(a) A group policy delivered or issued for delivery in this state that provides hospital, surgical or major medical expense insurance, or any combination of these coverages, on an expense incurred basis, but not a policy that provides benefits for specific diseases or for accidental injuries only, shall provide that an employee or member whose insurance under the group policy has been terminated for any reason, except discontinuance of the group policy in its entirety or with respect to an insured class, and who has been continuously insured under the group policy, and under any group policy providing similar benefits that it replaces, for at least three (3) months immediately prior to termination, shall be entitled to have the coverage nonetheless continued under the group policy for the fractional policy month remaining at termination, plus three (3) additional policy months upon payment in advance to the employer of the full group premium for this continuation of coverage, including any portion of the premium usually paid by the person's former employer on or before the beginning of each month's coverage.

(b) At the end of the period of continuation, the person shall be entitled to have issued to the person by the insurer a policy of health insurance that conforms to the applicable requirements specified in this chapter.

(c) An employee or member shall not be entitled to have coverage continued if the group policy was terminated in its entirety or was terminated with respect to an insured class of which the employee was a member, but the employee shall have the right of conversion upon termination of the group policy. An employee or member shall not be entitled to have coverage continued or a converted policy issued to the employee if termination of the employee's insurance under the group policy occurred because:

(1) The employee failed to pay any required contribution;

(2) The employee is eligible for medicare under Title XVIII of the federal Social Security Act (42 U.S.C. § 1395 et seq.); or

(3) Any discontinued group coverage was replaced by similar group coverage within thirty-one (31) days.

(d)

(1) This section shall apply to individuals who are terminated from group coverage because of divorce or because of the death of the insured spouse, except that an individual to whom any of the foregoing applies shall be entitled to have the coverage continued under the group policy for the fractional policy month remaining at termination plus up to fifteen (15) additional policy months upon payment in advance to the employer the full month's group premium for this continuation of coverage on or before the beginning of each month's coverage, including any portion of the premium usually paid by the employer. This subsection (d) does not prohibit a group policy from granting a longer period of continued coverage than provided in this subsection (d), nor from offering broader coverage than provided in this subsection (d), nor from granting coverage after the death of the insured spouse as otherwise provided. Individuals whose group coverage is terminated during pregnancy shall be entitled to have their coverage continued under the group policy for the fractional month remaining at termination plus a period of not less than six (6) months after the pregnancy ends and not more than the end of the second three-month period following the three-month period within which the pregnancy ends.

(2) Subdivision (d)(1) is applicable to all health benefits policies, plans, programs or contracts offered by commercial insurance companies, nonprofit insurance companies, prepaid plans, including health maintenance organizations, and to all health benefit programs provided state government employees.