Alert
Insurance Law Alert
04.13.2020

Executive Order No. 123 became effective on adoption on April 9, 2020, extending grace periods during which certain insurance companies, including health insurers, life insurers, and property and casualty insurers, will not be able to cancel policies for nonpayment of premiums is linked below.  The Executive Order makes the following changes:

  • Extends minimum grace periods: A minimum 60-day grace period will be required for health and dental insurance policies, and a minimum 90-day grace period will be required for life insurance, insurance premium-financing arrangements, and property and casualty insurance, which includes auto, homeowners, and renters insurance. Insurance companies will be required to notify policyholders of this emergency grace period and to waive certain late fees, interest, or other charges associated with delays in premium payments as directed by the Commissioner of Banking and Insurance. Insurers will also be required to provide each policyholder with an easily readable written description of the terms of the extended grace period.  The extended grace periods will not apply to employer-funded health plans, which under federal law, are regulated exclusively by the federal government.
  • Requires insurance companies to pay claims during the grace period:Insurance companies will be required to pay any claim incurred during the emergency grace period that would be covered under the policy. The Order further prohibits insurance companies from seeking recoupment of any claims paid during the emergency grace period based on non-payment of premiums.  
  • Ensures that unpaid premiums are made payable over a lengthy period: To ensure that policyholders are not required to make a lump sum payment on unpaid premiums at the end of the grace period, any unpaid premium will be amortized over the remainder of the policy term or a period of up to 12 months, as appropriate and as directed by the Commissioner of Banking and Insurance.  

The Order will take effect immediately and is linked here

Within a few short hours of issuance of the Executive Order, Commissioner Marlene Caride of the State of New Jersey Department of Banking and Insurance (Commissioner) issued 7 Insurance Bulletins Nos. 11-17) to implement the Executive Order 123.  The Bulletins were all effective on April 10, 2020 and apply to: Individual health insurance policies (Bulletin No. 11), small employer health insurance plans (Bulletin No. 12), Large employer group health insurance plans (Bulletin No. 13), Medicare Supplement health insurance plans (Bulletin No. 14), property/casualty insurance policies (Bulletin No. 15), life insurance contracts (Bulletin No. 16), and premium finance agreements (Bulletin No. 17).  Each provides greater guidance as to extension of grace periods and transition at the end of the extension periods to timely payment of premiums by the various insured groups.

Bulletin No. 20-17 directs Insurance premium finance companies to: 

  • Waive late payment fees, finance charges, and delinquency charges otherwise due, and not report late payments to credit rating agencies, during the 90-day period;
  • Allow premiums due but not paid during the 90-day period to be paid over either 12 months or the remainder of the current policy term, whichever is longer, except that a premium finance company may provide a longer repayment period; and
  • Ensure that late payments during the 90-day period are not considered in any future premium calculations at any time.

The extended grace periods described above  apply to policyholders that were in good standing with their insurance carrier on March 1, 2020.  This grace period is intended to be applied to all installment payments, including renewal down payments, provided that the insured provides notice to the insurer that the insured wishes to continue coverage.  If renewal is due during the term of the grace period, the contract can be renewed with the same terms with client approval, even if the client has not paid the installment during the grace period. The grace period is not intended to change the terms of the issued policy or be considered a forgiveness of installment payments.  Rather, the insurance premium finance company must grant COVID-19 impacted clients an extended grace period for the payment of installments due without penalty or interest.  

Bulletin No. 20-15 directs carriers issuing property/casualty policies  to:

  • Waive late payment fees otherwise due, and not report late payments to credit rating agencies, during the 90-day period;
  • Allow premiums due but not paid during the 90-day period to be paid over the remainder of the current policy term or up to 12 months in up to 12 equal installments, whichever is longer, except that an insurer may permit a longer repayment period; and
  • Ensure that late payments during the 90-day period are not considered in any future premium calculations at any time (i.e. applicable late payments should not be counted for any rating, pricing, tiering attributes, or similar underwriting categories).

As with all other grace periods subject to the Commissioner’s Bulletins, this grace period is intended to be applied to all installment payments, including renewal down payments, provided that the insured provides notice to the insurer that the insured wishes to continue coverage and is not intended to change the terms of the issued policy or be considered a forgiveness of the premium.  Rather, the insurer must grant the policyholder an extended grace period for the payment of premium due without penalty or interest.

In Bulletin No. 20-16, the Department directs all licensed life insurers to provide their policyholders or certificate holders who may be experiencing a financial hardship due to COVID-19 with at least a 90-day grace period to pay life insurance and annuity contracts premiums so that insurance policies or contracts are not cancelled for nonpayment of premium during this challenging time due to circumstances beyond the control of the insured.  A policyholder may elect this 90-day emergency grace period to begin retroactively on April 1, 2020 or opt for the grace period to begin on May 1, 2020.  During this extended grace period, life insurance companies cannot cancel any insurance policy for nonpayment of premium.

Insurers are directed to:

  • Waive late payment fees otherwise due, including any interest permitted pursuant to N.J.S.A.17B:25-3, and not report late payments to credit rating agencies, during the 90day period;
  • Allow premiums due but not paid during the 90-day period to be paid over the course of the following year in up to 12 equal installments, except that an insurer may permit a longer repayment period; and
  • Extend to 90 days the period to exercise policyholder and contract holder rights and benefits under life insurance and annuity contracts.

The extended grace periods described above applies to policyholders that were in good standing with their insurance carrier on March 1, 2020 and  is intended to be applied to premiums due after the initial premium has been made to secure coverage. It is not intended to change the terms of the issued policy or contract or be considered a forgiveness of the premium.  Rather, the insurer must grant the policyholder or certificate holder an extended grace period for the payment of premium due without penalty or interest.

In addition to posting information on their website,  insurers must provide each policyholder with an easily readable written description of the terms of the extended grace period offered pursuant to this guidance, which shall be submitted to the Department through the System for Electronic Rates and Forms Filing (“SERFF”) as an informational filing.  In addition, to eliminate the need for in person payment methods, in order to protect the safety of workers and customers, all agents, brokers, and other licensees who accept premium payments on behalf of insurers must take steps to ensure that customers able to make payments have the ability to make prompt insurance payments through alternate methods of payment, such as online payments.

Department Bulletins Nos. 11, 12, 13 and 14, each apply to a different health insurance marketplace.  Bulletin No. 20-11 relates to  standard individual health benefits plans  which currently include a 31-day grace period, with the grace period increased to 90 days when the individual policyholder is receiving advanced premium tax credits (“APTC”).  This bulletin requires an extension of these grace periods for each circumstance as described below.   

With respect to individual market policyholders that do not receive APTC, the current 31day grace period must be extended to a period of at least 60 calendar days.  During this period, a carrier may not terminate a policy for nonpayment of premium.  A policyholder may elect this emergency grace period to begin retroactively on April 1, 2020 or opt for the grace period to begin on May 1, 2020.  During this extended grace period, coverage must remain in force and claims may not be pended.   

With respect to individual market policyholders that receive APTCs, currently the federally required grace period is 90 days.  If a policyholder fails to timely make payments, issuers must pay all appropriate claims for services rendered to the policyholder during the first month of the three-month grace period and may pend claims for services rendered to the enrollee in the second and third months.  The Centers for Medicare and Medicaid Services (CMS) recently issued guidance1 related to the COVID-19 emergency, which permits carriers to delay this 90-day grace period for one or more months if premiums are not paid.  Therefore, the Department is requiring carriers to provide a one-month delay of initiation of the 90-day grace period for any policyholders that have missed a premium payment.  The one-month delay may begin retroactively on April 1, 2020 or may begin on May 1, 2020 as the policyholder determines. During this one-month delay, carriers must pay claims.  After the one-month delay of the grace period, the currently required 90-day grace period will begin, as provided under federal guidance.  

The extended grace periods described above shall apply to policyholders that were in good standing with their insurance carrier on March 1, 2020 and shall apply to premiums due after the initial premium has been made to secure coverage. 

After the extended grace period, policyholders must be offered the option of amortizing any unpaid premium over the remaining months of the policy.  For example, if 6 months are remaining on the policy, the policyholder must be given the option to pay the unpaid premium in 6 installments in addition to the regular monthly premium.   

Significantly, carriers are directed that they are not to seek recoupment from policyholders for the cost of claims incurred during this extended grace period.  Carriers shall not report late payments to credit reporting agencies, consistent with this guidance, for policyholders taking advantage of COVID-19-related relief.  Carriers are further directed to, in addition to posting information on the carrier’s website, provide each policyholder with an easily readable written description of the terms of the extended grace period offered pursuant to this guidance,  which shall be submitted as an informational filing to the Department at lifehealth@dobi.nj.gov.

After the emergency grace period, a policyholder must be offered the option of amortizing any unpaid premium over the remaining months of the policy, but for not less than six months.  For example, if six months are remaining on the policy, the policyholder must be given the option to pay the unpaid premium in six installments in addition to the regular monthly premium.  If less than six months remain on the policy, the carrier must allow at least six months for the deferred premium to be paid.

In the small employer market, i.e. an employer  who employed an average of at least 1 but not more than 50 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year, the mandates go beyond grace period extensions.  2020 Renewals Carriers must deem all small employers that have group plans with anniversary dates occurring during the month of March through the end of the state of emergency period as eligible for renewal.

Carriers must rescind the termination notices that may already have been sent to small employers for small employer health benefits plans with anniversary dates occurring during the month of March and through the end of the state of emergency period.  Those small employers shall be deemed eligible.  If a group wishes to terminate its small employer health benefits plan(s), the small employer must submit a written termination letter to the carrier prior to the renewal date.  Carriers must delay renewal reviews as may be necessary during the state of emergency.  Thus, when groups are renewing in 2021 and the business days in 2020 are reviewed, the State of Emergency period must be excluded from review.  

A small employer that lays off one or more employees may seek to re-hire those employees once business resumes operations.  Carriers must waive any applicable waiting period that would apply to employees who were laid off after March 1, 2020 and again become full time employees eligible for health insurance under the small employer’s policy. 

The Bulletin No. 20-12 also impacts the so-called “Actively at Work or Active Work Requirement”.   Since the Health Insurance Portability and Accountability Act (HIPAA), the active work requirement has not applied when absence from work is due to health status-related factors.  “Health status” is one such factor.  When a temporary lay-off or furlough is the result of a government declaration of a public health emergency requiring small employer businesses to close or substantially reduce hours, and non-essential employees are directed to stay home generally to mitigate the spread of a virus and the consequent health effects of it, then it is reasonable to determine failure to be actively at work under these circumstances is due to health status and is thus a health status related factor under HIPAA.   

Carriers may consider the public health emergency as health status.   Thus, employees who are furloughed or temporarily laid off during this public health emergency are not required to be found ineligible due to not being actively at work.   Employers who continue to cover furloughed or temporarily laid-off employees must remit the required premium for such coverage to the carrier. 

Carriers also must relax the full-time requirement to allow continued employee coverage for employees whose hours have been reduced.  The reduced hour requirements would apply only to employees who are currently covered and whose hours have been reduced.  By relaxing the full-time requirements, the employee may remain covered under the group policy without having to elect COBRA.   

Finally, the Bulletin extends the  Grace Period applicable under small employer policies.  Carriers shall make available an emergency 60-day grace period to any small employer that requests it.  The grace period may be initially applied towards the April or May premium as the policyholder determines and will continue for 60 calendar days from that date.   During this emergency grace period, a carrier shall not terminate that policy for nonpayment of premium.  Coverage must remain in force and claims must be paid and may not be pended.  If a carrier has already provided a policyholder with a legally required grace period for April 2020 premiums, the time period for which a grace period has already been granted shall be applied toward the emergency grace period. This 60-day grace period shall only apply to policyholders that were in good standing with their insurance carrier on March 1, 2020 and shall only apply to premiums due after the initial premium has been made to secure coverage.   

After the 60-day emergency grace period, a policyholder must be offered the option of amortizing any unpaid premium over the remaining months of the policy, but for not less than six months.  For example, if six months are remaining on the policy, the policyholder must be given the option to pay the unpaid premium in six installments in addition to the regular monthly premium.  If less than three months remain on the policy, the carrier must allow at least six months for the deferred premium to be paid. 

As in the individual marketplace, small employer carriers are directed that they are not to seek recoupment from any policyholder for any claims incurred during this emergency grace period.  Carriers shall not report late payments to credit reporting agencies, consistent with this guidance, for policyholders taking advantage of COVID19-related relief. 

Carriers are further directed to, in addition to posting information on the carrier’s website, provide each small employer policyholder with an easily readable written description of the terms of the extended grace period offered pursuant to this guidance.  Carriers must also report to the Department the manner in which they will comply with the bulletin concurrent with those changes taking effect.  All carrier changes must be uniformly applied to all small employer health benefits plans to which the changes would be applicable.  Carriers are directed to file this information with the Department as noted in the other bulletins.

Carriers currently evaluating large groups (groups of 51 or more) with renewals occurring later this year will need to consider one or more of the following provisions related to Covid-19. 

As a result of furlough, lay-off or reduced hours, some employees may elect COBRA.  Some laid off employees may elect individual coverage through the Marketplace where they qualify for a subsidy.  Employers may fail the participation requirement with the result being non-renewal of the large group policy.  To avoid negative impact to the employer group, carriers must deem all employers that have policies with anniversary dates occurring during the month of March through the end of the state of emergency period as eligible for renewal.  Carriers must rescind termination notices that may already have been sent to employers with anniversary dates occurring during the month of March and through the end of the state of emergency period.  Those employers shall be deemed eligible.  If a group wishes to terminate its policy the employer must submit a written termination letter to the carrier prior to the renewal date.  Carriers must delay renewal reviews as may be necessary during the state of emergency.  

Some employees are working fewer hours per week than the hours required for full-time as stated in the group policy or contract. Thus, they are ineligible to be covered as employees. For this reason, the Bulletin  permits carriers to relax the full-time requirement to allow continued employee coverage.  By relaxing the full-time requirements, the employee may remain covered under the group policy without having to elect COBRA.  

An employer that lays off one or more employees may seek to re-hire those employees once business resumes operations.  Since the employees were terminated from employment, they would be subject to the applicable waiting period.  However, under these circumstances, carriers are required to waive any applicable waiting period that would apply to employees who were previously laid off as a result of the pandemic and again become full time employees eligible for health insurance under the employer’s plan.

Finally, large group carriers shall make available an emergency 60-day grace period to any policyholder that has been financially or physically impacted by COVID-19.  Carriers must provide the emergency grace period to any large employer that provides the carrier with an attestation from a senior financial officer or certified public accountant attesting to the employer’s financial hardship caused by COVID-19. The attestation shall only require the employer to indicate that as a result of COVID19 it is experiencing a financial hardship, therefore making it difficult to pay its premium payments. Carriers may also make the emergency grace period available to any other large employer in the carrier’s discretion.   

The grace period may be initially applied towards the April or May premium as the policyholder determines and will continue for 60 calendar days from that date.   During this emergency grace period, a carrier shall not terminate that policy for nonpayment of premium.  Coverage must remain in force and claims must be paid and may not be pended.  

If a carrier has already provided a policyholder with a legally required grace period for April 2020 premiums, the time period for which a grace period has already been granted shall be applied toward the emergency grace period.  If coverage has been terminated due to nonpayment of premium after April 1, 2020, coverage must be reinstated for the term of the applicable emergency grace period.  This 60-day grace period shall only apply to policyholders that were in good standing with their insurance carrier on March 1, 2020 and shall only apply to premiums due after the initial premium has been made to secure coverage.   

After the 60-day emergency grace period, a policyholder must be offered the option of amortizing any unpaid premium over the remaining months of the calendar year.  For example, if six months are remaining in the calendar year, the policyholder must be given the option to pay the unpaid premium in six installments in addition to the regular monthly premium.  If only three months remain on the policy, but 6 months remain in the calendar year, the carrier must allow the policyholder the option to pay the unpaid premium in six installments in addition to the regular monthly premium. 

Carriers  shall not seek recoupment from any policyholder for any claims incurred during this emergency grace period. Carriers shall not report late payments to credit reporting agencies, consistent with this guidance, for policyholders taking advantage of COVID19-related relief.  

In addition to posting information on the carrier’s website, large group carriers must provide each large employer policyholder with an easily readable written description of the terms of the extended grace period offered pursuant to this guidance, which shall be submitted as an informational filing to the Department.   Carriers are directed to advise the Department of the actions the carrier is taking to provide large groups with flexibility consistent with the Bulletin.  Such information is to be submitted to the Department through SERFF as an informational filing.

Medicare supplement plans (MedSupp) provide a 31-day grace period consistent with New Jersey law at N.J.S.A. 17B:26-6 which governs individual Medicare Supplement plans and N.J.S.A. 17B:2737 which governs group Medicare Supplement plans.  In the case of a 31-day grace period, the policyholder has 31 days from the due date in which to pay the premiums. While the state of emergency is in effect, Bulletin No. 20-14  the Department of Banking and Insurance requires MedSupp carriers to provide a 60-day grace period during which MedSupp plans may not be terminated for nonpayment of premium.   The grace period may be initially applied towards the April or May premium as the policyholder determines and will continue for 60 calendar days from that date.  During this emergency grace period, a carrier shall not terminate that policy for nonpayment of premium.  Coverage must remain in force and claims must be paid and may not be pended. 

If a carrier has already provided a policyholder with a legally required grace period for April 2020 premiums, the time period for which a grace period has already been granted shall be applied toward the emergency grace period. This 60-day grace period shall only apply to policyholders that were in good standing with their insurance carrier on March 1, 2020 and shall only apply to premiums due after the initial premium has been made to secure coverage.  

After the 60-day emergency grace period, a policyholder must be offered the option of amortizing any unpaid premium over the remaining months of the policy, but for not less than six months.  For example, if six months are remaining on the policy, the policyholder must be given the option to pay the unpaid premium in six installments in addition to the regular monthly premium.  If less than six months remain on the policy, the carrier must allow at least six months for the deferred premium to be paid.

Carriers may not seek recoupment from any policyholder for any claims incurred during this emergency grace period.  Carriers are further directed to, in addition to posting information on the carrier’s website, provide each policyholder with an easily readable written description of the terms of the extended grace period offered pursuant to this guidance, which shall be submitted to the Department through SERFF as an informational filing.   

The Department will continue to review  its guidance embodied in Bulletin 20-11 through 20-17  during the duration of EO 103 and EO 119 to ensure policyholders receive the intended relief.  Additionally, on April 9, Assembly Bill N0 A3920 was introduced and imposed a minimum 60 day grace period on all insurance policies written in the state and regulated by the Commissioner.  Significantly, the bill, if adopted, empowers the Commissioner, in her discretion, to further extend grace periods.  While the relief afforded by Executive Order 123 and the implementing Bulletins issued by the Department may be vital to the insured population, the impact on the insurance industry cannot be ignored. As noted in the Washington Post article linked here, Insurers simply cannot continue to bear the cost of the Covid-19 Pandemic.  

At what point will the government recognize the impact on the insurance industry? 

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