SENATE BILL REPORT

SB 6798

BYSenator Smith

Requiring notice of health care insurance cancellation for nonpayment of premiums.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 2, 1990

Majority Report:     That Substitute Senate Bill No. 6798 be substituted therefor, and the substitute bill do pass.

     Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; Fleming, McCaslin, McMullen, Matson, Moore, Smitherman.

Senate Staff:Benson Porter (786-7470)

                February 5, 1990

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, FEBRUARY 2, 1990

BACKGROUND:

The insurance code contains various requirements for the cancellation of coverages provided under the code.  For example, cancellation of private automobile and certain other insurance policies by an insurer for nonpayment of premium is permitted 10 days after the insurer mails written notice to the insured.

However, these general cancellation provisions do not apply to health coverages.  Disability insurance policies must contain a provision that, at least, provides for a payment grace period of seven days for weekly premium payment policies, 10 days for monthly premium payment policies, and 31 days for all other policies.  In addition, disability insurance policies may contain an optional cancellation provision that allows an insurer to cancel a policy five days after the delivery of a cancellation notice to an insured.  Health care contractors are required to provide a grace period not less than 10 days for payment of fees, dues, and premiums.

Some concern has been expressed that health coverage providers are not required to provide written notice prior to cancellation of coverages for nonpayment of premium.

SUMMARY:

Disability insurance policies, group disability insurance policies, health care contracts, and health maintenance agreements may not be terminated for nonpayment of premium unless certain written notification is made.

The disability insurer, health care contractor, or health maintenance organization must send notice by certified mail at least 20 days prior to actual policy termination for nonpayment of premium.  This notice must be sent only one time during a one year policy period.

If a disability insurer, health care contractor, or health maintenance organization does not receive payment within the notice period, the policy may be terminated on the date the payment was due rather than at the end of the notice period.

EFFECT OF PROPOSED SUBSTITUTE:

Terms are modified so that notice must only be given to a group contract purchaser (employer) rather than each individual member.

Appropriation:  none

Revenue:   none

Fiscal Note:    none requested

Senate Committee - Testified:   James R. Carpenito (pro); Mel Sorensen, Washington Physicians Service/Blue Cross (con); Basil Badley, HIAA (con)