Guidelines relating to newborn baby coverage in expense-incurred disability policies with pregnancy or maternity coverage

Issued and entered September 15, 1986 by Herman W. Coleman, Commissioner of Insurance

ORDER OF ADOPTION

BACKGROUND

Some health insurers providing maternity or pregnancy coverage in an expense-incurred disability policy are failing to provide coverage for a newborn's stay in the hospital after delivery when the child does not have health problems. This thwarts the reasonable expectations of insureds and violates the Michigan Insurance Code.

Maternity is the state of being a mother. It is inextricably associated with pregnancy and childbirth. A maternity or pregnancy benefit is a medical care insurance benefit which covers all or a portion of costs arising from pregnancy and childbirth. A medical or hospital charge for a healthy infant following delivery is necessarily a cost arising from pregnancy and childbirth and should be covered to the same extent as the mother is covered. A policy that covers pregnancy or maternity costs, yet contains language that excludes medical or hospital charges associated with birth and delivery for healthy newborn infants, violates Section 2236(3) of the Michigan Insurance Code of 1956, as amended, (Code) MCLA 500.2236(3); MSA 24.12236(3), which provides in pertinent part:

Upon written notice to the insurer, the commissioner may disapprove, withdraw approval or prohibit the issuance, advertising or delivery of any form to any person in this state if it violates any provisions of this code, or contains inconsistent, ambiguous or misleading clauses, or contains exceptions and conditions that unreasonably or deceptively affect the risk purported to be assumed in the general coverage of the policy.

An insurer that fails to provide coverage for medical and hospital charges for healthy newborn infants which are incurred while the mother is hospitalized for delivery to the same extent as coverage is provided for the mother, under an expense-incurred disability policy that covers pregnancy or maternity costs violates Section 2026(1) of the Code, MCLA 500.2026(1); MSA 24.12026(1), which provides in relevant part:

(1) Unfair methods of competition and unfair or deceptive acts or practices in the business of insurance, other than isolated incidents, are a course of conduct indicating a persistent tendency to engage in that type of conduct and include:

(a) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.

(b) Failing to acknowledge promptly or to act reasonably and promptly upon communications with respect to claims arising under insurance policies.

(f) Failing to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.

(n) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

This treatment of an insurer's obligation to cover certain costs associated with the birth of healthy newborn infants is part of the mother's maternity benefit and does not, of course, diminish the insurer's obligation to cover costs of sick newborn infants under Sections 3403 and 3611 of the Code, MCLA 500.3403 and 500.3611; MSA 24.13403 and 24.13611.

GUIDELINES

Expense-incurred disability insurance policies which provide coverage for maternity or pregnancy cover healthy newborn infants to the same extent as coverage is provided for the mother. This coverage includes doctors' services, hospital room, nursery room, and other immediate post delivery charges until the mother or the infant is discharged, whichever comes first. When an insurer denies this coverage, it is Bureau policy to commence an appropriate compliance action against the insurer. It is also the policy of the Bureau to disapprove expense-incurred disability insurance policies that provide for maternity or pregnancy coverage yet exclude benefits for well babies during the mother's hospital maternity stay.

RIGHTS AND PROCEDURES

The guidelines in this bulletin shall become effective October 15, 1986. In conformity with Section 3(6) of the Administrative Procedures Act of 1969, MCLA 24.203(6); MSA 3.560(103)(6), these guidelines are a statement of policy which the agency intends to follow, which does not have the force or effect of law, and which binds the agency, but does not bind any other person.

The Bureau staff shall use these guidelines in reviewing all filings of expense-incurred disability insurance policies. Any policy filing which fails to meet the requirements of the Code shall be disapproved pursuant to Section 2236 of the Code, MCLA 500.2236; MSA 24.12236. The operation of this bulletin does not abrogate the rights of an insurer to a hearing and appeal of a disapproval as provided in that section.