THIRD PARTY ADMINISTRATOR GUIDE UNDERWRITING & ADMINISTRATIVE PROCEDURES

Transcription

1 THIRD PARTY ADMINISTRATOR GUIDE UNDERWRITING & ADMINISTRATIVE PROCEDURES A Subsidiary of HCC Insurance Holdings, Inc. Copyright 2005 By HCC Life Insurance Company

2 Home Office: Three TownPark Commons 225 TownPark Drive, Suite 145 Kennesaw, GA Regional Offices: Southeast Region Three TownPark Commons 225 TownPark Drive, Suite 145 Kennesaw, GA Northeast Region 401 Edgewater Place, Suite 400 Wakefield, MA Northwest Region 605 North Highway 169, Suite 300 Plymouth, MN Southwest Region Addison Drive Suite 700 Addison, TX West Region 8925 East Pima Center Parkway Suite 215 Scottsdale, AZ Copyright 2005 By HCC Life Insurance Company

3 This guide is being provided to you as a reference when doing business with HCC Life Insurance Company Some of the forms included in this guide are subject to change to enable us to standardize our procedures and operate more efficiently. For your convenience, we have made this guide available online at Nothing in this guide changes the terms of the policy. Any conflict between this guide and the policy, the policy will control. EXCESS REIMBURSEMENT POLICY Sample Policies, Endorsements, and State Specific Endorsements are available on our website at Please visit our website to learn more about HCC Life Insurance Company and to view any specimen policies you wish to review. HCC Life Insurance Company 1/ 2011

4 TABLE OF CONTENTS INTRODUCTION SECTION # I. A. Introduction to HCC Life Insurance Company I. 1-2 UNDERWRITING II. Product Highlights A. Contract Design II. 1 B. Compensation II. 1 C. Coverage 1. Minimums & Maximums II Special Options II. 1-2 D. Non-Preferred Industries/Preferred Industries II. 2 E. Managed Care Initiative II. 2 III. Specific (Individual) Coverage A. What is Specific Excess-Loss Coverage? III. 1 B. Setting the Specific Deductible III. 1 C. HCC Life Insurance Company No Laser Renewal Guarantee III. 1 D. Types of Coverage Available III. 2-3 E. Simultaneous Funding of Individual Claims III. 3 F. Terminal Specific Liability Option III. 4 G. Split Funded Premium Arrangements III. 4 6 H. Definitions III. 7 8 IV. Aggregate Coverage A. What is Aggregate Excess Loss Coverage? IV. 1 B. Types of Coverage Available IV. 1-2 C. Terminal Aggregate Liability Benefit IV. 2 D. Monthly Deductible Advance Reimbursement Option IV. 3-5 E. Dental, Prescription Drug Card, Weekly Income and Vision Benefits IV. 5 V. Medical Conversion Privilege A. Celtic Conversion V. 1 HCC Life Insurance Company 1/ 2011 SECTION #

5 VI. Requirements For A Quote Proposal A. General Underwriting Philosophy VI. 1-2 B. General Underwriting Data Needed In All Cases VI. 2 C. Detailed Underwriting Data Needed 1. Small Groups VI Large Groups VI. 3 D. Large Claim Data VI. 4 E. Disabled Person(s) Information VI..5 F. What We Need If HMOs Are Involved VI. 5 G. Utilization Review and Managed Care VI. 5-6 H. Catastrophic Claim Notification VI. 6-7 I. HCC Life Insurance Company Trigger Diagnoses List VI. 8-9 VII. Preferred Group Profile VII.1-2 ADMINISTRATIVE PROCEDURES VIII. Sold Case Requirements A. General Policy Administration VIII. 1 B. Documents Initiating Coverage VIII. 1-3 C. Completion of the Application VIII. 3-4 D. Final Underwriting Requirements VIII 4-5 E. Other Documentation Necessary 1. Licensing Requirements VIII Plan Document Signed by Plan Sponsor VIII. 6-7 F. Issuing the Schedule of Insurance and Policy VIII. 8 IX. Premium Accounting A. Premium Payments IX. 1 B. Late Premium Procedures IX. 1-2 C. Variances in Premium Remittances IX. 2 D. Enrollment Standards IX. 3-4 E. Terminations IX. 4-5 F. Reinstatement IX. 5-6 G. Rescissions IX. 6 H. Commissions IX. 7 HCC Life Insurance Company 1/ 2011

6 X. Other Features and Ongoing Services SECTION # A. Processing a Medical Conversion Election X. 1 B. Revising Existing Benefits X. 1-2 C. Changes In Enrollment X. 2 D. Termination of Coverage X. 2 Sample Forms Application for Reinstatement (Aggregate and/or Specific Insurance) Premium Accounting Worksheet Appendix A: HCC Life Insurance Company Disclosure Instructions Appendix A: Disclosure Statement (2 pages) HCC Life Insurance Company 1/ 2011

7 INTRODUCTION A. AN INTRODUCTION TO HCC LIFE INSURANCE COMPANY HCC Life Insurance Company is a wholly owned subsidiary of HCC Insurance Holdings, Inc. (NYSE: HCC). HCC is a specialty insurance holding company with headquarters in Houston, Texas and offices worldwide. HCC has a market capitalization of over $2.1 Billion in the following lines of business: Group Life Accident and Health General Aviation Property Marine and Energy Diversified Financial Products Other Specialty Insurance and Reinsurance Through a responsible long term growth strategy and timely acquisitions of medical insurance underwriting operations, HCC Life Insurance Company continues to expand its national leadership in underwriting medical stop loss insurance and providing related value added services such as large case management oversight and claim negotiation, provider network evaluation, and actuarial review. Avemco Insurance Company has contracted with HCC Life to manage all aspects of sales and administration for Avemco s block of stop loss business. The products we offer are flexible and competitively rated, offering aggregate and/or specific stop loss insurance to employers with a minimum of fifty employees. Our goal is to provide prompt and thorough service to both Plan Sponsors and Third Party Administrators. We feel that we have both the experienced support staff and creative, knowledgeable underwriters to accomplish this goal. Before a TPA can administer claims for an employer to be covered under the HCC Life Insurance Company stop loss program, they must complete a required questionnaire and satisfy HCC Life Insurance Company that they are competently and professionally paying claims for the employers they service. This approval will be continually evaluated. We HCC Life Insurance Company 1/2011 I. 1

8 expect approved TPAs to maintain a high degree of technical knowledge about their systems, keep current with the latest reasonable & customary charges in their areas and communicate any problems to us when they occur. If changes occur in either their systems or personnel that might affect HCC Life Insurance Company s initial understanding of their organization, TPAs are required to inform us of these changes. HCC Life Insurance Company offers Group Life and AD&D coverage along with our medical products. Through organic growth, HCC Life Insurance Company has developed Group Life and AD&D products to fit every employer s need. We offer Basic, Optional and Dependent Life and AD&D coverage with generous accelerated death, conversion and waiver of premium provisions. We have also added AD&D benefits that address unique occurrences in day to day living to provide a quality product. This publication is to be used as a reference guide. If you have any questions that are not addressed herein, please contact us. Of the two guides available, this guide covers the areas of Underwriting, Policy Issuance and In-Force Coverage Requirements. The second guide covers Specific and Aggregate Claims Processing. It contains information regarding claim reporting and submission for TPAs providing claims administration to groups covered under the excess reimbursement program. It is the responsibility of the TPA to read and implement these requirements. From time to time, we will provide updates for your guides as procedures and personnel change. We would appreciate it if you would make copies of these guides available to the key marketing, administrative and claims personnel in your office. If you would like additional copies for your office, please let us know. Additional supplies of forms we require are available upon request. HCC Life Insurance Company 1/2011 I. 2

9 UNDERWRITING II. PRODUCT HIGHLIGHTS A. CONTRACT DESIGN Our excess reimbursement contract is a claims reimbursement policy. It is HCC Life Insurance Company's goal to provide extensive flexibility with regard to the employer's existing plan in regard to deductibles and coinsurance levels in exchange for equitable limitations on various benefits. HCC Life Insurance Company underwriting guidelines assume that Active Service is waived. However, we require disclosure of all classes of inactive employees including retirees, disableds, and COBRA participants. Required disclosure also includes any active employees and dependents with potentially catastrophic medical conditions. A copy of our Disclosure Statement and instructions can be found in Appendix A. B. COMPENSATION Flexible compensation scale: 10% is standard, but we can offer more or less. C. COVERAGE 1. Minimums & Maximums a. Employee count: 50 employees or more; b. Specific Deductibles: $10,000 and higher, (subject to state and carrier limits); c. Maximum Specific Annual Reimbursement: $1,000,000 less the Specific Deductible (alternative limits are available upon request); d. Maximum Aggregate Reimbursement: $1,000,000 (alternative limits are available upon request). 2. Special Options a. Monthly Deductible Advance Reimbursement Option (also referred to as Monthly Aggregate Accommodation); b. Annual or Monthly premium payment; HCC Life Insurance Company 1/2011 II. 1

10 c. Single and Family, Composite or Tiered rates and factors; d. Split Funded premium arrangements; e. Terminal Liability Benefit for both Specific and Aggregate coverage; f. Optional Medical Conversion; g. Simultaneous Funding on Specific Reimbursements. h. No Laser Option D. NON-PREFERRED INDUSTRIES: PREFERRED INDUSTRIES: Apparel Manufacturers Accounting/ Audit Associations/ Unions Food Manufacturing Automobile Dealers Health Services Chemical Manufacturers Instrument Manufacturing Employee Leasing Firms/ PEOs Insurance Agents Furniture Manufacturers Insurance Carriers Highway Construction Textile Manufacturing Hotels/ Motels Transportation (Motor, Air, Ship, Rail) Law Firms Equipment Manufacturing Local/Interurban Transportation Wholesale Trade Non-Durable METs/ MEWAs Rubber/ Plastic Manufacturers Trucking/ Warehousing E. MANAGED CARE INITIATIVE: HCC Life Insurance Company s Actuarial Department works with our producers to evaluate provider networks. Our actuaries have developed a rating methodology that delivers favorable excess reimbursement pricing for effective Managed Care Networks. We call this program Net Value. Please contact your HCC Life Insurance Company underwriter to learn what is needed to provide you with the most competitive excess reimbursement pricing in conjunction with your preferred networks. HCC Life Insurance Company 1/2011 II. 2

11 III. SPECIFIC COVERAGE A. WHAT IS SPECIFIC EXCESS LOSS COVERAGE? Specific (Individual) excess reimbursement coverage is provided to insure the employer for claims of a catastrophic nature. HCC Life Insurance Company will reimburse the Plan Sponsor for eligible claims paid on behalf of an individual covered by the Plan Sponsor's Employee Benefit Plan once the Specific Deductible is exceeded. The exact coverage provided is detailed in the Schedule of Insurance located in the front of the medical excess reimbursement Policy issued to each Plan Sponsor. B. SETTING THE SPECIFIC DEDUCTIBLE A rule of thumb for determining the level at which a Plan Sponsor should cap their self funded liability is to set the Specific Deductible from 5% to 15% of the total expected annual health plan claims. The size of the group can also be a factor. Below is a guideline that can be used in the decision. * Number of Maximum Specific * Minimum Specific Covered Employees Deductible per Person Deductible per Person ,000 10, ,000 15, ,000 20, ,000 25, ,000 50, ,000 75, , , , ,000 * Subject to state restrictions C. HCC LIFE INSURANCE COMPANY NO LASER RENEWAL GUARANTEE Although new business is subject to the possibility of separate higher Specific Deductibles, we guarantee on renewal not to place separate higher Specific Deductibles on individuals that are not already lasered, except at the request of the Plan Sponsor. At renewal, we reserve the right to continue any separate higher Specific Deductibles that had previously been placed on individuals. We will not, however increase those higher Specific deductibles, except at the request of the Plan Sponsor. HCC Life Insurance Company 1/ 2011 III. 1

12 D. TYPES OF COVERAGE AVAILABLE (CONTRACT BASIS) Our Excess reimbursement Policy offers eight (8) standard versions of Specific Deductible coverage. 1. Incurred and Paid Basis (12/12) Claims will be covered that exceed the Specific Deductible and are: a. Incurred during the Contract Period, and b. Paid during the Contract Period. 2. Paid Basis Claims will be covered that exceed the Specific Deductible and are: a. Incurred during the Contract Period, or within 12 months prior to the Original Contract Period, and b. Paid during the Contract Period. 3. Incurred and Paid with a two month run-in (14/12) Claims will be covered that exceed the Specific Deductible and are: a. Incurred during the Contract Period, or within two months prior to the beginning of the Contract Period, and b. Paid during the Contract Period. 4. Incurred and Paid with a three month run-in (15/12) Claims will be covered that exceed the Specific Deductible and are: a. Incurred during the Contract Period, or within three months prior to the beginning of the Contract Period, and b. Paid during the Contract Period. 5. Incurred and Paid with a 12 month run-in (24/12) Claims will be covered that exceed the Specific Deductible and are: a. Incurred during the Contract Period; or within twelve months prior to the beginning of the Contract Period, and b. Paid during the Contract Period. HCC Life Insurance Company 1/ 2011 III. 2

13 6. Incurred in the Contract Period and Paid in the Contract Period plus three months (12/15) Claims will be covered that exceed the Specific Deductible and are: a. Incurred during the Contract Period, and b. Paid during the Contract Period or within three months thereafter. 7. Incurred in the Contract Period and Paid in the Contract Period plus six months (12/18) Claims will be covered that exceed the Specific Deductible and are: a. Incurred during the Contract Period, and b. Paid during the Contract Period or within six months thereafter. 8. Incurred in the Contract Period and Paid in the Contract Period plus twelve months (12/24) Claims will be covered that exceed the Specific Deductible and are: a. Incurred during the Contract Period, and b. Paid during the Contract Period or within twelve months thereafter. E. SIMULTANEOUS FUNDING OF SPECIFIC CLAIMS Simultaneous Funding is a value added feature that provides assistance with the financial burden to Plan Sponsors when there is a significant individual claimant in excess of the specific deductible. There is no additional charge to the premium rates for Simultaneous Funding. This feature is available once eligible claim payments for any one claimant have exceeded the Specific Deductible, subject to a minimum reimbursement submission request per claimant of $500. Simultaneous Funding need not be requested at policy inception and is to be requested and considered on an individual reimbursement request basis. * A Simultaneous Funding Form must be completed for each Simultaneous Funding claim request. The deadline for submission of the Simultaneous Funding Form is 7 calendar days after the expiration of the contract period. Simultaneous Funding requests received after this date will not be honored. On continuing claims, the TPA must complete this form with each subsequent claim submission requesting Simultaneous Funding. * Simultaneous Funding claims submission requirements are outlined in Section III of the HCC Life Insurance Company Notification and Specific/Aggregate Stop Loss & Life Claim Guide which can also be found on our website at HCC Life Insurance Company 1/ 2011 III. 3

14 F. TERMINAL SPECIFIC LIABILITY OPTION If a case terminates with HCC Life Insurance Company, this product option provides three months of run-out coverage for 12/12, 14/12, 15/12, 24/12 and Paid contracts. This option covers all claims incurred during a policy period and paid during a three month run-out period. It must be elected on the case s original effective date (not at renewal). Terminating policyholders must return to a fully insured arrangement to enact this coverage. Please contact your HCC Life Insurance Company underwriter for more details. G. SPLIT-FUNDED PREMIUM ARRANGEMENTS This funding arrangement provides the policyholder an opportunity to reduce Specific (Individual) excess reimbursement premium costs without taking on any additional risk. This arrangement allows the policyholder to receive immediate benefit in the form of reduced Specific premiums, if their Specific claims experience is favorable. At the same time, the cost for Specific coverage is guaranteed not to exceed the standard premium that would have been paid in the absence of the split-funded arrangement. Historically, policyholders with continuously favorable Specific claim experience have had difficulty accepting sizable annual rate increases due to Specific trend leveraging when they know that claim reimbursements have been significantly less than premiums paid. This creative funding alternative allows a policyholder with good experience to risk share while not exposing the plan to additional catastrophic claims liability. The split-funded arrangement also appeals to policyholders who have never had Specific Excess Loss coverage, realize the need, but want to avoid the substantial fixed costs relating to standard premium rates. Under this agreement, the policyholder would select the Specific Deductible, the appropriate contract basis and the desired reimbursement maximum. Based on these elements, the demographics of the group, the location of the employer and the benefit plan design, standard premium rate(s) would be developed. HCC Life Insurance Company 1/ 2011 III. 4

15 Depending on the deductible size and/or the annual standard premium, discounted payable monthly premium rates would be established. These rates would reflect a 5% to 35% discount from the standard premium rates. The difference between the standard premium and the discounted payable annual premium represents the policyholder s Split Funded Liability. All claims in excess of the Specific Deductible must be submitted to HCC Life Insurance Company for audit. Reimbursement would only be made to the policyholder when total reimbursable Specific claims exceed the specific deductible and the policyholder s Split Funded Liability. A year-end final settlement may be applicable based on the Split Funded Liability Endorsement as outlined in your policy. Examples of how the Split Funding arrangement could work may be found on the following page. HCC Life Insurance Company 1/ 2011 III. 5

16 Split-Funded Arrangement (3 examples with different claim experience scenarios) Assumptions: Month policy period 2. $100,000 Specific deductible 3. Actual Avg. Monthly Enrollment 1000 S/ 2000 F 3000 Total 4. 35% discount on standard monthly premium rates Scenario 1: Best case No Specific claims paid during policy period Standard Premium Arrangement Split-Funded Arrangement Monthly Rates: Discounted Payable Monthly Rates: $ 5.00 x 1000 x 12 = $ 60,000 $ 3.25 x 1000 x 12 = $ 39,000 $ x 2000 x 12 = $ 240,000 $ 6.50 x 2000 x 12 = $ 156,000 Total Annual Premium: $ 300,000 Discounted Annual Premium: $ 195,000 Total Annual Cost to the Amount of Split Funded Policyholder: $ 300,000 Liability: -0- Total Annual Cost to the Policyholder: $ 195,000 SAVINGS: $ 105,000 Scenario 2: Probable case 2 claims: $120,000 & $140,000 = $60,000 in excess of Specific Standard Premium Arrangement Split-Funded Arrangement Monthly Rates: Discounted Payable Monthly Rates: $ 5.00 x 1000 x 12 = $ 60,000 $ 3.25 x 1000 x 12 = $ 39,000 $ x 2000 x 12 = $ 240,000 $ 6.50 x 2000 x 12 = $ 156,000 Total Annual Premium: $ 300,000 Discounted Annual Premium: $ 195,000 Total Annual Cost to the Amount of Split Funded Policyholder: $ 300,000 Liability: $ 60,000 Total Annual Cost to the Policyholder: $ 255,000 SAVINGS: $ 45,000 Scenario 3: Worst case 4 claims: $150,000 each = $200,000 in excess of Specific Standard Premium Arrangement Split-Funded Arrangement Monthly Rates: Discounted Payable Monthly Rates: $ 5.00 x 1000 x 12 = $ 60,000 $ 3.25 x 1000 x 12 = $ 39,000 $ x 2000 x 12 = $ 240,000 $ 6.50 x 2000 x 12 = $ 156,000 Total Annual Premium: $ 300,000 Discounted Annual Premium: $ 195,000 Total Annual Cost to the Amount of Split Funded Policyholder: $ 300,000 Liability: $ 105,000 Total Annual Cost to the Policyholder: $ 300,000 HCCL Reimbursement $ 95,000 SAVINGS: $ -0- HCC Life Insurance Company 1/ 2011 III. 6

17 H. Definitions 1. Discounted Payable Monthly Premium Rates: These rates represent the Standard Monthly Premium Rates, which have been discounted based on the deductible size and the Annual Standard Premium. Under the Split-Funded Arrangement, it is these discounted rates that are remitted monthly by the Policyholder. 2. Early Policy Termination: If the excess reimbursement Insurance terminates before the end of the Policy Year (or Renewal Policy Year), the Split Funded Liability shall be no less than the amount stated on your Split Funded Endorsement. 3. Estimated Annual Policyholder Split Funded Amount: This amount represents the difference between the Estimated Annual Standard Premium Costs and the Estimated Discounted Payable Annual Premium Cost. Specific claims eligible for reimbursement under the policy would be subtracted from the Split Funded Liability until this amount is exhausted. 4. Estimated Annual Standard Premium Cost: This cost is calculated by multiplying the Standard Monthly Premium Rate(s) by the final enrollment (as of the effective date) by 12 months. 5. Estimated Discounted Payable Annual Premium Cost: This cost is calculated by multiplying the Discounted Monthly Premium Rates by the final enrollment (as of the effective date) by 12 months. 6. Final Settlement: Please refer to the Split Funded endorsement as outlined in your policy. 7. Maximum Policyholder Specific Claims Liability Cost: This cost is the sum of the Estimated Discounted Payable Annual Premium Cost and the Split Funded Liability as outlined in your Split Funded Endorsement. 8. Minimum Annual Policyholder Split Funded Liability Amount: This amount shall not be less than 85% of the Estimated Annual Policyholder Added Liability Amount at contract inception. Please refer to the Split Funded Endorsement. HCC Life Insurance Company 1/ 2011 III. 7

18 9. Specific Claims: These are eligible claims paid on behalf of a plan participant in excess of the employer s Specific Deductible which qualify for reimbursement under the excess reimbursement policy. 10. Standard Monthly Premium Rates: These rates represent the premium cost for the Specific excess reimbursement coverage which would be payable by the Policyholder in the absence of the Split-Funded Arrangement. HCC Life Insurance Company 1/ 2011 III. 8

19 IV. AGGREGATE COVERAGE A. WHAT IS AGGREGATE EXCESS LOSS COVERAGE? Aggregate excess reimbursement coverage is provided to protect the Plan Sponsor against total eligible claims paid exceeding the Annual Aggregate Deductible. HCC Life Insurance Company shall reimburse payments made by the Plan Sponsor for all eligible claims in excess of the Annual Aggregate Deductible. The exact coverage provided and the Annual Aggregate Deductible Factors will be listed in the Schedule of Insurance, which is part of the excess reimbursement policy issued to the Plan Sponsor. The actual Annual Aggregate Deductible is calculated by multiplying the monthly aggregate factor(s) by the respective number of single and family units covered during the entire Contract Period. However, the policy is subject to a Minimum Annual Aggregate Deductible. If the actual Annual Aggregate Deductible is less than the Minimum Annual Aggregate Deductible, as defined in the Excess Loss policy, no aggregate reimbursements will be made unless the total eligible claims also exceed the Minimum Annual Aggregate Deductible. Any Specific (Individual) Limit per individual will be considered ineligible as part of the total Aggregate claim. Depending upon the product features underwritten, care should be taken to review the contract for definitions and coverage. For example, loss limits as specified in the contract will determine eligible and ineligible charges toward the Aggregate Deductible, as well as claim reimbursement. Unless expressly underwritten in the proposal, certain ancillary charges such as drug card, vision, dental, etc. may be ineligible. B. TYPES OF COVERAGE AVAILABLE (CONTRACT BASIS) The Excess Reimbursement Policy offers five (5) standard versions of Aggregate coverage. 1. Incurred and Paid Basis (12/12) Claims will be covered that are: a. Incurred during the Contract Period, and b. Paid during the Contract Period. HCC Life Insurance Company 1/2011 IV. 1

20 2. Incurred in the Contract Period and Paid in the Contract Period plus three months (12/15) Claims will be covered that are: a. Incurred during the Contract Period, and b. Paid during the Contract Period or within three months thereafter. 3. Paid Basis Claims will be covered that are: a. Paid during the Contract Period. 4. Incurred and Paid with a three month Run-In (15/12) Claims will be covered that are: a. Incurred during the Contract Period or within three months prior to the beginning of the Contract Period, and b. Paid during the Contract Period. 5. Incurred and Paid with a twelve month Run-In (24/12) Claims will be covered that are: a. Incurred during the Contract Period or within twelve months prior to the beginning of the Contract Period, and b. Paid during the Contract Period. C. TERMINAL AGGREGATE LIABILITY BENEFIT In an effort to provide coverage for run-out Aggregate Claims when a group terminates their coverage, HCC Life Insurance Company offers a Terminal Aggregate Liability Benefit. This option provides three (3) months of paid claim run-out protection for those claims incurred during the current policy period before termination. In conjunction with this extended coverage, the Annual Aggregate Deductible is increased by a factor of The Plan Sponsor must elect this option up front at the Plan s coverage inception with HCC Life Insurance Company. Protection is triggered automatically upon non-renewal of the excess reimbursement contract and election by the plan sponsor to switch to a fully insured benefit plan. If the plan terminates prior to the completion of the twelve (12) month contract period, this provision would not apply. Coverage is limited to expenses that are not eligible for coverage under any other group insurance contract. Please contact your HCC Life Insurance Company underwriting or marketing representative for more details. HCC Life Insurance Company 1/2011 IV. 2

21 D. MONTHLY DEDUCTIBLE ADVANCE REIMBURSEMENT (MDAR) OPTION The purpose of Monthly Deductible Advance Reimbursement is to allow the small selffunded employer to receive an advance claim reimbursement during the policy year rather than waiting until policy year-end. This may assist those groups that are hesitant to selffund because of concerns they could endanger their financial cash flow position. 1. Underwriting a. Eligible Groups Please contact your HCC Life Insurance Company Regional Underwriter for Group Eligibility. b. Minimum Advancement The Minimum Aggregate Advancement is $1,000. c. Funding Cost - There is an additional charge per employee per month (in addition to the regular Aggregate Premium). - No commissions are payable on this amount. - Contact your HCC Life Insurance Company Regional Underwriter for details. 2. Administration a. TPA must be fully Approved (TPA Questionnaire reviewed and approval documented). b. TPA must be able to satisfy special requirements for Monthly Deductible Advance Reimbursement. 3. Monthly Aggregate TPA Reporting Requirements Within 15 days after the close of any calendar month, the TPA must supply a yearto-date claim detail listing reported by employees and dependents. This report should include the following information: a. Employee name b. Claimant name c. Service dates d. Type of service (medical, dental, vision, etc.) e. Amount of charge HCC Life Insurance Company 1/2011 IV. 3

22 f. Amount paid g. Date paid h. Check number i. Claim number HCC Life Insurance Company This report should indicate the appropriate contract dates and should be reported to reflect the type of contract (e.g. Paid, 12/15, etc.). 4. HCC Life Insurance Company Monthly Deductible Advance Reimbursement a. Monthly Deductible Advance Reimbursement is not a claim payment, but a financial advance of a potential claim that otherwise cannot be adjudicated until the end of the policy period. b. Financial Advances will be made only when the group: - has exceeded the actual year-to-date monthly attachment point and has exceeded the proportional year-to-date minimum attachment point, and - has exceeded the above by more than $1,000, and - has completed three months of the current policy period. Monthly Deductible Advance Reimbursement is not available in the last month of the contract or during a run-out period. c. Monthly Deductible Advance Reimbursement is not available in the last month of the contract or during a run-out period. 5. Tracking Monthly Aggregate Accommodations a. Once an advance has been made, HCC Life Insurance Company will keep exact records, by month, through the end of the Policy Period. b. At the end of the Policy Period when all reports are in, HCC Life Insurance Company will again review the reports carefully. c. If, at the end of the Policy Period; - There are no eligible losses in excess of the Annual Attachment Point, the Client must return any and all advances immediately. - There are eligible losses in excess of the Annual Attachment Point, however, these losses are less than previous Monthly Accommodations, and the Client must return any and all excess advances immediately. HCC Life Insurance Company 1/2011 IV. 4

23 - There are eligible losses in excess of the Annual Attachment Point that are greater than the sum of any Monthly Accommodations made, all unadvanced losses will be paid to the Client. d. HCC Life Insurance Company reserves the right to audit at any time, when the sum of the Monthly Accommodations exceeds $50,000. Failure to repay within 30 days of our request for payment will result in a 2% per month penalty until such amounts are repaid. E. DENTAL, PRESCRIPTION DRUG CARD, WEEKLY INCOME AND VISION BENEFITS These four benefits, in addition to the medical benefit, can be included in the Aggregate coverage with proper underwriting. With the exception of the Prescription Drug Card benefit, these additional benefits can only be underwritten and included if the benefits are not being offered for the first time. If the enrollment in these additional benefits is not the same as the medical coverage, then the aggregate funding factors will be calculated separately from the medical funding factors. HCC Life Insurance Company 1/2011 IV. 5

24 V. MEDICAL CONVERSION PRIVILEGE We offer a Medical Conversion product that allows eligible employees to convert their medical coverage and that of eligible dependents, if employment is terminated or if they become a member of an ineligible class of employees. An eligible dependent may convert if the employee dies or when a spouse is no longer an eligible dependent due to a legal divorce. A dependent child, upon reaching an ineligible age, may convert. The medical benefits will no longer be that of the employer s plan, but instead will be converted to the group benefit plan provided by the conversion carrier. Please call your underwriting or marketing representative if details are needed on the benefits available. See Article XI, section A for further information. A. CELTIC CONVERSION We offer Celtic Medical Conversion in all states. Please contact your underwriting or marketing representative for further information on this product. HCC Life Insurance Company 3//2005 V. 1

25 VI. REQUIREMENTS FOR A QUOTE PROPOSAL A. GENERAL UNDERWRITING PHILOSOPHY Our general underwriting philosophy is to provide a product that is both as flexible and competitive as possible. This is the first principle guiding our underwriters. Our flexibility is enhanced by the completeness of submissions and underscored by our willingness to consider most industries. HCC Life Insurance Company s underwriting competitiveness is skewed towards larger Specific Deductibles ($50,000 and above) and benefit plans that include effective Risk Management features (i.e. PPO and Utilization Review). NOTE: For self-insured and fully insured cases of any size, carrier history is important, since we value consistency in a potential client. Initially, we do not mind if you try us out in order to "test" our responsiveness and competitiveness. However, on an ongoing basis our preference would be to not provide quotes on your existing groups unless: 1. You are no longer doing business with a given carrier. In that case, we would like to know the reason (s) why; 2. The in-force carrier s renewal offer is unacceptable to you and/or your client 3. You are redistributing your excess reimbursement business to new carriers If you need to show your client that you have "tested the market", we would be glad to send you a letter reinforcing the competitiveness of the renewal in question. The reason for this policy is simple: "Test" quoting inhibits our ability to provide quality service by reducing the time our underwriters have available to provide you with innovative underwriting and sales ideas. It must be emphasized that our quotes are always contingent upon the receipt and the review of up-to-date claims and enrollment information and any other data specifically stated on the proposal. If we are asked to provide a quote for a prospective employer by two competing TPAs, we will provide each with an identical quote as long as the information is the same from both TPAs. HCC Life Insurance Company 1/2011 VI. 1

26 B. GENERAL UNDERWRITING DATA NEEDED IN ALL CASES 1. Industry type, with SIC code and a detailed description of the firm; 2. Census including date of birth, sex, dependent status, and employment status: active, disabled, retired or COBRA participation. If there are HMO participants, the same information is needed on them; 3. Copy of the plan document or booklet - HMO schedule of benefits as well (if appropriate); 4. Multi-location groups: number of employees at each location with zip code; 5. Large claim data (see item C); 6. Projections of future enrollment: What will be the percentage increase or decrease? HMO penetration projections? 7. If union employees are being covered, are the benefits the same? Is the contribution level the same? Do the union employees have the right to join an HMO while the salaried people do not or vice-versa? Are the union employees municipal workers? If so, are they eligible for Social Security? If not, do we have the retiree liability? How are union employees hired? Is it a closed or open union? 8. The employer's contribution level, if it is 100% for everyone, please indicate this. Note: Additional information is required for all employee leasing, PEOs (Professional Employment Organizations), hospital and association quote requests. Please contact your HCC Life Insurance Company underwriter for more details. C. DETAILED UNDERWRITING DATA NEEDED SMALL GROUPS: ( employee lives) * 1. Currently Fully Insured: a. Carrier history for the past three years; b. Premium rates currently in force and renewal rates; (This is very important if there is no claims experience available.) c. Plan changes for the past three years, please list and give effective dates; d. Average number of employee/single/dependent/family enrollment for the past three years; e. Claims activity (if available) for the past three years; f. Total health premium paid by year for the last three complete years. HCC Life Insurance Company 1/2011 VI. 2

27 2. Currently Self-Insured: HCC Life Insurance Company a. Carrier history for the past three years; b. Current excess reimbursement rates, deductible levels, factors and contract basis; c. Enrollment and paid claims by month for the past three years. If there are multiple benefits, please provide information broken down by benefit type. Experience should be the most recent available and must be no "older" than three months from the proposed effective date. * Availability varies by state. LARGE GROUPS: (101+ employee lives) 1. Currently Fully Insured: a. Carrier history for the past three years; b. Premium rates for the past three years; c. Total health premium paid by year for the past three years; d. Plan changes for the past three years; please list and give effective dates; e. Enrollment and paid claims by month, if possible, for the past three years and within three months of the proposed effective date; f. Highlight the "Extension of Benefits" provision in the plan document which details coverage provided after the master contract terminates for the totally disabled. 2. Currently Self-Insured: a. Excess Reimbursement carrier history for the past three years (including TPA history); b. Current TPA, excess reimbursement deductible, rates, factor(s) and excess reimbursement contract insuring basis and renewal information if available; c. Month by month claims and enrollment data for the most current three years. If there are multiple benefits, please provide this information broken down by benefit type. Our experience demonstrates that our quote turn around time can be cut substantially by complete quote request submissions. Please keep in mind if the above outlined information is not available in total, it does not mean that we will not provide a quote. We realize that you will not be able to get all the information we might like on every case. Please do your best to organize the submission and obtain as much data as possible. This will be most helpful in providing a competitive quote. HCC Life Insurance Company 1/2011 VI. 3

28 D. LARGE CLAIM DATA 1. Ongoing Claims: The following details must be provided for each claimant: i. Social Security number of claimant; ii. Age, sex and dependent status; iii. Total claims paid, pended, denied and processed to date; iv. Date of onset and date last claim received; v. Diagnosis; vi. Prognosis; vii. Current status of claimant; active, disabled, terminated, retired or COBRA participant Please refer to your HCC Life Insurance Company Notification and Specific/Aggregate Stop Loss & Life Claim Guide or contact the HCC Life Insurance Company Claims Department for detailed submission requirements. The above information must be provided for the following: 1. Any claim in excess of 50% of the lowest requested Individual Deductible for the last three years. 2. Any ongoing claim of a serious nature. The following is a guide for Major Catastrophic conditions. A more detailed list of the HCC LIFE INSURANCE COMPANY Trigger Diagnosis list can be found in section I, page VI.7. [at the end of Section VI. Head Traumas Neonatal High Risk Infants Amputations Serious Psychoneuritic Impairment Cancers Multiple or Serious Fractures Severe Burns Crushing or Massive Internal Injuries HIV/AIDS Hospitalizations of one month or more Spinal Cord Injuries Cerebral Vascular Accidents Premature Birth High Risk Pregnancies Chronic Medical Conditions (requiring long term treatment or rehabilitation) Major Organ Transplants (including stem cell or bone marrow) 2. No Longer Ongoing: a. Amount of claim and date(s) paid; HCC Life Insurance Company 1/2011 VI. 4

29 b. Current status of claimant; active, disabled, terminated, retired or COBRA participant. E. DISABLED PERSON(S) INFORMATION HCC Life Insurance Company requires detailed information on any disabled employee/dependent, COBRA participant or retiree. This information should include the date and nature of disability and the current medical/employment status (diagnosis, prognosis and expected date of return to work). F. WHAT WE NEED IF HMOs ARE INVOLVED HMO enrollment data is crucial to us. If the HMO enrollment exceeds 15% of the total number of eligible employees, the following additional data will be necessary before we can provide a quotation: 1. Employer contribution level for employees and dependent units; 2. Is the employer contributing equal dollar amounts to the HMOs? If not, please explain; 3. The indemnity plan's current and renewal rates and working rates if self-insured; 4. The HMO's current and renewal rates; 5. The type of HMOs involved: Staff or IPA; 6. A census identifying HMO and indemnity plan participants; 7. Enrollment history over the past three years: HMO vs. indemnity plan enrollment; 8. Summary of Benefit schedule offered by HMO plans; 9. HMO experience for three years if available. If the underwriter can determine that the existence of the HMO plan will not lead to adverse selection against the self-funded plan, and no selection problems will occur in the future, then we will provide a quotation. G. UTILIZATION REVIEW AND MANAGED CARE We offer meaningful discounts for Utilization Review programs that work with HCC Life Insurance Company in a cooperative effort. preferred utilization review program in place. We recognize that most TPAs have a In addition, HCC Life Insurance Company has a panel of consulting specialists available in the following areas: Oncology AIDS HCC Life Insurance Company 1/2011 VI. 5

30 Rehabilitation Medicine Neonatology Transplantation HCC Life Insurance Company HCC Life Insurance Company prefers to work only with plans that have mandated preadmission certification and concurrent stay review for all hospital confinements. The medical review must be performed by a UR vendor we have already assessed and approved based on their willingness to share information. HCC Life Insurance Company has a number of Preferred vendors, and has approved other vendors at the request of certain TPAs, provided the vendors perform satisfactorily with regard to prompt notification of potentially catastrophic claims based on the HCC Life Insurance Company s Trigger Diagnoses List. H. CATASTROPHIC CLAIM NOTIFICATION Once a catastrophic claim has been identified (see the Trigger Diagnosis List, following this page), the following steps should be taken: 1. Notify HCC Life Insurance Company by phone immediately. At this time, HCC Life Insurance Company should be advised of the patient's diagnosis, prognosis, current level of care, and plan of treatment. Also, please indicate the patient's physician with address, and phone number. 2. HCC Life Insurance Company s Preliminary Claim Unit (PCU) and/or Specialty Claim Unit (SCU) will talk to the plan administrator and the medical case management provider to assess the appropriate course of treatment and to review for possible cost savings. 3. Keep HCC Life Insurance Company informed of the patient's prognosis, level of care, and plan of treatment. Costs: If the claim plus the management fee exceed the specific deductible, HCC Life Insurance Company will reimburse the Plan Sponsor. If however, the claim plus the fee are below the specific, the Plan Sponsor will be responsible for the case management provider fee, unless other payment arrangements have been made or HCC Life Insurance Company has authorized case management be done at our expense. HCC Life Insurance Company 1/2011 VI. 6

31 TRIGGER DIAGNOSES LIST Suggested Categories and Guidelines for Identifying Potential Large Claims The specific diagnoses listed below are key indicators of potential catastrophic cases and should be referred to HCC LIFE. The following instances should also be explored for potential case management. Transplants Hyperalimentation (TPN) A length of stay request more than seven (7) days Home IV antibiotic therapy Trauma/Multiple Injuries High Risk Pregnancy (Multiple Births) Request for transfer to a rehabilitation facility Initiation of hemodialysis AIDS ICD-9 Codes Infectious Diseases ICD-9 Codes Human Immunodeficiency Virus 042 Meningitis Encephalopathy Subacute Bacterial Endocarditis 421 Pneumocystis Carinii Pneumonia Crohn's Disease Toxoplasmosis Osteomyelitis Bronchial or Pulmonary Candidiasis Tuberculosis Malignant Neoplasms -Any Site Cancers Blood Disorders Neurofibromatosis Aplastic Anemia Coagulation Defects Diabetes Mellitus Complications Immune Deficiencies Circulatory Disorders Amputations Amputations Arms and Hands Head and Spinal Trauma Legs and Feet Quadraplegia Paraplegia Burns Hemiplegia Over 20% of the Body Spinal Cord Injury Closed Head Injury Cardiovascular Disease Complications of trauma Cardiomyopathy Heart Failure Neuromuscular Intermediate Coronary Syndrome Amyotrophic Lateral Sclerosis Primary Pulmonary Hypertension (Lou Gehrig's disease) Myopathy Cerebral Vascular Disease with Neurological Deficits Guillain-Barre Anoxic Brain Damage Cerebral Palsy Multiple Fractures, Skull/Face Multiple Sclerosis 340 Intracerebral Hemorrhage Coma Renal Failure Acute Vascular Disease (Stroke/CVA) 436 Other High-Risk Neonatal Gaucher s Disease Intestinal Malabsorption Cirrhosis of the liver Spina bifida Emphysema Other congenital anomalies of nervous Morbid Obesity system (includes hydrocephalus) Alpha-1 Antitrypsin Deficiency Congenital anomalies of heart Post-inflammatory Pulmonary Short gestation, low birth weight <2,500g Fibrosis 515 Intrauterine hypoxia and birth asphyxia Hepatitis Respiratory Distress Syndrome 769 Pancreatitis Apnea/Bradycardia Lupus Broncho-Pulmonary Dysplasia (BPD) Aneurysm Cystic Fibrosis Biliary Atresia High Risk Obstetrical Multiple Gestations Premature Rupture of Membranes /2011 A SUBSIDIARY OF HCC INSURANCE HOLDINGS, INC. PAGE 1 OF 2

32 The specific procedures listed below are key indicators of potential catastrophic cases and should be referred to HCC LIFE INSURANCE COMPANY. Transplants should be referred to our Transplant Solutions team for cost containment assistance prior to transplantation. Procedures ICD-9 CODE CPT CODE Craniotomy Hyperbaric Oxygenation Plasmapheresis (Apheresis) Laryngectomy/Radical Neck Dissection Tracheostomy Implant Cardiac Assist Device Hemodialysis Pancreatectomy , Ventilator patient greater than 4 days Insertion shunt/fistula Gastric Bypass , 43843, 43846, TPN (Total Parenteral Nutrition) N/A Transplants V42 codes See Below Transplant Type CPT Bone Marrow Transplant Heart Heart-Lung Small Bowel Liver Lung (single) Lung (double) Pancreas 48160, Kidney /2011 A SUBSIDIARY OF HCC INSURANCE HOLDINGS, INC. PAGE 1 OF 2

33 VII. PREFERRED GROUP PROFILE Identifying good risk characteristics for excess reimbursement insurance is not an easy task, but we can paint a broad picture of the type of group that is likely to draw our interest. If a group exhibits most of the following characteristics and uses a HCC Life Insurance Company Preferred UR Vendor, it could qualify for a discount on the Specific rates. WHAT ARE THE CHARACTERISTICS OF A PREFERRED GROUP? They are listed below. Those features that are most important to the specific rates are identified with an asterisk. 1. Group Demographics: a. Average age range 28 to 35 b. 50% or more male c. 50% or more single * d. Demonstrated growth of 10% in each of the last three years (not through acquisition) e. Group size of 150 to 500 employee lives 2. Location characteristics: a. 80% or more in one location b. Less than 15% HMO market penetration in the group's domiciled state c. BC/BS has less than 45% of the market in that state d. Average daily hospital cost of less than $ Experience Characteristics: * a. First-year self-funded. b. If currently self-funded, the current administrator will remain the same. c. No more than one change in carrier/tpa in the last three (3) years. d. If self-funded, has three years of experience available month by month with corresponding enrollment figures. * e. Claims cost, based on actual experience, of less than $2,500 per employee (paid). * f. Few or no "shocks"...i.e., none in the last twelve (12) months exceeding 30% of the case deductible, or $10,000 whichever is higher. * g. No HMO participation. HCC Life Insurance Company 01/2011 VII. 1

34 4. Industry: * a. Growth industry (per Standard & Poor s, or other reputable investment standard) b. "Grey" or "White Collar" 5. Plan Design: * a. Comprehensive plan design b. Access to preferred provider pricing (i.e., PPO) * c. Non-contributory or minimum of 90% participation of all eligible employees and dependents * d. Utilization Review: Pre-Admission Certification and Case Management, in cooperation with HCC Life Insurance Company 6. Preferred Excess Reimbursement Contracts: * a. Claims basis: 12/12, 12/15, 15/12 b. Specific Deductible: $20,000 to $50,000 If you have a group, which exhibits most of these characteristics, please send it to your Underwriter for an evaluation. We can deliver very competitive pricing on the right risk. We're eager to have you put us to the test. HCC Life Insurance Company 01/2011 VII. 2