HB0502 100TH GENERAL ASSEMBLY

LRB100 06034 SMS 16065 b

100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB0502

Introduced , by Rep. Laura Fine

SYNOPSIS AS INTRODUCED:

215 ILCS 5/231.1	from Ch. 73, par. 843.1
215 ILCS 5/231.2 new

Amends the Legal Reserve Life Insurance Article of the Illinois Insurance Code. Removes a provision concerning continuation of coverage during the insured's total disability. Adds provisions requiring extension of coverage for an individual under a group policy during an authorized absence. Defines "authorized absence" to mean an absence that is administratively approved and does not result in a charge to leave of any kind or in loss of basic salary. Sets forth provisions concerning the conditions of the extension of coverage. Provides that the prior insurer shall be liable only to the extent of its extensions of coverage. Includes provisions related to the liability of the succeeding insurer, including regular coverage, temporary coverage, deductible and waiting periods, and determinations of the prior insurer's coverage. Effective immediately.

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Insurance Code is amended by changing Section 231.1 and by adding Sections 231.2 as follows:

(215 ILCS 5/231.1) (from Ch. 73, par. 843.1)

Sec. 231.1. Group Life Insurance Standard Provision. No policy of group life insurance shall be delivered in this State unless it contains in substance the following provisions, or provisions which in the opinion of the Director are more favorable to the persons insured, or at least as favorable to the persons insured and more favorable to the policyholder, provided, however, (a) that provisions (F) to (K) inclusive shall not apply to policies insuring the lives of debtors; (b) that the standard provisions required for individual life insurance policies shall not apply to group life insurance policies; and (c) that if the group life insurance policy is on a plan of insurance other than the term plan, it shall contain a nonforfeiture provision which in the opinion of the Director is equitable to the insured persons and to the policyholder, but nothing herein shall be construed to require that group life insurance policies contain the same nonforfeiture provisions as are required for individual life insurance policies:

(A) A provision that the policyholder is entitled to a grace period of 31 days for the payment of any premium due except the first, during which grace period the death benefit coverage shall continue in force, unless the policyholder shall have given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder shall be liable to the insurer for the payment of a pro rata premium for the time the policy was in force during such grace period.

(B) A provision that validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue; and that no statement made by any person insured under the policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such person's lifetime nor unless it is contained in a written instrument signed by him; provided, however, that no such provision shall preclude the assertion at any time of defenses based upon provisions in the policy which relate to eligibility for coverage.

(C) A provision that a copy of the application, if any, of the policyholder shall be attached to the policy when issued, and that all statements made by the policyholder shall be deemed representations and not warranties, and that no statement made by any person insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or, in the event of death or incapacity of the insured person, to his beneficiary or personal representative.

(D) A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of his coverage.

(E) A provision specifying an equitable adjustment of premiums or of benefits or of both to be made in the event the age of a person insured has been misstated, such provision to contain a clear statement of the method of adjustment to be made.

(F) A provision that any sum becoming due by reason of the death of the person insured shall be payable to the beneficiary designated by the person insured, except that where the policy contains conditions pertaining to family status the beneficiary may be the family member specified by the policy terms, subject to the provisions of the policy in the event there is no designated beneficiary, as to all or any part of such sum, living at the death of the person insured, and subject to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of such sum not exceeding $2,000 to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured.

(G) A provision that the insurer will issue to the policyholder for delivery to each person insured a certificate setting forth a statement as to the insurance protection to which he is entitled, to whom the insurance benefits are payable, a statement as to any dependent's coverage included in such certificate, and the rights and conditions set forth in provisions (H), (I), (J) and (K) following.

(H) A provision that if the insurance, or any portion of it, on a person covered under the policy or on the dependent of a person covered, ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, such person shall be entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, unless such right to convert such coverage was provided for in the group policy and is applied for in the application for conversion, provided that an application for the individual policy shall be made, and the first premium paid to the insurer, within 31 days after such termination, and provided further that:

(1) the individual policy may, at the option of such person, be on any one of the forms then customarily issued by the insurer at the age and for the amount applied for, except that the group policy may exclude the option to elect term insurance;

(2) the individual policy shall be in an amount equal to, unless such person chooses to elect a lesser amount, the amount of life insurance which ceases because of such termination, less the amount of any life insurance for which such person becomes eligible under the same or any other group policy within 31 days after such termination, provided that any amount of insurance which shall have matured on or before the date of such termination as an endowment payable to the person insured, whether in one sum or in installments or in the form of an annuity, shall not, for the purposes of this provision, be included in the amount which is considered to cease because of such termination; and

(3) the premium on the individual policy shall be at the insurer's then customary rate applicable to the form and amount of the individual policy, to the class of risk to which such person then belongs, and to such person's age attained on the effective date of the individual policy.

(4) If any individual insured under a group life insurance policy becomes entitled under the terms of such policy to have an individual policy of life insurance issued and if such individual is not given notice of the existence of such right at least 15 days prior to the expiration date of such period, then in such event the individual shall have an additional period within which to exercise such right, but nothing herein contained shall be construed to continue any insurance beyond the period provided in such policy. This additional period shall expire 15 days next after the individual is given such notice but in no event shall such additional period extend beyond 60 days next after the expiration date of the period provided in such policy. Written notice presented to the individual or mailed by the policyholder to the last known address of the individual or mailed by the insurer to the last known address of the individual as furnished by the policyholder shall constitute notice for the purpose of this Section.

Subject to the same conditions set forth above the conversion privilege shall be available (i) to a surviving dependent, if any, at the death of the employee or member, with respect to the coverage under the group policy which terminates by reason of such death and (ii) to the dependent of the employee or member upon termination of coverage of the dependent, while the employee or member remains under the group policy, by reason of the dependent ceasing to be a qualified family member under the group policy.

(I) A provision, except in the case of a policy described in paragraph (B) of Section 230.1, that the termination of the employment of an employee or the membership of a member shall not terminate the insurance of such employee or member under the group policy until the expiration of such period for which the premium for such employee or member has been paid, not exceeding 31 days.

(J) A provision that from time to time all new employees or members eligible for insurance and desiring the same shall be added to the group or class thereof originally insured.

(K) A provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of such termination whose insurance terminates, including the insured dependent of a covered person, and who has been so insured for at least five years prior to such termination date shall be entitled to have issued by the insurer an individual policy of life insurance, subject to the same conditions and limitations as are provided by provision (H) above, except that the group policy may provide that the amount of such individual policy shall not exceed the smaller of (a) the amount of the person's life insurance protection ceasing because of the termination or amendment of the group policy, less the amount of any life insurance for which he is or becomes eligible under a group policy issued or reinstated by the same or another insurer within 31 days after such termination, or (b) $10,000.

(L) A provision that if a person insured under the group policy, or the insured dependent of a covered person, dies during the period within which the individual would have been entitled to have an individual policy issued in accordance with provisions (H) or (I) above and before such an individual policy shall have become effective, the amount of life insurance which he would have been entitled to have issued under such individual policy shall be payable as a claim under the group policy, whether or not application for the individual policy or the payment of the first premium therefor has been made.

(M) (Blank). If active employment is a condition of insurance, a provision that an insured may continue coverage during the insured's total disability by timely payment to the policyholder of that portion, if any, of the premium that would have been required from the insured had total disability not occurred. The continuation shall be on a premium paying basis for a period of six months from the date on which the total disability started, but not beyond the earlier of (a) approval by the insurer of continuation of the coverage under any disability provision which the group insurance policy may contain or (b) the discontinuance of the group insurance policy.

(N) In the case of a policy insuring the lives of debtors, a provision that the insurer will furnish to the policyholder for delivery to each debtor insured under the policy a certificate of insurance describing the coverage and specifying that the death benefit shall first be applied to reduce or extinguish the indebtedness. Whenever the amount of insurance payable exceeds the amount of outstanding indebtedness the excess benefit shall be payable to the person otherwise contractually or legally entitled thereto; if there be no person determined to be so entitled, such excess shall be paid to the estate of the insured person.

(Source: P.A. 83-1465.)

(215 ILCS 5/231.2 new)

Sec. 231.2. Extension of coverage under authorized absence; liability.

(a) In this Section, "authorized absence" means an absence that is administratively approved and does not result in a charge to leave of any kind or in loss of basic salary.

(b) A group policy shall, if a covered employee or dependent is on authorized absence at the date of termination of the policy, provide an extension of coverage for the individual, beginning at the date of termination of the group policy and continuing during the period of authorized absence.

(c) Under a group life policy that contains a disability benefit extension of any type, such as premium waiver extension, extended death benefit in the event of total disability, or payment of income for a specified period during total disability, the termination of the group policy shall not operate to terminate the extension.

(d) Under a group policy providing benefits for loss of time from work or a specific indemnity during hospital confinement, termination of the group policy during a period of authorized absence or confinement shall have no effect on benefits payable for the condition or conditions causing continuing authorized absence or continuing confinement. The extension of coverage provision for loss of time benefits may provide for the integration of Social Security disability or retirement benefit increases which occur after the date of termination of the group policy only if integration of these benefit increases is also applicable prior to termination of the group policy.

(e) Under a group policy providing hospital, surgical, or medical expense coverages, the extension of coverage shall be at least 12 months under major medical or comprehensive medical coverage and at least 90 days under other hospital, surgical, or medical expense coverage, subject to the following:

(1) Coverage need not be extended beyond the date on which:

(A) the authorized absence terminates;

(B) the benefit period specified in the policy ends;

(C) the maximum benefit is paid; or

(D) coverage for the condition or conditions causing the authorized absence is provided under similar coverage, other than temporary coverage under subparagraph (B) of paragraph (2) of subsection (i) under the succeeding insurer's group policy.

(2) Extended coverage need not cover dental or uncomplicated pregnancy expenses or a condition other than the condition or conditions causing the authorized absence.

(3) The extension of coverage is not required where the succeeding insurer agrees, or the prior and succeeding insurers agree, to provide coverage for individuals who are on an authorized absence at the date of termination of the group policy that is not less favorable to them than would otherwise be required by this subsection (e).

(4) After the termination of extended basic hospital, surgical, or medical expense coverage, extended major medical expense coverage shall cover expenses eligible under the major medical expense coverage that are normally covered under the basic coverage, subject to paragraph (1); and

(5) A policy providing hospital, surgical, or medical expense coverage that covers only expenses in excess of those covered by basic hospital-surgical-medical expense coverage and major medical coverage or comprehensive medical coverage issued to the same group policyholder, need not provide extended coverage if the underlying coverage provides extended coverage.

(f) A provision for extending coverage shall be contained in each group policy as well as in corresponding certificates.

(g) The benefits payable during any period of extended coverage shall be subject to the group policy's regular coverage limits. The extended coverage shall terminate at the end of a normal benefit period or when the maximum benefit amount has been paid.

(h) The prior insurer shall be liable only to the extent of its extensions of coverage. Its liability shall be the same whether the group policyholder secures replacement coverage from another insurer, self-insures, or declines to provide the group with insurance.

(i) The succeeding insurer shall be liable as provided in this subsection (i) where its group policy replaces another providing similar coverage:

(1) Regular coverage shall be provided under the succeeding insurer's group policy to:

(A) each employee who is eligible for coverage in accordance with the succeeding insurer's group policy provisions regarding classes eligible and actively at work requirements;

(B) each dependent who is eligible for coverage in accordance with the succeeding insurer's group policy provisions regarding classes eligible and non-hospital confinement requirements; and

(C) a dependent of a disabled employee if the dependent is eligible for coverage in accordance with the succeeding insurer's group policy provisions regarding classes eligible and non-hospital confinement requirements and if the disabled employee is covered under the succeeding insurer's group policy.

(2) Each employee or dependent not covered under the succeeding insurer's group policy in accordance with paragraph (1) of this subsection (i) shall be provided with temporary coverage by the succeeding insurer, for losses occurring or beginning under the replacement policy, subject to the following:

(A) Temporary coverage need be provided only if the individual was validly covered under the prior group policy on the date of its termination and meets the requirements necessary to be a member of an eligible class under the succeeding insurer's group policy, other than requirements for working full time, part time, or a stated number of hours.

(B) The coverage to be provided by the succeeding insurer shall be the coverage of the prior group policy reduced by any benefits payable under such policy. The benefits of the succeeding insurer's group policy shall be determined after the benefits of the prior group policy have been determined.

(C) Temporary coverage shall be provided by the succeeding insurer until the first of:

(i) the date the individual becomes eligible under the coverage and under the circumstances described in paragraph (1) of this subsection (i);

(ii) for each type of coverage, the date the individual's coverage would terminate in accordance with the succeeding insurer's group policy provisions regarding individual termination of coverage, such as at termination of employment or when ceasing to be an eligible dependent; or

(iii) for an individual who is on authorized absence on the effective date of the succeeding group policy, under a type of coverage for which this Section requires an extension of coverage, the end of any period of extended coverage required of the prior insurer or, if the prior insurer's group policy was not subject to this Section, would have been required of the prior insurer had its group policy been so subject.

(3) If the succeeding insurer's group policy contains a pre-existing condition limitation, the coverage for these conditions of persons becoming covered by the succeeding group policy under paragraphs (1) or (2) of this subsection (i), during the period the limitation applies under that group policy, shall be the lesser of:

(A) the coverage of the succeeding group policy determined without application of the limitation; and

(B) the coverage of the prior group policy determined after application of any such limitation contained in the policy.

(4) The succeeding insurer, in applying any deductibles or waiting periods contained in its group policy, including pre-existing condition waiting periods, shall give credit for the satisfaction or partial satisfaction of the same or similar provisions under the prior group policy to the extent that the prior and succeeding group policies provide similar coverage. Deductible provision credit shall be given for the same or overlapping benefit periods for expenses incurred and applied against the deductible provisions of the prior group policy during the 90 days preceding the effective date of the succeeding group policy, but only to the extent that these expenses are recognized under the succeeding group policy and are subject to a similar deductible provision.

(5) Where a determination of the prior insurer's coverage is required by the succeeding insurer, the prior insurer, at the succeeding insurer's request, shall furnish a statement of the coverage available and a copy of pertinent group policy provisions to permit the succeeding insurer to verify the coverage statement or make its own coverage determination. Coverage of the prior group policy shall be determined in accordance with the definitions, conditions, and covered expense provisions of that group policy rather than those of the succeeding group policy. The coverage determination shall be made as if coverage had not been replaced by the succeeding insurer.

Section 99. Effective date. This Act takes effect upon becoming law.