THIRD PARTY ADMINISTRATOR GUIDE UNDERWRITING & ADMINISTRATIVE PROCEDURES

Transcription

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

35 ADMINISTRATIVE PROCEDURES VIII. SOLD CASE REQUIREMENTS A. GENERAL POLICY ADMINISTRATION HCC Life Insurance Company s Policy Administration function is partially decentralized. With regional locations serving the various areas of the nation, it is important for certain aspects of policy issuance to take place within the regional offices. As such, applications for coverage will be initiated from the regional offices upon notice of acceptance of HCC Life Insurance Company s tentative quote. The application(s) completed by the employer should be returned to the originating regional office along with the other documents, which if accepted, will initiate coverage. It is important to note that the policies and procedures outlined in this section of the guide are general in nature. The specific requirements of each application and policy language are binding upon the Policyholder. Language contained in this guide cannot be relied upon to bind the carrier or policyholder in any manner that differs from the coverages expressly stated within their contract. Please contact HCC Life Insurance Company s Policy Issuance Department or the web site at any time for a specimen contract and/or application from the carrier being quoted. A review of these documents will serve to prevent any future misunderstandings between the Employer and the carrier as to what is the nature of coverage offered. B. DOCUMENTS INITIATING COVERAGE When the HCC Life Insurance Company Underwriter is informed that a client has accepted our tentative quote we will prepare a formal Application as well as a "Sold Quote Summary" for presentation. These documents contain a synopsis of the policy plan being offered and applied for, tentative rates and coverage levels, and the conditions under which final underwriting will proceed (including a list of outstanding items, if any). The Application, Schedule of Insurance, Disclosure Statement, and The Licensing Requirements (noted on Page IX.5) must be signed and returned to HCC Life Insurance Company within 15 days along with the appropriate premium deposit and Premium and Enrollment form (see #2 below). Underwriting cannot be finalized, nor can a contract be issued, unless the above forms, along with any additional outstanding items, are received. HCC Life Insurance Company 01/2011 VIII. 1

36 No claims will be paid until a contract has been issued. No commissions are payable until a contract has been issued and the Agent of Record has provided licensing information to HCC Life Insurance Company. 1. Application: HCC Life Insurance Company will prepare this form upon notification that a case has been sold and send it to the TPA/Broker for execution. The Application must be signed by a duly authorized official of the Plan Sponsor, as well as by a licensed agent who is the "Agent of Record". It is then returned to HCC Life Insurance Company. All information must be completed on the Application and signed before HCC Life Insurance Company will accept it. See Section B for information regarding the completion of the Application. 2. Disclosure: A Disclosure Statement must be completed for each New Business sold case. Its purpose is to reveal plan participants, including employees, dependents, retirees and COBRA beneficiaries who are not at work or at life due to illness or injury on the proposed effective date, or who incurred (or have the potential to incur) charges in excess of $10,000 (or 50% of the Specific Deductible) in the last twelve months. This statement should be completed and submitted to us within the one-week period immediately prior to the effective date. While HCC Life Insurance Company does not require the completion of the HCC Life Insurance Company Disclosure Statement on renewals, the disclosure review process is the same. 3. Premium Deposit & Monthly Premium and Enrollment Form: All Premium payments should be made payable to HCC Life Insurance Company and sent to: HCC Life Insurance Company P.O. Box Atlanta, GA HCC Life Insurance Company 01/2011 VIII. 2

37 For Overnight Service use: HCC Life Insurance Company Attn: Box Feldwood Road College Park, GA These are a Lock Box addresses and should only receive Premium checks and worksheets. All other correspondence should be mailed directly to 225 Town Park Drive, Suite 145, Kennesaw, GA The deposit should be equal to the first month s Specific and Aggregate Premium (or the estimated annual aggregate premium amount, if being paid annually). The premium will be deposited in an escrow account until final underwriting is completed. (See Section C.) C. COMPLETION OF THE APPLICATION When the application is received from HCC Life Insurance Company, please review it for completeness and accuracy. If any identifying information is missing or inaccurate, please contact your Regional Underwriting office for corrections. Review the provisions of the coverages being offered with the client. Be sure that they understand what benefits are included in the Aggregate. Normally only medical benefits are covered. Explain the maximums, limits, rate, factors, contract basis (Paid, Incurred and Paid, etc.) and the function of the Aggregate Deductible. Some of our Standard Policy terms are listed below: Aggregate Reimbursement Maximum Typically $1,000,000 Percentage of claims to be reimbursed Unless otherwise specified, this will be 100% Aggregate Loss Limit Any claims paid out for an individual, which exceed the loss limit, whether or not reimbursed under our policy or another carriers policy, or retained by the policyholder, cannot be counted as eligible claims under our aggregate coverage. Unless included in the contract, certain ancillary charges such as drug card charges may be ineligible and therefore excluded by the Loss Limit. HCC Life Insurance Company 01/2011 VIII. 3

38 Specific Reimbursement Maximum The maximum reimbursement per individual is $1,000,000 less the specific deductible in effect during the contract period. Should a covered person be lasered at a specific deductible greater than that of the group, that individual s Specific Reimbursement Maximum shall be the maximum reimbursement per individual minus the separate deductible for that person. Do not modify any coverage descriptions, factors, rates, or limits without first calling HCC Life Insurance Company to see if a new application must be prepared. If a new application is needed, HCC Life Insurance Company will provide a revised copy on an expedited basis. Have the Application signed by an officer of the Plan Sponsor and show clearly the spelling of the name and the title of the officer. This is the client contact HCC Life Insurance Company will use to communicate with as necessary. Be sure to have the policy paperwork signed (witnessed) by the Licensed Agent of the Plan Sponsor, where applicable. D. DISCLOSURE/FINAL UNDERWRITING REQUIREMENTS Before final rates and factors can be issued, the following must be received by HCC Life Insurance Company. Signed Application (and Schedule of Insurance, if applicable) Disclosure Statement for New Business/ Disclosure Review Process on Renewals Binder Check Premium & Enrollment Form Licensing Requirements (See Section D) Rates and factors are subject to possible revision based upon receipt and review of the following items: 1. A census with date of birth, sex and dependent status for all participants on the effective date. Please be sure to include all COBRA participants as well as potential COBRA beneficiaries. If retirees are to be covered, they must be clearly identified on the census. If the final enrollment is significantly different (+/-10%) from that quoted, please be aware that this may affect the quoted rates and/or factors. HCC Life Insurance Company 01/2011 VIII. 4

39 2. Claims experience to the effective date including monthly enrollment figures. 3. Disclosure Our underwriters evaluate a risk based on the underwriting and claim information provided them by the Policyholder and TPA at the time of underwriting. Individuals who are at risk for high dollar claims because of certain diagnoses (refer to Trigger Diagnosis List), claimants who have reached or have the potential to reach 50% of the Specific Stop Loss Deductible and participants who are disabled (both employees, dependents and COBRA participants) should all be disclosed. Both the Employer Group (Policyholder) and the TPA should understand the important role Disclosure plays in the issuance of the Stop loss policy. The HCC Life Insurance Company Disclosure Statement must be filled out completely and accurately on New Business, as incomplete disclosure could result in a case being re-underwritten or possibly rescinded. The employer should not cancel Carrier coverage until the disclosure form has been reviewed and approved by HCC Life Insurance Company. While HCC Life Insurance Company does not require the HCC Life Insurance Company Disclosure Statement on renewal cases, the disclosure review process is the same. Disclosure related information can be found: 1) On new and renewal proposals that are issued under the Proposal Qualifications and Contingencies heading. Paid claims experience to the effective date including monthly enrollment figures. Updated shock loss information to the date HCC Life Insurance Company has been notified that the proposal has been accepted by the group. Shock loss information should include injuries, illnesses, diseases, diagnoses, or other losses of the type, which are reasonably likely to result in a significant medical expense claim or disability, regardless of current claim dollar amount. Information is always needed on any claim processed and unpaid, pended or denied for any reason. Please refer to our Trigger Diagnosis Disclosure List, which provides examples of some, but not all, types of shock losses. 2) In Appendix A of the Underwriting and Administrative Guide 3) On renewals, Disclosure instructions are sent with the renewal letters TPA s should review the following types of information in order to identify and disclose all possible candidates: 1. Hospital pre-certification information: Notification of potentially large claims such as; transplants, premature babies, and long hospital confinements should be reviewed 2. Large dollar claim: Claims that are pending, denied, processed, awaiting funding, and paid should be reported during the disclosure process. Please refer to the Trigger List in Part II. HCC Life Insurance Company 01/2011 VIII. 5

40 3. Work status: Individuals who are not actively working due to disability should be reported. This not only includes employees, but disabled dependents and COBRA participants as well. Some indicators that a dependent might be disabled are: 1) On Medicare and under age 65 and 2) Receiving Social Security Disability Income (SSDI) 4. COBRA: The status of individuals on COBRA should be disclosed Employer Groups (Policyholder) should consult with their Human Resources department and carefully review payroll records in order to list those individuals who are not actively working. 4. Detailed information on any disabled employee, dependent, COBRA participant or retiree. This information should include the date and nature of disability and the current medical/employment status (diagnosis, prognosis, and expected date of return to work). 5. A final plan document. We must review and approve all plan documents to verify that benefits correspond with those assumed when we prepared our quote. Any non-standard plan provisions or changes in benefits could result in adjustments to quoted rates and/or factors. Approval of a Plan Document will not supercede any exclusions or provisions established in the policy. 6. Any other information requested by the underwriter. E. OTHER DOCUMENTATION NECESSARY 1. LICENSING REQUIREMENTS All TPAs, Broker firms, or Individuals that act as the employer s broker or agent and/or earn commission on business with HCC Life Insurance Company are required to submit the following information to the Compliance Department located in the Corporate Office in Kennesaw, Georgia. These documents are a one-time requirement, unless the entity changes their name or the appointed individual leaves the entity, then new documents will be required for a change to be processed. Commissions cannot be paid until the licensing documents are received by the Compliance Department. HCC Life Insurance Company 01/2011 VIII. 6

41 Agency & Agent Licenses. Current licenses are required for both the entity and an employed individual of the entity (preferably an officer), in both their resident state and the account s state. (Appointments cannot be processed with Consultant or Broker type licenses.) Agency/Agent/Individual Information Certification & Authorization form. Verifies the office location where the appointment is required and who will receive commissions, if applicable. In compliance with the Violent Crime Control & Law Enforcement Act of 1994, criminal certification is required from the individual to be appointed and the Owner, President, CEO, or Authorized Executive Officer of the entity. In addition, this form gives authorization for a personal background investigation to be performed. Form W9. A W9 is required for every entity or individual that receives commission, regardless of net or gross remit. Producer Agreement. This two-part agreement is required for both the servicing entity and the commission recipient. Other State Specific Requirements. Certification, etc. Application, E&O, Home State It is the responsibility of the TPA or Broker firm to notify the Compliance Department when an appointed agent leaves their employment so we may terminate the agent s appointments. In addition, new licensing documents will need to be submitted for the individual replacing the terminated agent. If notification is not received in a timely manner, HCC Life Insurance Company reserves the right to bill the TPA or Broker firm for any renewal fees incurred for the terminated agent. HCC Life Insurance Company 01/2011 VIII. 7

42 2. Plan Document Signed by Plan Sponsor The employee benefit plan document must be executed by an official of the Plan Sponsor. The Plan Sponsor's signature on the copy forwarded to HCC Life Insurance Company acknowledges that benefits will be reimbursed within the provisions of the plan document in our possession. This copy will be used by HCC Life Insurance Company when adjudicating specific and aggregate claims. HCC Life Insurance Company will review and verify that the plan document benefits match those understood by our underwriters at the time the quote was prepared. Any changes from the originally submitted benefit plan quoted by our underwriters must be approved before we will accept them when the policy is issued. HCC LIFE INSURANCE COMPANY IS PROHIBITED FROM CONSIDERING ANY CLAIM FOR REIMBURSEMENT PRIOR TO RECEIPT AND ACCEPTANCE OF THE SIGNED MASTER PLAN DOCUMENT. F. ISSUING THE INSURANCE POLICY After rates and factors have been finalized based on those items listed under final underwriting requirements, and all the required documents in Item C and D (if not already on record) are received, HCC Life Insurance Company will issue the Policy. We will send the executed policy to the TPA/Broker. If additional endorsements or changes are necessary then the policyholder will be required to resubmit signed paperwork necessary to make the modifications. The specific requirements of the application and policy language are binding upon the Policyholder. Language contained in this manual cannot be relied upon to bind the carrier or Policyholder in any manner that differs from the coverage expressly stated within their contract. Please contact HCC Life Insurance Company s Policy Issuance Department or visit the web page at any time for a specimen contract and/or application. A review of these documents will serve to prevent any future misunderstandings between the Employer and HCC Life Insurance Company as to the nature of coverage offered. HCC Life Insurance Company 01/2011 VIII. 8

43 IX. PREMIUM ACCOUNTING HCC Life Insurance Company provides a Premium Accounting Worksheet to each Policyholder for the purpose of calculating premium payments. All information on the worksheet is essential for the processing of payments. A. PREMIUM PAYMENTS Premium payments are due on the first of the month. Payment should be submitted along with the Premium Accounting Worksheet. Customized worksheets are permitted, as long as the worksheet includes the following information: 1. Month for which payment being made is applicable 2. Group name and policy number 3. Listing of rates being remitted (must document whether or not rates are on a gross or net basis) 4. Enrollment counts for the month being remitted-adjustments must be documented (Section D) 5. Calculation of total monthly premium 6. Life Premium payment must include items 1-5 along with the volume of coverage All Premium payments should be made payable to HCC Life Insurance Company and sent to: For Overnight Service use: HCC Life Insurance Company HCC Life Insurance Company P.O. Box Attn: Box Atlanta, GA Feldwood Rd. College Park, GA These are Lock Box addresses and should only receive Premium checks and worksheets. All other correspondence should be sent to HCC LIFE INSURANCE COMPANY 225 Town Park Drive, Suite 145, Kennesaw, GA B. LATE PREMIUM PROCEDURES A premium is considered past due if not received by the end of the Grace Period established in the contract (normally 30 days) and may result in HCC Life Insurance Company making appropriate contact to determine the delay. HCC Life Insurance Company intends to notify all TPAs, Brokers and Producers of Policyholders whose premiums have not been received by the 10 th of the following month. The notice informs the TPA, Broker or Producer (which is deemed to be notice to the Policyholder), that HCC Life Insurance Company 01/2011 IX. 1

44 premium has not been received and that termination or rescission will take place without further notice. Premiums received after the 10 th are considered Late Payments. Late Payments will be noted as an unfavorable characteristic when terminating or when Reinstatement procedures are considered by HCC Life Insurance Company. Receipt of payment extensions are granted at the discretion of HCC Life Insurance Company. We reserve the right to cease extensions past the grace period at anytime and without prior notice. Please note that it is the policyholder s responsibility to make certain that premiums are paid. You are not entitled to rely upon the expectation of receiving premium notices in order to trigger responsibility for payment of premium. Coverage may be rescinded or terminated whether or not the late premium notice mentioned above is sent or received. Delayed premium payments that could justify rescission are considered independently from prior payments and how those payments were treated. Prior premium payment delay does not constitute waiver by the Carrier and may not be used to create any release of responsibility for timely submission of current and future payments. If any of these procedures are in conflict with any state law or regulation, we will adjust our procedures to conform with the state requirement accordingly. C. VARIANCES IN PREMIUM REMITTANCES All policies are on a self-bill basis. We do not send billing statements and it is the Policyholder s responsibility to pay the monthly premium in a timely manner. If the premium paid does not match the actual amount due, we will send a letter of variance. The variance may be credited or the additional payment can be made in the following month s billing statement. Since the premium received by HCC Life Insurance Company for the first month of coverage is estimated, please allow for premium reconciliation between the estimate and the actual earned first month s premium. This can be adjusted when submitting the second month s payment. If final rates are not established by the time the second month s premium is due, an estimated amount is still required to be paid on time, with reconciliation in the third month. HCC Life Insurance Company 01/2011 IX. 2

45 D. ENROLLMENT STANDARDS Under certain circumstances, at the discretion of HCC Life Insurance Company, a given monthly premium total may be revised due to enrollment fluctuations. Premium revisions shall not be permitted that are based on enrollment adjustments in excess of ninety-days (90) from the first of the month in which HCC Life Insurance Company receives a request for premium revision. Back charges or credits of more than 90 days for any employee must have supporting documentation that explains the delay in change notification. HCC Life Insurance Company will approve or disapprove these adjustments on a case-by-case basis. Please note that timely reporting is important for you and your client s protection. Enrollment changes of more than 10% from the effective date of coverage must be reported to the HCC Life Insurance Company immediately. HCC Life Insurance Company has the right to change rates and/or factors in order to adjust for changes in plan participation. If the total enrollment drops below a preset minimum number of lives as established within the policy, HCC Life Insurance Company may terminate the coverage. No action will be taken without notifying the TPA or Broker. We will accept a no loss/no gain procedure on additions and terminations for a month. By this we mean, if a group is completing their billing on the 15 th of the month for the following month: 1. We will count all additions made between the 1 st and the 15 th of the month. Any additions made from the 16 th to the end of the month will not be accounted for in that month and will be reflected in the following month s remittance. 2. We will count deletions made between the 1 st and 15 th of the month. Any deletions made from the 16 th to the end of the month will not be accounted for in that month and will be reflected in the following month s remittance. This does not mean they will not add or delete the individuals from the plan if it occurs after the 15 th. They will have to show them on the census for the next month, but they do not have to try and pro-rate for the short period. This philosophy mirrors running a census on the 15 th of the month and reporting based off that census. Basically, it relies on the fact that most groups have a normal ebb and flow HCC Life Insurance Company 01/2011 IX. 3

46 to add and terms and that they will generally balance out. We do not pro-rate any premiums, so this is our recommended procedure. E. TERMINATIONS There are occasions that warrant termination of an employer s contract. The following includes some, but not necessarily all, conditions that will result in termination of coverage. Non-Payment of Premium Premium is due on the first day of the month with a grace period as defined in the contract. If it is not received within the grace period, the Policyholder may be considered terminated without further notice. This type of termination may also take place if premium is not paid according to the contract terms. Examples of the latter would be an event of non-payment of annual advance premiums or when there is only partial payment of premiums due. In the event that a check is returned unpaid and termination results, the TPA, Broker and/or Producer will be notified. The premium due must be express mailed in the form of a certified check or money order and received within three (3) business days in order to prevent termination for non-payment of premium. If during any contract year, a second payment is returned unpaid, termination or rescission is automatic. If the Reinstatement Application (see Forms) is accepted, all future premiums must be submitted by certified check or money order. No exceptions will be made to these procedures unless required by law. In the event premium is not paid within the grace period and a Contract has not been issued, HCC Life Insurance Company will rescind coverage. Termination at the Policyholder s Request The Policyholder, upon written request to HCC Life Insurance Company, may effect termination and no refunds (such as commission refunds and prepaid annual refunds) will be recoverable. Additionally, upon termination, all minimum Annual Premiums are due unless prohibited by law. HCC Life Insurance Company 01/2011 IX. 4

47 Change of Third Party Administrator If a Plan Sponsor is terminating its claims administration service, we will terminate the excess reimbursement coverage effective on the date the Plan Sponsor terminates administration. A change in administration by the Plan Sponsor does not automatically transfer coverage under the Excess Reimbursement Policy. HCC Life Insurance Company must receive a letter on the Plan Sponsor s letterhead communicating the new administrator. HCC Life Insurance Company must recognize the administrator as Approved or the Excess Reimbursement Policy will not transfer. Changes in administration are only considered at the time of renewal or anniversary, unless written approval is granted by HCC Life Insurance Company. Plan Participation or Enrollment The policy defines the minimum expected levels of participation or enrollment in a covered plan. Failure by the Employer to maintain these requirements will result in the consequences defined by the policy, including termination. F. REINSTATEMENT Once a Plan Sponsor has been terminated for non-payment of premium, a producer and/or remitter can request reinstatement if the request is made up to or within 90 days of the termination date of the policy. The contract only allows one reinstatement per contract period. Additional reinstatement requests can be granted at the sole discretion of HCC Life Insurance Company. When a Producer/TPA submits a request for reinstatement, it should be directed to the Policy Issuance Department to the Kennesaw, Georgia Corporate Office who is responsible for sending out the reinstatement package. In the reinstatement package, we will request the following items: 1. The Reinstatement Application to be completed and signed by an officer of the Plan Sponsor. 2. Our normal Disclosure Statement form to be completed and signed, pending the most current information. 3. The submission of a current monthly aggregate paid claims report (if aggregate coverage is to be reinstated). 4. Premium through the current month of the request for reinstatement. HCC Life Insurance Company 01/2011 IX. 5

48 The reinstatement package must be returned to HCC Life Insurance Company within 15 days of receipt by the Producer/TPA for consideration of reinstatement. Failure to return the reinstatement package within 15 days will result in forfeiture of the policyholder s ability to apply for reinstatement. We reserve the right to refuse a request for reinstatement at anytime at our sole discretion. G. RESCISSIONS There are occasions when a Policy is rescinded. If a Policy is rescinded (as opposed to terminated), the Policyholder would need to reapply for coverage and have the case reunderwritten if the Policyholder wishes to have HCC Life Insurance Company consider further coverage. Upon rescission, all premiums received by HCC Life Insurance Company will be refunded directly to the Policyholder along with the rescission notice. The following are some, but not necessarily all, conditions that may cause rescission of coverage. Required Documents If HCC Life Insurance Company does not receive all of the documents requested for issuance of the Excess Reimbursement Insurance Contract within ninety (90) days of the proposed Effective Date of the new contract, then HCC Life Insurance Company, will rescind coverage back to the proposed Effective Date. Misrepresentations Misrepresentations concerning the Contract may have serious consequences and may void the Contract. Misrepresentations include, but are not limited to, misstating, withholding or suppressing information concerning the Contract, whether in the application or other processing stage. Misrepresentations, which may void coverage, are those made directly by the Policyholder as well as those made anyone with apparent authority to represent the interests of the Policyholder (including the Third Party Administrator). Misrepresentations are dealt with harshly under the contract because they can represent serious breaches of the essential communication upon which the Contract is based, whether or not the misrepresentations are made before the Contract is issued or during other processes. Because of the serious consequences of misrepresentations, it is essential that material information be verified before being submitted to HCC Life Insurance Company. HCC Life Insurance Company 01/2011 IX. 6

49 H. COMMISSIONS The Third Party Administrator, prior to submission of premium, may deduct commissions. Alternatively, the Third Party Administrator may choose to submit the gross premium to HCC Life Insurance Company and receive the commission from HCC Life Insurance Company. All producers, regardless of whether the premiums are remitted gross or net, must be licensed and appointed by. (See Article IX. Section D) Commissions are paid weekly for premium received and processed in the previous week. HCC Life Insurance Company 01/2011 IX. 7

50 HCC Benefits Corporation X. OTHER FEATURES AND ONGOING SERVICES A. PROCESSING A MEDICAL CONVERSION ELECTION Eligibility for conversion is determined as follows: 1. The person must have been covered under the employer's medical plan as described in the plan document for at least six months. 2. The person's coverage must have ended prior to termination of the excess reimbursement insurance. 3. The person is eligible to convert only once, even if he/she becomes covered under the employer's plan for a second time. 4. Only those who are under age 65 and residents of the United States are eligible. Conversions themselves are not to be handled by HCC Life Insurance Company. In the event that an eligible person desires medical conversion, a Carrier Specific Conversion Form is used to request conversion from the Issuing Carrier and must be sent to HCC Life Insurance Company for forwarding to the carrier. The conversion privilege must be exercised within 31 days, or the maximum number of days allowed within the state, whichever is less, after medical coverage terminates. No evidence of insurability will be required. The individual premium assessed for each conversion will be determined by the Carrier and is based on the employee's state of residence, age, sex, and the desired medical plan. The Carrier can provide information on other medical plans as well. B. REVISING EXISTING BENEFITS; AMENDMENTS TO THE PLAN DOCUMENT If a Plan Sponsor wishes to implement a plan change, written consent must be received from HCC Life Insurance Company before the changes can be covered under the Excess Reimbursement Policy. Rates and factors will be subject to change as outlined in the Excess Reimbursement Policy. Any plan change requests must be directed to the HCC Life Insurance Company Policy Issuance Department 31-days prior to implementation and should include the proposed effective date of the changes. If plan changes are approved, HCC Life Insurance Company will expect to receive a revised plan document, or an amendment to the existing plan document, which has been signed by the Plan Sponsor incorporating the plan changes. Any amendments or plan changes implemented by the Plan Sponsor and TPA prior to review and approval by HCC Life Insurance HCC Life Insurance Company 01/2011 X. 1

51 HCC Benefits Corporation Company are not considered covered benefits for the purposes of the excess reimbursement insurance and will not be used in calculating claim reimbursements. C. CHANGES IN ENROLLMENT: Enrollment changes of more than 15% from the enrollment on the effective date of coverage, or 10% in any one month, must be reported to the appropriate HCC Life Insurance Company underwriting representative immediately. HCC Life Insurance Company has the right to change rates and/or factors to adjust for the change in plan participation. D. TERMINATION OF COVERAGE: If a Plan Sponsor terminates the excess reimbursement coverage before the end of the contract period, HCC Life Insurance Company must receive written notification directly from the Plan Sponsor indicating the reason for the termination. This request for termination must be received no less than 31 days before the desired termination date and all premiums are due and payable up to the termination date. If a Plan Sponsor is terminating only your claims administration services, we will terminate the excess reimbursement coverage effective on the date the Plan Sponsor terminates your services. We will reinstate coverage only after a complete review of the situation is made and the new TPA is approved by HCC Life Insurance Company. If we approve the move to a new TPA prior to the move, we will issue an amendment to the Plan Sponsor's Schedule of Insurance showing the change in the claims paying organization without a lapse in coverage. SAMPLE DOCUMENTS [Next 5 Pages] HCC Life Insurance Company 01/2011 X. 2

52 Notice Date: APPLICATION FOR REINSTATEMENT Aggregate and/or Specific Insurance Policy/Certificate Number: Effective Date: Carrier: Termination Date: The Applicant named below makes application for reinstatement of the above Excess Reimbursement Insurance. This application is accepted and approved by HCC Life Insurance Company. Reinstatement will be granted to: Legal Name of Applicant: Address: City/State/Zip: Proposed Effective Date of Reinstatement: As a condition of reinstatement all premiums due must be current and paid in full including any outstanding balances due, and the following outstanding requirements must be received by our office within 15 days of the date of this notice. In addition, HCC Life Insurance Company reserves the right to re-underwrite this account as a condition of Reinstatement. We require updated claims experience, including notice of shock losses and/or ongoing or potential claims. The accompanying disclosure Statement must be completed as a condition of reinstatement. Applicant further understands that premiums are due no later than the first day of each calendar month; premiums not received when due will effect immediate cancellation of coverage retroactive to the date premiums were last paid. Premiums accepted prior to approval shall not keep the carrier from disapproving this application or subsequent renewals. In the event reinstatement is not approved, any premiums paid in consideration of reinstatement will be refunded and the carrier will have no obligation to the Applicant. If reinstated, this Policy will not be eligible for Reinstatement a second time during the Policy year. By: Applicant Officer Name Date Title: Accepted by HCC Life Insurance Company: Name Date HCC Life Insurance Company 1/2011 Premium

53 Policyholder Premium Accounting Worksheet Policy No. Effective Date Premium must be received by: Administrator Report Period to Coverage Specific Aggregate MDAR Current Units Prior* Units Total Units Rates Single x 0.0 Family x x x Gross Premium less Commission 0.0 % Net Premium Composite x 0.0 x x x Gross Premium less Commission 0.0 % Net Premium x 0.0 Gross Premium Medical Conversion Gross Premium x less Commission 0.0 % Net Premium Total Premium * Prior month adjustments are limited to the preceding 3 months. You must attach documentation to receive consideration for any months. Please make checks payable to HCC Life Insurance Company. Send checks to: HCC Life Insurance Company, P.O. Box , Atlanta, GA Premiums must be remitted by the last date shown in the Report Period (end of the month). Policy is subject to termination without prior notice if premiums are received past the end of the month due. HCC Life Insurance Company 1/2011 Premium

54 Appendix A: Disclosure HCC Life Insurance Company Disclosure Instructions HCC Life Insurance Company relies on producers (referred herein as Plan Supervisor) to properly advise new and renewal clients on the importance of a complete Disclosure Statement. We expect that the employer, with the support of the Plan Supervisor, will conduct a diligent review of their health plan before completing the Disclosure Statement. A diligent review would include review of the information described below no earlier than 15 days* prior to the Excess Loss Policy effective date. The Named Insured must return the Disclosure Statement to HCC LIFE INSURANCE COMPANY within 5 days of completion. Coverage will be automatically rescinded if the signed Disclosure Statement is not completed and returned to HCC Life Insurance Company within 30 days following the proposed effective date. All information will be treated as confidential. Should we require any additional information in order to approve the Disclosure Statement, HCC Life Insurance Company will be obligated to respond in writing to the Plan Supervisor no later than 20 days following receipt of the original Disclosure Statement. Diligent Review means a complete review of the following information: Reports of claims on any participant incurred and/or paid during the last 12 months in excess of 50% of the specific deductible or $25,000* (whichever is less). Reports of participants that are currently, or have been in the last 30 days, confined to a hospital or other medical facility on multiple occasions or for three (3)* or more consecutive days. Reports of any dependent children over the normal termination age covered by the plan under a disabled or handicapped child extension provision. Reports of any known potential catastrophic claims or other known shock loss claims. (Potential catastrophic claims means any claimants expected to incur claims that may reasonably be assumed will exceed 50% of specific deductible in the next plan year.) Please carefully review the Disclosure Diagnosis List accompanying disclosure statement. The Disclosure Diagnosis List is intended to assist the Named Insured with their disclosure review. Reports of any participants who are expected to be absent from work due to disability on the effective date of the Excess Loss policy. Reports of any participants that have been absent from work due to disability (sick time, Family Medical Leave, or scheduled Leave of Absence) during the past 30 days. (In the case of a dependent or COBRA participant, is by disability unable to perform his or her normal functions of a person of like sex and age.) Reports of any participants currently covered under COBRA, or who are currently in a COBRA election period. Reports of any participant who will be covered under a Fully Insured Carriers Extension of Benefits provision. We require complete details, including individual medical information, on any participant that is disclosed in this process. We can supply a confidentiality agreement, if required, to release individual medical information to HCC Life Insurance Company. In the case of a renewal, we also require the report of any additional large claims not previously disclosed as described above that become known after release of the renewal quote when the initial date of service is more than 15 days prior to the effective date of the renewal. ** In signing the Disclosure Statement, the Named Insured is assuming responsibility that all known potential large claimants have been disclosed. A claim will not be considered eligible under the Excess Loss contract if it is determined that an individual was not disclosed who met any of the criteria described above under the diligent review section. In order for HCC Life Insurance Company to allow coverage for a non-disclosed individual, it will be necessary to reunderwrite the contract terms. In re-underwriting the Excess Loss Policy, HCC Life Insurance Company may take the following actions: Revise the specific rates for the Named Insured. Apply a higher Specific Deductible to the Non-Disclosed Claimant. HCC Life Insurance Company 01/ 2011 Underwriting

55 Appendix A: Disclosure HCC Life Insurance Company Disclosure Instructions (continued) Complete Details means detailed information including, but not limited to: employee name and social security number, claimant name, social security number, date of birth, diagnosis, prognosis (if known) and Attending Physician name and phone number. Participant means any eligible employee, COBRA participant, retiree or their dependents. Known means information which can be reasonably assumed, based on the diligent review described above, that the Named Insured and/or Plan Supervisor had knowledge of when completing the disclosure statement. HCC Life Insurance Company encourages open dialogue with its producers on this important subject. Please do not hesitate to contact your Underwriter or Marketing Representative to discuss our disclosure requirement in greater detail. * Unless other terms are independently negotiated between HCC Life Insurance Company and the producer based on the amount of the specific deductible. ** This renewal window of protection for the policyholder exists provided that we have received written renewal confirmation. Continued negotiation of the renewal terms, right up to or past the effective date, will compromise this 15-day protective window. HCC Life Insurance Company 01/ 2011 Underwriting

56 HCC LIFE INSURANCE COMPANY DISCLOSURE/TRIGGER DIAGNOSES Full Legal Name of Applicant/Named Insured: This form must be completed by the named insured (Employer) and returned to HCC Life Insurance Company within 5 days of completion by the named insured. Should we require any additional information in order to evaluate this disclosure statement, we will respond in writing with any additional information necessary to complete our review. Upon receipt of the completed disclosure, the Company will assess all data, new and previously reported, and will inform the producer in writing within (5) working days of any changes to the rates, factors or terms of coverage. Please answer each question below. If the answer is yes to any part, please provide details below or attach another sheet, if necessary. Participant means any eligible employee, COBRA participant, retiree, or their dependents. 1. Have claims on any participant during the last 12 months been incurred and/or paid in excess of 50% of the specific deductible or $25,000 (whichever is less)? Yes No 2. Are any participants currently, or have they been in the past 30 days, confined to a hospital or other medical facility on multiple occasions or for three (3) or more consecutive days? Yes No 3. Are there currently any dependent children over the normal termination age covered by the plan under a disabled or handicapped child extension provision? Yes No 4. Other than the individuals already listed, are there other known potential shock loss claims? (potential catastrophic claims means any claimants expected to incur claims that may reasonably be assumed will exceed 50% of specific deductible in the next plan year) Shock losses are defined on the second page along with a Trigger Listing. (The Trigger Diagnosis List is intended to assist the Named Insured in their disclosure review.) Yes No Last Name, First Diagnosis/Prognosis Page 1 of 3 Mo./Yr. 1 st day for Treatment Last 12 Mths Paid Claims Amount Pended/Denied Claims Amount 5. Are there any participants who are expected to be absent from work due to disability on the effective date of the Stop Loss Policy coverage? Yes No 6. Have any participants been absent from work due to disability (sick time, Family Medical Leave, or scheduled Leave of Absence) during the past 30 days? (In the case of a dependent or COBRA participant, is by disability unable to perform his or her normal functions of a person of like sex and age.) Yes No Disabled Lives Status/Reason for Disability Are any participants covered under COBRA, or COBRA eligible? Yes No COBRA Participants Qualifying Event and COBRA Start Date If currently fully Insured, are extended benefits available from prior insurer for presently disabled eligible employees and/or dependents? Yes No N/A After diligent review, we hereby represent and warrant that the above list is complete and accurate to the best of our knowledge and belief, and that nothing has been intentionally omitted. In addition, should HCC Life Insurance Company require additional medical information on any individual disclosed above, we agree to provide access to this information so that HCC Life Insurance Company may evaluate the risk and provide final terms. We also acknowledge that furnishing false written information concerning their insurance; or the suppression, withholding or misstating of material facts, or failure to return this required document within the specified time frame may result in the stop loss contract being revised or in a rescission of the contract, at the election of the carrier. Named Insured (Employer) Date Agent Signature Date Officer Signature

57 Suggested Categories and Guidelines for Identifying Potential Large Claims The specific diagnoses listed below are key indicators of potential catastrophic cases and should be referred to HCC LIFE INSURANCE COMPANY. The following instances should also be explored for potential case management. Transplants A length of stay request more than seven (7) days Trauma/Multiple Injuries Request for transfer to a rehabilitation facility Hyperalimentation (TPN) Home IV antibiotic therapy High Risk Pregnancy (Multiple Births) Initiation of hemodialysis AIDS ICD-9 Codes Infectious Diseases ICD-9 Codes Human Immunodeficiency Virus 042 Meningitis Encephalopathy Subacute Bacterial Endocarditis 421 Pneumocystis Carinii Pneumonia Crohn's Disease Toxoplasmosis Osteomyelitis Bronchial or Pulmonary Candidiasis Tuberculosis Malignant Neoplasms -Any Site Cancers Blood Disorders Neurofibromatosis Aplastic Anemia Coagulation Defects Diabetes Mellitus Complications Immune Deficiencies Circulatory Disorders Amputations Amputations Arms and Hands Head and Spinal Trauma Legs and Feet Quadraplegia Paraplegia Burns Hemiplegia Over 20% of the Body Spinal Cord Injury Closed Head Injury Cardiovascular Disease Complications of trauma Cardiomyopathy Heart Failure Neuromuscular Intermediate Coronary Syndrome Amyotrophic Lateral Sclerosis Primary Pulmonary Hypertension (Lou Gehrig's disease) Myopathy Cerebral Vascular Disease with Neurological Deficits Guillain-Barre Anoxic Brain Damage Cerebral Palsy Multiple Fractures, Skull/Face Multiple Sclerosis 340 Intracerebral Hemorrhage Coma Renal Failure Acute Vascular Disease (Stroke/CVA) 436 Other High-Risk Neonatal Gaucher s Disease Intestinal Malabsorption Cirrhosis of the liver Spina bifida Emphysema Other congenital anomalies of nervous Morbid Obesity system (includes hydrocephalus) Alpha-1 Antitrypsin Deficiency Congenital anomalies of heart Post-inflammatory Pulmonary Short gestation, low birth weight <2,500g Fibrosis 515 Intrauterine hypoxia and birth asphyxia Hepatitis Respiratory Distress Syndrome 769 Pancreatitis Apnea/Bradycardia Lupus Broncho-Pulmonary Dysplasia (BPD) Aneurysm Cystic Fibrosis Biliary Atresia High Risk Obstetrical Multiple Gestations Premature Rupture of Membranes Page 2 of 3

58 The specific procedures listed below are key indicators of potential catastrophic cases and should be referred to HCC LIFE INSURANCE COMPANY. Transplants should be referred to our Transplant Solutions team for cost containment assistance prior to transplantation. Procedures ICD-9 CODE CPT CODE Craniotomy Hyperbaric Oxygenation Plasmapheresis (Apheresis) Laryngectomy/Radical Neck Dissection Tracheostomy Implant Cardiac Assist Device Hemodialysis Pancreatectomy , Ventilator patient greater than 4 days Insertion shunt/fistula Gastric Bypass , 43843, 43846, TPN (Total Parenteral Nutrition) N/A Transplants V42 codes See Below Transplant Type CPT Bone Marrow Transplant Heart Heart-Lung Small Bowel Liver Lung (single) Lung (double) Pancreas 48160, Kidney Page 3 of 3