Extends the free look period for senior citizens purchasing individual health insurance policies or contracts

This bill would amend the Insurance Law to provide an extended "free look" period for senior citizens purchasing individual health insurance policies or contracts.

Summary of Provisions:

Section 1 of the bill divides Insurance Law § 3216(c)(10) into subpara- graphs (A) and (B) and creates new subparagraphs (C) and (D). Subpara- graph (A) maintains the existing 10 to 20-day free look period for certain types of individual health insurance policies that insure an individual who is under the age of 65 on the effective date of coverage. Subparagraph (B) retains the current 30-day free look period for a poli- cy or certificate that is: (1) sold by mail order; (2) provides Medicare supplemental insurance for an insured who was under the age of 65 on the effective date of coverage; or (3) provides long-term care insurance for an insured who is under the age of 65 on the effective date of coverage.

Subparagraph (C) inserts new language that requires a 90-day free look period for a policy sold to an insured who is 65 years of age or older on the effective date of coverage. This new subparagraph also requires the policy, or a notice attached thereto, to state that the insurer will refund any premium paid (including any policy fees or other charges) upon surrender and written cancellation of the policy when a. claim for benefits has not been incurred. The policy, or a notice attached there- to, must also state that in the event a claim for benefits has been incurred during the time period from the effective date of coverage until 90 days from the date the policy is delivered to the policyholder, the insurer will offset any amounts the insurer has paid on claims for benefits under the policy against the refund of any premium paid (including any policy fees or other charges). Subparagraph (D) maintains the existing exclusion of single premium, nonrenewable insurance poli- cies that insure against accidents or accidental bodily injuries from Insurance Law §3216(c)(10).

Section 2 of the bill divides Insurance Law § 4306(h) into new para- graphs (1) and (2), and creates a new paragraph (3). Paragraph (1) main- tains the existing 10- to 20-day free look period for certain types of insurance contracts that insure an individual who is under the age of 65 on the effective date of coverage. Paragraph (2) retains the Current 30-day free look period for an insurance contract that is: (1) sold by mail order; (2) provides Medicare supplemental insurance for an insured who is under the age of 65 as of the effective date of coverage; or (3) provides long-term care insurance for an insured who is under the age of 65 as of the effective date of coverage. Paragraph (3) creates a 90-day

free look period for a contract sold to an insured who is 65 years of age or older on the effective date of coverage. This new paragraph also requires the contract, or a notice attached thereto, to state that the insurer will refund any premium paid (including any contract fees or other charges) upon surrender and written cancellation of the contract when a claim for benefits has not been incurred. The contract, or a notice attached thereto, must also state that in the event it claim for benefits has been incurred during the time period from the effective date of coverage until 90 days from the date the contract is delivered to the policyholder, the insurer will offset any amounts the insurer has paid on claims for benefits under the contract against the refund of any premium paid (including any contract fees or other charges).

Section 3 of the bill states that this bill would take effect 180 days after it becomes law, and would apply to all individual insureds whose effective dale of coverage is on or after the bill's effective date.

Existing Law:

Currently, individual accident and health insurance policies or contracts, written by commercial insurers, Article 43 non-profit medical and dental indemnity and health and hospital service corporations, must provide a 10- to 20-day free look period. Mail order coverage, Medicare supplement insurance, and long-term care insurance must contain a 30-day free look period. With regard to commercial insurers, individual, single premium, nonrenewable policies insuring against accidents or accidental bodily injuries do not need to contain a free look period.

Legislative History:

A.10369 passed Assembly in 2008.

Statement in Support:

In general, the "free look" period is a period of time after a policy has been purchased in which the insured may pull out of the insurance contract and obtain a refund. This bill extends the free look period to 90 days for individual accident and health insurance policies or contracts that cover an insured who is 65 years of age or older on the effective date of coverage.

A longer free look period is necessary because insurers, agents, and brokers may market certain individual health insurance policies as less expensive alternatives to Medicare supplement insurance or long-term care insurance. Senior citizens on fixed incomes are vulnerable to these misleading marketing techniques, and they often do not realize that these less expensive, limited benefit policies provide less coverage than Medicare supplement insurance or long-term care insurance. Further- more, there are a variety of Medicare supplement and long-term care insurance plans that a senior citizen may choose from, all of which contain varying benefits. Thus, senior citizens need more time upon

receipt of the policy or contract to evaluate whether the coverage they purchased is suitable for their needs.

Moreover, since Insurance Law § 3216( d)(2)(H) permits a commercial insurer to cancel an individual insured within 90 days of issuing the policy, a 90-day free look period for the insured seems appropriate.

Although a senior citizen could possibly manipulate a 90-day free look period, the language set forth in the bill attempts to protect the insurer from manipulation by requiring the insurer to offset any amounts the insurer pays on claims beginning at the policy's effective date and ending at the expiration of the 90-day free look period, against any 90-day free look period refund amounts. By requiring this offset language to be stated in the insurance policy or contract, this bill creates a deterrent to any possible manipulation.

Budget Implications:

This bill will not have an impact on state finances.

Effective Date:

This bill would take effect on the 180th day after it becomes Jaw and would apply to insureds whose effective date of coverage is on or after such date.