# COMAR Title 31 — Maryland Insurance Administration

## Subtitle 11 — Health Insurance — Group

### Chapter 01 — Conversion of Group Health Insurance

**Authority:** Insurance Article, §2-109, Annotated Code of Maryland

**Administrative History:** Effective date: November 1, 1983 (10:14 Md. R. 1261)

**Administrative History:** Regulation .02C adopted effective May 6, 1996 (23:9 Md. R. 670)

**Administrative History:** Regulation .07C amended effective May 6, 1996 (23:9 Md. R. 670)

**Administrative History:** Regulation .11 amended effective May 6, 1996 (23:9 Md. R. 670)

**Administrative History:** Chapter recodified from COMAR 09.30.61 to COMAR 31.11.01 effective September 7, 1998 (25:18 Md. R. 1439)

**Administrative History:** Chapter revised effective April 7, 2008 (35:7 Md. R. 752)

**Administrative History:** Regulation .03A amended effective June 22, 2015 (42:12 Md. R. 764)

#### Regulation .01 Purpose.

*COMAR 31.11.01.01*

The purpose of this chapter is to provide appropriate standards and requirements for implementing the conversion privilege and notification requirements under group health insurance policies.

#### Regulation .02 Definitions.

*COMAR 31.11.01.02*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Carrier” means:

    (a) An insurer as defined in Insurance Article, §1-101, Annotated Code of Maryland; or

    (b) A nonprofit health service plan that is licensed to operate in Maryland.

  (2) “Converted policy” means an individual policy or certificate issued to an individual in accordance with the requirements of this chapter upon termination of the individual's coverage under a group policy.

  (3) Expense Incurred.

    (a) “Expense incurred” means that the benefits payable under the contract are based on the medical expenses that the covered person incurs.

    (b) For the purposes of this chapter, a contract that includes both expense-incurred benefits and indemnity benefits shall be considered to be written on an “expense-incurred” basis.

  (4) “Group health insurance policy” or “group policy” means either:

    (a) An insurance contract issued by an insurer under Insurance Article, §15-302, Annotated Code of Maryland, that insures employees or members, with or without their dependents, for hospital, surgical, medical, or major medical insurance on an expense-incurred basis; or

    (b) A contract issued by a nonprofit health service plan to a group that insures employees or members, with or without their dependents, for hospital, medical, major medical, or surgical insurance on an expense-incurred basis.

  (5) “Indemnity” means that the benefits payable under the contract are set amounts that are not related to the expenses the covered person incurs, such as a hospital indemnity policy that pays a flat fee for each day the covered person is confined in a hospital, regardless of the actual expenses the covered person incurs during the hospital confinement.

  (6) “Insured person” means:

    (a) An employee, a member, or another certificate holder covered under the group policy; or

    (b) Any eligible dependent of the employee, member, or certificate holder covered under the group policy.

  (7) “Medicare” means Title XVIII of the United States Social Security Act as added by the Social Security Amendments of 1965 or as later amended or superseded.

#### Regulation .03 Applicability.

*COMAR 31.11.01.03*

A. This chapter is applicable to group health insurance policies issued or renewed in Maryland on or after October 1, 1983 and prior to January 1, 2014, except as provided in §§B—C of this regulation.

B. This chapter is not applicable to:

  (1) Group policies providing coverage only for:

    (a) Specified diseases;

    (b) Accidental injuries;

    (c) Accidental death;

    (d) Dental benefits;

    (e) Vision care or any other supplemental benefit; or

    (f) Any combination of the benefits described in §B(1)(a)—(e) of this regulation; or

  (2) The following types of group policies:

    (a) Hospital indemnity or other fixed indemnity coverage;

    (b) Credit insurance;

    (c) Disability income insurance;

    (d) Long term care insurance as defined in Insurance Article, §18-101, Annotated Code of Maryland;

    (e) Medicare supplement contracts;

    (f) Any coverage issued under Chapter 55 of Title 10, U.S. Code, and any coverage issued as supplemental to coverage issued under Chapter 55 of Title 10, U.S. Code;

    (g) Any coverage issued as supplemental to liability insurance, Workers' Compensation, or similar insurance;

    (h) Automobile medical-payment insurance, or any insurance under which benefits are payable with or without regard to fault, whether written on a group, blanket or individual basis; or

    (i) Any combination of the insurance benefits described in §B(2)(a)—(h) of this regulation.

C. The requirements of Regulations .09 and .10 of this chapter apply to all converted policies issued or renewed on or after April 7, 2008.

#### Regulation .04 Conversion Privilege.

*COMAR 31.11.01.04*

A. All group policies, as defined in this chapter, shall contain a provision stating that an insured person who has been continuously covered under the group policy and under any group policy providing similar benefits which it replaces for at least 3 months and whose coverage is terminated for any reason other than the reasons described in §D of this regulation, shall have issued to him without evidence of insurability a converted policy providing benefits not less than the minimum benefits required by this chapter.

B. A carrier shall include a notice of the right of conversion in each certificate of coverage provided to individuals covered under group policies.

C. Termination.

  (1) Termination of coverage shall include, but not be limited to, termination by reason of discontinuance of the group policy in its entirety or with respect to an insured class, or termination by reason of the individual's no longer meeting the definition of a dependent contained in the group policy, or by reason of no longer meeting the definition in the policy of an employee or member, or by reason of the individual's retirement.

  (2) The following are intended as illustrations of terminations by reason of no longer meeting the definition of dependent:

    (a) A surviving spouse, whose coverage under the group policy terminates at the death of the employee or member;

    (b) A spouse whose coverage under the group policy terminates by reason of divorce or legal separation;

    (c) A child whose coverage under the group policy terminates at the death of an employee or member;

    (d) A child whose coverage under the group policy terminates by reason of his reaching a limiting age specified in the group policy.

  (3) If a group policy provides that a retired employee may continue to be covered under the group policy, the employee shall be given the option of electing the same conversion rights that would apply if the employee's  insurance under the group policy had terminated at retirement.

D. Exceptions.

  (1) The carrier is not required to issue a converted policy if the insured person is enrolled in a health maintenance organization, or is covered or eligible for coverage under another group policy which provides benefits substantially equal to the minimum benefits required by these regulations, or if the provisions of Regulation .06H(1) of this chapter would be applicable.

  (2) The carrier is not required to issue a converted policy to a person eligible for Medicare.

  (3) The carrier is not required to issue a converted policy if termination under the group policy occurred because:

    (a) The employee, member, or dependent performed an act or practice that constitutes fraud in connection with the coverage;

    (b) The employee, member, or dependent made an intentional misrepresentation of a material fact under the terms of coverage; or

    (c) The terminated coverage under the group policy was replaced by similar coverage within 31 days after the date of termination of the group policy.

  (4) The carrier is not required to issue a converted policy if the individual's coverage under the group policy terminated due to the insured person's failure to pay a required premium.

#### Regulation .05 Insurer's Option.

*COMAR 31.11.01.05*

A. Instead of issuing an individual converted policy, the carrier may elect to provide the coverage required by this chapter by means of a group policy issued to a trustee and covering persons eligible for the conversion rights of these regulations.

B. The policy issued under §A of this regulation may provide that the entire premium be payable by the insured persons.

C. The group policy issued under §A of this regulation shall provide benefits not less than those stated in Regulations .06 and .10 of this chapter.

#### Regulation .06 Standards for Converted Policies.

*COMAR 31.11.01.06*

A. The converted policy shall become effective on the day following the date of termination of insurance coverage under the group policy.

B. The converted policy shall cover the employee or member or dependents of the employee or member, or both, who are covered by the group policy on the date of termination of insurance. At the option of the insurer, a separate converted policy may be issued to cover any dependent.

C. If a converted policy issued to an employee or member also covers a dependent child whose coverage under the group policy would have terminated at a specified date, the converted policy may provide for termination on or after that date, subject, however, to the requirements of Insurance Article, §15-402, Annotated Code of Maryland, whichever is applicable.

D. With respect to a person who was covered by the group policy, the period specified in the Time Limit on Certain Defenses provision of the converted policy shall begin with the date that person's insurance became effective under the group policy.

E. Preexisting Conditions.

  (1) The converted policy may not contain exclusions for preexisting conditions, except to the extent that a condition was excluded from the group policy from which conversion was made.

  (2) Benefits for pregnancy and childbirth may not be excluded from the converted policy if benefits for these conditions were provided under the group policy.

  (3) The converted policy may provide that:

    (a) Any hospital, surgical, or medical benefits payable under the converted policy may be reduced by the amount of any hospital, surgical, or medical benefits payable under the group policy after the termination of the individual's group coverage; and

    (b) During the first policy year, the benefits payable under the converted policy, together with the benefits payable under the group policy, will not exceed the benefits that would have been payable had the individual's coverage under the group policy remained in force and effect.

F. Any and all probationary and waiting periods set forth in the converted policy shall be considered as being met to the extent coverage was in force under the group policy.

G. A converted policy may include a provision under which the carrier may request the following information in advance of any premium due date of the policy of any person covered under the policy whether:

  (1) The person is covered for similar benefits by another hospital, surgical, medical or major medical expense insurance policy, or hospital or medical service subscriber contract, or medical practice, health maintenance organization, or other prepayment plan, or by any other plan or program;

  (2) The person is covered for similar benefits under any arrangement of coverage for individuals in a group, whether on an insured or uninsured basis, or whether the person is in the military service; or

  (3) Similar benefits are provided for or available to this person, pursuant to or in accordance with the requirements of any state or federal law.

H. The converted policy may provide that the carrier may refuse to renew the policy or the coverage of any person insured under the policy if:

  (1) Benefits provided or available to the person under the sources referred to in §G of this regulation together with the benefits provided by the converted policy would result in overinsurance according to the insurer's standards on file with the Commissioner;

  (2) The information requested in accordance with §G of this regulation is not provided in timely fashion;

  (3) The information provided in response to the requirement of §G of this regulation is fraudulent or contains material misstatements;

  (4) The individual failed to pay premiums or contributions in accordance with the terms of the converted policy, including timeliness requirements;

  (5) The individual performed an act or practice that constitutes fraud in connection with coverage; or

  (6) The individual made an intentional misrepresentation of a material fact under the terms of coverage.

I. Converted policies shall comply with the requirements of and contain the benefit provisions mandated under Insurance Article, Titles 14 and 15, Annotated Code of Maryland, to the extent applicable.

#### Regulation .07 Evidence of Insurability.

*COMAR 31.11.01.07*

A. The converted policy shall be issued without evidence of insurability.

B. If the insured person was individually rated less favorably than standard under the group policy, or if all persons in the group policy were rated less favorably than standard, the converted policy may be issued with a corresponding rating.

C. If, by reason of a specific waiver or endorsement in the group policy, the insured person was specifically excluded from coverage for a specific named condition or conditions, a corresponding waiver or endorsement may be attached to the converted policy.

#### Regulation .08 Application for Converted Policy.

*COMAR 31.11.01.08*

A. The conversion provision in the group policy may require that the insured person, or a person acting on behalf of the insured person, make written application for the converted policy and may not require that the first premium due to the carrier be paid sooner than 31 days following the termination of the insured person's coverage under the group policy, or sooner than any extended time provided in these regulations.

B. The application for the converted policy may not contain questions relating to the health, occupation, avocation, or lifestyle of the insured person, or other questions relating to insurability, except information required to determine eligibility for the converted policy.

C. The carrier may refuse to issue a converted policy or may issue a converted policy for a reduced amount if the application shows the insured person is covered under a group policy providing benefits substantially similar to the maximum benefits which the insured person could elect under the converted policy, or if the insured person has other health benefits available at least equal to the level of benefits which would permit the carrier to refuse to renew a converted policy in accordance with the standards of Regulation .06G and H of this chapter.

#### Regulation .09 Premiums for Converted Policies.

*COMAR 31.11.01.09*

A. Except as provided in §C of this regulation, the initial premium for the converted policy for the first 12 months and subsequent renewal premium shall be determined in accordance with the carrier's premium rates applicable to:

  (1) Individually underwritten standard risks;

  (2) The age and class of risk of each individual to be covered under the converted policy; and

  (3) The type and amount of coverage provided.

B. The experience under converted policies may not be an acceptable basis for establishing rates for converted policies.

C. A carrier may amend renewal premium rates for the subsequent year if:

  (1) The carrier experiences incurred losses for a period of 2 years, on converted policies that have been in force for at least 1 year, which exceed earned premiums by more than 20 percent; and

  (2) The amended premium rates are anticipated to produce a loss ratio of at least 120 percent.

D. Conditions pertaining to health status may not be an acceptable basis for classification for the purposes of this regulation.

E. The frequency of premium payment shall be the frequency customarily required by the carrier for the policy form and plan selected, provided that the carrier may not require premium payments less frequently than quarterly without the consent of the policyholder.

#### Regulation .10 Minimum Benefits under Converted Policies.

*COMAR 31.11.01.10*

A. Except as provided in §B of this regulation, if the group policy from which conversion is made provided coverage for basic hospital, medical, or surgical expense insurance, the insured person at the insured person's option shall be entitled to obtain a converted policy under any one of Plans A, B, or C, which are described in §C of this regulation.

B. If the group policy provided hospital benefits based on the full cost of a semiprivate room, the carrier, at its option, may offer the insured person only Plan A, and if the group policy provided hospital benefits on a basis other than the full cost of a semiprivate room, the carrier, at its option, may offer the insured person only Plans B and C.

C. Plans A—C provide the following minimum benefits:

  (1) A Plan A policy shall provide as minimum the following benefits or similar benefits which are substantially actuarially equivalent:

    (a) All semiprivate room and board and miscellaneous hospital charges for a 70-day maximum duration, and

    (b) Surgical-medical expense benefits according to a schedule consistent with those customarily offered by the carrier under group insurance policies and providing a maximum benefit of $7,000;

  (2) A Plan B policy shall provide as minimum the following benefits or similar benefits which are substantially actuarially equivalent:

    (a) Hospital room and board benefits in a maximum amount of $700 daily for a 70-day maximum duration;

    (b) Miscellaneous hospital expense benefits in a maximum amount of $7,000; and

    (c) Surgical-medical expense benefits according to a schedule consistent with those customarily offered by the carrier under group policies and providing a maximum benefit of $7,000;

  (3) A Plan C policy shall provide as minimum the following benefits or similar benefits which are substantially actuarially equivalent:

    (a) Hospital room and board benefits in a maximum amount of $350 daily for a 70-day maximum duration;

    (b) Miscellaneous hospital expense benefits in a maximum amount of $3,500; and

    (c) Surgical-medical expense benefits according to a schedule consistent with those customarily offered by the carrier under group policies and providing a maximum benefit of $3,500.

D. If the group policy from which conversion is made provided coverage for major medical or catastrophe expense benefits, the insured person shall be entitled to obtain a converted policy meeting the following minimum specifications subject to the deductible and the limitation of §§E and F of this regulation, or similar benefits which are substantially actuarially equivalent:

  (1) Hospital room and board benefits in an amount not less than 75 percent of the charges for semiprivate room accommodations;

  (2) Miscellaneous hospital expense benefits for the charges made by the hospital for services and supplies which are customarily furnished by the hospital and provided for use during a period of hospital confinement, in an amount not less than 75 percent of the charges incurred subject to a maximum of $7,000;

  (3) Surgical expense benefits not less than 75 percent of the scheduled benefits customarily offered by the carrier under its group policy with a maximum of $7,000;

  (4) Anesthesia services, consisting of administration of necessary general anesthesia and related procedures in connection with covered surgical services rendered by a physician other than the physician, or the physician's assistant, performing the surgical services, in an amount not less than 75 percent of the reasonable charges;

  (5) Medical expense benefits for the diagnosis and treatment of sickness or injury, in an amount not less than 75 percent of the reasonable charges; and

  (6) Seventy-five percent of reasonable charges for diagnostic X-ray, laboratory services, radiation therapy, prosthetic appliances, and rental of durable medical equipment required for therapeutic use.

E. Major medical or catastrophe coverage benefits may be subject to a deductible equal to the benefits provided under any basic hospital-medical-surgical policy or other plan of health benefits covering the insured person plus a cash deductible of $800.

F. A major medical or catastrophe converted policy may be subject to an aggregate maximum benefit limit per person of $350,000.

G. Benefit Periods and Benefit Limits.

  (1) The converted policy may use a definition of benefit period similar to that contained in the group policy from which conversion is made or may use a calendar year benefit period.

  (2) The converted policy may contain a benefit limit for each benefit period.

  (3) The benefit limit need not be greater than the limit for each benefit period which was available under the group policy, or $87,500, if less.

H. The benefits required under §§C and D of this regulation may be combined in a comprehensive policy which affords benefits at least as favorable as those required under §§C and D of this regulation, when both are applicable.

#### Regulation .11 Benefit Levels.

*COMAR 31.11.01.11*

If the coverage under the group policy from which conversion is being made provided benefits less than those which would be required in Regulation .10 of this chapter, the carrier, at its option, may provide a converted policy with benefits which are substantially similar to those provided under the group policy instead of offering the plans required in Regulation .10 of this chapter.

#### Regulation .12 Out-of-State Conversions.

*COMAR 31.11.01.12*

A. A converted policy which is delivered outside of Maryland as a conversion from a group policy issued in Maryland shall be on a form which is permitted to be delivered in the other jurisdiction.

B. If the carrier is prohibited by the law of the other jurisdiction from issuing a converted policy by reason of not being licensed in that jurisdiction, the carrier shall provide coverage in accordance with the requirements of these regulations under a group policy issued in Maryland or in another jurisdiction in which the carrier is licensed.

#### Regulation .13 Modified Requirements.

*COMAR 31.11.01.13*

Upon request of a carrier, the Commissioner may grant approval for modification of any of the minimum specifications or other requirements of these regulations upon a showing by the carrier that modification is equitably warranted.

#### Regulation .14 Notification.

*COMAR 31.11.01.14*

A. The insured person whose coverage under a group policy terminates and who is entitled to make application for a converted policy shall be notified of this right, on or before the date of termination of coverage, but not more than 61 days before.

B. An insured person who receives the timely notice of the conversion privilege, as described in §A of this regulation, shall be given the right to apply for the converted policy until at least 45 days after the date the individual's coverage under the group policy terminates.

C. If the insured person is not provided the notification described in §A of this regulation, then the insured person shall have the right to apply for a converted policy within the time stated in the notice which shall be at least 31 days after the date of the notice, except that the late notice may not extend the period for making application beyond 90 days after the termination of coverage in the group policy.

D. Except as provided in §E of this regulation, written notice presented to the insured person or mailed by the group policyholder to the last known address of the insured person or mailed by the carrier to the last known address of the insured person as furnished by the policyholder shall constitute notice for the purpose of this regulation.

E. Notice given by the policyholder or the carrier by mail which is returned undelivered does not constitute notice for the purpose of this regulation.

F. Unless the written notice is to be provided by the carrier, the group policy shall contain a provision to the effect that notice of the conversion privilege shall be given by the group policyholder to the affected certificate holder upon termination of coverage of the insured person.

#### Regulation .15 Amendment of Group Policy.

*COMAR 31.11.01.15*

Any group policy issued in Maryland before the effective date of these regulations and not in conformity with these regulations, shall be amended on the annual renewal date of the group policy to conform to the regulations in this chapter.