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Insurance Abstract
An insurance policy having a dormancy provision is provided in which
the dormancy provision enables a policyholder to activate and deactivate
benefits provided under the insurance policy. Also provided is a
method for enabling a holder of an insurance policy with a dormancy
provision to activate and deactivate benefits of an insurance policy,
and includes purchasing an insurance policy having a dormancy provision
and a set of associated benefits, paying premiums to maintain the
set of benefits in an active state, deactivating the set of benefits;
paying dormancy premiums to maintain the set of deactivated benefits
in a deactivated state, and reactivating the set of deactivated
benefits.
Insurance Claims
8. A method for enabling a holder of an insurance policy with a
dormancy provision to activate and deactivate benefits of an insurance
policy comprising:purchasing a health insurance policy having a
dormancy provision and a set of associated benefits, the dormancy
provision providing a right to activate and deactivate the set of
associated benefits under the policy;paying premiums to maintain
the set of associated benefits in an active state and dormancy premiums
to maintain the option of deactivating the set of associated benefits
under the dormancy provision;deactivating the set of associated
benefits; andpaying the dormancy premiums to maintain a set of deactivated
the set of benefits in a deactivated policy state;wherein the holder
has an option of activating at least a portion of the set of deactivated
benefits in accordance with terms of the dormancy provision.
9. The method according to claim 8, wherein the set of associated
benefits are required to be held in the active state for a predetermined
period of time before deactivating or a fee for early deactivation
is required to be paid.
10. The method according to claim 8, wherein the set of deactivated
benefits are required to be held in the deactivated state for a
predetermined period of time before activating or a fee for early
activation is required to be paid.
11. The method according to claim 8, wherein the holder may deactivate
the set of associated benefits or activate the set of deactivated
benefits upon the occurrence of at least one predefined event.
12. The method according to claim 11, wherein a predefined event
comprises a change in employment or benefit status of the holder
or notification of a change in employment or benefit status of the
holder.
13. The method according to claim 12, wherein notification of change
in employment or benefit status of the holder includes notification
within a predefined period of time of change in employment or benefit
status.
14. The method according to claim 8, wherein the holder must exhibit
alternative insurance coverage to deactivate the set of associated
benefits.
15. The method according to claim 8, wherein activating the set
of deactivated benefits comprises activating at least a portion
of the set of associated benefits.
16. The method according to claim 8, further comprising deactivating
and activating a set of dependent benefits associated with one or
more dependents of the holder.
17. (canceled)
18. A computer-implemented method of providing an insurance policy
comprising:issuing a health insurance policy comprising a dormancy
provision, said dormancy provision enabling a holder of the insurance
policy to activate and deactivate a set of benefits provided under
the insurance policy;receiving a notification to activate or deactivate
the set of benefits associated with the insurance policy;implementing
the set of benefits under the insurance policy when the set of benefits
are active;denying the set of benefits under the insurance policy
when the set of benefits are deactivated under the dormancy provision;verifying
receipt of insurance policy premiums on a periodic basis, said insurance
policy premiums corresponding to active insurance policy premiums
and dormancy premiums when the insurance policy is in an active
state and to dormancy premiums when the benefits of the insurance
policy are in a deactivated state.
19. The method of claim 18, wherein issuing the health and/or life
insurance policy comprises issuing a health insurance policy to
an individual and at least one dependent associated with the individual.
20. The method of claim 19, further comprising receiving an indication
to activate or deactivate at least a portion of the health benefits
associated with the respective dependent, said options being exercisable
independent of the holder of the insurance policy or other dependents.
21. The method of claim 18, further comprising determining the
active benefits of the insurance policy are held in the active state
for a predetermined period of time before deactivating or a fee
for early deactivation is required to be paid.
22. The method of claim 18, further comprising determining the
deactivated benefits of the insurance policy are held in the deactivated
state for a predetermined period of time before activating or a
fee for early activation is required to be paid.
23. The method of claim 18, further comprising receiving a notification
of the occurrence of at least one predetermined event before activating
or deactivating the set of associated benefits.
24. The method of claim 23, wherein a predefined event comprises
a change in employment or benefit status of the holder or notification
of a change in employment or benefit status of the holder.
25. The method of claim 24, wherein notification of change in employment
or benefit status of the holder includes notification within a predefined
period of time of change in employment or benefit status.
26. The method of claim 18, further comprising confirming proof
of an alternate insurance policy before deactivating the set of
benefits associated with the insurance policy.
27. A method for enabling a holder of an insurance policy with
a dormancy provision to activate and deactivate benefits of an insurance
policy comprising:purchasing a life insurance policy having a dormancy
provision and a set of associated benefits, the dormancy provision
providing a right to activate and deactivate the set of associated
benefits under the policy;paying premiums to maintain the set of
associated benefits in an active state and dormancy premiums to
maintain the option of deactivating the set of associated benefits
under the dormancy provision;deactivating the set of associated
benefits; andpaying the dormancy premiums to maintain the set of
benefits in a deactivated policy state;wherein the holder has an
option of activating at least a portion of the set of deactivated
benefits in accordance with terms of the dormancy provision.
28. The method according to claim 27, wherein the set of associated
benefits are required to be held in the active state for a predetermined
period of time before deactivating or a fee for early deactivation
is required to be paid.
29. The method according to claim 27, wherein the set of deactivated
benefits are required to be held in the deactivated state for a
predetermined period of time before activating or a fee for early
activation is required to be paid.
30. The method according to claim 27, wherein the holder may deactivate
the set of associated benefits or activate the set of deactivated
benefits upon the occurrence of at least one predefined event.
31. The method according to claim 30, wherein a predefined event
comprises a change in employment or benefit status of the holder
or notification of a change in employment or benefit status of the
holder.
32. The method according to claim 31, wherein notification of change
in employment or benefit status of the holder includes notification
within a predefined period of time of change in employment or benefit
status.
33. The method according to claim 27, wherein the holder must exhibit
alternative insurance coverage to deactivate the set of associated
benefits.
34. The method according to claim 27, wherein activating the set
of deactivated benefits comprises activating at least a portion
of the set of associated benefits.
35. The method according to claim 27, further comprising deactivating
and activating a set of dependent benefits associated with one or
more dependents of the holder.
36. A computer-implemented method of providing an insurance policy
comprising:issuing a life insurance policy comprising a dormancy
provision, said dormancy provision enabling a holder of the insurance
policy to activate and deactivate a set of benefits provided under
the insurance policy;receiving a notification to activate or deactivate
the set of benefits associated with the insurance policy;implementing
the set of benefits under the insurance policy when the set of benefits
are active;denying the set of benefits under the insurance policy
when the set of benefits are deactivated under the dormancy provision;verifying
receipt of insurance policy premiums on a periodic basis, said insurance
policy premiums corresponding to active insurance policy premiums
and dormancy premiums when the insurance policy is in an active
state and to dormancy premiums when the benefits of the insurance
policy are in a deactivated state.
37. The method of claim 36, further comprising determining the
active benefits of the insurance policy are held in the active state
for a predetermined period of time before deactivating or a fee
for early deactivation is required to be paid.
38. The method of claim 36, further comprising determining the
deactivated benefits of the insurance policy are held in the deactivated
state for a predetermined period of time before activating or a
fee for early activation is required to be paid.
39. The method of claim 36, further comprising receiving a notification
of the occurrence of at least one predetermined event before activating
or deactivating the set of associated benefits.
40. The method of claim 39, wherein a predefined event comprises
a change in employment or benefit status of the holder or notification
of a change in employment or benefit status of the holder.
41. The method of claim 40, wherein notification of change in employment
or benefit status of the holder includes notification within a predefined
period of time of change in employment or benefit status.
42. The method of claim 36, further comprising confirming proof
of an alternate insurance policy before deactivating the set of
benefits associated with the insurance policy.
43. The method of claim 36, wherein issuing the life insurance
policy comprises issuing a health insurance policy to an individual
and at least one dependent associated with the individual.
44. The method of claim 43, further comprising receiving an indication
to activate or deactivate at least a portion of the health benefits
associated with the respective dependent, said options being exercisable
independent of the holder of the insurance policy or other dependents.
Insurance Description
BACKGROUND
[0001]In order to defray the costs of health care, individuals,
families, and other entities (such as employers) routinely purchase
health insurance policies, certificates or contracts (individually
or collectively a "policy"). Generally, health insurance
policies provide that, in exchange for the policyholder's payment
of a premium, the health insurance company will cover some or all
of the health care costs incurred by the individuals covered under
the policy.
[0002]Other types of insurance coverage, such as life and property
insurance function in similar fashion, wherein the policyholder
pays a premium and the insurance company covers some or all of the
costs insured under the terms of the policy.
[0003]It is not unusual for individuals, families and other entities
to change insurance coverage over time. For example, an individual
may purchase a first health insurance policy to obtain coverage
when the individual becomes a legal adult and is no longer covered
under his or her parents' insurance policy. Later, the individual
may become employed and obtain health insurance coverage under the
employer's policy. Subsequently, the individual may change jobs,
move to another location, or make other changes that necessitate
or make desirable yet another change in health insurance policies.
Similar changes may occur in the individual's other types of insurance
policies, such as life and property insurance.
[0004]Typically, when an insured entity, such as an individual,
family or company, switches insurance carriers or policies, the
insured entity cancels the previous insurance policy to avoid paying
unnecessary and duplicative insurance premiums. However, as time
passes, the entity's circumstances may change. For example, a single
healthy adult age 25 may purchase a health insurance policy. The
adult may then get a job and obtain health insurance through the
employer. Over time, the individual may get married, have children,
or develop a chronic or other health condition. The individual may
then cease to work for the employer, leaving the individual with
only extremely expensive or no health insurance options, during
the COBRA term or after COBRA has expired.
[0005]In view of this and other situations in which an insured
entity's circumstances and insurance needs vary over time, there
is a need for a policy that provides flexibility in coverage to
the policyholder as the insurance needs of the policyholder vary.
SUMMARY
[0006]The present invention provides for a policy containing a
dormancy provision that enables an insured entity to vary the scope
and terms of coverage, including making the coverage go dormant
for one or more periods of time. The dormancy provision provides
flexibility by enabling an insured entity to maintain the option
of coverage under a first policy even while the entity is insured
under a different second policy by paying just a portion of the
premium for the first policy, such as a dormancy premium, to maintain
the option of reactivating coverage under the first policy should
such coverage be needed, for example if coverage under the second
policy terminates. The dormancy provision also provides portability
by allowing the policyholder to make life changes while maintaining
the option of activating or deactivating benefits under the policy.
Further, the dormancy provision also addresses the issue of uninsurability
by providing the policyholder with the assurance that they will
be insured even if circumstances arise that would normally serve
as a contraindication for coverage. The dormancy provision may be
implemented in any type of policy, including but not limited to,
health, life, or property insurance policies.
[0007]For example, in the context of health insurance, a single
healthy female purchases a medical insurance policy with a dormancy
provision and then makes her plan benefits go dormant after she
becomes insured under her employer's insurance plan. During this
time she is married and has a child. Subsequently, she decides to
quit her job and activate the benefits under her policy. According
to certain embodiments, the policyholder has the right to activate
the benefits under her policy, but the right may be subject to some
requirements that may include: 1) continuity of payment of the policy
premiums on a timely basis; 2) timely notification of desire to
deactivate benefits under the policy, e.g., a gap of no more than
a specified time between commencement of coverage under employer's
insurance plan and notification to deactivate benefits under the
policy; and 3) timely notification of desire to activate benefits,
i.e., a gap of no more than a specified time (e.g. 62 days) between
loss of coverage from her employer's plan and notification of reactivation
of the policy. Once dormant benefits under the policy are activated,
the policyholder pays insurance premiums under her plan as if she
had been paying her premiums all along.
[0008]In certain embodiments, a child and/or a husband may receive
coverage under the policy having the dormancy provision. In this
embodiment, when reactivating dormant benefits under a policy, a
policyholder adding dependents may pay a family rate or an individual
plus dependent rate.
[0009]In other embodiments, a child and/or a husband may receive
coverage under their own policy. In this embodiment, if the dependent
would be guaranteed coverage under the policyholder's policy, (for
example, if the dependent was a newborn and the insurance company
was notified of the newborn's birth within a specified period of
time) he would be issued his own policy without being underwritten.
[0010]However, there may be some prerequisites to activation of
the benefits under a policy when adding coverage for the child,
and may include: that the policyholder's benefits be in an active
state, notification of birth within a certain period of time and
payment of associated premiums for the dependent, or underwriting
for the child if notification is not received within a predefined
period of time. The child may also receive his own policy rather
than being added to his parent's policy.
[0011]Prerequisites to activation of the dormant policy with coverage
for the husband may include: underwriting before being added to
the policy. The husband may also buy his own dormancy policy, or
he could be declined for coverage.
[0012]Once a dependent is added to the policy, they may be subject
to the same activation/deactivation requirements as anyone under
the policy.
[0013]In another example, a spouse may have a preexisting condition
and may desire to be added as a dependent under his spouse's policy
having a dormancy provision. In some embodiments, in order to be
added to the policy, a husband may be subjected to a waiting period
before receiving benefits for services relating to the preexisting
condition. In certain embodiments, if the spouse is added to the
policy at a time in which the insurance benefits are dormant (for
example, the couple gets married, but the wife is covered under
an employer-sponsored program so she has deactivated her insurance
benefits under her dormancy policy), the waiting period for his
preexisting condition will begin to run as of the date spouse was
added to the dormant policy. If the wife activates her benefits
18 months later, the husband may immediately receive benefits for
services related to that preexisting condition because the waiting
period may have expired since the date he was added to the policy.
[0014]In another embodiment involving a medical insurance policy
having a dormancy provision, a single healthy male buys a dormancy
policy and makes his benefits go dormant once he is insured under
his employer's health plan. During this time he develops diabetes.
If he qualifies to activate the benefits of the dormant policy,
his premium rates remain on the same schedule as if he'd always
received benefits.
[0015]In some embodiments, a policyholder may be allowed to activate
his insurance benefits only within so many days of a qualifying
event, and/or he must have been covered under other medical insurance
within a certain period prior to activating his insurance benefits
under the dormancy policy. Requiring that a policyholder have other
existing medical insurance while the dormancy policy benefits are
dormant may ensure that a healthy person does not deactivate his
benefits under the dormancy policy and only pay dormancy premiums
until he needs the benefits under the dormancy policy, e.g. when
the policy holder becomes ill.
[0016]Embodiments of the present invention provide benefits to
policyholders because those who pay dormancy premiums for dormant
insurance benefits under their policies do not reapply for coverage
when activating their policy benefits. This may also provide an
added cost benefit because the policyholder pays the premium that
would apply if they had been insured during dormancy periods, which
will likely be lower than what the premium would be if the policyholder
had to reapply and disclose various medical conditions not present
at the policy's inception. Thus, premiums will change with attained
age and according to normal and periodic rate adjustments applied
to all similarly situated insureds, but not due to the development
of illness or disease during the period of dormancy.
[0017]These and other features and advantages of the present invention
will become apparent to those skilled in the art from the following
detailed description, wherein it is shown and described illustrative
embodiments of the invention, including best modes contemplated
for carrying out the invention. As it will be realized, the invention
is capable of modifications in various obvious aspects, all without
departing from the spirit and scope of the present invention. Accordingly,
the drawings and detailed description are to be regarded as illustrative
in nature and not restrictive.
BRIEF DESCRIPTION OF THE DRAWINGS
[0018]FIG. 1 depicts a method for providing a policy having a dormancy
provision.
[0019]FIG. 2 depicts a data sheet for a policy having dormant health
insurance benefits.
[0020]FIG. 3 depicts a data sheet for a policy with active health
insurance benefits.
DETAILED DESCRIPTION
Overview
[0021]Certain embodiments of the invention provide a policy with
a dormancy provision or a dormancy rider, right or insurance policy
provision that meets policyholders' shifting insurance coverage
needs over their lifetime despite potential life changes over time.
The dormancy feature of the present invention may be created through
language included within a policy, or by language within an attached
rider. A rider attaches to an existing policy and operates to delete,
add, or to delete and replace, i.e., modify, specific provisions
within the policy it attaches to. Insurance policies having a dormancy
provision or right, or a dormancy rider, herein "dormancy provision",
according to certain embodiments, gives a policyholder the option
to activate and deactivate insurance benefits under the policy.
[0022]For the purposes of certain embodiments of the present invention,
a policy is composed of features, terms and conditions of a typical
policy, except where the policy would be affected by a dormancy
provision.
[0023]Further, for purposes of certain embodiments of the present
invention, a policyholder may include an individual, a corporation,
an association, or another qualified group where members are eligible
to receive benefits and may individually select the dormancy feature
when another member may not.
[0024]FIG. 1 depicts a flow chart of a method 100 for providing
a policy having a dormancy provision. According to FIG. 1, a policy
with a dormancy provision is initially issued 110 in an active status
to an individual with no other coverage. The policy is maintained
though payment of premiums related to both the policy's dormancy
provision and the underlying insurance benefits. In this state,
the insurance company is responsible for covering reimbursement
costs for benefits defined in the policy. Collection of insurance
premiums keeps the policy in force and maintains 120 the active
policy. If premiums are not received within a defined period of
time, the policy terminates 125.
[0025]The active policy may remain active or may be deactivated
upon the occurrence of one or more predefined events 125. For example,
a predefined event may include change in employment status and/or
other insurance becoming available.
[0026]Subsequently, if the insurance company receives a deactivation
notification from the policyholder after the occurrence of one or
more predefined events 125, the policy benefits are deactivated
130. Notification by a policyholder to deactivate insurance benefits
may include providing written notification of intent to pay dormancy
premiums under the policy. When benefits are in the dormant state,
they are not available to the policyholder, and according to some
embodiments, not available for dependents.
[0027]In some embodiments, a policyholder may deactivate his insurance
benefits at any time. In other embodiments, the policy may include
provisions requiring that deactivation of benefits not be earlier
than a date the insurance company receives such a request. Further,
in some embodiments, a policyholder may be allowed to deactivate
his insurance benefits retroactively.
[0028]According to some embodiments, before a policyholder may
be allowed to deactivate the benefits under his policy, proof of
other insurance coverage may be required. In addition or alternatively,
a minimum waiting period may be required before deactivating policy
benefits having an active status at issue.
[0029]Once deactivated, the dormancy aspect of the policy provides
the individual with an opportunity to activate their benefits. The
dormant policy is maintained in the inactive status as long as dormancy
premiums are collected 140. Otherwise, in the event that dormancy
premiums are not paid, the policy terminates 145.
[0030]As set forth in FIG. 1, the occurrence 150 of one or more
predefined events is required before the policyholder may be permitted
to activate his policy benefits. Predefined events permitting activation
of insurance benefits may include the first day a policyholder is
approved under the policy, when the policyholder no longer has coverage
under other previously existing insurance coverage, upon the birth
of a child, for that child, if the policyholder's benefits are active,
or after the policy benefits are maintained in the dormant state
for a predetermined period of time.
[0031]In some embodiments, when a predefined event occurs, the
dormant insurance benefits may be activated upon notification. Notification
may include, for example, payment of premiums by the policyholder
and/or written notification from the policyholder or other entity.
In certain embodiments, notice of intent to activate the dormancy
policy may be required within a certain time period, e.g., 30 or
60 days, after the occurrence of one of the predefined events. Once
notice is received, the policy is activated 160, and as long as
insurance premiums are paid to the insurance company, the policy
and its associated benefits are maintained in an active state 120.
[0032]Although the embodiment in FIG. 1 involves a policy having
a dormancy provision issued with insurance benefits in an active
state, a policy with a dormancy provision may be issued to a policyholder
where the benefits are in an initial dormant state. For example,
in one embodiment, a policy is issued to a policyholder with other
existing insurance coverage, and benefits under the policy are issued
with an inactive status. Benefits under the policy may be activated
at a later point in time, for example, after the policyholder's
existing coverage is no longer available. In certain situations
where insurance benefits begin in a dormant state, there may be
an activation fee if the insurance benefits are activated within
a certain number of months from the initial policy issuance date.
Exemplary Embodiments
[0033]In one exemplary embodiment of the present invention, a term
life insurance policy includes a dormancy provision where benefits
are issued in the active status. According to this embodiment, at
the time the policy is issued, employer-sponsored life insurance
is not available to the policyholder. As long as premiums associated
with the insurance benefits and dormancy provision are paid, the
policyholder has the option of deactivating his life insurance benefits.
Thus, for example, if the policyholder changes employment and employer-sponsored
life insurance becomes available, the insurance benefits under the
policy with the dormancy provision may be deactivated and the policy
benefits maintained in the dormant status as long as dormancy premiums
are paid. According to certain embodiments, if the benefits under
a policy are inactive and the policy is non-renewed, i.e., due to
the death of the policyholder, a return of dormancy premiums may
be made. Alternatively, if the policyholder no longer has access
to life insurance, the benefits under the dormant policy may be
activated, and the benefits maintained in the active status as long
as premium payments are paid.
[0034]In another exemplary embodiment of the present invention,
a health insurance policy includes a dormancy provision where the
policy is issued with benefits in the inactive status. According
to this embodiment, the policyholder initially has access to employer-sponsored
or other health coverage. If the policyholder terminates employment
or no longer has access to health coverage, the benefits under the
dormant policy may be activated, i.e., policyholder's rights to
receive reimbursement for drugs, tests, and other diagnostic services,
under the policy are active. This activation, if within a certain
period of time, may require an activation fee. The benefits under
the policy may be maintained in the active status until the policyholder's
circumstances change, e.g., an alternate insurance source becomes
available, and then the policyholder may deactivate their health
insurance benefits. This provides policyholders with the assurance
that they may be medically insured even if their life situation
changes, and although the policyholders' premiums will change with
attained age and according to normal and periodic rate adjustments
applied to all similarly situated insureds, they will not change
due to the development of illness or disease during the period of
dormancy.
[0035]A medical insurance policy with a dormancy provision, according
to some embodiments, may include coverage for the policyholder and
any dependents. For example, when the policy is initially issued,
the insurance benefits may be automatically activated for both the
policyholder and any dependents unless the policyholder requests
to deactivate certain insurance benefits, e.g., benefits for one
or more dependents. Alternatively, the policyholder may be required
to add dependents to the policy and associated dormancy provision.
In a further embodiment, if a dependent is no longer an eligible
dependent under the policy, they may be required to apply for their
own policy. Otherwise, the dependent may be guaranteed a new policy,
e.g., in the case of death or divorce.
[0036]According to another embodiment, newborns may be automatically
added to the policy upon birth, or, alternatively, the insurance
company may require verification of the birth of the newborn before
providing medical benefits. The dependent may receive these benefits
by being added to his parent's policy, or issued his own policy.
In another example, a newborn may only receive insurance benefits
if the policyholder's benefits are in an active status. In another
embodiment, insurance benefits for a dependent may be activated
when the person is considered a dependent for purposes of other
medical insurance coverage and becomes entitled to benefits under
title XVII of the Social Security Act.
[0037]For preexisting conditions, a policy may include an exclusion
period, such as a 12-month exclusion period, that prevents an individual
from recovering expenses for his preexisting condition for 12 months
after the person was added to the policy. However, for certain dormancy
provision-associated policies, the 12-month exclusion period may
begin to toll even if the insurance benefits for that person are
in an inactive state. Thus, under certain policies having a dormancy
provision, a person with a preexisting condition may not have to
wait the full 12-month period from the time insurance benefits are
activated in order to receive active policy insurance benefits.
[0038]The dormancy provision, according to further embodiments,
remains in force until the renewal date, and may stay in force for
further periods in which it is renewed. Like other types of insurance
riders and policies, the renewability of the dormancy provision
may be subject to conditions.
[0039]For some embodiments, the policy and associated dormancy
provision may be terminated due to, for example, but not limited
to: a failure to pay premiums, a request to terminate policy by
the policyholder, a refusal to renew the policy by the insurance
company, or death (for an individual plan). However, a dormancy
policy may also be terminated for other reasons such as: failure
to pay dormancy premiums for a policy with inactive benefits, the
direct or indirect contribution or reimbursement (through wage adjustment
or otherwise) by or on behalf of an employer for any portion of
premiums or dormancy premiums, or the policyholder's employer treating
the policy as part of an employer-provided insurance plan for any
purpose, including tax purposes.
[0040]According to some embodiments, each time the dormancy policy
changes, a data page is sent to the policyholder. A data page may
include references to the policyholder's policy effective date,
benefit activation date, and benefit deactivation date. Thus, each
time the policyholder activates or deactivates his policy benefits,
or the policy changes due to the addition or removal of a dependent,
for example, a data page or insurance statement ("written notice")
may be sent to the policyholder or other appropriate parties. Written
notice may also be issued to a policyholder periodically, or when
premium amounts change. In addition, for a dormancy policy involving
medical insurance, the data page may include fields for dependent
information and other policy information such as deductible amounts
and benefits.
[0041]FIG. 2 is an exemplary data page 200 that may be sent to
a policyholder after deactivating the benefits under his health
insurance policy. Because data page 200 has a deactivation date
of Nov. 30, 2011, and no subsequent activation date, it corresponds
to a policy with inactive benefits. Data page 200 thus includes
dormancy premiums that are required in order for the policyholder
to maintain the policy benefits in the dormant state. In addition,
effective dates for injury and illness indicate that the benefits
under the policy are in an inactive status for both the policyholder
and his dependents.
[0042]FIG. 3 is an exemplary data page 300 that may be provided
after benefit activation. Data page 300 corresponds to a policy
having active benefits as of Aug. 15, 2012 with no subsequent deactivation
date. Data page 300 also includes the amount of premiums required
to maintain the benefits under the policy in the active state, and
an injury and illness effective date of Aug. 15, 2012 for the policyholder
and dependent No. 3. Benefits for dependent 1 and 2 remain in inactive
and do not have associated effective dates for injury and illness,
and instead the effective dates for injury and illness are designated
as having an "Inactive Status". The policyholder may choose
to activate the deactivated benefits of dependent 1 and 2 at a later
date. Further, in certain embodiments, dependents may also activate
and deactivate their benefits at any time while the policyholder's
benefits are active. According to some embodiments, if the policyholder
deactivates the benefits under his policy, the benefits for each
dependent covered under the policy are deactivated. Thus, for example,
in FIG. 3, the policyholder deactivated his insurance benefits on
Nov. 30, 2011, and dependent 3, the only dependent with active insurance
benefits during the time preceding, also has a deactivation date
of Nov. 30, 2011.
[0043]An example embodiment of how a policy with a dormancy provision
may operate in relation to a policyholder and his dependents follows.
A policyholder enrolls himself and family in a policy having a policy
effective date of Feb. 1, 2010. The policyholder pays the premiums
for his entire family. On Jun. 1, 2010, the policyholder is hired
by corporation Y and is provided with insurance coverage. The policyholder
notifies the insurance company on Jun. 1, 2010 to deactivate the
policy's benefits. In this situation, the policy benefits for the
policyholder and his dependents are all inactive. The insurance
company issues an updated data sheet to the policyholder indicating
that the benefits associated with the policy are inactive as of
Jun. 1, 2010. The policyholder pays the dormancy premium to maintain
the policy with benefits in the inactive state. On Jan. 20, 2013,
the policyholder terminates his employment and becomes self-employed,
and notifies the insurance company that the policy benefits should
be activated. The insurance company issues an updated data sheet
that indicates that benefits for the policyholder and his dependents
have an activation date of Jan. 20, 2013.
[0044]The following example illustrates how a medical insurance
policy with a dormancy provision would operate in relation to a
dependent of a policyholder, according to some embodiments. A dependent
is added to the policyholder's policy on the policy effective date,
Jan. 1, 2009. The dependent is hired by company X on May 15, 2009,
and company X provides full medical insurance to the dependent.
The policyholder or the dependent notifies the insurance company
of his desire to deactivate the benefits associated with dependent.
An updated data page is sent to the policyholder indicating that
the dependent has a deactivation date of May 15, 2009. The policyholder
continues to pay premiums for his portion of benefits, and pays
dormancy premiums for the dependent's portion of benefits. In the
future, the dependent obtains a new job and is no longer covered
under company X's medical insurance coverage. On Dec. 10, 2009,
either the policyholder or the dependent notifies the insurance
company of his desire to activate the dependent's medical benefits.
An updated data sheet is sent to policyholder indicating the change
in the dependent's status to show that the dependent's benefits
have an activation date of Dec. 10, 2009. Premium payments are made
to the insurance company for both the policyholder and the dependent
as if the dependent had always been covered under the policy.
Risks and Considerations associated with Dormancy Policies
[0045]Insurance policies with dormancy provisions, according to
some embodiments, include a certain amount of risk associated with
anti-selection opportunities created by characteristics of the dormancy
product and associated with expense issues.
[0046]Anti-selection opportunities created by a medical insurance
policy with a dormancy provision may include attracting those individuals
having a greater propensity for high cost medical conditions due
to the plan's flexibility with activation and deactivation. In addition,
policyholders with inactive benefits having low or no employer coverage
may activate the insurance benefits under their policy when health
situations arise or appear likely. Each of the above mentioned issues
may have the impact of raising general morbidity levels under the
product.
[0047]Additional anti-selection opportunities may include improper
deactivation of the policy. For example, when a policyholder's health
outlook is favorable, he may choose to deactivate the benefits under
his policy. Further, a healthy policyholder may allow coverage gaps
to occur by opting out of employer coverage. As a result, revenues
under the policy may be reduced with a less than proportionate reduction
in claims.
[0048]In contrast to individual medical plans that typically have
more favorable claim experience during early years of the policy
soon after insureds have passed through the medical underwriting
process, and less favorable experience in later years after the
underwriting impact has worn off and anti-selective lapse activity
has started to occur; for the policy having a dormancy provision,
there may be a higher frequency and length of deactivations during
early policy years and activations during later years which may
increase claims relative to revenue over the life of the product.
[0049]Moreover, risks associated with the policy with the dormancy
provision concerning expense issues may involve the difficulty of
spreading out the costs of significant front-end expenses associated
with distribution, underwriting, and issue of a plan due to the
inherent reduction of revenue when the dormancy period runs. Additional
costs are also associated with dormancy policies because administrative
costs are increased due to tracking dormancy status, application
of appropriate billing and claims adjudication based on status,
and verification that activation and deactivation requirements are
met.
[0050]The risks described above may be managed through a combination
of underwriting, product design, and pricing.
[0051]According to some embodiments, full medical underwriting
may be required at or before the date the dormancy policy is issued.
The underwriting may be identical or similar to other medical expense
applications without dormancy provisions. Further, in some embodiments,
no additional underwriting is done at subsequent activation and
deactivation events. In certain embodiments, there may be additional
underwriting done at subsequent activation and deactivation events.
This may provide the policyholder the assurance that they will be
insured regardless of their health status.
[0052]In addition, the policy may be designed with activation and
deactivation requirements. For example, some activation requirements
may include: prohibiting significant gaps in coverage during the
preceding dormancy period, voluntary or involuntary loss of existing
insurance coverage, or for policies in an initial dormant state,
there may be a requirement of a minimum dormant period prior to
activation or else an activation fee within a certain period of
time from the initial dormant state. Some deactivation requirements
may include: proof of employer coverage, and for products issued
in the initial active status, a minimum period prior to deactivation.
According to some embodiments, the policy may prohibit the policyholder
to enrich his benefits after the policy issues, but may allow the
policyholder to elect benefits of an alternative or lesser value
at activation, during a period of active benefits, or at any time.
[0053]The policy's rate structure for dormancy premiums charged
for the dormancy feature may closely parallel the premium structure
for the underlying medical insurance plans, which vary by characteristics
such as insured age and gender, health rating class, effective date
and duration since issue, geographic area and provider network,
plan and optional benefits selected. In addition, there may be fees
associated with early activation, early deactivation, or multiple
activations/deactivations in excess of a particular threshold over
the policy lifetime or within a specified period.
[0054]Dormancy premiums may also vary by current benefit status
(active vs. inactive) and status at inception. Dormancy premiums
may be higher when benefits are deactivated than when activated.
However, in order to maintain profitability of the policy regardless
of status, the cost of the dormancy premiums for the policy with
active benefits and the policy with inactive benefits may only be
slightly different. Dormancy premiums may be higher for a plan that
initially issues with inactive benefits.
[0055]At policy inception and during periods when benefits are
activated, common expense elements are present related to underwriting
and issue, distribution, sales, billing, claims, customer service,
and various overhead items. However, with policies having a dormancy
provision, other expenses may also need to be considered that are
related to changing and tracking dormancy status, and verifying
qualifications for a change in status.
[0056]According to certain embodiments, the pricing of insurance
premiums is expected to be similar or identical for policies with
and without the dormancy provision. Therefore, most or all of the
cost differences due to expenses and anti-selective morbidity may
need to be recognized within the development of the dormancy premiums.
[0057]In addition, according to some embodiments, for policies
issued under an initial dormancy period, it may be necessary to
establish statutory active life reserves. Such reserves may be related
to the portion of initial dormancy premiums, which, together with
investment income on the reserve balance, may fund higher claims
in later durations (subsequent to benefit activation).
[0058]The methods and systems according to the present invention
may be implemented using paper, paperless, and/or computer methods.
In some implementations, various combinations of software and hardware
may be used, as would be apparent to those of skill in the art and
as desired by the user. In addition, the present invention may be
implemented in conjunction with a general purpose or dedicated computer
system having a processor and memory components.
[0059]From the above description and drawings, it will be understood
by those of ordinary skill in the art that the particular embodiments
shown and described are for purposes of illustration only and are
not intended to limit the scope of the present invention. Those
of ordinary skill in the art will recognize that the present invention
may be embodied in other specific forms without departing from its
spirit or essential characteristics. References to details of particular
embodiments are not intended to limit the scope of the invention.
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