Rights of renewability

Rights of renewability

Every individual health policy answers one question that matters a great deal to the insured: when the term ends, can the insurance company walk away? The policy's renewability provision gives the answer. Renewability provisions are graded by how much control the insurer keeps. From the least protection for the insured to the most, they are:

Cancellable

A cancellable policy lets the insurer terminate coverage at any time, even in the middle of a term, by giving the insured written notice. Any premium paid for the period after cancellation is refunded on a pro rata basis. Claims that began before the cancellation took effect are still paid. This is the weakest form of protection.

Period of time (term, or nonrenewable)

Some policies are written for a single stated period, such as a short-term medical policy or a travel accident policy covering one trip. Coverage simply ends when the period ends. There is no renewal right at all, but the insurer cannot cancel during the period.

Optionally renewable

An optionally renewable policy cannot be cancelled mid-term, but on each premium due date or policy anniversary the insurer may decide, at its option, not to renew. It may decline an individual insured, and it may change the premium when it renews.

Conditionally renewable

A conditionally renewable policy may be non-renewed only for conditions stated in the policy, such as the insured reaching a specified age or leaving the employment that made them eligible. The insurer may not refuse to renew because the individual's health has deteriorated. Premiums may be raised, but only for a whole class of insureds.

Guaranteed renewable

A guaranteed renewable policy must be renewed at the insured's option, as long as premiums are paid on time, usually up to a stated age such as 65 or Medicare eligibility. The insurer cannot reduce or change an individual insured's benefits or single that person out. It can raise the premium, but only for an entire class of policyholders, never for one person because of their claims.

Noncancellable

A noncancellable (sometimes "noncancellable and guaranteed renewable") policy gives the most protection. The insurer must renew to the stated age, cannot change the benefits, and cannot raise the premium above the rates set out in the policy. This form is most common in individual disability income insurance.

Memory hook: guaranteed renewable guarantees the coverage; noncancellable guarantees the coverage and the price.

Guaranteed renewability of individual medical expense coverage

Today, individual hospital, surgical and medical expense coverage is guaranteed renewable by law. Federal law (the Health Insurance Portability and Accountability Act of 1996 and its successors) and state law require the insurer to renew at the policyholder's option. Non-renewal or discontinuance is allowed only for listed reasons:

• Nonpayment of premium.
• Fraud or intentional misrepresentation of material fact.
• The insurer discontinues a whole class (product) of policies. It must give the regulator and every covered person at least 90 days' written notice, offer every other individual medical product it sells, and act uniformly without regard to claims experience or health status.
• The insurer leaves the individual market entirely. It must give at least 180 days' written notice to the regulator and to each covered person, and it may not re-enter that market for five years.
• For a network plan, the insured no longer lives, resides or works in the service area, applied uniformly.

Two rules always apply: an insurer may never refuse to renew because of anyone's physical or mental condition or health, and it may not demand a limiting rider as a price of renewal. At renewal, the insurer may modify a policy form only on a uniform basis for everyone holding that form.