Other provisions II: waiver of premium, exclusions…

The other provisions, part two

This lesson covers five provisions that decide who pays: the premium, or the claim.

Waiver of premium answers who pays the premium while the insured is disabled.
Exclusions and preexisting condition rules answer whether a loss is covered at all.
Deductibles and coinsurance answer how a covered claim is split between insured and

insurer.

Waiver of premium

A waiver of premium provision keeps the policy in force without premium payments while the insured is totally disabled. The usual mechanics:

The insured must be totally disabled as the policy defines it.
A waiting period must pass first, commonly 90 days, sometimes six months.
Once the waiver starts, premiums paid during the waiting period are usually refunded.
The policy continues exactly as if premiums were being paid.
When the insured recovers, premium payments resume. The benefit usually ends at a stated

age, such as 65.

The premium is waived, not paid to the insured. Waiver of premium puts no money in the insured's pocket; it simply stops the bill.

Florida applies the same idea to group life: a waiver of premium for an insured totally disabled for at least six months must be offered with the application for any group life policy.

Exclusions

Exclusions are losses the policy never covers. Common ones:

war or acts of war, and injury during military service
intentionally self-inflicted injury
cosmetic surgery, unless needed because of an accident
injury or sickness covered by workers compensation
care provided free in a government facility

An excluded expense is not a covered expense, so it never counts toward the deductible or the out-of-pocket maximum.

Preexisting conditions

A preexisting condition is one that existed before coverage began. Florida's code defines a preexisting condition exclusion as a limitation of benefits because the condition was present before enrollment, whether or not any care was sought. The classic test looks back over a set period for a condition that either showed symptoms that would lead a prudent person to seek care, or for which care was recommended or received.

Under the Affordable Care Act, major medical plans may no longer exclude or limit coverage for preexisting conditions. The exclusions survive in coverage outside those rules. A Florida short-term health plan, for example, must give the buyer a signed disclosure of any preexisting condition exclusion.

The diagram has two parts. The top part asks who pays a ten thousand dollar covered claim with a one thousand dollar deductible and eighty twenty coinsurance. A horizontal bar is split into three pieces. The first, small piece is the one thousand dollar deductible, paid by the insured. The second is eighteen hundred dollars, the insured's twenty percent of the remaining nine thousand. The third and largest is seventy two hundred dollars, the insurer's eighty percent. Brackets under the bar total it up: the insured pays twenty eight hundred dollars and the insurer pays seventy two hundred. A note beneath says that once the out-of-pocket maximum, or stop-loss, is reached, the insurer pays one hundred percent for the rest of the year. Below that, a dashed red box labelled outside the flow lists exclusions, such as war, self-inflicted injury, cosmetic surgery and workers compensation, which are never paid and never count toward the deductible. The bottom part is a waiver of premium timeline. Premiums are paid until total disability begins. Then a waiting period runs, commonly ninety days. After it, premiums are waived until the insured recovers, and then premiums resume. A closing line says premiums paid during the waiting period are usually refunded, and that the premium is waived, with nothing paid to the insured. — How a covered claim is split between deductible, coinsurance and insurer, with exclusions outside the flow and the waiver of premium timeline.

Deductibles

A deductible is the flat dollar amount of covered expense the insured pays before the insurer pays anything. It keeps small claims off the books and lowers the premium: a higher deductible means a lower premium. Common types:

Calendar-year: met once per year, then resets.
Per-cause: applies separately to each illness or injury.
Corridor: sits between basic coverage and supplemental major medical.
Family: once a set number of members, often two or three, meet theirs, the whole family's

is met.

Carryover: expenses in the last three months of the year also count toward next year's.

Coinsurance and the out-of-pocket maximum

Coinsurance is the percentage split of covered expenses after the deductible. With 80/20 coinsurance the insurer pays 80 percent and the insured 20 percent.

Worked example: a $10,000 covered bill, a $1,000 deductible, 80/20 coinsurance.

The insured pays the first $1,000.
That leaves $9,000. The insured pays 20 percent, $1,800; the insurer pays $7,200.
The insured's total is $2,800.

The out-of-pocket maximum, or stop-loss, caps what the insured pays in a year. Once it is reached, the insurer pays 100 percent of covered expenses for the rest of the period.

A copayment is different again: a flat fee per service, such as $30 per office visit.

Other provisions II: waiver of premium, exclusions, preexisting conditions, coinsurance, deductibles