Life and Health Insurance. State Law Supplement. Maryland

Transcription

1 Life and Health Insurance State Law Supplement Maryland

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3 Life and Health Insurance State Law Supplement Important: Check for Updates States sometimes revise their exam content outlines unexpectedly or on short notice. To see whether there is an update for this product because of an exam change, go to and check the Insurance Licensing Blog. If there is an update, it will be clearly noted in the blog entries for this state. Maryland Effective April 30, 2013

4 At press time, this edition contains the most complete and accurate information currently available. Owing to the nature of license examinations, however, information may have been added recently to the actual test that does not appear in this edition. Please contact the publisher to verify that you have the most current edition. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Maryland Life and Health Insurance Law Supplement, Effective April 30, Kaplan, Inc. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher. If you find imperfections or incorrect information in this product, please visit and submit an errata report. Published in April 2013 by Kaplan Financial Education. Printed in the United States of America. ISBN: / PPN:

5 Maryland Law Supplement 1 INTRODUCTION This supplement focuses on statutes regarding Maryland insurance law. Key aspects of each statute are discussed to help the student pass the state law portion of the licensing examination. In order to understand the content of this supplement, the student should first study the national insurance License Exam Manual. Thorough preparation for the exam requires the complete study of both the national License Exam Manual and the supplement. I. Maryland Laws and Regulations Pertinent To Life, Accident, and Health Insurance Powers and duties of the commissioner [Secs , 104, 108, 201] The Maryland Insurance Commissioner has numerous powers and duties. According to Maryland state law, he shall administer and enforce all laws pertaining to the business of insurance. The Commissioner: revokes licenses of companies, producers, and adjusters for just cause; reports illegalities in the insurance business to the attorney general; has the power to revoke and suspend licenses, but the attorney general prosecutes when insurance laws are broken; regulates companies for solvency and regulates most insurance rates; collects fees and issues insurance licenses; delegates examining duties by appointing examiners or deputies; conducts hearings due to complaints; issues cease and desist orders for just cause; is appointed by the governor and consent of the Senate for a term of four years; and prepares and delivers an annual report to the governor and the general assembly. 1. The main function of the Insurance Commissioner is to protect the public regarding the business of insurance. The Commissioner shall be appointed by the governor with consent of the Senate for a term of four years and serve at the pleasure of the governor. The Commissioner, subject to the approval of the governor, shall appoint a Deputy Insurance Commissioner and during a vacancy in the office of the Commissioner, or in the absence or disability of the Commissioner for any reason, the Deputy Commissioner shall exercise all the powers and duties vested by law in the Commissioner. The Deputy Commissioner shall be covered by a surety bond in accordance with Maryland law. The Commissioner or any deputy, examiner, assistant, or employee of the Commissioner shall not be financially interested in any insurer, insurance agency, or insurance transaction except as a policyholder or claimant under a policy (conflict of interest). The Commissioner shall counsel and advise the governor on all matters assigned to the Administration. a.) Administration [Sec ] There is a Maryland Insurance Administration. This Administration is an independent unit of the state government. It is headed up by the Maryland Insurance Commissioner. The Commissioner shall control and supervise the Administration.

6 2 Maryland Law Supplement b.) Departmental divisions [Sec (a)] The Commissioner shall establish divisions or sections in the Administration, along the following lines of responsibility: Life insurance and health insurance Property insurance and casualty insurance Audit and examination Insurance professions Consumer affairs Insurance fraud c.) The Commissioner may: establish other areas of responsibility in the Administration; and reorganize or abolish areas of responsibility as necessary to fulfill effectively the duties of the Commissioner. 2. Examinations [Secs , 205, 207, 208] If the Commissioner finds it necessary to examine insurers, he may examine any accounts, records, documents, or transactions pertaining to these insurers. The Commissioner may also examine any producer, surplus lines broker, general agent, adjuster, public adjuster, or adviser. The expense incurred in any examination made pursuant to Maryland law must be paid for by the person or entity examined. The Commissioner must examine each domestic insurer and health mainte nance organization at least once every five years. 3. Orders or notices [Sec ] An order or notice of the Commissioner must be in writing and signed by the Commissioner or an individual authorized by the Commissioner. The order of the Commissioner shall state the effective date, its purpose, the grounds on which it is based, and the action or proposed action that will be taken. An order or notice may be served by a person or mailed to the person s last known address. 4. Hearings [Secs , 211, 214, 215] The Commissioner may hold a hearing if required by any provision of Maryland law or upon written demand by a person aggrieved by any act of the Commissioner. These hearings shall be held within 30 days after receipt of written demand by the Commissioner. Not less than 10 days in advance, the Commissioner shall give notice of the time and place of any hearing called. Within 30 days after termination of the hearing he shall make his order based on the hearing and provide a copy of such an order to the persons who were given the notice of hearing. Any person who is a party to such a hearing or whose pecuniary interests are directly or immediately affected by any such an order or refusal and who is aggrieved thereby may, within 30 days after the order has been delivered to the person, file an appeal with the Commissioner. 5. Penalties [Sec ] Each willful violation of any provisions of this article of Maryland law, with respect to the violation a greater penalty is not provided by other applicable laws of this state, may, in addition to any administrative penalty otherwise applicable thereto, and upon conviction in a court of competent jurisdiction of this state, be punishable by a fine of not more than $100,000.

7 Maryland Law Supplement 3 6. Rates [Sec ] The Commissioner is responsible for regulating insurance rates so they are not excessive, inadequate, or unfairly discriminatory, and the Commissioner also regu lates rate-making among insurers. 7. Regulatory jurisdiction The law of the state in which an insurance policy is delivered governs the contract. The policy may not contain a provision stating that the laws of the home state of the insurer govern the policy provisions. Definitions 1. Domestic insurance company This is a company incorporated, formed, or organized under the laws of Maryland and usually has its principal or home office located in this state. 2. Foreign insurance company This is a company incorporated or organized under the laws of another state but is licensed and permitted to conduct the business of insurance in the State of Maryland. a. For instance, Hanover Insurance Company of Worcester, Massachusetts is authorized to solicit insurance business in the State of Maryland. Therefore, in the State of Maryland, the Hanover Insurance Company is viewed as a foreign insurer. 3. Alien insurance company This is a company incorporated or organized outside the United States but licensed in the State of Maryland. a. For instance, Continental Reinsurance Company of London, England is incorporated in another country (England) but is licensed to conduct the business of insurance in this state. 4. Authorized insurance company An insurer that has received a certificate of authority from the State of Maryland and is licensed or authorized to conduct insurance business in this state is referred to as an authorized company. An authorized insurance company may also be referred to as an admitted company. 5. Unauthorized insurance company An insurer that has not received a certificate of authority from the State of Maryland and is not licensed or authorized to transact insurance business in this state may be referred to as an unauthorized company. An unauthorized insurance company may also be referred to as a nonadmitted company. 6. Transacting insurance [Sec ] The insurance business includes the transaction of all matters pertaining to a contract of insurance, both before and after the effectuation of such a contract, and all matters arising out of such a contract or any claim thereunder. Insurance business does not include the pooling together by public entities for the purpose of self-insuring casualty risks.

8 4 Maryland Law Supplement a. Transacting insurance involves making, negotiating, procuring, or proposing to make an insurance contract, taking an application, receiving or collecting premiums, issuing contracts, or any form of business considered insurance business. Other types of actions considered transacting insurance involve disseminating information as to coverages or rates, forwarding applications, delivering policies, inspecting risks, fixing rates, or investigating losses or claims. b. Premium tax [Sec ] In Maryland, the premium tax rate is 0% for annuity premiums and 2% for all other premiums. c. Insurance business does not include the pooling together by public entities for the purpose of self-insuring casualty risks. 7. Certificate of authority [Secs , 102] No person may act as an insurer, and no insurer may engage in the insurance business in this state except as authorized unless a certificate of authority is issued to it by the Commissioner. a. No insurer may have or maintain in Maryland any office, representative, or other facilities for the solicitation or servicing of any kind of insurance in any other state unless it is then authorized to engage in the same kind of insurance business in this state. b. A certificate of authority may not be required of an insurer with respect to the following: Transactions subsequent to issuance of a policy covering only subjects of insurance not resident, located, or expressly to be performed in Maryland at the time of issuance Transactions pursuant to surplus lines coverage lawfully written according to Maryland law Reinsurance transactions, except as to domestic reinsurers c. To engage in the insurance business in this state an insurer must be in compliance with Maryland law and with its charter powers and must be an incorporated stock insurer, an incorporated mutual insurer, or a reciprocal insurer. No Lloyd s underwriters may be organized in this state, and no foreign or alien Lloyd s underwriters may be authorized to engage in an insurance business in this state. d. Company name No insurer may be authorized to engage in an insurance business in Maryland that has or uses a name so similar to that of any insurer already so authorized as to tend to cause uncertainty or confusion or that tends to deceive or mislead as to the type of organization of the insurer. 8. Producer [Secs ; 1-101(u)(1)] This is a person who for compensation in any manner solicits, procures, or negotiates insurance contracts or the renewal or continuance of the insurance contracts. a. A producer does not include: individuals employed and used by producers or insurers for the performance of clerical or similar office duties;

9 Maryland Law Supplement 5 any regular salaried officer or employee of an insurer rendering assistance to or on behalf of a qualified producer, provided that the salaried officer or employee receives no commission or other compensation directly dependent on the amount of business obtained; or any person who secures and forwards information for the purpose of group insurance coverage or for enrolling individuals under group insurance coverages, when no commission is paid for these services. b. An independent producer is a producer who is not owned or controlled by any insurer or group of insurers. An independent producer s appointment does not prohibit the representation of more than one insurer or group of insurers. An independent producer s records shall remain the property of that producer, and he also retains the use and control of all expirations incurred while running the agency. In other words, the business solicited by an independent producer belongs to him. c. License [Secs (c)(1)] Before acting as an insurance producer, a person must obtain a license in the kind of insurance for which the person intends to act as a producer. In addition, a producer may not sell, solicit, or negotiate insurance on behalf of an insurer unless producer has an appointment from the insurer. However, a producer who does not have an appointment may: submit an informal inquiry to an insurer for any kind of insurance for which the insurance producer has a license; and solicit an application for any kind of insurance for which the producer has a license. d. License requirements [Sec ] To obtain a license to act as an insurance producer, a person must: file the appropriate application form with the Commissioner affirming that the individual is of good character and trustworthy; be at least 18 years old; meet the education, experience, and other qualification provisions of Maryland law; not have committed any act that would warrant denial of a license by the Commissioner; pass a written exam; and pay the appropriate and specified fee. e. Applicant qualifications [Sec ] Individual applicants for producer licenses are required to comply with several requirements including the following. 1.) Education and experience requirement [Sec ] The applicant must: be at least 18 years old; successfully complete a program of study approved by the Commissioner;

10 6 Maryland Law Supplement have been regularly employed as an employee of the insurance division or by an insurer or a producer for a period not less than one year (during the three years prior to the date of application) in responsible insurance duties in connection with the type of insurance for which the applicant desires to be qualified; or have been regularly employed by an insurer or a producer for a period not less than one year during the three years next preceding the date of entrance into the services of the armed forces of the United States. 2.) Written examination [Sec ] The Commissioner requires license applicants to satisfactorily pass a written examination. The examination will be given by the Commissioner and must be graded within 30 days after the date of the examination. Any person who has taken and failed to pass an examination is not entitled to take any further examination until 14 days after the date of the last examination that person failed. 3.) Examination exceptions [Sec ] The Commissioner may waive examination and experience require ments for those who have the following advance designations (in the case of a life license): CLU TM (Chartered Life Underwriter TM ), FSA (Fellow of the Society of Actuaries), CEBS (Certified Employee Benefit Specialist), ChFC (Chartered Financial Consultant), CIC (Certified Insurance Counselor), CFP (CERTIFIED FINANCIAL PLANNER TM ), FLMI (Fellow, Life Management Institute), LUTCF (Life Underwriter Training Council Fellow); and (in the case of a health license) RHU (Registered Health Underwriter), CEBS (Certified Employee Benefit Specialist), REBC (Registered Employee Benefit Consultant), HIA (Health Insurance Associate). a.) Licensing exemptions [Sec ] The licensing requirements of this section do not apply to: an insurer; an officer, director, or employee of an insurer or of an insurance producer who does not receive any commission on policies written or sold to insure risks residing, located or to be performed in the state if: the activities of the officer, director, or employee are executive, administrative, managerial, clerical, or a combination of these, and are only indirectly related to the sale, solicitation, or negotiation of insurance, the function of the officer, director, or employee relates to underwriting, loss control, inspection, or the processing, adjusting, investigating, or settling of a claim on a contract of insurance, or the officer, director, or employee is acting in the capacity of a special agent or agency supervisor assisting insurance producers where the individual s activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation, or negotiation of insurance; and

11 Maryland Law Supplement 7 an individual who performs administrative services related to mass marketed property and casualty insurance, provided that no commission is paid to the individual for the services; an employer, association, the officers, directors, and employees of an employer or association, or the trustees of an employee trust plan if: the employer, association, officers, directors, and employees, or trustees are engaged in the administration or operation of a program of employee benefits for the employer s or association s own employees or the employees of its subsidiaries or affiliates, the program involves the use of insurance issued by an insurer, and the employer, association, officers, directors, and employees, or trustees are not in any manner compensated, directly or indirectly, by the insurer issuing the contracts; and an employee of an insurer or organization employed by an insurer who is: engaged in the inspection, rating, or classification of risks or in the supervision of the training of insurance producers, and not individually engaged in the sale, solicitation, or negotiation of insurance; and a person whose activities in the state are limited to advertising without the intent to solicit insurance in the state through communications in printed publications or other forms of electronic mass media if: the distribution of the printed publications or other forms of electronic mass media is not limited to residents of the state, and the person does not sell, solicit, or negotiate insurance that would insure risks residing, located, or to be performed in the state; and a person who is not a resident of the state who sells, solicits, or negotiates a contract of insurance for commercial property and casualty risks to an insured with risks located in more than one state insured under the contract if: the person is otherwise licensed as an insurance producer to sell, solicit, or negotiate that insurance in the state where the insured maintains its principal place of business, and the contract insures risks located in that state, or a salaried, full-time employee who counsels or advises the employee s employer relative to the insurance interests of the employer or of the subsidiaries or business affiliates of the employer, provided that the employee does not sell or solicit insurance or receive a commission.

12 8 Maryland Law Supplement 4.) Fees [Sec ] a.) Fees for certificates of qualification Application fee... $25 b.) Managing general agent certificate of qualification Fee for initial certificate... $30 Annual renewal fee... $30 c.) Surplus lines broker certificate of qualification Fee for initial certificate within one year of renewal... $100 Fee for initial certificate more than year from renewal... $100 Biennial renewal fee... $200 d.) Fee for temporary insurance producer licenses and appointments... $27 e.) Public adjuster license Fee for initial license within one year of renewal... $25 Fee for initial license more than one year from renewal... $50 Biennial renewal fee... $50 f.) Adviser license Fee for initial license within 1 year of renewal... $100 Fee for initial license over 1 year from renewal... $200 Biennial renewal fee... $200 g.) Insurance producer license Fee for initial license... $54 Biennial renewal fee... $54 Application fee... $25 h.) Fee for each insurance vending machine license, for each machine every second year... $50 f. A producer may conduct insurance business affairs as a partnership or a corporation provided that every individual who solicits, negotiates, or accepts insurance business from the public possess a license. 1.) Qualifications of business entity [Sec ] To qualify for a license as an insurance producer, a business entity must designate a licensed insurance producer to act as the business entity s principal contact with the Administration. The designated insurance producer shall: provide to the Administration at the time of designation the insurance producer s name, business address, business telephone number, business facsimile number, and business electronic mail address;

13 Maryland Law Supplement 9 notify the Insurance Administration in writing of any change in the information within 10 days after the change; compile and maintain, to the extent reasonably possible, a list of locations where records of the business entity are maintained; and on request, cooperate with any investigation conducted by the Administration unless the cooperation is subject to a legal privilege asserted by the designated insurance producer or the business entity. g. Name or address change [Sec ] Every producer is required to file with the Commissioner, the agency or trade names to be used, its business address, and the name and residence addresses of each individual possessing a license who does business under the agency or trade name. The Insurance Department must be notified of a change of address within 30 days. h. Appointment [Sec , 118(b)(2)] Every insurer must maintain a producer register of appointed insurance producers who are authorized to sell, solicit, or negotiate insurance on its behalf. Within 30 days of appointing a producer, the insurer must record information about the appointment in the insurer s producer register and send documentation of the appointment to the producer. 1.) A licensed insurance producer who has been appointed by an insurer must maintain documentation of the insurer s appointment and a list of the insurers that have appointed the producer. This documentation is subject to inspection and examination by the Commissioner. 2.) An insurer may initially accept an insurance application from a insurance producer who is not appointed by the insurer and is not on the insurer s producer register if, within 30 days of accepting the application, the insurer rejects the application or appoints the producer and enters the required information in the insurer s producer register. 3.) Termination of appointment [Sec (e), (g)] All insurers doing business in this state must, within 30 days after the effective date of the termination of a producer, update the insurer s producer register by entering the effective date of the termination. The insurer must provide notice to the Commissioner of the termination and must mail a copy of the notice to the insurance producer within 15 days after notifying the Commissioner. Any disclosure to the Commissioner is considered a privileged communication and may not be used in any court action or proceeding other than an appeal from action of the Commissioner. i. Nonresident insurance producers [Sec ] Waiver of require ments for nonresidents The Commissioner shall waive any license application requirements for an applicant who is not a resident of this state if: the applicant has a valid license from the home state of the applicant; and the home state of the applicant awards nonresident licenses to residents of this state on the same basis.

14 10 Maryland Law Supplement 1.) Authority for nonresidents to obtain licenses Unless denied a license, a person who is not a resident of this state may obtain a nonresident license to act as an insurance producer if: the person currently is licensed as a resident insurance producer and in good standing in the person s home state; the person has submitted or transmitted to the Commissioner the applica tion for licensure that the person submitted to the person s home state or a completed uniform application; the person has paid the applicable fee; and the person s home state awards nonresident insurance producer licenses to residents of this state on the same basis. 2.) An individual who applies for an insurance producer license in this state who was previously licensed for the same lines of authority in another state need not comply with the education, experience, and examination requirements if: the person currently is licensed as an insurance producer in the home state of the person; the application is received by the Commissioner within 90 days after the cancellation of the applicant s previous license and the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state; or the state s producer database records, maintained by the National Association of Insurance Commissioners, its affiliates, or its subsidiaries indicate that the producer is or was licensed in good standing for the line of authority requested. j. License renewal [Sec ] Producer licenses are renewed every two years on the last day of the producer s birth month. If a license expires, the appointments held by the producer must be terminated as of the date of expiration. At least one month before a license expires, the Commissioner will mail the holder of the license a renewal application form, a notice that states the date by which the Commissioner must receive the renewal application, and the amount of the renewal fee. Before a license expires, the holder of the license may renew it for an additional two-year term if the holder files a renewal application, completes the required continuing education, and pays the required renewal fee. If accepted, the Commissioner will issue a renewal license. The Commissioner may also refuse to renew the license and must give notice to the holder within five days. 1.) Reinstatement [Sec ] For up to one year after the expiration date, a person whose license has expired may reinstate the expired license by: filing the appropriate reinstatement application with the Commissioner;

15 Maryland Law Supplement 11 paying the Commissioner the applicable renewal fee and a reinstatement fee of $100; and submitting proof of completion of the continuing education requirements. a.) A person whose license has expired is prohibited from conducting any insurance business until the effective date of the reinstatement. b.) If a person applies for reinstatement within 60 days after the license expired, the Commissioner will reinstate the license retroactively, with the reinstatement effective on the date the person s license expired. If a person applies for reinstatement more than 60 days after the license expired, the Commissioner will reinstate the person s license prospectively, with the reinstatement effective on the date the license is reinstated. c.) A person who does not request reinstatement within one year after the expiration date must apply for a license and meet the requirements specified by the Commissioner. d.) The Commissioner may waive the reinstatement procedures for a producer who is unable to comply with the renewal and reinstatement requirements due to military service or other extenuating circumstances, including a long-term medical disability. k. Continuing education [Sec ] 1.) Producers must comply with the state s continuing education requirement as a condition of renewing their licenses. The Commissioner may review all continuing education courses submitted and approve or disapprove courses. 2.) Producers who are licensed in a major line of authority (i.e., propertycasualty, life, health) must complete 24 hours of continuing education per renewal period. 3.) Producers who have a title insurance license must complete 16 hours of continuing education per renewal period. 4.) Producers who have been licensed for 25 or more consecutive years as of October 1, 2008, only need to complete eight hours of continuing education per renewal period. 5.) At least three of the required continuing education hours must be in courses related to ethics. 6.) Producers must complete continuing education courses in the line of authority for which the producer is licensed.

16 12 Maryland Law Supplement 7.) Health insurance producers who sell long-term care insurance must complete two hours of continuing education related to long-term care insurance. 8.) Each insurance producer who possesses a license to sell health insurance and who markets the senior prescription drug assistance program or assists a Medicare beneficiary to enroll in the senior prescription drug assistance program shall receive continuing education that directly relates to the senior prescription drug assistance program. 9.) Property-casualty producers who sell flood insurance must complete two hours of continuing education related to flood insurance. 10.) The Commissioner may not require an insurance producer to receive more than 16 hours of continuing education in a renewal period if the insurance producer is also a licensed funeral director or licensed mortician who: sells only life insurance policies or annuity contracts that fund a pre-need contract; and is not a viatical settlement broker. 11.) The Commissioner may waive the continuing education requirement for a producer for just cause. 12.) The following are exempt from the CE requirement: HMO employees who solicit membership in the HMO under a contract between the HMO and the Department of Health and Mental Hygiene Maryland attorneys who have a title insurance license Individuals who hold limited lines credit licenses or other limited lines licenses designated by the Commissioner as exempt Nonresident licensees whose state of residence has a continuing education reciprocity agreement with Maryland l. A person not resident and not having a place of business in this state (nonresident licensee) may receive a license to act as a producer upon compliance with the provisions of Maryland law, provided that the state in which the person resides will allow the same privilege to a resident of this state (reciprocity). m. Denial, suspension, and revocation of licenses [Sec ] An original application for a license may be refused until the Commissioner is satisfied that the applicant is not guilty of violating any provisions of Maryland law. A license duly issued may be suspended or revoked or may have the renewal refused by the Commissioner if he finds, after notice and hearing, that the applicant for, or holder of the license (producer) has: willfully violated any provision of Maryland law; intentionally misrepresented or concealed any material fact in the application for the license;

17 Maryland Law Supplement 13 obtained his license by misrepresentation, concealment, or fraud; misappropriated or withheld monies belonging to an insurer, producer, beneficiary, or insured; willfully and materially misrepresented the provisions of an insurance policy; committed fraudulent or dishonest practices in the business of insurance; been convicted of a crime involving moral turpitude; knowingly participated in the writing or issuance of substantial overinsurance of any property insurance risks; failed to pass an examination required under Maryland law; willfully failed to comply with any order, rule, or regulation issued by the Commissioner; failed or refused to pay over any money in his hands belonging to an insurer, producer, or any other person entitled to receive the same; shown a lack of trustworthiness or lack of competence to act as a producer; not intended to carry on business in good faith and hold himself out to the public as a producer; been refused a license or had his license suspended or revoked in another state; intentionally or willfully made any statement materially misrepresenting or making incomplete comparisons regarding the terms or conditions of any policy contract issued by any authorized insurer for the purpose of inducing or attempting to induce the owner of a policy to lapse, surrender, or forfeit the policy (twisting); solicited or negotiated insurance contracts for an unauthorized insurer; knowingly employed or continued to employ an individual acting in a fiduciary capacity who has been convicted of a felony or crime of moral turpitude within the preceding 10 years; forged another s name to an application for insurance or to any document related to an insurance transaction; improperly used notes or any other reference material to complete an examination for a license; failed to pay income tax or related interest or penalty under an assessment that is final or an order of the tax court that is final and not subject to judicial review; made an inaccurate statement with actual malice when providing information regarding the termination of a producer s appointment with an insurer; or transacted insurance business that was directed to him by a person whose license to engage in the insurance business was suspended or revoked. 1.) Criminal acts [Sec ] If an insurance producer is prosecuted for a crime in any jurisdiction, the producer shall report the prosecution to the Commissioner within 30 days after the producer s initial appearance before a court. The report shall include a copy of the charging document, any order issued by a court, and any other relevant legal documents.

18 14 Maryland Law Supplement n. Penalties [Sec , 301] The Commissioner may impose a penalty of not less than $100 nor more than $500 from the producer whose license is subject to suspension or revocation under Maryland law, and the Commissioner may require the individual to pass an examination and file a new application before the suspension is lifted. The Commissioner may require that restitution be made to any citizen who has suffered financial injury or damage as a result of the violation of any provisions of Maryland law. In addition to any administrative penalty otherwise applicable, a person who willfully violates any provision, with respect to which a greater penalty is not provided by other applicable state law, is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $100,000. o. Name or address change [Sec ] Every producer is required to notify the Commissioner of a change in legal name or address within 30 days of the change. p. Temporary licenses [Sec ] 1.) Without regard to the education, experience, or examination requirements, the Commissioner may issue a temporary license to act as an insurance producer to an individual if the individual: is otherwise qualified; and is the surviving spouse, next of kin, personal representative, or appointee of the personal representative of a deceased insurance producer, the spouse, next of kin, employee, or legal guardian of a mentally or physically disabled insurance producer, or an employee of a firm, or an officer or employee of a corporation, of a deceased or disabled insurance producer. 2.) Qualifications of temporary insurance producers Before a person acts as a temporary insurance producer in the state, the person must obtain: a temporary license in the kind of insurance for which the person intends to act as an insurance producer; and if applicable, an appointment from an insurer. 3.) Applications for temporary license An applicant for a temporary license shall: file with the Commissioner an application on the form that the Commissioner provides; and pay to the Commissioner the applicable fee. 4.) Issuance or refusal of temporary license Within 30 days after the date an application is received, the Commissioner shall: issue a temporary license to the applicant; or refuse in writing to issue a temporary license, stating the reasons for the refusal.

19 Maryland Law Supplement 15 5.) Term of temporary license A temporary license expires 15 months after its effective date. q. Commingling of funds [COMAR ] 1.) Every insurance producer acting as such in this state who does not have the express written consent of the insurance producer s principals to mingle premium monies with the insurance producer s personal funds shall hold the premium monies separate from other funds in accordance with this regulation. 2.) Insurance producers who do not make prompt remittance to principals and assureds of the funds shall deposit them in one or more appropriately identified accounts in a bank or banks authorized to do business in this state or subject to jurisdiction of this state, from which withdrawals may not be made except as hereinafter specified (any such account is hereinafter referred to as a premium account). 3.) An insurance producer who makes remittances to principals or assureds of the funds not later than the close of the fifth business day following receipt of the funds shall be deemed to have made prompt remittance and need not maintain a premium account for the funds. The term business day does not include Saturdays, Sundays, or legal holidays. 4.) Deposits in a premium account in excess of aggregate net premiums, return premiums, and deposits received but not remitted may be made to maintain a minimum balance, to guarantee the adequacy of the account, or to pay premiums due but uncollected (any such deposit is hereinafter referred to as a voluntary deposit). r. Identity of insurer [COMAR ] The identity of the insurer shall be made clear in all of its advertisements. An advertisement may not use a trade name, service mark, slogan, symbol, or other device that has the tendency to mislead or deceive as to the true identity of the insurer. s. Special enforcement procedures [COMAR (a)] advertising file Each insurer shall maintain at its home or principal office a complete file containing every printed, published, or prepared advertisement of individual policies and typical printed, published, or prepared advertisements of blanket, franchise, and group policies hereafter disseminated in this or any other state whether or not licensed in the other state, with a notation attached to each advertisement that shall indicate the manner and extent of distribution and the form number of any policy advertised. The file shall be subject to regular and periodical inspection by this division. These advertisements shall be maintained in this file for a period of not less than three years. t. Advertisements of benefits payable, losses covered, or premiums payable [COMAR ] 1.) Deceptive words, phrases, or illustrations Words, phrases, or illustrations may not be used in a manner that misleads or has the ten-

20 16 Maryland Law Supplement dency to deceive as to the extent of any policy benefit payable, loss covered, or premium payable. An advertisement relating to any policy benefit payable, loss covered, or premium payable shall be sufficiently complete and clear as to avoid deception or the tendency to deceive. 2.) Exceptions, reductions, and limitations When an advertisement refers to any dollar amount, period of time for which any benefit is payable, cost of policy, or specific policy benefit or the loss for which the benefit is payable, it shall disclose those exceptions, reductions, and limitations affecting the basic provisions of the policy without which the advertisement would have the tendency to mislead or deceive. 9. Public adjusters [Sec ] A public adjuster is anyone who receives compensation for investigating, evaluating, or giving advice on the adjustment of firstparty insurance claims under insurance contracts that insure real or personal property (other than motor vehicle insurance policies) or who solicits that kind of business. 10. Adviser [Secs , 204, 206, 211] No person may act as an insurance adviser, as defined under Maryland law, unless so authorized by virtue of a license issued or renewed pursuant to the provisions of Maryland law. a. The term insurance adviser means any person who, for money, a fee, commission, or any other thing of value offers to examine any policy of insurance for the purpose of giving any advice, counsel, recommendation, or information with respect to coverages and benefits provided by the contract. 1.) Any person who gives advice for a fee and uses the title of insurance adviser, insurance specialist, insurance counselor, insurance analyst, policyholders adviser, policyholders counselor, refund company, or any other similar title indicating that he is engaged in the business of giving advice or counsel shall be deemed an insurance adviser. b. A license as an insurance adviser will not authorize adjusting of losses nor receipt of compensation from insurers or producers for the sale or placement of insurance. c. Maryland law regarding advisers will not apply to: any officer, employee, producer or other representative of any authorized insurer while acting for an insurer; any producer possessing a license who acts on behalf of his client; to any attorney-at-law in this state acting within the course or scope of his profession; nor any licensed public adjuster acting within the scope of his license. d. The Commissioner of Insurance may issue an insurance adviser s license to: any person who is a resident of Maryland or who is a nonresident licensed as an insurance adviser in the state of the person s residence;

21 Maryland Law Supplement 17 a person who is a member of the Society of Actuaries, the Casualty Actuarial Society, or the Conference of Actuaries in Public Practice; a person who has been conferred the Chartered Property Casualty Underwriter (CPCU ) designation; a person who has been conferred the Chartered Life Underwriter (CLU ) designation; a person who has been conferred the Certified Employee Benefits Specialist(CEBS) designation; or any person who has successfully completed a course of study equivalent to any course of study required for membership in good standing in any of the aforementioned societies or organizations as approved by the Commissioner. e. The Commissioner may issue a limited insurance advisers license restricting the authority of the licensee to an extent agreed upon with said licensee. These limitations will be set forth in the license. In all other respects, the granting of limited insurance advisers licenses shall be governed by the provisions previously mentioned regarding insurance advisers. f. No license to act as an insurance adviser may be issued to anyone other than an individual. Licensees may conduct their insurance advisory business as a sole proprietorship, partnership, association, or corporation, provided that every individual who acts as an insurance adviser shall be licensed in accordance with the provisions of Maryland law, provided the trade name is registered with the Insurance Commissioner. g. Every insurance advisers certificate of qualification (license) issued pursuant to Maryland law expires at the end of every other June 30 unless it is renewed for a two-year term. h. No license or renewal license may be issued to any applicant unless there be on file with the Commissioner a bond in the penal sum of $1,000. These bonds may be made to the State of Maryland and shall specifically authorize recovery by the state of the penal sum provided in case the insurance adviser shall have been guilty of fraudulent or dishonest practices in connection with transactions of his or its business as an insurance adviser. i. The Commissioner may at any time require information that he deems necessary with respect to the business methods, policies, contracts, and transactions of a person, firm, association, or corporation licensed as an adviser. This information shall be furnished within 10 days after receiving written request and on forms as required by the Commissioner. j. No contract or agreement between an insurance adviser and any other person shall be enforceable by or on behalf of an insurance adviser unless it is in writing and executed personally in duplicate by the person to be charged or by his legal representative.

22 18 Maryland Law Supplement k. No person whose license has been revoked shall be entitled to any license or renewal license for a period of one year after the revocation, or if the revocation be judicially reviewed, for one year after the final determination of the judicial proceeding confirming the action of the Commissioner in revoking the license. l. If an application for a license under Maryland law is refused, or if any license is suspended or revoked by the Commissioner, notice shall be supplied to the applicant or to the licensee by registered or certified mail addressed to his last known address on record with the Commissioner. 11. Surplus lines broker and unauthorized insurers [Secs ; ] The purpose of a surplus lines law is to promote public welfare and to protect the public interest by regulating, taxing, supervising, and controlling unlicensed (unauthorized) insurers in Maryland. This type of law was also created to regulate the persons through whom the insurance (surplus lines brokers) is placed and to protect licensed insurers from unfair competition. a. Surplus lines insurance involves the full amount of a policy of insurance required to protect the interest of an insured who cannot obtain coverage in the normal market from insurers authorized to do business in this state. Once an insured attempts to secure coverage from three or more insurers who are authorized in this state and is unable to do so, coverage may be secured from a surplus lines insurer (through a surplus lines broker). b. Surplus lines coverage may be procured from unauthorized insurers subject to the following conditions: if procured through a broker, the insurance must be procured through a licensed surplus lines broker licensed in the State of Maryland, and the insurance must be eligible as surplus lines insurance in accordance with the provisions of Maryland law. 12. Types of companies [Sec ] a. Stock company This is a company owned by the holders of the company s capital stock whose main motivation is achieving profits. Policyholders of a stock company are not entitled to dividends nor liable for any assessments that may be necessary. b. Mutual company This is a company owned by its policyholders with the policyholders sharing in the company s profits in the form of dividends. Some mutual companies issue assessable policies while others issue nonassessable policies. c. Reciprocal Reciprocal insurance is that resulting from an interexchange among persons, known as subscribers, of reciprocal agreements of indemnity, the interinsurance being effectuated through an attorney-in-fact common to all such persons. 1.) A reciprocal insurer means an unincorporated aggregation of subscribers operating individually and collectively through an attorney-in-fact to provide reciprocal insurance among themselves.

23 Maryland Law Supplement 19 2.) A reciprocal insurer may, upon qualification according to the provisions of Maryland law, engage in any kind or kinds of insurance business except life and health insurance other than as supplementary coverage in a policy of liability insurance. Such an insurer may purchase reinsurance and may grant reinsurance as to any of insurance business in which it is authorized to engage. 13. Commissions [Sec ] A commission, fee, reward, rebate, or other consideration for selling, soliciting, or negotiating insurance may not be paid, directly or indirectly, to a person other than a licensed insurance producer. a. For life insurance or health insurance, this does not prohibit payment to or receipt by a person who formerly held a license and, if the person acted on behalf of an insurer, an appointment of: commissions on renewal premiums on existing policies; or other deferred commissions. b. Penalty A person who violates this act is guilty of a misdemeanor and one conviction is subject to a fine not exceeding $500 or imprisonment not exceeding six months or both for each violation. 14. Record retention [Comm. Law Sec ] If a law requires that a record be retained, the requirement is satisfied by retaining an electronic record of the information in the record which: accurately reflects the information set forth in the record at the time it was first generated in its final form as an electronic record or otherwise; and remains accessible for later reference. 15. Trust accounts [Bus. Reg. Sec ] A trust account means a preneed trust account. a. A preneed burial contract shall contain: the name of the buyer; the name of the seller; the name of each individual, other than the buyer, as to whom the preneed goods or preneed services are to be furnished; a description of the preneed goods or preneed services; and the amount of the buyer s financial obligation. b. A cemetery that makes a preneed burial contract may impose interest or a finance charge on preneed goods delivered before death or preneed services performed before death. If a cemetery imposes an interest or finance charge, the interest or finance charge shall be at a fixed rate. c. Trust account management Each trust account shall be: titled preneed trust account ; and established by the seller in the seller s name.

24 20 Maryland Law Supplement d. Each seller shall keep detailed records of all preneed burial contracts and specific funds. e. A preneed burial contract may be funded by a life insurance policy or an annuity contract if: the owner or operator of the cemetery is not the owner of or beneficiary under the life insurance policy or annuity contract; an assignment of benefits to the owner or operator of the cemetery may be revoked at any time by the owner of the life insurance policy or annuity contract; the owner or operator of the cemetery agrees to accept the benefits payable under the life insurance policy or annuity contract as payment in full for the services and merchandise agreed on in the preneed burial contract; and any benefits payable under the life insurance policy or annuity contract in excess of the amount necessary to pay the total price, as determined at the time of death of the insured, of the services and merchandise agreed on in the preneed burial contract are paid to the beneficiary under the life insurance policy or annuity contract. f. A preneed burial contract that is funded by a life insurance policy or an annuity contract shall terminate if the assignment of benefits to the owner or operator of a cemetery is revoked by the owner of the life insurance policy or annuity contract. Marketing Practices [Secs ] 1. Unfair trade practice law The purpose of state regulation regarding marketing or trade practices is to protect the public by defining or determining unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices of those so defined and determined. a. Larceny An insurance producer who knowingly procures by fraudulent representations, payment, or the obligation for the payment of any premium on any policy may be deemed to have engaged in larcenous activity. An insurance producer who acts in negotiating or renewing or continuing a policy of insurance in this state and who receives any money from an insured may be deemed to hold the premium in trust for the company. If he fails to pay these funds to the company after written demand made upon him, less commissions and any other deductions, this failure may be evidence that he has used or applied such a premium for a purpose other than paying funds for the company and will therefore be guilty of larceny. b. Fraud Any fraudulent act on the part of persons engaged in the insurance business is also illegal. Any actions on the part of a producer or any licensee in this state will subject them to a penalty as provided by the Commissioner of Insurance.

25 Maryland Law Supplement 21 c. False advertising [Sec ] A person may not make, publish, disseminate, circulate, place before the public, or cause directly or indirectly to be made, published, disseminated, circulated, or placed before the public in a newspaper, magazine, or other publication, in the form of a notice, circular, pamphlet, letter, or poster, over a radio or television station, or in any other way, an advertisement, announcement, or statement that contains an assertion, representation, or statement about the business of insurance or about a person in the conduct of the person s insurance business that is untrue, deceptive, or misleading. d. Defamation [Sec ] Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting, or encouraging any oral or written statement or any pamphlet, circular, article, or literature that is false or maliciously critical of or derogatory to the financial condition of any person, and that is calculated to injure any person engaged in the business of insurance is known as defamation and is also an illegal practice. e. False financial statements [Sec ] A person may not knowingly file with a supervisory or other public official, make, publish, disseminate, circulate, deliver to another person, place before the public, or cause directly or indirectly to be made, published, disseminated, circulated, delivered to another person, or placed before the public a false statement of the financial condition of an insurer. 1.) A person may not: make a false entry in a book, report, or statement of an insurer with intent to deceive an agent or examiner lawfully appointed to examine the condition or affairs of the insurer or a public official to whom the insurer is required by law to report or who has authority by law to examine the condition or affairs of the insurer; or with intent to deceive, willfully omit to make a true entry of a material fact about the business of the insurer in a book, report, or statement of the insurer. f. Rebating [Sec ] No company, officer, or producer may pay or allow, or offer to pay or allow, in connection with placing or negotiating any policy of insurance, any valuable consideration or inducement not specified in the policy or contract. Insurance personnel may not give, sell, or purchase, or offer to give, sell, or purchase anything of value whatsoever not specified in the contract, except for educational materials, promotional materials, or articles of merchandise that cost no more than $25, regardless of whether a policy is purchased. Any individual offering or accepting a rebate will be deemed guilty of rebating. The individual offering a rebate is known as the offeror. The individual accepting a rebate is known as the offeree. 1.) The most common form of rebating involves a producer offering to share commissions with a prospective insured in return for that insured purchasing a policy, or an insurer or producer offering securities, stocks, or bonds in return for the purchase of policies.

26 22 Maryland Law Supplement g. Misrepresentation [Secs , 213] No company, officer, or producer must make, issue, circulate, or use any written or oral statement misrepresenting the terms of any policy or contract of insurance. These parties may not misrepresent the terms of a contract to induce a person to lapse, forfeit, or surrender the policy issued to him or to alter or convert it for any other policy or contract. This type of misrepresentation is also known as twisting. 1.) Twisting is the most common form of misrepresentation. However, it is generally associated with the life insurance industry. h. Boycott, coercion, or intimidation [Sec ] A person may not enter into an agreement to commit, or by concerted action commit, an act of boycott, coercion, or intimidation that results in or tends to result in unreasonable restraint of or monopoly in the business of insurance. i. Illegal dealings in premiums No producer may assess an insured or any member of the public any additional fees or charges for services rendered, unless these charges are stipulated in the contract. This action on the part of a producer will be deemed to be an unfair trade practice or act under Maryland law. Violation of Maryland law regarding this area may result in a fine, prison sentence, or both. Increasing the charge or fee for an insurance policy for any amount and payment for the added amount or increase to anyone may be considered an illegal dealing in premium or inducement. j. Prohibited inducements [Sec ] A person may not issue, deliver, or allow an agent, officer, or employee of the person to issue or deliver agency company stock or other capital stock, benefit certificates or shares in a corporation, or an advisory board contract or other similar contract that promises returns and profits as an inducement to insurance. k. Discrimination [Sec (a)(1)] No insurer or producer may cancel or refuse to underwrite or renew a particular insurance risk or class of risk for any reason based on whole or in part on race, color, creed, sex, or blindness of an applicant or policyholder or for any arbitrary or unfairly discriminatory reason. 1.) No insurer or producer may cancel or refuse to underwrite or renew a particular insurance risk or class of risk except by the application of standards that are reasonably related to the insurers economic and business purposes. 2.) With respect to auto liability insurance, an insurer may not cancel, refuse to renew, or otherwise terminate coverage for any automobile risk because of the existence of a traffic violation or accident more than three years old on the date the policy or renewal is effective, or refuse to underwrite any auto insurance risk because of a traffic violation or accident more than five years old on the date of application. 3.) Discrimination against victims of domestic violence [Sec ] If an individual is a victim of domestic violence or subject to abuse, an insurer, nonprofit health service plan, or health

27 Maryland Law Supplement 23 maintenance organization may not use information about abuse or the individual s status as a victim of domestic violence to: cancel, refuse to underwrite or renew, or refuse to issue a policy of life or health insurance policy or health benefits plan; refuse to pay a claim, cancel, or otherwise terminate a life or health insurance policy or health benefits plan; increase rates for life insurance, health insurance, or health benefits plan; or for life insurance policies or health benefits plans, add a surcharge, apply a rating factor, or use any other underwriting practice that adversely takes the information into account. This section does not preclude an insurer from using mental or physical medical conditions, regardless of cause, in determining the eligibility, rate, or underwriting classification of the applicant or insured. l. Policy charges [Sec ] A person may not: collect a premium or charge for insurance if the insurance is not actually provided; or collect a premium or charge for insurance that is different than the amount that applies to that coverage. m. Penalties [Sec ] 1.) If an insurer violates a provision of the Unfair Trade Practices law, the Commissioner may suspend or revoke its certificate of authority and impose a fine of not less than $100 nor more than $125,000 and make restitution to any person who suffered financial injury or damage. This is an administrative penalty which may be in addition to other applicable penalties. n. Insurance fraud [Secs ; ] 1.) Maryland law provides that it is a fraudulent insurance act for a person to: knowingly fail to return any premiums paid for a policy if the insurance contracted for is not ultimately provided; present documentation or a statement in support of a claim or viatical settlement knowing that the documentation or statement contains false or misleading information; willfully collect an excessive premium; misappropriate or unreasonably withhold premiums or returned premiums; misappropriate benefits under a policy; knowingly or willfully make a false or fraudulent representation in reference to an insurance application; place insurance with an unauthorized insurer;

28 24 Maryland Law Supplement make a false sworn statement the person does not believe to be true in connection with an investigation or hearing conducted by the Commissioner; with intent to deceive, knowingly exhibit a false account, document, or advertisement about the affairs of an insurer; knowingly write or place a policy through, or pay a commission to, a person who is not properly licensed; represent to the public that a person is an insurance producer or public adjuster if the person has not received the appropriate license; or intentionally fail to report to an insurer the exact amount charged as a premium for insurance, if different from the policy premium, and to fail to maintain records that show that information. a.) A person convicted of fraud involving an amount greater than $300 must make restitution to the victim of the fraud and be subject to a fine not to exceed three times the value of the amount involved or $10,000, whichever is greater and not less than $500, be imprisoned for not more than 15 years, or both. o. Health insurance provisions 1.) Age limit and misstatement of age [Sec ] a.) Age limit If a policy of health insurance establishes, as an age limit or otherwise, a date after which the coverage provided by the policy will not be effective, and the date falls within a period for which the insurer accepts a premium for the policy, or if the insurer accepts a premium for the policy after that date, the coverage provided by the policy continues in effect until the end of the period for which the insurer has accepted the premium. b.) Misstatement of age If the age of the insured is misstated and, according to the correct age of the insured, the coverage provided by the policy would not have become effective or would have ceased before the acceptance of a premium for the policy, the liability of the insurer is limited to the refund, on request, of the premiums paid for the period not covered by the policy. 2.) Time limit on specified defenses [Sec ] Each health insurance policy shall contain the following provision: After two years from the date of issue of this policy no misstatements, except fraudulent misstatements, made by the applicant in the application for such policy shall be used to void the policy or to deny a claim for loss incurred or disability (as defined in the policy) commencing after the expiration of such two-year period.

29 Maryland Law Supplement 25 3.) Notice of claim [Sec ] Written notice of claim must be given to the insurer within 20 days after the occurrence or commencement of any loss covered by the policy or as soon thereafter as is reasonably possible. 4.) Form of policy [Sec (2)(ii)] On application by an adult member of a family, a policy of health insurance may insure, originally or by subsequent amendment: the applicant, who is deemed the policyholder; and two or more eligible members of the policyholder s family, including a spouse, dependent child, any other child under a specified age not exceeding 18 years, and any other individual dependent on the policyholder or any other individual related to and resident in the policyholder s household. p. Provisions regarding long-term care insurance and Medicare supplements 1.) Applicants at least 80 years old [Sec ] Before issuing a policy of long-term care insurance to an applicant who is at least 80 years old, unless the policy is guaranteed issue, the carrier shall obtain: a report of a physical examination; an assessment of functional capacity; or copies of medical records. 2.) Outline of coverage and Buyer s Guide for long-term care insurance [Sec ] The outline of coverage shall include: a description of the principal benefits and coverage provided in the policy or contract; a statement of the principal exclusions, reductions, and limitations in the policy or contract; a statement of the renewal provisions, including any reservation in the policy or contract of a right to change the schedule of premiums; a statement that the outline of coverage is a summary of the policy or contract issued or applied for and the policy or contract should be consulted to determine the governing contractual provisions; and any expected premium increases or additional premiums to pay for automatic or optional benefit increases, including a reasonable hypothetical or graphic demonstration of the potential premiums that the applicant will need to pay at age 75 for benefit increases. 3.) Renewability provision [COMAR (a)(1)(a)] Individual long-term care insurance policies shall contain an appropriately captioned renewability provision.

30 26 Maryland Law Supplement 4.) Minimum loss ratio standards for Medicare supplement policies [Sec ] Loss ratio means the ratio of losses incurred to premiums earned on policies that are issued, delivered, or renewed in the state. a.) Minimum acceptable loss ratios The minimum acceptable loss ratios for Medicare supplement policies are: for group Medicare supplement policies, at least 75% of the aggregate amount of premiums earned; and for individual Medicare supplement policies or subscriber contracts, at least 65% of the aggregate amount of premiums earned. q. Complaint record [Sec ] All insurance companies doing business in this state shall establish and maintain a compliant system to provide reasonable procedures for the resolution of written complaints initiated by their consumers. r. Summaries of long-term care benefits in life insurance policies [Sec ] If long-term care benefits are part of a life insurance policy or rider, the carrier shall provide a Policy Summary at the time of policy delivery. The Policy Summary required to be delivered under this section shall include: information required to be included in an outline of coverage; an explanation of how the long-term care benefits interact with other components of the life insurance policy, including deductions from death benefits; an illustration of the amount of benefits, length of benefit, and guaranteed lifetime benefits, if any, for each covered individual; any exclusions, reductions, or limitations on benefits of long-term care; and if applicable to the policy type a disclosure of the effects of exercising other rights under the policy, a disclosure of guarantees related to long-term care costs of insurance charges, and current and projected maximum lifetime benefits. s. Variable life insurance [Sec ] Variable life insurance is defined as an individual policy that provides for life insurance that varies according to the investment performance of a sepa rate account maintained by the insurer. 1.) A stock insurer or mutual insurer may issue individual and group variable life insurance contracts that provide for payment varying directly with the investment experience of a segregated asset account if the stock insurer or mutual insurer is authorized to issue life insurance contracts in the state and is authorized by the Commissioner to issue individual and group variable life insurance contracts. 2.) Variable life insurance sales material must be filed with the Commissioner 30 days before use.

31 Maryland Law Supplement Unfair claim settlement practices [Sec , 305] a. It is an unfair claim settlement practice for an insurer, when committed with the frequency to indicate a general business practice, to: misrepresent pertinent facts or policy provisions that relate to the claim or coverage at issue; fail to acknowledge and act with reasonable promptness on communications about claims that arise under policies; fail to adopt and implement reasonable standards for the prompt investigation of claims that arise under policies; refuse to pay a claim without conducting a reasonable investigation based on all available information; fail to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; fail to make a prompt, fair, and equitable good faith attempt to settle claims for which liability has become reasonably clear; compel insureds to institute litigation to recover amounts due under policies by offering substantially less than the amounts ultimately recovered in actions brought by the insureds; attempt to settle a claim for less than the amount to which a reasonable person would expect to be entitled after studying written or printed advertising material accompanying, or made part of, an application; attempt to settle a claim based on an application that is altered without notice to, or the knowledge or consent of, the insured; fail to include with each claim paid to an insured or beneficiary a statement of the coverage under which the payment is being made; make known to insureds or claimants a policy of appealing from arbitration awards to compel insureds or claimants to accept a settlement or compromise less than the amount awarded in arbitration; delay an investigation or payment of a claim by requiring a claimant or a claimant s licensed health care provider to submit a preliminary claim report and subsequently to submit formal proof of loss forms that contain substantially the same information; fail to settle a claim promptly whenever liability is reasonably clear under one part of a policy to influence settlements under other parts of the policy; fail to provide promptly a reasonable explanation of the basis for denial of a claim or the offer of a compromise settlement; refuse to pay a claim for an arbitrary or capricious reason based on all available information; and fail to act in good faith in settling a first-party property-casualty claim. b. The Commissioner may impose a penalty of up to $2,500 for each violation of the state s unfair claims settlement practices law. An insurer that fails to act in good faith in the settlement of an insurance claim may be fined up to $125,000 for each violation.

32 28 Maryland Law Supplement 3. Cease and desist order [Sec ] If the Commissioner finds that a person in the state has engaged or is engaging in an act or practice that is prohibited, the Commissioner shall order the person to cease and desist from the act or practice. a. The Commissioner shall hold a hearing before issuing a cease and desist order. b. The Commissioner shall give the person notice of the hearing and the charges against the person. c. The cease and desist order is final: if no appeal is taken, when the time allowed for taking an appeal from an order of the Commissioner expires; or if an appeal is taken, when the court issues a final decision that affirms the cease and desist order or dismisses the appeal. d. Violation of a cease and desist order issued under this section is deemed to be and is punishable as a violation of this article. e. A cease and desist order issued under this section or an order of court that enforces it does not relieve any person affected by the order from any other liability, penalty, or forfeiture under law. f. Regardless of whether a hearing is scheduled or held or a cease and desist order is issued, this section does not affect or prevent the imposition of a penalty provided by this article or other law for violation of another provision of this title. Fiduciary Responsibilities [COMAR to 04] Each insurance producer who does not have the express consent of his principals (insurer or insurers) to mingle premium monies with his personal funds shall hold premium monies separate from other funds in accordance with all of the following provisions. 1. Producers who do not make prompt remittance to principals (insureds) may deposit funds in an account from which withdrawals may not be made (premium trust account) except to pay the principals or insureds. 2. A producer who makes prompt remittance not later than five business days following receipt of the funds does not need to maintain a premium trust account. 3. Deposits in a premium trust account in excess of aggregate net premiums, return premiums, and deposits received but not remitted may be made to maintain a minimum balance or to pay premiums due but uncollected. 4. With regard to withdrawals, these may not be made from a premium trust account other than for payment of premium to principals, transfer to another account if consent of principal is provided, withdrawal of voluntary deposits, transfer to another account of commissions, or payment of return deposits to insureds. 5. Deposit of a premium in a premium trust account may not be construed as commingling of the net premium and of the commission portion of the premium.

33 Maryland Law Supplement 29 E. Maryland Life and Health Insurance Guaranty Corporation [Secs ; 9-405; 9-409] The purpose of the Maryland Life and Health Insurance Guaranty Corporation is to protect residents who are policyowners, insureds, beneficiaries, annuitants, payees, and assignees of life or health insurance policies against the failure in the performance of contractual obligations due to the impairment or insolvency of the insurer issuing the policy or contract. 1. This act created an association of insurers to guarantee the payment of benefits and continuation of coverages. Members of the Corporation are subject to assessments to provide funds to carry out the purposes of this section of Maryland law. 2. This act applies to direct life insurance policies, health insurance policies, annuity contracts, and contracts supplemental to life and health insurance policies and annuity contracts issued by persons authorized to transact insurance in this state (including nonprofit health service plans). a. This act does not apply to any policies or contracts under which the risk is borne by the policyholder, any policy or contract assumed by the impaired insurer under a contract of reinsurance, or any policy or contract issued by fraternal benefit societies. 3. The contractual obligations of the impaired insurer for which the Corporation becomes liable shall be as great as, but no greater than, the contractual obligations of the impaired insurer would have been in the absence of an impairment, not to exceed: $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender values; $500,000 for basic hospital, medical, and surgical insurance or major medical insurance provided by health benefit plans; $300,000 for disability insurance and $300,000 for long-term care insurance; $100,000 for any other health policy or coverages not included as basic hospital, medical, and surgical insurance, or major medical insurance, or disability insurance or long-term care insurance; and $250,000 in the present value of annuity benefits. 4. Member insurers may be assessed if the action is necessary. The board of directors may collect the assessments after 30 days written notice to the member insurers before payment is due. a. There are two classes of assessments, as follows. 1.) Class A assessments are made for the purpose of meeting administrative costs or other general expenses not related to a particular impaired insurer. 2.) Class B assessments are made to the extent necessary to carry out the powers and duties of the Corporation under Maryland law with regard to an impaired insurer. b. The total of all assessments upon a member insurer during any one calendar year shall not exceed 2% of the insurer s premiums on policies covered by the account.

34 30 Maryland Law Supplement 5. The Commissioner must notify the board of directors of the existence of an impaired insurer not later than three days after a determination of impairment is made or he receives notice of impairment. 6. The Commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the Commissioner may levy a forfeiture on any member insurer that fails to pay an assessment when due. The forfeiture must not exceed 5% of the unpaid assessment per month, but no forfeiture must be not less than $100 per month. F. INSURANCE INFORMATION AND PRIVACY PROTECTION [COMAR ] 1. Purpose and scope of rules The Maryland privacy protection rules require insurers and producers to provide notice to individuals about their privacy policies and practices. They describe the situations when a licensee may disclose nonpublic personal health information and nonpublic personal financial information about individuals to affiliates and nonaffiliated third parties. They also provide methods for individuals to prevent licensees from disclosing nonpublic personal financial information and nonpublic personal health information. 2. Initial and annual privacy notices Generally, licensees who are subject to the privacy rules must provide a notice reflecting their privacy practices for nonpublic financial information to customers when a customer relationship is initially established and at least once a year afterwards. The notices must explain how the consumer can opt out of the disclosure of nonpublic personal financial information. 3. Opt out notice requirements A licensee who is required to provide an opt out notice under the privacy rules must provide a clear and conspicuous notice to each of the licensee s consumers that accurately explains the right to opt out. A right to opt out notice must state: that the licensee discloses or reserves the right to disclose nonpublic personal financial information about its consumer to a nonaffiliated third party; that the consumer has the right to opt out of that disclosure; and a reasonable means by which the consumer may exercise the opt out right. 4. Disclosure of nonpublic personal health information A licensee may not disclose nonpublic personal health information about a consumer or customer unless the consumer or customer authorizes the disclosure. However, an authorization is not required before making disclosures in connection with certain insurance functions such as: claims adjustment and management; detecting or reporting fraud or criminal activity; underwriting; case management and utilization review; policyholder service functions; or administration of customer disputes and inquiries.

35 Maryland Law Supplement Nondiscrimination A licensee may not unfairly discriminate against any consumer or customer for opting out from the disclosure of his or her nonpublic personal financial information or refusing to authorize the disclosure of his or her nonpublic personal health information. II. Maryland Laws, Rules, and Regulations Pertinent To Life Insurance Only Group Life [Sec ] No life insurance policy may be delivered in this state insuring the lives of more than one individual unless it is provided for one of the groups identified under Maryland law. 1. Types of groups Several types of groups are eligible for group life insurance coverage in this state including, but not limited to, the following. a. Employee group The lives of a group of individuals may be insured under a policy issued to an employer for the benefit of his employees. A policy on which no part of the premium is to be derived from funds contributed by insured employees (noncontributory), it must insure all (100%) eligible employees. b. Labor union group [Sec (b)] The lives of a group of individuals may be insured under a group policy issued to a labor union. In this case, the labor union is deemed to be the policyholder. The same percentage amounts apply to labor union groups (noncontributory vs. contributory) as apply to employee groups. c. Trustee group The lives of a group of individuals may be insured under a policy issued to the trustees of a fund established by two or more employers in the same industry or by one or more labor unions. d. Professional association group The lives of a group of individuals may be insured under a policy issued to the trustees of a fund established by an association that has at least 100 members at the outset, is organized for purposes other than that of obtaining insurance, has been in active existence for at least two years, and holds regular meetings at least once a year. Noncontributory policies must cover 100% of eligible members who do not reject coverage in writing. e. Public employee The lives of a group of individuals may be insured under a policy issued to a county or to an incorporated city or town or association of counties. f. Debtor group The lives of a group of individuals may be insured under a policy issued to a creditor to insure the debtors of the creditor. The policy will be issued to the creditor with coverage provided for the amount of the installment loan. The amount of insurance on the life of any debtor shall at no time exceed the amount owed by him to the creditor.

36 32 Maryland Law Supplement g. Dependent coverage [Sec ] Insurance under a group life policy covering employees or members of a group may be extended to cover dependents (including spouse, domestic partner, and children) as well. The policy may provide that the term minor children shall include the insured employee s or member s child under 18 years of age or his child 18 years of age or older who is attending an educational institution and relying upon the insured employee or member for financial support. 1.) The insurance on the life of any spouse, domestic partner, or child may not exceed the amount of insurance on the insured employee or member. 2.) A spouse or dependent child insured under such a plan shall be entitled to the rights of conversion as set forth by the policy. h. Credit union The lives of a group of individuals may be insured under a policy issued to a credit union. The members eligible for insurance under the policy shall be all the members of the credit union. i. Volunteer fire, rescue squad, or ambulance service organizations The lives of a group of individuals may be insured under a policy issued to any of the three mentioned parties. The members eligible for this insurance under the policy shall be all registered members of the volunteer fire, rescue squad, or ambulance service organization. 2. Policy provisions [Sec ] No policy of group life insurance may be delivered in this state unless it contains several provisions as set forth by Maryland law including, but not limited to, the following. a. Grace period [Sec ] The group life policy must contain a provision that the policyholder be entitled to a grace period of 31 days. b. Incontestability [Sec ] The group life insurance must contain a provision that the validity of the policy not be contested, except for nonpayment of premium, after it has been in force for two years from its date of issue. c. Entire contract provision [Sec ] The group life policy must contain a provision that a copy of the application be attached to the policy when issued, and that all statements made by the policyholder be considered representations. d. Evidence of individual insurability [Sec ] The group life policy must contain a provision setting forth the conditions 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. Misstatement of age [Sec ] The group life insurance policy must contain a provision specifying an equitable adjustment of premiums, benefits, or both to be made in the event the age of a person insured has been misstated.

37 Maryland Law Supplement 33 f. Designated beneficiary [Sec ] The group life insurance policy must contain a provision that any sum becoming due by reason of the death of the person insured be payable to the beneficiary designated by the person insured. g. Individual certificates [Sec ] The group life insurance policy must contain a provision that the insurer will issue to the policyholder (i.e., employer) for delivery to each person insured (i.e., employee), an individual certificate setting forth a statement as to the insurance protection to which he is entitled and to whom the insurance benefits are payable. h. Conversion [Sec ] The group life insurance policy must contain a provision that if the insurance on a person covered under the policy ceases because of termination of employment, this person will be entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance provided the application is made within 31 days of termination. 1.) The individual policy must be in an amount not in excess of the amount of life insurance which ceases because of termination. i. Conversion on policy termination [Sec ] The group life insurance contains 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 at the date of termination whose insurance terminates and who has been so insured for at least five years before the termination date, will be entitled to have issued to him by the insurer an individual policy of life insurance. 1.) The group policy may provide that the amount of the individual policy not exceed the smaller of 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 any group policy issued or reinstated of the same or another insurer within 31 days after termination, and $10,000. j. Death pending conversion [Sec ] The group life policy must contain a provision that if a person insured under the policy dies during the period within which he would have been entitled to have an individual policy issued to him, the amount of life insurance that he would have been entitled to if issued to him under the individual policy be payable as a claim under the group policy to the designated beneficiary. k. Statement to debtors [Sec ] In the case of a policy issued to a creditor to insure debtors of the creditor, the insurer must furnish to the policyholder for delivery to each debtor insured under the policy a form containing a statement that the life of the debtor is insured under the policy and any death benefit paid thereunder by reason of his death will be applied to reduce or extinguish the indebtedness.

38 34 Maryland Law Supplement l. Assignability [Sec ] Nothing under Maryland law may prohibit any person insured under a group policy, pursuant to an arrangement among the insured, the group policyholder, and the insurer, from making to any person an assignment of any or all the rights and benefits conferred on him by any provision of the group policy. 1.) In other words, all rights and benefits provided by a group plan including conversion to an individual policy, may be assigned by the person insured under the group plan. m. Divorce or annulment Whether a life insurance beneficiary designation is automatically changed because there has been a divorce or annulment between the insured and the beneficiary depends largely on state law. Some states have laws providing that divorce automatically revokes the beneficiary designation, but many do not. Of course, the divorce decree itself may address the beneficiary designation as part of the property settlement between the spouses by requiring, for example, that insured maintain the former spouse as beneficiary of the policy. n. Prohibited provisions [Sec ] By law in most states, life insurance policies are not permitted to contain the following provisions: A provision that limits the time for bringing any lawsuit against the insurance company to less than one year after the reason for the lawsuit occurs A provision that allows a settlement at maturity of less than the face amount plus any dividend additions, less any indebtedness to the company and any premium deductible under the policy A provision that allows forfeiture of the policy because of the failure to repay any policy loan or interest on the loan if the total owed is less than the loan value of the policy A provision making the soliciting agent the agent of the person insured under the policy or making the acts or representations of the agent binding on the insured (The agent must only be an agent of the company, not the insured) 1.) Life insurance policies in Maryland may not contain: a provision that the insurer may reduce or deny liability under the policy because the insured has previously obtained other insurance from the same insurer; a provision that gives the insurer the right to declare the policy void because the insured has had a disease or ailment, whether specified or not, or has received institutional, hospital, medical, or surgical treatment or attention; or a provision that gives the insurer the right to declare the policy void because the insured has been rejected for insurance, unless the right is conditioned on a showing by the insurer that it would have refused to issue the policy had it known of the rejection.

39 Maryland Law Supplement 35 Miscellaneous This section does not prohibit a policy provision that gives the insurer the right to declare the policy void if: the insured has received institutional, hospital, medical, or surgical treatment or attention within two years before the policy was issued; and the insured or a claimant under the policy fails to show that the condition occasioning the treatment or attention was not serious or was not material to the risk. 1. Replacement [COMAR ] This is defined as any transaction into which new life insurance is purchased, and it is known or should be known to the proposing producer or insurer, that by reason of this transaction, existing life insurance has been or is to be: lapsed, forfeited, terminated, or surrendered; converted to reduced paid-up insurance, continued as extended term, or policy loan values will be reduced; amended so as to reduce benefits or coverage; reissued with a reduction in cash value; or used in a financed purchase. a. Exemptions [COMAR ] There are several exemptions from replacement regulations including, but not limited to, group insurance or group annuities; group and individual credit insurance; nonconvertible term insurance expiring in five years or less; policies relating to a pension or profit-sharing plan; or a conversion privilege exercised within the same company. All licensed producers in the State of Maryland must be provided with a copy of the replacement regulation by their insurer. b. Duties of producers [COMAR ] An insurance producer who initiates an application for a life insurance policy or annuity contract must obtain a statement signed by both the applicant and the producer indicating whether the applicant has an existing life insurance policy or annuity contract. The statement must be submitted to the insurer with or as part of the application. If the applicant does not have an existing life insurance policy or annuity contract, the producer s duties in connection with replacement are then complete. 1.) If the applicant has an existing life insurance policy or annuity contract, the producer must present the applicant with a notice regarding replacement no later than at the time of taking the application. The notice must be signed by both the applicant and the producer and attest that the notice has been read aloud by the insurance producer (or that the applicant declined to have the notice read aloud) and left with the applicant. The notice must: include a list of each life insurance policy or annuity contract proposed to be replaced, properly identified by name of insurer, the insured or annuitant, and life insurance policy or annuity contract number if available; and

40 36 Maryland Law Supplement state whether each life insurance policy or annuity contract will be replaced or whether a life insurance policy will be used as a source of financing for the new life insurance policy or annuity contract. 2.) In a replacement transaction, the producer must leave the original or a copy of all sales material with the applicant when an application for a new life insurance policy or annuity contract is completed. 3.) The producer must submit to the insurer: a copy of each document required by these rules; a statement identifying any preprinted or electronically presented insurer-approved sales materials used; and copies of individualized sales materials, including illustrations related to the specific life insurance policy or annuity contract purchased. c. Duties of the replacing insurer [COMAR ] If a transaction involves replacement, the replacing insurer must verify that the required forms are received and are in compliance with these rules and notify any other existing insurer that may be affected by the proposed replacement. The replacing insurer must also allow the owner of the life insurance policy or annuity contract to return the life insurance policy or annuity contract within 30 days after the delivery for a full refund. 1.) If the replacing insurer and the existing insurer in a transaction are the same, or subsidiaries or affiliates under common control, the replacing insurer must allow credit for the period that has elapsed under the incontestability and suicide period of the replaced life insurance policy or annuity contract up to the face amount of the existing policy or contract. d. Duties of existing insurer [COMAR ] For replacement transactions, the existing insurer must inform the owner by letter of the right to receive information regarding the existing policy or contract values, such as an in-force illustration or life insurance policy summary, within five business days. The existing insurer must retain and be able to produce all replacement notification received for at least five years or until the conclusion of the next regular market conduct examination conducted by the insurance department. 1.) Upon receiving a request to borrow, surrender, or withdraw life insurance policy values, an existing insurer must send a notice advising the owner of the policy that the release of life insurance policy values may affect the guaranteed elements, nonguaranteed elements, face amount, or surrender value of the policy, within 14 business days. The existing insurer must send the notice separately from the check if the check is sent to anyone other than the owner of the life insurance policy.

41 Maryland Law Supplement 37 e. Duties of insurers that use insurance producers [COMAR ] 1.) System of supervision and control An insurer shall maintain a system of supervision and control to ensure compliance with the requirements that includes, at a minimum, procedures to: inform its insurance producers of the requirements of this regulation and incorporate the requirements of this regulation into all relevant insurance-producer training manuals prepared by the insurer; provide to each insurance producer a written statement of the insurer s position with respect to the acceptability of replacements that provides guidance to its insurance producer as to the appropriateness of these transactions; review the appropriateness of each replacement transaction that the insurance producer does not indicate is in accord with this regulation; confirm that the requirements of this regulation have been met; and detect transactions that are replacements of existing life insurance policies or existing annuity contracts by the existing insurer but that have not been reported as replacements by the applicant or insurance producer. Compliance with this section may include systematic customer surveys, interviews, confirmation letters, and programs of internal monitoring. 2.) Capacity to monitor replacements An insurer shall: have the capacity to monitor each insurance producer s life insurance policy and annuity contract replacements for that insurer; and on request, make all records regarding replacements available for inspection by the Commissioner. The capacity to monitor shall include the ability to produce records for each insurance producer s: life insurance replacements, including financed purchases, as a percentage of the insurance producer s total annual sales for life insurance; number of lapses of life insurance policies as a percentage of the insurance producer s total annual sales for life insurance; annuity contract replacements as a percentage of the insurance producer s total annual annuity contract sales; number of transactions that are unreported replacements of existing life insurance policies or existing annuity contracts by the existing insurer detected by the insurer s monitoring system as required by this regulation; and replacements, indexed by replacing insurance producer and existing insurer.

42 38 Maryland Law Supplement 3.) Signed statement and notice An insurer shall require with or as a part of each application for life insurance or an annuity: a statement signed by the applicant and insurance producer indicating whether the applicant has an existing life insurance policy or existing annuity contract; and if the applicant has an existing life insurance policy or existing annuity contract, a completed notice regarding replacements. 4.) Production of information If an applicant has an existing life insurance policy or existing annuity contract, an insurer shall be able to produce copies of the following items for at least five years after the termination or expiration of the proposed life insurance policy or annuity contract: The sales material required by this regulation The basic illustration and any supplemental illustrations related to the specific life insurance policy or annuity contract that is purchased The insurance producer s and applicant s signed statements with respect to financing and replacement 5.) Sales material and illustrations An insurer shall ascertain and ensure that the sales material and illustrations required by this regulation: meet the requirements of this regulation; and are complete and accurate for the proposed life insurance policy or annuity contract. 6.) Application that does not meet requirements If an application does not meet the requirements of this regulation, an insurer shall: notify the insurance producer and applicant; and fulfill the outstanding requirements. 7.) Recordkeeping An insurer shall maintain records in paper, photograph, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces the actual document. f. Penalties If any person or insurer fails to comply with Maryland law regarding replacement, the Commissioner of Insurance may: suspend or revoke a license; impose a fine on an insurer of not less than $100 nor more than $125,000; and impose a fine on a producer of not less than $25 nor more than $500. g. Violations [COMAR ] 1.) Prohibition on twisting A failure to comply with law is a violation, including: deceptive or misleading information set forth in sales material;

43 Maryland Law Supplement 39 failing to ask the applicant, in completing the application, the pertinent questions regarding the possibility of financing or replacement; intentional incorrect recording of an answer; advising an applicant to respond negatively to any question regarding replacement in order to prevent notice to the existing insurer; or advising the owner of a life insurance policy or annuity contract to write directly to the insurer in such a way as to attempt to obscure the identity of the replacing insurance producer or insurer. 2.) Intent to finance new policy or contract with existing policy or contract value individual transaction prima facie case For purposes of a regulatory review of an individual transaction only, it is deemed prima facie evidence of a policyholder s intent to finance the purchase of a new life insurance policy or new annuity contract with existing life insurance policy values or existing annuity contract values if a withdrawal, surrender, or borrowing involving the life insurance policy values of an existing life insurance policy or the annuity contract values of an existing annuity contract is used to pay premiums: on a new life insurance policy or new annuity contract owned by the same policyholder or contract holder and issued by the same insurer; and within four months before or 13 months after the effective date of the new life insurance policy or new annuity contract. The prima facie standard established by this regulation is not intended to increase or decrease the monitoring obligations of an insurer. 3.) Replacement after indication that replacement not intended pattern of action prima facie case The owner of a life insurance policy or annuity contract may replace an existing life insurance policy or existing annuity contract after indicating in, or as a part of, an application for new coverage that replacement is not the intention of the owner. Notwithstanding this regulation, if owners of life insurance policies or annuity contracts of the same insurance producer have a pattern of replacing life insurance policies or annuity contracts after indicating on the application that replacement is not their intention, the pattern of action is prima facie evidence of the insurance producer s: knowledge that replacement was intended in connection with the identified transactions; and intent to violate this chapter. 4.) Provision of information If it is determined that the requirements of this regulation have not been met, the replacing insurer shall provide to the owner of the life insurance policy or annuity contract: an in-force illustration, if available, or life insurance Policy Summary for the replacement life insurance policy or available disclosure document for the replacement annuity contract; and the appropriate notice regarding replacements in this regulation.

44 40 Maryland Law Supplement 2. Standard nonforfeiture law [Secs ] Under the Maryland nonforfeiture law, life insurance policies must provide that if a premium payment is in default after premiums have been paid for at least one year, the insurer will grant: a paid-up nonforfeiture benefit, effective as of the due date of the premium in default; or an actuarially equivalent paid-up nonforfeiture benefit that provides a greater amount or longer period of death benefits or a greater amount or earlier payment of any endowment benefits. The request for a paid-up nonforfeiture benefit must be made to the insurer within 60 days after the due date of the premium in default. Policies must provide that the specified paid-up nonforfeiture benefit is effective unless the policyowner elects another available option within 60 days after the due date of the premium in default. a. Policies must also provide that on surrender of a policy within 60 days after the due date of a premium in default the insurer will pay a cash surrender value instead of a paid-up nonforfeiture benefit after premiums have been paid for at least: three years for ordinary life insurance; or five years for industrial life insurance. b. The Maryland nonforfeiture law does not apply to group life insurance, pure endowments, annuities, or certain nonrenewable term policies. 3. Disclosure requirements [COMAR ] a. Buyer s guide and policy summary Insurers must provide all prospective purchasers with a buyer s guide and a policy summary before accepting the applicant s initial premium or premium deposit. However, if the policy applied for contains an unconditional refund provision of at least 10 days or the policy summary contains such an unconditional refund offer, the buyer s guide and policy summary may be delivered with the policy or before delivery of the policy. b. Presentations involving tax advantages If a sales presentation refers to a tax shelter, tax deferment, or other tax advantages, the producer must obtain a separate statement signed by the applicant and the producer to the effect that the applicant has been advised to consult with his own tax advisers regarding the tax effects of the plan of insurance being applied for. This signed statement must be transmitted to the insurer together with the application. c. Other requirements These additional disclosure requirements apply to life insurance solicitations in Maryland. 1.) Each insurer must maintain at its home office or principal office, a complete file containing one copy of each document authorized by the insurer for use. Insurers must retain a copy of each authorized form for three years following the date of its last authorized use. 2.) Before starring a life insurance sales presentation, a producer must inform the prospective purchaser that he is acting as a life insurance producer

45 Maryland Law Supplement 41 and inform the prospect of the full name of the insurance company he is representing. If a producer is not involved in a sales situation, the insurer must identify its full name. 3.) A producer may not use terms such as financial planner, investment advisor, financial consultant, financial analyst, financial counsellor, and the like in the name of the producer s agency, in letterheads, logos, or in advertising or solicitation material, or in any sales presentation soliciting insurance to mislead or in any way that implies that compensation is unrelated to insurance sales, unless this is actually the case. 4.) Any reference to policy dividends must include a statement that dividends are not guaranteed. III. Maryland Laws, Rules, and Regulations Pertinent To Accident and Health Insurance Only Definitions [Sec , , , (h), , , Health Gen. Sec , Health Gen. Sec , COMAR (B)(3),] 1. Insurer includes each person engaged as indemnitor, surety, or contractor in the business of entering into insurance contracts. 2. Health care provider means a chiropractor, dentist, hospital, optometrist, pharmacist, physician, podiatrist, or psychologist. 3. Health care services means chiropractic, dental, hospital, medical, optometric, pharmaceutical, podiatric, or psychological services. 4. A nonprofit health service plan is issued a certificate of authority in the state, whether or not organized under the laws of the state. A nonprofit health plan must comply with the regulations and laws of this state if it does business in this state. The mission of a nonprofit health service plan shall be, in accordance with the charter of the nonprofit health service plan, to: provide affordable and accessible health insurance to the plan s insureds and those persons insured or issued health benefit plans by affiliates or subsidiaries of the plan; assist and support public and private health care initiatives for individuals without health insurance; and promote the integration of a health care system that meets the health care needs of all the residents of the jurisdictions in which the nonprofit health service plan operates.

46 42 Maryland Law Supplement 5. Health maintenance organization (HMO) means any person, including a profit or nonprofit corporation organized under the laws of any state or country, that: a. operates or proposes to operate in this state; b. provides or otherwise makes available to its members health care services that include at least physician, hospitalization, laboratory, x-ray, and preventive services, out-of-area coverage, and any other health care services that the Commissioner determines to be available generally on an insured or prepaid basis in the area serviced by the health maintenance organization, and, at the option of the health maintenance organization, may provide additional coverage; c. except for any copayment or deductible arrangement, is compensated only on a predetermined periodic rate basis for providing to members the minimum services; d. assures its subscribers and members, the Commissioner, and the Department that one clearly specified legal and administrative focal point or element of the health maintenance organization has the responsibility of providing the availability, accessibility, quality, and effective use of comprehensive health care services; and e. primarily provides services of physicians: directly through physicians who are either employees or partners of the health maintenance organization; or under arrangements with one or more groups of physicians, who are organized on a group practice or individual practice basis, under which each group: 6. HMO definitions is compensated for its services primarily on the basis of an aggregate fixed sum or on a per capita basis; and is provided with an effective incentive to avoid unnecessary inpatient use, whether the individual physician members of the group are paid on a fee-for-service or other basis. a. Member means a person who makes a contract or on whose behalf a contract is made with a health maintenance organization for health care services. b. Provider means any person, including a physician or hospital, who is licensed or otherwise authorized in this state to provide health care services. c. Subscriber means a person who makes a contract with a health maintenance organization, either directly or through an insurer or marketing organization, under which the person or other designated persons are entitled to the health care services. d. Individual contract means a contractual agreement for the provision of health care services on a prepaid basis entered into between an HMO and a subscriber

47 Maryland Law Supplement 43 covering the subscriber, the subscriber and the subscriber s dependents, or the subscriber s dependents. 7. Medically uninsurable individual means an individual who is a resident of the state and who: provides evidence that, for health reasons, a carrier has refused to issue substantially similar coverage to the individual; provides evidence that, for health reasons, a carrier has refused to issue substantially similar coverage to the individual, except at a rate that exceeds the plan rate; satisfies the definition of eligible individual ; has a history of or suffers from a medical or health condition that is included on a list promulgated in regulation by the board; is eligible for the tax credit for health insurance costs under the Internal Revenue Code; is a dependent of an individual who is eligible for coverage under this section; or satisfies the eligibility requirements established by federal law to enroll in a national temporary high risk pool program that is: established by the secretary of health and human services, and administered by the plan for the state. 8. Maryland Health Insurance Plan (Fund) The plan is an independent unit of the state government. The purpose of the plan is to decrease uncompensated care costs by providing access to affordable, comprehensive health benefits for medically uninsurable residents of the state by July 1, It is the intent of the General Assembly that the plan operate as a nonprofit entity and that fund revenue, to the extent consistent with good business practices, be used to subsidize health insurance coverage for medically uninsurable individuals. a. The board shall establish a standard benefit package to be offered by the plan. The plan must be filed with the Commissioner and be provided to any member at no charge upon request. Premium rates must be reviewed and approved by the Commissioner. The rates can vary on the basis of family composition and age. 9. Labor union group policy [Sec (b)] A policy may be issued to a labor union or similar employee organization, which shall be deemed to be the policyholder, to insure members of the union or organization for the benefit of persons other than the union or organization or any of its officials, representatives, or agents. The members eligible for insurance under the policy shall be all of the members of the union or organization, or all of any class or classes of members. Marketing Methods and Practices 1. Solicitation of health insurance There are numerous laws and regulations in the State of Maryland regarding the solicitation of health insurance. Some of the more important information concerning the solicitation of health insurance in this state are as follows.

48 44 Maryland Law Supplement a. Definition of advertisements [COMAR to.18] Advertisements in the State of Maryland include, but are not limited to, any printed and published material or descriptive literature of an insurer used in or on newspapers, magazines, or any other publications, radio, and TV, etc.; descriptive literature and sales aids of all kinds issued by an insurer for presentation to members of the public such as circulars, pamphlets, leaflets, booklets, illustrations, etc.; and prepared sales talks, presentations, and material for use by producers in their solicitation attempts. b. Advertisement in general [COMAR ] Advertisements must be truthful and not misleading in fact or in implication. Words or phrases, the meaning of which is clear only by implication or familiarity with insurance terminology, may not be used. c. Advertisements of benefits payable, losses covered, premiums payable [COMAR ] Words, phrases, or illustrations may not be used in a manner that misleads or has the tendency to deceive the public with regard to the extent of any policy benefit payable, loss coverage, or premium payable. Any advertisement relating to any of these items must be sufficiently complete and clear as to avoid deception or the tendency to deceive. d. Exceptions, reductions, and limitations When an advertisement refers to any dollar amount, period of time of which any benefit is payable, cost of policy, or specific policy benefit or loss for which the benefit is payable, it must disclose those exceptions, reductions, and limitations affecting the basic provisions of the policy that the advertisement would have the tendency to mislead or deceive. 1.) In addition, any preexisting conditions that are not covered by a policy must be stipulated in any advertisement of such a contract. e. Renewability Any advertisement that refers to renewability, cancellability, or termination of a policy, or that refers to a policy benefit, must disclose the provisions relating to renewability, cancellability, or termination. f. Testimonials Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised, and be accurately reproduced. g. Use of statistics An advertisement relating to the dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to any insurer or policy may not be used unless it accurately reflects all of the relevant facts. The advertisement may not imply that the statistics are derived from the policy advertised unless that is the fact. h. Inspection of policy An offer in an advertisement of free inspection of a policy or offer of a premium refund is not a cure for misleading or deceptive statements contained in the advertisement.

49 Maryland Law Supplement 45 i. Disparaging comparisons and statements An advertisement may not directly or indirectly make unfair or incomplete comparison of policies or benefits or otherwise falsely disparage competitors, their policies, services, or business methods. j. Identity of insurer [COMAR ] The identity of the insurer shall be made clear in all of its advertisements. An advertisement may not use a trade name, service mark, slogan, symbol, or other device that has the tendency to mislead or deceive as to the true indemnity of the insurer. k. Approval or endorsement by third parties [Sec ] An advertisement may not state or imply that an insurer or a policy has been approved or an insurer s financial condition has been examined and found to be satisfactory by governmental agency. An advertisement may not state or imply that an insurer or a policy has been approved or endorsed by any individual, group of individuals, society, association, or other organization, unless that is the fact. l. Advertising file [COMAR ] Insurers must maintain a complete file of all advertisements they use, with a notation attached to each advertisement indicating the manner and extent of distribution and the form number of any policy advertised. The file may be reviewed by the Commissioner. An advertisement must be kept on file for at least three years. 2. Application responsibilities No health insurance contract covering an individual (except a contract of group or blanket health insurance) may be made or effectuated unless at the time of the making of the contract the individual insured has consented thereto in writing. If the application contains an agreement whereby the insurer is authorized to issue a policy other than that applied for, or to amend the application, which amendment is to be ratified by the acceptance by the applicant of the contract as amended, the agreement must contain language substantially as follows: Except that no change in amount, classification, plan of insurance, or benefits will be effective unless agreed to in writing by the applicant. a. No alteration of any written application of health insurance may be made by any person other than the applicant without his written consent except that insertions may be made by the insurer (for administrative purposes only) in such a manner as to indicate clearly that the insertions are not to be ascribed to the applicant. b. All statements and descriptions in any application for health insurance must be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect statements may not prevent a recovery under the policy or contract unless: they are fraudulent; they are material either to the acceptance of the risk or to the hazard assumed by the insurer; or the insurer in good faith would either not have issued, reinstated, or renewed the policy or contract if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.

50 46 Maryland Law Supplement Individual Health Statutes Several policy clauses and provisions must be included in health policies issued in the State of Maryland including, but not limited to, the following. 1. Newly born and newly adopted child coverage [Sec ] All individual and group health insurance policies providing coverage on an expense incurred basis or those issued by a nonprofit corporation that provides coverage for a family member of the insured or subscriber must also provide that the health insurance benefits applicable for children must be payable with respect to a newly born or newly adopted child of the insured or subscriber from the moment of birth or adoption. a. The coverage for children must also consist of coverage of injury or sickness including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities. b. If payment of a specific premium or subscription fee is required to provide coverage for a child, the policy or contract may require that notification of birth of a newborn or adopted child and payment of the required premium or fees must be furnished to the insurer or nonprofit service or indemnity corporation within 31 days after the date of birth in order to have the coverage continue beyond the 31-day period. c. Date of adoption is defined as the earlier of a judicial decree of adoption or the assumption of custody, pending adoption, of a prospective adoptive child by a prospective adoptive parent. d. A minor for whom guardianship is granted by court or testamentary appointment shall be payable from the date of appointment. e. Coverage for unmarried dependent incapacitated children, grandchildren, and individuals under guardianship [Sec ] Coverage must be continued under the contract if all the following are met by the individual: Is unmarried Is dependent for support on the employee, member, or other covered individual At the time of reaching the limiting age, is incapable of self support because of mental or physical incapacity that started before the child, grandchild, or individual under guardianship attained the limiting age f. Dependent child age limit [Sec ] This includes any individual who is: the natural child, stepchild, adopted child, or grandchild of the insured; a child placed with the insured for legal adoption; or a child who is entitled to dependent coverage. The child would be covered up until 25 years of age as long as the child is a dependent of the insured and is unmarried. This is for both group or individual health insurance policies issued in this state.

51 Maryland Law Supplement Claim forms To provide a standard system of payment for medical services, all claim forms for any claimants under any individual or group health insurance policy issued in this state must conform to a form required by the Commissioner. 3. Standard provisions The mandatory uniform policy provisions are required to be included in any health insurance contract delivered or issued for delivery in this state. 4. Optional provisions Optional uniform policy provisions may be included in any health insurance policy delivered or issued for delivery in this state at the option of the insurer. 5. Renewability provisions Renewability provisions may be utilized by insurers delivering or issuing for delivery any health insurance policies in this state. a. Optional renewal by insurer A policy with a renewability feature where an insured may renew at the option of the insurer must provide the following provisions: any renewal must be performed on the anniversary date of the policy; the insurer may not prejudice any claim in force at the nonrenewal date; and any reason for nonrenewal may not be solely because of a change in the health or mental condition of an insured. 6. Insurable interest of third parties The word insured must not be construed as preventing a person other than the insured, with a proper insurable interest, from making application for and owning a policy covering the insured or from being entitled under such a policy to any indemnities, benefits, and rights provided. 7. Maternity benefits Every insurer that provides maternity benefits in any policy form customarily issued on an individual or family basis must offer the benefits to individuals regardless of marital status. 8. Exclusion of payments for blood products prohibited Insurers who issue or deliver an individual health insurance policy to any person in this state may not exclude payments for blood products, or derivatives and components, which would otherwise be covered under the health insurance contract. Nothing under Maryland law may apply to whole blood or concentrated red blood cells. 9. Coordination of benefits The Insurance Commissioner of Maryland may permit health insurance policies to contain nonduplication provisions or provisions to coordinate the coverage with other health insurance policies. A health insurance policy may not contain nonduplication provisions or provisions to coordinate coverage with an individually underwritten and issued, guaranteed renewable, specified disease policy, which does not provide benefits on an expense-incurred basis. 10. Inclusion of benefits for mental illness [Sec ] Every individual hospital or medical insurance policy written in this state must include benefits for expenses arising from the treatment of acute mental illnesses and emotional disorders that in the professional judgement of practitioners are subject to significant improvement through a short-term therapy (see mental illness under Misc. Statutes).

52 48 Maryland Law Supplement 11. Nurse midwife services Every health insurer who proposes to issue, renew, modify, alter, amend, or reissue any health insurance policy in this state that is written on an expense-incurred basis must offer the option of providing benefits for expenses arising from the care, treatment, or services rendered by a nurse midwife. a. Any policy issued in this state may not require that the nurse midwife be employed by a physician or must act pursuant to a physician s orders. 12. Hospice care Every insurer who issues or delivers an individual health insurance policy to any person in this state on an expense-incurred basis must offer benefits for hospice care services to its insureds (for terminally ill patients). 13. Increased Social Security payments A health insurance disability income contract may not reduce payments to any person entitled to receive disability payments because Social Security payments received by him have been increased. 14. Notice of claim [Sec ] Written notice of claim must be given to the insurer within 20 days after the occurrence or commencement of any loss covered by the policy, or as soon thereafter as reasonably possible. Notice given to the insurer s authorized producer will be deemed notice to the insurer. Group Health Statutes [Secs , COMAR ] Group health insurance is that form of insurance covering groups or persons and their dependents. The coverage may be solicited to any of several groups including employer sponsored groups, labor unions, employee trusts, public employees, professional groups, and associations. 1. Required provisions Each group health insurance policy issued in this state must contain the following provisions. a. In the absence of fraud, all statements made by applicants or the policyholder on the application must be deemed representations and not warranties. b. The insurer must furnish to the policyholder for delivery to each employee or member of the insured group, a statement in summary form of the essential features of the insurance coverage provided to the employee or member. c. From time to time, eligible new employees or members or dependents may be added to the group originally insured. 2. Direct payment to health care provider Any group health policy provides that all or any portion of any indemnities provided by any such policy be paid directly to the hospital or person rendering these services if requested by the group policyholder. 3. Standard and optional provisions These standard uniform and optional uniform policy provisions discussed previously also apply to group health insurance.

53 Maryland Law Supplement Conversion [COMAR (B), (D)] All covered individuals under group health insurance policies have the right to convert to an individual health insurance contract if their employment is terminated. Conversion rights are also provided for a spouse or child who cease to be a dependent by virtue of divorce or the death of an employee. Conversions are allowed without evidence of insurability and generally may not contain any preexisting condition exclusion. If the insured person was individually rated less favorably than standard under the group policy, or if all persons in the group policy were rated less favorably than standard, the converted policy may be issued with a corresponding rating. 5. Maternity benefits [Sec ] Every group or blanket health insurance policy delivered in this state, under which maternity benefits are provided for pregnancy and childbirth of employees or members, must provide identical benefits regardless of marital status to all covered employees or members, or all covered employees or members and all covered dependents of employees or members, respectfully. 6. Optometrist services All group health insurance policies issued in this state that provide insurance against expenses incurred for services that optometrists are licensed to perform may obligate the insurer to insure the expenses when rendered by an optometrist. 7. Effect of increased Social Security payments A group and blanket health insurance contract may not reduce payments to any person entitled to receive disability income payments because Social Security payments received by him have been increased. 8. Alzheimer s disease [Sec ] Each health insurer proposing to issue a group health insurance policy in this state on an expense-incurred basis must offer the group the option of providing benefits for expenses arising from the care, including nursing home care and intermediate or custodial nursing care, of victims of Alzheimer s disease. a. A health insurer may establish reasonable limits on the benefits offered for coverage, including copayment and deductible provisions and maximum annual and lifetime dollar limits. 9. Additional provisions Required provisions under individual health insurance policies, such as exclusion of payments for blood products prohibited, nurse midwife services, hospice care, coordination of benefits, coverage of children, and other life provisions, are also provided for under group health insurance in this state. 10. Small employer groups [Secs to 1208] (This is only effective until January 1, 2014.) A small employer is a person that on at least 50% of its working days during the preceding calendar quarter employed at least two but not more than 50 eligible employees (an employee may not be counted who is considered parttime), the majority of whom are employed in the state. a. Full-time employees who work at least 30 hours per week are eligible for coverage under the plan. Employees who are employed on a temporary or substitute basis

54 50 Maryland Law Supplement or work less than 30 hours per week are not eligible. Nonprofit organizations or sole employees determined by the IRS to be exempt from taxation, who have a normal workweek of at least 20 hours and are not covered under a public or private plan for health insurance are also eligible. b. All carriers who offer small employer health insurance plans must offer the standard plan. Carriers may also offer a limited benefit plan and optional additional coverages that are priced separately from the benefits in the standard plan. The carrier must clearly distinguish the standard plan from any other plans it offers and make it clear that the enhancements to the plan are not required by law. Carriers that insure at least 10% of the lives in the state s small employer market are required to offer a wellness plan. Other carriers may choose to offer a wellness plan. c. The Maryland Health Care Commission will adopt regulations that specify the requirements for the standard benefit plan and the wellness plan, including deductibles and cost-sharing requirements. The Commission will exclude or limit benefits or adjust cost-sharing arrangements in the standard plan if the average rate for the plan exceeds 10% of the average annual wage in the state. d. Small employer plans are community rated, without regard to health status or occupation. The community rate may only be adjusted for age and geographic location in the state. Rates may vary based on family composition. After applying these risk adjustment factors, the carrier may offer a discount of up to 20% if the employer participates in a wellness program. e. The Commissioner has established the Maryland Small Employer Health Reinsurance Pool so that member companies may reinsure claims. 1.) The Reinsurance Pool is governed by a board of directors composed of seven members representing carriers whose principal business in health insurance is comprised of small employers and, to the extent possible, at least one nonprofit health service plan, at least one commercial carrier, and at least one health maintenance organization. 2.) At a minimum, the Pool reinsures up to the level of coverage specified under the Standard Plan. f. Preexisting condition provision [Sec ] A carrier may impose a preexisting condition provision only if it: relates to a condition, regardless of the cause of the condition, for which medical advice, diagnosis, care, or treatment was recommended or received within the six-month period ending on the enrollment date; extends for a period of not more than 12 months after the enrollment date or 18 months in the case of a late enrollee; and is reduced by the aggregate of the periods of creditable coverage.

55 Maryland Law Supplement 51 E. Miscellaneous Health Statutes 1. Compensation for services of chiropractors [Sec ] For the purposes of health and accident, sickness and other insurance policies, a chiropractor licensed to practice in the State of Maryland is entitled to compensation for those services which he is licensed to perform under the provisions of Maryland law and which he has rendered to any insured. 2. Reimbursement for services of podiatrists [Sec ] Any health insurance policy issued in this state that provides for reimbursement for any podiatrical services by a duly licensed podiatrist entitles the podiatrist to reimbursement for any services performed. 3. Services of psychologists [Sec ] Any health policy issued for delivery in this state providing coverage for treatment by a psychologist entitles the duly licensed psychologist to reimbursement for any services provided for an insured. 4. Medical malpractice claims report Every insurer providing professional liability insurance to a physician licensed in this state and every self-insured hospital must report quarterly any claim or action for damages for personal injuries claimed to have been caused by an error, omission, or negligence in the performance of the insured s professional services without consent, if the claim resulted in a final judgment in any amount, a settlement in any amount, or a final disposition not resulting in payment on behalf of the insured. 5. Medical files Medical files compiled by insurers are available for inspection on demand by the applicant, claimant, or his producer. 6. Credit health insurance [Secs ] a. Definition Credit health insurance is insurance on a debtor that provides indemnity for payments on a specific loan or other credit transaction while the debtor is disabled. b. Limits on benefits The total amount of periodic benefits payable by credit health insurance in the event of disability may not exceed the total amount of the scheduled unpaid installments of the indebtedness. The amount of each benefit payment may not exceed the original indebtedness divided by the number of periodic installments. c. Term of coverage The term of credit health insurance may not extend more than 15 days after the scheduled maturity date of the debt unless the term is extended without additional cost to the debtor. If the debt is discharged before its scheduled maturity date due to renewal or refinancing, the insurer must terminate the credit health insurance in force before issuing any new insurance for the renewed or refinanced indebtedness. The insurer must pay or credit a refund if the insurance terminates before the scheduled maturity date of the indebtedness.

56 52 Maryland Law Supplement d. Choice of insurers If a creditor requires credit health insurance as additional security for a debt, the debtor may provide the required coverage through existing policies the debtor owns or provide the required coverage through any authorized insurer. 7. Uniform claim forms The Commissioner must adopt uniform claim forms for the reimbursement of hospital and health care practitioners services. 8. Blanket health insurance [Secs , 309(C)] This type of insurance may be issued to common carriers in order to cover passengers being conveyed, employers covering employees for specified hazards associated with a particular job, or schools, camps, and athletic teams covering students, participants, and athletes. If the employer has paid the entire cost of a blanket health insurance policy, benefits under the policy may be made payable to the employer. 9. Stop-loss provision This type of provision found in health insurance contracts issued for delivery in this state permits the insurer s liability to cease at a given dollar amount. 10. Filing of health insurance forms for approval The filing of a form should be accompanied by the filing of premium rates for it. Subsequent changes in premium rates should be filed with supporting data at least 90 days before the date any change in the rate is proposed to become effective. a. If a rider or endorsement reduces or eliminates coverage of a policy, signed acceptance by the policyowner at the time of or before delivery of the policy is required. b. Any form which, by its terms, provides that only one of several benefits will be payable as a result of any one accident or sickness must state that the largest of the benefits will be payable. c. A noncancellable and guaranteed renewable family health insurance policy that covers the spouse of an insured must provide that, in the event of the death of the insured applicant, the spouse become the successor insured. d. In any policy form in which the insurer has the right to change premium rates, the policy must provide that notice of any increase in rates be given to the policyholder by mail at least 40 days before the expiration of the grace period (the expiration of the policy). 11. Limitations and exclusions HMO contracts [COMAR ] HMO contracts may not limit or exclude coverage for preexisting conditions. They also may not limit or exclude coverage for losses: in which a contributing cause was the commission of or attempt to commit a crime, either by the insured or another individual; in which a contributing cause was the member being engaged in an illegal occupation;

57 Maryland Law Supplement 53 sustained as a result of the insured being intoxicated or under the influence of any drug; due to the use of alcohol, drugs, or narcotics; or due to alcoholism or drug addiction. F. MARYLAND HEALTH INSURANCE PLAN [Secs ] 1. High risk pools Several states have established state-administered health insurance plans for residents who do not otherwise have access to health insurance. These people include those can afford to buy health insurance but are not eligible for group insurance and have a medical condition or other high-risk factor that makes it impossible to find a health insurance company that will insure them at any price. State high-risk insurance plans pool the people who fall into these high-risk categories and provide a state-sponsored health plan they can buy into. Although the premiums for these plans are often higher than the premiums in group plans, high-risk pools can help people who are denied health insurance for medical reasons or are facing a gap in coverage because of employment changes. Maryland has adopted such a plan, known as the Maryland Health Insurance Plan. 2. Description of the plan The Maryland Health Insurance Plan is a nonprofit entity that provides access to affordable, comprehensive health benefits for medically uninsurable residents. 3. Eligibility A medically uninsurable individual means a resident of Maryland who: shows that, for health reasons, a carrier has refused to issue substantially similar coverage to the individual or has refused to issue coverage except at a rate that is higher than the plan rate; has a history of or suffers from certain specified medical or health conditions; is eligible for the tax credit for health insurance costs under federal law; or is a dependent of an individual who is eligible for coverage. A medically uninsurable individual does not include someone who is eligible for coverage under: Medicare; the Maryland Medical Assistance Program or the Maryland Children s Health Program; or an employer-sponsored group health insurance plan that includes benefits comparable to plan benefits, unless the individual is eligible for the tax credit for health insurance costs under federal law. 4. Standard benefit package; premiums The board that administers the plan establishes a standard benefit package offered by the plan and sets a premium rate, subject to review by the Commissioner. The board must determine a standard risk rate by considering the premium rates charged by carriers in Maryland for coverage comparable to that of the plan. Premium rates must be reasonably calculated to encourage enrollment in the plan. The board may subsidize premiums, deductibles, and other policy expenses, based on a member s income.

58 54 Maryland Law Supplement 5. Unlawful referral to plan It is unlawful for a carrier, insurance producer, or third party administrator to refer an individual employee to the plan, or arrange for an individual employee to apply to the plan, for purposes of separating the employee from the group health insurance coverage provided through the employee s employer. 6. Portability provisions The plan may not apply a preexisting condition exclusion to an eligible individual who applies for coverage under the plan within 63 days of terminating prior creditable coverage. G. OTHER HEALTH CARE PROVIDERS 1. Nonprofit health service plans [Secs , 102] A nonprofit health service plan is a corporation without capital stock organized to operate a plan in which health care providers provide health care services to subscribers under contracts that enable each subscriber to certain health care services. A nonprofit health service plan is exempt from Maryland taxation. a. The mission of a nonprofit health service plan is to: provide affordable and accessible health insurance to the plan s insureds; assist and support public and private health care initiatives for individuals without health insurance; and promote the integration of a health care system that meets the health care needs of all residents. 2. Health maintenance organizations (HMOs) [Secs , 705] Under Maryland law, a health maintenance organization (HMO) is defined as an entity that: is a for-profit or nonprofit corporation providing its members with health care services that include at least physician, hospitalization, laboratory, x-ray, emergency, and preventive services, and out-of-area coverage, on an insured or prepaid basis; except for any copayment or deductible arrangement, is compensated only on a predetermined periodic rate basis for providing members with the minimum services specified above; and primarily provides services of physicians directly through physicians who are either employees or partners of the health maintenance organization or under arrangements with one or more groups of physicians, who are organized on a group practice or individual practice basis. 3. Dental plan organizations [Secs , 412] Dental plan organizations must obtain a certificate of authority before doing business in the state. The organization must establish and maintain a complaint system to provide procedures for resolving written complaints from enrollees about the plan s services. a. Surplus requirement [Sec ] A dental plan organization shall have and maintain at all times a surplus equal to the greater of $50,000 or 2% of the organizations annual gross premium income, up to a maximum of the required capital and surplus of a stock insurer.

59 Maryland Law Supplement 55 1.) The deposit shall be: an admitted asset of the dental plan organization in the determination of surplus; used to protect the interests of the dental plan organization s enrollees; used to assure continuation of limited health care services to enrollees of a dental plan organization that is in rehabilitation or conservation; and if a dental plan organization is placed in receivership or liquidation, an asset subject to provisions of the Uniform Insurers Liquidation Act. 2.) All income from deposits shall be an asset of the dental plan organization. 3.) A dental plan organization may withdraw a deposit or any part thereof after making a substitute deposit of equal amount and value. 4.) A substitute deposit of any securities is subject to the approval of the Commissioner. 4. Third-party administrators [Sec ] A third-party administrator is a person who, while acting for an insurer or health plan sponsor, has control over or custody of premiums, contributions, or any other money with respect to a plan or has discretionary authority over the adjustment, payment, or settlement of benefit claims under a plan or over the investment of a plan s assets. H. MANDATED HEALTH INSURANCE OFFERS AND BENEFITS Group and individual health insurance policies issued in Maryland must provide several required benefits, including, but not limited to, the following. 1. Prescription drugs [Sec ] Health plans that provide reimbursement for prescription drugs may not establish the amount of reimbursement, including copayments and deductibles, based on the identity, practicing specialty, or occupation of the prescriber. A plan may not impose a copayment, deductible, or other condition on an insured who uses the services of a community pharmacy that is not imposed when the insured uses the services of a mail order pharmacy. 2. Hospitalization at childbirth [Sec ] Health plans must provide that whenever a mother is required to remain hospitalized after childbirth for medical reasons and the mother requests that the newborn remain in the hospital, the plan will pay the cost of additional hospitalization for the newborn for up to four days. 3. Postpartum care [Sec ] Health plans must provide coverage for the cost of inpatient hospitalization services for a mother and newborn child for a minimum of: 48 hours of inpatient hospitalization care after an uncomplicated vaginal delivery; and 96 hours of inpatient hospitalization care after an uncomplicated cesarean section.

60 56 Maryland Law Supplement 4. Mammograms [Sec ] Health plans must provide coverage for breast cancer screening in accordance with the latest screening guidelines issued by the American Cancer Society. They are not required to cover breast cancer screenings in asymptomatic women that are provided by a facility that is not accredited by the American College of Radiology or certified or licensed under a program established by the State. No deductible may be required for this coverage. 5. Reconstructive breast surgery [Sec ] Health plans must provide coverage for reconstructive breast surgery, including coverage for all stages of reconstructive breast surgery performed on a nondiseased breast to establish symmetry with the diseased breast when reconstructive breast surgery is performed on the diseased breast. 6. Obstetrician/gynecologist coverage [Sec ] Health plans must classify an obstetrician/gynecologist as a primary care provider or, if the obstetrician/ gynecologist chooses not to be a primary care provider, must allow a woman to receive routine gynecological care from an in-network obstetrician/gynecologist without requiring the woman to visit a primary care provider first. a. If a plan classifies an obstetrician/gynecologist as a primary care provider and a woman does not choose an obstetrician/gynecologist as the woman s primary care provider, the plan must shall allow the woman an annual visit to an in-network obstetrician/gynecologist for routine gynecological care without requiring the woman to visit the woman s primary care provider first. b. Plans must also allow a woman to receive medically necessary, routine obstetric and gynecological care from an in-network, certified nurse midwife or any other in-network provider authorized to provide obstetric and gynecological services without first requiring the woman to visit a primary care provider. 7. Osteoporosis prevention and treatment [Sec ] Health plans must cover bone mass measurement for the prevention, diagnosis, and treatment of osteoporosis when the bone mass measurement is requested by a health care provider. 8. Prostate cancer screening [Sec ] Health plans must cover a digital rectal exam and a blood test called the prostate-specific antigen (PSA) test for men who are between 40 and 75 years of age. 9. Chlamydia screening/cervical cancer [Sec ] Health plans must cover an annual routine chlamydia screening test for: women who are under the age of 20 years if they are sexually active, and at least 20 years old if they have multiple risk factors; and men who have multiple risk factors. Plans must also cover a human papillomavirus screening at the testing intervals outlined in the recommendations for cervical cytology screening developed by the American College of Obstetricians and Gynecologists.

61 Maryland Law Supplement Mastectomy; prosthetic devices [Sec ] Health plans must provide coverage for a prosthesis that has been prescribed by a physician for an enrollee or insured who has undergone a mastectomy and has not had breast reconstruction. 11. Colorectal cancer screening [Sec ] Health plans must cover for colorectal cancer screening in accordance with the latest screening guidelines issued by the American Cancer Society. 12. Child hearing aid coverage [Sec ] Health plans must cover hearing aids for a covered minor child if the hearing aids are prescribed, fitted, and dispensed by a licensed audiologist. A plan may limit the benefit to $1,400 per hearing aid for each hearing-impaired ear every 36 months. 13. Treatment of morbid obesity [Sec ] Health insurance plans must provide coverage for the surgical treatment of morbid obesity that is recognized by the National Institutes of Health as effective for the long-term reversal of morbid obesity and consistent with guidelines approved by the National Institutes of Health. Coverage must be provided to the same extent as for other medically necessary surgical procedures. 14. Off-label use of drugs [Sec ] Health insurance plans that provide coverage for drugs may not exclude coverage for off-label use of a drug that is recognized for treatment in any of the standard reference or medical literature. Off-label use means the prescription of a drug for a treatment other than those treatments stated in the labeling approved by the federal Food and Drug Administration. 15. Nicotine replacement therapy drugs [Sec ] Health insurance plans must provide coverage for two 90-day courses of nicotine replacement therapy in each policy year. Nicotine replacement therapy is a product obtained by prescription that delivers nicotine to an individual attempting to cease the use of tobacco products. It does not include over-the-counter products. The insurer may not impose a different copayment or coinsurance requirement for nicotine replacement therapy than is imposed for any other comparable prescription. 16. Vitro fertilization [Sec ] Benefits may not exclude benefits for all outpatient expenses arising from in vitro fertilization procedures performed on the policyholder or subscriber or dependent spouse of the policyholder or subscriber. a. Limitations on benefits An entity may limit coverage of the benefits required under this section to three in vitro fertilization attempts per live birth, not to exceed a maximum lifetime benefit of $100,000. I. OTHER PROVISIONS 1. Genetic testing [Sec ] a. A health insurer, nonprofit health service plan, or health maintenance organization may not: use genetic testing or genetic information to reject, cancel, increase the rates of, affect the terms or conditions of, or otherwise affect a health insurance policy or contract;

62 58 Maryland Law Supplement request or require genetic testing or genetic information to determine whether or not to issue or renew health benefits coverage; or release identifiable genetic information or the results of a genetic test to any person who is not an employee of the insurer, nonprofit health service plan, or health maintenance organization or a participating health care provider who provides medical services to insureds or enrollees without the prior written authorization of the individual from whom the test results or genetic information was obtained. b. This section does not apply to life insurance policies, annuity contracts, longterm care insurance policies, or disability insurance policies. 2. Eligibility of children [Sec ] All group health policies must allow the addition of an insured s children to the policy or contract at any time and without evidence of insurability if the dependent children previously were covered under the policy of the insured s spouse and the spouse has died. This requirement applies regardless of whether the children are eligible for any continuation or conversion privileges under the policy of the deceased spouse. This benefit must be exercised within six months after the death of the spouse. 3. Eligibility of spouses [Sec ] Group health insurance policies must provide continuous open enrollment for the purpose of allowing a married employee to include coverage for the employee s spouse or children if the employee s spouse loses coverage under another group health insurance contract or policy because of the involuntary termination of the spouse s employment other than for cause. a. A group health insurance contract or policy may not require evidence of insurability for a spouse who qualifies for group health insurance coverage under this section. b. A married employee who wishes to alter the terms of the employee s coverage under this section must notify the employer within six months after the date on which the coverage of the employee s spouse under another group health insurance contract or policy terminates. 4. Conversion or continuation of group health insurance Information regard ing conversion privileges under group health insurance has been discussed previously. All group policies must contain a provision stating that an insured person who has been covered under the group policy for at least three months and the person s coverage is terminated for any reason may have issued to the person without evidence of insurability a converted policy providing benefits not less than the minimum benefits required by Maryland law.

63 Maryland Law Supplement 59 J. Medicare Supplement Insurance 1. Medicare Supplement Disclosure Requirements [COMAR ] a. Guide to Health Insurance for People with Medicare Issuers of health policies or certificates that provide hospital or medical expense coverage to persons eligible for Medicare must provide those applicants with a Guide to Health Insurance for People with Medicare using the prescribed form. The Guide must be provided whether or not the policies or certificates are advertised, solicited, or issued as Medicare supplements. 1.) Except for direct response issuers, issuers must deliver the Guide to the applicant at the time of application and obtain acknowledgement of receipt. Direct response issuers must deliver the Guide to the applicant upon request, but no later than when the policy is delivered. b. Notice of modifications No later than 30 days before the annual effective date of any Medicare benefit changes, an issuer must notify its Medicare supplement policyholders and certificate holders of modifications the insurer has made to Medicare supplement insurance policies or certificates. The notice must also inform each policyholder or certificate holder as to when any premium adjustment is to be made due to changes in Medicare. The notice may not contain or be accompanied by a solicitation. c. Outline of coverage Issuers must provide an outline of coverage to all applicants when the application is presented and, except for direct response policies, must obtain an acknowledgement of receipt. The language and format of the outline of coverage is prescribed by law. The outline must be printed in at least 12-point type. All Medicare Supplement plans must be shown on the cover page, with the plans offered by the insurer prominently identified. Premium information for plans that are offered must be prominently displayed on the cover page or immediately following it. All possible premiums for the applicant must be illustrated. 2. Minimum standards for Medicare supplement policies The purpose of Maryland law with regard to minimum standards for Medicare supplement policies is to provide for the reasonable standardization of coverage and simplification of terms and benefits of these contracts, to facilitate public understanding and comparison of these policies, to eliminate policy provisions that may be misleading or confusing, and to provide for full disclosures in the sale of health insurance coverages to persons eligible for Medicare. a. Policy terms and definitions An insurance policy may not be advertised, marketed, or solicited in this state as a Medicare supplement policy if any of the terms defined in the policy are less favorable to the insured person than the definitions or terms found in regulation contracts.

64 60 Maryland Law Supplement b. Minimum benefit standards [COMAR , Secs , 909, 910] A health insurance policy may not be advertised, marketed, or solicited in this state as a Medicare supplement policy or as a Medigap policy unless it meets the general and minimum standards of Maryland law, and the insurer and its producers adhere to the requirements of Maryland law. Some of these general standards include, but are not limited to, the following. 1.) A Medicare supplement policy may not deny a claim for losses incurred more than six months from the effective date of coverage for a preexisting condition. 2.) A Medicare supplement policy may not provide benefits for losses resulting from sickness on a different basis than benefits provided for losses resulting from accidents. 3.) A Medicare supplement policy must provide that benefits designed to cover deductibles or coinsurance amounts under Medicare will be changed automatically to coincide with any corresponding changes in the applicable Medicare deductible in copayment amounts. 4.) A Medicare supplement policy may not provide for termination of coverage of a spouse because of termination of coverage of the insured (except for nonpayment of premium), may not be refused renewal by the insurer on the grounds of deterioration of health of the person or persons covered, or be refused renewal for any other reason unless approved by the Insurance Commissioner. 5.) Termination of a Medicare supplement policy must be without prejudice to any continuous loss that began while the policy was in force. 6.) Payment of a benefit for Medicare eligible expenses may be conditioned on the same or less restrictive payment conditions, including a determination of medical necessity, as are applicable to Medicare claims. 7.) Coverage under a Medicare supplement policy may not be subject to any exclusions, limitations, or reductions not consistent with the exclusions, limitations, or reductions under Medicare (with some exceptions). 8.) Policy replacement requirements If a Medicare supplement policy or certificate replaces another Medicare supplement policy or certificate, the replacing carrier shall waive the time periods applicable to preexisting conditions, waiting periods, elimination periods, and probationary periods in the new Medicare supplement policy or certificate for similar benefits to the extent the time was spent under the original Medicare supplement policy or certificate. If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the replacing carrier shall offer coverage to each individual who was covered under the old group Medicare supplement policy on its date of termination.

65 Maryland Law Supplement 61 Under the new group Medicare supplement policy, coverage may not be excluded for a preexisting condition that would have been covered under the group Medicare supplement policy being replaced. 9.) Cancellation, nonrenewal, or termination of policy A carrier may not cancel or nonrenew a Medicare supplement policy or certificate for any reason other than for nonpayment of premium or material misrepresentation. 10.) Right to return policy, free look Each Medicare supplement policy or certificate shall have prominently printed on the first page of the policy or certificate or attached to it, a notice that states that the applicant may return the Medicare supplement policy or certificate within 30 days after its delivery and receive a refund of the premium if, after examination of the Medicare supplement policy or certificate, the applicant is not satisfied for any reason. The carrier shall pay a refund made directly to the applicant in a timely manner. c. Prohibited policy provisions The Medicare supplement policy may not contain waivers to exclude, limit, or reduce coverage or benefits for specifically named or described diseases or physical conditions unless the exclusions, limitations, or reductions are specifically provided for under Maryland law. d. Compensation to producers First-year commission may not exceed 200% of the commission paid for servicing the contract in the second and subsequent years. e. Guaranteed issue [COMAR ] 1.) Eligible individuals People who are eligible for guaranteed issue of a Medicare supplement policy include people who were previously enrolled under some other type of health plan and whose coverage terminated for any of the various reasons specified in the regulations. The types of previous coverage that qualify under this rule include: group employee health plans that provide benefits that supplement Medicare benefits; Medicare Advantage plans under Medicare Part C; plans under the Program of All-Inclusive Care for the Elderly (PACE) program; or other Medicare supplement plans. 2.) Rights of eligible individuals If an applicant for Medicare supplement insurance is an eligible individual, the issuer may not: deny the individual a Medicare supplement policy that is offered and available for issuance to new enrollees;

66 62 Maryland Law Supplement discriminate in the pricing of a Medicare supplement policy because of the individual s health status, claims experience, receipt of health care, or medical condition; or impose an exclusion for preexisting conditions. 3.) Guaranteed issue time periods Generally, the guaranteed issue time period extends for 63 days after the individual s previous health coverage terminates. f. Open enrollment [COMAR ] The open enrollment period for Medicare supplement insurance is the six-month period beginning with the first day of the first month in which an individual is both 65 years old or older and is enrolled for benefits under Medicare Part When an application is submitted during this period, an issuer may not deny or condition the issuance or effectiveness of a Medicare supplement policy or certificate or discriminate in the pricing of the policy or certificate because of the applicant s health status, claims experience, receipt of health care, or medical condition. g. Marketing standards [COMAR , Sec ] 1.) An issuer, directly or through its producers, must: Establish marketing procedures to assure that any comparison of policies by its agents or other producers will be fair and accurate; Establish marketing procedures to assure that excessive insurance is not sold or issued; Display prominently by type, stamp, or other appropriate means on the first page of the policy the following: Notice to buyer: This policy may not cover all of your medical expenses. ; Make every reasonable effort to identify whether a prospective applicant or enrollee for Medicare supplement insurance already has health insurance and the types and amounts of any insurance; and Display prominently on the first page of the policy a notice that the buyer has the right to return the policy within 30 days and receive a refund of premium. 2.) The following practices are prohibited in the marketing of Medicare supplement insurance: Twisting: Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers to induce a person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert an insurance policy or to take out a policy with another insurer High pressure tactics: Using any marketing method that tends to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance

67 Maryland Law Supplement 63 Cold lead advertising: Using any method of marketing that fails to disclose conspicuously that a purpose of the marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company h. Suitability requirements; excessive insurance [COMAR ] In recommending the purchase or replacement of a Medicare supplement policy or certificate an agent must make reasonable efforts to determine the appropriateness of a recommended purchase or replacement. A sale of a Medicare supplement policy or certificate that will provide an individual with more than one Medicare supplement policy or certificate is prohibited. i. Premium ratings Benefits are identical for all Medicare supplement plans of the same type, but premiums may vary from one company to another. Insurance companies use three methods to calculate premiums: issue age, attained age, and no age (community rating). Under the issue age method, an insured s premium will be based on his age when he purchased the policy. Under the attained age method, the premium will be based on current age and will increase as the insured gets older. Under the no age (community rating) method, everyone pays the same premium regardless of age. All of these rating methods are subject to rate increases and Medicare changes. j. Minimum loss ratios [Sec ] Medicare supplement policies must return aggregate benefits that are reasonable in relation to the premium charged. The minimum acceptable loss ratios for Medicare supplement policies are 75% of the aggregate amount of premiums earned for group policies and 65% for individual policies. k. Suspension of benefits [COMAR (B)(12)] 1.) A Medicare supplement policy or certificate shall provide that benefits and premiums under the policy or certificate shall be suspended at the request of the policyholder or certificateholder for a period not to exceed 24 months in which the policyholder or certificateholder has applied for and is determined to be entitled to medical assistance under Title XIX of the Social Security Act (Medicaid), but only if the policyholder or certificateholder notifies the issuer of the policy or certificate within 90 days after the date the individual becomes entitled to medical assistance. 2.) If the suspension occurs and if the policyholder or certificateholder loses entitlement to Medicaid, the policy or certificate shall be automatically reinstituted, effective as of the date of termination of entitlement, if the policyholder or certificateholder provides notice of loss of entitlement within 90 days after the date of loss of entitlement and pays the premium attributable to the period, effective as of the date of termination of entitlement.

68 64 Maryland Law Supplement K. Long-Term care insurance 1. Long-term care [Secs , 106; COMAR ] Maryland long-term care contract requirements have been established by regulation concerning the design and sale of LTC policies. These regulations, applicable to the State of Maryland, include the following. Long-term care policies issued in Maryland must provide benefits for at least 24 months. An outline of coverage must be provided at the time of initial solicitation to anyone who is purchasing LTC insurance. This outline will summarize the benefits and coverages included in the LTC policy. To provide for full and fair disclosure in the sale of LTC policies, an outline of coverage must be provided. A Buyer s Guide, in a format developed by the National Association of Insurance Commissioners (NAIC), must be delivered to all applicants before an application or enrollment form is presented. Long-term care policies may only be terminated for nonpayment of premium, a material misrepresentation on the application (only within a reasonable contestable period), or for fraud on the application. For nonpayment of premium, 30 days notice of termination must be provided by an insurer to the covered person and the individual designated by the covered person to receive notification of termination (no policy may be delivered until the insurer has notified the applicant that they have the option of designating one other individual to receive a termination notice). A 30-day free-look provision is required. Policies are issued as noncancellable or guaranteed renewable only. Preexisting conditions may be excluded for no more than six months. LTC policy loss ratios must be at least 60%; at least $.60 of each premium dollar collected must be paid as benefits to policyholders. Coverage must be provided for Alzheimer s disease. LTC policy exclusions include preexisting conditions (six-month limitation), war, suicide, intentionally self-inflicted injuries, alcoholism and drug addiction, treatment paid for by the government, and mental and nervous disorders (other than Alzheimer s disease). Group long-term care policies must provide the covered individuals with rights of continuation or conversion of coverage. If a group long-term care policy is replaced by another policy issued to the same policyholder within 12 months of the pervious policy s termination, all persons covered under the terminated policy must be covered under the new policy without an exclusion for preexisting conditions or a requirement that the provision of coverage depends upon the person s health, claim experience, or use of long-term care services. The addition of any riders or endorsements to a policy that reduces or eliminates benefits requires the signed acceptance of the policyholder. Producers soliciting long-term care policies must list all other policies in force and those that have lapsed or been terminated during the last five years.

69 Maryland Law Supplement 65 When a policy is being replaced, written notice must be provided to the existing insurer within five days from the date of the application. Insurers are required to submit copies of all advertising to the Insurance Commissioner at least five business days before its intended use. Insurers may not authorize producers to sell long-term care insurance unless they have initially received training in the needs for and purposes of long-term care insurance. Producers must receive at least two hours of long-term care insurance continuing education during the preceding 24-month period. A producer is required to make reasonable efforts to determine the appropriateness of a recommended purchase or replacement. a. Policy summary [Sec ] If long-term care benefits are part of a life insurance policy or rider, the insurer must provide a policy summary at the time of policy delivery. The summary must include: information required to be included in an outline of coverage; an explanation of how the long-term care benefits interact with other components of the life insurance policy, including deductions from death benefits; an illustration of the amount of benefits, length of benefit, and guaranteed lifetime benefits if any, for each covered individual; any exclusions, reductions, or limitations on benefits for long-term care; and if applicable to the policy type, a disclosure of the effects of exercising other rights under the policy, a disclosure of guarantees related to long-term care costs of insurance charges, and current and projected maximum lifetime benefits. b. Home health care services [Sec ] If the policy provides benefits for home health care services, it may not limit or exclude benefits by: requiring that the insured would need care in a nursing facility if home health care services were not provided; requiring that the insured first or simultaneously receive nursing or therapeutic services at home or in a community setting before home health care services are covered; limiting eligible services provided by registered nurses or licensed practical nurses; requiring that a nurse or therapist provide services that can be provided by a home health aide or other licensed or certified home care worker acting within the scope of licensure or certification; requiring that the insured have an acute condition before home health care services are covered; or limiting benefits to services provided by Medicare-certified agencies or providers. Coverage for home health care services may be applied to the coverage for other benefits provided in the policy when determining maximum coverage under the terms of the policy.

70 66 Maryland Law Supplement c. Replacement [COMAR ] Application forms for individual long-term care policies and for certificate holders under group policies other than employer-employee groups must include questions to determine whether at the time of the application the applicant has another long-term care insurance policy or certificate in force, or whether a long-term care policy or certificate is intended to replace any other long-term care policy or certificate or other insurance then in force. A supplementary application signed by the applicant may be used for this purpose. 1.) An agent soliciting an application for long-term care insurance must list any other long-term care coverage or other health insurance policies the applicant has that are still in force or that have lapsed or otherwise terminated during the past five years. 2.) Upon determining that a sale will involve replacement, the agent or the insurer must furnish the applicant with a notice regarding replacement of long-term care coverage or other health insurance before delivering the policy. A copy of the notice must be given to the applicant, and another copy signed by the applicant must be retained by the insurer. 3.) Insurers using direct response solicitation must deliver a notice regarding replacement to the applicant upon issuance of a long-term care policy. 4.) When replacement is intended, the replacing insurer must give written notice to the existing insurer, identifying the insured and the policy number or the insured s address. The notice must be given within five working days from the date the application for the new coverage is received at the home office of the insurer, or the date the policy is issued, whichever is earlier. d. Applicant s options [COMAR ] An application for a longterm care insurance policy or certificate must contain a statement to be signed separately by the applicant and stating that the applicant has been informed of the right to: designate a person to receive any notice of termination; purchase inflation protection, home health care if not included in the policy, and nonforfeiture benefits; and choose the form of nonforfeiture benefit if the policy provides a choice. The statement must also state that the benefits and any costs of each of these options have been fully explained to the applicant. e. Benefit triggers: nonqualified policies [COMAR ] The eligibility criteria for the payment of benefits (benefit triggers) under a federally nonqualified long-term care policy may be no more restrictive than either: a deficiency in the ability to perform no more than three of the activities of daily living; or the presence of cognitive impairment.

71 Maryland Law Supplement 67 The activities of daily living (ADLs) include bathing, continence, dressing, eating, toileting, and transferring. f. Benefit triggers: qualified policies [COMAR ] A federally-qualified long-term care insurance contract must pay benefits on a determination that the insured is unable to perform at least two activities of daily living for an expected period of at least 90 days due to a loss of functional capacity or to severe cognitive impairment. g. Applications for older adults [Sec ] Before issuing a policy of long-term care insurance to an applicant who is at least 80 years old, unless the policy is guaranteed issue, the carrier shall obtain a report of a physical examination, an assessment of functional capacity, or copies of medical records. h. Underwriting considerations Long-term care policies may be underwritten either on the application only or on the application and attending physician s records. Some companies also interview the proposed insured by phone or require a paramedical exam. Many insurers issuing long-term care policies use multiple rating structures as part of their underwriting processes. Applicants in the standard class are considered a normal risk for long-term care and are charged accordingly. Applicants in the substandard class include those with serious ailments such as diabetes, heart or lung disease, or rheumatoid arthritis. Some companies may have a preferred class such as those who are in good health, don t smoke, maintain an acceptable weight level, and don t have a family history of heart disease, cancer, and so on. Applications; medications [Sec ] Each application for longterm care insurance, except applications that are for long-term care insurance that is guaranteed issue, shall contain clear and unambiguous questions to ascertain the health condition of the applicant. If an application for long-term care insurance asks whether the applicant has had medication prescribed by a physician, the application also shall ask the applicant to list the medication that has been prescribed. If the carrier knew or should have known that the medication listed, at the time of application was directly related to a medical condition for which coverage would otherwise be denied, the policy or certificate of long-term care insurance may not be rescinded for that condition. i. Long-term care tax credit for employers [Sec ] Employers may claim a state income tax credit equal to 5% of the costs incurred during the taxable year to provide long-term care insurance as part of an employee benefit package. The credit is limited to the lesser of $5,000 or $100 for each employee covered by long-term care insurance under the employee benefit package. j. Long-term care tax credit for individuals [Sec ] This credit applies to premiums for federally tax-qualified long-term care premiums on policies covering Maryland residents. An individual may claim a state income tax credit equal to 100% of the eligible premiums paid during the taxable year for

72 68 Maryland Law Supplement long-term care insurance covering the individual or the individual s spouse, parent, stepparent, child, or stepchild. This credit: is limited to $500 for each insured covered by long-term care insurance for which the individual pays the premiums; and may not be claimed by more than one taxpayer with respect to the same insured individual. In addition, the credit may not be claimed if: the insured individual was covered by long-term care insurance at any time before July 1, 2000; or the credit has been claimed for that insured individual for any prior taxable year. The total amount of the credit for any taxable year is limited to the state income tax for that taxable year, as calculated before the application of certain other credits. The unused amount of the credit may not be carried over to any other taxable year. L. Maryland Health Benefit Exchange 1. Definitions a. Exchange [Sec , 102] Exchange means the Maryland Health Benefit. The exchange is established as a public corporation; this includes an individual exchange and the small business health options program (SHOP). b. The purposes of the exchange are to: reduce the number of uninsured in the state; facilitate the purchase and sale of qualified health plans in the individual market; assist qualified employers in the state in facilitating the enrollment of their employees in qualified health plans in the small group market and in accessing small business tax credits; assist individuals in accessing public programs, premium tax credits, and costsharing reductions; and supplement the individual and small group insurance markets outside of the exchange. c. Beginning January 1, 2014, the exchange shall allow any qualified plans that meet the minimum standards established by the exchange to be offered in the exchange, and may exercise its authority to establish minimum standards for qualified plans in addition to those required by the Affordable Care Act. d. The exchange shall: make qualified plans available to qualified individuals and qualified employers;

73 Maryland Law Supplement 69 allow a carrier to offer a qualified dental plan through the exchange that provides limited scope dental benefits that meet the requirements of the Internal Revenue Code, either separately, in conjunction with, or as an endorsement to a qualified health plan, provided that the qualified health plan provides pediatric dental benefits that meet the requirements of the Affordable Care Act; allow a carrier to offer a qualified vision plan through the exchange that provides limited scope vision benefits that meet the requirements of the Internal Revenue Code, either separately, in conjunction with, or as an endorsement to a qualified health plan, provided that the qualified health plan provides pediatric vision benefits that meet the requirements of the Affordable Care Act; and consistent with the guidelines of the Affordable Care Act, implement procedures for the certification, recertification, and decertification of: health benefit plans as qualified health plans, dental plans as qualified dental plans, and vision plans as qualified vision plans. e. Beginning January 1, 2016, in addition to establishing minimum standards for qualified plans, the exchange may employ alternative contracting options and active purchasing strategies, including: competitive bidding; negotiation with carriers to achieve optimal participation and plan offerings in the exchange; and partnering with carriers to promote choice and affordability for individuals and small employers among qualified plans offering high value, patient-centered, team-based care, value-based insurance design, and other high-quality and affordable options. 2. SHOP [Sec ] a. The SHOP Exchange shall be a separate insurance market within the exchange for small employers, and may not be merged with the individual market of the individual exchange. b. The SHOP Exchange shall allow qualified employers to: as required by regulations adopted by the secretary under the Affordable Care Act, designate a coverage level within which their employees may choose any qualified health plan; designate a carrier or an insurance holding company system, and a menu of qualified health plans offered by the carrier or the insurance holding company system in the SHOP Exchange from which their employees may choose; and designate one or more qualified dental plans and qualified vision plans to be made available to their employees.

74 70 Maryland Law Supplement 3. Open enrollment for small employer plans [Sec ] A carrier shall establish a standardized annual open enrollment of at least 30 days for each small employer. The carrier shall have an open enrollment period for all employees who are outside the initial or annual open enrollment period for 30 days. a. A carrier shall provide an special open enrollment period for each individual who experiences a triggering event. The period shall be at least 60 days, beginning on the date of the triggering event. b. A triggering event occurs when: an eligible employee or dependent loses minimum essential coverage; or an eligible employee who is enrolled in a qualified health plan in the SHOP Exchange. 4. Open enrollment for individuals Beginning October 15, 2014, a carrier that sells health benefits plans to individuals must establish an annual open enrollment period. The annual open enrollment period shall begin on October 15 and extend through December 7 of each year. a. A carrier shall provide a 60 day special open enrollment period for each individual who experiences a triggering event. b. A triggering event occurs when: an individual gains a dependent or becomes a dependent through marriage, birth, adoption, or placement for adoption; or an individual is offered a health benefit plan through the individual exchange. M. Patient Protection and Affordable Care Act 1. Coverage of children to age 26 Children up to age 26 can be insured as dependents covered by their parent s insurance policy. a. The children can join or remain on the parent s plan even if they are: married; not living with their parents; attending school not financially dependent on their parent(s); or eligible to enroll in their employer s plan. b. Until 2014, grandfathered group plans do not have to offer dependent coverage up to age 26 if the person is eligible for group coverage outside the person s parent s plan. c. A 30-day enrollment period must be provided by employers. 2. Preventive care The insured and dependents of the insured on the health care plan may be eligible for some preventive services at no additional cost to the insured.

75 Maryland Law Supplement 71 If the health plan has been enforce since March 20, 2010, and the plan is not grandfathered, the health care providers are required to provide such services. a. Network providers will provide these services only through an in-network provider. With the use of an out-of-network provider, the insured may be charged a fee. b. Office visit fees must be billed separately from any preventive services. 3. Preexisting conditions a. Children Health plans cannot limit or deny benefits or deny coverage for a child younger than age 19 because the child has a preexisting condition. The act states that if a health problem or disability a child developed before coverage has been applied for, the insurance company or provider may not deny coverage solely on that basis. This applies to both group and individual policies. b. Preexisting Condition Insurance Plan (PCIP) PCIP offers a comprehensive benefit package that provides preventive care (paid at 100%, with no deductible) when the insured is seen in an in-network doctor and the doctor indicates a preventive diagnosis. Included are annual physicals, flu shots, routine mammograms, and cancer screenings. For other care, the insured will pay a deductible before PCIP pays for the health care. After the insured pays the deductible, the insured is also responsible for 30% of medical costs in-network. There is a separate $500 deductible for prescriptions. The maximum the insured will pay out-of-pocket for covered services in a calendar year is $6,250 in-network/$10,000 out-of-network. Benefits are effective on or after January 1, Lifetime and annual limits a. The Affordable Care Act prohibits health plans from putting lifetime dollar limits on most benefits that are received by an insured. In 2014, the act also restricts and phases out the annual dollar limits on most benefits that an insured will receive under a health plan. b. For plans starting on or after September 23, 2012, but not before January 1, 2014, the annual dollar limit is $2 million. After January 1, 2014, there are no annual dollar limits. c. Plans are allowed to put an annual dollar limit and lifetime dollar limit on health care services that are not considered essential. 5. Essential health benefits a. Health plans offered in the individual and small group markets must include essential health benefits: Ambulatory patient services

76 72 Maryland Law Supplement Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care b. All Medicaid state plans and insurance policies that are certified and offered in the exchanges must offer these services starting in Grandfathered and non-grandfathered plans a. A grandfathered plan is not required to comply with some of the consumer protections of the Affordable Care Act that apply to other health plans that are not grandfathered. b. A non-grandfathered plan means the plan must comply with all rules and laws of the Affordable Care Act. c. Consumer protections that apply to all plans (both grandfathered and nongrandfathered plans) include the following. Plans are prohibited from applying lifetime dollar limits to key health benefits. Plans are not permitted to cancel the policy solely because of an honest mistake on an application. Plans must extend dependent coverage to adult children until they turn 26, (exception until 2014, if the young adult is offered coverage outside of their parent s plans, they must opt for that coverage). d. Group plans and grandfathered plans are not required to: provide certain recommended preventive services at no additional charge; offer new protections when an insured is appealing claims and coverage denials; or protect the choice of health care providers and the insured s access to emergency care. e. Individual health plans are not required to: phase out annual dollar limits on key benefits; or eliminate preexisting condition exclusions for children younger than 19 years old.

77 Maryland Law Supplement Rescission Rescission is the retroactive cancellation of a health policy. Under the Affordable Care Act, if an insured makes an unintentional mistake on an application, the insurance company cannot retroactively cancel the entire policy except for fraud or intentional misrepresentation of a material fact. 8. Internal appeal and external review If an insurer denies payment of a service or treatment, the Affordable Care Act tells the insured how to progress with an appeal (this is known as an internal appeal). If the plan still denies the payment after the appeal, the law allows for an independent review organization to decide whether to uphold or overturn the decision (this is known as the external review). 9. Metal values Beginning in 2014, non-grandfathered health plans in the individual and small group markets must meet certain actuarial values. The actuarial value is calculated as the percentage of total average cost for covered benefits that a plan will cover. a. The levels are: Bronze plan 60% Silver plan 70% Gold plan 80% Platinum plan 90% b. These level help the consumer compare plans with similar levels of coverage, so the consumer can make a well-informed decision. For example, if the gold plan is selected, the actuarial value of 80% means the consumer would be responsible for 20% of the cost of all covered benefits. c. Issuers may offer catastrophic-only coverage with lower actuarial values for eligible individuals. 10. SHOP payment and billing A small business health options program is an exchange for small businesses to compare health plans, get answers to questions, and enroll in or offer to employees a plan that meets their needs. Businesses with up to 100 employee will be eligible. The state can limit participation to businesses with up 50 employees until a. Under the Affordable Care Act, premiums will no longer be based on the employees health or medical history as they now are in many states. Instead, premiums can vary only based on the ages and smoking histories of employees. Some states may opt for even stronger consumer protections. Employees cannot be excluded from a plan or denied plan benefits because of preexisting health conditions. b. Premiums will be set according to modified community rating. In effect, every business in the small-group pool will pay the same basic rate for insurance.

78 74 Maryland Law Supplement c. A unique function of SHOP exchanges is to administer a streamlined premium billing and collection system. The exchange will prepare and issue a single bill to each participating employer that reflects premiums owed for all plans in which its employees are enrolled. The employer will make a single payment to the exchange, and the exchange will be responsible for paying the various plan issuers. 11. Tax credits/subsidies a. Now through 2013, a company may be eligible for a small business premium tax credit of up to 35% of the company s share of the employees premiums. To be eligible, a business must: have fewer than the equivalent of 25 full-time workers; have an average annual employee wage below $50,000; and cover at least 50% of the cost of health insurance coverage. b. Starting in 2014, the maximum tax credit increases to 50% of the employer s share of health insurance coverage but is available only to small employers that purchase coverage through the SHOP. This larger tax credit will be available for two years. c. Nonprofit employers meeting the eligibility criteria can receive credits for 25% of the employer s share of premium costs through 2013 and 35% of these premium costs for two years starting in d. In 2014, taxpayers with household incomes between 100% and 400% of the federal poverty level will be eligible for premium tax credits for coverage purchased through the exchanges for themselves and members of their family who are not eligible for other health care coverage. These premium tax credits are paid on an advance basis to the health insurance provider, which will reduce the monthly premiums owed by families to purchase coverage. The Congressional Budget Office estimates that when the Affordable Care Act is fully phased in, individuals receiving premium tax credits will get an average subsidy of more than $5,000 per year. The Treasury Department proposed regulations that outline eligibility standards for the premium tax credit and how such tax credits will be calculated. The exchange will follow these standards in determining eligibility and calculating advance payments of the premium tax credit. The coverage taxpayers may acquire with the assistance of the premium tax credits will supplement not supersede existing employer-sponsored health programs, allowing Americans to keep the coverage they have. 12. Penalties and fines a. Individuals If the insured was covered by a qualified health plan for the whole year, no penalty would be assessed. If the insured was not covered: in 2014, a penalty of $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income whichever is greater;

79 Maryland Law Supplement 75 in 2015, a penalty of $325 per adult and $ per child (up to $975 for a family) or 2% of family income, whichever is greater; and in 2016 and beyond, a penalty of $695 per adult and $ per child (up to $2,085 for a family) or 2.5% of family income, whichever is greater. Penalty is subject to the cost of living on an annual basis. b. Employers The following applies for 2014 and beyond. If the employer has 25 or fewer employees and an average wage up to $50,000, it may be eligible for a health insurance tax credit, but no penalty applies. If the employer has at least 50 full-time employees, does not offer coverage, and if one employee receives a premium tax credit or cost sharing subsidy in an exchange, the employer must pay a penalty for not offering coverage. The penalty is $2,000 annually times the number of full-time employees minus 30. The penalty increases each year by the growth in insurance premiums. If the employer has at least 50 full-time employees, offers coverage, and if the insurance pays for at least 60% of covered health expenses for a typical population, and if the covered employees do not pay more than 9.5% of family income for the employer coverage, then no penalty applies. If the employer has at least 50 full-time employees, offers coverage, and either the insurance pays for less than 60% of health expenses or employees are paying more than 9.5% of family income for their coverage, then the affected employees may buy coverage in the exchange and receive a premium tax credit. In this event, the employer will be subject to a penalty of $3,000 annually for each full-time employee receiving a tax credit, up to a maximum of $2,000, times the number of full-time employees minus 30. This penalty will increase annually based on increases in insurance premiums.

80 76 Maryland Law Supplement Maryland LAW supplement PRACTICE FINAL Student instructions: Following your thorough study of this supplement, take this 50-question sample examination. Grade your performance utilizing the answer key provided. Carefully review the topics pertaining to those questions answered incorrectly. I. General Insurance 1. An applicant for insurance who knowingly shares a producer s commission in return for purchasing a policy is guilty of rebating twisting coercion collusion 2. Which of the following is(are) the powers and duties of the Commissioner of Insurance? I. Prosecutes producers who violate state insurance laws II. Issues cease and desist orders for just cause III. Appoints examiners or deputies I only I and II I, II and III II and III 3. An insurance company chartered and formed under the laws of the State of Maryland is known, in this state, as an alien company a foreign company a nonadmitted company a domestic company 4. An individual who misrepresents the terms of an insurance contract in order to illegally induce a prospective insured to lapse or surrender his current plan of insurance has engaged in rebating twisting defamation larceny 5. Statements made by a producer that are false and derogatory with regard to the financial condition of another producer would be considered coercion intimidation unfair discrimination defamation 6. An insurance company incorporated or formed under the laws of another state but authorized to solicit insurance in the State of Maryland best describes a domestic company an alien company a stock company a foreign company 7. An insurance company that receives a license from the State of Maryland and is licensed to conduct property and casualty business in this state best describes a nonadmitted company an authorized company a government insurer an unauthorized insurance company 8. In accordance with Maryland state insurance regulations, Lloyd s underwriters (Lloyd s of London) may only be formed as a foreign insurer only be formed as a domestic insurer not be organized in the State of Maryland be organized in the State of Maryland as an alien insurer

81 Maryland Law Supplement An insurer formed under the laws of another country but licensed to solicit insurance business in the State of Maryland best describes an alien company a domestic company a mutual company a foreign company 10. An insurer owned by its policyholders which provides the potential for these policyholders to share in the company s profits in the form of dividends best describes a stock company a mutual company a foreign company an unauthorized company 11. An individual licensed by the State of Maryland to place insurance business with an unauthorized insurance company best describes a nonresident producer a producer a surplus lines broker a public adjuster 12. For a producer to qualify for licensure under Maryland law, he must file with the Commissioner a bond in the penal sum of $2,000 $5,000 No bond is required. A bond is only required at renewal. 13. A producer licensed in the State of Maryland is required to file which of the following with the Commissioner? Any changes or additions to or deletions to the license The agency or trade name to be used by the licensee Both A and B Neither A nor B 14. Producer licenses must be renewed every year on the anniversary of the issuance date every other year on the last day of the producer s birth month every year on the producer s birthday every two years on the anniversary of the issuance date 15. A producer who holds a life insurance license must complete how many hours of continuing education? How many hours of a producer s continuing education requirement must be devoted to courses on ethics? Which of the following entities may secure a license to act as an insurance adviser? I. Sole proprietorship II. Partnership III. Corporation I and II I, II and III I and III II and III 18. Each of the following statements is true EXCEPT producer s licenses expire every other year the Commissioner may revoke or suspend a license of a producer for just cause producer s licenses are issued for periods of 1 year either a producer or an insurer may terminate a license at any time with written notice to the Commissioner

82 78 Maryland Law Supplement 19. A producer who knowingly procures, by fraudulent representations, payment of any premium on any insurance contract may be guilty of larceny fraud misrepresentation rebating 20. The maximum liability of the Maryland Life and Health Insurance Guaranty Corporation for life insurance death benefits on a single contract is $300,000 $500,000 $750,000 $1 million 21. The maximum penalty that may be assessed for a violation of the state s Unfair Trade Practice law is $125,000 $100,000 $50,000 $25, To engage in the insurance business in Maryland, an insurer may be any of the following EXCEPT a mutual company a Lloyd s underwriter a stock company a reciprocal insurer 23. The Maryland Insurance Commissioner is appointed by the governor for a term of 4 years appointed by the governor for a term of 6 years elected by the people for a term of 4 years elected by the people for a term of 6 years II. Life Insurance 24. The existing insurer must inform the owner by letter of the right to receive information regarding the existing policy or contract values in a replacement of a life insurance policy, such as an in-force illustration or life insurance policy summary, within how many days? The replacing insurer must allow the owner of the life insurance policy or annuity contract to return the life insurance policy or annuity contract within how many days for a full refund? A person will be entitled to have a converted group life policy issued to them by the insurer, without evidence of insurability, if the application is made within how many days of termination? All of the following define a replacement policy EXCEPT the existing policy is converted within the same insurance company existing life insurance is continued as an extended term policy the existing policy is used in a financed purchased of a new policy existing life insurance has been or is to be lapsed 28. A noncontributory group life insurance plan may be provided to an employee group if what percentage of all employees participate? 50% 70% 75% 100% 29. A person insured under a group life policy and whose employment has been terminated dies during the conversion period. The insurer will make no payment since a premium was never received submit a declaration form to the underwriting department for approval provide coverage in an amount that the insured would have been entitled to had he not died none of the above

83 Maryland Law Supplement An insurer must keep all records of replacement transactions for a period of 1 year 2 years 3 years 5 years 31. All of the following provisions are required in a sales presentation when selling life insurance EXCEPT when starting an life insurance interview, the producer must disclose for who the producer works state that dividends are guaranteed in a policy deliver a Buyer s Guide and policy summary before accepting the premium for an insurance contract unless the contract has a free look provision the producer must receive a signed statement from the applicant stating that the applicant has been advised to consult with a tax advisor 32. A producer who violates Maryland law regarding state replacement regulations may be assessed a prison sentence of 6 months a fine of not less than $50 nor more than $1,000 a fine of not less than $25 nor more than $250 a fine of not less than $25 nor more than $ The Maryland nonforfeiture law applies to which of the following? Annuities Group life insurance Ordinary life Certain nonrenewable term policies III. Accident and Health Insurance 34. Long-term care insurance policies issued in Maryland must provide benefits for at least 6 months 9 months 18 months 24 months 35. Health plans must provide coverage for inpatient hospitalization after an uncomplicated cesarean section for at least 12 hours 24 hours 48 hours 96 hours 36. Under the Affordable Care Act, the Gold plan pays for what percentage? 70% 80% 90% 100% 37. Under Maryland s SHOP plans, the open enrollment period should be for at least how many days? Testimonials used in the advertisement of accident and health insurance policies issued in this state must be genuine accurately produced both A and B neither A nor B 39. An individual health policy provides for the coverage of newborn infants from the moment of birth as long as a premium is paid within 31 days 30 days 20 days 15 days 40. Maternity benefits provided by a group health policy shall be offered to individuals over the age of majority as long as they are coinsured by the plan regardless of marital status until employment is secured

84 80 Maryland Law Supplement 41. All health insurance policies providing benefits on an expense-incurred basis must offer the option of which of the following? Nursing midwife services Nursing home coverages Travel accident coverage Direct response services 42. A purchaser of a Medicare supplement policy must be provided with which of the following? A 10-day free-look period A 15-day free-look period A 20-day free-look period A 30-day free-look period 43. Under the Affordable Care Act, children can remain on the parent s health care plan under all of the following EXCEPT a child who is married and under the age of 26 a 27-year-old child who is not living with their parents but the parents are responsible for the child s living expenses a 23-year-old child who is in the school, but is not dependent on the parents for support a 20-year-old disabled child who depends on the child s parents for financial support 44. What effect will Social Security payments have on benefits received from an individual or group disability income policy? Will reduce payments by 50% Will reduce payments by the amount of the increase Will not reduce payments Will not reduce payments until they exceed $620 per month 45. Which of the following types of health insurance plans may be issued to groups of 3 or more employees in a copartnership? Noncancellable health insurance Franchise health insurance Fraternal health insurance Accidental death insurance 46. Health plans must cover a prostate-specific antigen test for all men regardless of age men who are between 20 and 40 years old men who are between 40 and 75 years old men who are over 65 years old 47. The open enrollment period for Medicare supplement insurance is the six-month period beginning on the first day of the month in which a person is at least 65 years old, regardless of whether the person is enrolled in Medicare at least 67 years old and enrolled in Medicare Part B both 65 years old or older and enrolled in Medicare Part A both 65 years old or older and enrolled in Medicare Part B 48. Which of the following is the most restrictive benefit trigger provision that may be included in a federally non-qualified long-term care insurance policy? Inability to perform 2 activities of daily living (ADLs) Inability to perform 3 activities of daily living (ADLs) Inability to perform 4 activities of daily living (ADLs) Inability to perform 5 activities of daily living (ADLs) 49. An individual who pays premiums on a federally tax-qualified long-term care insurance policy may claim a state income tax credit of up to what amount for each insured? $100 $250 $500 $1, Which of the following provides benefits principally for those persons who are terminally ill? Hospice care Home health care Hospital room and board Stop-loss coverage

85 Maryland Law Supplement 81 ANSWERS TO Maryland LAW PRACTICE FINAL 1. A 11. C 21. A 31. B 41. A 2. D 12. C 22. B 32. D 42. D 3. D 13. C 23. A 33. C 43. B 4. B 14. B 24. B 34. D 44. C 5. D 15. C 25. C 35. D 45. B 6. D 16. B 26. C 36. B 46. C 7. B 17. B 27. A 37. C 47. D 8. C 18. C 28. D 38. C 48. B 9. A 19. A 29. C 39. A 49. C 10. B 20. A 30. C 40. C 50. A

86 Notes