Ariz. Rev. Stat. § 20-1408 – Right to obtain individual policy; requirements; exceptions; definition

A. Each group disability insurance policy delivered or issued for delivery in this state shall provide for the right of all persons covered under the group contract to convert to an individual disability policy on the death of the named insured, the entry of a decree of dissolution of marriage or any other condition other than the failure of the insured to pay the required premium specifically stated in the policy under which coverage would otherwise terminate as to a covered spouse or covered dependent children of the named insured.
B. All persons exercising their right to an individual disability policy under subsection A are entitled to have an individual disability policy issued to them by the issuer on a form provided for conversion which provides coverage most similar to that provided under the group policy. Each person entitled to have a conversion policy issued to him may elect a lesser form of coverage.
C. A written application and the first premium payment for the converted policy shall be made to the insurer within thirty-one days following termination of coverage under the existing policy. A monthly premium rate shall be offered to the person exercising continuation or conversion rights, and payment of one monthly premium shall be deemed sufficient consideration to enact the continuation or conversion policy. The effective date of the conversion policy is the day following the termination of insurance under the group policy.
D. Coverage provided through the conversion policy shall be without additional evidence of insurability and shall not impose any preexisting condition limitations, exclusions or other contractual time limitations other than those remaining unexpired under the policy or contract from which conversion is exercised.
E. Conversion of coverage may, at the option of the spouse exercising the right, include covered dependent children for whom the spouse has responsibility for care or support.
F. The insurer may elect to provide group insurance coverage in lieu of the issuance of a converted individual policy.
G. Each certificate of coverage shall include notice of the conversion privilege.
H. This section does not apply to disability income policies, to accidental death or dismemberment policies or to single term nonrenewable policies.
I. Conversion is not available to a person eligible for medicare or eligible for or covered by other similar disability benefits which together with the conversion coverage would constitute overinsurance.
J. At the time of filing a petition for dissolution of marriage, the clerk of the court shall provide to the petitioner for a dissolution of marriage two copies of the notice of the right of a dependent spouse to convert health insurance coverage under this section. The petitioner shall cause one copy of the notice to be served on the respondent together with a copy of the petition, summons and preliminary injunction. The director shall prepare the notice which must include a summary of this section. The clerk of the court or the director is not liable for damages arising from information contained in or omitted from the notices prepared or provided under this section.
K. This section also applies to blanket accident and sickness insurance policies and to all disability insurance issued by hospital, medical, dental and optometric service corporations, health care services organizations and fraternal benefit societies.
L. Any person who is a United States armed forces reservist, who is ordered to active military duty on or after August 22, 1990 and who had coverage under a disability insurance policy provided by the person's employer at such time shall have the right to reinstate such coverage upon release from active military duty subject to the following conditions:
1. 1. Following reemployment by the reservist's former employer, the reservist shall make written application to the insurer within ninety days of discharge from active military duty or within one year of hospitalization continuing after discharge. Coverage shall be effective upon receipt of application by the insurer.
2. 2. The coverage reinstated shall be the same coverage provided by the employer to other employees and their dependents in the employer group health insurance plan at the time of application.
3. 3. The insurer may exclude from such coverage any health or physical condition arising during and occurring as a direct result of active military duty.
M. Each dependent of a person eligible for reinstatement under this provision shall be afforded the same rights and be subject to the same conditions as the insured, if the dependent was insured under the disability insurance policy at the time the eligible person entered active duty. Any dependent of such person born during the period of active military duty shall have the same rights as other dependents noted in this section.
N. The director shall adopt emergency rules applicable to persons who are leaving active service in the armed forces of the United States and returning to civilian status consistent with the provisions of subsection L of this section, including:
1. 1. Conditions of eligibility.
2. 2. Coverage of dependents.
3. 3. Preexisting conditions.
4. 4. Termination of insurance.
5. 5. Probationary periods.
6. 6. Limitations.
7. 7. Exceptions.
8. 8. Reductions.
9. 9. Elimination periods.
10. 10. Requirements for replacement.
11. 11. Any other conditions of group and blanket disability contracts.
O. A group policy or any conversion policy that is issued under this section shall not be cancelled or nonrenewed except if:
1. 1. The individual has failed to pay premiums or contributions pursuant to the terms of the health insurance coverage or the insurer has not received premium payments in a timely manner.
2. 2. The individual has performed an act or practice that constitutes fraud or has made an intentional misrepresentation of material fact under the terms of the coverage.
3. 3. The insurer has ceased to offer coverage to individuals that is consistent with the requirements of sections 20-1379 and 20-1380.
4. 4. In the case of an insurer that offers health care coverage in this state through a network plan, no member of the group resides, lives or works in the service area served by the network plan or in an area for which the insurer is authorized to transact business but only if the coverage is terminated uniformly without regard to any health status-related factor of any covered individual.
5. 5. In the case of an insurer who offers health coverage in the group market only through one or more bona fide associations, the membership of an employer in the association has ceased but only if that coverage is terminated uniformly without regard to any health status-related factor or any covered individual.
P. A conversion policy may be modified if the modification complies with the notice and disclosure requirements set forth in the group policy and evidence of coverage. A modification of a conversion policy which has already been issued to an insured shall not result in the effective elimination of any benefit originally included in the conversion policy.
Q. For the purposes of this section, "network plan" means a health care plan provided by an insurer under which the financing and delivery of health care services are provided, in whole or in part, through a defined set of providers under contract with the insurer.