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Please note that Connecticut is changing testing providers. Effective 9/1/2021, state insurance exams will be administered by Pearson Vue. For additional information about exam requirements and complete exam content outlines, please review the Insurance Licensing Candidate Handbook at www.pearsonvue.com/ct/insurance.

Note that the exam format is changing, as well. The new exam will consist of 2 parts: General Knowledge and State Law. However, you will receive one overall score. The new exam breakdown is as follows:

Connecticut Life Insurance Examination

90 Total Questions (75 scored, 15 pretest)
Time Limit: 2 hours; Passing Score: 70%

The following are content additions to supplement your existing text:

Insurance Basics

Consequences of Incomplete Applications

Before a policy is issued, all of the questions on the application must be answered. If the insurer receives an incomplete application, the insurer must return it to the applicant for completion. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer waived its right to have an answer to the question. The insurer will not have the right to deny coverage based on any information that the unanswered question might have contained.

Third-Party Ownership

Most insurance policies are written where the insured and owner of the policy is the same person. However, there are situations in which the contract may be owned by someone other than the insured. These types of contracts are known as third-party ownership. Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it. Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.

Reciprocal Exchanges

A reciprocal is insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers, collectively known as a Reciprocal Insurance Company or Exchange. The company is put into effect and administered through an attorney-in-fact common to all persons. Subscribers agree to become liable for their share of losses and expenses incurred among all subscribers, and they authorize the attorney-in-fact to manage and operate the exchange.

Viatical Settlements

Viatical settlements allow someone living with a life-threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death.

While viatical settlements are not policy options, they are separate contracts in which the insured sells the death benefit to a third party at a discounted rate. There are several important concepts you need to understand about viaticals:

• The insureds are referred to as viators;
• Viatical settlement provider means a person, other than a viator, that enters into a viatical settlement contract;
• Viatical producers represent the providers;
• Viatical brokers represent the insureds.

Viators usually receive a percentage of the policy’s face value from the person who purchases the policy. The new owner continues to maintain premium payments and will eventually collect the entire death benefit.

Social Security Benefits

Social Security, also referred to as Old Age Survivors Disability Insurance — OASDI, is a Federal program enacted in 1935, which is designed to provide protection for eligible workers and their dependents against financial loss due to old age, disability, or death. With a few exceptions, almost all individuals are covered by Social Security. In some aspects, Social Security plays a role of federal life and health insurance, which is important to consider when determining an individual's needs for life insurance.

Social Security uses the Quarter of Coverage (QC) system to determine whether or not an individual is qualified for Social Security benefits. The type and amount of benefits are determined by the amount of credits or QCs a worker has earned. Anyone working in jobs covered by Social Security or operating his/her own business may earn up to a maximum of 4 credits for each year of work.

The term fully insured refers to someone who has earned 40 quarters of coverage (the equivalent of 10 years of work), and is therefore entitled to receive Social Security retirement, premium-free Medicare Part A, and survivor benefits. If an individual is entitled to premium-free Medicare Part A, they are automatically eligible for Medicare Part B, but must pay a monthly premium.

An individual can attain a currently insured status (or partially insured), and by that qualify for certain benefits if he or she has earned 6 credits (or quarters of coverage) during the 13-quarter period ending with the quarter in which the insured:

• Dies;
• Becomes entitled to disability insurance benefits; or
• Becomes entitled to old-age insurance benefits.

For younger workers, the number of quarters required to qualify for the benefits differs by age according to a table established by Social Security.

*The current full retirement age is 66, and is gradually increasing to age 67.

Stranger-Originated Life Insurance (STOLI) and Investor-Originated Life Insurance (IOLI)

Stranger-originated life insurance (STOLI) is a life insurance arrangement in which a person with no relationship to the insured (a "stranger") purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies. In other words, STOLIs are financed and purchased solely with the intent of selling them for life settlements.

STOLIs violate the principle of insurable interest, which is in place to ensure that a person purchasing a life insurance policy is actually interested in the longevity rather than the death of the insured. Because of this, insurers take an aggressive legal stance against policies they suspect are involved in STOLI transactions.

Note that lawful life settlement contracts do not constitute STOLIs. Life settlement transactions result from existing life insurance policies; STOLIs are initiated for the purpose of obtaining a policy that would benefit a person who has no insurable interest in the life of the insured at the time of policy origination.

Investor-owned life insurance (IOLI) is another name for a STOLI, where a third-party investor who has no insurable interest in the insured initiates a transaction designed to transfer the policy ownership rights to someone with no insurable interest in the insured and who hopes to make a profit upon the death of the insured or annuitant.

USA PATRIOT Act and Anti-Money Laundering

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, also known as the USA PATRIOT Act was enacted on October 26, 2001. The purpose of the Act is to address social, economic, and global initiatives to fight and prevent terrorist activities. The Act enabled the Financial Crime Enforcement Network (FinCEN) to require banks, broker-dealers, and other financial institutions to establish new anti-money laundering (AML) standards. With new rules in place, FinCEN incorporated the insurance industry into this group.

To secure the goals of the Act, FinCEN has implemented an AML Program that requires the monitoring of all financial transactions and reporting of any suspicious activity to the government, along with prohibiting correspondent accounts with foreign shell banks. A comprehensive customer identification and verification procedure is also to be set in place. The AML program consists of the following minimum requirements:

Assimilate policies, procedures and internal controls based on an in-house risk assessment, including:

• Instituting AML programs similar to banks and securities lenders; and
• File suspicious activity reports (SAR) with Federal authorities;
• Appointing a qualified compliance officer responsible for administering the AML program;
• Continual training for applicable employees, producers and other; and
• Allow for independent testing of the program on a regular basis.

Suspicious Activity Reports (SARs) Rules

Any company that is subject to the AML Program is also subject to SAR rules. SAR rules state that procedures and plans must be in place and designed to identify activity that one would deem suspicious of money laundering, terrorist financing and/or other illegal activities. Deposits, withdrawals, transfers or any other business deals involving $5,000 or more are required to be reported if the financial company or insurer “knows, suspects or has reason to suspect” that the transaction:

• Has no business or lawful purpose;
• Is designed to deliberately misstate other reporting constraints;
• Uses the financial institution or insurer to assist in criminal activity;
• Is obtained using fraudulent funds from illegal activities; or
• Is intended to mask funds from other illegal activities.

Some "red flags" to look for in suspicious activity:

• Customer uses fake ID or changes a transaction after learning that he or she must show ID;
• Two or more customers use similar IDs;
• Customer conducts transactions so that they fall just below amounts that require reporting or recordkeeping;
• Two or more customers seem to be working together to break one transaction into two or more (trying to evade the Bank Secrecy Act (BSA) requirements); or
• Customer uses two or more money service business (MSB) locations or cashiers on the same day to break one transaction into smaller transactions (trying to evade BSA requirements).

Relevant SAR reports must be filed with FinCEN within 30 days of initial discovery. Reporting takes place on FinCEN Form 108.

Life Insurance Policies

A. Term Life Insurance

Renewable and Convertible

Most term insurance policies are renewable, convertible, or renewable and convertible (R&C).

The renewable provision allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability. The premium for the new term policy will be based on the insured's current age. For example, a 10-year term policy that is renewable can be renewed at the end of the 10-year period for a subsequent 10-year period without evidence of insurability. However, the insured will have to pay the premium that is based on his or her attained age. If an individual purchases a 10-year term policy at age 35, he or she will pay a premium based on the age of 45 upon renewing the policy.

The convertible provision provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability. The premium will be based on the insured's attained age at the time of conversion.

Return of Premium

Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid. The return of premium is paid if the death occurs within a specified period of time or if the insured outlives the policy term.

ROP policies are structured to consider the low risk factor of a term policy but at a significant increase in premium cost, sometimes as much as 25% to 50% more. Traditional term policies offer a low-cost, simple-death benefit for a specified term but have no investment component or cash value. When the term is over, the policy expires and the insured is without coverage. An ROP policy offers the pure protection of a term policy, but if the insured remains healthy and is still alive once the term limit expires, the insurance company guarantees a return of premium. However, since the amount returned equals the amount paid in, the returned premiums are not taxable.

D. Variable Life

Variable universal life insurance is a type of insurance that combines many features of the whole life with the flexible premium of universal life and the investment component of variable life, making it a securities version of the universal life insurance. Variable universal life insurance, like universal life itself, has the following features and characteristics:

• A flexible premium that can be increased, decreased or skipped as long as there is enough value in the policy to fund the death benefit;
• Increasing and decreasing the amount of insurance; and
• Cash withdrawals or policy loans.

Unlike universal life, most of the investment vehicles in variable universal life policies do not guarantee return.

F. Group Life

Contributory vs Noncontributory

The employer or other group sponsor may pay all of the premiums or share premiums with the employees. When an employer pays all of the premiums, the plan is referred to as a noncontributory plan. Under a noncontributory plan, an insurer will require that 100% of the eligible employees be included in the plan. When the premiums for group insurance are shared between the employer and employees, the plan is referred to as a contributory plan. Under a contributory plan, an insurer will require that 75% of eligible employees be included in the plan.

Life Insurance Policy Provisions, Options and Riders

A. Standard Provisions

Insuring Clause

The insuring clause (or insuring agreement) sets forth the basic agreement between the insurer and the insured. It states the insurer’s promise to pay the death benefit upon the insured’s death. The insuring clause usually is located on the policy face page, and also defines who the parties to the contract are, how long coverage is in force, and the type of loss insured against.

Consideration

Both parties to a contract must provide some value, or consideration, in order for the contract to be valid. The consideration provision states that the consideration (value) offered by the insured is the premium and statements made in the application. The consideration given by the insurer is the promise to pay in accordance with the terms of the contract. The consideration clause is not always a separate provision, but is often included in the entire contract provision. A separate provision concerning the payment of policy premiums is usually also found in the policy.

F. Riders Affecting the Death Benefit Amount

Accidental Death and Dismemberment

The accidental death and dismemberment rider (AD&D) pays the principal (face amount) for accidental death, and pays a percentage of that amount, or a capital sum, for accidental dismemberment. The accidental death portion is the same as that already discussed with the accidental death rider. The dismemberment portion of the rider will usually determine the amount of the benefit according to the severity of the injury. The full principal amount will usually be paid for loss of two hands, two arms, two legs or the loss of vision in both eyes. A capital amount is usually limited to half the face value and is payable in the event of the loss of one hand, arm, leg, or eye. The dismemberment can be defined differently by insurance companies, from the actual severance of the limb to the loss of use.

Federal Tax Considerations for Life Insurance & Annuities

Taxation of Group Life and Employer-Sponsored Plans

The premiums that an employer pays for life insurance on an employee, whereby the policy is for the employee's benefit, are tax deductible to the employer as a business expense. If the group life policy coverage is $50,000 or less, the employee does not have to report the premium paid by the employer as income (not taxable to the employee).

Any time a business is the named beneficiary of a life insurance policy, or has a beneficial interest in the policy, any premiums that the business pays for such insurance are not tax deductible. Therefore, when a business pays the premiums for any of the following arrangements, the premiums are not deductible:

• Key-employee (key-person) insurance;
• Stock redemption or entity purchase agreement;
• Split-dollar insurance.

The cash value of a business owned life insurance policy or an employer provided policy accumulates on a tax-deferred basis and is taxed in the same manner as an individually owned policy.

Policy loans are not taxable to a business. Unlike an individual taxpayer, a corporation may deduct interest on a life insurance policy loan for loans up to $50,000.

Policy death benefits paid under a business owned or an employer provided life insurance policy are received income tax free by the beneficiary (in the same manner as in individually owned policies).

Connecticut Accident & Health Insurance Examination

90 Total Questions (75 scored, 15 pretest)
Time Limit: 2 hours; Passing Score: 70%

The following are content additions to supplement your existing text:

Health Insurance Basics

Modes of Premium Payment

In regard to insurance premiums, mode refers to the frequency the policyowner pays the premium. An insurance policy's rates are based on the assumption that the premium will be paid annually at the beginning of the policy year and that the company will have the premium to invest for a full year before paying any claims. If the policyowner chooses to pay the premium more frequently than annually, there will be an additional charge because the company will have additional expenses in billing the premium. However, the premium may be paid annually, semi-annually, quarterly, or monthly.

Higher Frequency = Higher Premium

Monthly > Quarterly > Semi-Annual > Annual

Subrogation

Subrogation is the legal process by which an insurance company seeks recovery of the amount paid to the insured from a third party who may have caused the loss. Through subrogation, the insured cannot collect twice.

D. Limited Policies

Cancer Policy

Cancer policies cover only one illness: cancer, and pay a lump-sum cash benefit when the insured is first diagnosed with cancer. It is a supplemental policy intended to fill in the gap between the insured's traditional health coverage and the additional costs associated with being diagnosed with the illness. There are no restrictions on how the insured spends the funds, so the benefit can be used to pay for medical bills, experimental treatment, mortgage, personal living expenses, loss of income, etc.

Critical Illness

A critical illness policy covers multiple illnesses, such as heart attack, stroke, renal failure, and pays a lump-sum benefit to the insured upon the diagnosis (and survival) of any of the illnesses covered by the policy. The policy usually specified a minimum number of days the insured must survive after the illness was first diagnosed.

Short-Term Medical

Short-term medical insurance plans are designed to provide temporary coverage for people in transition (those between jobs or early retirees), and are available for terms from one month up to 11 months, depending on the state. Unlike regular individual major medical plans, short-term health insurance policies are not regulated by the Affordable Care Act and their enrollment is not limited to the open enrollment period; they also do not meet the requirements of the federally mandated health insurance coverage.

Like traditional health plans, short-term plans may have medical provider networks, and impose premiums, deductibles, coinsurance and benefit maximums. They also cover physician services, surgery, outpatient and inpatient care.

Individual Health Insurance Policy General Provisions

C. Other General Provisions

Probationary Period

The probationary period provision states that a period of time must lapse before coverage for specified conditions goes into effect. This provision is most commonly found in disability income policies. The probationary period also applies to new employees who must wait a certain period of time before they can enroll in the group plan. The purpose of this provision is to avoid unnecessary administrative expenses in cases of employee turnover.

Exclusions and Limitations

Exclusions specify for what the insurer will not pay. These are causes of loss that are specifically excluded from coverage. Reductions are a decrease in benefits because of certain specified conditions. The most common exclusions in health insurance policies are injury or loss that results from any of the following:

• War;
• Military duty;
• Self-inflicted injury;
• Dental expense;
• Cosmetic medical expenses;
• Eye refractions; or
• Care in government facilities.

In addition, most policies will temporarily suspend coverage while an insured resides in a foreign country or while serving in the military.

Mental and Emotional Disorders — Usually the lifetime benefit for major medical coverage limits the amount payable for mental or emotional disorders. The benefit is usually expressed as a separate lifetime benefit and there is frequently a limit on the number of outpatient visits per year. The benefit may also pay a maximum limit per visit. These limitations usually do not apply to inpatient treatment.

Substance abuse — As with mental and emotional disorders, outpatient treatment of substance abuse is usually limited to a maximum limit.

Coinsurance

Most major medical policies include a coinsurance provision that provides for the sharing of expenses between the insured and the insurance company. After the insured satisfies the policy deductible, the insurance company will usually pay the majority of the expenses, typically 80%, with the insured paying the remaining 20%. Other coinsurance arrangements exist such as 90/10; 75/25; or 50/50. The larger the percentage that is paid by the insured, the lower the required premium will be. The purpose of the coinsurance provision is for the insurance company to control costs and discourage overutilization of the policy.

Copayments

A copayment provision is similar to the coinsurance feature in that the insured shares part of the cost for services with the insurer. Unlike coinsurance, a copayment has a set dollar amount that the insured will pay each time certain medical services are used.

Deductibles

A deductible is a specified dollar amount that the insured must pay first before the insurance company will pay the policy benefits. The purpose of a deductible is to have the insured absorb the smaller claims, while the coverage provided under the policy will absorb the larger claims. Consequently, the larger the deductible, the lower the premium that is required to be paid.

Most major medical policies feature an annual deductible (also called a calendar year deductible) that, as the name implies, is paid once in any year, regardless of the amount of claims in that year. The policy may contain an individual deductible, in which each insured is personally responsible for a specified deductible amount each year, or a family deductible (usually 2 to 3 times the individual deductible) whereby the annual deductible is satisfied if two or more family members pay a deductible in a given year, regardless of the amount of claims incurred by additional family members. Some policies contain what is known as a per occurrence deductible or flat deductible which the insured is required to pay for each claim, possibly resulting in more than one deductible being paid in a given year.

The policy may also contain a provision which applies when more than one family member is injured in a single accident, also called the common accident provision. In this case, only one deductible applies for all family members involved in the same accident.

Some supplemental major medical plans also include an integrated deductible in which case the amount of the deductible may be satisfied by the amount paid under basic medical expense coverage. For example, if the supplemental coverage included a $1,000 integrated deductible, and the insured incurs $1,000 in basic medical expenses, the deductible will be satisfied. If the basic policy only covered $800 of the basic expenses, the insured would have to satisfy the remaining $200 difference.

Some policies also include a carry-over provision that states that if the insured did not incur enough expenses during the year to meet the deductible, any expenses incurred during the last 3 months may be carried over to the next policy year to satisfy the new annual deductible.

Disability income and long-term care policies usually have a time deductible in the form of elimination period.

Eligible Expenses

Eligible expenses are those medical expenses covered by a health insurance plan. The eligible expenses are specified in the policy.

Pre-Authorization and Prior Approval Requirements

Some health insurance policies will require the pre-authorization or prior approval of certain medical procedures, tests, or hospital stays. The insured must obtain the insurer's approval before the procedure, test, or hospital stay to be sure the policy will cover the expenses.

Usual, Reasonable and Customary (URC) Charges

Some medical expense insurance plans contain a benefit schedule, which very specifically states exactly what is covered in the plan and for how much. Other plans may incorporate the term usual/reasonable/customary. Usual/reasonable/customary means that the insurance company will pay an amount for a given procedure based upon the average charge for that procedure in that specific geographic area.

Impairment Rider

The impairment (exclusion) rider may be attached to a contract for the purpose of eliminating coverage for a specifically defined pre-existing condition, such as back injuries. Impairment riders may be temporary or may become a permanent part of the policy. Attaching this rider excludes coverage for a condition that would otherwise be covered. Often a person's only means of purchasing insurance at a reasonable cost when they have an existing impairment is through a policy which excludes coverage for the specific impairment.

For example, a physician may have suffered from a back injury prior to applying for a disability policy. The company may agree to issue a disability policy, but with an exclusion rider, excluding coverage for any claim related to his back. The policy would cover any other disability he may incur in the future, as long as it is not related to his back. This may be the only way the insured is able to obtain coverage. The underwriter makes a decision when writing the contract whether to make the exclusion permanent, or, for a short time only (such as if the insured is able to go a specified period of time with no further treatment). The terms of the rider will be clearly stated in the policy.

Most riders in both life and health insurance add some form of additional coverage and often, there is extra cost added to the premium for the rider. The impairment (exclusion) rider is an exception in that it takes something away from standard coverage. There is no extra charge for this, nor is the premium reduced to reflect a reduction in coverage.

Guaranteed Insurability Rider

This policy rider is also referred to as the Future Increase Option or the Guaranteed Purchase Option. This option, which is also available on life insurance policies, will allow the insured to purchase additional amounts of disability income coverage without evidence of insurability. The insured is usually provided a number of option dates, such as every two years, on which the additional purchase option may be exercised. Most companies do not allow the insured to exercise the additional purchase option beyond a certain age, usually age 50. The premium for the additional amount of insurance will be based on the insured’s attained age at the time the option is exercised. In order to prevent over-insurance, the insured must meet an earnings test prior to each purchase. In addition, the insurer will usually limit the amount that may be purchased at each of the option dates to some specified amount, such as $500-$5,000.

Primary and Contingent Beneficiaries

Any death benefits available in a policy will be paid to a beneficiary. A primary beneficiary is the first person so designated. However, if the primary beneficiary should die before the benefits become payable, the benefits would go to a contingent or secondary beneficiary. If no beneficiary is designated, the benefits will be placed in the deceased's estate.

Multiple primary and contingent beneficiaries may be designated in a policy. If multiple primary beneficiaries are named, each individual will receive a proportionate percentage of the death benefit. If one of multiple primary beneficiaries dies, equivalent percentages are re-established.

For example, if there were two primary beneficiaries named in a policy, each would receive 50% of the death benefit. If one of the two beneficiaries died, the remaining beneficiary would receive 100%.

If an individual health insurance policy provides a death benefit, it must also include a change of beneficiary provision. This provision gives the policyholder, unless he/she has made an irrevocable designation of a beneficiary, the right to change any primary and/or contingent beneficiary or make any other change without the consent of the beneficiary or beneficiaries.

Owner’s Rights

If an individual health insurance policy provides a death benefit, the policyowner will be able to designate a beneficiary and to change the beneficiary unless the beneficiary designation is irrevocable. The power to change the beneficiary is provided in the change of beneficiary provision. The policyowner also has the right to make any other change without the consent of the beneficiary(ies).

Medical Plans

B. Types of Plans

Flexible Spending Accounts (FSAs)

A Flexible Spending Account (FSA) is a form of cafeteria plan benefit funded by salary reduction and employer contributions. The employees are allowed to deposit a certain amount of their paycheck into an account before paying income taxes. Then, during the year, the employee can be directly reimbursed from this account for eligible health care and dependent care expenses. FSA benefits are subject to annual maximum and "use-or-lose" rule. This plan does not provide a cumulative benefit beyond the plan year.

There are 2 types of Flexible Spending Accounts: a Health Care Account for out-of-pocket health care expenses, and a Dependent Care Account (subject to annual contribution limits) to help pay for dependent's care expenses which makes it possible for an employee and his or her spouse to continue to work.

An FSA is exempt from federal income taxes, Social Security (FICA) taxes and, in most cases, state income taxes, saving 1/3 or more in taxes. If the plan favors highly compensated employees, the benefits for the highly compensated employees are not exempt from federal income taxes.

Child and dependent care expenses must be for the care of one or more qualifying persons:

• A dependent who was under age 13 when the care was provided and who can be claimed as an exemption on the employee's Federal Income Tax return;
• A spouse who was physically or mentally not able to care for himself or herself; or
• A dependent who was physically or mentally not able to care for himself or herself and who can be claimed as an exemption (as long as the person is earning gross income less than an IRS-specified amount).

Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves.

The insured may change benefits during open enrollment. After that period, generally, no other changes can be made during the plan year. However, the insured might be able to make a change under one of the following circumstances, referred to as qualified life event changes:

• Marital status;
• Number of dependents;
• One of dependents becomes eligible for or no longer satisfies the coverage requirements under the Medical Reimbursement plan for unmarried dependents due to attained age, student status, or any similar circumstances;
• The insured, the insured's spouse's or qualified dependent's employment status that affects eligibility under the plan (at least a 31-day break in employment status to qualify as a change in status);
• Change in dependent care provider; or
• Family medical leave.

The IRS limits the annual contribution for Dependent Care Accounts to a specified amount that gets adjusted annually for cost of living. This is a family limit, meaning that even if both parents have access to flexible care accounts, their combined contributions cannot exceed the amount.

E. Federal Legislature

2. PPACA (Patient Protection and Affordable Care Act)

Taxes and Subsidies

Enrollment in the Health Insurance Market place began in October 2013, and tax credits for those who qualify became available in 2014.

After submitting an application for health insurance for a qualified health plan, individuals will be able to take an advance tax credit to reduce the cost of their health care coverage if purchased through an exchange. For the purposes of the premium tax credit, household income is defined as the Modified Adjusted Gross Income (MAGI) of the taxpayer, spouse, and dependents. The MAGI calculation includes income sources such as wages, salary, foreign income, interest, dividends, and Social Security.

Legal residents and citizens who have incomes between 100% and 400% of the Federal Poverty Level (FPL) are eligible for the tax credits. States have the option of extending Medicaid coverage to people under 138% of the FPL. Persons who receive public coverage like Medicare or Medicaid are not eligible for the tax credits.

Persons who are eligible for a premium tax credit and have household incomes between 100% and 250% of FPL are eligible for cost-sharing subsidies (reductions). Eligible individuals will be required to purchase a silver level plan in order to receive the cost-sharing subsidy.

The tax credit is sent directly to the insurance company, and reduces the insured's monthly health care premiums. Tax credits are based upon the individual's or family's expected annual income.

Small employers that offer health plans may be eligible for federal tax credits, depending on the average wages and size of the employer. These tax credits, available to low-wage employers (under $50,000 average per employee) with 25 or fewer workers, may cover up to 50% of premiums paid for small business employers and 35% of premiums paid for small tax-exempt employers.

To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP).

The credit is available to eligible employers for 2 consecutive taxable years.

Employer Notification Responsibilities

All employers that offer health coverage to their employees are required to provide information about the Patient Protection and Affordable Care Act and the new Health Insurance Marketplace exchanges. The purpose of the notification is to help employees evaluate health insurance options for them and their dependents.

Insurance Regulation

Broker

A broker is an insurance producer that is not appointed by an insurance company and is deemed to be representing the client in matters of insurance.

Transacting Insurance

Transacting insurance is the process of conducting insurance business. An insurance transaction includes the following:

• Solicitation of applications for insurance;
• Collecting premiums, fees, and assessments for insurance contracts;
• Issuing and delivering insurance policies; and
• Directly and indirectly acting as an insurance agent.

Filing and Approval of Policy Forms

The written policy forms, including endorsements, that are to be used by an insurance company must be filed and approved by the Insurance Department prior to their use in the state. The filing may be done on paper or in electronic form, but must be in a format prescribed by the Department.

After a form is accepted for review, the Department of Insurance will approve or disapprove the form within 90 days. If the Department determines that additional information from the insurer is necessary, they will make a request to the insurer. The insurer, then, has 10 days to provide the requested information.

Disclosure

In most cases, if an insurance producer receives compensation directly from a customer at the initial placement, that compensation cannot be accepted unless the producer has disclosed to the customer the amount of compensation the producer will receive. If the amount of compensation is not known at the time of disclosure, the producer must explain the method for calculation such compensation and provide a reasonable estimate.

Premium Accountability

Each authorized insurance company is required to report to the Commissioner any failure on the part of the producer to remit premiums for policies issued through the producer within 30 days, or any instance where a check issued by a producer is returned for insufficient funds.

If the producer is found guilty of a failure to remit the premiums on issued policies to the insurer, his or her license may be suspended or revoked. The Commissioner will send a notice to the producer to remit the premiums. The following time limits will then apply:

• 15 days for the producer to pay the funds; otherwise, the producer’s license will be automatically suspended;
• 60 days for the producer to request a hearing – if no hearing is requested and no premiums are remitted, the license will be revoked;
• A hearing must take place 30 days from the receipt of the written request.

Brokered Transactions Guarantee Fund

The Insurance Department must establish and maintain a Brokered Transactions Guaranty Fund. Any resident aggrieved by a business action of a licensed surplus lines broker or an unlicensed person acting as a producer who embezzled money or property, or illegally obtained money or property by reason of fraud, misrepresentation or deceit, may recover, with the Department's approval, compensation in an amount not exceeding a total of $10,000. This excludes failure in the performance of contractual obligations due to the impairment of an insurer.

Unfair and Prohibited Practices

Illegal Inducement

It is unlawful to pay, offer or accept any of the following as an inducement to buy insurance:

• Any special favor or advantage in dividends or benefits;
• Any stocks, bonds, securities, or accrued dividends or profits; or
• Anything of value not specified in the insurance contract.

Coercion of Borrower

It is illegal for an insurer or an insurance producer to engage in any activity that will either create for itself a monopoly or will in any way force a person to believe he or she must buy insurance from a particular producer or insurer to comply with a creditor's or lender's insurance requirement.

State Statutes Rules, and Regulations Pertinent to Accident and Health Insurance Only

Policy Clauses and Provisions

Minimum Standards

As a means of protecting health insurance consumers, individual and group medical expense policies sold in the state must conform to a minimum level of standards set by the Connecticut Insurance Department.

Definition

Health insurance policy means insurance providing benefits due to illness or injury, resulting loss of life, loss of earnings, or expenses incurred, and includes the following types of coverage:

• Basic hospital expense coverage;
• Basic medical-surgical expense coverage;
• Hospital confinement indemnity coverage;
• Major medical expense coverage;
• Disability income protection coverage;
• Accident only coverage;
• Long-term care coverage;
• Specified accident coverage;
• Medicare Supplement coverage;
• Limited benefit health coverage;
• Hospital or medical service plan contract;
• Hospital and medical coverage provided to subscribers of a health care center; and
• Specified disease coverage.

The insurance regulations require that individual accident and sickness insurance policies issued and delivered in this state may only contain definitions that comply with those set by the Code.

Prohibited Provisions

All individual health insurance policies sold in this state must adhere to the following provision:

• Probation waiting periods may not exclude coverage for accident-related claims at all, and are limited to 6 months for cases where the cause of disability or medical treatment is related to certain specified diseases (hernia, varicose veins, tonsils, appendix, etc.).
• Disability income policies may include a return of premium provision as long as the policy is noncancellable, is not issued beyond age 50, the insurer provides a clear and complete explanation of how the benefit is calculated, a surrender value is available within 3 years, and the policy surrender value may be obtained either upon the surrender of the policy, the policyowner's death or expiration of the policy.
• No other type of health insurance (other than disability income policies) may offer a return of premium provision.

Required and Options Coverages

Mental Health and Nervous Disorder Coverages

Each individual health insurance policy must provide benefits for the diagnosis and treatment of mental or nervous conditions. Mental or nervous conditions means mental disorders, and does not include

• Intellectual disability;
• Learning disorders;
• Motor skills disorders;
• Communication disorders;
• Caffeine-related disorders;
• Relational problems; and
• Additional conditions that may be a focus of clinical attention.

Policy terms and benefits for mental and nervous conditions must be equal to those for diagnosis and treatment of other medical, surgical or physical health conditions.

Substance Abuse Treatment

Every group health insurance policy that provides basic or major hospital or medical-surgical expense coverage must also provide coverage for treatment of substance abuse or medical complications of alcoholism, which would include diseases like cirrhosis of the liver, gastrointestinal bleeding, pneumonia or delirium tremens. Confinement for medical complications of alcoholism is provided on the same basis as any other disease specified in the contract. The benefits may be excluded if they are covered by a separate policy issued by the same group.

Maternity Benefits for Dependent Children

Health insurance policies that provide maternity benefits and provide health coverage for the insured's family must also provide maternity benefits for covered dependent children. Coverage for a newborn must cover injury and sickness, as well as treatment of diagnosed congenital defects and birth abnormalities.

Health insurance policies requiring a specific premium or subscription fee may require notification of birth within 61 days for coverage to continue on a newborn.

Pre-existing Conditions

The term pre-existing conditions cannot be more restrictive than the following: existing of symptoms which would cause a person to seek diagnosis, care or treatment, or for which medical advice or treatment was recommended or provided by a physician within 5 years preceding the effective date of coverage. Pre-existing condition provision in health policies limits or excludes benefits for that condition.

The following, however, are exceptions to the pre-existing condition regulation:

• Routine follow-up care to determine whether a breast cancer has reoccurred in a person previously determined to be breast cancer free is not considered medical advice or care.
• Genetic information cannot be treated as a condition in the absence of a diagnosis.
• Pregnancy is not considered a pre-existing condition.

  Chiropractic

  Every individual medical expense policy must provide coverage for chiropractic services to the same extent coverage is rendered by a physician, as long as its purpose is to treat a condition that is covered under the policy and is within the services the chiropractor is licensed to perform.

  Mammogram

  Individual health insurance policies must provide for women covered under the policy:

• 1 baseline mammogram for any woman age 35 to 39 inclusive;
• 1 mammogram every year for any woman age 40 or older.

Carrier Disclosure

Renewal Agreements, Nonrenewal, and Cancellation

All health insurance policies must include a provision explaining the terms and conditions under which the policy may be renewed or cancelled.

Guaranteed renewable and noncancelable policies must clearly state the term that the policy is guaranteed renewable (e.g. age 65). The insurer cannot cancel or refuse to renew a policy while it is guaranteed renewable or noncancelable. Premium rates for guaranteed renewable policies may be increased only for the entire class of policies. Noncancelable policies not only guarantee that the policy will be renewed, but guarantee the premium rate.

Group health insurance policies must permit covered employees whose employment is terminated or reduced to continue coverage if the group policy remains in force. (This does not apply to termination for gross misconduct.)

Suitability

It is the agent's responsibility to exercise due diligence to determine if a proposed policy is suitable for the applicant. The proposed insurance needs to meet the needs of the applicant and be affordable.

Policy Replacement

To protect the consumer against suffering, damage or loss because of the unnecessary changing of health insurance policies (new waiting periods, higher premium rates, etc.), the Commissioner has established regulations governing the replacement of policies.

In group medical policies, when a replacement medical policy is issued, the following rules apply:

• The prior insurer remains liable only for claims arising before the replacement, even though the expenses occur after the new policy is issued, except in cases where benefits are extended for any reason;
• The succeeding insurer must allow all those who participated in the prior insurer's plan to be eligible for participation in the new plan;
• Plan participants who have a pre-existing condition when the replacement occurs must be covered for that condition. Benefits must be at least equal to the lesser of the succeeding plan's benefits or the previous plans benefits; and
• Deductibles and coinsurance amounts paid before the replacement must be recognized by the succeeding plan when determining benefit levels.

Application Responsibilities

Making a false or fraudulent statements or misrepresentations on or relative to an application for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, producer, or individual is an illegal act.

Insurance providers or agents must give a notice of information practices with every application for insurance either at the time of policy delivery or at the time the applicant’s personal information is collected. The notice must be in writing, and must explain the types of personal information that may be collected, the required disclosures, and a description of the applicant’s rights.

Medicare Supplement Insurance

Definitions

Connecticut law defines a Medicare Supplement policy as

• A group or individual policy of accident and sickness insurance;
• A subscriber contract of hospital and medical service corporations or health care centers, other than a policy issued pursuant to a contract under Section 1876 of the federal Social Security Act; or
• An issued policy under a demonstration project specified in the federal code, which is advertised, marketed or designed primarily as a supplement to reimbursements under Medicare for the hospital, medical or surgical expenses of persons eligible for Medicare.

Except as otherwise specifically excluded, this applies to all Medicare supplement policies and certificates delivered or issued for delivery in Connecticut.

Nonduplication of Benefits

A Medicare supplement policy may not duplicate any benefit that is provided under Medicare. Issuers must report to the Insurance Commissioner annually (on or before March 1) information regarding any state resident who has in force more than one Medicare supplement policy of certificate. The report must include the policy and certificate number, and the date of issuance.

Long-Term Care/Home Health Care Policies

Long-term care insurance is any policy designed to provide the insured with at least 1 year of coverage after a reasonable elimination period for one or more necessary diagnostic, preventive, therapeutic, rehabilitative, or personal care services in a setting other than an acute care unit of a hospital.

Long-term care coverage may be issued by an insurance company, fraternal benefit society, hospital service corporation, medical service corporation or health care center that is authorized to issue such coverage by the Commissioner.

Long-term care insurance is a recent innovation, prompted by the enormous costs that can be associated with the health care needs of the aged. With the increase in life expectancy and improved medical care, people are living longer.

There are several standard provisions that are required in all long-term care policies issued and delivered in this state - individual, group and direct response. Those provisions include, but are not limited to the following:

• LTC policies cannot deny a claim for a pre-existing condition that occurred more than 6 months from the effective date of the policy;
• Limitations and Exclusions: LTC policies cannot impose limitations or exclusions that are more restrictive than in any other health insurance policies;
• LTC policies cannot use waivers to exclude, limit or reduce coverage for specifically named pre-existing diseases of physical conditions;
• Waiver of premium: policies must make reasonable provision for waiver of premium;
• Right to return: a notice must be printed on the first page of the policy explaining the policyowner’s right to return the policy within 30 days for a full refund of the premium (direct response policies must be returned to the insurer; policies solicited through an agent may be returned to the agent or the insurer);
• Return of premium: policies must include a provision stating that upon notification to the company of an insured’s death, the company will refund the premium on a pro rata basis;
• Elimination period cannot be greater than 100 days of confinement;
• Extension of benefits and payment of benefits.

All group LTC policies must include a continuation of coverage provision that allows the certificate holder to continue coverage or convert to an individual policy if the group plan is cancelled or nonrenewed.

Individual policies must include a renewability provision, either guaranteed renewable or noncancellable. That provision must appear on the first page of the policy and clearly state the duration of the term of coverage for which the policy is issued or may be renewed.

Nursing Home vs. Home vs. Community

Long-term care insurance may provide benefits to insureds confined in a nursing home, at home, or to residents of a life care or continuing care retirement community or other residential community for the elderly.

The Commissioner may, upon written request by the issuer of the coverage, issue an order to modify or suspend a specific provision or regulation adopted with respect to a specific long-term policy upon a written finding that

• The modification or suspension would be in the best interest of the insureds;
• The purposes to be achieved could not be effectively or efficiently achieved without such modification or suspension; and
• The modification or suspension is necessary to the development of an innovative and reasonable approach for insuring long-term care.

Levels of Care

Long-term care policies that provide benefits for home health care services only (and not for nursing home care) do not have to meet policy requirements relating to long-term care in a nursing facility. However, they must meet all other long-term care policy requirements.

There are three levels of care that may be provided under a long-term care policy:

• Skilled nursing care;
• Intermediate care; and
• Custodial or residential care.

Of these levels of care, custodial care is what most elderly persons will require at some time in their lives and is also the type of care that is not covered by Medicare.

Zero-Day Hospital

Long-term care policies cannot condition benefits on whether or not the insured has been hospitalized for a certain period of time before benefits become available.

Spousal Discount

Most companies offer a spousal discount of premium if both husband and wife purchase long-term care coverage from them.

Reinstatement of Used Benefits

Long-term care insurance policies are written with a benefit limit per day and a lifetime benefit amount. When a spouse is included for coverage on a rider attached to the policy, upon admission to a long-term care facility, the limit is restored for that insured.

Related Terms

Community care refers to a program of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly, and other disabled adults who can benefit from care in a group setting.

Alternate care refers to care provided outside the person's home, but in a setting other than a long-term care facility.

Case management is the process of managing the care of an insured person and determining the necessary level of care and treatment as a method of controlling health care costs. Each case is reviewed at reasonable intervals.

Activities of Daily Living

Long-term care benefits triggers are defined by federal law and must be used in qualified policies:

• Disability is measured in terms of the insured's ability to perform, without substantial human assistance from another individual, the activities of daily living, which includes eating, bathing, using the toilet, dressing, continence, and getting in or out of bed.
• Cognitive impairment is the loss of abstract reasoning that results in an individual needing supervision and /or assistance.

A plan of care is a document prepared by a physician or licensed social worker and a registered nurse, specifying the prescribed long-term care services or treatment consistent with the patient's conditions and abilities. The plan must include services that could not be omitted without adversely affecting the patient's condition.

Elimination Period

The elimination period is the period of time after the onset of a loss during which benefits are not paid. The longer the elimination period, the lower the premium rate.

In Connecticut, the elimination period in a long-term care policy cannot be more than 100 days of confinement.

Marketing Methods and practices

Solicitation

Long-term care insurers must establish marketing procedures to ensure that

• Any comparison of policies by their producers will be fair and accurate;
• Excessive insurance is not sold to any individual;
• Producers will determine whether applicants have existing long-term care coverage;
• Applicants will be notified of the existence of any state sponsored insurance counseling programs; and
• Twisting, high-pressure sales tactics and cold lead advertising will not be used.

The first page of the outline of coverage and the policy must contain a Notice to Buyer which explains that the policy may not cover all of the costs associated with long-term care during the coverage period, and advising the buyer to review the policy limitations.

Requirements for Small Employers

Special Provisions

There are several plans that may be offered to small employers. They include the following:

• Basic hospital plan;
• Basic surgical plan;
• Supplemental major medical plan (written in conjunction with a basic plan);
• Comprehensive major medical plan; and
• PPO plan.

Disclosure Requirements

A small employer carrier must quote premium rates to any small employer within 30 days after receipt of the employer's completed application. Carriers cannot disclose to a small employer the fact that any of the eligible employees of that small employer have been reinsured with the Connecticut Small Employer Health Reinsurance Pool.

Connecticut Comprehensive Health Care Plan

Prior to the implementation of the Affordable Care Act, every carrier that was offering individual health insurance in Connecticut or every hospital or a medical service corporation that chose not to participate in the HRA, was required to make an individual comprehensive health care plan available to every resident of the state, except for residents who are both 65 years of age or older and eligible for Medicare, as a condition of transacting health insurance. Carriers that provided group health insurance were required to make a group comprehensive health care plan.