(3) "HOSPITAL INDEMNITY" MEANS THAT BENEFITS PAYABLE UNDER A
POLICY ARE BASED ON FLAT FEES AN INSURER PAYS FOR EACH DAY AN INDIVIDUAL
IS CONFINED IN A HOSPITAL REGARDLESS OF THE ACTUAL EXPENSES THE
INDIVIDUAL INCURS DURING THE HOSPITAL CONFINEMENT.

(A) A POLICY WILL BE CONSIDERED TO PROVIDE BENEFITS ON AN
EXPENSE-INCURRED BASIS IF BENEFITS PAYABLE UNDER THE POLICY ARE BASED
ON BOTH MEDICAL EXPENSES INCURRED AND FLAT FEES REGARDLESS OF ACTUAL
EXPENSES INCURRED.

(B) THIS SECTION APPLIES TO HEALTH BENEFIT PLANS ISSUED UNDER
SUBTITLE 12 OF THIS TITLE.

(C) THIS SECTION DOES NOT APPLY IF:

(1) COVERAGE IS TERMINATED BECAUSE AN INDIVIDUAL FAILS TO PAY
A REQUIRED PREMIUM;

(2) COVERAGE IS TERMINATED FOR FRAUD OR MATERIAL
MISREPRESENTATION BY THE INDIVIDUAL; OR

(3) ANY COVERAGE PROVIDED BY A SUCCEEDING HEALTH BENEFIT

PLAN:

(I) IS PROVIDED AT A COST TO THE INDIVIDUAL THAT IS LESS
THAN OR EQUAL TO THE COST TO THE INDIVIDUAL OF THE EXTENDED BENEFIT
REQUIRED UNDER THIS SECTION; AND

(II) DOES NOT RESULT IN AN INTERRUPTION OF BENEFITS.

(D) DURING AN EXTENSION PERIOD REQUIRED UNDER THIS SECTION A
PREMIUM MAY NOT BE CHARGED.

(E) (1) THIS SUBSECTION APPLIES TO:

(I) INSURERS AND NONPROFIT HEALTH SERVICE PLANS THAT
PROVIDE HOSPITAL, MEDICAL, OR SURGICAL BENEFITS ON AN EXPENSE-INCURRED
BASIS UNDER GROUP OR BLANKET HEALTH INSURANCE POLICIES THAT ARE ISSUED
OR DELIVERED IN THE STATE; AND

(II) HEALTH MAINTENANCE ORGANIZATIONS THAT PROVIDE
HOSPITAL, MEDICAL, OR SURGICAL BENEFITS UNDER CONTRACTS THAT ARE ISSUED
OR DELIVERED IN THE STATE.

(2) IF AN INDIVIDUAL IS TOTALLY DISABLED WHEN THE INDIVIDUAL'S
COVERAGE TERMINATES, AN ENTITY SUBJECT TO THIS SUBSECTION SHALL
CONTINUE TO PAY BENEFITS COVERED BENEFITS, IN ACCORDANCE WITH THE
POLICY IN EFFECT AT THE TIME THE INDIVIDUAL'S COVERAGE TERMINATES, FOR
EXPENSES INCURRED BY THE INDIVIDUAL FOR THE CONDITION CAUSING THE
DISABILITY UNTIL THE EARLIER OF:

(I) THE DATE THE INDIVIDUAL CEASES TO BE TOTALLY DISABLED;

OR