Elective Insurance Change: Know The Law

The laws regarding elective insurance vary across different states and types of insurance. For instance, in the US, nearly all states have compulsory laws requiring employers to purchase workers' compensation insurance, except for Texas and New Jersey, which are elective states. In terms of health insurance, elective surgery is often covered if it is deemed medically necessary, but cosmetic or plastic surgery is typically not covered. Additionally, each state has its own consumer protection laws regarding insurance, such as California's recent expansion of health access and reproductive care protections.

Consumer protection laws

In the US, insurance is regulated at the state level, with the federal government generally taking a hands-off approach. However, there are some federal laws in place to protect consumers. For example, the McCarran-Ferguson Act of 1945 declared that state-level regulation of insurance served the public interest. State laws, such as the Texas Insurance Code, outline the rights and responsibilities of consumers and insurance providers.

The Consumer Rights Act 2015 in the UK reforms and consolidates consumer law, including new laws for digital content and ancillary contracts, unfair contract terms, and changes to the mechanisms for consumer redress. The Act applies to consumer insurance contracts and gives consumers the right to a reassessment and, in some cases, financial compensation if they are unhappy with an offer from their insurer.

In California, new insurance protections were introduced in 2023 to address climate change, expand health access and reproductive care, preserve health protections, protect against fraud, and ensure public safety. For example, one of the new laws requires health insurers and health plans offering coverage through Covered California to report annually on the total amount of abortion funds. This law will help identify available funds to support abortion patients in the state.

Additionally, the Consumer Insurance Act in the UK, which came into force on April 6, 2013, gives customers more clarity on what information they need to disclose to their insurer when taking out insurance. The Act provides legal protection for customers who unknowingly give incorrect or incomplete information to their insurer, as long as they did not carelessly or deliberately lie or misrepresent their circumstances.

In the context of elective surgery, health insurance will typically pay for procedures that are medically necessary. The definition of "medically necessary" may vary depending on the health plan, but it generally refers to treatments that address an illness, injury, deformity, disease, or significant symptoms. It's important to note that elective surgery refers to a procedure that can be delayed or chosen not to be done, rather than an emergency procedure. Most elective surgeries are indeed medically necessary and, therefore, covered by health insurance. However, cosmetic or plastic surgery is often not covered by health plans.

Health insurance coverage

Most surgical procedures performed in the United States are elective, and a majority of these are covered, at least in part, by health insurance. However, it's essential to note that health insurance plans usually only cover elective surgeries that are deemed medically necessary. This means that the surgery is required to treat or diagnose an illness, injury, deformity, disease, or significant symptoms such as severe pain, or to restore bodily functions.

When considering elective surgery, it's important to review your health insurance coverage and understand the specific terms of your plan. Some health plans may not cover certain types of elective surgeries, such as cosmetic or plastic surgery (with some exceptions, like breast reconstruction after a mastectomy). Other procedures that may not be covered include bariatric surgery and LASIK eye surgery. Therefore, it is crucial to contact your health plan representative or carefully review your plan documents to determine if your desired procedure is covered.

Additionally, even if your health plan covers the elective surgery, it may not pay for the entire cost. You may be responsible for paying a deductible, copay, or coinsurance. It is also important to ensure that the surgeon, hospital, and other providers involved in your surgery are within your insurance network to maximize coverage and minimize out-of-pocket expenses.

In terms of changing your health insurance coverage, there are generally two set times each year when you can make adjustments: the Open Enrollment Period (OEP) and the Special Enrollment Period (SEP). The OEP typically runs from November 1 to January 15, during which you can make changes to your plan, add or drop someone, modify coverage, or cancel your insurance altogether. On the other hand, a SEP is triggered by certain qualifying life events, such as getting married, having a child, moving to a different location, or experiencing changes in income. During a SEP, you usually have 60 days to make changes to your health insurance plan, and there may be limitations on the number of health plan categories available to choose from.

Workers' compensation laws

• Benefits for accidental job-related injuries: Employees are entitled to statutory benefits for "personal injury by accident arising out of and in the course of employment."
• Wage-loss, medical, and death benefits: Wage-loss benefits typically cover about half to two-thirds of the employee's average weekly wage.
• Covered "employees": "Employees" are defined by law and generally do not include independent contractors.
• Fault is usually not a factor: Neither the employee's negligence nor the employer's lack of fault is considered when determining benefit eligibility.
• Employees give up the right to sue: In exchange for assured benefits, employees waive their right to sue the employer for injuries covered by workers' compensation laws.
• Employees can sue negligent third parties: If a third party's negligence contributed to the accident, the employee can sue them, and any proceeds should reimburse the employer for benefits paid.
• Administered by a state agency: The responsibility for managing workers' compensation falls on a designated state agency.

Additionally, workers' compensation benefits are only payable for work-related injuries and are not available for self-inflicted injuries or those caused by intoxication or substance abuse. The benefits include income replacement for partial or total disability, medical and rehabilitation costs, and survivor benefits in case of a fatal illness or injury.

Regarding the interaction with other benefits, workers' compensation may overlap with retirement plans, medical plans, Social Security, and federal benefits laws such as the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA).

In terms of employer requirements, when a job-related accident occurs, employers must file an accident report with the appropriate state workers' compensation agency and treat the injury as legitimate, even if the circumstances are suspicious. Employers should respond to the injured employee, provide first aid or medical attention, document the accident, and ensure prompt medical treatment.

Insurance fraud

There are two main types of insurance fraud: hard fraud and soft fraud. Hard fraud occurs when someone deliberately fakes an accident, injury, theft, or other loss to collect money from an insurance company. Soft fraud, the more common type, occurs when a policyholder exaggerates a legitimate claim or provides false information on an application to obtain a lower premium.

The consequences of insurance fraud can be severe, with penalties ranging from fines to imprisonment. It is punishable by up to five years in state prison and a $50,000 fine in California. The specific penalties vary depending on the state, the amount of money involved, and the criminal history of the defendant.

To combat insurance fraud, states have established fraud bureaus to investigate and prosecute insurance fraud incidents. Additionally, insurance companies have implemented advanced technologies, such as predictive analytics and artificial intelligence, to detect and prevent fraudulent claims.

Insurance company data reporting

Data privacy laws and legislation have become increasingly important for insurance companies to comply with, as they become more reliant on digital technologies and consumer data. These laws are designed to protect consumer data from hackers and unauthorised sharing or selling. Compliance with these laws is critical to avoid heavy fines, reputational damage, and difficulty attracting new business.

Data Privacy Laws

• Federal Gramm-Leach-Bliley Act (GLBA): Requires financial institutions, including insurance companies, to explain their information-sharing practices to customers and offer an opt-out option.
• General Data Protection Regulation (GDPR): Applies to companies processing the personal data of European Union citizens. It requires businesses to protect personal data and privacy within EU member states.
• Reasonable Security Practices and Procedures and Sensitive Personal Data or Information Rules (SPDI Rules): Enacted in India in 2017 to protect the data of private citizens. It mandates insurance companies to have a uniform framework for data, cloud, mobile, and cyber security, along with a governance mechanism to address security issues.
• California Consumer Privacy Act (CCPA): Requires companies operating in California to provide consumers with transparency and control over their personal data.
• Personal Information Protection and Electronic Documents Act (PIPEDA): Regulates how private sector organisations collect and use personal information of Canadian residents for commercial activities.
• Health Insurance Portability and Accountability Act (HIPAA): Places rules on how health-related data can be collected, stored, and processed in the US to prevent fraud and abuse.
• Sarbanes-Oxley Act (SOX): Aims to increase transparency and security in the activities of US insurance organisations, while preventing fraudulent actions and protecting financial records.
• Payment Card Industry Data Security Standard (PCI DSS): Safeguards the security of credit card processing. Insurance providers must have a PCI DSS compliance system if they accept credit cards or store related information.

Compliance and Best Practices

To ensure compliance with data privacy laws and protect sensitive data, insurance companies should implement the following practices:

• Appoint a data protection officer to oversee data protection measures.
• Conduct a risk assessment to identify the types of sensitive data and how it is stored and processed.
• Ensure secure access to data by implementing principles like zero trust or least privilege.
• Monitor user activity to prevent data breaches and detect abnormal behaviour.
• Manage privileged users and control their access to reduce the risk of unauthorised access.
• Reduce third-party risks by monitoring vendors and service providers who access customer data.
• Encrypt data to protect customer information in the event of a data breach.
• Prepare an incident response plan to mitigate the consequences of a data breach and comply with notification requirements.

Data Breach Notification Laws

In addition to data privacy laws, insurance companies must also comply with data breach notification laws, which vary by state and jurisdiction. These laws mandate how businesses must notify individuals affected by a data breach involving personally identifiable information (PII). While specific requirements differ, businesses are generally required to notify affected individuals as soon as possible, without unreasonable delay. Failure to comply can result in civil penalties and lawsuits.

Common elements of data breach notification requirements include:

• Sending written notices to affected individuals, typically within 30 to 60 days of discovering the breach.
• Making a general notification through the media and relevant state agencies or officers.
• Offering identity theft prevention and mitigation services to affected individuals.
• Reporting the breach to consumer reporting agencies if a large number of individuals are affected.

Frequently asked questions