Rights of renewability

Why renewability matters

A health policy runs for a term, often one year, and then comes up for renewal. The renewability provision answers two questions the insured cares about most:

1. Can the insurer end the coverage, either during the term or at renewal?
2. Can the insurer raise the premium or change the terms when it renews?

The answers fall into a ladder of five classes, from weakest protection for the insured to strongest. The stronger the promise, the higher the premium, because the insurer is giving up the right to walk away from a risk that gets worse.

The five classes, weakest to strongest

• Cancellable: the insurer may cancel at any time, even mid-term, by giving written

notice and returning any unearned premium, and may also refuse to renew. Weakest protection.

• Optionally renewable: the insurer cannot cancel mid-term, but on any renewal date or

premium due date it may refuse to renew for any reason, or renew at a higher premium.

• Conditionally renewable: the insurer may refuse to renew **only for reasons stated in

the policy, such as reaching a stated age or leaving the employment that made the insured eligible. It may not** refuse because the insured's health has declined. Premiums may be raised for a whole class of insureds.

• Guaranteed renewable: the insurer must renew as long as premiums are paid, usually

to a stated age such as 65. It cannot change the policy provisions, but it may raise premiums for an entire class of insureds, never for one person alone.

• Noncancellable (noncan): the insurer must renew to the stated age and **cannot

change the premium or the provisions**. The strongest and most expensive class, found mainly in disability income insurance.

A term or nonrenewable policy, such as short-term travel accident coverage, simply ends when its period expires; there is no right to renew at all.

Exam tip: Guaranteed renewable and noncancellable both force the insurer to renew. The difference is premium: guaranteed renewable premiums can rise by class; noncancellable premiums are locked.

Guaranteed renewability of major medical coverage

Under federal law carried into state law, individual and group major medical coverage must be renewed at the option of the insured or policyholder. The insurer may nonrenew only for a short list of reasons that have nothing to do with the insured's health:

• nonpayment of premium,
• fraud or intentional misrepresentation of a material fact,
• the insurer stops offering the product or leaves the market entirely,
• for a network plan, the insured no longer lives, resides or works in the service area,
• for coverage sold only through an association, association membership ends, applied

uniformly (Fla. Stat. 627.6425(2)(e)).

For group coverage, failing to meet the plan's employer contribution or participation rules is an added reason.

How Florida limits product and market exits

Florida spells out what an insurer must do before it walks away:

• Dropping one policy form in the individual market: at least 90 days' notice to each

covered individual, an offer of any other individual coverage the insurer sells, and action taken uniformly without regard to health status (Fla. Stat. 627.6425(3)(a)1-3).

• Leaving the entire individual market: at least 180 days' notice to the Office of

Insurance Regulation and to each individual (Fla. Stat. 627.6425(3)(b)1).

• Leaving a group market: at least 180 days' notice to the office, the policyholder,

and covered participants, and the insurer may not re-enter that market for 5 years (Fla. Stat. 627.6571(3)(b)1-2). One mailing per household counts as notice to everyone living there (Fla. Stat. 627.6571(3)(c)).

Guaranteed renewable does not mean frozen. At renewal an insurer may modify a large-group product, and a small-group product if done uniformly (Fla. Stat. 627.6571(4)). Small-employer carriers must make the plan's renewability provisions available to the employer (Fla. Stat. 627.6699(13)(b)1.b).