Provident American Life Insurance by DynamiteKegs

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									        MARKET CONDUCT EXAMINATION REPORT
                      AS OF
                 DECEMBER 31, 1999




                _________________________________

PROVIDENT AMERICAN LIFE & HEALTH INSURANCE COMPANY
                  17800 Royalton Road
               Strongsville, OH 44136-5197
                _________________________________

                 NAIC Group Code 1200
                NAIC Company Code 67903




  EXAMINATION PERFORMED BY INDEPENDENT CONTRACTORS FOR

      COLORADO DEPARTMENT OF REGULATORY AGENCIES
                 DIVISION OF INSURANCE




                               1
Market Conduct Examination    Provident American Life & Health Insurance Company




                             Sarah S. Malloy, CIE, AIRC, PAHM
                                 Sandra J. Rich, AIE, ALHC

                         Independent Market Conduct Examiners
                                    Contracting with
                           The Colorado Division of Insurance
                                1560 Broadway, Suite 850
                                 Denver, Colorado 80202
                                     (303) 894-7499




                                         2
Market Conduct Examination      Provident American Life & Health Insurance Company




          PROVIDENT AMERICAN LIFE & HEALTH INSURANCE COMPANY
                            17800 Royalton Road
                        Strongsville, Ohio 44136-5197




                                MARKET CONDUCT
                               EXAMINATION REPORT
                                       as of
                                  December 31, 1999




                               Examination Performed by

                        Sarah S. Malloy, CIE, AIRC, PAHM
                            Sandra J. Rich, AIE, ALHC




                             Independent Contract Examiners




                                           3
Market Conduct Examination             Provident American Life & Health Insurance Company




                                            August 18, 2000




The Honorable Willia m J. Kirven III
Commissioner of Insurance
State of Colorado
1560 Broadway, Suite 850
Denver, Colorado 80202

Commissioner:

This market conduct examination of Provident American Life & Health Insurance Company, was
conducted pursuant to Sections 10-1-203, 10-1-204, 10-1-205(8), 10-3-1106 and 10-16-216, Colorado
Revised Statutes, which authorizes the Insurance Commissioner to examine Individual Health Insurance.
We examined the Company’s records at Ceres Group corporate offices located at 17800 Royalton Road,
Strongsville, Ohio 44136-5197. The market conduct examination covered the period from January 1,
1999 through December 31, 1999.

The results of the examination are respectfully submitted by the following independent market conduct
examiners.



                                                 Sarah S. Malloy, CIE, AIRC, PAHM




                                                Sandra J. Rich, AIE, ALHC




                                                   4
Market Conduct Examination                       Provident American Life & Health Insurance Company


                               MARKET CONDUCT
                             EXAMINATION REPORT
                                      OF
              PROVIDENT AMERICAN LIFE & HEALTH INSURANCE COMPANY

                                                 TABLE OF CONTENTS


   SECTION                                                                                                             PAGE

  I.     COMPANY PROFILE.......................................................................................... 6

  II.    PURPOSE AND SCOPE OF EXAMINATION .................................................. 7

  III.   EXAMINERS' METHODOLOGY...................................................................... 8

  IV.    EXAMINATION REPORT SUMMARY .......................................................... 11

  V.     FACTUAL FINDINGS ...................................................................................... 16

          A. Company Operations/Management .............................................................. 17
          B. Marketing and Sales ..................................................................................... 41
          C. Complaints ................................................................................................... 79
          D. Producers...................................................................................................... 83
          E. Underwriting - Forms ................................................................................... 86
          F. Underwriting - Rates................................................................................... 129
          G. Underwriting – Applications...................................................................... 134
          H. Underwriting - Cancellations/Non-Renewals/Declinations ....................... 141
          J. Claims ......................................................................................................... 155
          K. Utilization Review ..................................................................................... 164

  VI. SUMMARY OF ISSUES AND RECOMMENDATIONS ............................... 167

  VII. EXAMINATION REPORT SUBMISSION...................................................... 169




                                                                   5
Market Conduct Examination
Company Profile                        Provident American Life & Health Insurance Company


                                       COMPANY PROFILE

Provident American Life and Health Insurance Company (PAHLIC) is a member of the Ceres Group that
also includes Central Reserve Life Insurance Company and Continental General Insurance Company. As
of December 31, 1998, (PAHLIC) was licensed to transact business in forty (40) states and the District of
Columbia. In 1999, A. M. Best assigned the classification of NR-3 (Rating Procedure Inapplicable)
stating that its normal rating procedure does not properly apply to Provident American’s business and/or
operations. The Company’s financial size category is Class IV.

Ceres Group, Inc. formerly Central Reserve Life Corporation, was incorporated in 1964 as Citation Life
Insurance Company under the laws of the State of Ohio. “Ceres Group, Inc.” became the Company’s
name in December 1998 following shareholder approval of the change of the Company’s state of
incorporation from Ohio to Delaware through a merger of the Company into a wholly owned subsidiary.
The Company is a holding company, which through its subsidiaries, specializes in meeting the accident
and health insurance needs of individuals and small to mid-sized businesses and the health and life
insurance needs of Americans age 65 and older. In 1998, the Company’s business was conducted
primarily through its then principal operating subsidiary, Central Reserve Life Insurance Company.

On December 31, 1998, Central Reserve acquired Provident American Life and Health Insurance
Company from Provident American Corporation. PALHIC is a life and accident and health insurer that
markets managed care health insurance products to individuals and small businesses. Ceres Group, Inc.
owns 100% of Central Reserve which was its principal operating subsidiary as of December 31, 1998.
Central Reserve owns 100% of PALHIC.

PALHIC specializes in marketing managed care health insurance products to individuals and small
businesses in forty (40) states, through a distribution system of 27,000 agents. The majority of its
business is derived from group association major medical products sold to individuals. A smaller portion
of its business is derived from traditional life (whole life and limited pay) products. Agents of PALHIC
are provided with Central products as well, including Central Reserve’s small and large group health line,
specialty health insurance products, in addition to Continental General Insurance Company’s senior
health and life insurance product lines. Through Provident American Corporation and Internet marketing
subsidiary, HealthAxis.com, the Company has the ability to offer direct on-line health insurance products
through the Internet.

The Company’s 1998 direct written premium for accident and health plans in Colorado was $4,182,000
representing 0.33% of market share. The Company’s loss ratio for 1998 in Colorado was 78.06%.




                                                    6
Market Conduct Examination
Purpose and Scope                      Provident American Life & Health Insurance Company

                          PURPOSE AND SCOPE OF EXAMINATION

Independent examiners, contracting with the Colorado Division of Insurance (DOI), in accordance with
Sections 10-1-202, 10-1-203, 10-1-204, C.R.S., which empowers the Commissioner to require any
company, entity, or new applicant to be examined, reviewed certain business practices of Provident
American Life & Health Insurance Company. The findings in this report, including all work products
developed in producing it, are the sole property of the Colorado Division of Insurance.

Examiners performed this market conduct examination on a routine basis to assist the Colorado
Commissioner of Insurance in meeting statutory examination requirements. The purpose of the
examination was to determine the Company’s compliance with Colorado insurance law and with
generally accepted operating principles related to individual sickness and accident insurance policies.
Examination information contained in this report should serve only these purposes. The conclusions and
findings of this examination are public record. The preceding statements are not intended to limit or
restrict the distribution of this report.

Examiners conducted the examination in accordance with procedures developed by the Colorado Division
of Insurance, based on model procedures developed by the National Association of Insurance
Commissioners. They relied primarily on records and materials maintained by the Company. The market
conduct examination covered the period from January 1, 1999 through December 31, 1999.

The examination included review of the following:

        Company Operations / Management
        Marketing and Sales
        Complaints
        Producers
        Policy Forms
        Rating
        Applications
        Cancellations / Non-Renewals / Declinations
        Claims
        Utilization Review

The final exam report is a report written by exception. References to additional practices, procedures, or
files that did not contain improprieties, were omitted. Based on review of these areas, comment forms
were prepared for the Company identifying any concerns and/or discrepancies. The comment forms
contain a section that permits the Company to submit a written response to the examiners’ comments.

For the period under examination, the examiners included statutory citations and regulatory references
related to individual insurance laws. Examination findings may result in administrative action by the
Division of Insurance. Examiners may not have discovered all unacceptable or non-complying practices
of the Company. Failure to identify specific Company practices does not constitute acceptance of such
practices. This report should not be construed to either endorse or discredit any insurance company or
insurance product.




                                                     7
Market Conduct Examination
Examiners’ Methodology                      Provident American Life & Health Insurance Company

                                 EXAMINERS' METHODOLOGY

The examiners reviewed the Company’s business practices to determine compliance with Colorado
insurance laws and Colorado regulations as they pertain to individual plans. For this examination, special
emphasis was given to the laws and regulations as shown in Exhibit 1.

                                                Exhibit 1

  Law/Regulation                                        Concerning
Section 10-1-101-      General Provisions
        10-1-130
Section 10-2-101-      Colorado Single Insurance Producer Licensing Act
        10-2-704
Section 10-3-1101-     Unfair Competition – Deceptive Practices
        10-3-1104
Section 10-7-109       No Defense for Nonpayment
Section 10-8-601.5     Applicability and Scope
Section 10-16-101-     Colorado Health Care Coverage Act: Part I: Short Title - Definitions -
        10-16-121      General Provisions
Section 10-16-201-     Part 2: Sickness and Accident Insurance
        10-16-219
Section 10-16-701-     Consumer Protection Standards Act for the Operation of Managed Care
        10-16-708      Plans
Regulation 1-1-4       Maintenance of Offices in this State
Regulation 1-1-6       Concerning the Elements of Certification for Accident and Health Forms,
                       Automobile Private Passenger Forms, and Claims-Made Liability Forms
Regulation 1-1-7       Market Conduct Record Retention
Regulation 1-2-10      Colorado Single Producer Act: Conditions, Fees and Transition
Regulation 4-2-3       Sickness and Accident Insurance Advertising
Regulation 4-2-5       Hospital Definition
Regulation 4-2-6       Concerning The Definition of the Term “Complications of Pregnancy”
Regulation 4-2-7       Payment of Monetary Penalties by Commercial Insurance Companie s,
                       Nonprofit Hospital and Health Service Corporations, Health Maintenance
                       Organizations and Property and Casualty Insurance Companies for
                       Failure to Promptly Pay Claims for Services
Regulation 4-2-8       Required Health Insurance Benefits for Home Health Services and
                       Hospice Care
Regulation 4-2-11      Individual and Group Health Insurance Rate Filings
Regulation 4-2-12      Concerning Pre-Existing Conditions and Qualifying Previous and
                       Existing Coverages
Regulation 4-2-13      Mammography Minimum Benefit Level
Regulation 4-2-15      Required Provisions in Carrier Contracts with Providers and
                       Intermediaries Negotiating on Behalf of Providers
Regulation 4-2-16      Women’s Access to Obstetricians and Gynecologists under Managed
                       Care Plans
Regulation 4-2-17      Prompt Investigation of Health Plan Claims Involving Utilization Review



                                                    8
Market Conduct Examination
Examiners’ Methodology                       Provident American Life & Health Insurance Company


Regulation 4-2-18       Concerning the Method of Crediting and Certifying Creditable Coverage
                        for Pre-existing Conditions
Regulation 4-2-19       Concerning Individual Health Benefit Plans Issued to
                        Self-employed Business Groups of One
Regulation 4-2-20       Concerning The Colorado Comprehensive Health Benefit Plan
                        Description Form
Regulation 4-6-5        Implementation of Basic and Standard Health Benefit Plans
(Amended)
Regulation 6-2-1        Complaint Record Maintenance
Regulation 6-2-2        Responses to Division Inquiries Regarding Complaints
Regulation 6-2-2,       Responses to Division Inquiries Regarding Complaints
(Amended)

Company Operations/Management

The examiners reviewed Company management and administrative controls, Board of Directors meeting
minutes, internal/external auditing functions, record retention, provider contracts, and timely cooperation
with the examination process. The Company’s Certificate of Authority was reviewed to determine
compliance with regard to the types of insurance.

Marketing and Sales

The examiners reviewed all of the printed material provided by the Company for language that did not
accurately represent products or that could be untrue, deceptive or misleading. The material used to advertise
one of the plans on the Internet was also reviewed. The examiners determined if the Company had methods
of control over advertising content and checked for the submission of the Certificate of Compliance to be filed
annually with the Colorado Division of Insurance.

Complaints

The examiners reviewed and compared the complaint log maintained by the Division of Insurance against the
Company’s complaint log to verify the accuracy of the Company’s tracking system and determined if the
Company had instituted a Complaint Appeal and Grievance system. The examiners also reviewed the reason
for and disposition of complaints received directly from policyholders, attorneys and providers.

Producers

The examiners reviewed the producer’s licenses for all producers solic iting insurance in 1999 during the
review of the Applications and Cancellation/Declination sections of the examination.

Policy Forms

The examiners reviewed the policy form provided by the Company as the most frequently sold plan
during 1999 and certifie d with the Colorado Division of Insurance as being in use during 1999. Also
reviewed, to prevent a duplication of effort, was a policy form originally sent to DOI staff and transferred
to the market conduct section. The forms reviewed are identified below:


                                                     9
Market Conduct Examination
Examiners’ Methodology                       Provident American Life & Health Insurance Company


Most frequently sold Indemnity and PPO Policy             PAL997IMM-CO

Policy transferred from DOI to market conduct section PAHHIC-INDMM-POL-96-CO

Applications

Amendatory endorsements and riders

Rating

The examiners reviewed the rates charged in the sample of files used in the Underwriting-Application
section of the examination. These were reviewed for compliance with the rate filings submitted to the
Colorado Division of Insurance as the rates in effect during the examination period.

Applications

The examiners systematically selected a sample of one hundred (100) individual files for plans effective
from January 1, 1999 through December 31, 1999. Fifty (50) of the files selected were new business files
and fifty (50) were renewal business files. The files were reviewed for compliance with applicable
Colorado insurance law.

Cancellations/Non-Renewals/Declinations

The examiners systematically selected a sample of fifty (50) files cancelled and fifty (50) files declined
during the period under examination. These files were reviewed to determine if the procedures used for
cancellations/declinations were in compliance with Colorado insurance law and contractual obligations.

Claims

A systematically selected sample of one hundred (100) paid and one hundred (100) combined
denied/closed-out claims, processed from January 1, 1999 through December 31, 1999, was selected for
review for the Company’s overall claims handling practices to determine timeliness of payment, accuracy
of processing and entitlement to policy benefits.

Utilization Review

The following entities conducted utilization review during 1999 for Provident American Life & Health
Insurance Company:

         First Health                    Entire year for a piece of the Colorado business
         The Araz Group                  January until mid-August
         Med-Value                       Mid-August for the Araz block of business and approximately
                                         1/3 of the First Health Business

The examiners reviewed the Company’s utilization management program including policies and
procedures. The examiners also reviewed samples of files requiring utilization review decisions.



                                                    10
Market Conduct Examination
Summary                                      Provident American Life & Health Insurance Company

                              EXAMINATION REPORT SUMMARY

The examination resulted in a total of forty-one (41) findings in which the Company did not appear to be
in compliance with Colorado Statutes and Regulations. The following is a summary of the examiners’
findings and recommendations.

•   Company Operations/Management: The examiners found seven (7) areas of concern in their
    review of company operations and management.

        1. Failure to maintain and disclose the existence of an access plan.

        2. Failure to include all required provisions in carrier/intermediary and provider contracts.

        3. Failure to file a summary of anti-fraud efforts in 1999.

        4. Failure to maintain all records necessary for market conduct purposes.

        5. Failure to provide responses within the required time period.

        6. Failure to file documentation and data on business groups of one.

        7. Failure to maintain copies of intermediary health care subcontracts.

     It was recommended that the Company develop and establish the necessary procedures to ensure
     compliance with Colorado insurance law in general and specifically that:

                1.   Plans required to be maintained are complete.
                2.   Provider/Intermediary contracts include all required provisions.
                3.   Required reports be filed with the Division of Insurance.
                4.   Records necessary for market conduct purposes be maintained.
                5.   Timely responses be made to written requests.
                6.   Copies of intermediary health care subcontracts are maintained

•   Marketing and Sales: The examiners found five (5) areas of concern in their review of marketing
    and sales materials. Examiners identified and summarized the following issues:

        1. Failure to disclose availability of Colorado Health Plan Description Form in marketing
            material.

        2. Failure to disclose availability of an access plan in marketing material.

        3. Failure to use correct format and complete information in Colorado Health Plan Description
           Forms.

        4. Failure to use sufficiently clear content in internet advertising to avoid a tendency to mislead.




                                                     11
Market Conduct Examination
Summary                                     Provident American Life & Health Insurance Company


       5. Failure to accurate ly describe coverage in printed advertising brochures.

       It was recommended that the Company’s marketing and sales materials be brought into
       compliance with Colorado insurance law.

•   Complaints: The examiners found two (2) areas of concern in their review of complaints and the
    procedures for the handling and processing of complaints.

       1. Failure to maintain a complete record of all consumer complaints received.

       2. Failure to include required information in complaint record.

       It was recommended that the Company ensure that all complaints received are recorded and
       recorded in the format required by Colorado insurance law.

•   Producers : The examiners found one (1) area of concern in their review of producers writing
    business during the period from January 1, 1999 through December 31, 1999.

       1. Failure to determine that producers were properly licensed prior to solicitation and
          acceptance of risk.

       It was recommended that the company establish procedures to ensure that all producers are
       licensed and authorized for the line of insurance being solicited.

•   Policy Forms : Examiners found fifteen (15) areas of concern in their review of the Company’s
    policy forms. The issues are summarized as follows:

       1. Failure to file an Annual Report for health insurance forms and failure to file prior to use.

       2. Failure to clearly and correctly state the conditions of renewability.

       3. Failure to fully disclose and/or allow the following required mandated benefits.

               •   Hospitalization and general anesthesia for dental procedures for dependent children.
               •   Outpatient self-management training and education and medical nutrition therapy for
                   diabetics.
               •   One newborn home visit during first week of life if released from hospital less than
                   48 hours after delivery
               •   Bereavement counseling services, under hospice benefits, for the primary care giver
                   and individuals with significant personal ties to the patient.




                                                   12
Market Conduct Examination
Summary                                      Provident American Life & Health Insurance Company


               •   Incomplete home health care benefits reflected.

       4. Failure to use correct definitions in the policies as indicated below:

               •   Adopted child-Coverage required placement in the residence of the insured.
               •   Disabled dependent-Required disability which came into existence prior to age 19 (or
                   age 25 in the case of a full-time student)
               •   Home Health Care-Required patients be discharged from a hospital or extended care
                   facility.
               •   Complications of pregnancy and childbirth-Defined as conditions requiring hospital
                   confinement.

       5 Failure to have correct and/or approved different wording of required and optional provisions.

       6. Failure to reflect the correct type of plan being offered over the Internet.

       7. Failure to use a correctly titled policy coversheet for indemnity plans.

       8. Failure to indicate the correct entity responsible for obtaining any necessary preauthorization.

       9. Using suicide as a defense for non-payment of life benefits for two policy years.

        The examiners recommended that the Company review and revise contract forms to comply with
        individual sickness and accident policy laws and regulations.

•   Rating: Examiners identified two (2) areas of concern.

         1. Failure to apply a risk modification plan as it was filed with the Division of Insurance.

         2. Failure to use rates that are not excessive in relation to benefits and failure to use rates that
            are non-discriminatory.

         The examiners recommended that the Company review and revise its procedures to ensure that
         rates are applied as filed and that rates are not excessive in relation to benefits. It was




                                                     13
Market Conduct Examination
Summary                                      Provident American Life & Health Insurance Company


            also recommended that the Company work with the Division of Insurance to identify the cases
            in which rates were not applied as filed and the cases in which rates were discriminatory and
            excessive in relation to benefits.

•   Applications : The examiners found one (1) area of concern in their review of individual application
    files for the examination period. The examiners identified the following issue:

        1. Failure to adhere to requirements for determining if individual policies were being sold to
           business groups of one.

        The examiners recommended that the Company review and revise its procedures to determine if
        any applicants are self-employed persons meeting the definition of a business group of one and to
        comply with all requirements of Colorado insurance law in those applicable instances

•   Cancellations/Non-Renewals/Declinations: There were four (4) areas of concern identified during
    the review of the individual cancellation/non-renewal/declination files.

       1. Failure to reflect the correct number of days allowed for a break in coverage on Certificates of
          Creditable Coverage.

       2. Failure to send Certificates of Creditable Coverage within forty-five (45) days of termination.

       3.    Failure to advise of CUHIP eligibility when declining coverage.

       4.    Failure to advise declined Business Groups of One of the availability of small group coverage.

       The examiners recommended that the company review and correct any inadequacies in procedures
       to ensure that proper termination information is sent in a consistent and timely manner.

•   Claims: The examiners found three (3) areas of concern in their review of the claims handling
    practices of the Company.

        1. Failure to accurately determine the number of days utilized for processing claims.

        2. Failure to consistently pay claims within sixty (60) days after receipt of a complete claim.

        3. Failure to consistently process claims accurately.

        The examiners recommended that the Company review its claim processing procedures and
        quality controls to ensure that they are adequate to minimize or prevent errors from recurring.
        Interest due as a result of delayed processing of claims identified during this examination was
        calculated and paid to the appropriate party. Copies of the method of computation, letters of
        explanation, the checks and explanation of benefit forms were provided to the examiners.




                                                    14
Market Conduct Examination
Summary                                    Provident American Life & Health Insurance Company


      Utilization Review: The examiners found one (1) area of concern in their review of utilization
      review policies and procedures and cases involving utilization review.

         1. Failure to provide written/electronic notification of certification or adverse determinations
            for utilization review decisions.

   The examiners recommended that the Company establish procedures to ensure that the required
   notifications are sent to the covered person and/or the provider.




                                                  15
Market Conduct Examination
Factual Findings                 Provident American Life & Health Insurance Company




             MARKET CONDUCT EXAMINATION REPORT

                             FACTUAL FINDINGS

        PROVIDENT AMERICAN LIFE & HEALTH INSURANCE
                        COMPANY




                                      16
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company




               COMPANY OPERATIONS / MANAGEMENT
                          FINDINGS




                                       17
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


  Issue A1: Failure to maintain an access plan document containing or describing all rights
            and responsibilities re quired by law.

Section 10-16-704(9), C.R.S., Network adequacy, states:

       Beginning January 1, 1998, a carrier shall maintain and make available upon request of the
       commissioner, the executive director of the department of public health and environment, or the
       executive director of the department of health care policy and financing, in a manner and form
       that reflects the requirements specified in paragraphs (a) to (k) of this subsection (9), an access
       plan for each managed care network that the carrier offers in this state. The carrier shall make the
       access plans, absent confidential information as specified in section 24-72-204(3), C.R.S.,
       available on its business premises and shall provide them to any interested party upon request. In
       addition, all health benefit plans and marketing materials shall clearly disclose the existence and
       availability of the access plan. [Emphasis added.] All rights and responsibilities of the covered
       person under the health benefit plan, however, shall be included in the contract provisions,
       regardless of whether or not such provisions are also specified in the access plan. The carrier
       shall prepare an access plan prior to offering a new managed care network and shall update an
       existing access plan whenever the carrier makes any material change to an existing managed care
       network, but not less than annually. The access plan shall describe or contain at least the
       following:

               (b) The carrier’s procedures for making referrals within and outside its network that, at a
                   minimum, must include the following:

               (II)    A provision that referral options cannot be restricted to less than all providers in
                       the network that are qualified to provide covered specialty services;
               (III)   Timely referrals for access to specialty care;
               (IV)    A process for expediting the referral process when indicated by medical
                       condition;
               (V)     A provision that referrals approved by the plan cannot be retrospectively denied
                       except for fraud or abuse;
               (c)     The carrier’s process for monitoring and assuring on an ongoing basis the
                       sufficiency of the network to meet the health care needs of populations that enroll
                       in managed care plans;
               (d)     The carrier’s quality assurance standards, adequate to identify, evaluate, and
                       remedy problems relating to access, continuity, and quality of care;
               (e)     The carrier’s efforts to address the needs of covered persons with limited English
                       proficiency and illiteracy, with diverse cultural and ethnic backgrounds, and with
                       physical and mental disabilities;
               (f)     The carrier’s methods for determining the health care needs of covered persons,
                       tracking and assessing clinical outcomes from network services, and evaluating
                       consumer satisfaction with services provided;
               (g)     the carrier’s method for informing covered persons of the plan’s services and
                       features, including but not limited to the following:
               (I)     The plan’s grievance procedures, which shall be in conformance with division
                       rules concerning prompt investigation of health claims involving utilization
                       review and grievance procedures;


                                                   18
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


                (II)     The extent to which specialty medical services, includin g physical therapy,
                         occupational therapy, and rehabilitation services are available;
                (III)    The plan’s process for choosing and changing network providers; and
                (IV)     The plan’s procedures for providing and approving emergency and medical care;
                (h)      The carrier’s system for ensuring the coordination and continuity of care for
                         covered persons referred to specialty providers;
                (i)      The carrier’s process for enabling covered persons to change primary care
                         professionals;
                (j)      The carrier’s proposed plan for providing continuity of care in the event of
                         contract termination between the carrier and any of its participating providers or
                         in the event of the carrier’s insolvency or other inability to continue operations.
                         The description shall explain how covered persons will be notified of the contract
                         termination or the carrier’s insolvency or other cessation of operations and
                         transferred to other providers in a timely manner.
                (k)      Any other information required by the commissioner to determine compliance
                         with the provisions of this part 7.

The initial material provided by the Company in response to the request in the pre-exam request letter was
a 1999 PPO Accessibility Report that did not describe or contain the required parts of the law reflected
above. The additional material that was provided in response to the comment form was a typed sheet
listing each of the deficiencies mentioned in the comment form and how the Company felt it was
complying with each deficiency. It does not appear that an access plan document containing or
describing the required procedures, provisions and processes had been developed or maintained by the
Company.



Recommendation No. 1:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-704, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has established procedures to ensure
that it maintains a complete access plan in the required manner and form and that the existence and
availability of such plan is disclosed in marketing materials.




                                                    19
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


 Issue A2: Failure to include all required provisions in contracts between carriers/
           Intermediaries/providers.

Section 10-16-702, C.R.S., Legislative declaration, states:

        (1) The general assembly hereby finds, determines, and declares that the purposes of this part 7
            are:

               (a) To incorporate consumer protections in the creation and maintenance of provider
                   networks by carriers;

                (b) To establish standards to assure the adequacy, accessibility, and quality of health care
                    services offered under a managed care plan; and

                (c) To establish requirements for written agreements between carriers offering managed
                    care plans and participating providers regarding the standards, terms, and provisions
                    under which the participating provider will provide services to covered persons.

Section 10-16-121, C.R.S., Required contract provisions in contracts between carriers and providers,
states:

        (1) A contract between a carrier and a provider or its representative concerning the delivery,
            provision, payment or offering of care or services covered by a managed care plan shall make
            provisions for the following requirements:

                (a) The contract shall contain a provision stating that neither the provider nor the carrier
                    shall be prohibited from protesting or expressing disagreement with a medical
                    decision, medical policy, or medical practice of the carrier or provider.

                (b) The contract shall contain a provision that states the carrier shall not terminate the
                    contract with a provider because the provider expresses disagreement with a carrier’s
                    decision to deny or limit benefits to a covered person, or because the provider assists
                    the covered person to seek reconsideration of the carrier’s decision or because a
                    provider discusses with a current, former, or prospective patient any aspect of the
                    patient’s medical condition, any proposed treatments or treatment alternatives,
                    whether covered by the plan or not, policy provisions of a plan, or a provider’s
                    personal recommendation regarding selection of a health plan based on the provider’s
                    personal knowledge of the health needs of such patients.

        (3) Each contract between a carrier and an intermediary shall contain a provision requiring that
            the underlying contract authorizing the intermediary to negotiate and execute contracts with
            carriers, on behalf of the providers, shall comply with the requirements of subsection (1) of
            this section.




                                                    20
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


Section 10-16-705, C.R.S., Requirements for carriers and participating providers, states:

        (1) In addition to any other applicable requirements of this part 7, a carrier offering a managed
            care plan shall satisfy all the requirements of this section.

        (3) Every contract between a carrier and a participating provider shall set forth a hold harmless
             provision specifying that covered persons shall, in no circumstances, be liable for money
             owed to participating providers by the plan and that in no event shall a participating provider
             collect or attempt to collect from a covered person any money owed to the provider by the
             carrier. Nothing in this section shall prohibit a participating provider from collecting
             coinsurance, deductibles, or copayments as specifically provided in the covered person’s
             contract with the managed care plan.

        (4)(a) Every contract between a carrier and a participating provider shall include provisions for
                continuity of care as specified in this subsection (4).

          (b) Each managed care plan shall allow covered persons to continue receiving care for sixty
              days from the date a participating provider is terminated by the plan without cause when
              proper notice as specified in subsection (7) of this section has not been provided to the
              covered person.

          (c)   In the circumstance that coverage is terminated for any reason other than nonpayment of
                the premium, fraud, or abuse, every managed care plan shall provide for continued care
                for covered persons being treated at an in-patient facility until the patient is discharged.

        (7)     A carrier and participating provider shall provide at least sixty days written notice to each
                other before terminating the contract without cause. The carrier shall make a good faith
                effort to provide written notice of termination within fifteen working days after receipt of
                or issuance of a notice of termination to all covered persons that are patients seen on a
                regular basis by the provider whose contract is terminating, regardless of whether the
                termination was for cause or without cause. Where a contract termination involves a
                primary care provider, all covered persons that are patients of that primary care provider
                shall also be notified. Within five working days after the date that the provider either
                gives or receives notice of termination, the provider shall supply the carrier with a list of
                those patients of the provider that are covered by a plan of the carrier.

        (8)     The rights and responsibilities under a contract between a carrier and a participating
                provider shall not be assigned or delegated by the provider without the prior written
                consent of the carrier, and any subcontracts shall comply with the requirements of this
                part 7.

        (9)     A carrier’s contract with participating providers shall include a provision that
                participating providers do not discriminate, with respect to the provision of medically
                necessary covered benefits, against covered persons that are participants in a publicly
                financed program.




                                                    21
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


        (14)     Every contract between a carrier or entity that contracts with a carrier and a participating
                 provider for a managed care plan that requires preauthorization for particular services,
                 treatments, or procedures shall include:

               (a) A provision that clearly states that the sole responsibility for obtaining any necessary
                   preauthorization rests with the participating provider that recommends or orders said
                   services, treatments, or procedures, not with the covered person; and

               (b) A provision that allows a covered person to receive a standing referral, as defined in
                   section 10-16-102 (43.5), for medically necessary treatment, to a specialist or
                   specialized treatment center participating in the carrier’s network or participating in a
                   subdivision or subgrouping of the carrier’s network if the subdivision or subgrouping
                   demonstrates network adequacy pursuant to section 10-16-704. The primary care
                   provider for the covered person, in consultation with the specialist and covered person,
                   shall determine that the covered person needs ongoing care from the specialist in order
                   to make the standing referral. A time period for the standing referral of up to one year,
                   or a longer period of time if authorized by the carrier or any entity that contracts with
                   the carrier, shall be determined by the primary care provider in consultation with the
                   specialist or specialized treatment center. The specialist or specialized treatment center
                   shall refer the covered person back to the primary care provider for primary care. To
                   be reimbursed by the carrier or entity contracting with a carrier, treatment provided by
                   the specialist shall be for a covered person and must comply with provisions contained
                   in the covered person’s certificate or policy. The primary care physician shall record
                   the reason, diagnosis, or treatment plan necessitating the standing referral.

Section 10-16-706, C.R.S., Intermediaries, states:

        (1) In addition to any other applicable requirements of this part 7, a contract between a carrier
            and an intermediary shall satisfy all the requirements of this section.

        (2) Intermediaries and participating providers with whom they contract shall comply with all
             the applicable requirements of section 10-16-705.

        (3) The responsibility to ensure that participating providers have the capacity and legal authority
             to furnish covered benefits shall be retained by the carrier.

        (4) A carrier shall have the right to approve or disapprove participating status of a sub-contracted
             provider in its own or a contracted network for the purpose of delivering covered benefits to
             the carrier’s covered persons.

        (6) If applicable, an intermediary shall transmit utilization documentation and cla ims paid
             documentation to the carrier. The carrier shall monitor the timeliness and appropriateness of
             payments made to participating providers and health care services received by covered
             persons.




                                                     22
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


       (7) If applicable, an intermediary shall maintain books , records, financial information, and
            documentation of services provided to covered persons at the intermediary’s place of
            business in this state.

       (8) An intermediary shall allow the commissioner access to the intermediary’s books, records,
           financial inf ormation, and any documentation of services provided to covered persons as
           necessary to determine compliance with this part 7.

       (9) A carrier shall have the right, in the event of the intermediary’s insolvency, to require the
           assignment to the carrier of the provisions of a participating provider’s contract addressing
           the provider’s obligation to furnish covered services.

Regulation 4-2-15, Required Provisions in Carrier Contracts With Providers and Intermediaries
Negotiating on Behalf of Providers, promulgated pursuant to Sections 10-1-109 and 10-16-121(5),
C.R.S., states:

IV.(B) Clarification of Terms

       “Intermediary” is defined in Section 10-16-102(25.5), C.R.S. An intermediary must be
       authorized by health care providers to negotiate and execute provider contracts with carriers
       on behalf of such providers. Examples of intermediaries may include but are not limited to:
       medical service organizations, provider networks, provider organizations, physician group
       practices, and physician hospital organizations.

V.(II) Rules

       Each and every contract between a carrier and an intermediary that concerns the delivery
       provision, payment or offering of care or services covered by a managed care plan that is issued,
       renewed, amended or extended after January 1, 1997, shall contain a provision substantially
       similar to the following:

               “[Name of intermediary] shall include in each and every one of its underlying contracts
               authorizing said intermediary to negotiate and execute contracts with carriers on behalf of
               providers a provision substantially similar to the following:

                       Each and every contract which [name of intermediary] negotiates and executes
                       with carriers, on behalf of the providers covered by this intermediary-provider
                       contract, shall contain a provision stating that: 1) No individual or group of
                       providers covered by the contract shall be prohibited from protesting or
                       expressing disagreement with a medical decision, medical policy, or medical
                       practice of the carrier or an entity representing or working for such carrier (e.g., a
                       utilization review company); 2) The carrier or an entity representing or working
                       for such carrier shall not be prohibited from protesting or expressing
                       disagreement with a medical decision, medical policy, or medical practice of an
                       individual or group of providers covered by the contract; and 3) The carrier shall
                       not terminate any contract executed by [name of intermediary] because any
                       individual or group of providers covered by the contract (a) expresses


                                                   23
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


                          disagreement with a decision by the carrier or an entity representing or working
                          for such carrier to deny or limit benefits to a covered person, or (b) assists the
                          covered person to seek reconsideration of the carrier’s decision, or (c) discusses
                          with a current, former, or prospective patient any aspect of the patient’s medical
                          condition, any proposed treatments or treatment alternatives, whether covered by
                          the plan or not, policy provisions of a plan, or a provider’s personal
                          recommendation regarding selection of a health plan based on the provider’s
                          personal knowledge of the health needs of such patients.”

National Insurance Administrators (NIA) and Provident American Life & Health Insurance Company
(PLHIC) were sister corporations, both owned by Provident American Corporation. NIA had a written
access agreement with Araz (a third party administrator) in effect until September 1, 1999. Araz was a
health care management company that established, maintained, and managed provider networks and
delivered cost containment services to insurance companies, third-party administrators, self-insured
employers, and health care providers. NIA retained the services of Araz for the purpose of developing
and managing relationships with PPOs throughout the United States, and for controlling health care costs
through various programs that Araz had developed. The provider network with which Araz had a
contract was Sloans Lake. PALHIC accessed Araz through the written access agreement between NIA
and Araz. The Company provided a copy of this contract to the examiners.

A review of this contract between National Insurance Administrators (NIA) and Provident American
Life & Health Insurance Company, entered into as of April 1, 1998 and terminated on September 1, 1999,
indicated non-compliance with Colorado insurance law in the following instances:


                                THE ARAZ GROUP, INC. & NIA
                            MANAGED CARE SERVICES AGREEMENT

    Section 10-16-121           Section 10-16-705           Section 10-16-706         Regulation 4-2-15

        (1)(a) & (b)                                                   (2)               V. (II) Rules
     Failure to contain                                     Failure to comply with     Failure to contain
         provisions                                        requirements of Section         provisions
                                                                  10-16-705
                                    (4)(a)(b)(c)                       (3)
                                 Failure to contain           Failure to contain
                                     provisions                    provision
                                         (7)                           (4)
                                 Failure to contain           Failure to contain
                                     provision                     provision
                              (15 & 5 day requirements)
                                         (9)                         (6)
                                 Failure to contain          Failure to contain
                                     provision                   provisions




                                                      24
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


                                 (14)(a) & (b)                      (7)
                               Failure to contain           Failure to contain
                                   provisions                   provision
                                                                    (8)
                                                            Failure to contain
                                                                provision
                                                                    (9)
                                                            Failure to contain
                                                                provision


A review of the following Sloans Lake Ma naged Care, Inc., Intermediary Provider Contracts indicated
non-compliance with Colorado insurance law in the following instances:


               1998 FACILITY AGREEMENT FOR RENAL DIALYSIS SERVICES

    Section 10-16-121         Section 10-16-705            Section 10-16-706        Regulation 4-2-15

          (1)(a)                 (4)(a) & (b)                        (2)               V. (II) Rules
    Failure to contain         Failure to contain         Failure to comply with     Failure to contain
        provision                  provision             requirements of Section         provisions
                                                                10-16-705
                                       (8)                           (3)
                               Failure to contain           Failure to contain
                                   provision                     provision
                                                                     (4)
                                                            Failure to contain
                                                                 provision


                          1998 PARTICIPATING GROUP AGREEMENT

    Section 10-16-121         Section 10-16-705            Section 10-16-706        Regulation 4-2-15

           (1)(a)               (4)(a)(b) & (c)                     (2)                 V. (II) Rules
     Failure to contain        Failure to contain         Failure to comply with    Use of an incomplete
         provision                 provisions            requirements of Section   provision as it does not
                                                                10-16-705             mention “medical
                                                                                     policy” or “medical
                                                                                          practice”
                                       (8)                          (3)
                               Failure to contain           Failure to contain
                                   provision                    provision
                                 (14)(a) & (b)                      (4)
                               Failure to contain           Failure to contain
                                   provisions                   provision

                                                    25
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company

                              1998 HOSPITAL AGREEMENT
                            PPO/PIP (Personal Injury Protection)

   Section 10-16-121       Section 10-16-705           Section 10-16-706       Regulation 4-2-15

         (1)(a)              (4)(a) & (b)                        (2)             V. (II) Rules
   Failure to contain      Failure to contain         Failure to comply with   Failure to contain
       provision               provision             requirements of Section       provisions
                                                            10-16-705
                                   (8)                           (3)
                           Failure to contain           Failure to contain
                               provision                     provision
                                                                 (4)
                                                        Failure to contain
                                                             provision


                  1998 AMBULATORY SURGERY CENTER AGREEMENT
                         PPO and PIP (Personal Injury Protection)

   Section 10-16-121       Section 10-16-705           Section 10-16-706       Regulation 4-2-15

     (1)(a) & (b)                  (8)                           (2)             V. (II) Rules
   Failure to contain      Failure to contain         Failure to comply with   Failure to contain
       provisions              provision             requirements of Section       provisions
                                                            10-16-705
                                                                 (3)
                                                        Failure to contain
                                                             provision
                                                                 (4)
                                                        Failure to contain
                                                             provision


                        1998 HOME HEALTH SERVICE AGREEMENT

   Section 10-16-121       Section 10-16-705           Section 10-16-706       Regulation 4-2-15

         (1)(a)                    (8)                           (2)             V. (II) Rules
   Failure to contain      Failure to contain         Failure to comply with   Failure to contain
       provision               provision             requirements of Section       provisions
                                                            10-16-705




                                                26
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


                                                                (3)
                                                        Failure to contain
                                                            provision
                                                                (4)
                                                        Failure to contain
                                                            provision


                              1998 FACILITY AGREEMENT

   Section 10-16-121     Section 10-16-705              Section 10-16-706       Regulation 4-2-15

         (1)(a)                 (4)(b)                            (2)             V. (II) Rules
   Failure to contain     Failure to contain           Failure to comply with   Failure to contain
       provision              provision               requirements of Section       provisions
                                                             10-16-705
                                  (8)                             (3)
                          Failure to contain             Failure to contain
                              provision                       provision
                                                                  (4)
                                                         Failure to contain
                                                              provision


                  1999 AMBULATORY SURGERY CENTER AGREEMENT
                         PPO and PIP (Personal Injury Protection)
                                   Effective 07/01/99

   Section 10-16-121     Section 10-16-705              Section 10-16-706       Regulation 4-2-15

         (1)(a)                   (3)                             (2)             V. (II) Rules
   Failure to contain     Failure to contain           Failure to comply with   Failure to contain
       provision              provision               requirements of Section       provisions
                         Section 6.2.1 of the                10-16-705
                         contract is in direct
                         contradiction of the
                         required provision.
                                  (8)                           (3)
                          Failure to contain            Failure to contain
                              provision                     provision
                                                                (4)
                                                        Failure to contain
                                                            provision




                                                 27
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


                        1999 PARTICIPATING PROVIDER AGREEMENT
                                      Effective 07/15/99

   Section 10-16-121        Section 10-16-705               Section 10-16-706        Regulation 4-2-15

         (1)(a)                   (4)(b)(c)                           (2)                V. (II) Rules
   Failure to contain        Failure to contain            Failure to comply with    Use of an incomplete
       provision                 provisions               requirements of Section   provision as it does not
                                                                 10-16-705             mention “medical
                                                                                      policy” or “medical
                                                                                           practice”
                                      (7)                           (3)
                             Provision is not in            Failure to contain
                           compliance with good                 provision
                           faith effort to provide
                           notification within 15
                                     days
                                      (8)                           (4)
                             Failure to contain             Failure to contain
                                  provision                     provision
                                (14)(a) & (b)
                             Failure to contain
                                  provision



                              1999 HOSPITAL AGREEMENT
                           PPO and PIP (Personal Injury Protection)
                                     Effective 09/01/99

   Section 10-16-121        Section 10-16-705               Section 10-16-706        Regulation 4-2-15

         (1)(a)                      (3)                              (2)               V. (II) Rules
   Failure to contain        Failure to contain            Failure to comply with     Failure to contain
       provision                 provision                requirements of Section         provisions
                            Section 6.2.1 of the                 10-16-705
                            contract is in direct
                            contradiction of the
                            required provision.
                                   (4)(b)                           (3)
                             Failure to contain             Failure to contain
                                 provisions                     provision
                                                                    (4)
                                                            Failure to contain
                                                                provision



                                                     28
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


            1999 ALTERNATIVE MEDICINE PPO-Participating Group Agreement
                                Effective 07/01/99

   Section 10-16-121     Section 10-16-705               Section 10-16-706        Regulation 4-2-15

         (1)(a)                   (3)                             (2)                 V. (II) Rules
   Failure to contain     Failure to contain            Failure to comply with    Use of an incomplete
       provision              provision                requirements of Section   provision as it does not
                                                              10-16-705             mention “medical
                                                                                   policy” or “medical
                                                                                        practice”
                              (4)(b) & (c)                       (3)
                          Failure to contain             Failure to contain
                               provisions                    provision
                                   (7)                           (4)
                          Provision is not in            Failure to contain
                        compliance with good                 provision
                        faith effort to provide
                        notification within 15
                                  days
                             (14)(a) & (b)
                          Failure to contain
                               provision


                           1999 FACILITY AGREEMENT
                        PPO and PIP (Personal Injury Protection)
                                  Effective 07/01/99

   Section 10-16-121     Section 10-16-705               Section 10-16-706        Regulation 4-2-15

         (1)(a)                   (3)                              (2)               V. (II) Rules
   Failure to contain     Failure to contain            Failure to comply with     Failure to contain
       provision              provision                requirements of Section         provisions
                         Section 6.2.1 of the                 10-16-705
                         contract is in direct
                         contradiction of the
                         required provision.
                            (4)(b) & (c)                         (3)
                          Failure to contain             Failure to contain
                              provisions                     provision
                                  (7)                            (4)
                          Failure to contain             Failure to contain
                              provision                      provision




                                                  29
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


                        1999 HOME HEALTH SERVICE AGREEMENT
                           PPO and PIP (Pers onal Injury Protection)
                                     Effective 07/01/99

   Section 10-16-121        Section 10-16-705              Section 10-16-706       Regulation 4-2-15

         (1)(a)                      (3)                             (2)             V. (II) Rules
   Failure to contain       Failure to contain            Failure to comply with   Failure to contain
       provision                 provision               requirements of Section       provisions
                           Section 6.2.1 of the                 10-16-705
                           contract is in direct
                           contradiction of the
                           required provision.
                                   (4)(b)                          (3)
                            Failure to contain             Failure to contain
                                provisions                     provision
                                     (7)                           (4)
                            Provision is not in            Failure to contain
                          compliance with good                 provision
                          faith effort to provide
                          notification within 15
                                    days


                            1999 ALTERNATIVE MEDICINE PPO
                               Participating Provider Agreement
                                       Effective 07/01/99

   Section 10-16-121        Section 10-16-705              Section 10-16-706       Regulation 4-2-15

         (1)(a)                      (3)                             (2)             V. (II) Rules
   Failure to contain       Failure to contain            Failure to comply with   Failure to contain
       provision                 provision               requirements of Section       provisions
                           Section 6.2.1 of the                 10-16-705
                           contract is in direct
                           contradiction of the
                           required provision.
                               (4)(b) & (c)                        (3)
                            Failure to contain             Failure to contain
                                provisions                     provision
                                     (7)                           (4)
                            Provision is not in            Failure to contain
                          compliance with good                 provision
                          faith effort to provide
                          notification within 15
                                    days



                                                    30
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


                                  (14)(a) & (b)
                                Failure to contain
                                    provision


                           1999 PARTICIPATING GROUP AGREEMENT
                                       Effective 07/01/99

    Section 10-16-121           Section 10-16-705              Section 10-16-706       Regulation 4-2-15

           (1)(a)                        (3)                             (2)             V. (II) Rules
     Failure to contain         Failure to contain            Failure to comply with   Failure to contain
         provision                   provision               requirements of Section       provisions
                               Section 6.2.1 of the                 10-16-705
                               contract is in direct
                               contradiction of the
                               required provision.
                                         (7)                           (3)
                                Provision is not in            Failure to contain
                              compliance with good                 provision
                              faith effort to provide
                              notification within 15
                                        days
                                   (14)(a) & (b)                       (4)
                                Failure to contain             Failure to contain
                                     provision                     provision



Recommendation No. 2:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Sections 10-16-121,10-16-702, 10-16-705, 10-16-706, C.R.S. and Regulation
4-2-15. In the event the Company is unable to show such proof, it should provide evidence to the
Division of Insurance that it has established procedures to ensure that its provider contracts and those of
its intermedia ries include all provisions required by Colorado insurance law.




                                                        31
    Market Conduct Examination
    Company Operations/Management Provident American Life & Health Insurance Company


      Issue A3: Failure to file a summary of anti-fraud efforts in 1999 with annual report.

    Section 10-1-127(6)(c), C.R.S., Fraudulent insurance acts – immunity for furnishing information relating
    to suspected insurance fraud – legislative declaration, states:

            Every licensed insurance company doing business in this state shall include as part of its annual
            report as required in section 10-3-109 a summary of its anti-fraud efforts as described in
            paragraph (a) of this subsection (6).

    Bulletin 5-96, November 12, 1996, states:

    PURPOSE

    Since the passage of House Bill 96-1149, the Division of Insurance has received numerous inquiries
    regarding the above-described requirements and the procedures which should be followed to comply with
    these requirements. The purpose of this bulletin is to respond to the most-frequently asked questions and
    to clarify the expectations of the division.

    ACTION REQUIRED

    When should the company file the summary of its anti-fraud efforts?
    On or before the first day of March in each year, with its annual statement

    The Company failed to include a summary of its anti-fraud efforts with the annual report that was filed in
    February 1999.



Recommendation No. 3:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-1-127, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has established procedures to ensure
that it complies with the requirement to include a summary of anti-fraud efforts as part of its annual
report.




                                                        32
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


  Issue A4: Failure to maintain all records necessary for a market conduct examination.

Regulation 1-1-7, Market Conduct Record Retention, promulgated under the authority of Section 10-1-
109, C.R.S., states:

       III.    Rule

               A.     Definitions

               1.     “Application” shall include any application form or enrollment form for coverage
                      under any policy.

               B.     Records Required For Market Conduct Purposes

               (1)    Every insurer/carrier or related entity licensed to do business in this state shall
                      maintain its books, records, documents and other business records so that the
                      insurer’s/carrier’s or related entity’s claims, rating, underwrit ing, marketing,
                      complaint, and producer licensing records are readily available to the
                      commissioner. Unless otherwise stated within this regulation, records shall be
                      maintained for the current calendar year plus two calendar years.

               (2)    A policy record shall be maintained for each policy issued in this state. Policy
                      records shall be maintained for the current policy term, plus two calendar years,
                      unless otherwise contractually required to be retained for a longer period.
                      Provided, however, documents from policy records no longer required to be
                      maintained under this regulation, which are used to rate or underwrite a current
                      policy, must be maintained in the current policy records. Policy records shall be
                      maintained so as to show clearly the policy term, basis for rating and, if
                      terminated, return premium amounts, if any. Policy records need not be
                      segregated from the policy records of other states so long as they are readily
                      available to the commissioner as required under this rule. A separate copy need
                      not be maintained in the individual policy records, provided that any data relating
                      to that policy can be retrieved. Policy records shall include:

               (a)    The application for each policy, if any;

               (b)    Declaration pages, endorsements, riders, termination notices, guidelines or
                      manuals associated with or used for the rating or underwriting of the policy.
                      Binders(s) shall be retained if a policy was not issued; and

               (4)    Records relating to the insurer’s/carrier’s or related entity’s compliance with this
                      state’s producer licensing requirements shall be maintained, which shall include
                      the licensing records of each agency and producer associated with the insurer or
                      related entity. Licensing records shall be maintained so as to show clearly the
                      dates of the appointment and termination of each producer.




                                                  33
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


In the following instances the Company could not furnish requested records required for
this market conduct examination:

Cancellations                   Six (6) instances in which the licenses for agents who
                                initially solicited the business which was underwritten
                                could not be produced.

Applications                    One (1) instance in which the 1999 license for an agent
                                could not be produced.

                                One (1) instance in which a new business file could not
                                be located

                                Unable to determine the number of instances. The
                                Company could not produce any documentation of the
                                initial notification mailing (sent 1/19/99) concerning the
                                Women’s Health and Cancer Rights Act of 1998.

                                Fourteen (14) instances in which the Company could not
                                provide documentation of the Colorado Health Plan
                                Description Form being sent to applicants applying over
                                the internet for the HealthAxis plans. There were
                                fourteen (14) applicants for the HealthAxis plan in the
                                sample of new business applications.

                                One (1) instance in which an application for a renewal
                                application file could not be furnished.

Declinations                    Five (5) instances in which declination files could not be
                                produced.

Consumer Complaints             Two (2) instances in which information needed for a
                                review of the files could not be furnished.

Utilization Review              Prior to September, 1999, records for the utilization
                                review cases processed by Araz could not be provided.

Producers                       One (1) instance in which the notice of termination letter
                                for a producer terminated June 11, 1999 could not be
                                located.

Claims                          Four (4) instances in which claim files could not be
                                located. (3 closed files and 1 denied file)

                                Thirteen (13) instances in which required information
                                (copies of the bill and repricing sheet) could not be
                                furnished for paid claims.


                                                   34
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


Recommendation No. 4:

Within 30 days, the Company should provide documentation demonstrating why it
should not be considered in violation of Regulation 1-1-7. In the event the Company is
unable to show such proof, it should provide evidence to the Division of Insurance that it
has established procedures to ensure it maintains all records required for market conduct
purposes.




                                                    35
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


  Issue A5: Failure to respond to written requests for information/material/
            comment forms within the time period require d by Colorado insurance law.

Regulation 6-2-2, Response to Division Inquiries, promulgated pursuant to Sections 8-45-117(1)(c), 10-1-
109, 10-2-104, 10-3-1110(1), 10-16-109 and 10-1-108(16), C.R.S., states:

        Section 2. Background and Purpose

        Part 2, article 1, title 10, C.R.S. allows the Division to conduct both formal and informal
        examinations into the conduct of all persons transacting insurance business in this state. Section
        10-1-204 (2) (b) (I), C.R.S., authorizes the Commissioner to suspend, revoke, deny or nonrenew
        the license or authority of a company for failure to comply with any reasonable written request of
        the examiner. Sections 10-2-801 (1), 10-2-804 (4), and 10-16-416, C.R.S., authorizes the
        Commissioner to impose a monetary penalty and suspend, revoke, refuse to continue or renew or
        refuse to issue an insurance producer license for failure to comply with any lawful rule or order of
        the Commissioner. This regulation authorizes the Commissioner, after notice and hearing, to
        impose penaltie s for violation of any lawful order of the Commissioner.

        The purpose of this regulation is to prescribe the time period in which all persons shall respond to
        Division inquiries, including requests for documents, formal and informal examinations and
        investigations of consumer complaints regarding alleged violations of Colorado insurance laws.

        Section 3. Definitions

        As used in this regulation:

        C.      “Market Conduct Examination Comment Form” is either 1) a written request from the
                examiner for books, records, materials, information, or data necessary for examination of
                the company’s operations, or 2) a written comment from the examiner which identifies
                concerns related to company actions and requires additional information or
                acknowledgement from the company.

        Section 4. Rules

        B.      Unless a longer time period is specified in the request, every insurance company shall
                provide a complete response to Market Conduct Examination Comment Forms within
                five business days from the date of the receipt of the form.

        C.      If additional time to respond is required, the person shall request an extension by letter to
                the Division employee or examiner making the inquiry. The request shall be made within
                the original response period established in sections (A) and (B) above, and shall state in
                detail the reasons necessitating the extension. When a request for extension is granted,
                the person shall respond within the new time period granted by the Division employee or
                examiner.

The Company failed in the instances described below to respond to written requests and comment forms
within the time frame ( 5 business days) required by Colorado law.

                                                    36
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


                                     Memoranda

Response Time:                 7 Business Days                 Two (2) instances

                               6 Business Days                 Eight (8) instances

                               8 Business Days                 One (1) instance

                               3 Business Days                 One (1) instance
                               beyond the extension granted

                               1 Business Day                  Four (4) instances
                               beyond the extension granted

Requests for Extensions        6 Business Days                 Two (2) instances


                                   Comment Forms

Response Time:                 6 Business Days                 Two (2) instances

There were eight (8) comment forms issued in connection with provider contracts that
were not completely responded to at the close of the examination.

As of the date the comment forms were issued the business days that had elapsed from
the date of issue with none of the comment forms returned with an agree or disagree
were:

Response Time                  36 Business Days                One (1) instance

                               33 Business Days                One (1) instance

                               32 Business Days                One (1) instance

                               28 Business Days                One (1) instance

                               29 Business Days                One (1) instance

                               25 Business Days                One (1) instance

                               26 Business Days                Two (2) instances




                                                  37
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


Recommendation No. 5:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Regulation 6-2-2. In the event the Company is unable to show such proof, it
should provide evidence to the Division of Insurance that it has established procedures to ensure that all
written requests and/or written comment forms from market conduct examiners can be completely
responded to within either the time period required by law or within the new time period granted by an
extension.




                                                    38
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


  Issue A6: Failure to file documentation of compliance and data on number of Business
            Groups of One that were covered.

Section 10-8-601.5(1)(G), C.R.S., Applicability and scope states:

        Before marketing or selling individual health benefit plans to business group of one self-
        employed persons, and on or before March 1 of each year during which it markets or sells such
        plans, the individual carrier provides to the commissioner documentation that it meets the
        conditions of this subparagraph (I) and submits data on the number of business groups of one
        covered.

Regulation 4-2-19, Concerning Individual Health Benefit Plans Issued to Self-Employed Business Groups
of One, promulgated pursuant to Sections 10-1-109(1), 10-8-601.5(1)(c)(I) and (3), 10-16-108.5(8), and
10-16-109, C.R.S., states:

        V. A. Rules

        7. Pursuant to Section 10-8-601.5(1)(c)(I)(G), C.R.S., before marketing or selling individual
           health benefit plans to self-employed business groups of one, and on or before March 1 of
           each year during which it markets or sells such plans, the individual carrier shall provide
           documentation that it meets all of the conditions of this part A of Section V of this regulation,
           and shall submit data on the number of business groups of one in force as of December 31 of
           each year. The documentation shall be sent to the Rates and Forms Section of the Colorado
           Division of Insurance, 1560 Broadway, Suite 850, Denver 80202. Acceptable documentation
           is shown in Appendix B

The Company had not made the required filing, described above, concerning the individual plans it
markets in Colorado.



Recommendation No. 6:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-8-601.5, C.R.S. and Regulation 4-2-19. In the event the Company
is unable to show such proof, it should provide evidence to the Division of Insurance that it has
established procedures to ensure that all required documentation and data on business groups of one is
filed as required by Colorado insurance law.




                                                     39
Market Conduct Examination
Company Operations/Management Provident American Life & Health Insurance Company


  Issue A7: Failure to maintain copies of all intermediary health care subcontracts.

Section 10-16-706(5), C.R.S., Intermediaries, states:

          A carrier shall maintain copies of all intermediary health care subcontracts.

The Company did not maintain a copy of any of the contracts between Sloans Lake and the providers and
facilities with which they contracted.




Recommendation No. 7:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-706, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has established procedures to ensure
it maintains copies of all intermediary health care subcontracts.




                                                    40
Market Conduct Examination
Marketing and Sales          Provident American Life & Health Insurance Company




                        MARKETING AND SALES
                             FINDINGS




                                     41
Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


  Issue B1: Failure to display on marketing materials a notice advising of the availability of
            the Colorado Comprehensive Health Benefit Plan Description Form.

Amended Regulation: 4-2-20, Concerning the Colorado Comprehensive Health Benefit Plan Description
Form, promulgated pursuant to Sections 10-1-109, 10-3-1110(1), 10-16-108.5(11)(b), and 10-16-109,
C.R.S., states:

    Section 4. RULES

    (F)(1)       Carriers shall prominently include with all marketing materials the following
                 notice:

        “Colorado law requires carriers to make available a Colorado Health Plan Description Form,
        which is intended to facilitate comparison of health plans. The form must be provided
        automatically within three (3) business days to a potential policyholder who has expressed
        interest in a particular plan. The carrier also must provide the form, upon oral or written request,
        within three (3) business days, to any person who is interested in coverage under or who is
        covered by a health benefit plan of the carrier.”

Bulletin 2-98, Distribution and Use of the Colorado Comprehensive Health Benefit Description Form,
Issue and Effective Date: April 14, 1998, states in part:

        II.      Action Necessary

                 (A)(2) All marketing materials shall include a statement that a Colorado Health Plan
                 Description Form for each policy being marketed or sold is available immediately upon
                 request.

The Company furnished three (3) Product Brochures, used by Provident American agents to present and
quote the following three plans and internet advertising for the fourth plan.

        1.    HealthQuest Plus           Form No. MK-HQ-11/97
        2.    HealthEdge                 Form No. MK-HE-11/97
        3.    Solution Plus              Form No. MK-Sol-11/97
        4.    HealthAxis                 Marketed via the Internet

 Neither of the three (3) brochures nor the internet advertising included the required statement concerning
the availability of the Colorado Comprehensive Health Benefit Plan Description Form.




                                                     42
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


Recommendation No. 8:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Amended Regulation 4-2-20. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has established procedures ensuring
that all marketing materials include a notice concerning the availability of the Colorado Comprehensive
Health Benefit Plan Description Form.




                                                   43
Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


 Issue B2: Failure to disclose availability of an access plan in marketing material.

Section 10-16-704(9), C.R.S., Network Adequacy, states:

        Beginning January 1, 1998, a carrier shall maintain and make available upon request of the
        commissioner, the executive director of the department of public health and environment, or the
        executive director of the department of health care policy and financing, in a manner and form that
        reflects the requirements specified in paragraphs (a) to (k) of this subsection (9), an access plan for
        each managed care network that the carrier offers in this state. The carrier shall make the access
        plans, absent confidential information as specified in section 24-72-204 (3), C.R.S., available on its
        business premises and shall provide them to any interested party upon request. In addition, all
        health benefit plans and marketing materials shall clearly disclose the existence and availability of
        the access plan.

The Company furnished three (3) Product Brochures, used by Provident American agents to present and
quote the following three plans and advertising material used on the internet for the fourth plan.

        1.   HealthQuest Plus             Form. No. MK-HQ-11/97
        2.   HealthEdge                   Form No. MK-HE-11/97
        3.   Solution Plus                Form No. MK-Sol-11/97
        4.   Health Axis                  Marketed via the Internet

None of the three (3) brochures nor the internet advertising disclosed the existence and availability of the
access plan.



Recommendation No. 9:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-704. In the event the Company is unable to show such proof, it
should provide evidence to the Division of Insurance that it has established procedures to ensure that all
marketing materials disclose the existence and availability of the access plan.




                                                     44
Market Conduct Examination
Marketing and Sales                        Provident American Life & Health Insurance Company


 Issue B3: Failure to use correct format and complete information in Colorado
           Comprehensive Health Plan Description Forms.

Section 10-3-1104, Unfair methods of competition and unfair or deceptive acts or practices, states:

(1) The following are defined as unfair methods of competition and unfair or deceptive acts or practices
    in the business of insurance;

    (a)           Misrepresentations and false advertising of insurance policies: Making, issuing,
                  circulation, or causing to be made, issued , or circulated, any estimate, circular, statement,
                  sales presentation, omission, or comparison which:
    (b)
    (I) Misrepresents the benefits, advantages, conditions, or terms of any insurance policy;

Section 10-16-108.5(11)(b), Fair marketing standards, states:

              The format for and elements of the Colorado health benefit plan description form shall be
              determined by rule of the commissioner after consultation with consumer, provider, and
              carrier representatives. The commissioner shall promulgate such rule no later than November
              15, 1997.

Amended Regulation: 4-2-20, Concerning The Colorado Comprehensive Health Benefit Plan Description
Form, promulgated pursuant to Sections 10-1-109, 10-3-1110(1), 10-16-108.5(11)(b), and 10-16-109,
C.R.S., states:

Section 2.        Basis and Purpose

          The purpose of this regulation is to establish and implement rules concerning the format for,
          elements of, and issuance of a Colorado Health Benefit Plan Description Form, pursuant to
          Section 10-16-108.5(11)(b), C.R.S. As required by law, the form is designed to facilitate
          comparison of different health plans by persons interested in purchasing or obtaining coverage
                                                             y
          under a health benefit plan. As also required b law, this regulation sets out procedures for
          carriers to make available a Colorado Health Benefit Plan Description Form for each policy,
          contract, and plan of health benefits that either covers a Colorado resident or is marketed to a
          Colorado resident or such resident’s employer.

Section 4.        Rules

          A. Effective September 30, 1998, all carriers offering or providing health benefit plan coverage
             or medicare supplemental coverage shall make available a completed copy of the Colorado
             Health Plan Description Form shown in Appendix A for each policy, contract, and plan of
             health benefits that either covers a Colorado resident or is marketed to a Colorado resident or
             such resident’s employer, except as provided in Part B of Section 4 of this regulation.
             However, carriers shall be deemed to be in compliance with this amended regulation if they
             elect to continue using the health benefit form required in the original regulation 4    -2-20,
             before amendment, but only for plans issued prior to January 1, 1999.



                                                       45
Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company

         C. Carriers shall use the exact format found in Appendix A for the Colorado Health Plan
            Description Form, including all headings, notes, row numbers, and footnotes. All boxes must
            be filled in. Carriers may modify box dimensions, reduce margins, or use a landscape rather
            than a portrait page layout format, but carriers shall follow the exact requirements and use
            only the choices set forth in the directions found in Appendix B of this regulation. A carrier
            may also add its logo to the form and print the form in color or black and white. Pursuant to
            Section 10-3-1104(1), C.R.S., in completing the form, carriers shall not misrepresent the
            benefits, advantages, conditions, or terms of the policy.[Emphases added.]

    I.   With respect to the specific Colorado Health Plan Description Form required to be made available
         by carriers pursuant to Part E (1) of Section 4, a carrier shall develop a separate Colorado Health
         Plan Description Form for each of its policies, contracts, and plans of benefits. If a carrier offers
         a policy with a choice of copays, coinsurance levels, deductibles, lifetime maximums, annual
         maximums, and/or other benefit maximums, minimums or restrictions, the carrier shall provide a
         separate Colorado Health Plan Description Form specific to the particular benefits of the policy
         being sold, marketed, or which is in place.

Section 7., Effective Date

         This amended regulation is effective on September 30, 1998. However, carriers shall be deemed
to be in compliance with this amended regulation if they elect to continue using the health benefit form in
the original regulation (i.e., before amendment) for plans issued prior to January 1, 1999.

A review of the Company’s Colorado Health Plan Description Form for the plan indicated below, indicates
that it does not appear to comply with the required format and appears to misrepresent the benefits of the
plan in some instances.

                                                HealthEdge


As this plan has both a traditional plan and a hospital & physician PPO, it appears that a Colorado Health
Plan Description Form should have been developed for each of these plans instead of combining them in
one form.

Appendix B

Part A:, Type of Coverage

Question 1., Type of Plan. Enter type of plan. Select one of the following choices only: (1) “Medical
expense policy,” (2) “Hospital expense policy”, (3) “Preferred provider plan,” (4) “Health maintenance
organization (HMO)”, (5) “Point of service (i.e., an HMO plan with some out-of-network benefits)”, or
(6) “Limited service licensed provider network (LSLPN) plan”. Note: Plans that have in- and out-of-
network benefits that are not offered by an HMO but which use gatekeepers should enter “Preferred
Provider Plan.”

The Company has used: Traditional Plan (Any Hospital/Any Physician) and Hospital & Physician
PPO.



                                                     46
Market Conduct Examination
Marketing and Sales                     Provident American Life & Health Insurance Company


Question 2, Coverage for Out-of-Network Care. Indicate if out-of network care is covered. Select one of
the following choices only: (1) “Only for emergency care,” (2) “Only for emergency and urgent plans];
(3) “only for specified services, patient pays more for such out-of-network care” [e.g., POS
plans]; (4) “Yes, but patient pays more for out-of-network care,” [e.g., PPO’s], (5) “Yes; policy makes
no distinction between in and out-of-network care” [e.g., traditional indemnity plans].

The CHPDF reflects, “Yes, but patient pays more for out-of-network services.”

This would be correct for the Hospital & Physician PPO, but not for the Traditional Plan, which would
use “Yes, policy makes no distinction between in and out of network care.


Part B: Summary of Benefits

Questions 4-31: General Directions.

•   If the plan does not make such a distinction (e.g., traditional indemnity plan) replace two columns
    with a single column labeled “Benefit Levels.”

The CHPDF reflects two columns which would be correct for the PPO plan, but does not appear to
be correct for the traditional version of this plan.


Question 4, Annual Deductible. Enter applicable individual and family annual deductibles for the plan as
a whole. Indicate whether they are aggregate or separate deductibles. If the plan does not require
deductibles, enter “No deductibles.”

The CHPDF does not indicate whether the deductibles are aggregate or separate deductibles.


Question 5, Out-of-Pocket Annual Maximum. Enter applicable out-of-pocket individual and family
annual maximums. If the out-of-pocket maximum excludes deductibles and/or copays, so indicate. If the
plan has combined in- and out-of-network annual out-of-pocket maximum, so indicate. If the plan has no
out-of-pocket maximum, enter “No out-of-pocket maximum.”

The CHPDF reflects: Individual a) Selected ded. Per insured & coins. % of next $5000 or $2500 of
covered charges & copays Family b) MAX. 3 deds./cal. Yr. + coins. % of next $5000 or $2500 of
covered expenses & copays per insured. This is reflected in both the In-Network and the Out-Of-
Network columns.

This information appears to be both incomplete and misleading. There are two (2) coinsurance choices
for the Traditional Plan and three (3) coinsurance choices for the PPO Plan. The wording indicates that
the deductible will be included in the maximum out of pocket amount. This is in contradiction to what is
stated in the advertising brochure for The Provident HealthEdge plan. For both the Traditional and the
PPO Plan, the brochure states under “Maximum Out Of Pocket For Covered Expenses”: (not including
deductibles and copayments) There are also specific amounts shown in this brochure as maximum out of
pocket for covered expenses for both plans as follows:

                                                   47
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


                $1000 (80/20) and $1250 (50/50) for the Traditional Plan
                90% Plan
                $500 PPO, $1500 Non-PPO
                80% Plan
                $1000 PPO, $2000 Non-PPO
                50% Plan
                $1250 PPO and Non-PPO


Question 7A, Covered Providers. Indicate covered providers. Select one of the following choices only:
(1) “[Insert name of provider network]. See provider directory for complete list”, (2) [Insert total
number] physicians and [Insert total number] hospitals in Colorado. See provider directory for complete
list”, or (3) “All providers, licensed or certified to provide covered benefits.”

The CHPDF reflects under the In-Network column: “Sloans Lake Managed Care (see provider dir.
For complete list)” and “N/A” under the Out-Of-Network column.

This would be correct for the PPO Plan, but choice (3) “All providers, licensed or certified to provide
covered benefits” would be correct for the Traditional Plan.


Question 7B, Accessibility of Providers. Select one of the following choices only: Network plans using
this kind of pod system should answer “No”; all other network plans should answer “Yes”. If the answer
depends on the service area or some other factor, so indicate (e.g., “Yes, except in Denver and Adams
County.”) Plans that do not use networks should enter: “Not applicable. This is not a network plan.”

The CHPDF does not reflect a Question 7B.


Question 8, Routine Medical Office Visits, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins.

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.


Question 12, Inpatient Hospital, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered subj. to ded. &
coins. and add’l $500 copay.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.



                                                    48
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


Question 13, Outpatient/Ambulatory Surgery, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins. And an add’l $250 copay.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.


Question 14, Laboratory & X-Ray, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.


Question 16, Ambulance, See General Directions for questions 8-30.

The CHPDF reflects under both the In-Network and the Out-Of-Network columns, “Covered up to
$600, subj. to ded. & coins.”

This is an accurate description of the benefit, however the General Directions state: “Indicate significant
benefit limits. If per diem, annual, or per visit maximums apply, show them.” The $600 ambulance
benefit is $600 per occurrence and is incomplete and could be misleading without this notation.


Question 25, Home Health Care, See General Directions for questions 8-30.

The CHPDF reflects under both the In-Network and the Out-Of-Network columns, “Covered, subj.
to ded. & coins. & pol limits.”

This is an accurate description of the benefit, however the General Directions state: “Indicate significant
benefit limits. If per diem, annual, or per visit maximums apply, show them.” The maximum 60 visits is
per calendar year and is incomplete and could be misleading without this notation.


Question 26, Hospice Care

The CHPDF reflects: "Covered, subj. to ded. & coins., max of $91 /day, $8,281/benefit paid; max. 3
benefit periods of 6 mos. each.”

Indicating that benefit periods are 6 months is incorrect and misrepresents the benefits of the plan. The
benefit periods should be 3 mos. instead of 6 mos.



                                                    49
Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


Question 30, Chiropractic Care, Briefly describe coverage, if any, and note if coverage may be obtained
either under a separate dental/vision/chiropractic care plan or as an optional benefit.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins., max. 15 visits/insured/cal. yr.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.


Part C: Limitations and Exclusions

Question 33, Exclusionary Riders., Can an individual’s specific, pre-existing condition be entirely
excluded from the policy? All group carriers must enter “No”. Depending on the policy, individual
carriers should enter “Yes, unless the individual is a HIPAA-eligible individual as defined under federal
and state law” or “No”.

The CHPDF states: “Yes”.

This is incomplete as the remainder of the sentence that is required if “Yes” is used is not reflected.


Part D: Using the Plan

Questions 36-38: General Directions. If the plan has separate in- and out-of-network benefits, use two
columns and label them “in-network” and “Out-of-network.” If the plan does not make such a distinction
(e.g., a traditional indemnity plan), replace two columns with a single column labeled “Using the Plan.”

The CHPDF has two columns, one “In-Network” and one “Out-Of-Network”.

This is correct for the PPO Plan that is being described, however it is not in compliance with the
instructions for the Traditional plan that this form is also being used for.


Question 39, Customer Service Number: Enter your main customer service number for
members/insureds.

The CHPDF reflects the following question as No. 39: “With respect to network plans, are all the
providers listed in Question 7 of this form accessible to me through my primary care physician”?

The initial Regulation 4-2-20 required this question. The amended Regulation 4-2-20 does not use this
question, making forty-two (42) questions instead of forty-three (43) in Part D of the form. Section 7,
Effective Date, of the amended regulation requires the new format for plans issued as of January 1, 1999.




                                                     50
Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


Question 42., To assist in filing a grievance, indicate the form number of this policy; whether it is
individual, small group or large group; and if it is a short-term policy.

The CHPDF reflects this question as Question 43 and states: PAL9971MM-CO.
This should be Question No. 42 and it does not appear to be complete as the instructions for completing
require one of the following choices to be indicated after the form number: (1) Individual, (2) Small
group only, (3) Large group only, or (4) Group—all sizes. Note: If a carrier offers the identical policy in
several markets (e.g., large group market, small group market, etc.) then multiple responses may be
included here


Part E: Cost

The CHPDF reflects this section as Part E: How Physicians Are Paid. This section contains
summary information about physician reimbursement. To find out how a particular provider is
paid under this plan, ask that provider. The CHPDF also uses three questions, numbered 44., 45.,
and 46., under this section.

The amended regulation requires the following format for plans issued as of January 1, 1999: Part E:
Cost with the only question No. 43, “What is the cost of this plan.” The answer should be as follows:
“Contact your agent, this insurance company, or your employer, as appropriate, to find out the premium
for this plan. In some cases, plan costs are included with this form.” The three (3) additional questions
are now included under Part F:, Physician Payment Methods and Plan Expenditures for Health Expenses,
Administration and Profit.


Part F: Physician Payment Methods, and Plan Expenditures for Health Expenses, Administration and
Profit.

The CHPDF states: “Part F: Cost and Medical Expenditures and has Question 47, What is the
cost of this plan and Question 48, What percentage of total Colorado premiums are spent on
health care expenses as distinct from administration and profit?”

This is the format required prior to January 1, 1999. The instructions indicate that the following is
required by the amended regulation: “Any person interested in applying for coverage, or who is covered
by, or who purchases coverage under this plan may request answers to the questions listed below. The
request may be made orally or in writing to the agent marketing the plan or directly to the insurance
company and shall be answered within five (5) working days of the receipt of the request.”

•   What are the three most frequently used methods of payment for primary care physicians?
•   What are the three most frequently used methods of payment for physician specialists?
•   What other financial incentives determine physician payment?
•   What percentage of total Colorado premiums are spent on health care expenses as distinct from
    administration and profit?




                                                     51
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


A review of the Company’s Colorado Health Plan Description Form for the plan below, indicates that it
does not appear to comply with the required format and appears to misrepresent the benefits of the plan in
some instances.

                                              Solution Plus

Since this plan has both a traditional plan and a hospital and physician PPO, it appears that a Colorado
Health Plan Description Form should have been developed for each of these plans instead of combining
them in one form.

Appendix B

Part A:, Type of Coverage

Question 1., Type of Plan. Enter type of plan. Select one of the following choices only: (1) “Medical
expense policy,” (2) “Hospital expense policy”, (3) “Preferred provider plan,” (4) “Health maintenance
organization (HMO)”, (5) “Point of service (i.e., an HMO plan with some out-of-network benefits)”, or (6)
“Limited service licensed provider network (LSLPN) plan”. Note: Plans that have in- and out-of-
network benefits that are not offered by an HMO but which use gatekeepers should enter “Preferred
Provider Plan.”

The Company has used: Traditional Plan (Any Hospital/Physician) and Hospital and Physician PPO.


Question 2, Coverage for Out-of-Network Care. Indicate if out-of-network care is covered.
Select one of the following choices only: (1) “Only for emergency care,” (2) “Only for emergency and
urgent care”. (3) “only for specified services, patient pays more for such out-of-network care” [e.g., POS
plans]; (4) “Yes, but patient pays more for out-of-network care,” [e.g., PPO’s], (5) “Yes, policy makes no
distinction between in and out-of-network care” [e.g., traditional indemnity plans]

The CHPDF reflects, “Yes, but patient pays more for out-of-network services.”

This would be correct for the Hospital & Physician PPO, but not for the Traditional Plan, which would use
“Yes, policy makes no distinction between in and out of network care.”


Part B: Summary of Benefits

Questions 4-31: General Directions.

•   If the plan does not make such a distinction (e.g., traditional indemnity plan) replace two columns with
    a single column labeled “Benefit Levels.”

The CHPDF reflects two columns which would be correct for the PPO plan, but does not appear to be
correct for the traditional version of this plan.




                                                    52
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


 Question 4, Annual Deductible. Enter applicable individual and family annual deductibles for the plan as a
whole. Indicate whether they are aggregate or separate deductibles. If the plan does not require
deductibles, enter “No deductibles.”

The CHPDF does not indicate whether the deductibles are aggregate or separate deductibles.


Question 5, Out-of-Pocket Annual Maximum. Enter applicable out-of-pocket individual and family annual
maximums. If the out-of-pocket maximum excludes deductibles and/or copays, so indicate. If the plan has
combined in- and out-of-network annual out-of-pocket maximum, so indicate. If the plan has no out-of-
pocket maximum, enter “no out-of-pocket maximum.”

The CHPDF reflects: Individual a) Selected ded. Per insured & coins. % of next % $5000 or $2500 of
covered charges & copays Family b) MAX. 3 deds./cal. Yr. + coins. % of next $5000 or $2500 of
covered expenses & copays per insured. This is reflected in both the In-Network and the Out-OF-
Network columns.

This information appears to be both incomplete and misleading. There are two (2) coinsurance choices for
the Traditional Plan and three (3) coinsurance choices for the PPO Plan. The wording indicates that
the deductible will be included in the4 maximum out of pocket amount. This is in contradiction of what is
stated in the advertising brochure for The Provident Solution Plus plan. For both the Traditional and the
PPO Plan, the brochure states under “Maximum Out Of Pocket For Covered Expenses”. (not including
deductibles and copayments) There are also specific amounts shown in this brochure as maximum out of
pocket for covered expenses for both plans as follows:

                        $1,000 (80/20) and $1,250. (50/50) for Traditional Plan
                        90% Plan
                        $500 PPO, $1,500 Non-PPO
                        80% Plan
                        $1,000 PPO, $2,000 Non-PPO
                        50% Plan
                        $1,250 PPO and Non-PPO


Question 7A, Covered Providers. Indicate covered providers. Select one of the following choices only: (1)
“[Insert name of provider network]. See provider directory for complete list”, (2) “[Insert total number]
physicians and “[Insert total number] hospitals in Colorado as of [insert date]. See provider directory for
complete list”, (3) “All providers, licensed or certified to provide covered benefits.”

The CHPDF reflects under the In-Network column: “The Affordable Medical Network (see provider
dir. For complete list)” and “N/A” under the Out-Of-Network column.

This would be correct for the PPO Plan, but choice (3) “All providers, licensed or certified to provide
covered benefits” would be correct for the Traditional Plan.




                                                    53
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


Question 7B, Accessibility of Providers. Select one of the following choices only: Network plans using this
kind of pod system should answer “No”, all other network plans should answer “Yes”. If the answer
depends on the service area or some other factor, so indicate (e.g., “Yes, except in Denver and Adams
County.”) Plans that do not use networks should enter: “Not applicable. This is not a network plan.”

The CHPDF does not reflect a Question 7B.


Question 8, Routine Medical Office Visits, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins.”

This is an accurate description of the benefit, however, it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.


Question 12, Inpatient Hospital, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered subj. to ded. &
coins. and add’l $500 copay.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or Out-of-network.


Question 13, Outpatient/Ambulatory Surgery, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins. And an add’l $500 copay.”

This is an accurate description of the benefit however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.


Question 14, Laboratory & X-Ray, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.




                                                   54
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


Question 16, Ambulance, See General Directions for question 8-30.

The CHPDF reflects under both the In-Network and the Out-Of-Network columns, “Covered up to
$600, subj. to ded. & coins.”

This is an accurate description of the benefit, however the General Directions state: “Indicate significant
benefit limits. If per diem, annual, or per visit maximums apply, show them.” The $600 ambulance
benefit is $600 per occurrence and is incomplete and could be misleading without this notation.


Question 25, Home Health Care, See General Directions for questions 8-30.

The CHPDF reflects under both the In-Network and the Out-Of-Network columns, “Covered,
subj. to ded. & coins. & pol. limits.”

This is an accurate description of the benefit, however the General Directions state: “Indicate significant
benefit limits. If per diem, annual, or per visit maximums apply, show them.” The maximum 60 visits is
per calendar year and is incomplete and could be misleading without this notation.


Question 26, Hospice Care

The CHPDF reflects: “Covere d, subj. to ded. & coins., max of $91 /day, $8,281/benefit paid; max. 3
benefit periods of 6 mos. each.”

Indicating that benefit periods are 6 months is incorrect and misrepresents the benefits of the plan. The
benefit periods should be 3 mos. instead of 6 mos.


Question 30, Chiropractic Care, Briefly describe coverage, if any, and note if coverage may be obtained
either under a separate dental/vision/chiropractic care plan or as an optional benefit.

The CHPDF reflects under the Out-Of-network column: “For Trad. Plan-covered, subj. to ded. &
coins., max. 15 visits/insured/cal. yr.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the traditional Plan which is the same benefit whether in- or out-of-network.


Part C: Limitations and Exclusions

Question 33, Exclusionary Riders. Can an individual’s specific, pre-existing condition be entirely
excluded from the policy? All group carriers must enter “No”. Depending on the policy, individual
carriers should enter “Yes, unless the individual is a HIPAA-eligible individual as defined under federal
and state law” or “No”.



                                                    55
Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


The CHPDF states “Yes”.

This is incomplete as the remainder of the sentence that is required if “Yes” is used is not reflected.


Part D: Using the Plan

Questions 36-38: General Directions. If the plan has separate in- and out-of network benefits, use two
columns and label them “in-network” and “Out-of-network.” If the plan does not make such a distinction
(e.g., a traditional indemnity plan), replace two columns with a single column labeled “Using the Plan.”

The CHPDF has two columns, one “In-Network and one “Out-Of-Network.”

This is correct for the PPO Plan that is being described, however it is not in compliance with the
instructions for the Traditional plan that this form is also being used for.


Question 39, Customer Service Number: Enter your main customer service number for
members/insureds.

The CHPDF reflects the following question as No. 39: “With respect to ne twork plans, are all the
providers listed in Question 7 of this form accessible to me through my primary care physician?”

The initial Regulation 4-2-20 required this question. The amended Regulation 4-2-20 does not use this
question, making forty-two (42) questions instead of forty-three (43) in Part D of the form. Section 7,
Effective Date, of the amended regulation required the new format for plans issued as of January 1, 1999.


Question 42., To assist in filing a grievance, indicate the form number of this policy; whether it is
individual, small group or large group; and if it is a short-term policy.

The CHPDF reflects this question as Question 43 and States: PAL9971MM-CO.
This should be Question No. 42 and it does not appear to be complete as the instructions for
completing require one of the following choices to be indicated after the form number: (1)
“Individual”, (2) “Small group only”, (3) “Large group only”, or (4) “Group –all sizes.” Note: If a
carrier offers the identical policy in several markets (e.g., large group market, small group market,
etc.) then multiple responses may be included here.


Part E: Cost

The CHPDF reflects this section as: Part E: How Physicians Are Paid. This section contains
summary information about physician reimbursement. To find out how a particular provider is
paid under this plan, ask that provider. The CHPDF also uses three questions, numbered 44., 45.,
and 46., under this section.

The amended regulation requires the following format for plans issued as of January 1, 1999: Part E:
Cost with the only question No. 43, “What is the cost of this plan.” The answer should be as follows:
                                                     56
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company

“Contact your agent, this insurance company, or your employer, as appropriate, to find out the premium
for this plan. In some cases, plan costs are included with this form”. The three (3) additional questions
are now included under Part F:, Physician Payment Methods and Plan Expenditures for Health Expenses,
Administration and Profit.


Part F: Physician Payment Methods, and Plan Expenditures for Health Expenses, Administration and
Profit

The CHPDF states: “ Part F: Cost and Medical Expenditures and has Question 47, What is the
cost of this plan and Question 48, What percentage of total Colorado premiums are spent on
health care expenses as distinct from administration and profit?”

This is the format required prior to January 1, 1999. The instructions indicate that the following is
required by the amended regulation: “Any person interested in applying for coverage, or who is covered
by, or who purchases coverage under this plan may request answers to the questions listed below. The
request may be made orally or in writing to the agent marketing the plan or directly to the insurance
company and shall be answered within five (5) working days of the receipt of the request.”

•   What are the three most frequently used methods of payment for primary care physicians?
•   What are the three most frequently used methods of payment for physician specialists?
•   What other financial incentives determine physician payment?
•   What percentage of total Colorado premiums are spent on health care expenses as distinct from
    administration and profit?



A review of the Company’s Colorado Health Plan Description Form for the plan below indicates that it
does not appear to comply with the required format and appears to misrepresent the benefits of the plan in
some instances.

                                            HealthQuest Plus

Since this plan has both a traditional plan and a hospital and physician PPO, it appears that a Colorado
Health Plan Description Form should have been developed for each of these plans instead of combining
them in one form.

Appendix B

Part A:, Type of Coverage

Question 1., Type of Plan. Enter type of plan. Select one of the following choices only: (1) “Medical
expense policy,” (2) “Hospital expense policy”, (3) “Preferred provider plan,” (4) “Health maintenance
organization (HMO)”, (5) “Point of service (i.e., an HMO plan with some out-of-network benefits)”, or (6)
“Limited service licensed provider network (LSLPN) plan”. Note: Plans that have in- and out-of-network
benefits that are not offered by an HMO but which use gatekeepers should enter “Preferred Provider Plan.”



                                                    57
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


The Company has used: Traditional Plan (Any Hospital/Physician) and Hospital and Physician PPO.


Question 2, Coverage for Out-of-Network Care. Indicate if out-of-network care is covered.
Select one of the following choices only: (1) “Only for emergency care,” (2) “Only for emergency and
urgent care”. (3) “only for specified services, patient pays more for such out-of-network care” [e.g., POS
plans]; (4) “Yes, but patient pays more for out-of-network care,” [e.g., PPO’s], (5) “Yes, policy makes no
distinction between in and out-of-network care” [e.g., traditional indemnity plans]

The CHPDF reflects, “Yes, but patient pays more for out-of-network services.”

This would be correct for the Hospital & Physician PPO, but not for the Traditional Plan, which would use
“Yes, policy makes no distinction between in and out of network care.”


Part B: Summary of Benefits

Questions 4-31: General Directions.

• If the plan does not make such a distinction (e.g., traditional indemnity plan) replace two columns with
a single column labeled “Benefit Levels.”

The CHPDF reflects two columns which would be correct for the PPO plan, but does not appear to be
correct for the traditional version of this plan.


Question 4, Annual Deductible. Enter applicable individual and family annual deductibles for the plan as a
whole. Indicate whether they are aggregate or separate deductibles. If the plan does not require
deductibles, enter “No deductibles.”

The CHPDF does not indicate whether the deductibles are aggregate or separate deductibles.


Question 5, Out-of-Pocket Annual Maximum. Enter applicable out-of-pocket individual and family annual
maximums. If the out-of-pocket maximum excludes deductibles and/or copays, so indicate. If the plan has
combined in- and out-of-network annual out-of-pocket maximum, so indicate. If the plan has no out-of-
pocket maximum, enter “no out-of-pocket maximum.”

The CHPDF reflects: Individual a) Selected ded. Per insured & coins. % of next % $5000 or $2500 of
covered charges & copays Family b) MAX. 3 deds./cal. Yr. + coins. % of next $5000 or $2500 of
covered expenses & copays per insured. This is reflected in both the In-Network and the Out-Of-
Network columns.

This information appears to be both incomplete and misleading. There are two (2) coinsurance choices for
the Traditional Plan and three (3) coinsurance choices for the PPO Plan. The wording indicates that the
deductible will be included in the4 maximum out of pocket amount. This is in contradiction of what is


                                                    58
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


stated in the advertising brochure for The Provident HealthQuest Plus plan. For both the Traditional and
the PPO Plan, the brochure states under “Maximum Out Of Pocket For Covered Expenses”. (not including
deductibles and copayments) There are also specific amounts shown in this brochure as maximum out of
pocket for covered expenses for both plans as follows:

                        $1,000 (80/20) and $1,250. (50/50) for Traditional Plan
                        90% Plan
                        $500 PPO, $1,500 Non-PPO
                        80% Plan
                        $1,000 PPO, $2,000 Non-PPO
                        50% Plan
                        $1,250 PPO and Non-PPO


Question 7A, Covered Providers. Indicate covered providers. Select one of the following choices only: (1)
“[Insert name of provider network]. See provider directory for complete list of current providers”, (2)
[Insert total number] physicians and [Insert total number] hospitals in Colorado as of [insert date] See
provider directory for complete list’, or (3) “All providers licensed or certified to provide covered
benefits.”

The CHPDF reflects under the In-Network column: Sloans Lake Managed Care (see provider dir.
for complete list)” and “N/A” under the Out-Of-Network column.

This would be correct for the PPO Plan, but choice (3) “All providers, licensed or certified to provide
covered benefits” would be correct for the Traditional Plan.


Question 7B, Accessibility of Providers. Select one of the following choices only: Network plans using this
kind of pod system should answer “No”, all other network plans should answer “Yes”. If the answer
depends on the service area or some other factor, so indicate (e.g., “Yes, except in Denver and Adams
County.”) Plans that do not use networks should enter: “Not applicable. This is not a network plan.”

The CHPDF does not reflect a Question 7B.


Question 8, Routine Medical Office Visits, See General Directions for questions 8-30.

The CHPDF reflects unde r the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins.”

This is an accurate description of the benefit, however, it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.




                                                    59
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


Question 12, Inpatient Hospital, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered subj. to ded. &
coins. and add’l $500 copay.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or Out-of-network.


Question 13, Outpatient/Ambulatory Surgery, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins. And an add’l $500 copay.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.

The CHPDF reflects under the Out-Of-Network column: “Covered, subj. to ded. & coins., and for
Plans B & C an add’l $500 copay.”

The B Plan should not be shown here since it is a Hospital Only Plan.


Question 14, Laboratory & X-Ray, See General Directions for questions 8-30.

The CHPDF reflects under the Out-Of-Network column: “For Trad. Plan-covered, subj. to ded. &
coins.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the Traditional Plan which is the same benefit whether in- or out-of-network.


Question 16, Ambulance, See General Directions for question 8-30.

The CHPDF reflects under both the In-Network and the Out-Of-Network columns, “Covered up to
$1,200., subj. to ded. & coins.”

This is an accurate description of the benefit, however the General Directions state: “Indicate significant
benefit limits. If per diem, annual, or per visit maximums apply, show them.” The $1,200. ambulance
benefit is $1,200. per occurrence and is incomplete and could be misleading without this notation.


Question 25, Home Health Care, See General Directions for questions 8-30.

The CHPDF reflects under both the In-Network and the Out-Of-Network columns, “Covered, subj.
to ded. & coins. & pol. limits.”


                                                    60
Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


This is an accurate description of the benefit, however the General Directions state: “Indicate significant
benefit limits. If per diem, annual, or per visit maximums apply, show them.” The maximum 60 visits is
per calendar year and is incomplete and could be misleading without this notation.


Question 26, Hospice Care

The CHPDF reflects: Covered, subj. to ded. & coins., max of $91 /day, $8,281/benefit paid; max. 3
benefit periods of 6 mos. each.

Indicating that benefit periods are 6 months is incorrect and misrepresents the benefits of the plan. The
benefit periods should be 3 mos. instead of 6 mos.


Question 30, Chiropractic Care, Briefly describe coverage, if any, and note if coverage may be obtained
either under a separate dental/vision/chiropractic care plan or as an optional benefit.

The CHPDF reflects under the Out-Of-network column: “For Trad. Plan-covered, subj. to ded. &
coins., max. 15 visits/insured/cal. yr.”

This is an accurate description of the benefit, however it would not apply only to the Out-Of-Network
column for the traditional Plan which is the same benefit whether in- or out-of-network.


Part C: Limitations and Exclusions

Question 33, Exclusionary Riders. Can an individua l’s specific, pre-existing condition be entirely
excluded from the policy? All group carriers must enter “No”. Depending on the policy, individual
carriers should enter “Yes, unless the individual is a HIPAA-eligible individual as defined under federal
and state law” or “No”.

The CHPDF states “Yes”.

This is incomplete as the remainder of the sentence that is required if “Yes” is used is not reflected.


Part D: Using the Plan

Questions 36-38: General Directions. If the plan has separate in- and out-of network benefits, use two
columns and label them “in-network” and “Out-of-network.” If the plan does not make such a distinction
(e.g., a traditional indemnity plan), replace two columns with a single column labeled “Using the Plan.”

The CHPDF has two columns, one “In-Network and one Out-Of-Network.”

This is correct for the PPO Plan that is being described, however it is not in compliance with the
instructions for the Traditional plan that this form is also being used for.


                                                     61
Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


Question 39, Customer Service Number: Enter your main customer service number for
members/insureds.

The CHPDF reflects the following question as No. 39: With respect to network plans, are all the
providers listed in Question 7 of this form accessible to me through my primary care physician?

The initial Regulation 4-2-20 required this question. The amended Regulation 4-2-20 does not use this
question, making forty-two (42) questions instead of forty-three (43) in Part D of the form. Section 7,
Effective Date, of the amended regulation required the new format for plans issued as of January 1, 1999.


Question 42., To assist in filing a grievance, indicate the form number of this policy; whether it is
individual, small group or large group; and if it is a short-term policy.

The CHPDF reflects this question as Question 43 and States: PAL9971MM-CO.
This should be Question No. 42 and it does not appear to be complete as the instructions for
completing require one of the following choices to be indicated after the form number: (1)
Individual, (2) Small group only, (3) Large group only, or (4) Group –all sizes. Note: If a carrier
offers the identical policy in several markets (e.g., large group market, small group market, etc.)
then multiple responses may be included here.


Part E: Cost

The CHPDF reflects this section as: Part E: How Physicians Are Paid. This section contains
summary information about physician reimbursement. To find out how a particular provider is
paid under this plan, ask that provider. The CHPDF also uses three questions, numbered 44., 45.,
and 46., under this section.

The amended regulation requires the following format for plans issued as of January 1, 1999: Part E:
Cost with the only question No. 43, “What is the cost of this plan.” The answer should be as follows:
“Contact your agent, this insurance company, or your employer, as appropriate, to find out the premium
for this plan. In some cases, plan costs are included with this form”. The three (3) additional questions
are now included under Part F:, Physician Payment Methods and Plan Expenditures for Health Expenses,
Administration and Profit.


Part F: Physician Payment Methods, and Plan Expenditures for Health Expenses, Administration and
Profit

The CHPDF states: Part F: Cost and Medical Ex penditures and has Question 47, What is the

cost of this plan and Question 48, What percentage of total Colorado premiums are spent on health
care expenses as distinct from administration and profit.




                                                     62
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


This is the format required prior to January 1, 1999. The instructions indicate that the following is
required by the amended regulation: “Any person interested in applying for coverage, or who is covered
by, or who purchases coverage under this plan may request answers to the questions listed below. The
request may be made orally or in writing to the agent marketing the plan or directly to the insurance
company and shall be answered within five (5) working days of the receipt of the request.”

• What are the three most frequently used methods of payment for primary care physicians?
• What are the three most frequently used methods of payment for physician specialists?
• What other financial incentives determine physician payment?
• What percentage of total Colorado premiums are spent on health care expenses as distinct from
   administration and profit?



A review of the Company’s Colorado Health Plan Description Form for the plan indicated below, indicates
that it does not appear to comply with the required format and appears to misrepresent the benefits of the
plan in some instances.

                                               HealthAxis

As this plan has both a traditional plan and a hospital & physician PPO, it appears that a Colorado Health
Plan Description Form should have been developed for each of these plans instead of combining them in
one form.

Appendix B

Part A:, Type of Coverage

Question 1., Type of Plan. Enter type of plan. Select one of the following choices only: (1) “Medical
expense policy,” (2) “Hospital expense policy”, (3) “Preferred provider plan,” (4) “Health maintenance
organization (HMO)”, (5) “Point of service (i.e., an HMO plan with some out-of-network benefits)”, or
(6) “Limited service licensed provider network (LSLPN) plan”. Note: Plans that have in- and out-of-
network benefits that are not offered by an HMO but which use gatekeepers should enter “Preferred
Provider Plan.”

The Company has used: Traditional Indemnity Plans and Preferred Provider (PPO) Hospital and
Physician Plans.


Question 2, Coverage for Out-of-Network Care. Indicate if out-of network care is covered. Select one of
the following choices only: (1) “Only for emergency care,” (2) “Only for emergency and urgent care”.
(3) “only for specified services; patient pays more for such out-of-network care” [e.g., POS plans]; (4)
“Yes, but patient pays more for out-of-network care,” [e.g., PPO’s], (5) “Yes; policy makes no
distinction between in and out-of-network care” [e.g., traditional indemnity plans].

The CHPDF reflects, “Yes, but patient pays more for out-of-network services.”


                                                    63
Market Conduct Examination
Marketing and Sales                      Provident American Life & Health Insurance Company


This would be correct for the Hospital & Physician PPO, but not for the Traditional Plan, which would
use “Yes, policy makes no distinction between in and out of network care.”


Part B: Summary of Benefits

Questions 4-31: General Directions.

•   If the plan does not make such a distinction (e.g., traditional indemnity plan) replace two columns
    with a single column labeled “Benefit Levels.”

The CHPDF reflects two columns which would be correct for the PPO plan, but does not appear to
be correct for the traditional version of this plan.


Question 4, Annual Deductible. Enter applicable individual and family annual deductibles for the plan as
a whole. Indicate whether they are aggregate or separate deductibles. If the plan does not require
deductibles, enter “No deductibles.”

The CHPDF does not indicate whether the deductibles are aggregate or separate deductibles.


Question 5, Out-of-Pocket Annual Maximum. Enter applicable out-of-pocket individual and family
annual maximums. If the out-of-pocket maximum excludes deductibles and/or copays, so indicate. If the
plan has combined in- and out-of-network annual out-of-pocket maximum, so indicate. If the plan has no
out-of-pocket maximum, enter “No out-of-pocket maximum.”

The CHPDF reflects: Individual a) Selected ded. Per insured & coins. % of next $5000 or $2500 of
covered charges & copays Family b) MAX. 3 deds./cal. Yr. + coins. % of next $5000 or $2500 of
covered expenses & copays per insured. This is reflected in both the In-Network and the Out-Of-
Network columns.

This information appears to be both incomplete and misleading. There are three (3) coinsurance choices
for the Traditional Plan and three (3) coinsurance choices for the PPO Plan. There are four (4) different
deductibles for the Traditional Plan and four (4) different deductibles for the PPO Plan. The wording
indicates that the deductible will be included in the maximum out of pocket amount. This is in
contradiction to what is stated in the advertising material on the Internet for The HealthAxis plan. For
both the Traditional and the PPO Plan, the advertising material states under “Maximum Out Of Pocket
For Covered Expenses”: (not including deductibles and copayments) There are also specific amounts
shown in this advertising material as maximum out of pocket for covered expenses for both plans as
follows:

                $1,250 for both the Traditional and the PPO-Bronze Plan

                $1,000 for both the Traditional and the PPO(In Network)-Silver Plan and $2,000 for Out
                of Network


                                                    64
Market Conduct Examination
Marketing and Sales                     Provident American Life & Health Insurance Company


                $1,000 for both the Traditional and the PPO (In Network)-Gold Plan
                and $2,000 for Out of Network

                $250 for both the Traditional and the PPO (In Network)-Platinum Plan
                and $750 for Out of Network


Question 7A, Covered Providers. Indicate covered providers. Select one of the followin g choices only:

(1) “[Insert name of provider network]. See provider directory for complete list of current providers”,
(2) “[Insert total number] physicians and [Insert total number] hospitals in Colorado as of [insert date].
See provider directory for complete list”, or (3) “All providers, licensed or certified to provide covered
benefits.”

The CHPDF reflects under the In-Network column: “The Affordable Medical Network (see
provider dir. for complete list)” and “N/A” under the Out-Of-Network column.”

This would be correct for the PPO Plan, but choice (3) “All providers, licensed or certified to provide
covered benefits” would be correct for the Traditional Plan.


Question 7B, Accessibility of Providers. Select one of the following choices only: Network plans using
this kind of pod system should answer “No”; all other network plans should answer “Yes”. If the answer
depends on the service area or some other factor, so indicate (e.g., “Yes, except in Denver and Adams
County.”) Plans that do not use networks should enter: “Not applicable. This is not a network plan.”

The CHPDF does not reflect a Question 7B.


Question 8, Routine Medical Office Visits, See General Directions for questions 8-30.

The CHPDF reflects under the In-Network column: “For Traditional Indemnity Plans: physician
office visit charge copay $20 (Platinum Plan); (Gold Plan). Silver & Bronze Plans – no copay, subj.
to ded. & coins. For PPO Plans: physician office visit charge copay: $15 (Platinum & Gold), $25
(Silver & Bronze)”. The CHPDF reflects under the Out-Of-Network column: “For Traditional
Indemnity Plans: physician office visit charge copay $20 (Platinum Plan); $25 (Gold Plan). Silver
& Bronze Plans – no copay, subj. to ded. & coins. For PPO Plans: physic ian office visit charge
copay; $40 (Platinum & Gold), $60 (Silver & Bronze)

The schedule of benefits, PPO, Out of Network , Page E2-Silver Plan and Page E3-Bronze Plan indicate a
copay of $50 instead of $60.




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Market Conduct Examination
Marketing and Sales                     Provident American Life & Health Insurance Company


Question 11, Prescription Drugs. Indicate the amount of coverage for prescription drugs. Also indicate
whether the level of coverage is based on generic versus brand name drugs, use of a prescription drug
card, and/or other requirements. Note if separate copays and deductibles apply. Examples: “Separate
$100 deductible. $8 copay per prescription.” Or “80% generic; 50% brand name drugs.” Or “90% with
prescription drug card. Maximum benefit of $200/month.” Or “$5 per prescription for drugs on our
approved list only.” If a formulary is used, add this statement: “For drugs on our approved list, contact
[name], at [telephone number].”

The CHPDF does not appear to be complete with the description of benefits as the advertising
material printed off the Internet indicates different copays and perce ntages that are not mentioned
in the CHPDF. The following is an example for one of the four different plans.

        Bronze Plans: IND Brand Formulary, Copay of $20 and the plan pays 80% after Copay.
        PPO (In or Out of Network)Brand Formulary , Copay of $20 and the plan pays 80%
        after
        copay
        PPO (In or Out of Network) Brand Non-Formulary, Copay of $30 and the plan pays 70%
        after copay


Question 15, Emergency Care,. See General Directions for Questions 8-30.

The CHPDF reflects a heading of “X-Rays & Diagnostic Tests”.


Question 16, Ambulance, See General Directions for questions 8-30.

The CHPDF reflects a heading of “Emergency Care”.


Question 17, Urgent, Non-Routine, After Hours Care, See General Directions for questions 8-30.

The CHPDF reflects a heading of “Ambulance”.


Question 18, Biologically Based Mental Illness Care.

The CHPDF reflects a heading of “Urgent, Non-Routine, After Hours Care”.
The CHPDF reflects the following under both the In and Out of Network columns: “Inpatient:
Indemnity Silver & Bronze Plans: same, plus add’l. $400 copay.”

The benefit for Biologically-Based Mental Illness Care appears to be described under Hospital Co-
Payment on the Schedule of Benefit pages.




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Market Conduct Examination
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Question 20., Alcohol & Substance Abuse, See General Directions for Questions 8-30. If coverage varies
depending on whether the care is in- or out-patient, so indicate. Also indicate if coverage varies
depending on whether care is for alcohol versus other substance abuse.

The CHPDF reflects a heading of “Other Mental Health Care” and describes the benefits and
copays as the same as shown for Biologically-Based Mental Illness Care in Question 18.


Question 21., Physical, Occupational and Speech Therapy. If benefit levels vary, so indicate. Example:
“Physical therapy: 50% maximum for up to six visits per event; Occu0pational: 80%, Speech: not
covered.” If coverage varies depending on whether in or out-patient, so indicate.

The CHPDF reflects a heading of Alcohol & Substance Abuse.


Question 22., Durable Medical Equipment.

The CHPDF reflects a heading of Physical, Occupational, & Speech Therapy.


Question 23., Oxygen.

The CHPDF reflects a heading of Durable Medical Equipment.


Question 24., Organ Transplants.

The CHPDF reflects a heading of Oxygen.


Question 25., Home Health Care.

The CHPDF reflects a heading of Organ Transplants.


Question 26., Hospice Care., See General Directions for Questions 8-30.

The CHPDF reflects a heading of Home Health Care. Both the In and Out of Network columns
state: “Covere d, subj. to ded, & coins. & max. of 60 visits.

This does not appear to be complete as the instructions state: “If per diem, annual, or per visit maximums
apply, show them.” The policy provides for 60 visits each calendar year. [Emphasis added.]




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Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


Question 27., Skilled Nursing Facility Care

The CHPDF reflects a heading of Hospice Care. Both the In and Out of Network columns state:
“Covered, subj. to ded. & coins., max of $91/day, $8,281/benefit paid; max. 3 benefit periods of 6
mos. each.”

The benefit periods should be 3 months each instead of 6 months each.


Question 28., Dental Care.

The CHPDF reflects a heading of Skilled Nursing Facility Care.


Question 29., Vision Care.

The CHPDF reflects a heading of Dental Care.


Question 30., Chiropractic Care.

The CHPDF reflects a heading of Vision Care.


Question 31., Significant Additional Covered Services (list up to 5)

The CHPDF reflects a heading of Chiropractic Care and states in both the In and Out of Network:
“For all Plans: Covered, subj. to Routine Medical Office visits copays (#8 above). Benefit
Maximum: 15 visit/insured/calendar year.”

The copays appear to be incorrect as stated for Question 8.


Part C: Limitations and Exclusions

Question 33, Exclusionary Riders., Can an individual’s specific, pre-existing condition be entirely
excluded from the policy? All group carriers must enter “No”. Depending on the policy, individual
carriers should enter “Yes, unless the individual is a HIPAA-eligible individual as defined under federal
and state law” or “No”.

The CHPDF states “Yes”.

This is incomplete, as the remainder of the sentence that is required if “Yes” is used is not reflected.




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Market Conduct Examination
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Part D: Using the Plan

Questions 36-38: General Directions. If the plan has separate in- and out-of-network benefits, use two
columns and label them “in-network” and “Out-of-network.” If the plan does not make such a distinction
(e.g., a traditional indemnity plan), replace two columns with a single column labeled “Using
the Plan.”

The CHPDF has two columns, one “In-Network” and one “Out-Of-Network.”

This is correct for the PPO Plan that is being described, however it is not in compliance with the
instructions for the Traditional plan that this form is also being used for.


Question 39, Customer Service Number: Enter your main customer service number for
members/insureds.

The CHPDF reflects the following question as No. 40: With respect to network plans, are all the
providers listed in Question 7 of this form accessible to me through my primary care physician?

The initial Regulation 4-2-20 required this question. The amended Regulation 4-2-20 does not use this
question, making forty-two (42) questions instead of forty-three (43) in Part D of the form. Section 7,
Effective Date, of the amended regulation requires the new format for plans issued as of January 1, 1999.


Question 42., To assist in filing a grievance, indicate the form number of this policy; whether it is
individual, small group or large group; and if it is a short-term policy.

The CHPDF reflects this question as Question 44 and states: PAL9971MM-CO.

This should be Question No. 42 and it does not appear to be complete as the instructions for completing
require one of the following choices to be indicated after the form number: (1) Individual, (2) Small
group only, (3) Large group only, or (4) Group—all sizes. Note: If a carrier offers the identical policy in
several markets (e.g., large group market, small group market, etc.) then multiple responses may be
included here


Part E: Cost

The CHPDF reflects this section as: Part E: How Physicians Are Paid. This section contains
summary information about physician reimbursement. To find out how a particular provider is
paid under this plan, ask that provider. The CHPDF also uses three questions, numbered 45., 46.,
and 47., under this section.




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Market Conduct Examination
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The amended regulation requires the following format for plans issued as of January 1, 1999: Part E:
Cost with the only question No. 43, “What is the cost of this plan.” The answer should be as follows:
“Contact your agent, this insurance company, or your employer, as appropriate, to find out the premium
for this plan. In some cases, plan costs are included with this form.” The three (3) additional questions
are now included under Part F:, Physician Payment Methods and Plan Expenditures for Health Expenses,
Administration and Profit.


Part F: Physician Payment Methods, and Plan Expenditures for Health Expenses, Administration and
Profit.

The CHPDF states: Part F: Cost and Medical Ex penditures and has Question 48, What is the cost
of this plan and Question 49, What percentage of total Colorado premiums are spent on health care
expenses as distinct from administration and profit.

This is the format required prior to January 1, 1999. The instructions indicate that the following is
required by the amended regulation: “Any person interested in applying for coverage, or who is covered
by, or who purchases coverage under this plan may request answers to the questions listed below. The
request may be made orally or in writing to the agent marketing the plan or directly to the insurance
company and shall be answered within five (5) working days of the receipt of the request.”

•   What are the three most frequently used methods of payment for primary care physicians?
•   What are the three most frequently used methods of payment for physician specialists?
•   What other financial incentives determine physician payment?
•   What percentage of total Colorado premiums are spent on health care expenses as distinct from
    administration and profit?



Recommendation No. 10:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-3-1104, Section 10-16-108.5 C.R.S. and Amended Regulation 4-2-
20. In the event the Company is unable to show such proof, it should provide evidence to the
Division of Insurance that it has established procedures to ensure that all its Comprehensive Health Plan
Description Forms are correctly formatted and reflect complete and correct information.




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 Issue B4: Failure to use sufficiently clear content in internet advertising to avoid a tendency to be
           misleading.

Section 10-3-1104, C.R.S., Unfair methods of competition and unfair or deceptive acts or practic es,
states:

(1) The following are defined as unfair methods of competition and unfair or deceptive acts or practices
    in the business of insurance:

     (b) False information and advertising generally: Making, publishing, disseminating, circulating, or
         placing before the public, or causing, directly or indirectly, to be made, published, disseminated,
         circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the
         form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station, or in
         any other way, an advertisement, announcement, or statement containing any assertion,
         representation, or statement with respect to the business of insurance, or with respect to any
         person in the conduct of his insurance business which is untrue, deceptive, or misleading;

Regulation 4-2-3, Sickness and Accident Insurance advertising, promulgated under the authority of
Section 10-1-109, C.R.S., states:

         III.    Rules

E.       Format and Content of Advertisements.

         1. The format and content of an advertisement of an accident or sickness insurance policy shall
            be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead
            or deceive. Whether an advertisement has a capacity or tendency to mislead or deceive shall
            be determined by the Commissioner of Insurance from the overall impression that the
            advertisement may be reasonably expected to create upon a person of average education or
            intelligence, within the segment of the public to which it is directed.

A review of the advertising material that was on the internet for the HealthAxis plan during 1999 revealed
the following:

Under the Heading: What’s Covered Under Provident Major Medical Plans -Page 5

Child Health Supervision-Not subject to deductible and coinsurance.
This is in conflict with what is correctly stated on Page 30 of Policy PAL997IMM-CO that states: “This
benefit is not subject to the co-payment, deductible and coinsurance requirements.” [Emphasis added.]

Under the Heading: What’s Covered Under Provident Major Medical Plans -Page 6

Homeopathic Benefit-Homeopathic treatment rendered by a licensed homeopathist is covered to a
maximum of $50 per visit (after the deductible), and a maximum of $500 per calendar year. Not subject
to copay or coinsurance. (Supplies used by the homeopathic provider are not covered.) This is in conflict
with the coverage provided as stated on Page 29 of Policy PAL997IMM-CO that states: “a



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Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


maximum of $300 per calendar year per covered person”. The advertising is incomplete in not stating
that this amount applies per covered person and the maximum amount payable per calendar year is
incorrect.

Heading: What’s Covered Under Provident Major Medical Plans -Page 5

Hospice Care -Benefits are payable for a benefit period of six months. Benefits will continue for an
additional benefit period if the terminally ill insured lives beyond the prognosis for life expectancy. All
benefits are subject to a maximum of $91 per day, and a maximum of $8,281 per benefit period, and a
maximum of three benefit periods. Subject to deductible and coinsurance. If an insured is receiving
hospice benefits, bereavement counseling services for an immediate family member are covered.
Bereavement benefits are payable up to a maximum of $1,077 and end three months after the insured’s
death. Bereavement counseling services are not subject to deductible and coinsurance.

The benefits described in this section of advertising are not in compliance with benefits required by
Colorado insurance law in the following ways.

1. Benefits are to be provided for not less than three (3) benefit periods to any individual if needed. As a
   benefit period for hospice care services is defined in Regulation 4-2-8 as a period of three (3) months,
   benefits are payable for up to nine (9) months instead of twelve (12) months.

2. As any policy offered shall provide a benefit of no less than $91 per day for hospice benefits, the
   maximum of $8,281 for a benefit period of six (6) months could not be correct.

3. Bereavement benefits cannot be limited to an immediate family member. The definition of
   patient/family in Regulation 4-2-8 is one consisting of those individuals who are closely linked with
   the patient, including the immediate family, the primary care giver and individuals with significant
   personal ties. The definition of “immediate family” in the policy (page 13) is “You or your spouse,
   the children, brothers, sisters, and parents or step parents of either you or your spouse; and the
   spouses of the children, brothers, and sisters of either you or your spouse”.

Under the Heading: What’s Covered Under Provident Major Medical Plans -Page 6

Prostate Cancer Screening (PSA) Tests-(for males age 50 and over) No physician office visit or other
copays apply. Subject to deductible and coinsurance.

The benefits described in this section of advertising do not comply with Colorado insurance law in the
following way:

        This benefit shall not be subject to policy deductibles.




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Market Conduct Examination
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Under the Heading: What’s Covered Under Provident Major Medical Plans -Page 7

Routine Mammograms -A base line mammogram (low dose mammography) for women at least age
35. Every two years for women ages 40-49. Every year for women age 50 and older. Not subject to
deductible.

The benefits described in this section of advertising do not comply with Colorado insurance law in the
following ways:

 1. The description is incomplete in that it does not mention the screening available on an annual or
    contract year for women ages 40-49 with risk factors to breast cancer as determined by her
    physician.

Under the Heading: What’s Covered Under Provident Major Medical Plans -Page 7

Routine Nursery Care and Well Baby Care -Coverage includes room, board, or miscellaneous
institutional care or care rendered by a doctor associated with the hospital confinement. Coverage also
includes payment for charges for doctors, medical examinations, special studies, x-rays and laboratory
tests, immunizations, supplies for preventive health care and for circumcision and routine nursery care
given to any infant from the moment of birth until discharged from the hospital.

This description of benefits in the advertising material is not in compliance with Colorado insurance law
in the following way:

1. The description indicates there is no well baby care coverage for an infant after being discharged from
   the hospital. Colorado insurance law requires, and the policy provides for, 1 newborn home visit
   during the first week of life if the newborn is released from the hospital less than 48 hours after
   delivery.

Under the Heading: C. Exclusions and Limitations Applicable to Major Medical Expense Benefits -
Page 11

The following exclusions are applicable to all health insurance benefits. Except as specifically provided
for in the policy, the policy does not cover:

Heading: C. Exclusions and Limitations Applicable to Major Medical Expense Benefits-Page 11

•   Expenses resulting from suicide or attempted suicide, whether sane or insane;

The prevailing view in Colorado courts is that broad exclusions for self-inflicted injuries or suicide
attempts may not be applied in instances in which the insured or member was “insane” at the time of
injury in sickness and accident policies written in Colorado. The above exclusions do not appear to be an
accurate representation of the plan’s coverage and have the capacity or tendency to be misleading to the
insurance buying public.




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Market Conduct Examination
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Under the Heading: What’s Not Covered Under Provident Major Medical Plans -Page 2 of 5

B. Exclusions and Limitations Applicable to Dental Care Expense Benefits

Benefits are not paid for:

•   General anesthesia, unless administered in conjunction with bony impaction, prescribed drugs,
    premedication or analgesia;

Colorado insurance law requires coverage to be provided for general anesthesia when rendered in a
hospital, outpatient surgical facility or other licensed facility for dependent children receiving dental care.
This is a mandatory coverage effective for both new and renewal policies as of September 1, 1998. The
above exclusion is more limiting than allowed by law and as such would have a tendency to be
misleading in that it misrepresents the benefits to be covered.

Under the Heading: What’s Not Covered Under Provident Major Medical Plans, Page 4 of 5

C. Exclusions and Limitations Applicable to Major Medical Expense Benefits

•   Services or supplies for personal comfort or convenience, including custodial care or homemaker
    services;

Colorado insurance law requires homemaker services under the hospice benefit. This exclusion is more
limiting than allowed by law and would have a tendency to be misleading in that it misrepresents the
benefits that would have to be covered under the hospice care benefit included in the plan.

Under the Heading: Some Things You Need to Know About Provident Major Medical Plans, Page 1
                   of 3



Recommendation No. 11:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-3-1104, C.R.S. and Regulation 4-2-3. In the event the Company is
unable to show such proof, it should provide evidence to the Division of Insurance that it has established
procedures to ensure that advertising material placed before the public is sufficiently accurate, complete
and clear to avoid any tendency to be misleading or deceptive.




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Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


 Issue B5: Failure to use sufficiently clear content in marketing brochures to avoid a tendency to
           mislead.

Regulation 4-2-3, Sickness and Accident Insurance Advertising, promulgated under the authority of
10-1-109, C.R.S.

Section II, Purpose

The purpose of this regulation is to assure truthful and adequate disclosure of all material and relevant
information in the advertising of accident and sickness insurance. This purpose is intended to be
accomplished by the establishment of, and adherence to certain minimum standards and guidelines of
conduct in the advertising of accident and sickness insurance in a manner which prevents unfair
competition among insurers and is conductive to the accurate presentation and description to the
insurance buying public of a policy of such insurance offered through various advertising media.

Section III, Rules

E. Format and Content of Advertisements.

      1. The format and content of an advertisement of an accident or sic kness insurance policy shall be
         sufficiently complete and clear to avoid deception of the capacity or tendency to mislead or
         deceive. Whether an advertisement has a capacity or tendency to mislead or deceive shall be
         determined by the Commissioner of Insurance from the overall impression that the
         advertisement may be reasonably expected to create upon a person of average education or
         intelligence, within the segment of the public to which it is directed.

      2. Advertisements shall be truthful and not misle ading in fact or in implication.
         Words or phrases, the meaning of which is clear only by implication or by
         familiarity with insurance terminology, shall be used.

Section 10-16-104, C.R.S., Mandatory coverage provisions, states:

         (12) Hospitalization and general anesthesia for dental procedures for dependent
              children.

         (a) All individual and all group sickness and accident insurance policies that are
             delivered or issued for delivery within the state by an entity subject to the
             provisions of part 2 of this article and all individual and group health care service
             or indemnity contracts issued by an entity subject to the provisions of part 3 or 4
             of this article except supplemental policies that cover a specific disease or other
             limited benefit shall provide coverages for general anesthesia, when rendered in a
             hospital, outpatient surgical facility, or other facility licensed pursuant to section
             25-3-101, C.R.S., and for associated hospital or facility charges for dental care
             provided to a dependent child, as dependent is defined in section 10-16-102 (14),
             of a covered person. Such dependent child shall, in the treating dentist’s opinion,
             satisfy one or more of the following criteria:



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Market Conduct Examination
Marketing and Sales                       Provident American Life & Health Insurance Company


          (I)     The child has a physical, mental, or medically compromisin g condition; or

         (II)     The child has dental needs for which local anesthesia is ineffective because
                  of acute infection, anatomic variations, or allergy; or

         (III)    The child is an extremely uncooperative, unmanageable, anxious, or
                  uncommunicative child or adolescent with dental needs deemed sufficiently
                  important that dental care cannot be deferred; or

         (IV)      The child has sustained extensive orofacial and dental trauma

          (c)     The provisions of this subsection (12) shall not apply to treatment rendered
                  for temporal mandibular joint (TMJ) disorders.

Regulation 4-2-8, Required Health Insurance Benefits for Home Health Services and Hospice
Care, promulgated under the authority of 10-1-109 and 10-16-104(8)(d), C.R.S., states:

(II)    Basis and purpose

The purpose of this regulation is to establish requirements for standard policy provisions
which state clearly and completely the criteria for and extent of coverage for home health
services and hospice care and to facilitate prompt and informed decisions regarding patient
placement and discharge.

(V)    Requirements for hospice care

(B)    General Provisions Pertaining to Hospice Care

        2. The policy offering shall provide that benefits are allowed only for individuals
        who are terminally ill and have a life expectancy of six months or less, except that
        benefits may exceed six months should the patient continue to live beyond the
        prognosis for life expectancy, in which case the benefits shall continue at the same
        rate for one additional benefit period. No insurer shall be required to provide
        coverage for more than three benefit periods to any individual.

(C)     Benefits for Hospice Care Services

        2. The policy or certificate may contain a dollar limitation on hospice benefits. Services
        available to the insured will be negotiated at a hospice per diem rate with the hospice provider.
        Any policy offered shall provide a benefit of no less than $91 per day for any combination of the
        following services which are planned, implemented and evaluated by the interdisciplinary team:

                 The total benefit for these services shall not be less than the per diem benefit multiplied
                 by ninety-one (91) days.




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Market Conduct Examination
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Section 10-16-201.5, C.R.S., Renewability of health benefit plans – modification of health benefit plans,
states:

   (1) A carrier providing coverage under a health benefit plan shall not refuse to renew such plan
       except for the following reasons:

        (a) Nonpayment of the required premium;

        (b) Fraud or intentional misrepresentation of material fact on the part of the plan sponsor with
        respect to group health benefit plan coverage and the individual with respect to individual
        coverage;

        (d) The carrier elects to discontinue offering and nonrenew all of its individual, small group, or
        large group health benefit plans delivered or issued for delivery in this state. In such case, the
        carrier shall provide notice of the decision not to renew coverage to all policyholders and covered
        persons and to the insurance commissioner in each state in which an affected individual is known
        to reside at least one hundred eighty days prior to the nonrenewal of the health benefit plan by the
        carrier. The carrier shall also discontinue and nonrenew all of its individual or small or large
        group health benefit plans in Colorado. Notice to the insurance commissioner under this
        paragraph (d) shall be provided at least three working days prior to the notice to the affected
        individuals.

     (4) An individual health benefit plan must clearly disclose in its contracts and marketing materials
        the conditions of renewability which conform with the requirements of this section.


                        Exclusion: Dental treatment or care – Page 7

The requirement to provide hospitalization and general anesthesia coverage for dental procedures for
dependent children was effective for both new and renewal policies as of September 1, 1998. The
Company has indicated in its advertising brochures, captioned above, that Dental treatment or care is
excluded. Without an exception for dependent children and no provision for hospitalization and general
anesthesia for dental procedures reflected elsewhere, this general exclusion is more limiting than allowed
by Colorado insurance law.

                                          Hospice Care – Page 4

The advertising brochures state that benefits are payable for a benefit period of six months. All benefits
are subject to a maximum of $91 per day and a maximum of $8,281 per benefit period with a maximum
of three benefit periods. This wording could be confusing since the brochures state that benefits are
payable for a benefit period of six months and all benefits are subject to a maximum of $91 per day and a
maximum of $8,281 per benefit period. The $8,281 per benefit period would apply to a three month
benefit period not the six month benefit period.




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Market Conduct Examination
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                                  Renewability of Health Benefit Plans

The advertising material does not include the renewability wording required by Colorado law that states
that an individual health benefit plan must clearly disclose in its contracts and marketing materials the
conditions of renewability…



Recommendation No. 12:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Sections 10-16-104, 10-16-201, 10-16-104, 10-16-201.5,10-16-202, C.R.S. and
Regulations 4-2-3 and 4-2-8. In the event the Company is unable to show such proof, it should provide
evidence to the Division of Insurance that it has established procedures to ensure that advertising and
solicitation material is not deceptive with the capacity to mislead.




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Market Conduct Examination
Complaints                   Provident American Life & Health Insurance Company




                             COMPLAINT
                              FINDINGS




                                     79
Market Conduct Examination
Complaints                               Provident American Life & Health Insurance Company


 Issue C1: Failure to maintain a complete record of all consumer complaints received.

Section 10-3-1104(1)(i), C.R.S., Unfair methods of competition and unfair or deceptive acts or practices
in the business of insurance:, states:

        Failure to maintain complaint handling procedures: Failing of any insurer to maintain a complete
        record of all the complaints which it has received since the date of its last examination. This
        record shall indicate the total number of complaints, their classification by line of insurance, the
        nature of each complaint, the disposition of these complaints, and the time it took to process each
        complaint. For purposes of this paragraph (i), “complaint” shall mean any written
        communication primarily expressing a grievance.

In five (5) instances written communication from consumers was noted which appeared to fall under the
definition of a “complaint”, as expressed in Section 10-3-1104(1)(i), however these files were not on the
Company’s list of complaints received directly from consumers in 1999. Four (4) of these
communications were noted in the sample of cancellation files and one (1) was noted in the sample of
application files.



Recommendation No. 13:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-3-1104(1)(i). In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has established procedures to ensure
that all written communications primarily expressing a grievance are recorded as complaints.




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Complaints                                  Provident American Life & Health Insurance Company


     Issue C2: Failure to include all required information in the complaint record.

Section 10-3-1104(1)(i), C.R.S., Unfair methods of competition and unfair or deceptive acts or practices,
states:

           Failure to maintain complaint handling procedures: Failing of any insurer to maintain a complete
           record of all the complaints which it has received since the date of its last examination. This record
           shall indicate the total number of complaints, their classification by line of insurance, the nature of
           each complaint, the disposition of these complaints, and the time it took to process each complaint .
           [Emphasis added.] For purposes of this paragraph (i) “complaint” shall mean any written
           communication primarily expressing a grievance.

Regulation 6-2-1, Complaint Record Maintenance, promulgated pursuant to Section 10-3-1110, C.R.S.,
states:

II         Purpose

Failure to maintain a record of complaints, as specified therein, is declared to be an unfair trade practice 10-
3-1104(1)(i), C.R.S. The purpose of this regulation is to prescribe the minimum information required to be
maintained in such a record of complaints and to prescribe a format for such record which may be used by
any person subject to this Regulation.

III        Content of complaint record

Attachment A of this Regulation sets forth the minimum information required to be contained in a person’s
complaint record in order for it to comply with the statute. Refinements and additions to the information
specified therein may, of course, be maintained in such complaint record. Attachment B of this Regulation
contains an explanation of the various headings, codes and other notations contained in Attachment A. The
codes are used in order to simplify both the identification of the action underlying the complaint and the
keeping of the records.

V          Maintenance of record

The complaint record shall be kept on a calendar year basis and the number of complaints by line of
insurance, function, reason, disposition, and state of origin shall be compiled not less frequently than
annually. [Emphasis added.]

The Company did not track the final action or disposition during the period under examination.




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Market Conduct Examination
Complaints                             Provident American Life & Health Insurance Company


Recommendation No. 14:

Within 30 days the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-3-1104(1), C.R.S. and Regulation 6-2-1. In the event the Company
is unable to show such proof, it should provide evidence to the Division of Insurance that it has
established procedures to maintain separate records of consumer complaints that include at least the
minimum information required by Colorado insurance law.




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Market Conduct Examination
Producers                    Provident American Life & Health Ins urance Company




                                 PRODUCER
                                  FINDINGS




                                      83
Market Conduct Examination
Producers                               Provident American Life & Health Ins urance Company


 Issue D1: Failure to determine that all producers were properly licensed prior to solicitation
            of insurance.

Section 10-2-103, C.R.S., Definitions, states:

(6)     “Insurance producer” or “producer”, except as otherwise provided in section 10-2-105, means a
        person who solicits, negotiates, effects, procures, delivers, renews, continues, or binds:

(a)     Policies of insurance for risks residing, located, or to be performed in this state;

(7)     “License” means a document issued by the commissioner which authorizes a person to act as an
        insurance producer for the lines of insurance specified in such document. [Emphasis added.]….

Section 10-2-407(1), C.R.S., License – lines of insurance – authority, indicates:

        (a)     Life;
        (b)     Health coverage;
        (c)     Life and variable contracts;
        (d)     Property;
        (e)     Casualty;
        (f)     Bail bonds; …

Section 10-2-401, C.R.S., License required, states:

        (1) No person shall act as or hold oneself out to be an insurance producer unless duly licensed as
            an insurance producer in accordance with this article. Every insurance producer who solicits
            or negotiates an application for insurance of any kind on behalf of an insurer shall be
            regarded as representing the insurer and not the insured or any beneficiary of the insured in
            any controversy between the insurer and such insured or beneficiary.

        (2) No insurance producer shall make application for, procure, negotiate for, or place for others
            any policies for any line or lines of insurance for which he or she is not then qualified and
            licensed.

The population consisted of the number of different producers noted in the samples of Application and
Cancelled/Declined files. The same agent, although the producer on more than one file was only counted
once in the population. The applications submitted over the internet by HealthAxis were only counted
once in the population. The population comprised the sample. The three (3) exceptions involved two (2)
instances in which the agents signing applications in 1999 were not authorized for the health coverage
line of insurance being solicited and one (1) instance in which the agent did not have a Colorado
producer’s license on the date that the application for insurance was taken.

      PRODUCERS IN SAMPLE OF APPLICATIONS AND CANCELLATIONS/DECLINATIONS
      Population   Sample Size    Number of Exceptions  Percentage to Sample
         40           40                   3                     8%




                                                      84
Market Conduct Examination
Producers                              Provident American Life & Health Ins urance Company


Recommendation No. 15:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Sections 10-2-103, 10-2-401 and 10-2-407, C.R.S. In the event the Company is
unable to show such proof, it should provide evidence to the Division of Insurance that it has established
procedures to ensure that all producers are licensed and authorized for the lines of insurance being sold.




                                                   85
Market Conduct Examination
Underwriting – Policy Forms   Provident American Life & Health Insurance Company




                              UNDERWRITING
                               POLICY FORM
                                 FINDINGS




                                       86
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


 Issue E1: Failure to file an Annual Report of policy forms in 1999 and failure to file prior to use.

Section 10-16-107(2), C.R.S., Rate regulation – approval of policy forms – benefit certificates –
evidences of coverage – loss ratio guarantees – disclosures on treatment of intractable pain, states:

        No policy of sickness and accident insurance or subscription certificate or membership certificate
        or other evidence of health care coverage shall be delivered or issued for delivery in this state, nor
        shall any endorsement, rider, or application which becomes a part of any such policy, contract, or
        evidence of coverage be used, until the insurer has filed a certification with the commissioner that
        such policy, endorsement, rider, or application conforms , to the best of the insurer’s good faith
        knowledge and belief, to Colorado law pursuant to section 10-16-107.2 and copies of the rates
        and the classification of risks or subscribers pertaining thereto are filed with the commissioner.

Section 10-16-107.2(1), C.R.S., Filing of health policies, states:

        All sickness and accident insurers, health maintenance organizations, and nonprofit hospital and
        health service corporations authorized by the commissioner to conduct business in Colorado shall
        submit an annual report to the commissioner listing any policy form, endorsement, or rider for
        any sickness, accident, nonprofit hospital and health service corporation, health maintenance
        organization, or other health insurance policy, contract, certificate, or other evidence of coverage
        issued or delivered to any policyholder, certificate holder, enrollee, subscriber, or member in
        Colorado. Such listing shall be submitted by January 15, 1993, and not later than December 31 of
        each subsequent year and shall contain a certification by an officer of the organization that each
        policy form, endorsement, or rider in use complies with Colorado law. The necessary elements of
        the certification shall be determined by the commissioner.

Section 10-16-107.2(2), C.R.S., Filing of health policies, states:

        All sickness and accident insurers, health maintenance organizations, nonprofit hospital and
        health service corporations, and other entities providing health care coverage authorized by the
        commissioner to conduct business in Colorado shall also submit to the commissioner a list of any
        new policy form, application, endorsement, or rider at least thirty-one days before using such
        policy form, application, endorsement, or rider for any health coverage. Such listing shall also
        contain a certification by an officer of the organization that each new policy form, application,
        endorsement, or rider proposed to be used complies, to the best of the insurer’s good faith
        knowledge and belief, with Colorado law. The necessary elements of the certification shall be
        determined by the commissioner.

Section 10-16-201, C.R.S., Form and content of individual sickness and accident insurance policies,
states:

        (1)(f) Each such form, including riders and endorsements, is identified by a form number in the
        lower left-hand corner of the first page thereof.




                                                     87
Market Conduct Examination
Underwriting – Policy Forms            Provident American Life & Health Insurance Company


Regulation 1-1-6, Concerning the Elements of Certification for Accident and Health Forms, Automobile
Private Passenger Forms, and Claims-Made Liability Forms, promulgated pursuant to Section 10-1-109,
10-4-419, 10-4-725, and 10-16-107.2, C.R.S., promulgated pursuant to Section 10-1-109, 10-4-419, 10-4-
725, and 10-16-107.2, C.R.S., states:

       (III)   Rules

       (A)     Definitions

       (3)     “Annual Report for health insurance” shall mean a list of all policy forms, endorsements
               and riders for any sickness, accident, and/or health insurance policy, contract, certificate,
               or other evidence of coverage currently in use and issued or delivered to any
               policyholder, certificate holder, enrollee, subscriber, or member in Colorado, including
               the titles of the programs or products affected by the forms.

       (4)     “Certification of Compliance” shall mean a certification form which contains elements of
               certification as determined by the Commissioner, signed by a designated officer of the
               entity.

       (9)     “Listing of New Policy Forms for health insurance” shall mean a list of any new policy
               forms, endorsements and riders for any sickness, accident, and/or health insurance policy,
               contract, certificate, or other evidence of coverage issued or delivered to any
               policyholder, certificate holder, enrollee, subscriber, or member in Colorado and the title
               of the program or product affected by the form, and the effective date the form will be
               used.

               B.      Filing requirements

               At least 31 days prior to using any new form, subject to the provisions of this regulation,
               each entity must file in a format prescribed by the Commissioner, a Listing of New
               Policy Forms including a fully executed certificate of compliance. Any such listing and
               the applicable certificate of compliance must be prepared individually for each program.

               Not later than July 1 of each year, each private passenger automobile insurer and claims-
               made liability insurer must file an Annual Report of policy forms including a fully
               executed certificate of compliance. Not later than December 31 of each year, each entity
               providing health care coverages must file an annual report of policy forms including a
               fully executed certificate of compliance. [Emphasis added.]

       (C)     Elements of Certification

               The elements of certification as determined by the Commissioner which must
               be included in the Colorado Health Coverage Certification Forms, the
               Colorado Automobile Private Passenger Insurance Certification Form, and the
               Colorado Claims-Made Liability Insurance Certification Form are as follows:
               [Emphasis added.]



                                                    88
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


        1. The name of the entity;

        2. A statement that the officer signing the certification form is knowledgeable of
           accident and health insurance or health care benefits, automobile private passenger
           insurance, or claims-made liabilit y insurance, whichever is being certified.

        3. A statement that the officer signing the certification form has carefully reviewed
           the policy forms, subscription certificates, membership certificates or other
           evidences of health care coverage identified on the Listing of New Policy Forms
           or Annual Report; [Emphasis added.]

        4. A statement that the officer signing the certification form has read and
           understands each applicable law, regulation and bulletin;

        5. A statement that the officer signing the certification form is aware of applicable
           penalties for certification of a noncomplying form;

        6. A statement that the officer signing the certification form certifies:

        b. For Annual Reports of health insurance, that the documents identified on the
           listing provide all applicable mandated coverages and are in full compliance with
           all Colorado Insurance Laws and Regulations;

        7. The name and title of the officer signing the certification form and the date the
           certification form is signed.

        8. The actual signature of the officer. Signature stamps or signature on behalf of the
           officer are not acceptable.

It appears that the Company did not file in 1999 the required annual report of policy forms that
is to be filed and accompanied by a fully executed certificate of compliance.


In response to the request in the pre-exam letter from the Colorado Division of Insurance to provide a
numbered list of all forms used for individuals and groups, including riders, endorsements and
amendments in use during the period of the examination, the Company furnished a list that reflected the
following:

New Policy Form filings filed March 2, 1998

        Colorado Health Coverage Certification Form – Certificate Form A(3-1-96 ed.)
        Individual Comprehensive Major Medical Policy: PAL997IMM-CO, et al
        New Forms:




                                                    89
Market Conduct Examination
Underwriting – Policy Forms            Provident American Life & Health Insurance Company


        Description                                              Form Number

        Individual Outline of Coverage                           PAL997IMM-OC-CO
        Individual Replacement Notice                            PAL997IMM-IND RPL NOT-CO
        Health Insurance Portability and
        Accountability Act (HIPAA) Rider                         PAL997IMM-HIPAA


New Policy Form filings filed November 18, 1997

        Colorado Health Coverage Certification Form – Certificate Form A(3-1-98 ed.)
        Individual Comprehensive Major Medical Policy: PAL997IMM-CO, et al
        New Forms

        Description                                              Form Number

        Individual Health Policy                                 PAL997IMM-CO
        Application                                              MK-79701-APP-Individual-CO
        Health Plan Description                                  PAL997IMM-HPD-CO
        Life Insurance and Accidental Death
        And Dismemberment Insurance Rider                        PAL997IMM-LIFE/ADD
        Dental Benefit Rider                                     PAL997IMM-DENT
        Normal Pregnancy Rider                                   PAL997IMM-MAT
        Pregnancy Benefit Rider                                  PAL997IMM-MAT-2
        Supplemental Accident Rider                              PAL997IMM-SUPP/ACC
        Exclusion Endorsement                                    PAL997IMM-EXCLUSION
        Amendment Rider                                          PAL997IMM-PREMIUM
        Amendment Rider                                          PAL997IMM-INCENTIVE
        Amendment Rider                                          PAL997IMM-AMENDMENT
        Endorsement                                              PAL997IMM-ENDORSEMENT


During the review of the Cancelled/Non-renewed files, it was noted that the following forms, used in
1999, did not appear to have been filed with the Commissioner along with the appropriate certification.

        1. NOTICE TO SELF EMPLOYED INDIVIDUALS                   No Form Number

        2. HealthAxis (Internet) Application                     MK-79701-APP-Individual-CO

Although this is the same Form No. for the application submitted as a new form filing on November 18,
1997, this application is different in that there is no provision for an applicant’s signature, the Form
Number is not in the lower left hand corner of the first page of the application, and there are numerous
formatting differences.

        3. Medical Information Questionnaire                     No Form Number
           (Under/Over/Weight)



                                                   90
Market Conduct Examination
Underwriting – Policy Forms           Provident American Life & Health Insurance Company


        4. Children Underwriting Questionnaire                  UN-150-CO

        5. Exclusion Endorsement                                PALHIC-COMBO EXCL-96

        6. General Medical Information Questionnaire            No Form Number

        7. Respiratory Disorder Questionnaire                   No Form Number

        8. Exclusion Endorsement(reflects a group policy no.) No Form Number

        9. Headache Questionnaire                               No Form Number

        10. Exclusion Endorsement                               30030/M023

        11. Back/Neck Questionnaire                             No Form Number

        12. Avocation Questionnaire                             LUW/AVO(A)-Q)

        13. Notice to Applicant Regarding Replacement of Accident and Sickness Insurance –
            PALHIC – IND RPL-98. This form number is in the right-hand corner of the form and is a
            different form number than the one filed by the Company on March 2, 1998.

        14. Exclusion Endorsement                               Form No. 00034/EE17

        15. Exclusion Endorsement                              Form No. 00034/GU18
            Both of the form numbers for the exclusion endorsements are different from the one filed by
            the Company on November 18, 1997.

During the review of the New Business Applications, the forms listed below, used in 1999, did not appear
to have been filed with the Commissioner by Provident American Life & Health Insurance Company.

        16. Application                                      Form No. 115496P
            The Company indicated this was a Provident Indemnity Life form although it was
            being used with Provident American business.

        17. Employer Disclosure                                 Form No. MK-180-ED (Rev. 7/95)

        18. Endorsement                                       Form No. P1697GMM-Endorsement
            The Company indicated this form had been filed by Provident Indemnity Life Insurance
            Company and although being used with Provident American business, the form reflected
            a Company name of Provident Indemnity.

        19. Aviation Questionnaire                                      No Form No.

        20. Mental/Nervous Questionnaire                                No           Form           No.




                                                   91
Market Conduct Examination
Underwriting – Policy Forms           Provident American Life & Health Insurance Company


Recommendation No. 16:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-107.2, C.R.S. and Regulation 1-1-6. In the event the Company
is unable to show such proof, it should provide evidence to the Division of Insurance that it has
established procedures to ensure that it files an annual report of policy forms, accompanied by the
required certificate of compliance, with the Colorado Division of Insurance.




                                                  92
Market Conduct Examination
Underwriting – Policy Forms            Provident American Life & Health Insurance Company


  Issue E2: Failure to clearly and correctly disclose the required conditions of renewability.

Section 10-16-201.5, C.R.S., Renewability of health benefit plans – modific ation of health benefit plans,
states:

        (1) A carrier providing coverage under a health benefit plan shall not refuse to renew such plan
            except for the following reasons:

        (a)     Nonpayment of the required premium;

        (b)     Fraud or intentional misrepresentation of material fact on the part of the plan sponsor
                with respect to group health benefit plan coverage and the individual with respect to
                individual coverage;

        (d)     The carrier elects to discontinue offering and nonrenew all of its individual, small group,
                or large group health benefit plans delivered or issued for delivery in this state. In such
                case the carrier shall provide notice of the decision not to renew coverage to all
                policyholders and covered persons and to the insurance commissioner in each state in
                which an affected individual is known to reside at least one hundred eighty days prior to
                the nonrenewal of the health benefit plan by the carrier. The carrier shall also discontinue
                and nonrenew all of its individual or small or large group health benefit plans in
                Colorado. Notice to the insurance commissioner under this paragraph (d) shall be
                provided at least three working days prior to the notice to the affected individuals. . . .

        (4)     An individual health benefit plan must clearly disclose in its contracts and marketing
                materials the conditions of renewability which conform with the requirements of this
                section.

The Company was informed in December, 1999 that review of the following policy was being transferred
to the market conduct section in order to prevent a duplication of effort during the upcoming market
conduct examination. The Company has indicated that this Policy was not marketed in Colorado in 1999,
however the policy did cover Colorado insureds during 1999 and any policies in force during that time
would be subject to Colorado law.

                           Policy Form No-PALHIC-INDMM-POL-96 CO


From a review of this Policy, it appears that the following statements concerning Renewability are
misleading and/or incorrect:

Cover Sheet          “Renewable at the option of the Company”. This statement is misleading in that
the Company may refuse to renew only for certain reasons, specifically described in Colorado insurance
law.




                                                    93
Market Conduct Examination
Underwriting – Policy Forms              Provident American Life & Health Insurance Company


Page 5, “RENEWAL PROVISION” The introductory paragraph of this provision states: This policy
may be renewed at the applicable rate at the option of the company to age 65, subject to the Maximum
Lifetime Benefit Amount”. Colorado insurance law does not allow nonrenewal of coverage solely at the
option of the Company, but only for specific reasons.

The following was noted concerning the list of five (5) instances in this provision:

1. the insured reaches age 65 and becomes eligible for Medicare: [Emphasis added]

This is in contradiction with Item 3, Page 13, Termination, which states: “The date the insured reaches
age 65 and becomes covered under Medicare” [Emphasis added]. Colorado insurance law does not allow
when an insured becomes eligible for Medicare as reason for non-renewal.


The following policy was the one form sold to Colorado insureds in 1999. The Company used one policy
form with different schedules of benefits to distinguish the plan types.

                                          Policy PAL9971MM-CO

From a review of this policy it appears the following statements concerning Renewability are misleading
and/or incorrect:

The “Renewal Provision” on Pages 46 and 47 states:

        This policy may be renewed at the applicable rate at our option to age 65 or when
        you become eligible for Medicare, subject to lifetime maximum. We may cancel
        or refuse to renew this policy as of a premium due date when any premium due is
        not received by the end of the 31-day grace period; on the date that you, your
        covered spouse or your covered dependent become eligible for Medicare; when
        terminating all policies with this plan number issued in the state in which you live
        on the policy effective date; or when terminating all policies in your state of
        residence. Additionally, we may only cancel or refuse to renew if you, your
        spouse or your dependents commit an act of fraud or material misrepresentation
        with regard to this policy or its benefits. We will provide you with the appropriate
        prior notice of our intent not to renew this policy.

The first sentence of this provision indicates the policy may be renewed at the applicable
rate at our option to age 65 or when you become eligible for Medicare, subject to lifetime
maximum [Emphasis added.] Colorado insurance law allows nonrenewal of health benefit
plans for only a limited number of reasons. These reasons do not include (1) solely at the
option of the Company, or (2) when an insured becomes eligible for Medicare nor when
the covered spouse or dependent becomes eligible for Medicare.

The last sentence of this provision does not appear to meet the requirement for a health
benefit plan to clearly disclose in its contracts the conditions of renewability in that it does
not state the required number of days for prior notification of the decision not to renew.



                                                      94
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


Recommendation No. 17:

Within 30 days the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-201.5, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has revised its policy forms to ensure
they reflect clear and correct conditions of renewability as required by Colorado insurance law.




                                                     95
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


  Issue E3: Failure to allow benefits for attempted suicide or self-inflicted injuries sustained
            by an insane person.

The prevailing view in Colorado courts is that broad exclusions for self-inflicted injuries or suicide
attempts may not be applied in instances in which the insured or member was “insane” at the time of
injury in sickness and accident policies written in Colorado. See e.g. Continental Casualty Co. v.
Maguire, 471 P.2d 636 (Colo. Ct. App. 1970); Metropolitan Life Insur. Co. v. Wright, 480 P.2d 597
(Colo. Ct. App. 1971); Mass. Protective Ass’n v. Daugherty, 288 P. 888 (Colo. 1930) (life insurance
policy). The reasoning applied by these courts is that injuries sustained in such circumstances are
“accidents,” not “intentional” acts, since an individual who is insane is incapable of forming the requisite
intent.

Bulletin 8-99, Suicide Exclusions And Exclusions For Intentionally Self-Inflicted Injuries In Health
Insurance Policies, states:

Section 1: Background and Purpose

The Division of Insurance (“Division”) has received consumer complaints concerning some health
insurance carriers’ usage and interpretations of suicide exclusions and exclusions for intentionally self-
inflicted injuries in their policies. Some carriers are using exclusions to deny coverage for intentionally
self-inflicted injuries, including suicide or attempted suicide, even where the injury, suicide or suicide
attempt may be the result of sickness, accident or illness, which is covered under the policy. The
exclusions at issue use language the same or substantially similar to the following: “benefits are excluded
for treatment as a result of attempted suicide or suicide or intentionally self-inflicted injury, whether sane
or insane.” The purpose for this bulletin is to clarify the Division’s position on this issue.

Section 2: Applicability and Scope

The subject matter of this bulletin concerns all health insurance carriers that use exclusions for
intentionally self-inflicted injuries, including suicide and suicide attempts in their policies.

Section 3: Division Position

The Division adheres to the opinion of the Colorado courts that suicide, attempted suicide or other acts of
self-destruction committed while insane are an accident. Those performing the above acts while insane
are incapable of formulating the intent necessary to categorize the act as intentional. Therefore, insurance
policies that provide coverage for sickness, accidents and illness, either as may be required by law (such
as for mental illness) or otherwise, may not deny coverage for intentional acts committed while insane.
Such exclusions are contrary to law and are void as against public policy. Accordingly, carriers are
advised to amend policy language and interpret existing policy language accordingly.




                                                     96
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


                                        Policy PAL997IMM-CO

Exclusions

Exclusion 27, Page 32 states:

        Expenses resulting from suicide or attempted suicide, whether sane or insane;

Health policies cannot exclude benefits based on suicide attempts or self-inflicted injuries if the
circumstances are such that the covered person was unable to form intent for those actions. An example
being if a person was unable to control his/her actions due to severe mental illness, attempts to harm
themselves would be accidental, not intentional. Case law has supported this position of requiring intent
in order to apply exclusions for self-inflicted injury.



Recommendation No. 18:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Colorado law. In the event the Company is unable to show such proof, it
should provide evidence to the Division of Insurance that it has revised its policy forms to ensure that
insane individuals have access to treatment for suicide attempts or self-inflicted injuries.




                                                    97
Market Conduct Examination
Underwriting – Policy Forms                Provident American Life & Health Insurance Company


   Issue E4: Failure to adequately disclose benefits for hospital and anesthesia for dental
             procedures for dependent children.

Section 10-16-104, C.R.S., Mandatory coverage provisions, states:

        (12) Hospitalization and general anesthesia for dental procedures for dependent children.

        (a) All individual and all group sickness and accident insurance policies that are delivered or
            issued for delivery within the state by an entity subject to the provisions of part 2 of this
            article and all individual and group health care service or indemnity contracts issued by an
            entity subject to the provisions of part 3 or 4 of this article except supplemental policies that
            cover a specific disease or other limited benefit shall provide coverages for general
            anesthesia, when rendered in a hospital, outpatient surgical facility, or other facility licensed
            pursuant to section 25-3-101, C.R.S., and for associated hospital or facility charges for dental
            care provided to a dependent child, as dependant is defined in section 10-16-102 (14), of a
            covered person. Such dependent child shall, in the treating dentist’s opinion, satisfy one or
            more of the following criteria:

        (I)        The child has a physical, mental, or medically compromising condition; or
        (II)       The child has dental needs for which local anesthesia is ineffective because of acute
                   infection, anatomic variations, or allergy; or
        (III)      The child is an extremely uncooperative, unmanageable, anxious, or uncommunicative
                   child or adolescent with dental needs deemed sufficiently important that dental care
                   cannot be deferred; or
        (IV)       The child has sustained extensive orofacial and dental trauma.

        (c) The provisions of this subsection (12) shall not apply to treatment rendered for temporal
            mandibular joint (TMJ) disorders.

                              Policy Form No-PALHIC-INDMM-POL-96 CO


The requirement to provide hospitalization and general anesthesia coverage for dental procedures for
dependent children was effective for both new and renewal policies as of September 1, 1998.

 A review of this policy did not reveal any description of this mandated coverage available to insured
dependent children and additionally the policy reflected the following exclusion:

                                  Exclusions And Limitations Section-Page 20

        11. Any charges for physician’s services or x-ray examinations involving any of the teeth, their
            surrounding tissue or structure, unless covered by rider or unless the charges are:

                a. in connection with the treatment or removal of malignant tumors.
                b. for services provided within 90 days of an injury and as a result of injury to whole
                   natural teeth without dental invasion while this policy is in force.


                                                       98
Market Conduct Examination
Underwriting – Policy Forms            Provident American Life & Health Insurance Company


A review of the “Dental Benefit Rider”, Form No. PAL9971MM-DENT, indicates:

                               Exclusions And Limitations Section-Page 6

      No benefits will be payable (nor will such benefits count toward meeting the deductible) for:

        1. any procedure, service or supplies which are included as covered medical expenses under any
           medical care plan;

                               Exclusions And Limitations Section-Page 7

     10. general anesthesia, unless administered in conjunction with bony impaction, prescribed drugs,
         premedication or analgesia;

The policy is not in compliance with Colorado insurance law as the exclusion on Page 20 would exclude
and limit this benefit unless covered by rider. The Dental Benefit Rider, on Page 6 excludes any
procedure, service or supplies to be covered under the policy and on Page 7 limits coverage for general
anesthesia to certain circumstances. The policy appears to be incomplete and misleading because of the
exclusions and limitations and no exception mentioned for the mandated benefit available for
hospitalization and general anesthesia for dental procedures for dependent children.

                                        Policy PAL997IMM-CO

A review of this policy did not reveal any description of the mandated coverage of hospitalization and
general anesthesia coverage for dental procedures for dependent children and additionally the policy
reflected the following:

Exclusions

                 Page 32, Item 30. - Dental treatment or care;

A review of the optional Dental Benefit Rider revealed the following:

                Exclusions and Limitations, Page 7, Item 10.- general anesthesia, unless administered in
                conjunction with bony impaction, prescribed drugs, premedication or analgesia;

The policy does not appear to be in compliance with Colorado insurance law as it excludes dental
treatment or care and does not provide for this particular coverage associated with dental care provided
for a dependent child. The optional Dental Benefit Rider also excludes this mandated benefit.




                                                    99
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


Recommendation No. 19:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-104, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has revised its forms to include the
mandatory coverage for hospitalization and general anesthesia for dental procedures for dependent
children.




                                                    100
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


  Issue E5: Failure to include complete mandated coverages available for diabetics.

Section 10-16-104, C.R.S., Mandatory coverage provisions, states:

        (13)    Diabetes

        (a)     Any health benefit plan, except supplemental policies covering a specified disease or
                other limited benefit, that provides hospital, surgical, or medical expense insurance shall
                provide coverage for diabetes that shall include equipment, supplies, and outpatient self-
                management training and education, including medical nutrition therapy if prescribed by
                a health care provider licensed to prescribe such items pursuant to Colorado law, and, if
                coverage is provided through a managed care plan, such qualified provider shall be a
                participating provider in such managed care plan.

        (b)     Diabetes outpatient self-management training and education when prescribed shall be
                provided by a certified, registered, or licensed health care professional with expertise in
                diabetes.

        (c)     The benefits provided in this subsection (13) are subject to the same annual deductibles
                or copayments established for all other covered benefits within a given policy.

        (d)     Private third-party payors shall not reduce or eliminate coverage due to the requirements
                of this subsection (13).

                           Policy Form No-PALHIC-INDMM-POL-96 CO


A review of the above referenced policy revealed the following:

                                       Benefit Provisions-Page 18

                              13. Other services and supplies. Charges for:

        i.      diabetic supplies (insulin covered as a prescription drug or through the pharmacy card
                benefit);

This description of benefit provisions does not appear to be complete as it does not mention the mandated
benefits of outpatient self-management training and education nor does it mention medical nutrition
therapy. Colorado insurance law mandated these additional benefits for diabetics effective July 1, 1998.

                                        Policy PAL997IMM-CO

A review of the above referenced policy revealed no mention of any coverage for diabetes. This is not in
compliance with Colorado insurance law as this is a mandated coverage.




                                                    101
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


Additionally the following was noted:

On Page 36, under Prescription Drug Card Benefit, it states:

        Prescription Drug Card Benefits will not be paid for:

        8. Services or appliances; therapeutic devices including hypodermic needles; syringes; support
           garments; other non-medical items, regardless of their intended use;

This statement appears to exclude the mandated coverage for diabetes equipment/supplies.



Recommendation No. 20:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-104, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has revised its forms to reflect the
complete mandated coverage for diabetes as described in Colorado insurance law.




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    Issue E6: Failure to correctly define the requirements to qualify as a dependent.

Section 10-16-201, C.R.S., Form and content of individual sickness and accident insurance policies,
states:

         (1) No such policy shall be delivered or issued for delivery in this state unless:

         (c) It purports to insure only one person, except as provided in sections 10-16-214 and 10-16-
             215, and except that a policy or contract may be issued upon the application of an adult
             member of a family, who shall be deemed the policyholder, covering members of any one
             family, including husband, wife, dependent children or any children under the age of
             nineteen, and other dependents living with the family; and . . .

                                         Policy PAL977IMM-CO

A review of the above referenced policy revealed the following:

The “Disabled Dependent” heading on Page 9 states:

         A covered dependent who is all of the following:

         •   Incapable of self-sustaining employment by reason of disability (including mental retardation,
             nervous or mental disorder, and/or physical handicap other than pregnancy) which came into
             existence prior to age 19 (or age 25 in the case of a full-time student);

The Company’s definition of a “disabled dependent” appears to be more restrictive than allowed by law
in the following way:

•    There is no requirement as to when the disability occurs for a disabled dependent. Also, a disabled
     child may be able to work in self-sustaining employment but nevertheless be dependent upon the
     parent.



Recommendation No. 21:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Sections 10-16-104 and 10-16-201, C.R.S. In the event the Company is unable
to show such proof, it should provide evidence to the Division of Insurance that it has revised its forms to
indicate the correct requirements to meet the definition of a disabled dependent.




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 Issue E7: Failure to include complete mandated Preventive Child Health Supervision
           Service benefits.

Section 10-16-104(11), C.R.S., Child health supervision services, states:

        Child health supervision services. (a) For purposes of this subsection (11), unless the
        context otherwise requires, "child health supervision services" means those preventive
        services and immunizations required to be provided in basic and standard health benefit
        plans pursuant to section 10-16-105(7.2), to dependent children up to age thirteen. Such
        services shall be provided by a physician or pursuant to a physician's supervision or by a
        primary health care provider who is a physician's assistant or registered nurse who has
        additional training in child health assessment and who is working in collaboration with a
        physician.

Amended Regulation 4-6-5, Implementation of Basic and Standard Health Benefit Plans, promulgated
pursuant to Sections 10-1-109, C.R.S., 10-16-105(7.2), C.R.S., and 10-16-108.5(8), C.R.S., states:

                                             Attachment 1
                                       Covered Preventive Services

        Age 0-12 months                   1 newborn home visit during first week of life if newborn
                                          released from hospital less than 48 hours after delivery.

                            Policy Form No-PALHIC-INDMM-POL-96 CO

A review of the following rider used with the above referenced policy reflected the following:

                           Preventive Child Health Supervision Services Rider
                                  PALHIC-IND PCHSS Rider-96-CO

“The policy provides benefits for covered dependent children for the following preventive child health
supervision services from birth until age 13:”

                Immunizations as recommended by the American Academy of Pediatrics
                Five well child visits and 1 PKU between age 0 – 12 months
                Two well child visits between age 13 – 35 months
                Three well child visits between ages 3 – 6 years
                Three well child visits between age 7 – 12 years

This listing of covered benefits does not appear to be complete in that it does not include:

1 newborn home visit during first week of life if newborn released from hospital less than 48 hours after
delivery – Age 0-12 months




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Recommendation No. 22:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-104, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has revised its forms to include a
complete description of the mandated coverage for child health supervision services.




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  Issue E8: Failure to state correctly, clearly or completely the extent of coverage for Hospice
            Care.

Section 10-16-104, Mandatory coverage provisions, states:

       (8)     Availability of hospice care coverage.

       (d)     The commissioner, in consultation with the department of public health and environment,
               may establish by rule and regulation requirements for standard policy and plan provisions
               which state clearly and completely the criteria for and extent of insured coverage for
               home health services and hospice care. Such provisions shall be designed to facilitate
               prompt and informed decisions regarding patient placement and discharge.

Regulation 4-2-8, Required Health Insurance Benefits For Home Health Services and Hospice Care,
promulgated under the authority of 10-1-109 and 10-16-104(8)(d), C.R.S., states:

       (II)    Basis and purpose

       The purpose of this regulation is to establish requirements for standard policy provisions which
       state clearly and completely the criteria for and extent of coverage for home health services and
       hospice care and to facilitate prompt and informed decisions regarding patient placement and
       discharge.

       (V)     Requirements for hospice care

       (A)     Definitions

               4. A “patient/family” is one unit of care consisting of those individuals who are closely
                  linked with the patient, including the immediate family, the primary care giver and
                  individuals with significant personal ties.

               10. “Homemaker services” means services provided the patient which include:

                                                          u
                      (a) General Household Activities incl ding the preparation of meals and routine
               household care; and

                     (b) Teaching, demonstrating and providing patient/family with household
               management techniques that promote self-care, independent living and good nutrition.

               20. A “benefit period” for hospice care services is a period of three months, during
                   which services are provided on a regular basis.

       (B)     General Provisions Pertaining to Hospice Care

               2. The policy offering shall provide that benefits are allowed only for individuals who
                  are terminally ill and have a life expectancy of six months or less, except that



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               benefits may exceed six months should the patient continue to live beyond the
               prognosis for life expectancy, in which case the benefits shall continue at the same rate
               for one additional benefit period. No insurer shall be required to provide coverage for
               more than three benefit periods to any individual.

      (C)      Benefits for Hospice Care Services

               2. The policy or certificate may contain a dollar limitation on hospice benefits.
                  Services available to the insured will be negotiated at a hospice per diem rate with the
                  hospice provider. Any policy offered shall provide a benefit of no less than $91 per
                  day for any combination of the following services which are planned, implemented
                  and evaluated by the interdisciplinary team:

            (a) Intermittent and 24 hour on-call professional nursing services provided by or under the
                 supervision of a Registered Nurse;

            (b)   Intermittent and 24 hour on-call social/counseling services;

            (c) Certified nurse aide services or nursing services delegated to other persons pursuant to
                Section 12-38-132, C. R. S;

            (d) Therapies including physical, occupational and speech; and

            (e) Nutritional counseling by a nutritionist or dietician.

               The total benefit for these services shall not be less than the per diem benefit multiplied
               by ninety-one (91) days.

               3. The policy offering shall include the following benefits which are exclusive of and
                   shall not be included in the dollar limitation for hospice care benefits as specified in 2
                   above.

                       (a) Bereavement support services for the family of the deceased person during
                       the three month period following death, and in no event shall this total benefit be
                       less than $1077.[Emphasis added.]

            (c) Medical supplies;

            (d) Drugs and biologicals;

            (e) Prosthesis and orthopedic appliances

            (f) Oxygen and respiratory supplies;

            (g) Diagnostic testing;

            (h) Rental or purchase of durable medical equipment


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             (i) Transportation; and

             (j) Physician services.

                            Policy Form No-PALHIC-INDMM-POL-96 CO


A review of the above referenced policy reflected the following:

                                        Benefit Provisions-Page 17
                                           11. Hospice benefit

e. Bereavement counseling services for the immediate family (spouse, children and parents) within three
   months following the covered person’s death, up to a maximum of $1,077 [Emphasis added.]

This statement of who is entitled to bereavement counseling services appears to be more restrictive than
allowed by Colorado insurance law. The definition of family as stated in Regulation 4-2-8, also includes
in addition to the immediate family, the primary care giver and individuals with significant personal ties
to the patient.

Also, the following was noted in the Definitions Section, Page 10 of the policy:

Immediate Family

Immediate Family means the insured, the insured’s spouse, and respective parents, brothers, sisters,
children, grandchildren and siblings. This definition is in conflict with the definition of “immediate
family” used on Page 17.

                                   Policy Form No-PAL997IMM-CO

A review of the above referenced policy revealed the following:

Item 21., “hospice care” on pages 26 and 27 states:

        This benefit will cover charges incurred for a benefit period of six months, subject to a maximum
        of $91 per day and a maximum of $8,281 per benefit period per covered person. If a terminally
        ill covered person lives beyond the prognosis for life expectancy, benefits will continue at the
        same rate for an additional benefit period. In no event will coverage be provided for more than
        three benefit periods. Covered expenses include charges incurred for the following hospice
        services:

The above description of the “hospice care” benefit provided appears to be incorrect as the policy
provides for a possible 3 benefit periods of six months each. Colorado insurance law requires 3 benefit
periods of three months each. Also being subject to a maximum of $91 per day per benefit period, the
maximum of $8,281, shown in the policy for every six months is not correct in that the maximum of




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$8,281 is available every three months. A nine month period would have a possible maximum benefit of
$24,843 ($8,281 X 3) whereas the company’s benefit for nine month would maximize at $16,562 ($8,281
X 2).

On Page 27, the following sentence is reflected:

        Bereavement counseling services by a licensed clinical social worker, pastoral counselor, or
        counselor for an immediate family member are covered for up to a period of three months after
        the covered person’s death, up to a maximum of $1,077.

This statement of who is entitled to bereavement counseling services appears to be more restrictive than
allowed by Colorado insurance law. The definition of family as stated in Regulation 4-2-8, also includes
in addition to the immediate family, the primary care giver and individuals with significant personal ties
to the patient.


Item 21 on Page 27 states under the heading of “hospice care”:

        Covered expenses include charges incurred for the following hospice services:

There does not appear to be any mention of the homemaker services required by Regulation 4-2-8.

Additionally on Page 30 the “Exclusions” Section states:

        The following exclusions are applicable to all Health Insurance Benefits.

        On Page 33, Item 47., states: services or supplies for personal comfort or convenience, including
        custodial care or homemaker services;


Item 21 on Page 27 states under the heading of “hospice care”:

        Covered expenses include charges incurred for the following hospice services:

There does not appear to be any mention of the required benefit of certified nurse aide services or nursing
services delegated to other persons pursuant to section 12-38-132, C.R.S.


Item 21 on Page 27 states under the heading of “hospice care”:

•   physical, respiratory or speech therapy;




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This does not appear to be a complete description of the required benefits as there is no mention of
“occupational” therapy.


There does not appear to be a description of the following required benefits in the policy:

        (1)     Oxygen and respiratory supplies
        (2)     Diagnostic testing
        (3)     Rental or purchase of durable medical equipment
        (4)     Transportation
        (5)     Physician services



Recommendation No. 23:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-104, C.R.S. and Regulation 4-2-8. In the event the Company is
unable to show such proof, it should provide evidence to the Division of Insurance that it has revised its
forms to correctly, clearly and completely state the extent of coverage provided for hospice care.




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  Issue E9: Failure to indicate correct requirements and benefits for home health care
             services.

Section 10-16-104, C.R.S., Mandatory coverage provisions, states:

        (8) Availability of hospice care coverage

        (d) The commissioner, in consultation with the department of public health and
        environment, may establish by rule and regulation requirements for standard policy
        and plan provisions which state clearly and completely the criteria for and extent of
        insured coverage for home health services and hospice care. Such provisions shall
        be designed to facilitate prompt and informed decisions regarding patient placement
        and discharge.

Regulation 4-2-8, Required Health Insurance Benefits for Home Health Services and Hospice Care,
promulgated under the authority of 10-1-109 and 10-16-104(8)(d), C.R.S., states:

        (IV)    Requirements for home health services

        (B)     General Provisions Pertaining to Home Health Care

                (1) The policy offering shall provide that home health services are to be covered when
                such services are necessary as alternatives to hospitalization or in place of hospitalization.
                Prior hospitalization shall not be required.[Emphasis added.]

        (C)     Benefits for Home Health Care Services

                (2) The policy offered shall include benefits for the following services:

                    (d) Occupational therapy;


                           Policy Form No-PALHIC-INDMM-POL-96 CO

A review of the above referenced policy reflected the following:

                                            Definitions-Page 9

Home Health Care

Home health care means a formal program of care and treatment which is performed in the home of
patients discharged from a hospital or extended care facility, …




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The statement defining “Home Health Care” as being available for patients discharged from a hospital or
extended care facility does not appear to be in compliance with Colorado insurance law in that there is no
requirement for being discharged from an extended care facility before home health care may take place
and prior hospitalization is specifically excluded as a requirement.

                                  Policy Form No. PAL9971MM-CO

A review of the above referenced policy revealed the following:

Section II-Health Insurance Benefits

Covered Expenses

Item 20. Home health care.

Page 26 states:

        •   Physical, respiratory or speech therapy performed for rehabilitative treatment.

This statement does not include the required occupational therapy.



Recommendation No. 24:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-104, C.R.S. and Regulation 4-2-8. In the event the Company is
unable to show such proof, it should provide evidence to the Division of Insurance that it has revised its
forms to correctly reflect requirements for and to include all required coverages for home health care
benefits.




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  Issue E10: Failure to have correct and/or approved different wording in required and
             optional provisions.

Section 10-16-202(1), C.R.S., Required provisions in individual sickness and accident policies, states:

       Except as provided in section 10-16-204, each such policy delivered or issued for delivery to any
       person in this state shall contain the provisions specified in this section in the words in which the
       same appear in this section; except that the insurer, at its option, may substitute for one or more of
       such provisions corresponding provisions of different wording approved by the commissioner
       which are in each instance not less favorable in any respect to the insured or the beneficiary. Such
       provisions shall be preceded individually by the caption appearing in this section or, at the option
       of the insurer, by such appropriate individual or group captions or subcaptions as the
       commissioner may approve.

       (2) A provision as follows: “Entire contract-----changes: This policy, including the endorsements
           and the attached papers, if any, constitutes the entire contract of insurance. No change in this
           policy shall be valid until approved by an executive officer of the insurer and unless such
           approval be endorsed hereon or attached hereto. No agent has authority to change this policy
           or to waive any of its provisions.”

        (3) Provisions as follows: “Time limit on certain defenses:” (a) After two years from the date of
            issue of this policy no misstatements, except fraudulent misstatements, made by the applicant
            in the application for such policy shall be used to void the policy or to deny a claim for loss
            incurred or disability (as defined in the policy) commencing after the expiration of such two-
            year period.”

        (c) If this is an individual disability income insurance policy then no claim for loss incurred or
            disability, as defined in this individual disability income insurance policy, commencing after
            two years from the date of issue of the policy shall be reduced or denied on the ground that a
            disease or physical condition not excluded from coverage by name or a specific description
            effective on the date of loss had existed prior to the effective date of coverage of this policy.

       (4)(a) A provision as follows; “Grace period: A grace period of ……..(insert a number not less
              than ‘7’ for weekly premium policies, ‘10’ monthly premium policies, and ‘31’ for all other
              policies) days will be granted for the payment of each premium falling due after the first
              premium, during which grace period the policy shall continue in force.”

       (b) A policy in which the insurer reserves the right to refuse any renewal shall have, at the
           beginning of the provision referred to in paragraph (a) of this subsection (4), “Unless not less
           than thirty days prior to the premium due date the insurer has delivered to the insured or has
           mailed to the insured’s last address as shown by the records of the insurer written notice of its
           intention not to renew this policy beyond the period for which the premium has been
           accepted,”.

       (5)(a) A provision as follows: “Reinstatement: If any renewal premium is not paid within the
              time granted the insured for payment, a subsequent acceptance of premium by the insurer



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            or by any agent duly authorized by the insurer to accept such premium, without requiring in
            connection therewith an application for reinstatement, shall reinstate the policy. If the
            insurer or such agent requires an application for reinstatement and issues a conditional
            receipt for the premium tendered, the policy will be reinstated upon approval of such
            application by the insurer or, lacking such approval, upon the forty-fifth day following the
            date of such conditional receipt unless the insurer has previously notified the insured in
            writing of its disapproval of such application. The reinstated policy shall cover only loss
            resulting from such accidental injury as may be sustained after the date of reinstatement
            and loss due to such sickness as may begin more than ten days after such date. In all other
            respects the insured and insurer shall have the same rights thereunder as they had under the
            policy immediately before the due date of the defaulted premium, subject to any provisions
            endorsed hereon or attached hereto in connection with the reinstatement. Any premium
            accepted in connection with a reinstatement shall be applied to a period for whic h premium
            has not been previously paid, but not to any period more than sixty days prior to the date of
            reinstatement.” [Emphasis added.]

      (8) A provision as follows: “Proofs of loss: Written proof of loss must be furnished to the
          insurer at its said office in case of claim for loss for which this policy provides any periodic
          payment contingent upon continuing loss within ninety days after the termination of the
          period for which the insurer is liable and in case of claim for any other loss within ninety
          days after the date of such loss. Failure to furnish such proof within the time required shall
          not invalidate nor reduce any claim if it was not reasonably possible to give proof within such
          time, if such proof is furnished as soon as reasonably possible and in no event, except in the
          absence of legal capacity, later than one year from the time proof is otherwise
          required.”[Emphasis added.]

      (10)(a) A provision as follows: “Payment of claims: Indemnity for loss of life will be payable in
              accordance with the beneficiary designation and the provisions respecting such payment
              which may be prescribed herein and effective at the time of payment. If no such
              designation or provision is then effective, such indemnity shall be payable to the estate of
              the insured. Any other accrued indemnities unpaid at the insured’s death may, at the
              option of the insurer, be paid either to such beneficiary or to such estate. All other
              indemnities will be payable to the insured.”

      (12) A provision as follows: “Legal actions: No action at law or in equity shall be brought to
           recover on this policy prior to the expiration of sixty days after written proof of loss has
           been furnished in accordance with the requirements of this policy. No such action shall be
           brought after the expiration of three years after the time written proof of loss is required to
           be furnished.”

      (13)(a) A provision as follows: “Change of beneficiary: Unless the insured makes an
              irrevocable designation of beneficiary, the right to change of beneficiary is reserved to
              the insured and the consent of the beneficiary or beneficiaries shall not be requisite to
              surrender or assignment of this policy or to any change of beneficiary or beneficiaries, or
              to any other changes in this policy.”




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        (b) The first clause of this provision, relating to the irrevocable designation of beneficiary, may
            be omitted at the insurer’s option.

Section 10-16-201.5, C.R.S., Renewability of health benefit plans – modification of health benefit plans,
states:

        (1) A carrier providing coverage under a health benefit plan shall not refuse to renew such plan
            except for the following reasons:

        (d) The carrier elects to discontinue offering and nonrenew all of its individual, small group, or
            large group health benefit plans delivered or issued for delivery in this state. In such case the
            carrier shall provide notice of the decision not to renew coverage to all policyholders and
            covered persons and to the insurance commissioner in each state in which an affected
            individual is known to reside at least one hundred eighty days prior to the nonrenewal of the
            health benefit plan by the carrier. The carrier shall also discontinue and nonrenew all of its
            individual or small or large group health benefit plans in Colorado. Notice to the insurance
            commissioner under this paragraph (d) shall be provided at least three working days prior to
            the notice to the affected individuals. [Emphasis added.]

Section 10-16-203(1), C.R.S., Optional provisions in individual sickness and accident insurance policies,
states:

        Except as provided in section 10-16-204, no individual sickness and accident insurance policy
        delivered or issued for delivery to any person in this state shall contain provisions respecting the
        matters set forth below unless such provisions are in the words in which the same appear in this
        section; except that the insurer may, at its option, use in lieu of any such provision a
        corresponding provision of different wording approved by the commissioner which is not less
        favorable in any respect to the insured or the beneficiary. Any such provision contained in the
        policy shall be preceded individually by the appropriate caption appearing in this section or, at the
        option of the insurer, by such appropriate individual or group captions or subcaptions as the
        commissioner may approve.

        (3) A provision as follows: “Misstatement of age: If the age of the insured has been misstated,
            all amounts payable under this policy shall be such as the premium paid would have
            purchased at the correct age.”

        (9) A provision as follows: “Conformity with state statutes: Any provision of this policy which,
            on its effective date, is in conflict with the statutes of the state in which the insured resides on
            such date is hereby amended to conform to the minimum requirements of such statutes.”

Section 10-16-204,C.R.S., Inapplicable or inconsistent provisions in individual policies of sickness and
accident insurance, states:

        If any provision of part 1 of this article or this part 2 is in whole or in part inapplicable to or
        inconsistent with the coverage provided by a particular form of policy, the insurer, with the
        approval of the commissioner, shall omit from such policy any inapplicable provision or part of a
        provision and shall modify any inconsistent provision or part of the provision in such manner as


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        to make the provision as contained in the policy consistent with the coverage provided by the
        policy. [Emphasis added.]

                           Policy Form No-PALHIC-INDMM-POL-96 CO

A review of the above referenced policy revealed the following:

General Policy Provisions -Page 22

Entire Contract

The contract consists of the following items:

1.      This policy.

2.      Any amendments or endorsements.

3.      The individual application(s) and health statements of the covered persons.

Any statements made by a covered person will, in the absence of fraud, be deemed representations and
not warranties. Only written statements signed by the insured or the covered person will be used in
defense of a claim. A copy of such written statements, if applicable, will be furnished to the insured or
the covered person or his/her beneficiary, if any, if a claim is denied based upon such a statement.

Amendment and Changes

The policy may be amended by PALHIC, but without prejudice to any loss incurred prior to the effective
date of the amendment. To be valid, any change or waiver attached to the policy must be: (1) in writing;
(2) approved by an officer of PALHIC; (3) acknowledged by the insured; and (4) made a part of the
policy. No agent has the authority to change the policy or waive any of its provisions, extend
time for payment of premiums, waive any of our rights or requirements, and no representations by an
agent or any other person shall be binding on the company unless such representation is reduced to
writing and signed by an officer of the company.

The Company has substituted what appear to be corresponding provisions of different wording and also
substituted captions for the “Entire contract-changes” provision. This is allowed only if approved by the
commissioner


General Policy Provisions -Page 23

Grace Period

If PALHIC does not give notice in writing that the policy is to be terminated, the insured is granted a
grace period of 31 days for the payment of any premium falling due after the first premium. During the
grace period the policy coverage remains in force. Eligible claims incurred during the grace period will
be payable upon receipt of the premium due. The policy and all coverage thereunder automatically


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terminates on the last premium due date if the premium is not received during the grace period. If we
refuse to renew all policies of this kind in the state in which the policy was issued or in your class, we
will notify you in writing 30 days in advance of the premium due date at your la st known address in our
file. In this event there is no 31-day grace period. [Emphasis added.]

The Company has substituted what appear to be corresponding provisions of different wording. This is
allowed only if approved by the commissioner. The state ment indicating 30 days advance notice of
nonrenewal is not in compliance with Colorado insurance law.


General Policy Provisions -Page 23

Reinstatement

If a premium is not received within the time granted you for payment, a later acceptance of premium by
us or an authorized agent, without a reinstatement application, shall reinstate the policy. If we require a
reinstatement application and give you a conditional receipt for the premium, the policy will be reinstated
as of the date of such conditional receipt, unless we notify you of our disapproval within 45 days of that
date.

We and you shall have the same rights as before the date of the defaulted premium subject to any
endorsements on or riders attached to the policy in connection with the reinstatement. Any premium
accepted shall be applied to a period for which premium has not previously been paid, but not to any
period more than 60 days prior to the reinstated date. We reserve the right to change the premium mode
in connection with any reinstate ment. [Emphasis added.]

The Company has substituted what appear to be corresponding provisions of different wording that are
not less favorable to the insured or beneficiary and has also added additional wording concerning the right
to change the premium mode in the “Reinstatement” provision. This provision is also incomplete in that
it does not mention the time frames for the reinstated policy to cover loss from injury and sickness. This
is allowed only if approved by the commissioner.


How To File Claims -Page 21

Proof of Loss

Written proof of loss must be furnished to PALHIC at its Home Office or its Administrative Office within
90 days after the date of such loss. Failure to furnish such proof within the time required shall not void or
reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is
furnished as soon as reasonably possible and in no event, except in the absence of legal capacity, later
than one year from the date of loss. [Emphasis added.]

The Company has used the words “from the date of loss” in this provision instead of “from the time proof
is otherwise required”. This would have the effect of changing the time frame allowed for submitting
proof of loss from the fifteen (15) months allowed by Colorado insurance law to twelve (12) months.



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General Policy Provisions -Page 24

Legal Action

No legal action may be brought to obtain benefits under the policy:

        1. for at least 60 days after proof of loss has been furnished; or

        2. after the expiratio n of the applicable statute of limitations from the time written proof of loss
           is required to have been furnished. [Emphasis added.]

The Company has substituted what appear to be corresponding provisions of different wording in the
“Legal action” provision. This is allowed only if approved by the commissioner.


Change of Beneficiary

The “Change of beneficiary” provision was not found in the policy. If the Company intended to omit this
provision, it would need the approval of the commissioner to do this.

                                       Policy No-PAL997IMM-CO

A review of the above referenced policy revealed the following:

“Entire Contract” on Page 45 states:

        The policy and any attached riders or endorsements constitutes the entire contract of insurance
        between you and us. The rights and duties under the policy of us, you and each covered person
        are established by the terms and conditions of the policy. You may act on behalf of each
        covered person concerning coverage provided under the policy. Each act by, agreement with, or
        notice given to you will bind each covered person.

        Any statements made by a covered person will be deemed representations and not warranties.
        Only written statements signed by you or a covered person will be used in defense of a claim. A
        copy of such written statement, if applicable, will be furnished to you or the covered person or
        his/her beneficiary, if any, if a claim is based upon such a statement.

“How Changes to this Policy can be Made” on Page 46 states:

        A change in the terms and conditions of the coverage provided under the policy will be evidenced
        by an amendment. Your consent, or the consent of a covered person or beneficiary, is not
        required prior to the amendment becoming effective. Only our executive officers may give
        consent on our behalf. No agent has authority to waive a complete answer to any question on a
        written application; pass on a person’s insurability; or make, alter, or waive any provision of the
        policy.




                                                    118
Market Conduct Examination
Underwriting – Policy Forms            Provident American Life & Health Insurance Company


The Company has substituted what appear to be corresponding provisions of different wording. This is
allowed only if approved by the commissioner.


“Time Limit on Certain Defenses: on Page 48 states:

•   We cannot void a benefit or deny a claim which begins two years after the covered person’s effective
    date because of misstatements on the application for this policy, unless such misstatements were
    fraudulent; and

•   We cannot reduce a benefit or deny a claim because a condition duly disclosed in the application was
    present before the covered person’s effective date, unless a rider to the policy contains an exclusion
    for that condition.

The Company has substituted what appears to be a corresponding provision of different wording and also
included an additional provision with different wording. This is allowed only if approved by the
commissioner.


“Notice of Claim” on Page 41 states:

        We must be notified of a claim in writing and receive proof of loss within 90 days after the start
        of a claim, or as soon as reasonably possible and in no event, except in the absence of legal
        capacity, later than one year from the time proof is otherwise required. Notification of claim
        should include the following:

•   your name and social security number;

•   policy number;

•   home address; and

•   the physician or hospital bill.

If a claim is made for a covered spouse and/or covered dependent, his/her name and age should be
included.

Send notification of a claim to:

        The Provident
        Claims Department
        P.O. Box 31499
        Tampa, FL 33631-3499




                                                   119
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


The Company has substituted what appears to be corresponding provisions of different wording and failed
to include that “notice given by or on behalf of the insured or the beneficiary to any authorized agent of
the insurer, with information sufficient to identify the insured, shall be deemed notice to the insurer. The
different wording is allowed only if approved by the commissioner and failing to include wording in these
required provisions is not in compliance with Colorado insurance law.


“Notice of Claim” on Page 41 states:

        We must be notified of a claim in writing and receive proof of loss within 90 days after the start
        of a claim, or as soon as reasonably possible and in no event, except in the absence of legal
        capacity, later than one year from the time proof is otherwise required. …

It appears the Company has incorporated the wording of the “Proofs of loss” provision under the caption
“Notice of Claim.” This is allowed only if approved by the commissioner.


“Facility of Payment” on Page 43 states:

        If any benefit is payable to the estate of a person, or to a person, who is a minor or otherwise not
        competent to give a valid release, we may pay the benefit, up to an amount not exceeding $1,000,
        to any relative by blood or connection by marriage of the person who is deemed by us to be
        equitably entitled to the benefit. The amounts so paid will be deemed to be benefits paid under
        the policy and to the extent of such payments, we will be fully discharged from liability under the
        policy.

        The benefits that are payable in accordance with this provision will be charged against any
        applicable maximum payment or benefit of the policy rather than the amount payable in the
        absence of this provision.

It appears the Company has substituted what appears to be corresponding provisions of different wording
and also substituted captions for the “Payment of claims” caption. Also, the reference to a beneficiary is
not reflected and it appears this would be an applicable provision in view of the automatic life coverage of
$7,500 on the primary insured with the option of purchasing for the spouse. It appears the required policy
provision with the caption of “Change of beneficiary” should be in the policy for the same reason,
however it could not be located. The different wording is allowed only if approved by the commissioner
and omitting an applicable required provision is not in compliance with Colorado insurance law.


“Legal Actions are Limited” on Page 48 states:

        A lawsuit to recover on a claim cannot be brought against us until at least 60 days, but no later
        than three years, after proof of loss is required to be filed.




                                                    120
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


It appears the Company has substituted wording that has the result of changing the requirement of this
provision. The use of limiting the time in which a lawsuit can be brought to 60 days after proof of loss is
required to be filed instead of 60 days after written proof of loss has been furnished would require 150
days. If a proof of loss was furnished earlier than 90 days, the time in which a lawsuit could be brought
could be much less than 150 days. This provision is not in compliance with Colorado insurance law.


“Correcting Misstatements” on Page 45 states:

        If any relevant fact about the covered person has been misstated, the true facts will be used to
        determine whether insurance is inforce. If the age of any covered person has been misstated, an
        adjustment in premium or benefits, or both, will be made based on the true facts. No
        misstatement of age will continue insurance otherwise terminated or terminate insurance
        otherwise inforce.

It appears the Company has used a corresponding optional provision and caption of different wording
which is not less favorable in any respect to the insured. [Emphasis added.] This is allowed only if
approved by the commissioner.


“Policy will Conform with State Laws” on Page 45 states:

        Any provision of the policy which does not agree with the laws of the state in which you reside
        on the policy effective date, is automatically changed to agree with the minimum requirements of
        those laws.

It appears the Company has used a corresponding optional provision and caption of different wording
which is not less favorable in any respect to the insured. [Emphasis added.] This is allowed only if
approved by the commissioner.



Recommendation No. 25:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Sections 10-16-201.5, 10-16-202 and 10-16-204, C.R.S. In the event the
Company is unable to show such proof, it should provide evidence to the Division of Insurance that it has
revised its forms to contain the required and optional provisions as worded in the statute or obtain
approval from the commissioner to either omit or use corresponding provisions with different wording.




                                                    121
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


 Issue E11: Failure to reflect in the application the correct type of plan being offered over the
            Internet.

Section 10-3-1104(1)(b), C.R.S., Unfair methods of competition and unfair or deceptive acts
or practices states:

        False information and advertising generally: Making, publishing, disseminating,
        circulating, or placing before the public, or causing, directly or indirectly, to be made,
        published, disseminated, circulated, or placed before the public, in a newspaper,
        magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or
        poster, or over any radio or television station, or in any other way, an advertisement,
        announcement, or statement containing any assertion, representation, or statement
        with respect to the business of insurance, or with respect to any person in the conduct
        of his insurance business, which is untrue, deceptive, or misleading;

The Company’s Application Form MK-79701-APP-Individual-CO, used in Colorado in 1999 to apply for
the HealthAxis plan offered over the internet, has an incorrect description of the plan of insurance being
offered. Provident American did not market any group plans in Colorado in 1999. On the sixth page of
this application, under the “AGREEMENT” (Standard Disclaimer) section, the last sentence states:

        I understand that this group insurance plan is not an employer/employee benefit plan and
        therefore is not subject to COBRA requirements. [Emphasis added.]

This statement does not appear to be correct and therefore could be misleading to any person applying for
the HealthAxis individual plan of insurance that is offered over the internet.



Recommendation No. 26:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-3-1104. In the event the Company is unable to show such proof, it
should provide evidence to the Division of Insurance that it has revised its internet application to indicate
that this is an individual insurance plan instead of a group insurance plan.




                                                    122
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


 Issue E12: Failure to reflect correct type of plan on policy coversheet for indemnity plans.

Section 10-3-1104(1)(b), C.R.S., Unfair methods of competition and unfair or deceptive acts
or practices states:

        False information and advertising generally: Making, publishing, disseminating,
        circulating, or placing before the public, or causing, directly or indirectly, to be made,
        published, disseminated, circulated, or placed before the public, in a newspaper,
        magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or
        poster, or over any radio or television station, or in any other way, an advertisement,
        announcement, or statement containing any assertion, representation, or statement
        with respect to the business of insurance, or with respect to any person in the conduct
        of his insurance business, which is untrue, deceptive, or misleading;

The Company has indicated that Policy Form PAL997IMM-CO, the only policy form used in Colorado in
1999, was used for both Traditional Indemnity and PPO Plans. The Schedule of Benefits pages used
distinguished the type of plan used for HealthAxis Internet Plans, HealthQuest Plus, Solution Plus and
HealthEdge with Traditional Indemnity and PPO Plans being issued under each of these four (4) Plans.
The only Cover Sheet used for the policy appears to be misleading in the following way:

1. It is titled PREFERRED PROVIDER PLAN OF INSURANCE which would not be a correct
   description of the Indemnity Plans.



Recommendation No. 27:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-3-1104, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has revised its policy coversheets to
correctly identify those that are indemnity plans.




                                                    123
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


 Issue E13: Failure to indicate the correct entity responsible for obtaining any necessary
            preauthorization.

Section 10-16-705, C.R.S., Requirements for carriers and participating providers, states:

        (1) In addition to any other applicable requirements of this part 7, a carrier offering a managed
            care plan shall satisfy all the requirements of this section.

        (14) Every contract between a carrier or entity that contracts with a carrier and a participating
             provider for a managed care plan that requires preauthorization for particular services,
             treatments, or procedures shall include:

                                                                                         n
                (a) A provision that clearly states that the sole responsibility for obtai ing any necessary
                    preauthorization rests with the participating provider that recommends or orders said
                    services, treatments, or procedures, not with the covered person;

                                         Policy PAL997IMM-CO

A review of the above referenced policy revealed the following:

Page 3, “Introduction to Your Coverage” states:

        The policy also requires precertification authorization for certain services. A precertification
        penalty will be assessed if precertification authorization is not obtained before a covered person
        receives certain covered expenses. The provider may be willing to obtain precertification,
        however, the covered person is ultimately responsible for obtaining precertification. Please refer
        to the Precertification of Care section for more information.

Page 34, “Precertification of Care” states:

        It is the covered person’s responsibility to precertify. Precertification is required each time a
        covered person expects to incur an expense for one of the above listed items. The covered
        person’s provider may be willing to obtain precertification for the covered person, however, the
        covered person is ultimately responsible for obtaining precertification. To precertify, the covered
        person should call the telephone number listed on the back of your identification card or in the
        provider directory.

These statements in the policy appear to be in direct contradiction of Colorado insurance law that
indicates the sole responsibility for obtaining any necessary preauthorization rests with the participating
network provider recommending or ordering services, not with the covered person.




                                                    124
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


Recommendation No. 28:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-705, C.R.S. In the event the Company is unable to show such
proof, it should provide evidence to the Division of Insurance that it has revised its forms to indicate that
the sole responsibility for obtaining any necessary preauthorization rests with the participating provider
that recommends or orders said services, treatments, or procedures.




                                                     125
Market Conduct Examination
Underwriting – Policy Forms            Provident American Life & Health Insurance Company


 Issue E14: Failure to correctly define coverage for complications of pregnancy.

Section 10-16-104, C.R.S., Mandatory coverage provisions, states:

        (2) Complications of pregnancy and childbirth

        (a) Any sickness and accident insurance policy providing indemnity for disability due to sickness
            issued by an entity subject to the provisions of part 2 of this article and any individual or
            group service or indemnity contract issued by an entity subject to part 3 of this article shall
            provide coverage for a sickness or disease which is a complication of pregnancy or childbirth
            in the same manner as any other similar sickness or disease is otherwise covered under the
            policy or contract. Any sickness and accident insurance policy providing indemnity for
            disability due to accident shall provide coverage for an accident which occurs during the
            course of pregnancy or childbirth in the same manner as any other similar accident is covered
            under the policy

        (b) Any sickness and accident insurance policy providing coverage for sickness on an expense-
            incurred basis shall provide coverage for a sickness or disease which is a complication of
            pregnancy or childbirth in the same manner as any other similar sickness or disease is
            otherwise covered under the policy.

Regulation 4-2-6, Concerning The Definition Of The Term “Complications of Pregnancy” For Use In
Accident And Health Insurance Contracts And Certificates, promulgated under the authority of Sections
10-1-108, 10-1-109, et seq., and 10-3-1101 et. seq., C.R.S., states:

        III.    Rule

        All insurers marketing sickness and accident insurance within the State of Colorado shall employ
        in each insurance policy or certificate of insurance issued covering a resident of the State of
        Colorado a definition of the term “complications of pregnancy” no more restrictive than that
        which follows:

                “Complications of pregnancy” means any disease, disorder or condition whose diagnoses
                are distinct from pregnancy but are adversely affected by pregnancy or are caused by
                pregnancy, and (a) require physician prescribed supervision; and (b) result in a loss or
                expense which would, if not related to pregnancy, be covered by the applicable indemnity
                or expense incurred provisions of the contract.

                                        Policy PAL997IMM-CO

A review of the above referenced policy revealed the following:

Section 1-Definitions
Complications of Pregnancy and Childbirth

Page 6, Item 1 states:



                                                   126
Market Conduct Examination
Underwriting – Policy Forms             Provident American Life & Health Insurance Company


Complications of pregnancy and childbirth include:

        conditions requiring hospital confinement (when the pregnancy is not terminated) whose
        diagnoses are caused by pregnancy or are distinct from pregnancy but are adversely affected by
        pregnancy, which require physician prescribed supervision, and which result in loss or experience
        which would, if not related to pregnancy, be covered by the provisions of this policy. These
        conditions include, but are not limited to:

Page 6, Item 2 states:

        Complications of pregnancy and childbirth shall not include conditions which do not require
        hospital confinement nor conditions associated with the management of a difficult pregnancy,
        including but not limited to:

These definitions of “Complications of Pregnancy and Childbirth” appear to be more restrictive than what
is allowed by Colorado insurance law. To limit coverage to conditions requiring hospital confinement is
not providing coverage in the same manner as any other similar sickness or disease that is otherwise
covered under the policy.



Recommendation No. 29:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-104, C.R.S. and Regulation 4-2-6. In the event the Company is
unable to show such proof, it should provide evidence to the Division of Insurance that it has revised its
forms to reflect the correct definition of the coverage mandated by Colorado insurance law for
complications of pregnancy.




                                                   127
Market Conduct Examination
Underwriting – Policy Forms            Provident American Life & Health Insurance Company


 Issue E15: Failure to allow for life benefits in the event of suicide, as required by Colorado
            insurance law.

Section 10-7-109, C.R.S., Suicide no defense for nonpayment., states:

        The suicide of a policyholder after the first policy year of any life insurance policy issued by any
        life insurance company doing business in this state shall not be a defense against the payment of a
        life insurance policy, whether said suicide was voluntary or involuntary, and whether said
        policyholder was sane or insane. [Emphasis added.] …


Rider PAL997IMM-LIFE/ADD is a Life Insurance And Accidental Death And Dismemberment (AD&D)
Insurance Benefit Rider used by the Company. Life insurance is automatically provided for the Primary
Insured with the option of purchasing for the Spouse.

        Under the heading: “Benefit Limitation Applicable to Life Insurance Benefits” on Page 2, the
        following is stated:

        If a covered person should die by suicide within two years following his/her effective date of
        coverage, our liability shall be limited to the amount of premiums paid for his/her life insurance
        without interest. [Emphasis added.]



Recommendation No. 30:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-7-109. In the event the Company is unable to show such proof, it
should provide evidence to the Division of Insurance that it has revised this Rider to be in compliance
with Colorado insurance law.




                                                   128
Market Conduct Examination
Underwriting – Rating        Provident American Life & Health Insurance Company




                             UNDERWRITING
                                RATING
                               FINDINGS




                                     129
Market Conduct Examination
Underwriting – Rating                     Provident American Life & Health Insurance Company


  Issue F1: Failure to apply a risk modification plan as it was filed with the Division of
            Insurance.

Section 10-16-107(1), C.R.S., Rate regulation – approval of policy forms – benefit certificates –
evidences of coverage – loss ratio guarantees – disclosures on treatment of intractable pain, states:

        Rates for any sickness, accident, or health insurance policy, contract, certificate, or other evidence
        of coverage issued or delivered to any policyholder, enrollee, subscriber, or member in Colorado,
        by an insurer subject to the provisions of part 2 of this article or an entity subject to the provisions
        of part 3 or 4 of this article shall not be excessive, inadequate, or unfairly discriminatory. To
        assure compliance with the requirements of this section that rates are not excessive in relation to
        benefits, the commissioner shall promulgate rules and regulations to require rate filings and, as
        part thereof, may require the submission of adequate documentation and supporting information
        including actuarial opinions or certifications and set loss ratios for loss ratio guarantees.

Regulation 4-2-11, Individual and Group Health Insurance Rate Filings, promulgated under the authority
of Sections 10-1-109, 10-16-107 and 10-16-109, states:

II. Basis and purpose

The purpose of this regulation is to provide and implement rules for the proper filing of rates by
individual and group health insurers, nonprofit hospital and health service corporations, and health
maintenance organizations licensed to conduct business in Colorado.

III. Rules

A. Definitions

        2. “Colorado Health Rate Filing Form” means a form prescribed by the Commissioner which
        must accompany all individual and group health rate filings submitted to the Colorado Division of
        Insurance.

        6. “Premium” means the amount of money charged a policyholder for an insurance policy.

        11. “Risk modification plan” means any rating plan, system or formula whereby a base rate is
        adjusted or modified based on past loss experience, benefits provided, deductibles applied, and
        various risk characteristics or conditions. Modification factors may be expressed as flat amounts
        or percentages including ranges of debits or credits for particular categories. The effect of the
        modification factors is to increase or decrease the base rate.

B. Rate Filing Requirement

        1. Every health carrier, except medicare supplement, long term care and credit health and
        disability carriers, providing individual and group health insurance benefits is required to file the
        rates which is proposes to use. Such filings must state the proposed effective date thereof,
        projected duration of the rates and must indicate the type and the extent of the benefits provided.



                                                     130
Market Conduct Examination
Underwriting – Rating                    Provident American Life & Health Insurance Company


In the review of the Application-Renewal files, it was noted in six (6) files that the 10% surcharge for
smokers was applied to the entire family’s rates instead of just the smoker. This results in the premium
being higher than it should be. The Company’s filing for Policy PALHIC-INDMM-96 reflects that the
10% surcharge is to be applied to the tobacco user’s rate only.

                                       Applications-Renewal Files
  Population        Sample Size         Number of Exceptions              Percentage to Sample
     743               50                          6                              12%



Recommendation No. 31:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-107 and Regulation 4-2-11. In the event the Company is unable
to show such proof, it should provide evidence to the Division of Insurance that it has established
procedures to ensure that the smoker surcharge is applied as it was filed. It is also recommended that the
Company work with the Division of Insurance in recalculating the premiums for all instances in which
only one insured was a tobacco user and the surcharge was applied to the entire family’s rates.




                                                   131
Market Conduct Examination
Underwriting – Rating                      Provident American Life & Health Insurance Company


  Issue F2: Failure to use rates that are not excessive in relation to benefits and failure to use
            rates that are non-discriminatory.

Section 10-16-107(1) C.R.S., Rate regulation - approval of policy forms – benefit certificates – evidences
of coverage – loss ratio guarantees – disclosures on treatment of intractable pain, states:

        Rates for any sickness, accident, or health insurance policy, contract, certificate, or other evidence
        of coverage issued or delivered to any policyholder, enrollee, subscriber, or member in Colorado,
        by an insurer subject to the provisions of part 2 of this article or an entity subject to the provisions
        of part 3 or 4 of this article shall not be excessive, inadequate, or unfairly discriminatory. To
        assure compliance with the requirements of this section that rates are not excessive in relation to
        benefits, the commissioner shall promulgate rules and regulations to require rate filings and, as
        part thereof, may require the submission of adequate documentation and supporting information
        including actuarial opinions or certifications and set loss ratios for loss ratio guarantees.

Section 10-3-1104, C.R.S., Unfair methods of competition and unfair or deceptive acts or practices,
states:

         (1) The following are defined as unfair methods of competition and unfair or deceptive acts or
             practices in the business of insurance:

         (f)(II) Making or permitting any unfair discrimination between individuals of the same class or
                 between neighborhoods within a municipality and of essentially the same hazard in the
                 amount of premium, policy fees, or rates charged for any policy or contract of insurance,
                 or in the benefits payable thereunder, or in any of the terms or conditions of such
                 contract, or in any other manner whatever;

The Company has identified in its rate filings and in marketing material, an initial 12 month rate
guarantee factor of 1.07 that could be purchased as an optional rider. It appears that prior to 11/1/97, the
12 month initial rate guarantee was automatic and there was no additional charge. The Company is now
applying this factor of 1.07 to the premium for the life of the policy although it is only the initial term that
has this option available. After that, there are only six month premium guarantees. The Company is
charging consumers an excessive rate by continuing to charge an additional 7% for a benefit no longer
being provided. This also appears to be unfair discrimination as one consumer is being penalized for
his/her initial decision to take advantage of the offer of an initial rate guarantee while another is not, yet
both are, at each renewal, receiving an automatic 6 month rate guarantee.




                                                      132
Market Conduct Examination
Underwriting – Rating                   Provident American Life & Health Insurance Company


Recommendation No. 32:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Sections 10-3-1104 and 10-16-107, C.R.S. In the event the Company is unable
to show such proof, it should provide evidence to the Division of Insurance that it has established
procedures to ensure that the 12 month rate guarantee factor of 1.07 is applied only for the period, the
initial term, that there is a 12 month rate guarantee. It is also recommended that the Company work with
the Division of Insurance in recalculating the premiums for all instances in which this rate guarantee
factor has been incorrectly applied to renewal policies.




                                                  133
Market Conduct Examination
Underwriting – Applications   Provident American Life & Health Insurance Company




                              UNDERWRITING
                               APPLICATIONS
                                 FINDINGS




                                      134
Market Conduct Examination
Underwriting – Applications             Provident American Life & Health Insurance Company


 Issue G1: Failure to determine if individual policies were being sold to business groups of
           one.

Section 10-8-601.5(1)(c)(I), C.R.S., Applicability and scope, states:

        Effective October 1, 1997, the provisions of this article and article 16 of this title concerning
        small employer carriers and small group plans shall not apply to an individual health benefit plan
        newly issued to a business group of one that includes only a self-employed person who has no
        employees, or a sole proprietor who is not offering or sponsoring health care coverage to his or
        her employees, together with the dependents of such a self-employed person or sole proprietor if,
        pursuant to rules adopted by the commissioner, all of the following conditions are met:

                (A)     As part of the application process, the carrier determines whether or not the
                        applicant is a self-employed person who meets the definition of a business group
                        of one pursuant to section 10-8-602 (2.5).

                (E)     As part of its application form, an individual carrier requires a business group of
                        one self-employed person purchasing an individual health benefit plan pursuant
                        to this subparagraph (I) to read and sign a disclosure form stating that, by
                        purchasing an individual policy instead of a small group policy, such person
                        gives up what would otherwise be his or her right to purchase a business group of
                        one standard, basic, or other health benefit plan from a small employer carrier for
                        a period of three years after the date the individual health benefit plan is
                        purchased, unless a small employer carrier voluntarily permits such person to
                        purchase a business group of one policy within such three-year period. The
                        disclosure form shall also briefly describe the factors used to set rates for the
                        individual policy being purchased in comparison with the factors used to set rates
                        for a business group of one small group policy. The individual carrier shall
                        provide to the business group of one self-employed applicant a copy of the health
                        benefit plan description form for the Colorado standard health benefit plan in
                        addition to the description form for the individual plan being marketed. The
                        disclosure form may be included within any other certification form that the
                        carrier uses for the plan. The division of insurance shall make available a
                        standard plan description form to individual carriers upon request.

                (F)     The application to be filled out by the business group of one self-employed
                        person includes the following certification to be signed and filled out by a
                        representative of the carrier “I, [name of representative], acting on behalf of
                        [name of carrier], certify that the marketing and sale of this individual health
                        benefit plan complies with all of the provisions of section 10-8-601.5 (1) (c) (I),
                        Colorado Revised Statutes, concerning the sale of individual coverage to a
                        business group of one. If this is not the case, I understand that this plan may be
                        regulated as a small group health plan.”. (Deleted by amendment, L. 99, p. 1032,
                        Section 1, effective August 4, 1999.)




                                                   135
Market Conduct Examination
Underwriting – Applications             Provident American Life & Health Insurance Company


Regulation 4-2-19, Concerning Individual Health Benefit Plans Issued To Self-Employed Business
Groups Of One, promulgated pursuant to Sections 10-1-109(1), 10-8-601.5(1)(c)(I) and (3), 10-16-
108.5(8), and 10-16-109, C. R. S., states:

II.     Basis and Purpose

The purpose of this regulation is to establish and implement rules concerning health benefit plans
marketed and/or newly issued to self-employed business groups of one on or after October 1, 1997. In
some cases such plans are exempt from Colorado’s small group guarantee issue laws, pursuant to House
Bill 97-1323 and codified in Section 10-8-601.5(1)(c)(I) to (II), and (3), C.R.S.

III.    Applicability and Scope

This regulation shall apply to individual health benefit plans marketed and/or newly issued to self-
employed business groups of one on or after October 1, 1997.

IV.     Definitions

                A. “Self-employed business group of one” means, pursuant to Section 10-8-
                   601.5(1)(c)(I), C.R.S., that type of business group of one that includes only a self-
                   employed person who has no employees, or a sole proprietor who is not offering or
                   sponsoring health care coverage to his or her employees.

V.      Rules

        A. An individual health benefit plan marketed and/or newly issued on or after October 1, 1997,
           to a self-employed business group of one, together with the dependents of the self-employed
           business group of one, shall be regulated as an individual health benefit plan instead of a
           small group health plan if the carrier issuing such policy, the policy itself, and the application
           for coverage meet all the following conditions:

                1. Pursuant to Section 10-8-601.5(1)(c)(I)(A), C.R.S., the carrier issuing the policy shall
                   determine whether or not the applicant is a self-employed business group of one. A
                   carrier shall meet this requirement by having applicants fill out the “Determination of
                   Self-Employed Business Group of One Form” in Appendix A. A copy of the
                   completed form shall be kept on file with each application. Applicants answering
                   “yes” to all the questions in the form meet the test of a self-employed business group
                   of one. An applicant who does not meet this test falls into one of two categories.
                   Either:

                      a) The applicant is a small employer that is not a self-employed business group of
                         one and thus any plan sold to such person is subject to the small group laws of
                         Colorado, pursuant to Section 10-8-601.5(1)(a); or
                      b) The applicant is neither a small employer, nor a self-employed business group of
                         one, nor any other person covered by the small group laws of Colorado (see
                         Section 10-8-601.5(1), C.R.S.) and thus any plan sold to such person is not



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                subject to this regulation but is subject to the other laws of Colorado relating to
                individual health benefit plans.

            5. The individual carrier, as part of its application form shall require each self-employed
               business group of one to read and sign a disclosure form, as required by Section 10-
               8-601.5(1)(c)(I)(E), C.R.S.

                    a. The form shall include the following statement:

                    “I, (name of applicant), meet the definition of a self-employed business group of
                    one as atteste d to on the accompanying Determination of Self-Employed
                    Business Group of One Form. I understand that by purchasing an individual
                    policy instead of a small group policy I give up what would otherwise be my
                    right to purchase a business group of one Standard, Basic, or other small group
                    health benefit plan from a small employer carrier for a period of three (3) years
                    after the effective date of the individual health benefit plan for which I am
                    applying. I understand that this will be the case unless a small employer carrier
                    voluntarily permits me to purchase a small group policy within such three (3)
                    year period.

                    “I have read the attached comparison of benefits form which shows how the
                    benefits of the plan for which I am applying differs from the Colorado Standard
                    Health Benefit Plans and how the rates differ.”

                    b. The comparison of benefits disclosure form shall be the same as the
                       Colorado Standard Health Benefit Plan (“Standard Plans”) benefit grid
                       shown in Regulation 4-6-5, including all three Standard Plans, with the
                       following modifications:

                        1. Individual health benefit plans that have network benefits (e.g., health
                           maintenance organizations, preferred provider plans, point of service
                           plans) shall add two columns to the form and use those two columns to
                           indicate how the coverage under the individual health benefit plan being
                           marketed compares with each of the benefits under the three Standard
                           Plans. The first column shall be labeled “In-Network Benefits” and the
                           second labeled “Out-of-Network Benefits.” All boxes in the last two
                           columns must be filled in.

                        2. Individual health benefit plans that do not distinguish between in-and
                           out-of-network benefits (e.g., traditional indemnity plans) shall add one
                           column to the form and use that additional column to indicate how the
                           coverage under the individual health benefit plan being marketed
                           compares with each of the benefits under the three Standard Plans. All
                           boxes in the last column must be filled in.




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                                3. A last row shall be added to the forms described in Section V.A.5.b.
                                   above and labeled “Factors that Determine Plan Cost.”

                         (i)        For the three Standard Plans, the boxes shall be filled in as follows: “On
                                    and after January 1, 1998, rates may only be based on plan design,
                                    geographic location of the employer, family composition and age of the
                                    self-employed policyholder, and health care cost trend.”

                         (ii)       For each individual health benefit plan being marketed to self-employed
                                    business groups of one, the statement shall include any and all factors
                                    which may affect rates (e.g., ages of each covered person, geographic
                                    location, smoker/nonsmoker, actual claims experience, health status,
                                    length of time on the policy, gender, pre-existing conditions, health care
                                    cost trend, administrative costs).

                6. The application for coverage shall include the following certification, as required by
                   Section 10-8-601.5(1)(c)(I)(F), C.R.S.:

                     “I,      [name of representative] , acting on behalf of        [name of carrier]
                     certify that the marketing and sale of this individual health benefit plan complies with
                     all of the provisions of Section 10-8-601.5(1)(c)(I), C.R.S., concerning the sale of
                     individual coverage to a business group of one. If this is not the case, I understand
                     that this plan may be regulated as a small group health plan.”

                B.       Material failure by a carrier or its representative to comply with the requirements
                         of Part A of Section V of this regulation will result in policies being sold to self-
                         employed business group of one becoming subject to Colorado’s small group
                         laws.

Amended Regulation 4-2-19, Concerning Individual Health Benefit Plans Issued To Self-Employed
Business Groups Of One, promulgated pursuant to Sections 10-1-109(1), 10-8-601.5(1)(c)(I) and (3), 10-
16-108.5(8), and 10-16-109, C.R.S.

II.     Basis and Purpose

The purpose of this regulation is to establish and implement rules concerning health benefit plans
marketed and/or newly issued to self-employed business groups of one on or after October 1, 1997. In
some cases such plans are exempt from Colorado’s small group guarantee issue laws, pursuant to Section
10-8-601.5(1)(c), (c.5) and (3), C.R.S. The purpose of the 1999 amendments to this regulation is to bring
the regulation into compliance with new statutory provisions contained in Senate Bills 99-69 and 99-114,
and House Bill 99-1371.

III.    Applicability And Scope

This amended regulation shall apply to individual health benefit plans marketed and/or newly issued to
self-employed business groups of one on or after November 1, 1999.



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IV.   Rules

      A.1. Pursuant to Section 10-8-601.5(1)(c)(I)(A), C.R.S., the carrier issuing the policy shall
      determine whether or not the applicant is a self-employed business group of one. A carrier shall
      meet this requirement by having applicants fill out the “Determination of Self-Employed
      Business Group of One Form” in Appendix A. A copy of the completed form shall be kept on
      file with each application. In addition, pursuant to Section 10-16-102(6)(c), C.R.S., a carrier may
      require all business group of one applicants to supply certain tax and withholding documents in
      order to determine if an applicant meets the definition of a business group of one. Applicants
      who answer “yes” to all the questions in the Appendix A form and, if required by the carrier, who
      can document their answers shall be considered to have met the test of a self-employed business
      group of one. An applicant who does not meet this test falls into one of two categories. Either:
      …

                          5. The individual carrier, as part of its application form shall require each
                          self-employed business group of one to read and sign a disclosure form, as
                          required by Section 10-8-601.5(1)(c)(I)(E), C.R.S.

                              a)       The form shall include the following statements:

                                       “Please read and sign the following disclosure required by
                                       Colorado law:

                                                I, (name of applicant) meet the definition of a self-
                                       employed business group of one as attested to on the
                                       accompanying Determination of Self Employed Business Group
                                       of One Form. I understand that by purchasing an individual
                                       policy instead of a small group policy I give up what would
                                       otherwise be my right to purchase, during open enrollment
                                       periods as specified by law, a business group of one Standard,
                                       Basic, or other small group health benefit plan from a small
                                       employer carrier for a period of three (3) years after the effective
                                       date of the individual health benefit plan for which I am
                                       applying. I understand that this will be the case unless a small
                                       employer carrier voluntarily permits me to purchase a small
                                       group policy within such three (3) year period.

                                       I understand that the factors used to set new and renewal rates
                                       for the individual policy I want to purchase consist of [NOTE:
                                       CARRIERS ENTER FACTORS HERE]. By comparison, the
                                       rating factors that would apply if I purchased a small group
                                       business group of one policy are limited to plan design, my age,
                                       overall cost and utilization trends (“index rate’), my family size,
                                       and a factor that reflects the cost of care where I live.




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                                          I have been given a health plan benefit description form showing
                                          the benefits under Colorado’s small group Standard Health
                                          Benefit Plans. I have also been given a Colorado Health Plan
                                          Description Form for the plan for which I am applying.”

                                 b)       Individual carriers may obtain from the Division of Insurance a
                                          Colorado Health Plan Description Form for the state’s Standard
                                          Health Benefit Plans. Carriers may reproduce and distribute this
                                          form in order to comply with the provisions of Section 10-8-
                                          601.5, (1)(c)(I)(E), C.R.S., and paragraph (5)(a) of Section V of
                                          this regulation.

A sample of fifty (50) Application files (New Business) was systematically selected for review. One (1)
of these files could not be located by the Company, reducing the sample to forty-nine (49).

(1) None of the forty-nine (49) files contained any documentation of a determination by the Company as
    to whether or not the applicant was a self-employed person meeting the definition of a business group
    of one.

(2) None of the forty-nine (49) files contained any documentation of a disclosure form provided by the
    Company to be signed by the applicant.

(3) None of the forty-nine (49) files contained documentation that a health benefit plan description form
    for the Colorado standard health benefit plan had been provided to any applicant.

(4) Documentation of the certification by the Company’s representative was required until August 4,
    1999. Twenty-five (25) of the forty-nine (49) files had applications dated prior to August 4, 1999

                   NEW BUSINESS APPLICATION FILES (ITEMS 1 THROUGH 3)
  Population        Sample Size    Number of Exceptions     Percentage to Sample
     354               49                  49                      100%


                          NEW BUSINESS APPLICATION FILES (ITEM 4)
  Population         Sample Size    Number of Exceptions     Percentage to Sample
     354                49                  25                       51%



Recommendation No. 33:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-8-601.5 and Regulation 4-2-19 and Amended Regulation 4-2-19.
In the event the Company is unable to show such proof, it should provide evidence to the Division of
Insurance that it has established procedures to determine if any applicants for individual policies are self-
employed persons meeting the definition of a business group of one. Procedures should also be
established to comply with all requirements of Colorado law in those applicable instances.

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                          UNDERWRITING
             CANCELLATIONS/NON-RENEWALS/DECLINATIONS
                             FINDINGS




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 Issue H1: Failure to reflect the correct number of days allowed for a break in coverage on
           Certificates of Creditable Coverage.

Section 10-16-118, C.R.S., Limitations on preexisting condition limitations, states:

        (1) A health coverage plan that covers residents of this state:

               (b) Shall waive any affiliation period or time period applicable to a preexisting condition
                   exclusion or limitation period for the period of time an individual was previously covered
                   by creditable coverage if such creditable coverage was continuous to a date not more than
                   ninety days prior to the effective date of the new coverage….[Emphasis added.]

Regulation 4-2-18, Concerning The Method of Crediting and Certifying Creditable Coverage For Pre-
Existing Conditions, promulgated by the Commissioner under the authority granted in Sections 10-1-
109(1), 10-16-109 and 10-16-118(1)(b), C.R.S., as amended by Senate Bill 97-54, states:

        III.       Applicability and Scope

         This rule shall apply to all health coverage plans which are issued or renewed on or after
         October 30, 1997.

Note: Originally issued as Emergency Regulation 97-E-6, effective July 31, 1997.

        V.         Rules

                   A. Application of federal laws concerning creditable coverage

                   1. The method for crediting and certifying creditable coverage for determining pre-
                      existing condition limitations, as required by Section 10-16-118(1)(b), C.R.S., shall
                      be as set forth in federal regulations promulgated pursuant to HIPAA, with the
                      following exceptions:

                           b. Where Colorado law exists on the same subject and has different
                              requirements that are not pre-empted by federal law, Colorado law shall
                              prevail.

                   B. Exception: Minimum ninety (90) day gap for creditable coverage

                   Colorado law requires health coverage plans to waive any exclusionary time periods
                   applicable to a pre-existing condition exclusion or limitation period for the period of time
                   an individual was previously covered by creditable coverage if such creditable coverage
                   was continuous to a date not more than ninety (90) days prior to the effective date of the
                   new coverage. [Emphasis added.] Colorado law prevails over the federal regulations.

The population consisted of all individual plans terminated in 1999. A systematically selected sample




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of fifty (50) files was chosen for review. The Company automatically generates and mails a Certificate of
Prior Coverage when a plan of insurance is terminated. This form reflects the following:

        7. If the individual(s) identified in items 2 and 4 has at least 18 months of creditable coverage
           (disregarding period of coverage before a 63-day break,) check here and skip items 8 and 9.

Colorado law prevails over the federal regulations and indicates creditable coverage may be credited and
certified if such creditable coverage was continuous to a date not more than ninety (90) days prior to the
effective date of the new coverage.


                           INDIVIDUAL PLANS TERMINATED IN 1999
    Population       Sample Size      Number of Exceptions    Percentage to Sample
       104                 50                 50                      100%



Recommendation No. 34:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-118, C.R.S. and Regulation 4-2-18. In the event the Company is
unable to show such proof, it should provide evidence to the Division of Insurance that it has established
procedures to ensure that Certificates of Creditable Coverage reflect correct information concerning the
number of days allowed for a break in coverage under Colorado insurance la w.




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 Issue H2: Failure to send Certificates of Creditable Coverage within the time frame allowed
           by the Division of Insurance.

Senate Bill 97-054, Section 1. Legislative declaration, states:

         The general assembly hereby finds, determines, and declares that the intent of this legislation
is solely to bring Colorado statutes into compliance with the provisions of the federal “Health
Insurance Portability and Accountability Act of 1996”, where Colorado laws do not already meet or
exceed the minimum requirements of the federal act…:

Regulation 4-2-18, Concerning The Method of Crediting and Certifying Creditable Coverage
For Preexisting Conditions, promulgated by the Commissioner under the authority granted in
Sections 10-1-109(1), 10-16-109, and 10-16-118(1)(b), C.R.S., as amended by Senate Bill
97-54, states:

        III.    Applicability and Scope

        This rule shall apply to all health coverage plans which are issued or renewed on or
        after October 30, 1997.

        V.      Rules

                A. Application of federal laws concerning creditable coverage

                1. The method for crediting and certifying creditable coverage for
                    determining pre-existing condition limitations, as required by Section 10-
                    16-118(1)(b), C.R.S., shall be as set forth in federal regulations
                    promulgated pursuant to HIPAA, with the following exceptions:

                         a. Those exceptions specifically enumerated in this regulation; and

                         b. Where Colorado law exists on the same subject and has different
                            requirements that are not pre-empted by federal law, Colorado
                            law shall prevail.

                2. The federal regulations found in 45 C.F.R. 146.113(a)(3), (b) and (c); 45
                    C.F.R. 146.115; 45 C.F.R. 146.117; 45 C.F.R. 146.119(b); and 45 C.F.R.
                    146.125 (a)(3), (b), (d) and (e) adopted by the Department of Health and
                    Human Services are hereby incorporated by reference, and shall have the
                    force of Colorado law, in accordance with Section 24-4-103(12.5),
                    C.R.S. These federal regulations concern methods of counting creditable
                    coverage, requirements concerning a health plan’s duty to provide
                    certificates of creditable coverage to insureds, special enrollment periods,
                    the effective dates for certification requirements, transition rules for
                    counting creditable coverage, and transition rules for certificates of
                    creditable coverage.. This rule does not include la ter amendments to, or
                    editions of, the above-referenced regulations.


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                    Interested parties are encouraged to refer to the summary and
                    supplementary information concerning the incorporated regulations
                    which begins in Volume 62, number 67, page 16894 of the Federal
                    Register, April 8, 1997, for assistance in interpreting the federal
                    regulations.

The population consisted of all individual plans terminated in 1999. A systematically
selected sample of fifty (50) files was selected for review. The seven (7) exceptions represent
instances in which the Certificates of Creditable Coverage were not sent within the required
time frame after termination.


                           INDIVIDUAL PLANS TERMINATED IN 1999
  Population        Sample Size     Number of Exceptions   Percentage to Sample
     104               50                    7                     14%



Recommendation No. 35:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Regulation 4-2-18. In the event the Company is unable to show such proof, it
should provide evidence to the Division of Insurance that it has revised its procedures to ensure that
Certificates of Creditable Coverage are sent within the time frame allowed by the Colorado Division
of Insurance.




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  Issue H3: Failure to advise of eligibility for Colorado Uninsurable Health Insurance Plan to
            applicants declined for coverage because of medical conditions or history.

Section 10-8-503, C.R.S., Definitions, As used in this part 5, unless the context otherwise requires:

(16)    “Plan” means the Colorado uninsurable health insurance plan created by this part 5.

Section 10-8-513, C.R.S., Eligibility for coverage under the plan

(1)     Except for those individuals who meet the criteria set forth in subsection (2) of this section, any
        individual who is a resident of this state and who has been residing in the United States under the
        color of law for at least six months, including children who have been placed for adoption, as
        defined in section 10-16-104 (16.5) or are under the legal guardianship of a resident of Colorado,
        shall be eligible for coverage under the plan, if such individual is able to provide evidence
        satisfactory to the administering carrier that such individual meets one of the following
        conditions:

(a)     Such individual has applied to a carrier for a health benefit plan and:

(I)     Such application has been rejected or refused because of the health or medical condition of the
        applicant; or
(II)    Such application has been accepted, but at a premium rate exceeding the rate available through
        the plan; or
(III)   Such application was accepted with a reduction or exclusion of coverage for a pre-existing
        medical or health condition for a period exceeding six months.
(b)     Such individual has a history of any medical or health condition that is on the list, if any, adopted
        by the board pursuant to section 10-8-506(1) (g.5).
(c)     Such individual has had a health benefit plan involuntarily terminated by a carrier in this state for
        any reason other than nonpayment of a premium or premiums.

Section 10-8-521, Notice to residents, states:

If any individual who is a resident of this state applies to a carrier for a health benefit plan and the carrier
responds to such application as described in section 10-8-513(1)(a), the carrier shall give the individual
written notice that the individual may be eligible for coverage under the plan, including information about
available benefits, exclusions, and premium subsidies, and the name, address, and telephone number of
the plan.

Amended Regulation 4-6-3, Concerning Colorado Uninsurable Health Insurance Plan Standardized
Notice Form and Eligibility Requirements, promulgated by the Commissioner of Insurance under the
authority of Sections 10-1-109 and 10-8-520, C.R.S., states:

III.    Rules

B.      Notification Requirements for Individuals with Adverse Underwriting Decisions




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In order to comply with Section 10-8-521, C.R.S., all insurers giving notice to an applicant or insured of
one or more of the following adverse underwriting determinations shall be required to give notice to the
applicant or insured that he or she may be eligible for coverage under the Colorado Uninsurable Health
Insurance Plan. The adverse underwriting decisions which require the insurer to notify the
applicant/insured are:

1.      The applicant is rejected for insurance because of the medical condition or history of the
        applicant; or

2.      The premium rate for insurance exceeds the rate available through the Colorado Uninsurable
        Health Insurance Plan; or

3.      Coverage will be reduced by a restrictive rider or by the exclusion of coverage for a pre-existing
        condition for longer than six months.

Insurers shall be required to complete the Uninsurable Health Plan Notice Form for every adverse
underwriting determination listed above. Insurers may print the Uninsurable Health Plan Notice Form on
their own stationery but shall use the order, format and content of the Uninsurable Health Plan Notice
Form, as prescribed by the Commissioner of Insurance.

The insurer shall attach a copy of the Uninsurable Health Plan Notice Form to the notice of adverse
underwriting determination sent to an applicant for insurance. The insurer shall attach a copy of the
Notice Form to a copy of the policy and endorsement when it is sent to the insured in the case of an
individual being accepted for health insurance coverage but at a premium rate exceeding the rate available
through the CUHIP plan.

C.      Elements of the Uninsurable Health Plan Notice Form:

The elements of notification as determined by the Commissioner which must be given to individuals with
adverse underwriting decisions:

1.      Applicant/Insured’s Name

2.      Policy # (if applicable)

3.      Reasons for notice: rejection of coverage, health rate higher than the rate available through
        CUHIP or coverage that will be reduced by a restrictive rider or by excluding coverage for a pre-
        existing condition longer than six months.

4.      Name, address, contact person and phone number of CUHIP Administering Carrier to whom
        interested persons should be referred.

5.      Name and phone number of underwriter or other contact at the insurer’s office.

6.      You may receive information about the available cuhip benefits and exclusions by contacting the
        cuhip administering carrier.



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The population consisted of all the applications that had been declined by the Company in 1999. A
systematic sample of fifty (50) files was chosen for review. The Company was unable to locate six (6) of
the files, thereby reducing the sample to forty-four (44) files. These files were all declined because of the
medical condition or history of the applicant and none of the files contained the required notification
requirement for individuals with adverse underwriting decisions.


                           Individual Applicants Declined Coverage in 1999
    Population         Sample Size       Number of Exceptions           Percentage to Sample
       118                44                       44                           100%



Recommendation No. 36:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-8-521, C.R.S. and Amended Regulation 4-6-3. In the event the
Company is unable to show such proof, it should provide evidence to the Division of Insurance that it has
revised its procedures to ensure notification of eligibility under the Colorado Uninsurable Health
Insurance Plan in applicable instances.




                                                    148
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Cancellations/Non-renewals/Declinations            Provident American Life & Health Insurance Company



 Issue H4: Failure to notify declined Business Groups of One of the availability of coverage
           under a small group policy.

Section 10-8-601.5(1)(c) C.R.S., Applicability and scope, states:

        Effective October 1, 1997, the provisions of this article and article 16 of this title concerning
        small employer carriers and small group plans shall not apply to an individual health benefit plan
        newly issued to a business group of one that includes only a self-employed person who has no
        employees, or a sole proprietor who is not offering or sponsoring health care coverage to his or
        her employees, together with the dependents of such a self-employed person or sole proprietor if,
        pursuant to rules adopted by the commissioner, all of the following conditions are met:

        (A) As part of the application process, the carrier determines whether or not the applicant is a
            self-employed person who meets the definition of a business group of one pursuant to section
            10-8-602 (2.5).

        (B) If the applicant is a business group of one self-employed person, the carrier accepts or rejects
            such person and, if such person is applying for family coverage, accepts or rejects the entire
            family unless the applicant waives coverage for a family member who has other coverage in
            effect.

        (C) For at least the first three years after the initial effective date of the policy, the percentage
            increase in rates upon renewal for plans sold to business groups of one remains the same as
            the average percentage increase in rates upon renewal for an individual health carrier's entire
            book of individual health benefit plans sold to business groups of one in Colorado, excluding
            changes attributable to demographics.

        (D) If the carrier rejects an application for a business group of one self-employed person and the
            carrier does business in both the individual and small group markets, the carrier shall notify
            the applicant of the availability of coverage through the small group market and of the
            availability of small group coverage through the carrier.

        (E) As part of its application form, an individual carrier requires a business group of one self-
            employed person purchasing an individual health benefit plan pursuant to this subparagraph
            (I) to read and sign a disclosure form stating that, by purchasing an individual policy instead
            of a small group policy, such person gives up what would otherwise be his or her right to
            purchase a business group of one standard, basic, or other health benefit plan from a small
            employer carrier for a period of three years after the date the individual health benefit plan is
            purchased, unless a small employer carrier voluntarily permits such person to purchase a
            business group of one policy within such three-year period. The disclosure form shall also
            briefly describe the factors used to set rates for the individual policy being purchased in
            comparison with the factors used to set rates for a business group of one small group policy.
            The individual carrier shall provide to the business group of one self-employed applicant a




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             copy of the health benefit plan description form for the Colorado standard health benefit
             plan in addition to the description form for the individual plan being marketed. The
             disclosure form may be included within any other certification form that the carrier uses for
             the plan. The division of insurance shall make available a standard plan description form to
             individual carriers upon request.

Regulation 4-2-19, Concerning Individual Health Benefit Plans Issued To Self-Employed Business
Groups of One, promulgated pursuant to Sections 10-1-109(1), 10-8-601.5(1)(c)(I) and (3), 10-16-
108.5(8), and 10-16-109, C.R.S., states:

III.    Applicability and Scope

This regulation shall apply to individual health benefit plans marketed and/or newly issued to self-
employed business groups of one on or after October 1, 1997.

IV.     Definitions

        A. “Self-employed business group of one” means, pursuant to Section 10-8-601.5(1)(c)(I),
           C.R.S., that type of business group of one that includes only a self-employed person who has
           no employees, or a sole proprietor who is not offering or sponsoring health care coverage to
           his or her employees.

V.      Rules

       A.      An individual health benefit plan marketed and/or newly issued on or after October 1,
       1997 to a self-employed business group of one, together with the dependents of the self-employed
       business group of one, shall be regulated as an individual health benefit plan instead of a small
       group health plan if the carrier issuing such policy, the policy itself, and the application for
       coverage meet all the following conditions:

            1. Pursuant to Section 10-8-601.5(1)(c)(I)(A), C.R.S., the carrier issuing the policy shall
             determine whether or not the applicant is a self-employed business group of one. A carrier
             shall meet this requirement by having applicants fill out the “Determination of Self-
             Employed Business Group of One Form” in Appendix A. A copy of the completed form
             shall be kept on file with each application. Applicants answering “yes” to all the questions
             in the form meet the test of a self-employed business group of one. An applicant who does
             not meet this test falls into one of two categories. Either:

             a) The applicant is a small employer that is not a self-employed business group of one and
             thus any plan sold to such person is subject to the small group laws of Colorado, pursuant to
             Section 10-8-601.5(1)(a), C.R.S.;

            2. Pursuant to Section 10-8-601.5(1)(c)(I)(B), C.R.S., the carrier issuing the individual
            health benefit plan coverage shall accept or reject a self-employed business group of one who
            applies for coverage and, if such person is applying for family coverage, his/her entire family
            (all dependents), unless the applicant waives coverage for a family member who has other
            coverage in effect. A carrier shall meet this family coverage requirement by:


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                 a)      Asking each self-employed business group of one applicant requesting coverage
            for himself/herself and one or more dependents for the names of all his/her dependents;

                b)       Where the applicant waives coverage for a family member, keeping on file with
            the application a signed statement from the applicant that he/she is waiving coverage for a
            dependent because that person already has other coverage in effect and shall state what that
            coverage is and when it became effective; and

                 c)       Where a self-employed business group of one is rejected for individual coverage
            because one or more family members fail to meet normal and actuarially-based underwriting
            criteria, the carrier shall clearly state this as part of the reason for the denial and shall notify
            the applicant in writing of the availability of coverage for his/her whole family under a small
            group policy.

            3. If, pursuant to Part V.A.2 of this regulation, a carrier rejects a self-employed business
            group of one for coverage under an individual plan, and if that same carrier sells coverage in
            both the individual and small group markets, then the carrier shall make small group coverage
            available to those self-employed business groups of one it rejects for individual coverage, as
            required by Section 10-8-601.5(1)(c)(I)(D), C.R.S. This offer shall be in writing and shall be
            included as part of the denial of individual coverage letter. A copy of the denial letter and the
            offer of small group coverage shall be maintained by the carrier on file with the original
            application.

            4. A carrier issuing an individual health benefit plan to a self-employed business group of
            one shall abide by the rating restrictions described in Section 10-8-601.5(1)(c)(I)(C), C.R.S.

            Accordingly:

             a. All self-employed business groups of one holding individual policies issued by the same
            carrier shall, during the first three years after the effective date of coverage, receive the same
            annual percentage rate increase upon renewal, adjusted for changes in demographic
            characteristics of covered self-employed business groups of one. This shall apply regardless
            of the particular policy purchased by such individuals, the date the policy was issued, or the
            actual claims experience on the plan of a particular self-employed business group of one.

            b. To calculate a renewal rate increase for a self-employed business group of one covered
            by an individual health benefit plan, a carrier shall calculate an annual average of the renewal
            rate percentage increases for all the individual health benefit plans sold to self-employed
            business groups of one as of the date of this calculation. The average shall be based on the
            total number of policyholders (both self-employed business groups of one and others covered
            by the same plan) on each plan as of the date of this calculation and the annual percentage
            rate increase each policyholder received, excluding increases attributable to changes in
            demographics.

            c. Renewal rate restrictions shall be applied on an annualized basis.




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        5. The individual carrier, as part of its application form shall require each self-employed business
        group of one to read and sign a disclosure form, as required by Section 10-8-601.5(1)(c)(I)(E),
        C.R.S.

            a. The form shall include the following statement:

                “I, (name of applicant), meet the definition of a self-employed business group of one as
                attested to on the accompanying Determination of Self-Employed Business Group of One
                Form. I understand that by purchasing an individual policy instead of a small group
                policy, I give up what would otherwise be my right to purchase a business group of one
                Standard, Basic, or other small group health benefit plan from a small employer carrier
                for a period of three (3) years after the effective date of the individual health benefit plan
                for which I am applying. I understand that this will be the case unless a small employer
                carrier voluntarily permits me to purchase a small group policy within such three (3) year
                period.

                “I have read the attached comparison of benefits form which shows how the benefits of
                the plan for which I am applying differs from the Colorado Standard Health Benefit Plans
                and how the rates differ.”

            b. The comparison of benefits disclosure form shall be the same as the Colorado Standard
               Health Benefit Plan (“Standard Plans”) benefit grid shown in Regulation 4-6-5, including
               all three Standard Plans, with the following modifications:
               1. Individual health benefit plans that have network benefits (e.g., health maintenance
               organizations, preferred provider plans, point of service plans) shall add two columns to
               the form and use those two columns to indicate how the coverage under the individual
               health benefit plan being marketed compares with each of the benefits under the three
               Standard Plans. The first column shall be labeled “In-Network Benefits” and the second
               labeled “Out-of Network Benefits.” All boxes in the last two columns must be filled in.
               2. Individual health benefit plans that do not distinguish between in and out-of-network
               benefits (e.g., traditional indemnity plans) shall add one column to the form and use that
               additional column to indicate how the coverage under the individual health benefit plan
               being marketed compares with each of the benefits under the three Standard Plans. All
               boxes in the last column must be filled in.

                3. A last row shall be added to the forms described in Section V.A.5.b above and labeled
                “Factors that Determine Plan Cost.”

        (i) For the three Standard Plans, the boxes shall be filled in as follows: “On and after January 1,
1998, rates may only be based on plan design, geographic location of the emplo yer, family composition
and age of the self-employed policyholder, and health care cost trend.”

         (ii) For each individual health benefit plan being marketed to self-employed business groups of
one, the statement shall include any and all factors which may affect rates (e.g., ages of each covered
person, geographic location, smoker/nonsmoker, actual claims experience, health status, length of time on
the policy, gender, pre-existing conditions, health care cost trend, administrative costs).



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Cancellations/Non-renewals/Declinations              Provident American Life & Health Insurance Company



       6. The application for coverage shall include the following certification, as required by Section
10-8-601.5(1)(c)(I)(F), C.R.S.:

        “I, ____[name of representative]____, acting on behalf of_______[name of carrier]______,
        certify that the marketing and sale of this individual health benefit plan complies with all of the
        provisions of Section 10-8-601.5(1)(c)(I), C.R.S., concerning the sale of individual coverage to a
        business group of one. If this is not the case, I understand that this plan may be regulated as a
        small group health plan.”

Amended Regulation 4-2-19, Concerning Individual Health Benefit Plans Issued to Self-Employed
Business Groups Of One, promulgated pursuant to Sections 10-1-109(1), 10-8-601.5(1)(c)(I) and (3), 10-
16-108.5(8), and 10-16-109, C.R.S., states:

        III.       Applicability And Scope

        This amended regulation shall apply to individual health benefit plans marketed and/or newly
        issued to self-employed business groups of one on or after November 1, 1999.

        V.         Rules

         (A)(1)          Pursuant to Section 10-8-601.5(1)(c)(I)(A), C.R.S., the carrier issuing the policy
        shall determine whether or not the applicant is a self-employed business group of one. A carrier
        shall meet this requirement by having applicants fill out the “Determination of Self-Employed
        Business Group of One Form” in Appendix A. A copy of the completed form shall be kept on
        file with each application. In addition, pursuant to Section 10-16-102(6)(c), C.R.S., a carrier may
        require all business group of one applicants to supply certain tax and withholdin g documents in
        order to determine if an applicant meets the definition of a business group of one. Applicants
        who answer “yes” to all the questions in the Appendix A form and, if required by the carrier, who
        can document their answers shall be considered to have met the test of a self-employed business
        group of one. An applicant who does not meet this test falls into one of two categories. ….

               5. The individual carrier, as part of its application form shall require each self-employed
               business group of one to read and sign a disclosure form, as required by Section 10-8-
               601.5(1)(c)(I)(E), C.R.S.

                           a)      The form shall include the following statements:

                                   Please read and sign the following disclosure required by Colorado law:

                                            I, ___(name of applicant)___, meet the definition of a self-
                                            employed business group of one as attested to on the
                                            accompanying Determination of Self-Employed Business Group
                                            of One Form. I understand that by purchasing an individual
                                            policy instead of a small group policy I give up what would
                                            otherwise be my right to purchase, during open enrollment
                                            periods as specified by law, a business group of one Standard,



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Cancellations/Non-renewals/Declinations            Provident American Life & Health Insurance Company



                                          Basic, or other small group health benefit plan from a small
                                          employer carrier for a period of three (3) years after the effective
                                          date of the individual health benefit plan for which I am
                                          applying. I understand that this will be the case unless a small
                                          employer carrier voluntarily permits me to purchase a small
                                          group policy within such three (3) year period.

                                          I understand the factors used to set new and renewal rates for the
                                          individual policy I want to purchase consist of [NOTE:
                                          CARRIERS ENTER FACTORS HERE]. By comparison, the
                                          rating factors that would apply if I purchased a small group
                                          business group of one policy are limited to pla n design, my age,
                                          overall cost and utilization trends (“index rate”), my family size,
                                          and a factor that reflects the cost of care where I live.

                                          I have been given a health plan benefit description form showing
                                          the benefits under Colorado’s small group Standard Health
                                          Benefit Plans. I have also been given a Colorado Health Plan
                                          Description Form for the plan for which I am applying.”

                        b)               Individual carriers may obtain from the Division of Insurance a
                        Colorado Health Plan Description Form for the state’s Standard Health Benefit
                        Plans. Carriers may reproduce and distribute this form in order to comply with
                        the provisions of Section 10-8-601.5,(1)(c)(I)(E), C.R.S., and paragraph (5)(a) of
                        Section V of this regulation.

As there were no disclosure forms to determine if the applicants in any of the forty-four (44) declined
files was a self-employed business group of one. It appears that the Company did not make this
determination as required by Colorado insurance law. This failure to make the determination is addressed
in the Application Section of the examination. All of the applicants were rejected for individual coverage
because one or more family members were uninsurable due to medical history. It is apparent from the
occupations listed on the applications that some of the applicants were self-employed business groups of
one and when rejected for individual coverage should have been notified of the availability of coverage
under a small group policy. There is no evidence of notification in any of the files. As there is no
documentation as to how many of the applicants were self-employed business groups of one, it was not
possible to develop an error percentage.



Recommendation No. 37:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-8-601.5 and Regulation 4-2-19 and Amended Regulation 4-2-19. In
the event the Company is unable to show such proof, it should provide evidence to the Division of
Insurance that it has revised its procedures to ensure that business groups of one, declined because one or
more family members fail to meet normal and actuarially-based underwriting criteria, are notified of the
availability of coverage under a small group policy.


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Claims                       Provident American Life & Health Insurance Company




                                   CLAIMS
                                  FINDINGS




                                     155
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Claims                                  Provident American Life & Health Insurance Company


 Issue J1: Failure to accurately determine the number of days utilized for processing claims.

Section 10-3-1110(2), C.R.S., Regulations, states:

        The commissioner may, after notice and hearing, as provided in article 4 of title 24, C.R.S.,
        promulgate rules and regulations with respect to the payment of benefits under group and
        individual contracts of accident and sickness coverage and under group and individual contracts
        for property or casualty coverage, except for property and casualty coverage provided pursuant to
        the “Colorado Auto Accident Reparations Act”, part 7 of article 4 of this title, issued by
        organizations authorized to do business in this state under the provisions of articles 4 and 8 and
        parts 1, 3, and 4 of article 16 of this title. Such rules and regulations may establish a penalty
        payable to the claimant on benefit payments which are delayed more than sixty days after a valid
        and complete filing of the claim unless there is a reasonable dispute between the parties
        concerning such claim. Such penalty shall not exceed twenty dollars on claims of less than one
        hundred dollars or interest at a rate of eight percent annually on claims above one hundred
        dollars. In addition to such penalties payable to the claimant, the commissioner, after notice and
        hearing, may assess a civil penalty against any insurer of one hundred dollars per day for each
        day benefit payments are delayed more than sixty days after a valid and complete filing of the
        claim unless there is a reasonable dispute between the parties concerning such claim.

Regulation 4-2-7, Concerning the payment of Monetary Penalties by Commercial Insurance Companies,
Nonprofit Hospital and Health Service Corporations, Health Maintenance Organizations and Property and
Casualty Insurance Companies for Failure to Promptly Pay Claims for Services, promulgated under the
authority of 10-1-108(8), 10-1-109 and 10-3-1110, C.R.S., states:

        IV.     Penalty

                 A. Whenever it is brought to the attention of the Division of Insurance whether by
        written complaint, investigation, examination or other means, that any insurer has failed to pay a
        claim under any sickness and accident and property and casualty insurance policy within 60 days
        after the date a valid and complete claim has been received by the insurer, and unless there is a
        reasonable dispute between the insurer and the insured concerning the claim, the Commissioner
        may impose a monetary penalty to be paid by the insurer to the insured. Such penalty shall be no
        more than $20.00 in the case of claims of $100. or less. In the case of claims of $100. or more,
        the amount of such penalty shall be 8 percent annual interest on the amount of the claim, from the
        date a valid and complete claim has been received by the insurer until the date the claim is paid
        by the insurer. For the purpose of imposing a penalty under this regulation, a claim shall be
        considered to have been received:

                1. On the date the claim is logged in by the insurer, if the insurer has a regular practice of
                logging in claims as they are received, or

                2. An earlier date if the insured can offer credible evidence that the claim was received
                   by the insurer on an earlier date than indicated in (1) above. Any penalty imposed
                   under this regulation will be applied to the portion of the claim ultimately owed
                   which is not paid within the 60 day time limit.



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        V.      General Provisions

                C. In order to comply with this regulation, the insurer must mail or otherwise, deliver the
                benefit check to the insured or the provider, within the 60 day time period. If a benefit
                check is issued but not mailed or delivered within the 60 day time period, the insurer will
                be deemed to be in violation of this regulation.

The data being entered into the Company’s claim system and used for computing the days from receipt of
a claim until the check is mailed to the claimant (processing time) is producing an incorrect number of
days. Any information provided by this system in response to an inquiry to determine if any claims
exceeded the required sixty (60) days to process would produce incorrect information.

If the claim is initially received by a repricing entity, the Company calculates the claim processing time,
using the date the repricing sheet is actually received at the Company to the date the adjuster has reached
a determination of the claim and released the benefit or denial of benefit. The check prints the day of
release and is mailed the following day. The Company uses the date the check is printed for calculation
of the processing days instead of using the date mailed. This would always be short by one day and by
two days if on the day before a holiday and three days if the determination was entered on a Friday with a
holiday on Monday. Additionally the system is excluding non-working days from the calculation and
Colorado insurance law requires that calendar days be used for this computation. The procedures
described above result in an inability to accurately track the number of days utilized for payment of
claims and to determine those on which late payment penalties would apply.

Carriers cannot avoid their statutory obligations regarding the amount of time allowed for processing
claims without a penalty being due when an intermediary repricer is the entity initially receiving the
claim.



Recommendation No. 38:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-3-1110(2), C.R.S. and Regulation 4-2-7. In the event the Company
is unable to show such proof, it should provide evidence to the Division of Insurance that it has revised its
procedures to ensure the actual days used to pay a claim can be determined from information entered into
its system.




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Claims                                     Provident American Life & Health Insurance Company


 Issue J2: Failure to process claims within the required sixty (60) days.

Section 10-3-1104, C.R.S., Unfair methods of competition and unfair or deceptive acts or practices states:

        (1) The following are defined as unfair methods of competition and unfair or deceptive acts or
            practices in the business of insurance:

               (f)(II) Unfair discrimination: Making or permitting any unfair discrimination between
               individuals of the same class or between neighborhoods within a municipality and of
               essentially the same hazard in the amount of premium, policy fees, or rates charged for any
               policy or contract of insurance, or in the benefits payable thereunder, or in any of the terms or
               conditions of such contract, or in any other manner whatever;

               (h) Unfair claim settlement practices: Committing or performing, either in willful violation
                   of this part 11 or with such frequency as to indicate a tendency to engage in a general
                   business practice, any of the following:

               (V)     Failing to affirm or deny coverage of claims within a reasonable time after proof of
                       loss statements have been completed;

Section 10-3-1110(2), C.R.S., Regulations, states:

               The commissioner may, after notice and hearing, as provided in article 4 of title 24, C.R.S.,
               promulgate rules and regulations with respect to the payment of benefits under group and
               individual contracts of accident and sickness coverage and under group and individual
               contracts for property or casualty coverage, except for property and casualty coverage
               provided pursuant to the “Colorado Auto Accident Reparations Act” part 7 of article 4 of this
               title, issued by organizations authorized to do business in this state under the provisions of
               articles 4 and 8 and parts 1, 3, and 4 of article 16 of this title. Such rules and regulations may
               establish a penalty payable to the claimant on benefit payments which are delayed more than
               sixty days after a valid and complete filing of the claim unless there is a reasonable dispute
               between the parties concerning such claim. Such penalty shall not exceed twenty dollars on
               claims of less than one hundred dollars or interest at a rate of eight percent annually on claims
               above one hundred dollars. In addition to such penalties payable to the claimant, the
               commissioner, after notice and hearing, may assess a civil penalty against any insurer of one
               hundred dollars per day for each day benefit payments are delayed more than sixty days after
               a valid and complete filing of the claim unless there is a reasonable dispute between the
               parties concerning such claim.

Regulation 4-2-7, Concerning the payment of Monetary Penalties by Commercial Insurance Companies,
Nonprofit Hospital and Health Service Corporations, Health Maintenance Organizations and Property and
Casualty Insurance Companies for Failure to Promptly Pay Claims for Services, promulgated under the
authority of Sections 10-1-108(8), 10-1-109 and 10-3-1110, C.R.S., states, in part:

        (II)         PURPOSE AND SCOPE

        Under 10-3-1104(1)(h), C.R.S., all persons as defined in 10-3-1102(3) C.R.S. are obligated to


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      promptly pay claims under insurance policies. 10-3-1110(2) C.R.S. authorizes the commissioner
      to promulgate rules and regulations with respect to the payment of benefits under group and
      individual contracts of sickness and accident coverage and to first party claims under individual
      contracts for property or casualty coverage, except for property and casualty coverage provided
      pursuant to the “Colorado Auto Accident Reparations Act’, issued by organizations authorized to
      do business in this state under the provisions of Articles 4, 8, 16, and 17 of Title 10, C.R.S. That
      section further provides that the Commissioner may impose against such organizations which fail
      to pay claims within 60 days, monetary penalties payable to the insured of up to $20.00 in case of
      a claim of less than $100.00 and 8 percent interest per annum in claims over $100. The purpose
      of this regulation is to describe the procedure and the circumstances under which such penalties
      will be imposed.

      (III)     DEFINITIONS

            As used in this rule, unless the context otherwise requires:

                (1) “Insurer” means those organizations which are authorized to do business in this state
                    under the provisions of Articles 4,8,16, and 17 of Title 10, C.R.S.

      (IV)      PENALTY

                (A) Whenever it is brought to the attention of the Division of Insurance whether by
                written complaint, investigation, examination or other means, that any insurer has failed
                to pay a claim under any sickness and accident and accident and property and casualty
                insurance policy within 60 days after the date a valid and complete claim has been
                received by the insurer, and unless there is a reasonable dispute between the insurer and
                the insured concerning the claim, the Commissioner may impose a monetary penalty to
                be paid by the insurer to the insured. Such penalty shall be no more than $20.00 in the
                case of claims of $100.00 or less. In the case of claims of $100.00 or more, the amount
                of such penalty shall be 8 percent annual interest on the amount of the claim, from the
                date a valid and complete claim has been received by the insurer until the date the claim
                is paid by the insurer. For the purpose of imposing a penalty under this regulation, a
                claim shall be considered to have been received:

            1. On the date the claim is logged in by the insurer, if the insurer has a regular practice of
               logging in claims as they are received, or

            2. An earlier date if the insured can offer credible evidence that the claim was received by
               the insurer on an earlier date than indicted in (1) above. Any penalty imposed under this
               regulation will be applied to the portion of the claim ultimately owed which is not paid
               within the 60 day time limit.

      (V)       GENERAL PROVISIONS

                (C)      In order to comply with this regulation, the insurer must mail or otherwise deliver
                the benefit check to the insured or the provider, within the 60 day time period. If a
                benefit check is issued but not mailed or delivered within the 60 day time period, the


                                                    159
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Claims                                  Provident American Life & Health Insurance Company


                insurer will be deemed to be in violation of this regulation. All claims must be paid
                promptly. The fact that a claim is paid within 60 days does not necessarily establish that
                the claim has been paid promptly or within a reasonable time as required by 10-3-
                1104(1)(h)(V) and (VI), C.R.S.

A systematically selected sample of 100 paid claims and 100 denied/closed-out claims was selected for
review. Five (5) of the paid claims could not be located which reduced this sample to ninety-five (95).
The sample of denied/closed claims consisted of sixty-seven (67) denied files and thirty-three (33) closed-
out files. Three (3) of the closed-out files could not be located which reduced this sample to ninety-seven
(97) files.

Nineteen (19) paid claim files had a turnaround time that exceeded sixty (60) days after receipt of a valid
and complete claim. The date of receipt used by the examiners was the earliest date of (1) the imprinted
receipt date by Sloans Lake on the claim form (if legible) or (2) the date entered by Sloans Lake on the
Claim Cover Sheet, or (3) the receipt date stamp of Provident American Life & Health Insurance
Company, or (4) the date entered on the Araz repricing sheet. An additional day was added to the
calendar day calculation and if the final action date was on a Friday, two (2) additional day(s) were added
to the calendar day calculation. This was done because the Company has indicated that the checks were
mailed the next business day after the final (last action) date. During the course of the examination the
Company made all applicable interest payments and provided documentation of this to the examiners.

The nineteen (19) paid claim exceptions represent files in the following categories:

        1.      System reflected processing time in excess of 60 days and no interest paid-7 Files

        2.      System reflected processing time in excess of 60 days and no interest due as payment
                applied to the deductible -1 file.

        3.      System reflected processing time of less than 60 days that exceeded 60 days when using
                correct method of calculation with no interest paid-11 files

                                 PAID CLAIMS PROCESSED IN 1999
       Population              Sample Size  Number of Exceptions                  Percentage to Sample
         17,961                   95                   19                                 20%


Seven (7) denied claim exceptions represent files in the following category:

        1.       System reflected processing time of less than 60 days that exceeded 60 days when using
                 correct method of calculation.

One (1) closed-out claim exception represents a file in the following category:

        1.       The time elapsed between the Company’s initial receipt of the claim and the date
                 of the first request to the provider for additional information exceeded 60 days.



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Claims                                 Provident American Life & Health Insurance Company


                                DENIED CLAIMS PROCESSED IN 1999
       Population              Sample Size  Number of Exceptions                 Percentage to Sample
         9,554                    97                   8                                 8%




Recommendation No. 39:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Sections 10-3-1104, 10-3-1110, C.R.S. and Regulation 4-2-7. In the event
the Company is unable to show such proof, it should provide evidence to the Division of Insurance
that it has implemented procedures to ensure that valid and complete claims are affirmed or denied
within the time frame established by Colorado insurance law. Procedures should also be established
to ensure that the processing of requests for additional information necessary to adjudicate the claim
are requested within the time frame established by Colorado insurance law.




                                                   161
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Claims                                 Provident American Life & Health Insurance Company


 Issue J3: Failure to process claims accurately in all instances.

Sections 10-3-1104, C.R.S., Unfair methods of competition and unfair or deceptive acts or practices,
states:

        (1)(f)(II) Making or permitting any unfair discrimination between individuals of the same class or
        between neighborhoods within a municipality and of essentially the same hazard in the amount of
        premium, policy fees, or rates charged for any policy or contract of insurance or in the benefits
        payable thereunder, or in any of the terms or conditions of such contract, or in any other manner
        whatever;

Section 10-16-104, C.R.S., Mandatory coverage provisions, states:

        (11) Child health supervision services

        (a) For purposes of this subsection (11), unless the context otherwise requires, “child health
        supervision services” means those preventive services and immunizations required to be provided
        in basic and standard health benefit plans pursuant to section 10-16-105 (7.2), to dependent
        children up to age thirteen. ….

        (b) An individual, small group, or large group health benefit plan issued in Colorado or covering
        a Colorado resident that provides coverage for a family member of the insured or subscriber, shall
        as to such family member’s coverage, also provide that the health insurance benefits applicable to
        children include coverage for child health supervision services up to the age of thirteen. Each
        such plan shall, at a minimum, provide benefits for preventive child health supervision services.
        A plan described in this paragraph (b) may provide that child health supervision services rendered
        during a periodic review shall only be covered to the extent such services are provided during the
        course of one visit by or under the supervision of a single physician, physician’s assistant, or
        registered nurse.

        (c) Benefits for child health supervision services shall be exempt from a deductible or dollar limit
        provision in any individual, small group, or large group health benefit plan issued in Colorado or
        covering a Colorado resident and such exemption shall be explicitly stated in such a plan. Any
        copayment or coinsurance applicable to the benefits received during the course of one visit
        pursuant to paragraph (b) of this subsection (11) shall not exceed the copayment or coinsurance
        payment applicable to a physician visit. ….

Regulation 4-6-5, promulgated pursuant to Sections 10-1-109, C.R.S., 10-16-105(7.2), C.R.S., and 10-16-
108.5(8), C.R.S., states:

CURRENT RECOMMENDATIONS FOR ROUTINE IMMUNIZATION OF INFANTS AND
CHILDREN IN THE UNITED STATES




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Recommended                     Immunizations
Age

4-6 years                       DTP, Polio
                                DTaP may be used

4-20 years                      MMR

                                 PAID CLAIMS PROCESSED IN 1999
        Population             Sample Size   Number of Exceptions                Percentage to Sample
          17,961                  95                    5                                 5%

A systematically selected sample of ninety-five (95) paid claim files was reviewed. The five (5)
exceptions shown represent the following instances in which it appears claims were not processed
accurately:

1.     An overpayment of $6.45 occurred as a result of the claims examiner paying on the $60.00
amount charged for an office visit instead of the repriced amount of $53.55

2.       The claims examiner considered a physical therapy benefit in the amount of $10.00 under
chiropractic benefit (limited to 3 modalities/services per day) and denied the charge as being excluded by
the policy. During the examination the Company sent the claimant a letter and corrected EOB reflecting the
$10.00 amount being applied to the claimant’s deductible.

3.      An overage of $14.90 was applied to this claimant’s deductible as a result of the claims examiner
not entering the network discount for the charge on the processing screen. The charged amount of $63.00
was applied instead of the repriced amount of $48.10.

4.       The claims examiner entered an amount of $13.00 to be applied to the deductible, instead of the
correct amount of $42.50. The Company corrected this on July 17, 2000 and issued an adjustment.

5.      The claims examiner entered the place of service as “physician’s office” instead of the correct
“independent laboratory”. For this plan, the repriced amount of $41.93 was subject to the deductible if lab
and diagnostic tests were performed and/or billed outside the physician’s office. This resulted in a payment
of $41.93 made to the claimant instead of being applied to the deductible.




Recommendation No. 40:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Sections 10-3-1104 and 10-16-104, C.R.S. In the event the Company is
unable to show such proof, it should provide evidence to the Division of Insurance that it has
established procedures to ensure equitable payment of claims as stated in its insurance plans and as
mandated by Colorado insurance law.



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Market Conduct Examination
Utilization Review            Provident Ame rican Life & Health Insurance Company




                             UTILIZATION REVIEW
                                  FINDINGS




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Market Conduct Examination
Utilization Review                     Provident Ame rican Life & Health Insurance Company


 Issue K1: Failure to provide, in all instances, written or electronic notification of
           certification or adverse determinations for utilization review decisions.

Section 10-16-112(2), C.R.S., Private utilization review – health care coverage entity responsibility,
states:

       Any private utilization review organization providing services to an insurance carrier, nonprofit
       hospital and health care service corporation, or health maintenance organization regulated
       pursuant to the provisions of this article is the direct representative of the insurance carrier,
       nonprofit hospital and health care service corporation, or health maintenance organization. Any
       insurance carrier, nonprofit hospital and health care service corporation, or health maintenance
       organization is responsible for the actions of any private utilization review organization acting
       within the scope of any contract and on its behalf within the scope of any contract which result in
       any violation of this title or any rules or regulations promulgated by the commissioner.

Regulation 4-2-17, Prompt Investigation of Health Plan Claims Involving Utilization Review,
promulgated pursuant to Sections 10-1-109, 10-3-1107, 10-3-1110, and 10-16-109, C.R.S., states:

       Section 6.       Procedures For Review Decisions

       B. For prospective review determinations, a health carrier shall make the determination within
       two (2) working days of obtaining all necessary information regarding a proposed admission,
       procedure or service requiring a review determination. For purposes of this section, “necessary
       information” includes the results of any face-to-face clinical evaluation or second opinion that
       may be required.

                    1) In the case of a determination to certify an admission, procedure or service, the
                    carrier shall notify the provider rendering the service by telephone within one (1)
                    working day of making the initial certification; and shall provide written or electronic
                    confirmation of the telephone notification to the covered person and/or the provider
                    within two (2) working days of making the initia l certification.

                    2) In the case of an adverse determination, the carrier shall notify the provider
                    rendering the service by telephone within one (1) working day of making the adverse
                    determination; and shall provide written or electronic confirmation of the telephone
                    notification to the covered person and the provider within one (1) working day of
                    making the adverse determination.

       C. For concurrent review determinations, a health carrier shall make the determination within
       one (1) working day of obtaining all necessary information.

                        1) In the case of a determination to certify an extended stay or additional
                    services, the carrier shall notify by telephone the provider rendering the service
                    within one (1) working day of making the certification; and shall provide written or
                    electronic confirmation to the covered person and/or the provider within one (1)
                    working day after the telephone notification. The written notification shall include



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Market Conduct Examination
Utilization Review                      Provident Ame rican Life & Health Insurance Company

                    the number of extended days or next review date, the new total number of days or
                    services, approved, and the date of admission or initiation of services.

                    2) In the case of an adverse determination, the carrier shall notify by telephone the
                    provider rendering the service within one (1) working day of making the adverse
                    determination; and shall provide written or electronic notification to the covered
                    person and the provider within one (1) working day of the telephone notification.
                    The service shall be continued without liability to the covered person until the
                    covered person and the provider rendering the service have been notified of the
                    determination.

        D. For retrospective review determinations, a health carrier shall make the determination within
           thirty (30) working days of receiving all necessary information.

                1) In the case of a certification, the carrier may notify in writing the covered person and
                the provider rendering the service.

                2) In the case of an adverse determination, the carrier shall notify in writing the
                provider rendering the service and the covered person within five (5) working days of
                making the adverse determination.

It was noted in seven (7) files in which Utilization Review was performed for Provident American Life &
Health Insurance Company, that no notification letters of certification or adverse determination were sent.
These files involved both certifications and adverse determinations.

Colorado insurance law requires written or electronic notification in all cases of certification and adverse
determinations.



Recommendation No. 41:

Within 30 days, the Company should provide documentation demonstrating why it should not be
considered in violation of Section 10-16-112 and Regulation 4-2-17. In the event the Company is unable
to show such proof, it should establish procedures to ensure that notification is sent in all cases of
utilization review certification and adverse determinations.




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Market Conduct Examination
Summary of Issues/Rec's. Locator Provident American Life & Health Insurance Company

                    SUMMARY OF ISSUES AND RECOMMENDATIONS

                                      ISSUES                                            Rec.   Page
                                                                                        No.     No.
 COMPANY OPERATIONS/MANAGEMENT – FINDINGS
 Failure to maintain an access plan document containing or describing all rights         1      19
 and responsibilities required by law.
 Failure to include all required provisions in contracts between                         2      31
 carriers/intermediaries/providers.
 Failure to file a summary of anti-fraud efforts in 1999 with annual report.             3      32
 Failure to maintain all records necessary for a market conduct examination.             4      35
 Failure to respond in all instances to written requests for information, material or    5      38
 comment forms within the time period required by Colorado insurance law.
 Failure to file documentation of compliance and data on number of Business              6      39
 Groups of One that were covered.
 Failure to maintain copies of all intermediary health care subcontracts.                7      40
 MARKETING AND SALES - FINDINGS
 Failure to display on marketing materials a notice advising of the availability of      8      43
 the Colorado Comprehensive Health Benefit Plan Description Form.
 Failure to disclose availability of an access plan in marketing material.               9      44
 Failure to use correct format and complete information in Colorado                      10     70
 Comprehensive Health Plan Description Forms.
 Failure to use sufficiently clear content in internet advertising to avoid a            11     74
 tendency to be misleading.
 Failure to use sufficiently clear content in marketing brochures to avoid a             12     78
 tendency to mislead.
 COMPLAINTS - FINDINGS
 Failure to maintain a complete record of all consumer complaints received.              13     80
 Failure to include all required information in the complaint record.                    14     82
 PRODUCERS - FINDINGS
 Failure to determine that all producers were properly licensed prior to                 15     85
 solicitation of insurance.
 UNDERWRITING - POLICY FORMS - FINDINGS
 Failure to file an Annual Report of policy forms in 1999 and failure to file prior      16     92
 to use.
 Failure to clearly and correctly disclose the required conditions of renewability.      17     95
 Failure to allow benefits for attempted suicide or self-inflicted injuries sustained    18     97
 by an insane person.
 Failure to adequately disclose benefits for hospital and anesthesia for dental          19    100
 procedures for dependent children.
 Failure to include complete mandated coverages available for diabetics.                 20    102
 Failure to correctly define the requirements to qualify as a dependent.                 21    103
 Failure to include complete mandated child health supervision services.                 22    105
 Failure to state correctly, clearly or completely the extent of coverage for            23    110
 Hospice Care.
 Failure to indicate correct requirements and benefits for home health care              24    112
 services.

                                                   167
Market Conduct Examination
Summary of Issues/Rec's. Locator Provident American Life & Health Insurance Company

                                       ISSUES                                             Rec.   Page
                                                                                          No.     No.
 Failure to have correct and/or approved different wording in required and                 25     121
 optional provisions.
 Failure to reflect in the application the correct type of plan being offered over         26    122
 the Internet.
 Failure to reflect correct type of plan on policy coversheet for indemnity plans.         27    123
 Failure to indicate the correct entity responsible for obtaining any necessary            28    125
 preauthorization.
 Failure to correctly define coverage for complications of pregnancy.                      29    127
 Failure to allow for life benefits in the event of suicide, as required by Colorado       30    128
 insurance law.
 UNDERWRITING – RATING - FINDINGS
 Failure to apply a risk modification plan as it was filed with the Division of            31    131
 Insurance.
 Failure to use rates that are not excessive in relation to benefits and failure to use    32    133
 rates that are non-discriminatory.
 UNDERWRITING - APPLICATION FILES - FINDINGS
 Failure to determine if individual policies were being sold to business groups of         33    140
 one.
 UNDERWRITING - CANCELLATIONS/NON-RENEWALS5
 DECLINATIONS – FINDINGS
 Failure to reflect the correct number of days allowed for a break in coverage on          34    143
 Certificates of Creditable Coverage.
 Failure to send Certificates of Creditable Coverage within the time frame                 35    145
 allowed by the Division of Insurance.
 Failure to advise of eligibility for Colorado Uninsurable Health Insurance Plan           36    148
 to applicants declined for coverage because of medical conditions or history.
 Failure to notify declined Business Groups of One of the availability of coverage         37    154
 under a small group policy.
 CLAIMS – FINDINGS
 Failure to accurately determine the number of days utilized for processing                38    157
 claims.
 Failure to process claims within the required sixty (60) days.                            39    161
 Failure to process claims accurately in all instances.                                    40    163
 UTILIZATION REVIEW – FINDINGS
 Failure to provide, in all instances, written or electronic notification of               41    166
 certification or adverse determinations for utilization review decisions.




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Market Conduct Examination
Submission Page                   Provident American Life & Health Insurance Company



                        Independent Market Conduct Examiners

                           Sarah S. Malloy, CIE, AIRC, PAHM

                               Sandra J. Rich, AIE, ALHC

                                      Contracting with
                            The Colorado Division of Insurance
                                  1560 Broadway, Suite 850
                                  Denver, Colorado 80202
           participated in this examination and in the preparation of this report.




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