Renewal Premiums - Explained

Part A: Increasing your health premium

(Typical Wording*)

Renewal Premium: The current Mode of Premium Payment is shown on the Policy Schedule. Renewal Premium is payable on or before its due date, and must be paid to the Company at its home office. Any Renewal Premium not paid on or before its due date is premium in default. If a Renewal Premium payment default is not corrected and properly paid before the end of the grace period as provided in the Grace Period provision of this policy, coverage under this Policy will terminate.

Renewal Premium rates for this Policy may be increased by Us for any renewal period after the Issue Date, including during the Premium Rate Guarantee Period, if after the Issue Date:

a. You add Insureds to the Policy;
b. You change the amount of the Calendar Year Deductible shown on the Policy Schedule;
c. You change the Insured Coinsurance Percentage shown on the Policy Schedule;
d. You change any other coverage provision;
e. You change residence to a different zip code;
f. You change the Mode of Premium Payment;
g. You add optional coverage riders, if any;
h. You change after the Issue Date to a different optional Participating Provider network available in Your state, if any; and/or
i. A change occurs in Participating provider Services Subject to Co-Pay, Non-Participating Provider Services Subject to Co-Pay, Participating Provider Services Subject to Calendar Year Deductible, Miscellaneous Benefits and the Non-Participating Provider Services Subject to Separate Deductible for Non-Participating Providers by amendatory endorsement pursuant to any federal or state law or regulation.

First paragraph: This explains the need for timely payment of premium and the results of failure to do so. Note that generally, a premium paid to the agent is not regarded as premium paid “to the home office.” You need to make certain your premium is in the possession of the home office by the due date or, at least, by the end of the grace period. That is your responsibility.

Second paragraph: This explains the various situations when the renewal premium rate may be increased by the insurance company. Most of the triggers justifying a possible premium increase are things you, the primary insured, do which increases the risk of exposure in some way. However, there is also lumped together in one paragraph (item i., above), a list of things over which neither you nor the insurance company have control that can result in an increase in premium. These are changes (increases in coverage, basically) required by federal or state law or regulation. The changes precipitated by things you did, apply only to yourpolicy; changes required by law will apply to all of the company’s insureds.

The Premium Rate Guarantee Period referred to in the second paragraph is that period of time (shown on the Policy Schedule immediately following the Issue Date) that must expire before the insurance company is allowed to increase the Renewal Premium, unless one of the nine reasons (a. -i. above) occurs. (The Renewal Premium is the amount charged for your policy for the period of time from one Renewal Date to the next Renewal Date.) If any of these nine reasons exist, the insurer may even increase the Renewal Premium during this Premium Rate Guarantee Period.

The Guarantee Period can be as long as one year or as short as one month. It is entirely dependent on your mode of premium payment (annual, semi-annual, quarterly or monthly). Changes resulting from any of the nine reasons listed above can occur with the very next Renewal Premium, which could be within 30 days if you pay your premium monthly.

As you will see, however, there are some types of Renewal Premium rate increases that are notpermitted during the Premium Rate Guarantee Period.

Part B: Premium increases after expiration of Guarantee Period

(Typical Wording*):

The current table of premium rates upon which the initial Premium and the First Renewal Premium were calculated for this Policy may include scheduled increases in the amount of Renewal Premium based upon the future attained age of each insured. To be eligible for a discounted or preferred premium rate each Insured may be required to complete a preferred health risk assessment upon enrollment and at renewal. Additionally the current table of premium rates upon which the Initial Premium and First Renewal Premium were calculated and any subsequent table of premium rates upon which the Renewal Premium for any renewal period is to be calculated may be changed from time to time by Us. Accordingly, after expiration of the Premium Rate Guarantee Period, the amount of Renewal Premium may be increased for any renewal period based upon items a. through i., above, as well as the following:

j. new attained age of any insured reached prior to the first day of any renewal period;
k. change by Us in the table of premium rates used to calculate the First Renewal Premium; and
l. change by Us in the table of premium rates used to calculate Renewal Premium for any prior renewal period.

Some types of premium increases, however, can only be made after the Premium Rate Guarantee Period has expired. (See j.-l. above) Section j. above refers to an increase in premium based on your attained age. As you get older, your health status changes and the premium may rise. Sections k. and l. above refer to premium increases that can only be made by the insurance company after the Premium Rate Guarantee Period has expired and result from a change in the tablesof premium rates used to calculate Renewal Premium for various classifications (Class) of insureds established by the insurance company. The classifications are established based on a variety of different actuarially determined risk factors. Any changes in premium of this type are made across the board for every insured in that Class—not just you. As you can see from a review of items (i) through (ix) in the sample provision above, premium changes of this type are prompted by a concern by the insurance company that

Any change in the table of premium rates establishing the amount of required Renewal Premium during any renewal period will be implemented on a Class basis for all members of Your Renewal Premium Class. Factors that may be involved and considered by Us in determining the amount of Renewal Premium to be charged to Your Renewal Premium Class during any renewal period include a combination of one or more of the following: (i) past claims experience of Your Renewal Premium Class; (ii) anticipated inflationary trends in the cost of future medical services; (iii) historical experience in the inflationary cost of medical services; (iv) anticipated inflationary trends in the cost of drugs and other medications; (v) historical experience in the past inflationary cost of drugs and other medications; (vi) anticipated future claims experience of your Renewal Premium Class; (vii) anticipated advances in the medical diagnosis capabilities of injuries and illnesses, including the anticipated cost thereof; (viii) anticipated advances in the manner, method and delivery of medical care and treatment, including the anticipated cost thereof; and (ix) and any other reason permitted by applicable state law. We will tell You at least thirty (30) days in advance of the effective date of any Renewal Premium increase that occurs due to a change in the table of premium rates for Renewal Premium.

As you can see from a review of items (i) through (ix) in the sample provision above, premium changes of this type are prompted by a concern by the insurance company that anticipated health care costs are accelerating at a rate beyond that which was expected when the original tables of renewal premium rates were established.

*Wording may vary from contract to contract and from state to state.