. Michigan goes further for small employers. A small employer carrier may not sell a plan with a waiting period for new or late enrollees. For small employers other than sole proprietors, it may use an affiliation period of up to 60 days for new enrollees and 90 days for late enrollees, applied uniformly, with no premium and no coverage during it (MCL 500.3707(2)).

Conversion Privileges

National discussions use one state’s statute to illustrate a group health conversion privilege. Michigan’s sections on individual conversion policies, MCL 500.3612 and 500.3612a, were repealed in 2016, so read the policy for any privilege. Michigan statute keeps conversion rights for Medicare supplement coverage after a group loss (MCL 500.3831) and for group long-term care certificates (MCL 500.3907(2)).

Medicare Supplement Policies

Topic	Rule that governs in Michigan
Which plans an insurer must offer	Core benefits only, and if it offers any additional benefit or plan K or L, plan C or F as well (D or G for people newly eligible after December 31, 2019) (MCL 500.3811a(2); MCL 500.3811b)
Replacing one policy with another	The new insurer waives preexisting, waiting, elimination and probationary periods for similar benefits to the extent time was spent under the original coverage. The statute sets no minimum time in force (MCL 500.3833)
Open enrollment	No health-based denial or pricing for 6 months from the first month of Part B at 65 or older. At least 6 months of continuous creditable coverage bars a preexisting exclusion, and less reduces it (MCL 500.3829(1), (2))

Long-Term Care Policies

Topic	Rule that governs in Michigan
Disclosure document	A “summary of coverage,” free-standing, in at least 10-point type, given before application with the applicant’s signature (MCL 500.3933). Medicare supplement law calls its document the “outline of coverage” (MCL 500.3815)
Permitted exclusions	Only preexisting conditions, mental or nervous disorders (never Alzheimer’s disease or related disorders), alcoholism and drug addiction, war, felony, riot or insurrection, armed forces service, suicide or self-inflicted injury, and a motor vehicle accident (MCL 500.3905(1)(b)). Territorial limits are barred, and the list does not include aviation, care given by family members or care available under other programs
Lapse notice	For an individual policy, the insurer needs a second person designated to receive lapse notices, or a signed waiver, before issuing (MCL 500.3906(1))

Multiple Employer Welfare Arrangements

National texts describe a MEWA as an arrangement of several large employers that self-funds benefits. The federal definition reaches an arrangement for the employees of two or more employers (29 USC 1002(40)). Michigan requires a certificate of authority, unless the MEWA is fully insured, when an employer member, or an employer it solicits, is domiciled or headquartered here (MCL 500.7001(h); MCL 500.7004).

Working With the Differences

Name the product first. If a client asks whether a plan can refuse to cover her diabetes for a period after she buys it, a health insurance policy delivered or renewed here may not (MCL 500.3406ii(1)), while a Medicare supplement policy bought outside open enrollment and guaranteed issue may, for up to 6 months (MCL 500.3829).

Lesson summary

• A Michigan health insurance policy may not impose a preexisting condition exclusion, but Medicare supplement and long-term care policies keep their own 6-month rules.
• A Michigan health insurance policy must be renewed at the option of the individual or plan sponsor, subject to the listed exceptions.
• Small employer plans may use affiliation periods of 60 and 90 days, not waiting periods.
• Michigan Medicare supplement law adds the plan C or F availability rule and waives time already served on replacement without a minimum.
• Long-term care policies use a summary of coverage, a statutory list of exclusions and a second lapse-notice designee or signed waiver.
• Michigan’s individual conversion sections are repealed, and statutory conversion rights remain for Medicare supplement and group long-term care coverage.
• A MEWA tied to Michigan needs a certificate of authority unless it is fully insured.