Current through Register Vol. 49, No. 2, February 2024
Section
1.
Purpose
The purpose of this Rule is to implement Ark. Code Ann. §
23-97-301
et seq., to promote the public interest, to promote the availability of
long-term care insurance coverage, to protect applicants for long-term care
insurance, as defined, from unfair or deceptive sales or enrollment practices,
to facilitate public understanding and comparison of long-term care insurance
coverages, and to facilitate flexibility and innovation in the development of
long-term care insurance.
Section
2.
Authority
This rule is issued pursuant to the authority vested in the
Commissioner under Ark. Code Ann. §§
23-97-307(a),
23-97-310(a),
23-97-320,
23-61-108, and
25-15-201 et
seq.
Section 3.
Applicability and Scope
Except as otherwise specifically provided, this rule applies to
all long-term care insurance policies, including qualified long-term care
contracts and life insurance policies that accelerate benefits for long-term
care delivered or issued for delivery in this state on or after the effective
date by insurers; fraternal benefit societies; nonprofit health, hospital and
medical service corporations; prepaid health plans; health maintenance
organizations and all similar organizations. Certain provisions of this rule
apply only to qualified long-term care insurance contracts as noted.
Section 4.
Definitions
For the purpose of this rule, the terms "long-term care
insurance," "qualified long-term care insurance," "group long-term care
insurance," "Commissioner," "applicant," "policy" and "certificate" shall have
the meanings set forth in Ark. Code Ann. §
23-97-304.
In addition, the following definitions apply.
A.
(1)
"Exceptional increase" means only those increases filed by an insurer as
exceptional for which the Commissioner determines the need for the premium rate
increase is justified:
(a) Due to changes in
laws or rules applicable to long-term care coverage in this state; or
(b) Due to increased and unexpected
utilization that affects the majority of insurers of similar
products.
(2) Except as
provided in Section 20 of this Rule, exceptional increases are subject to the
same requirements as other premium rate schedule increases.
(3) The Commissioner may request a review by
an independent actuary or a professional actuarial body of the basis for a
request that an increase be considered an exceptional increase.
(4) The Commissioner, in determining that the
necessary basis for an exceptional increase exists, shall also determine any
potential offsets to higher claims costs.
B. "Incidental," as used in Section 20(J) of
this Rule, means that the value of the long-term care benefits provided is less
than ten percent (10%) of the total value of the benefits provided over the
life of the policy. These values shall be measured as of the date of
issue.
C. "Insurer or Issuer" means
any entity authorized to issue long-term care insurance pursuant to Ark. Code
Ann. §
23-97-304(7)(C).
D. "Partnership policies or Partnership
program" means those long-term care insurance policies that meet the
requirements of the Federal Long-Term Care Partnership Program as authorized
under the Deficit Reduction Act of 2005, Section 6021.
E. "Qualified actuary" means a member in good
standing of the American Academy of Actuaries.
F. "Similar policy forms" means all of the
long-term care insurance policies and certificates issued by an insurer in the
same long-term care benefit classification as the policy form being considered.
Certificates of groups that meet the definition in Ark. Code Ann. §
23-97-304(6)
are not considered similar to certificates or policies otherwise issued as
long-term care insurance, but are similar to other comparable certificates with
the same long-term care benefit classifications. For purposes of determining
similar policy forms, long-term care benefit classifications are defined as
follows: institutional long-term care benefits only, non-institutional
long-term care benefits only, or comprehensive long-term care
benefits.
Section 5.
Policy Definitions
No long-term care insurance policy delivered or issued for
delivery in this state shall use the terms set forth below, unless the terms
are defined in the policy and the definitions satisfy the following
requirements:
A. "Activities of daily
living" means at least bathing, continence, dressing, eating, toileting and
transferring.
B. "Acute condition"
means that the individual is medically unstable. Such an individual requires
frequent monitoring by medical professionals, such as physicians and registered
nurses, in order to maintain his or her health status.
C. "Adult day care" means a program for six
(6) or more individuals, of social and health-related services provided during
the day in a community group setting for the purpose of supporting frail,
impaired elderly or other disabled adults who can benefit from care in a group
setting outside the home.
D.
"Bathing" means washing oneself by sponge bath; or in either a tub or shower,
including the task of getting into or out of the tub or shower.
E. "Cognitive impairment" means a deficiency
in a person's short or long-term memory, orientation as to person, place and
time, deductive or abstract reasoning, or judgment as it relates to safety
awareness.
F. "Continence" means
the ability to maintain control of bowel and bladder function; or, when unable
to maintain control of bowel or bladder function, the ability to perform
associated personal hygiene (including caring for catheter or colostomy
bag).
G. "Dressing" means putting
on and taking off all items of clothing and any necessary braces, fasteners or
artificial limbs.
H. "Eating" means
feeding oneself by getting food into the body from a receptacle (such as a
plate, cup or table) or by a feeding tube or intravenously.
I. "Hands-on assistance" means physical
assistance (minimal, moderate or maximal) without which the individual would
not be able to perform the activity of daily living.
J. "Home health care services" means medical
and nonmedical services, provided to ill, disabled or infirm persons in their
residences. Such services may include homemaker services, assistance with
activities of daily living and respite care services.
K. "Medicare" means "The Health Insurance for
the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then
Constituted or Later Amended," or "Title I, Part I of
Public Law
89-97, as Enacted by the Eighty-Ninth Congress of
the United States of America and popularly known as the Health Insurance for
the Aged Act, as then constituted and any later amendments or substitutes
thereof," or words of similar import.
L. "Mental or nervous disorder" shall not be
defined to include more than neurosis, psychoneurosis, psychopathy, psychosis,
or mental or emotional disease or disorder.
M. "Personal care" means the provision of
hands-on services to assist an individual with activities of daily
living.
N. "Skilled nursing care,"
"personal care," "home care," "specialized care," "assisted living care" and
other services shall be defined in relation to the level of skill required, the
nature of the care and the setting in which care must be delivered.
O. "Toileting" means getting to and from the
toilet, getting on and off the toilet, and performing associated personal
hygiene.
P. "Transferring" means
moving into or out of a bed, chair or wheelchair.
Q. All providers of services, including but
not limited to "skilled nursing facility," "extended care facility,"
"convalescent nursing home," "personal care facility," "specialized care
providers," "assisted living facility," and "home care agency" shall be defined
in relation to the services and facilities required to be available and the
licensure, certification, registration or degree status of those providing or
supervising the services. When the definition requires that the provider be
appropriately licensed, certified or registered, it shall also state what
requirements a provider must meet in lieu of licensure, certification or
registration when the state in which the service is to be furnished does not
require a provider of these services to be licensed, certified or registered,
or when the state licenses, certifies or registers the provider of services
under another name.
Section
6.
Policy Practices and Provisions
A. Renewability. The terms "guaranteed
renewable" and "noncancellable" shall not be used in any individual long-term
care insurance policy without further explanatory language in accordance with
the disclosure requirements of Section 9 of this rule.
(1) A policy issued to an individual shall
not contain renewal provisions other than "guaranteed renewable" or
"noncancellable."
(2) The term
"guaranteed renewable" may be used only when the insured has the right to
continue the long-term care insurance in force by the timely payment of
premiums and when the insurer has no unilateral right to make any change in any
provision of the policy or rider while the insurance is in force, and cannot
decline to renew, except that rates may be revised by the insurer on a class
basis.
(3) The term
"noncancellable" may be used only when the insured has the right to continue
the long-term care insurance in force by the timely payment of premiums during
which period the insurer has no right to unilaterally make any change in any
provision of the insurance or in the premium rate.
(4) The term "level premium" may only be used
when the insurer does not have the right to change the premium.
(5) In addition to the other requirements of
this Subsection, a qualified long-term care insurance contract shall be
guaranteed renewable, within the meaning of Section 7702B (b)(1)(C) of the
Internal Revenue Code of 1986, as amended.
B. Limitations and Exclusions. A policy may
not be delivered or issued for delivery in this state as long-term care
insurance if the policy limits or excludes coverage by type of illness,
treatment, medical condition or accident, except as follows:
(1) Preexisting conditions or
diseases;
(2) Mental or nervous
disorders; however, this shall not permit exclusion or limitation of benefits
on the basis of Alzheimer's Disease;
(3) Alcoholism and drug addiction;
(4) Illness, treatment or medical condition
arising out of:
(a) War or act of war
(whether declared or undeclared);
(b) Participation in a felony, riot or
insurrection;
(c) Service in the
armed forces or units auxiliary thereto;
(d) Suicide (sane or insane), attempted
suicide or intentionally self-inflicted injury; or
(e) Aviation (this exclusion applies only to
non-fare-paying passengers).
(5) Treatment provided in a government
facility (unless otherwise required by law), services for which benefits are
available under Medicare or other governmental program (except Medicaid), any
state or federal workers' compensation, employer's liability or occupational
disease law, or any motor vehicle no-fault law, services provided by a member
of the covered person's immediate family and services for which no charge is
normally made in the absence of insurance;
(6) Expenses for services or items available
or paid under another long-term care insurance or health insurance
policy;
(7) In the case of a
qualified long-term care insurance contract, expenses for services or items to
the extent that the expenses are reimbursable under Title XVIII of the Social
Security Act or would be so reimbursable but for the application of a
deductible or coinsurance amount.
(8) This Subsection is not intended to
prohibit exclusions and limitations by type of provider. However, no long-term
care issuer may deny a claim because services are provided in a state other
than the state of policy issue under the following conditions:
(a) When the state other than the state of
policy issue does not have the provider licensing, certification or
registration required in the policy, but where the provider satisfies the
policy requirements outlined for providers in lieu of licensure, certification
or registration; or
(b) When the
state other than the state of policy issue licenses, certifies or registers the
provider under another name.
For purposes of this Subsection, "state of policy issue" means
the state in which the individual policy or certificate was originally
issued.
(9) This
Subsection is not intended to prohibit territorial limitations.
C. Extension of Benefits.
Termination of long-term care insurance shall be without prejudice to any
benefits payable for institutionalization if the institutionalization began
while the long-term care insurance was in force and continues without
interruption after termination. The extension of benefits beyond the period the
long-term care insurance was in force may be limited to the duration of the
benefit period, if any, or to payment of the maximum benefits and may be
subject to any policy waiting period, and all other applicable provisions of
the policy.
D. Continuation or
Conversion.
(1) Group long-term care
insurance issued in this state on or after the effective date of this Section
shall provide covered individuals with a basis for continuation or conversion
of coverage.
(2) For the purposes
of this Section, "a basis for continuation of coverage" means a policy
provision that maintains coverage under the existing group policy when the
coverage would otherwise terminate and which is subject only to the continued
timely payment of premium when due. Group policies that restrict provision of
benefits and services to, or contain incentives to use certain providers or
facilities may provide continuation benefits that are substantially equivalent
to the benefits of the existing group policy. The Commissioner shall make a
determination as to the substantial equivalency of benefits, and in doing so,
shall take into consideration the differences between managed care and
non-managed care plans, including, but not limited to, provider system
arrangements, service availability, benefit levels and administrative
complexity.
(3) For the purposes of
this Section, "a basis for conversion of coverage" means a policy provision
that an individual whose coverage under the group policy would otherwise
terminate or has been terminated for any reason, including 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 any group policy
which it replaced), for at least six months immediately prior to termination,
shall be entitled to the issuance of a converted policy by the insurer under
whose group policy he or she is covered, without evidence of
insurability.
(4) For the purposes
of this Section, "converted policy" means an individual policy of long-term
care insurance providing benefits identical to or benefits determined by the
Commissioner to be substantially equivalent to or in excess of those provided
under the group policy from which conversion is made. Where the group policy
from which conversion is made restricts provision of benefits and services to,
or contains incentives to use certain providers or facilities, the
Commissioner, in making a determination as to the substantial equivalency of
benefits, shall take into consideration the differences between managed care
and non-managed care plans, including, but not limited to, provider system
arrangements, service availability, benefit levels and administrative
complexity.
(5) Written application
for the converted policy shall be made and the first premium due, if any, shall
be paid as directed by the insurer not later than thirty-one (31) days after
termination of coverage under the group policy. The converted policy shall be
issued effective on the day following the termination of coverage under the
group policy, and shall be renewable annually.
(6) Unless the group policy from which
conversion is made replaced previous group coverage, the premium for the
converted policy shall be calculated on the basis of the insured's age at
inception of coverage under the group policy from which conversion is made.
Where the group policy from which conversion is made replaced previous group
coverage, the premium for the converted policy shall be calculated on the basis
of the insured's age at inception of coverage under the group policy
replaced.
(7) Continuation of
coverage or issuance of a converted policy shall be mandatory, except where:
(a) Termination of group coverage resulted
from an individual's failure to make any required payment of premium or
contribution when due; or
(b) The
terminating coverage is replaced not later than thirty-one (31) days after
termination, by group coverage effective on the day following the termination
of coverage:
(i) Providing benefits identical
to or benefits determined by the Commissioner to be substantially equivalent to
or in excess of those provided by the terminating coverage; and
(ii) The premium for which is calculated in a
manner consistent with the requirements of Paragraph (6) of this
Section.
(8)
Notwithstanding any other provision of this Section, a converted policy issued
to an individual who at the time of conversion is covered by another long-term
care insurance policy that provides benefits on the basis of incurred expenses,
may contain a provision that results in a reduction of benefits payable if the
benefits provided under the additional coverage, together with the full
benefits provided by the converted policy, would result in payment of more than
100 percent of incurred expenses. The provision shall only be included in the
converted policy if the converted policy also provides for a premium decrease
or refund which reflects the reduction in benefits payable.
(9) The converted policy may provide that the
benefits payable under the converted policy, together with the benefits payable
under the group policy from which conversion is made, shall not exceed those
that would have been payable had the individual's coverage under the group
policy remained in force and effect.
(10) Notwithstanding any other provision of
this Section, an insured individual whose eligibility for group long-term care
coverage is based upon his or her relationship to another person shall be
entitled to continuation of coverage under the group policy upon termination of
the qualifying relationship by death or dissolution of marriage.
(11) For the purposes of this Section a
"managed-care plan" is a health care or assisted living arrangement designed to
coordinate patient care or control costs through utilization review, case
management or use of specific provider networks.
E. Discontinuance and Replacement
If a group long-term care policy is replaced by another group
long-term care policy issued to the same policyholder, the succeeding insurer
shall offer coverage to all persons covered under the previous group policy on
its date of termination. Coverage provided or offered to individuals by the
insurer and premiums charged to persons under the new group policy:
(1) Shall not result in an exclusion for
preexisting conditions that would have been covered under the group policy
being replaced; and
(2) Shall not
vary or otherwise depend on the individual's health or disability status, claim
experience or use of long-term care services.
F.
(1) The
premium charged to an insured shall not increase due to either:
(a) The increasing age of the insured at ages
beyond sixty-five (65); or
(b) The
duration the insured has been covered under the policy.
(2) The purchase of additional coverage shall
not be considered a premium rate increase, but for purposes of the calculation
required under Section 26 of this Rule, the portion of the premium attributable
to the additional coverage shall be added to and considered part of the initial
annual premium.
(3) A reduction in
benefits shall not be considered a premium change, but for purpose of the
calculation required under Section 26 of this Rule, the initial annual premium
shall be based on the reduced benefits.
G. Electronic Enrollment for Group Policies
(1) In the case of a group defined in Ark.
Code Ann. §
23-97-304(6),
any requirement that a signature of an insured be obtained by an agent or
insurer shall be deemed satisfied if:
(a) The
consent is obtained by telephonic or electronic enrollment by the group
policyholder or insurer. A verification of enrollment information shall be
provided to the enrollee;
(b) The
telephonic or electronic enrollment provides necessary and reasonable
safeguards to assure the accuracy, retention and prompt retrieval of records;
and
(c) The telephonic or
electronic enrollment provides necessary and reasonable safeguards to assure
that the confidentiality of individually identifiable information and
"privileged information" pursuant to Sections 501, 505(b), and 507 of the
Gramm-Leach-Bliley Act, codified at
15 U.S.C.
6801,
6805(b)
and
6807 and
Rule 77 of the Arkansas Insurance Department is maintained.
(2) The insurer shall make
available, upon request of the Commissioner, records that will demonstrate the
insurer's ability to confirm enrollment and coverage amounts.
Section 7.
Unintentional Lapse
Each insurer offering long-term care insurance shall, as a
protection against unintentional lapse, comply with the following:
A.
(1)
Notice before lapse or termination. No individual long-term care policy or
certificate shall be issued until the insurer has received from the applicant
either a written designation of at least one person, in addition to the
applicant, who is to receive notice of lapse or termination of the policy or
certificate for nonpayment of premium, or a written waiver dated and signed by
the applicant electing not to designate additional persons to receive notice.
The applicant has the right to designate at least one person who is to receive
the notice of termination, in addition to the insured. Designation shall not
constitute acceptance of any liability on the third party for services provided
to the insured. The form used for the written designation must provide space
clearly designated for listing at least one person. The designation shall
include each person'
% full name and
home
address. In the case of an applicant who elects not to designate an
additional person, the waiver shall state: "Protection against unintended
lapse. I understand that I have the right to designate at least one person
other than myself to receive notice of lapse or termination of this long-term
care insurance policy for nonpayment of premium. I understand that notice will
not be given until thirty (30) days after a premium is due and unpaid. I elect
NOT to designate a person to receive this notice."
The insurer shall notify the insured of the right to change this
written designation, no less often than once every two (2) years.
(2) When the policyholder or
certificate holder pays premium for a long-term care insurance policy or
certificate through a payroll or pension deduction plan, the requirements
contained in Subsection A(l) of this Section need not be met until sixty (60)
days after the policyholder or certificate holder is no longer on such a
payment plan. The application or enrollment form for such policies or
certificates shall clearly indicate the payment plan selected by the
applicant.
(3) Lapse or termination
for nonpayment of premium. No individual long-term care policy or certificate
shall lapse or be terminated for nonpayment of premium unless the insurer, at
least thirty (30) days before the effective date of the lapse or termination,
has given notice to the insured and to those persons designated pursuant to
Subsection A(l) of this Section, at the address provided by the insured for
purposes of receiving notice of lapse or termination. Notice shall be given by
first class United States mail, postage prepaid; and notice may not be given
until thirty (30) days after a premium is due and unpaid. Notice shall be
deemed to have been given as of five (5) days after the date of
mailing.
B.
Reinstatement. In addition to the requirement in Subsection A of this Section,
a long-term care insurance policy or certificate shall include a provision that
provides for reinstatement of coverage, in the event of lapse if the insurer is
provided proof that the policyholder or certificate holder was cognitively
impaired or had a loss of functional capacity before the grace period contained
in the policy expired. This option shall be available to the insured if
requested within five (5) months after termination and shall allow for the
collection of past due premium, where appropriate. The standard of proof of
cognitive impairment or loss of functional capacity shall not be more stringent
than the benefit eligibility criteria on cognitive impairment or the loss of
functional capacity contained in the policy and certificate.
Section 8.
Required
Disclosure Provisions
A. Renewability.
Individual long-term care insurance policies shall contain a renewability
provision.
(1) The provision shall be
appropriately captioned, shall appear on the first page of the policy, and
shall clearly state that the coverage is guaranteed renewable or
noncancellable. This provision shall not apply to policies that do not contain
a renewability provision, and under which the right to nonrenew is reserved
solely to the policyholder.
(2) A
long-term care insurance policy or certificate, other than one where the
insurer does not have the right to change the premium, shall include a
statement that premium rates may change.
B. Riders and Endorsements. Except for riders
or endorsements by which the insurer effectuates a request made in writing by
the insured under an individual long-term care insurance policy, all riders or
endorsements added to an individual long-term care insurance policy after date
of issue or at reinstatement or renewal that reduce or eliminate benefits or
coverage in the policy shall require signed acceptance by the individual
insured. After the date of policy issue, any rider or endorsement which
increases benefits or coverage with a concomitant increase in premium during
the policy term must be agreed to in writing signed by the insured, except if
the increased benefits or coverage are required by law. Where a separate
additional premium is charged for benefits provided in connection with riders
or endorsements, the premium charge shall be set forth in the policy, rider or
endorsement.
C. Payment of
Benefits. A long-term care insurance policy that provides for the payment of
benefits based on standards described as "usual and customary," "reasonable and
customary" or words of similar import shall include a definition of these terms
and an explanation of the terms in its accompanying outline of
coverage.
D. Limitations. If a
long-term care insurance policy or certificate contains any limitations with
respect to preexisting conditions, the limitations shall appear as a separate
paragraph of the policy or certificate and shall be labeled as "Preexisting
Condition Limitations."
E. Other
Limitations or Conditions on Eligibility for Benefits. A long-term care
insurance policy or certificate containing any limitations or conditions for
eligibility other than those prohibited in Ark. Code Ann. §§
23-97-307,
23-97-308,
and
23-97-309
shall set forth a description of the limitations or conditions, including any
required number of days of confinement, in a separate paragraph of the policy
or certificate and shall label such paragraph "Limitations or Conditions on
Eligibility for Benefits."
F.
Disclosure of Tax Consequences. With regard to life insurance policies that
provide an accelerated benefit for long-term care, a disclosure statement is
required at the time of application for the policy or rider and at the time the
accelerated benefit payment request is submitted that receipt of these
accelerated benefits may be taxable, and that assistance should be sought from
a personal tax advisor. The disclosure statement shall be prominently displayed
on the first page of the policy or rider and any other related documents. This
Subsection shall not apply to qualified long-term care insurance
contracts.
G. Benefit Triggers.
Activities of daily living and cognitive impairment shall be used to measure an
insured's need for long-term care and shall be described in the policy or
certificate in a separate paragraph and shall be labeled "Eligibility for the
Payment of Benefits." Any additional benefit triggers shall also be explained
in this Section. If these triggers differ for different benefits, explanation
of the trigger shall accompany each benefit description. If an attending
physician or other specified person must certify a certain level of functional
dependency in order to be eligible for benefits, this too shall be
specified.
H. A qualified long-term
care insurance contract shall include a disclosure statement in the policy and
in the outline of coverage as contained in Section 31(E)(3) of this Rule that
the policy is intended to be a qualified long-term care insurance contract
under Section 7702B(b) of the Internal Revenue Code of 1986, as
amended.
I. A nonqualified
long-term care insurance contract shall include a disclosure statement in the
policy and in the outline of coverage as contained in Section 31 of this Rule
that the policy is not intended to be a qualified long-term care insurance
contract.
Section 9.
Required Disclosure of Rating Practices to Consumers
A. This Section shall apply as follows:
(1) Except as provided in Paragraph (2) of
this Subsection, this Section applies to any long-term care policy or
certificate issued in this state on or after 6 months from the effective date
of this Rule.
(2) For certificates
issued on or after the effective date of this amended rule under a group
long-term care insurance policy as defined in Ark. Code Ann. §
23-97-304(6)
which policy was in force at the time this amended rule became effective, the
provisions of this Section shall apply on the policy anniversary following one
year from the effective date of this Rule.
B. Other than policies for which no
applicable premium rate or rate schedule increases can be made, insurers shall
provide all of the information listed in this Subsection to the applicant at
the time of application or enrollment, unless the method of application does
not allow for delivery at that time. In such a case, an insurer shall provide
all of the information listed in this Section to the applicant no later than at
the time of delivery of the policy or certificate.
(1) A statement that the policy may be
subject to rate increases in the future;
(2) An explanation of potential future
premium rate revisions, and the policyholder's or certificate holder's option
in the event of a premium rate revision;
(3) The premium rate or rate schedules
applicable to the applicant that will be in effect until a request is made for
an increase;
(4) A general
explanation for applying premium rate or rate schedule adjustments that shall
include:
(a) A description of when premium
rate or rate schedule adjustments will be effective (e.g., next anniversary
date, next billing date, etc.); and
(b) The right to a revised premium rate or
rate schedule as provided in Paragraph (3) if the premium rate or rate schedule
is changed;
(5)
(a) Information regarding each premium rate
increase on this policy form or similar policy forms over the past ten (10)
years for this state or any other state that, at a minimum, identifies:
(i) The policy forms for which premium rates
have been increased;
(ii) The
calendar years when the form was available for purchase; and
(iii) The amount or percent of each increase.
The percentage may be expressed as a percentage of the premium rate prior to
the increase, and may also be expressed as minimum and maximum percentages if
the rate increase is variable by rating characteristics.
(b) The insurer may, in a fair manner,
provide additional explanatory information related to the rate
increases.
(c) An insurer shall
have the right to exclude from the disclosure premium rate increases that only
apply to blocks of business acquired from other nonaffiliated insurers or the
long-term care policies acquired from other nonaffiliated insurers when those
increases occurred prior to the acquisition.
(d) If an acquiring insurer files for a rate
increase on a long-term care policy form acquired from nonaffiliated insurers
or a block of policy forms acquired from nonaffiliated insurers on or before
the later of the effective date of this Section or the end of a
twenty-four-month period following the acquisition of the block or policies,
the acquiring insurer may exclude that rate increase from the disclosure.
However, the nonaffiliated selling company shall include the disclosure of that
rate increase in accordance with Subparagraph (a) of this paragraph.
(e) If the acquiring insurer in Subparagraph
(d) above files for a subsequent rate increase, even within the
twenty-four-month period, on the same policy form acquired from nonaffiliated
insurers or block of policy forms acquired from nonaffiliated insurers
referenced in Subparagraph (d), the acquiring insurer shall make all
disclosures required by Paragraph (5), including disclosure of the earlier rate
increase referenced in Subparagraph (d).
C. An applicant shall sign an acknowledgement
at the time of application, unless the method of application does not allow for
signature at that time, that the insurer made the disclosure required under
Subsection B(l) and (5). If due to the method of application the applicant
cannot sign an acknowledgement at the time of application, the applicant shall
sign no later than at the time of delivery of the policy or
certificate.
D. An insurer shall
use the forms in Appendices B and F to comply with the requirements of
Subsections B and C of this Section.
E. An insurer shall provide notice of an
upcoming premium rate schedule increase to all policyholders or certificate
holders, if applicable, at least forty-five (45) days prior to the
implementation of the premium rate schedule increase by the insurer. The notice
shall include the information required by Subsection B when the rate increase
is implemented.
Section
10.
Initial Filing Requirements
A. This Section applies to any long-term care
policy issued in this state on or after six months from the effective date of
this Rule.
B. An insurer shall
provide the information listed in this Subsection to the Commissioner thirty
(30) days prior to making a long-term care insurance form available for sale.
(1) A copy of the disclosure documents
required in Section 9 of this Rule; and
(2) An actuarial certification consisting of
at least the following:
(a) A statement that
the initial premium rate schedule is sufficient to cover anticipated costs
under moderately adverse experience and that the premium rate schedule is
reasonably expected to be sustainable over the life of the form with no future
premium increases anticipated;
(b)
A statement that the policy design and coverage provided have been reviewed and
taken into consideration;
(c) A
statement that the underwriting and claims adjudication processes have been
reviewed and taken into consideration;
(d) A complete description of the basis for
contract reserves that are anticipated to be held under the form, to include:
(i) Sufficient detail or sample calculations
provided so as to have a complete depiction of the reserve amounts to be
held;
(ii) A statement that the
assumptions used for reserves contain reasonable margins for adverse
experience;
(iii) A statement that
the net valuation premium for renewal years does not increase (except for
attained-age rating where permitted); and
(iv) A statement that the difference between
the gross premium and the net valuation premium for renewal years is sufficient
to cover expected renewal expenses; or if such a statement cannot be made, a
complete description of the situations where this does not occur;
(I) An aggregate distribution of anticipated
issues may be used as long as the underlying gross premiums maintain a
reasonably consistent relationship;
(II) If the gross premiums for certain age
groups appear to be inconsistent with this requirement, the Commissioner may
request a demonstration under Subsection C based on a standard age
distribution; and
(e)
(i) A
statement that the premium rate schedule is not less than the premium rate
schedule for existing similar policy forms also available from the insurer
except for reasonable differences attributable to benefits; or
(ii) A comparison of the premium schedules
for similar policy forms that are currently available from the insurer with an
explanation of the differences.
C.
(1) The
Commissioner may request an actuarial demonstration that benefits are
reasonable in relation to premiums. The actuarial demonstration shall include
either premium and claim experience on similar policy forms, adjusted for any
premium or benefit differences, relevant and credible data from other studies,
or both.
(2) In the event the
Commissioner asks for additional information under this provision, the period
in Subsection B of this Section does not include the period during which the
insurer is preparing the requested information.
Section 11.
Prohibition Against
Post-Claims Underwriting
A. All
applications for long-term care insurance policies or certificates except those
that are guaranteed issue shall contain clear and unambiguous questions
designed to ascertain the health condition of the applicant.
B.
(1) If
an application for long-term care insurance contains a question that asks
whether the applicant has had medication prescribed by a physician, it must
also ask the applicant to list the medication that has been
prescribed.
(2) If the medications
listed in the application were known by the insurer, or should have been known
at the time of application, to be directly related to a medical condition for
which coverage would otherwise be denied, then the policy or certificate shall
not be rescinded for that condition.
C. Except for policies or certificates which
are guaranteed issue:
(1) The following
language shall be set out conspicuously and in close conjunction with the
applicant's signature block on an application for a long-term care insurance
policy or certificate:
Caution: If your answers on this application are incorrect
or untrue, the [company] has the right to deny benefits or rescind your
policy.
(2) The
following language, or language substantially similar to the following, shall
be set out conspicuously on the long-term care insurance policy or certificate
at the time of delivery:
Caution: The issuance of this long-term care insurance
[policy] [certificate] is based upon your responses to the questions on your
application. A copy of your [application] [enrollment form] [is enclosed] [was
retained by you when you applied]. If your answers are incorrect or untrue, the
company has the right to deny benefits or rescind your policy. The best time to
clear up any questions is now, before a claim arises! If, for any reason, any
of your answers are incorrect, contact the company at this address: [insert
address]
(3) Prior to
issuance of a long-term care policy or certificate to an applicant age eighty
(80) or older, the insurer shall obtain one of the following:
(a) A report of a physical
examination;
(b) An assessment of
functional capacity;
(c) An
attending physician's statement; or
(d) Copies of medical records.
D. A copy of the
completed application or enrollment form (whichever is applicable) shall be
delivered to the insured no later than at the time of delivery of the policy or
certificate unless it was retained by the applicant at the time of
application.
E. Every insurer or
other entity selling or issuing long-term care insurance benefits shall
maintain a record of all policy or certificate rescissions, both state and
countrywide, except those that the insured voluntarily effectuated and shall
annually furnish this information to the insurance Commissioner in the format
prescribed by the National Association of Insurance Commissioners in Appendix
A.
Section 12.
Minimum Standards for Home Health and Community Care Benefits in
Long-Term Care Insurance Policies
A. A
long-term care insurance policy or certificate shall not, if it provides
benefits for home health care or community care services, limit or exclude
benefits:
(1) By requiring that the insured
or claimant would need care in a skilled nursing facility if home health care
services were not provided;
(2) By
requiring that the insured or claimant first or simultaneously receive nursing
or therapeutic services, or both, in a home, community or institutional setting
before home health care services are covered;
(3) By limiting eligible services to services
provided by registered nurses or licensed practical nurses;
(4) By requiring that a nurse or therapist
provide services covered by the policy that can be provided by a home health
aide, or other licensed or certified home care worker acting within the scope
of his or her licensure or certification;
(5) By excluding coverage for personal care
services provided by a home health aide;
(6) By requiring that the provision of home
health care services be at a level of certification or licensure greater than
that required by the eligible service;
(7) By requiring that the insured or claimant
have an acute condition before home health care services are covered;
(8) By limiting benefits to services provided
by Medicare-certified agencies or providers; or
(9) By excluding coverage for adult day care
services.
B. A long-term
care insurance policy or certificate, if it provides for home health or
community care services, shall provide total home health or community care
coverage that is a dollar amount equivalent to at least one-half of one year's
coverage available for nursing home benefits under the policy or certificate,
at the time covered home health or community care services are being received.
This requirement shall not apply to policies or certificates issued to
residents of continuing care retirement communities.
C. Home health care coverage may be applied
to the nonhome health care benefits provided in the policy or certificate when
determining maximum coverage under the terms of the policy or
certificate.
Section 13.
Requirement to Offer Inflation Protection
A. No insurer may offer a long-term care
insurance policy unless the insurer also offers to the policyholder in addition
to any other inflation protection the option to purchase a policy that provides
for benefit levels to increase with benefit maximums or reasonable durations
which are meaningful to account for reasonably anticipated increases in the
costs of long-term care services covered by the policy. Insurers must offer to
each policyholder, at the time of purchase, the option to purchase a policy
with an inflation protection feature no less favorable than one of the
following:
(1) Increases benefit levels
annually in a manner so that the increases are compounded annually at a rate
not less than five percent (5%);
(2) Increases benefit levels annually in a
manner so that the increases are compounded annually based on changes to the
Consumer Price Index;
(3) Covers a
specified percentage of actual or reasonable charges and does not include a
maximum specified indemnity amount or limit; or
(4) Alternative methods that are meaningful
to account for reasonably anticipated increases in the costs of long-term care
services covered by the policy, upon prior approval by the
Commissioner.
B. Where
the policy is issued to a group, the required offer in Subsection A above shall
be made to the group policyholder; except, if the policy is issued to a group
as defined in Ark. Code Ann. §
23-97-304(6)
other than to a continuing care retirement community, the offering shall be
made to each proposed certificate holder.
C. The offer in Subsection A in this Section
above shall not be required of life insurance policies or riders containing
accelerated long-term care benefits.
D.
(1)
Insurers shall include the following information in or with the outline of
coverage:
(a) A graphic comparison of the
benefit levels of a policy that increases benefits over the policy period with
a policy that does not increase benefits. The graphic comparison shall show
benefit levels over at least a twenty (20) year period.
(b) Any expected premium increases or
additional premiums to pay for automatic or optional benefit
increases.
(2) An
insurer may use a reasonable hypothetical, or a graphic demonstration, for the
purposes of this disclosure.
E. Inflation protection benefit increases
under a policy which contains these benefits shall continue without regard to
an insured's age, claim status or claim history, or the length of time the
person has been insured under the policy.
F. An offer of inflation protection that
provides for automatic benefit increases shall include an offer of a premium
which the insurer expects to remain constant. The offer shall disclose in a
conspicuous manner that the premium may change in the future unless the premium
is guaranteed to remain constant.
G.
(1)
Inflation protection as provided in Subsection A(l) of this Section shall be
included in a long-term care insurance policy unless an insurer obtains a
rejection of inflation protection signed by the policyholder as required in
this Subsection. The rejection may be either in the application or on a
separate form.
(2) The rejection
shall be considered a part of the application and shall state:
I have reviewed the outline of coverage and the graphs that
compare the benefits and premiums of this policy with and without inflation
protection.
Specifically, I have reviewed Plans ______, and I reject
inflation protection.
Section 14.
Requirements for
Application Forms and Replacement Coverage
A. Application forms shall include the
following questions designed to elicit information as to whether, as of the
date of the application, the applicant has another long-term care insurance
policy or certificate in force or whether a long-term care policy or
certificate is intended to replace any other accident and sickness or long-term
care policy or certificate presently in force. A supplementary application or
other form to be signed by the applicant and agent, except where the coverage
is sold without an agent, containing the questions may be used. With regard to
a replacement policy issued to a group as defined in Ark. Code Ann. §
23-97-304(6),
the following questions may be modified only to the extent necessary to elicit
information about health or long-term care insurance policies other than the
group policy being replaced, provided that the certificate holder has been
notified of the replacement.
(1) Do you have
another long-term care insurance policy or certificate in force (including
health care service contract, health maintenance organization
contract)?
(2) Did you have another
long-term care insurance policy or certificate in force during the last twelve
(12) months?
(a) If so, with which
company?
(b) If that policy lapsed,
when did it lapse?
(3)
Are you covered by Medicaid?
(4) Do
you intend to replace any of your medical or health insurance coverage with
this policy [certificate]?
B. Agents shall list any other health
insurance policies they have sold to the applicant.
(1) List policies sold that are still in
force.
(2) List policies sold in
the past five (5) years that are no longer in force.
C. Solicitations Other than Direct Response.
Upon determining that a sale will involve replacement, an insurer; other than
an insurer using direct response solicitation methods, or its agent; shall
furnish the applicant, prior to issuance or delivery of the individual
long-term care insurance policy, a notice regarding replacement of accident and
sickness or long-term care coverage. One copy of the notice shall be retained
by the applicant and an additional copy signed by the applicant shall be
retained by the insurer. The required notice shall be provided in the following
manner:
NOTICE TO APPLICANT REGARDING REPLACEMENT OF INDIVIDUAL
ACCIDENT AND SICKNESS OR LONG-TERM CARE INSURANCE
[Insurance company's name and address]
SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE
FUTURE.
According to [your application] [information you have furnished],
you intend to lapse or otherwise terminate existing accident and sickness or
long-term care insurance and replace it with an individual long-term care
insurance policy to be issued by [company name] Insurance Company. Your new
policy provides thirty (30) days within which you may decide, without cost,
whether you desire to keep the policy. For your own information and protection,
you should be aware of and seriously consider certain factors which may affect
the insurance protection available to you under the new policy.
You should review this new coverage carefully, comparing it with
all accident and sickness or long-term care insurance coverage you now have,
and terminate your_present policy only if, after due consideration, you find
that purchase of this long-term care coverage is a wise decision.
(Signature of Agent, Broker or Other Representative)
[Typed Name and Address of Agent or Broker]
The above "Notice to Applicant" was delivered to me on:
(Applicant's Signature)
STATEMENT TO APPLICANT BY AGENT [BROKER OR OTHER
REPRESENTATIVE]:
(Use additional sheets, as necessary.)
I have reviewed your current medical or health insurance
coverage. I believe the replacement of insurance involved in this transaction
materially improves your position. My conclusion has taken into account the
following considerations, which I call to your attention:
1. Health conditions that you may presently
have (preexisting conditions), may not be immediately or fully covered under
the new policy. This could result in denial or delay in payment of benefits
under the new policy, whereas a similar claim might have been payable under
your present policy.
2. State law
provides that your replacement policy or certificate may not contain new
preexisting conditions or probationary periods. The insurer will waive any time
periods applicable to preexisting conditions or probationary periods in the new
policy (or coverage) for similar benefits to the extent such time was spent
(depleted) under the original policy.
3. If you are replacing existing long-term
care insurance coverage, you may wish to secure the advice of your present
insurer or its agent regarding the proposed replacement of your present policy.
This is not only your right, but it is also in your best interest to make sure
you understand all the relevant factors involved in replacing your present
coverage.
4. If, after due
consideration, you still wish to terminate your present policy and replace it
with new coverage, be certain to truthfully and completely answer all questions
on the application concerning your medical health history. Failure to include
all material medical information on an application may provide a basis for the
company to deny any future claims and to refund your premium as though your
policy had never been in force. After the application has been completed and
before your sign it, reread it carefully to be certain that all information has
been properly recorded.
D. Direct Response Solicitations. Insurers
using direct response solicitation methods shall deliver a notice regarding
replacement of accident and sickness or long-term care coverage to the
applicant upon issuance of the policy. The required notice shall be provided in
the following manner:
NOTICE TO APPLICANT REGARDING REPLACEMENT OF ACCIDENT AND
SICKNESS OR LONG-TERM CARE INSURANCE
[Insurance company's name and address]
SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE
FUTURE.
According to [your application] [information you have furnished],
you intend to lapse or otherwise terminate existing accident and sickness or
long-term care insurance and replace it with the long-term care insurance
policy delivered herewith issued by [company name] Insurance Company. Your new
policy provides thirty (30) days within which you may decide, without cost,
whether you desire to keep the policy. For your own information and protection,
you should be aware of and seriously consider certain factors which may affect
the insurance protection available to you under the new policy.
You should review this new coverage carefully, comparing it with
all accident and sickness or long-term care insurance coverage you now have,
and terminate your present policy only if, after due consideration, you find
that purchase of this long-term care coverage is a wise decision.
1. Health conditions which you may presently
have (preexisting conditions), may not be immediately or fully covered under
the new policy. This could result in denial or delay in payment of benefits
under the new policy, whereas a similar claim might have been payable under
your present policy.
2. State law
provides that your replacement policy or certificate may not contain new
preexisting conditions or probationary periods. Your insurer will waive any
time periods applicable to preexisting conditions or probationary periods in
the new policy (or coverage) for similar benefits to the extent such time was
spent (depleted) under the original policy.
3. If you are replacing existing long-term
care insurance coverage, you may wish to secure the advice of your present
insurer or its agent regarding the proposed replacement of your present policy.
This is not only your right, but it is also in your best interest to make sure
you understand all the relevant factors involved in replacing your present
coverage.
4. [To be included only
if the application is attached to the policy.] If, after due consideration, you
still wish to terminate your present policy and replace it with new coverage,
read the copy of the application attached to your new policy and be sure that
all questions are answered fully and correctly. Omissions or misstatements in
the application could cause an otherwise valid claim to be denied. Carefully
check the application and write to [company name and address] within thirty
(30) days if any information is not correct and complete, or if any past
medical history has been left out of the application.
A. Where replacement is intended, the
replacing insurer shall notify, in writing, the existing insurer of the
proposed replacement. The existing policy shall be identified by the insurer,
name of the insured and policy number or address including zip code. Notice
shall be made within five (5) working days from the date the application is
received by the insurer or the date the policy is issued, whichever is
sooner.
B. Life Insurance policies
that accelerate benefits for long-term care shall comply with this Section if
the policy being replaced is a long-term care insurance policy. If a life
insurance policy that accelerates benefits for long-term care is replaced by
another such policy, the replacing insurer shall comply with the long-term care
replacement requirements.
Section 15.
Reporting
Requirements
A. Every insurer shall
maintain records for each agent of that agent's amount of replacement sales as
a percent of the agent's total annual sales and the amount of lapses of
long-term care insurance policies sold by the agent as a percent of the agent's
total annual sales.
B. Every
insurer shall report annually by June 30 the ten percent (10%) of its agents
with the greatest percentages of lapses and replacements as measured by
Subsection A above. (Appendix G)
C.
Reported replacement and lapse rates do not alone constitute a violation of
insurance laws or necessarily imply wrongdoing. The reports are for the purpose
of reviewing more closely agent activities regarding the sale of long-term care
insurance.
D. Every insurer shall
report annually by June 30 the number of lapsed policies as a percent of its
total annual sales and as a percent of its total number of policies in force as
of the end of the preceding calendar year. (Appendix G)
E. Every insurer shall report annually by
June 30 the number of replacement policies sold as a percent of its total
annual sales and as a percent of its total number of policies in force as of
the preceding calendar year. (Appendix G)
F. Every insurer shall report annually by
June 30, for qualified long-term care insurance contracts, the number of claims
denied for each class of business, expressed as a percentage of claims denied.
(Appendix E).
For purposes of this Section:
(1) "Policy" means only long-term care
insurance;
(2) Subject to Paragraph
(3) in this Subsection, "claim" means a request for payment of benefits under
an in force policy regardless of whether the benefit claimed is covered under
the policy or any terms or conditions of the policy have been met;
(3) "Denied" means the insurer refuses to pay
a claim for any reason other than for claims not paid for failure to meet the
waiting period or because of an applicable preexisting condition; and
(4) "Report" means on a statewide
basis.
H. Reports
required under this Section shall be filed with the Commissioner.
Section 16.
Licensing and
Producer Training Requirements
A. A
producer is not authorized to sell, solicit or negotiate with respect to
long-term care insurance except as authorized by Ark. Code Ann. §
23-64-501
et seq.
(1) An individual may not sell,
solicit or negotiate long-term care insurance unless the individual is licensed
as an insurance producer for accident and health or sickness or life and has
completed a one-time training course by or before January 1, 2009. In addition,
an insurer shall assure that no individual may sell, solicit or negotiate
long-term care insurance until such individual meets the insurer's training
requirements. The training shall meet the requirements set forth in Subsection
B.
(2) An individual already
licensed and selling, soliciting or negotiating long-term care insurance on
July 1, 2008 may not continue to sell, solicit or negotiate long-term care
insurance unless the individual has completed a one-time training course as set
forth in Subsection B, within one year from the effective date of this Rule by
or before July 1, 2009.
(3) In
addition to the one-time training course required in Paragraphs (1) and (2)
above, an individual who sells, solicits or negotiates long-term care insurance
shall complete ongoing training as set forth in Subsection B.
(4) The training requirements of Subsection B
may be approved as continuing education courses under Ark. Code Ann. §
23-64-301
et seq.
B..
(1) The one-time training required by this
Section shall be no less than eight (8) hours and the ongoing training required
by this Section shall be no less than four (4) hours every 24 months.
(2) The training required under Paragraph (1)
shall consist of topics related to long-term care insurance, long-term care
services and the Arkansas Long-Term Care Partnership program, which topics
shall include, but not be limited to:
(a)
State and federal regulations and requirements and the relationship between
qualified state long-term care insurance Partnership programs and other public
and private coverage of long-term care services, including Medicaid;
(b) Available long-term services and
providers;
(c) Changes or
improvements in long-term care services or providers;
(d) Alternatives to the purchase of private
long-term care insurance;
(e) The
effect of inflation on benefits and the importance of inflation protection;
and
(f) Consumer suitability
standards and guidelines.
(3) The training required by this Section
shall also include training outlining state Medicaid and Long-Term Care
Partnership requirements (refer to the Arkansas Long-Term Care Partnership
Agent Training Guidelines as maintained by the Arkansas Insurance Department on
its Website or otherwise).
(4) The
training required by this Section shall not include training that is insurer or
company product specific or that includes any sales or marketing information,
materials, or training, other than those required by state or federal
law.
C.
(1) Insurers subject to this Rule shall
obtain verification that a producer receives training required by Subsection A
before a producer is permitted to sell, solicit or negotiate the insurer's
long-term care insurance products, maintain records subject to the state's
record retention requirements, and make that verification available to the
Commissioner upon request.
(2)
Insurers subject to this Rule shall maintain records with respect to the
training of its producers concerning its Partnership policies that will allow
the state insurance department to provide assurance to the state Medicaid
agency that producers have received the training contained in Subsection
B(2)(a) as required by Subsection A and that producers have demonstrated an
understanding of the Partnership policies and their relationship to public and
private coverage of long-term care, including Medicaid, in this state. These
records shall be maintained in accordance with the state's record retention
requirements and shall be made available to the Commissioner upon
request.
D. The
satisfaction of these training requirements in any state shall be deemed to
satisfy the training requirements in this state.
Section 17.
Discretionary Powers of
Commissioner
The Commissioner may upon written request and after an
administrative hearing, issue an order to modify or suspend a specific
provision or provisions of this rule with respect to a specific long-term care
insurance policy or certificate upon a written finding that:
A. The modification or suspension would be in
the best interest of the insureds;
B. The purposes to be achieved could not be
effectively or efficiently achieved without the modification or suspension;
and
C.
(1) The modification or suspension is
necessary to the development of an innovative and reasonable approach for
insuring long-term care; or
(2) The
policy or certificate is to be issued to residents of a life care or continuing
care retirement community or some other residential community for the elderly
and the modification or suspension is reasonably related to the special needs
or nature of such a community; or
(3) The modification or suspension is
necessary to permit long-term care insurance to be sold as part of, or in
conjunction with, another insurance product.
Section 18.
Reserve Standards
A. When long-term care benefits are provided
through the acceleration of benefits under group or individual life policies or
riders to such policies, policy reserves for the benefits shall be determined
in accordance with Arkansas Code Annotated §
23-84-101 et
seq. Claim reserves shall also be established in the case when the policy or
rider is in claim status.
Reserves for policies and riders subject to this Subsection
should be based on the multiple decrement model utilizing all relevant
decrements except for voluntary termination rates. Single decrement
approximations are acceptable if the calculation produces essentially similar
reserves, if the reserve is clearly more conservative, or if the reserve is
immaterial. The calculations may take into account the reduction in life
insurance benefits due to the payment of long-term care benefits. However, in
no event shall the reserves for the long-term care benefit and the life
insurance benefit be less than the reserves for the life insurance benefit
assuming no long-term care benefit.
In the development and calculation of reserves for policies and
riders subject to this Subsection, due regard shall be given to the applicable
policy provisions, marketing methods, administrative procedures and all other
considerations which have an impact on projected claim costs, including, but
not limited to, the following:
(1)
Definition of insured events;
(2)
Covered long-term care facilities;
(3) Existence of home convalescence care
coverage;
(4) Definition of
facilities;
(5) Existence or
absence of barriers to eligibility;
(6) Premium waiver provision;
(7) Renewability;
(8) Ability to raise premiums;
(9) Marketing method;
(10) Underwriting procedures;
(11) Claims adjustment procedures;
(12) Waiting period;
(13) Maximum benefit;
(14) Availability of eligible
facilities;
(15) Margins in claim
costs;
(16) Optional nature of
benefit;
(17) Delay in eligibility
for benefit;
(18) Inflation
protection provisions; and
(19)
Guaranteed insurability option.
Any applicable valuation morbidity table shall be certified as
appropriate as a statutory valuation table by a member of the American Academy
of Actuaries.
B.
When long-term care benefits are provided other than as in Subsection A above,
reserves shall be determined in accordance with Rule 22, "Reserve Standards for
Valuation of Individual Disability Policies."
Section 19.
Loss Ratio
A. This Section shall apply to all long-term
care insurance policies or certificates except those covered under Sections 10
and 20.
B. Benefits under long-term
care insurance policies shall be deemed reasonable in relation to premiums
provided the expected loss ratio is at least sixty percent (60%), calculated in
a manner which provides for adequate reserving of the long-term care insurance
risk. In evaluating the expected loss ratio, due consideration shall be given
to all relevant factors, including:
(1)
Statistical credibility of incurred claims experience and earned
premiums;
(2) The period for which
rates are computed to provide coverage;
(3) Experienced and projected
trends;
(4) Concentration of
experience within early policy duration;
(5) Expected claim fluctuation;
(6) Experience refunds, adjustments or
dividends;
(7) Renewability
features;
(8) All appropriate
expense factors;
(9)
Interest;
(10) Experimental nature
of the coverage;
(11) Policy
reserves;
(12) Mix of business by
risk classification; and
(13)
Product features such as long elimination periods, high deductibles and high
maximum limits.
C.
Subsection B shall not apply to life insurance policies that accelerate
benefits for long-term care. A life insurance policy that funds long-term care
benefits entirely by accelerating the death benefit is considered to provide
reasonable benefits in relation to premiums paid, if the policy complies with
all of the following provisions:
(1) The
interest credited internally to determine cash value accumulations, including
long-term care, if any, are guaranteed not to be less than the minimum
guaranteed interest rate for cash value accumulations without long-term care
set forth in the policy;
(2) The
portion of the policy that provides life insurance benefits meets the
nonforfeiture requirements of Ark. Code Ann. §
23-81-201, et
seq.;
(3) The policy meets the
disclosure requirements contained in Ark. Code Ann. §
23-97-307;
(4) Any policy illustration that meets the
applicable requirements of the NAIC Life Insurance Illustrations Model Rule;
and
(5) An actuarial memorandum is
filed with the insurance department that includes:
(a) A description of the basis on which the
long-term care rates were determined;
(b) A description of the basis for the
reserves;
(c) A summary of the type
of policy, benefits, renewability, general marketing method, and limits on ages
of issuance;
(d) A description and
a table of each actuarial assumption used. For expenses, an insurer must
include percent of premium dollars per policy and dollars per unit of benefits,
if any;
(e) A description and a
table of the anticipated policy reserves and additional reserves to be held in
each future year for active lives;
(f) The estimated average annual premium per
policy and the average issue age;
(g) A statement as to whether underwriting is
performed at the time of application. The statement shall indicate whether
underwriting is used and, if used, the statement shall include a description of
the type or types of underwriting used, such as medical underwriting or
functional assessment underwriting. Concerning a group policy, the statement
shall indicate whether the enrollee or any dependent will be underwritten and
when underwriting occurs; and
(h) A
description of the effect of the long-term care policy provision on the
required premiums, nonforfeiture values and reserves on the underlying life
insurance policy, both for active lives and those in long-term care claim
status.
Section
20.
Premium Rate Schedule Increases
A. This Section shall apply as follows:
(1) Except as provided in Paragraph (2), this
Section applies to any long-term care policy or certificate issued in this
state on or after July 1, 2006.
(2)
For certificates issued on or after the effective date of this amended rule
under a group long-term care insurance policy as defined in Ark. Code Ann. §
23-97-304(6),
which policy was in force at the time this amended rule became effective, the
provisions of this Section shall apply on the policy anniversary following
January 1, 2007.
B. An
insurer shall provide notice of a pending premium rate schedule increase,
including an exceptional increase, to the Commissioner at least thirty (30)
days prior to the notice to the policyholders and shall include:
(1) Information required under Section 9 of
this Rule;
(2) Certification by a
qualified actuary that:
(a) If the requested
premium rate schedule increase is implemented and the underlying assumptions,
which reflect moderately adverse conditions, are realized, no further premium
rate schedule increases are anticipated;
(b) The premium rate filing is in compliance
with the provisions of this Section;
(3) An actuarial memorandum justifying the
rate schedule change request that includes:
(a) Lifetime projections of earned premiums
and incurred claims based on the filed premium rate schedule increase; and the
method and assumptions used in determining the projected values, including
reflection of any assumptions that deviate from those used for pricing other
forms currently available for sale;
(i)
Annual values for the five (5) years preceding and the three (3) years
following the valuation date shall be provided separately;
(ii) The projections shall include the
development of the lifetime loss ratio, unless the rate increase is an
exceptional increase;
(iii) The
projections shall demonstrate compliance with Subsection C; and
(iv) For exceptional increases,
(I) The projected experience should be
limited to the increases in claims expenses attributable to the approved
reasons for the exceptional increase; and
(II) In the event the Commissioner determines
as provided in Section 4A(4) of this Rule that offsets may exist, the insurer
shall use appropriate net projected experience;
(b) Disclosure of how reserves have been
incorporated in this rate increase whenever the rate increase will trigger
contingent benefit upon lapse;
(c)
Disclosure of the analysis performed to determine why a rate adjustment is
necessary, which pricing assumptions were not realized and why, and what other
actions taken by the company have been relied on by the actuary;
(d) A statement that policy design,
underwriting and claims adjudication practices have been taken into
consideration; and
(e) In the event
that it is necessary to maintain consistent premium rates for new certificates
and certificates receiving a rate increase, the insurer will need to file
composite rates reflecting projections of new certificates;
(4) A statement that renewal
premium rate schedules are not greater than new business premium rate schedules
except for differences attributable to benefits, unless sufficient
justification is provided to the Commissioner; and
(5) Sufficient information for review and
approval of the premium rate schedule increase by the Commissioner.
C. All premium rate schedule
increases shall be determined in accordance with the following requirements:
(1) Exceptional increases shall provide that
seventy percent (70%) of the present value of projected additional premiums
from the exceptional increase will be returned to policyholders in
benefits;
(2) Premium rate schedule
increases shall be calculated such that the sum of the accumulated value of
incurred claims, without the inclusion of active life reserves, and the present
value of future projected incurred claims, without the inclusion of active life
reserves, will not be less than the sum of the following:
(a) The accumulated value of the initial
earned premium times fifty-eight percent (58%);
(b) Eighty-five percent (85%) of the
accumulated value of prior premium rate schedule increases on an earned
basis;
(c) The present value of
future projected initial earned premiums times fifty-eight percent (58%);
and
(d) Eighty-five percent (85%)
of the present value of future projected premiums not in Subparagraph (c) on an
earned basis;
(3) In the
event that a policy form has both exceptional and other increases, the values
in Paragraph (2)(b) and (d) will also include seventy percent (70%>) for
exceptional rate increase amounts; and
(4) All present and accumulated values used
to determine rate increases shall use the maximum valuation interest rate for
contract reserves as specified in Rule 22. The actuary shall disclose as part
of the actuarial memorandum the use of any appropriate averages.
D. For each rate increase that is
implemented, the insurer shall file for review and approval by the Commissioner
updated projections, as defined in Subsection B(3)(a), annually for the next
three (3) years and include a comparison of actual results to projected values.
The Commissioner may extend the period to greater than three (3) years if
actual results are not consistent with projected values from prior projections.
For group insurance policies that meet the conditions in Subsection K, the
projections required by this Subsection shall be provided to the policyholder
in lieu of filing with the Commissioner.
E. If any premium rate in the revised premium
rate schedule is greater than 200 percent of the comparable rate in the initial
premium schedule, lifetime projections, as defined in Subsection B(3)(a), shall
be filed for review and approval by the Commissioner every five (5) years
following the end of the required period in Subsection D. For group insurance
policies that meet the conditions in Subsection K, the projections required by
this Subsection shall be provided to the policyholder in lieu of filing with
the Commissioner.
F.
(1) If the Commissioner has determined that
the actual experience following a rate increase does not adequately match the
projected experience and that the current projections under moderately adverse
conditions demonstrate that incurred claims will not exceed proportions of
premiums specified in Subsection C, the Commissioner may require the insurer to
implement any of the following:
(a) Premium
rate schedule adjustments; or
(b)
Other measures to reduce the difference between the projected and actual
experience.
It is to be expected that the actual experience will not exactly
match the insurer's projections. During the period that projections are
monitored as described in Subsections D and E, the Commissioner should
determine that there is not an adequate match if the differences in earned
premiums and incurred claims are not in the same direction (both actual values
higher or lower than projections) or the difference as a percentage of the
projected is not of the same order.
(2) In determining whether the actual
experience adequately matches the projected experience, consideration should be
given to Subsection B(3)(e), if applicable.
G. If the majority of the policies or
certificates to which the increase is applicable are eligible for the
contingent benefit upon lapse, the insurer shall file:
(1) A plan, subject to Commissioner approval,
for improved administration or claims processing designed to eliminate the
potential for further deterioration of the policy form requiring further
premium rate schedule increases, or both, or to demonstrate that appropriate
administration and claims processing have been implemented or are in effect;
otherwise the Commissioner may impose the condition in Subsection H of this
Section; and
(2) The original
anticipated lifetime loss ratio, and the premium rate schedule increase that
would have been calculated according to Subsection C had the greater of the
original anticipated lifetime loss ratio or fifty-eight percent (58%) been used
in the calculations described in Subsection C(2)(a) and (c).
H.
(1) For a rate increase filing that meets the
following criteria, the Commissioner shall review, for all policies included in
the filing, the projected lapse rates and past lapse rates during the twelve
(12) months following each increase to determine if significant adverse
lapsation has occurred or is anticipated:
(a)
The rate increase is not the first rate increase requested for the specific
policy form or forms;
(b) The rate
increase is not an exceptional increase; and
(c) The majority of the policies or
certificates to which the increase is applicable are eligible for the
contingent benefit upon lapse
(2) In the event significant adverse
lapsation has occurred, is anticipated in the filing or is evidenced in the
actual results as presented in the updated projections provided by the insurer
following the requested rate increase, the Commissioner may determine that a
rate spiral exists. Following the determination that a rate spiral exists, the
Commissioner may require the insurer to offer, without underwriting, to all in
force insureds subject to the rate increase the option to replace existing
coverage with one or more reasonably comparable products being offered by the
insurer or its affiliates.
(a) The offer
shall:
(i) Be subject to the approval of the
Commissioner;
(ii) Be based on
actuarially sound principles, but not be based on attained age; and
(iii) Provide that maximum benefits under any
new policy accepted by an insured shall be reduced by comparable benefits
already paid under the existing policy.
(b) The insurer shall maintain the experience
of all the replacement insureds separate from the experience of insureds
originally issued the policy forms. In the event of a request for a rate
increase on the policy form, the rate increase shall be limited to the lesser
of:
(i) The maximum rate increase determined
based on the combined experience; and
(ii) The maximum rate increase determined
based only on the experience of the insureds originally issued the form plus
ten percent (10%).
I. If the Commissioner determines that the
insurer has exhibited a persistent practice of filing inadequate initial
premium rates for long-term care insurance, the Commissioner may, in addition
to the provisions of Subsection H of this Section, prohibit the insurer from
either of the following:
(1) Filing and
marketing comparable coverage for a period of up to five (5) years;
or
(2) Offering all other similar
coverages and limiting marketing of new applications to the products subject to
recent premium rate schedule increases.
J. Subsections A through I shall not apply to
policies for which the long-term care benefits provided by the policy are
incidental, as defined in Section 4B, if the policy complies with all of the
following provisions:
(1) The interest
credited internally to determine cash value accumulations, including long-term
care, if any, are guaranteed not to be less than the minimum guaranteed
interest rate for cash value accumulations without long-term care set forth in
the policy;
(2) The portion of the
policy that provides insurance benefits other than long-term care coverage
meets the nonforfeiture requirements as applicable in any of the following:
(a) Arkansas Code Annotated §
23-81-201, et
seq;
(b) Arkansas Code Annotated §
23-81-301 et
seq., and
(c) Rule 6 On Variable
Annuity Contracts;
(3)
The policy meets the disclosure requirements of Ark. Code Ann. §
23-97-307;
(4) An actuarial memorandum is filed with the
insurance department that includes:
(a) A
description of the basis on which the long-term care rates were
determined;
(b) A description of
the basis for the reserves;
(c) A
summary of the type of policy, benefits, renewability, general marketing
method, and limits on ages of issuance;
(d) A description and a table of each
actuarial assumption used. For expenses, an insurer must include percent of
premium dollars per policy and dollars per unit of benefits, if any;
(e) A description and a table of the
anticipated policy reserves and additional reserves to be held in each future
year for active lives;
(f) The
estimated average annual premium per policy and the average issue
age;
(g) A statement as to whether
underwriting is performed at the time of application. The statement shall
indicate whether underwriting is used and, if used, the statement shall include
a description of the type or types of underwriting used, such as medical
underwriting or functional assessment underwriting. Concerning a group policy,
the statement shall indicate whether the enrollee or any dependent will be
underwritten and when underwriting occurs; and
(h) A description of the effect of the
long-term care policy provision on the required premiums, nonforfeiture values
and reserves on the underlying insurance policy, both for active lives and
those in long-term care claim status.
K. Subsections F and H shall not apply to
group insurance policies as defined in Arkansas Code Annotated §
23-97-304(6)
where:
(1) The policies insure 250 or more
persons and the policyholder has 5,000 or more eligible employees of a single
employer; or
(2) The policyholder,
and not the certificate holders, pays a material portion of the premium, which
shall not be less than twenty percent (20%) of the total premium for the group
in the calendar year prior to the year a rate increase is filed.
Section 21.
Filing Requirement
Prior to an insurer or similar organization offering group
long-term care insurance to a resident of this state pursuant to Ark. Code Ann.
§
23-97-301
et seq., it shall file with the Commissioner evidence that the group policy or
certificate thereunder has been approved by a state having statutory or
regulatory long-term care insurance requirements substantially similar to those
adopted in this state.
Section
22.
Filing Requirements for Advertising
A. Every insurer, health care service plan or
other entity providing long-term care insurance or benefits in this state shall
file a copy of any long-term care insurance advertisement intended for use in
this state whether through written, radio or television medium to the
Commissioner of Insurance of this state for review and approval by the
Commissioner to the extent it may be required under state law. In addition, all
advertisements shall be retained by the insurer, health care service plan or
other entity for at least three (3) years from the date the advertisement was
first used.
B. The Commissioner may
exempt from these requirements any advertising form or material when, in the
Commissioner's opinion, this requirement may not be reasonably
applied.
Section 23.
Standards for Marketing
A. Every
insurer, health care service plan or other entity marketing long-term care
insurance coverage in this state, directly or through its producers, shall:
(1) Establish marketing procedures and agent
training requirements to assure that:
(a) Any
marketing activities, including any comparison of policies, by its agents or
other producers will be fair and accurate; and
(b) Excessive insurance is not sold or
issued.
(2) Display
prominently by type, stamp or other appropriate means, on the first page of the
outline of coverage and policy the following:
"Notice to buyer: This policy may not cover all of the costs
associated with long-term care incurred by the buyer during the period of
coverage. The buyer is advised to review carefully all policy
limitations."
(3) Provide
copies of the disclosure forms required in Section 9C (Appendices B and F) to
the applicant.
(4) Inquire and
otherwise make every reasonable effort to identify whether a prospective
applicant or enrollee for long-term care insurance already has accident and
sickness or long-term care insurance and the types and amounts of any such
insurance, except that in the case of qualified long-term care insurance
contracts, an inquiry into whether a prospective applicant or enrollee for
long-term care insurance has accident and sickness insurance is not
required.
(5) Every insurer or
entity marketing long-term care insurance shall establish auditable procedures
for verifying compliance with this Subsection A.
(6) If the state in which the policy or
certificate is to be delivered or issued for delivery has a senior insurance
counseling program approved by the Commissioner, the insurer shall, at
solicitation, provide written notice to the prospective policyholder and
certificate holder that the program is available and the name, address and
telephone number of the program.
(7) For long-term care health insurance
policies and certificates, use the terms "noncancellable" or "level premium"
only when the policy or certificate conforms to Section 6 A(3) of this
Rule.
(8) Provide an explanation of
contingent benefit upon lapse provided for in Section 28D(3), and, if
applicable, the additional contingent benefit upon lapse provided to policies
with fixed or limited premium paying periods in Section 28D(4).
B. In addition to the practices
prohibited in Ark. Code Ann. §
23-66-201 et seq., the following
acts and practices are prohibited:
(1)
Twisting. Knowingly making any misleading representation or incomplete or
fraudulent comparison of any insurance policies or insurers for the purpose of
inducing, or tending to induce, any person to lapse, forfeit, surrender,
terminate, retain, pledge, assign, borrow on or convert any insurance policy or
to take out a policy of insurance with another insurer.
(2) High pressure tactics. Employing any
method of marketing having the effect of or tending to induce the purchase of
insurance through force, fright, threat, whether explicit or implied, or undue
pressure to purchase or recommend the purchase of insurance.
(3) Cold lead advertising. Making use
directly or indirectly of any method of marketing which fails to disclose in a
conspicuous manner that a purpose of the method of marketing is solicitation of
insurance and that contact will be made by an insurance agent or insurance
company.
(4) Misrepresentation.
Misrepresenting a material fact in selling or offering to sell a long-term care
insurance policy.
C.
(1) With respect to the obligations set forth
in this Subsection, the primary responsibility of an association, as defined in
Ark. Code Ann. §
23-97-304(2),
when endorsing or selling long-term care insurance shall be to educate its
members concerning long-term care issues in general so that its members can
make informed decisions. Associations shall provide objective information
regarding long-term care insurance policies or certificates endorsed or sold by
such associations to ensure that members of such associations receive a
balanced and complete explanation of the features in the policies or
certificates that are being endorsed or sold.
(2) The insurer shall file with the insurance
department the following material:
(a) The
policy and certificate,
(b) A
corresponding outline of coverage, and
(c) All advertisements requested by the
insurance department.
(3) The association shall disclose in any
long-term care insurance solicitation:
(a)
The specific nature and amount of the compensation arrangements (including all
fees, commissions, administrative fees and other forms of financial support)
that the association receives from endorsement or sale of the policy or
certificate to its members; and
(b)
A brief description of the process under which the policies and the insurer
issuing the policies were selected.
(4) If the association and the insurer have
interlocking directorates or trustee arrangements, the association shall
disclose that fact to its members.
(5) The board of directors of associations
selling or endorsing long-term care insurance policies or certificates shall
review and approve the insurance policies as well as the compensation
arrangements made with the insurer.
(6) The association shall also:
(a) At the time of the association's decision
to endorse, engage the services of a person with expertise in long-term care
insurance not affiliated with the insurer to conduct an examination of the
policies, including its benefits, features, and rates and update the
examination thereafter in the event of material change;
(b) Actively monitor the marketing efforts of
the insurer and its agents; and
(c)
Review and approve all marketing materials or other insurance communications
used to promote sales or sent to members regarding the policies or
certificates.
(d) Subparagraphs (a)
through (c) shall not apply to qualified long-term care insurance
contracts.
(7) No group
long-term care insurance policy or certificate may be issued to an association
unless the insurer files with the state insurance department the information
required in this Subsection.
(8)
The insurer shall not issue a long-term care policy or certificate to an
association or continue to market such a policy or certificate unless the
insurer certifies annually that the association has complied with the
requirements set forth in this Subsection.
(9) Failure to comply with the filing and
certification requirements of this Section constitutes an unfair trade practice
in violation of Ark. Code Ann. §
23-66-206.
Section 24.
Suitability
A. This Section
shall not apply to life insurance policies that accelerate benefits for
long-term care.
B. Every insurer,
health care service plan or other entity marketing long-term care insurance
(the "issuer") shall:
(1) Develop and use
suitability standards to determine whether the purchase or replacement of
long-term care insurance is appropriate for the needs of the
applicant;
(2) Train its agents in
the use of its suitability standards; and
(3) Maintain a copy of its suitability
standards and make them available for inspection upon request by the
Commissioner.
C.
(1) To determine whether the applicant meets
the standards developed by the issuer, the agent and issuer shall develop
procedures that take the following into consideration:
(a) The ability to pay for the proposed
coverage and other pertinent financial information related to the purchase of
the coverage;
(b) The applicant's
goals or needs with respect to long-term care and the advantages and
disadvantages of insurance to meet these goals or needs; and
(c) The values, benefits and costs of the
applicant's existing insurance, if any, when compared to the values, benefits
and costs of the recommended purchase or replacement.
(2) The issuer, and where an agent is
involved, the agent shall make reasonable efforts to obtain the information set
out in Paragraph (1) above. The efforts shall include presentation to the
applicant, at or prior to application, the "Long-Term Care Insurance Personal
Worksheet." The personal worksheet used by the issuer shall contain, at a
minimum, the information in the format contained in Appendix B, in not less
than twelve (12) point type. The issuer may request the applicant to provide
additional information to comply with its suitability standards. A copy of the
issuer's personal worksheet shall be filed with the Commissioner.
(3) A completed personal worksheet shall be
returned to the issuer prior to the issuer's consideration of the applicant for
coverage, except the personal worksheet need not be returned for sales of
employer group long-term care insurance to employees and their
spouses.
(4) The sale or
dissemination outside the company or agency by the issuer or agent of
information obtained through the personal worksheet in Appendix B is
prohibited.
D. The
issuer shall use the suitability standards it has developed pursuant to this
Section in determining whether issuing long-term care insurance coverage to an
applicant is appropriate.
E. Agents
shall use the suitability standards developed by the issuer in marketing
long-term care insurance.
F. At the
same time as the personal worksheet is provided to the applicant, the
disclosure form entitled "Things You Should Know Before You Buy Long-Term Care
Insurance" shall be provided. The form shall be in the format contained in
Appendix C, in not less than twelve (12) point type.
G. If the issuer determines that the
applicant does not meet its financial suitability standards, or if the
applicant has declined to provide the information, the issuer may reject the
application. In the alternative, the issuer shall send the applicant a letter
similar to Appendix D. However, if the applicant has declined to provide
financial information, the issuer may use some other method to verify the
applicant's intent. Either the applicant's returned letter or a record of the
alternative method of verification shall be made part of the applicant's
file.
H. The issuer shall report
annually to the Commissioner the total number of applications received from
residents of this state, the number of those who declined to provide
information on the personal worksheet, the number of applicants who did not
meet the suitability standards, and the number of those who chose to confirm
after receiving a suitability letter.
Section 25.
Prohibition Against
Preexisting Conditions and Probationary Periods in Replacement Policies or
Certificates
If a long-term care insurance policy or certificate replaces
another long-term care policy or certificate, the replacing insurer shall waive
any time periods applicable to preexisting conditions and probationary periods
in the new long-term care policy for similar benefits to the extent that
similar exclusions have been satisfied under the original policy.
Section 26.
Availability of
New Services or Providers
A. An insurer
shall notify policyholders of the availability of a new long-term policy series
that provides coverage for new long-term care services or providers material in
nature and not previously available through the insurer to the general public.
The notice shall be provided within twelve (12) months of the date that the new
policy series is made available for sale in this state.
B. Notwithstanding Subsection A above,
notification is not required for any policy issued prior to the effective date
of this Rule or to any policyholder or certificate holder who is currently
eligible for benefits, within an elimination period or on a claim, or who
previously had been in claim status, or who would not be eligible to apply for
coverage due to issue age limitations under the new policy. The insurer may
require that policyholders meet all eligibility requirements, including
underwriting and payment of the required premium to add such new services or
providers.
C. The insurer shall
make the new coverage available in one of the following ways:
(1) By adding a rider to the existing policy
and charging a separate premium for the new rider based on the insured's
attained age;
(2) By exchanging the
existing policy or certificate for one with an issue age based on the present
age of the insured and recognizing past insured status by granting premium
credits toward the premiums for the new policy or certificate. The premium
credits shall be based on premiums paid or reserves held for the prior policy
or certificate;
(3) By exchanging
the existing policy or certificate for a new policy or certificate in which
consideration for past insured status shall be recognized by setting the
premium for the new policy or certificate at the issue age of the policy or
certificate being exchanged. The cost for the new policy or certificate may
recognize the difference in reserves between the new policy or certificate and
the original policy or certificate; or
(4) By an alternative program developed by
the insurer that meets the intent of this Section if the program is filed with
and approved by the Commissioner.
D. An insurer is not required to notify
policyholders of a new proprietary policy series created and filed for use in a
limited distribution channel. For purposes of this Subsection, "limited
distribution channel" means through a discrete entity, such as a financial
institution or brokerage, for which specialized products are available that are
not available for sale to the general public. Policyholders that purchased such
a new proprietary policy shall be notified when a new long-term care policy
series that provides coverage for new long-term care services or providers
material in nature is made available to that limited distribution
channel.
E. Policies issued
pursuant to this Section shall be considered exchanges and not replacements.
These exchanges shall not be subject to Sections 14 and 24, and the reporting
requirements of Section 15A through Section 15E of this Rule.
F. Where the policy is offered through an
employer, labor organization, professional, trade or occupational association,
the required notification in Subsection A above shall be made to the offering
entity. However, if the policy is issued to a group as defined in Ark. Code
Ann. §
23-97-304(6),
the notification shall be made to each certificate holder.
G. Nothing in this Section shall prohibit an
insurer from offering any policy, rider, certificate or coverage change to any
policyholder or certificate holder. However, upon request any policyholder may
apply for currently available coverage that includes the new services or
providers. The insurer may require that policyholders meet all eligibility
requirements, including underwriting and payment of the required premium to add
such new services or providers.
H.
This Section does not apply to life insurance policies or riders containing
accelerated long-term care benefits.
I. This Section shall become effective on
July 1, 2008.
Section
27.
Right to Reduce Coverage and Lower Premiums
A.
(1)
Every long-term care insurance policy and certificate shall include a provision
that allows the policyholder or certificate holder to reduce coverage and lower
the policy or certificate premium in at least one of the following ways:
(a) Reducing the maximum benefit;
or
(b) Reducing the daily, weekly
or monthly benefit amount.
(2) The insurer may also offer other
reduction options that are consistent with the policy or certificate design or
the carrier's administrative processes.
B. The provision required in Section 27(A)(1)
of this Rule shall include a description of the ways in which coverage may be
reduced and the process for requesting and implementing a reduction in
coverage.
C. The age to determine
the premium for the reduced coverage shall be based on the age used to
determine the premiums for the coverage currently in force.
D. The insurer may limit any reduction in
coverage to plans or options available for that policy form and to those for
which benefits will be available after consideration of claims paid or
payable.
E. If a policy or
certificate is about to lapse, the insurer shall provide a written reminder to
the policyholder or certificate holder of his or her right to reduce coverage
and premiums in the notice required by Section 7A(3) of this Rule.
F. This Section does not apply to life
insurance policies or riders containing accelerated long-term care
benefits.
G. The requirements of
this Section shall apply to any long-term care policy issued in this state on
or after July 1, 2009
Section
28.
Nonforfeiture Benefit Requirement
A. This Section does not apply to life
insurance policies or riders containing accelerated long-term care
benefits.
B. To comply with the
requirement to offer a nonforfeiture benefit pursuant to the provisions of Ark.
Code Ann. §
23-97-319:
(1) A policy or certificate offered with
nonforfeiture benefits shall have coverage elements, eligibility, benefit
triggers and benefit length that are the same as coverage to be issued without
nonforfeiture benefits. The nonforfeiture benefit included in the offer shall
be the benefit described in Subsection E; and
(2) The offer shall be in writing if the
nonforfeiture benefit is not otherwise described in the Outline of Coverage or
other materials given to the prospective policyholder.
C. If the offer required to be made under
Ark. Code Ann. §
23-97-319
is rejected, the insurer shall provide the contingent benefit upon lapse
described in this Section. Even if this offer is accepted for a policy with a
fixed or limited premium payment period, the contingent benefit on lapse in
Subsection D(4) of this Rule shall still apply.
D.
(1)
After rejection of the offer required under Ark. Code Ann. §
23-97-319,
for individual and group policies without nonforfeiture benefits issued after
the effective date of this Section, the insurer shall provide a contingent
benefit upon lapse.
(2) In the
event a group policyholder elects to make the nonforfeiture benefit an option
to the certificate holder, a certificate shall provide either the nonforfeiture
benefit or the contingent benefit upon lapse.
(3) The contingent benefit on lapse shall be
triggered every time an insurer increases the premium rates to a level which
results in a cumulative increase of the annual premium equal to or exceeding
the percentage of the insured's initial annual premium set forth below based on
the insured's issue age, and the policy or certificate lapses within 120 days
of the due date of the premium so increased. Unless otherwise required,
policyholders shall be notified at least thirty (30) days prior to the due date
of the premium reflecting the rate increase.
Triggers for a Substantial Premium
Increase
|
Issue Age
|
Percent Increase Over Initial Premium
|
|
29 and under
|
200%
|
|
30-34
|
190%
|
|
35-39
|
170%
|
|
40-44
|
150%
|
|
45-49
|
130%
|
|
50-54
|
110%
|
|
55-59
|
90%
|
|
60
|
70%
|
|
61
|
66%
|
|
62
|
62%
|
|
63
|
58%
|
|
64
|
54%
|
|
65
|
50%
|
|
66
|
48%
|
|
67
|
46%
|
|
68
|
44%
|
|
69
|
42%
|
|
70
|
40%
|
|
71
|
38%
|
|
72
|
36%
|
|
73
|
34%
|
|
74
|
32%
|
|
75
|
30%
|
|
76
|
28%
|
|
77
|
26%
|
|
78
|
24%
|
|
79
|
22%
|
|
80
|
20%
|
|
81
|
19%
|
|
82
|
18%
|
|
83
|
17%
|
|
84
|
16%
|
|
85
|
15%
|
|
86
|
14%
|
|
87
|
13%
|
|
88
|
12%
|
|
89
|
11%
|
|
90 and over
|
10%
|
(4) A
contingent benefit on lapse shall also be triggered for policies with a fixed
or limited premium paying period every time an insurer increases the premium
rates to a level that results in a cumulative increase of the annual premium
equal to or exceeding the percentage of the insured's initial annual premium
set forth below based on the insured's issue age, the policy or certificate
lapses within 120 days of the due date of the premium so increased, and the
ratio in Paragraph (6)(b) is forty percent (40%) or more. Unless otherwise
required, policyholders shall be notified at least thirty (30) days prior to
the due date of the premium reflecting the rate increase.
Triggers for a Substantial Premium
Increase
|
Issue Age
|
Percent Increase Over Initial Premium
|
|
Under 65
|
50%
|
|
65-80
|
30%
|
|
Over 80
|
10%
|
This provision shall be in addition to the contingent benefit
provided by Paragraph (3) above and where both are triggered, the benefit
provided shall be at the option of the insured.
(5) On or before the effective date of a
substantial premium increase as defined in Subsection D (3) above, the insurer
shall:
(a) Offer to reduce policy benefits
provided by the current coverage without the requirement of additional
underwriting so that required premium payments are not increased;
(b) Offer to convert the coverage to a
paid-up status with a shortened benefit period in accordance with the terms of
Subsection E. This option may be elected at any time during the 120-day period
referenced in Subsection D(3); and
(c) Notify the policyholder or certificate
holder that a default or lapse at any time during the 120-day period referenced
in Subsection D(3) shall be deemed to be the election of the offer to convert
in Subparagraph (b) above unless the automatic option in Subsection (6)(c)
applies.
(6) On or
before the effective date of a substantial premium increase as defined in
Subsection D(3) above, the insurer shall:
(a)
Offer to reduce policy benefits provided by the current coverage without the
requirement of additional underwriting so that required premium payments are
not increased;
(b) Offer to convert
the coverage to a paid-up status where the amount payable for each benefit is
ninety percent (90%) of the amount payable in effect immediately prior to lapse
times the ratio of the number of completed months of paid premiums divided by
the number of months in the premium paying period. This option may be elected
at any time during the 120-day period referenced in Subsection D(4);
and
(c) Notify the policyholder or
certificate holder that a default or lapse at any time during the 120-day
period referenced in Subsection D(4) shall be deemed to be the election of the
offer to convert in Subsection 28 (D) 6 (b) above if the ratio is forty percent
(40%) or more.
E. Benefits continued as nonforfeiture
benefits, including contingent benefits upon lapse in accordance with
Subsection D(3), but not Subsection D(4), are described in this Subsection:
(1) For purposes of this Subsection, attained
age rating is defined as a schedule of premiums starting from the issue date
which increases age at least one percent per year prior to age fifty (50), and
at least three percent (3%) per year beyond age fifty (50).
(2) For purposes of this Subsection, the
nonforfeiture benefit shall be of a shortened benefit period providing paid-up
long-term care insurance coverage after lapse. The same benefits (amounts and
frequency in effect at the time of lapse but not increased thereafter) will be
payable for a qualifying claim, but the lifetime maximum dollars or days of
benefits shall be determined as specified in Paragraph (3).
(3) The standard nonforfeiture credit will be
equal to 100% of the sum of all premiums paid, including the premiums paid
prior to any changes in benefits. The insurer may offer additional shortened
benefit period options, as long as the benefits for each duration equal or
exceed the standard nonforfeiture credit for that duration. However, the
minimum nonforfeiture credit shall not be less than thirty (30) times the daily
nursing home benefit at the time of lapse. In either event, the calculation of
the nonforfeiture credit is subject to the limitation of Subsection
F.
(4)
(a) The nonforfeiture benefit shall begin not
later than the end of the third year following the policy or certificate issue
date. The contingent benefit upon lapse shall be effective during the first
three (3) years as well as thereafter.
(b) Notwithstanding Subparagraph (a), for a
policy or certificate with attained age rating, the nonforfeiture benefit shall
begin on the earlier of:
(i) The end of the
tenth year following the policy or certificate issue date; or
(ii) The end of the second year following the
date the policy or certificate is no longer subject to attained age
rating.
(5)
Nonforfeiture credits may be used for all care and services qualifying for
benefits under the terms of the policy or certificate, up to the limits
specified in the policy or certificate.
F. All benefits paid by the insurer while the
policy or certificate is in premium paying status and in the paid up status
will not exceed the maximum benefits which would be payable if the policy or
certificate had remained in premium paying status.
G. There shall be no difference in the
minimum nonforfeiture benefits as required under this Section for group and
individual policies.
H. The
requirements set forth in this Section shall become effective twelve (12)
months after adoption of this provision and shall apply as follows:
(1) Except as provided in Paragraphs (2) and
(3) below, the provisions of this Section apply to any long-term care policy
issued in this state on or after the effective date of this amended
rule.
(2) For certificates issued
on or after the effective date of this Section, under a group long-term care
insurance policy as defined in Ark. Code Ann. §
23-97-304(6),
which policy was in force at the time this amended rule became effective, the
provisions of this Section shall not apply.
(3) The last sentence in Subsection C and
Subsections D(4) and D(6) shall apply to any long-term care insurance policy or
certificate issued in this state after January 1, 2009, except new certificates
on a group policy as defined in Subsection 4E(1).
I. Premiums charged for a policy or
certificate containing nonforfeiture benefits or a contingent benefit on lapse
shall be subject to the loss ratio requirements of Section 19 or Section 20
treating the policy as a whole.
J.
To determine whether contingent nonforfeiture upon lapse provisions are
triggered under Subsection D(3) or D(4), a replacing insurer that purchased or
otherwise assumed a block or blocks of long-term care insurance policies from
another insurer shall calculate the percentage increase based on the initial
annual premium paid by the insured when the policy was first purchased from the
original insurer.
K. A
nonforfeiture benefit for qualified long-term care insurance contracts that are
level premium contracts shall be offered that meets the following requirements:
(1) The nonforfeiture provision shall be
appropriately captioned;
(2) The
nonforfeiture provision shall provide a benefit available in the event of a
default in the payment of any premiums and shall state that the amount of the
benefit may be adjusted subsequent to being initially granted only as necessary
to reflect changes in claims, persistency and interest as reflected in changes
in rates for premium paying contracts approved by the Commissioner for the same
contract form; and
(3) The
nonforfeiture provision shall provide at least one of the following:
(a) Reduced paid-up insurance;
(b) Extended term insurance;
(c) Shortened benefit period; or
(d) Other similar offerings approved by the
Commissioner.
Section 29.
Standards for Benefit
Triggers
A. A long-term care insurance
policy shall condition the payment of benefits on a determination of the
insured's ability to perform activities of daily living and on cognitive
impairment. Eligibility for the payment of benefits shall not be more
restrictive than requiring either a deficiency in the ability to perform not
more than three (3) of the activities of daily living or the presence of
cognitive impairment.
B.
(1) Activities of daily living shall include
at least the following as defined in Section 5 and in the policy:
(a) Bathing;
(b) Continence;
(c) Dressing;
(d) Eating;
(e) Toileting; and
(f) Transferring;
(2) Insurers may use activities of daily
living to trigger covered benefits in addition to those contained in Paragraph
(1) as long as they are defined in the policy.
C. An insurer may use additional provisions
for the determination of when benefits are payable under a policy or
certificate; however the provisions shall not restrict, and are not in lieu of,
the requirements contained in Subsections A and B.
D. For purposes of this Section the
determination of a deficiency shall not be more restrictive than:
(1) Requiring the hands-on assistance of
another person to perform the prescribed activities of daily living;
or
(2) If the deficiency is due to
the presence of a cognitive impairment, supervision or verbal cueing by another
person is needed in order to protect the insured or others.
E. Assessments of activities of
daily living and cognitive impairment shall be performed by licensed or
certified professionals, such as physicians, nurses or social
workers.
F. Long-term care
insurance policies shall include a clear description of the process for
appealing and resolving benefit determinations.
G. The requirements set forth in this Section
shall be effective 12 months after the effective date of this Rule, and shall
apply as follows:
(1) Except as provided in
Paragraph (2), the provisions of this Section apply to a long-term care policy
issued in this state on or after the effective date of the amended
rule.
(2) For certificates issued
on or after the effective date of this Section, under a group long-term care
insurance policy as defined in Ark. Code Ann. §
23-97-304(6)
that was in force at the time this amended rule became effective, the
provisions of this Section shall not apply.
Section 30.
Additional Standards for
Benefit Triggers for Qualified Long-Term Care Insurance Contracts
A. For purposes of this Section the following
definitions apply:
(1) "Qualified long-term
care services" means services that meet the requirements of Section 7702(c)(1)
of the Internal Revenue Code of 1986, as amended, as follows: necessary
diagnostic, preventive, therapeutic, curative, treatment, mitigation and
rehabilitative services, and maintenance or personal care services which are
required by a chronically ill individual, and are provided pursuant to a plan
of care prescribed by a licensed health care practitioner.
(2)
(a)
"Chronically ill individual" has the meaning prescribed for this term by
Section 7702B(c)(2) of the Internal Revenue Code of 1986, as amended. Under
this provision, a chronically ill individual means any individual who has been
certified by a licensed health care practitioner as:
(i) Being unable to perform (without
substantial assistance from another individual) at least two (2) activities of
daily living for a period of at least ninety (90) days due to a loss of
functional capacity; or
(ii)
Requiring substantial supervision to protect the individual from threats to
health and safety due to severe cognitive impairment.
(b) The term "chronically ill individual"
shall not include an individual otherwise meeting these requirements unless
within the preceding twelve-month period a licensed health care practitioner
has certified that the individual meets these requirements.
(3) "Licensed health care
practitioner" means a physician, as defined in Section 1861(r)(l) of the Social
Security Act, a registered professional nurse, licensed social worker or other
individual who meets requirements prescribed by the Secretary of the
Treasury.
(4) "Maintenance or
personal care services" means any care the primary purpose of which is the
provision of needed assistance with any of the disabilities as a result of
which the individual is a chronically ill individual (including the protection
from threats to health and safety due to severe cognitive
impairment).
B. A
qualified long-term care insurance contract shall pay only for qualified
long-term care services received by a chronically ill individual provided
pursuant to a plan of care prescribed by a licensed health care
practitioner.
C. A qualified
long-term care insurance contract shall condition the payment of benefits on a
determination of the insured's inability to perform activities of daily living
for an expected period of at least ninety (90) days due to a loss of functional
capacity or to severe cognitive impairment.
D. Certifications regarding activities of
daily living and cognitive impairment required pursuant to Subsection C shall
be performed by the following licensed or certified professionals: physicians,
registered professional nurses, licensed social workers, or other individuals
who meet requirements prescribed by the Secretary of the Treasury.
E. Certifications required pursuant to
Subsection C may be performed by a licensed health care professional at the
direction of the carrier as is reasonably necessary with respect to a specific
claim, except that when a licensed health care practitioner has certified that
an insured is unable to perform activities of daily living for an expected
period of at least ninety (90) days due to a loss of functional capacity and
the insured is in claim status, the certification may not be rescinded and
additional certifications may not be performed until after the expiration of
the ninety-day (90) period.
F.
Qualified long-term care insurance contracts shall include a clear description
of the process for appealing and resolving disputes with respect to benefit
determinations.
Section
31.
Standard Format Outline of Coverage
This Section of the rule implements, interprets and makes
specific, the provisions of Ark. Code Ann. §
23-97-312 in
prescribing a standard format and the content of an outline of coverage.
A. The outline of coverage shall be a
free-standing document, using no smaller than ten-point type.
B. The outline of coverage shall contain no
material of an advertising nature.
C. Text that is capitalized or underscored in
the standard format outline of coverage may be emphasized by other means that
provide prominence equivalent to the capitalization or underscoring.
D. Use of the text and sequence of text of
the standard format outline of coverage is mandatory, unless otherwise
specifically indicated.
E. Format
for outline of coverage:
COMPANY NAME
ADDRESS - CI TY & STATE
TELEPHONE NUMBER
LONG-TERM CARE INSURANCE
OUTLINE OF COVERAGE
[Policy Number or Group Master Policy and Certificate
Number]
Except for policies or certificates which are guaranteed issue,
the following caution statement, or language substantially similar, must appear
as follows in the outline of coverage.
Caution: The issuance of this long-term care insurance [policy]
[certificate] is based upon your responses to the questions on your
application. A copy of your [application] [enrollment form] [is enclosed] [was
retained by you when you applied]. If your answers are incorrect or untrue, the
company has the right to deny benefits or rescind your policy. The best time to
clear up any questions is now, before a claim arises! If, for any reason, any
of your answers are incorrect, contact the company at this address: [insert
address]
1. This policy is [an
individual policy of insurance] ([a group policy] which was issued in the
[indicate jurisdiction in which group policy was issued]).
2. PURPOSE OF OUTLINE OF COVERAGE. This
outline of coverage provides a very brief description of the important features
of the policy. You should compare this outline of coverage to outlines of
coverage for other policies available to you. This is not an insurance
contract, but only a summary of coverage. Only the individual or group policy
contains governing contractual provisions. This means that the policy or group
policy sets forth in detail the rights and obligations of both you and the
insurance company. Therefore, if you purchase this coverage, or any other
coverage, it is important that you READ YOUR POLICY (OR CERTIFICATE)
CAREFULLY!
3. FEDERAL TAX
CONSEQUENCES.
This [POLICY] [CERTIFICATE] is intended to be a federally
tax-qualified long-term care insurance contract under Section 7702B (b) of the
Internal Revenue Code of 1986, as amended.
OR
Federal Tax Implications of this [POLICY] [CERTIFICATE]. This
[POLICY] [CERTIFICATE] is not intended to be a federally tax-qualified
long-term care insurance contract under Section 7702B (b) of the Internal
Revenue Code of 1986 as amended. Benefits received under the [POLICY]
[CERTIFICATE] may be taxable as income.
4. TERMS UNDER WHICH THE POLICY OR
CERTIFICATE MAY BE CONTINUED IN FORCE OR DISCONTINUED.
(a) For long-term care health insurance
policies or certificates describe one of the following permissible policy
renewability provisions:
(1) Policies and
certificates that are guaranteed renewable shall contain the following
statement: RENEWABILITY: THIS POLICY [CERTIFICATE] IS GUARANTEED RENEWABLE.
This means you have the right, subject to the terms of your policy,
[certificate] to continue this policy as long as you pay your premiums on time.
[Company Name] cannot change any of the terms of your policy on its own, except
that, in the future, IT MAY INCREASE THE PREMIUM YOU PAY.
(2) Policies and certificates that are
noncancellable shall contain the following statement: RENEWABILITY: THIS POLICY
[CERTIFICATE] IS NONCANCELLABLE. This means that you have the right, subject to
the terms of your policy, to continue this policy as long as you pay your
premiums on time. [Company Name] cannot change any of the terms of your policy
on its own and cannot change the premium you currently pay. However, if your
policy contains an inflation protection feature where you choose to increase
your benefits, [Company Name] may increase your premium at that time for those
additional benefits.
(b)
For group coverage, specifically describe continuation/conversion provisions
applicable to the certificate and group policy;
(c) Describe waiver of premium provisions or
state that there are not such provisions.
5. TERMS UNDER WHICH THE COMPANY MAY CHANGE
PREMIUMS.
In bold type larger than the maximum type required to be used for
the other provisions of the outline of coverage, state whether or not the
company has a right to change the premium, and if a right exists, describe
clearly and concisely each circumstance under which the premium may
change.
6. TERMS UNDER
WHICH THE POLICY OR CERTIFICATE MAY BE RETURNED AND PREMIUM REFUNDED.
(a) Provide a brief description of the right
to return-"free look" provision of the policy.
(b) Include a statement that the policy
either does or does not contain provisions providing for a refund or partial
refund of premium upon the death of an insured or surrender of the policy or
certificate. If the policy contains such provisions, include a description of
them.
7. THIS IS NOT
MEDICARE SUPPLEMENT COVERAGE. If you are eligible for Medicare, review the
Medicare Supplement Buyer's Guide available from the insurance company.
(a) For agents: Neither [insert company name]
nor its agents represent Medicare, the federal government or any state
government.
(b) For direct
response: [insert company name] is not representing Medicare, the federal
government or any state government.
8. LONG-TERM CARE COVERAGE. Policies of this
category are designed to provide coverage for one or more necessary or
medically necessary diagnostic, preventive, therapeutic, rehabilitative,
maintenance, or personal care services, provided in a setting other than an
acute care unit of a hospital, such as in a nursing home, in the community or
in the home.
This policy provides coverage in the form of a fixed dollar
indemnity benefit for covered long-term care expenses, subject to policy
[limitations] [waiting periods] and [coinsurance] requirements. [Modify this
paragraph if the policy is not an indemnity policy.]
9. BENEFITS PROVIDED BY THIS POLICY.
(a) Covered services, related deductibles,
waiting periods, elimination periods and benefit maximums.
(b) Institutional benefits, by skill
level.
(c) Non-institutional
benefits, by skill level.
(d)
Eligibility for Payment of Benefits
Activities of daily living and cognitive impairment shall be used
to measure an insured's need for long-term care and must be defined and
described as part of the outline of coverage.
Any additional benefit triggers must also be explained. If these
triggers differ for different benefits, explanation of the triggers should
accompany each benefit description. If an attending physician or other
specified person must certify a certain level of functional dependency in order
to be eligible for benefits, this too must be specified.
10. LIMITATIONS AND EXCLUSIONS.
Describe:
(a)
Preexisting conditions;
(b)
Non-eligible facilities and provider;
(c) Non-eligible levels of care (e.g.,
unlicensed providers, care or treatment provided by a family member,
etc.);
(d) Exclusions and
exceptions;
(e) Limitations.
This Section should provide a brief specific description of any
policy provisions which limit, exclude, restrict, reduce, delay, or in any
other manner operate to qualify payment of the benefits described in Number 6
above.
THIS POLICY MAY NOT COVER ALL THE EXPENSES ASSOCIATED WITH YOUR
LONG-TERM CARE NEEDS.
11. RELATIONSHIP OF COST OF CARE AND
BENEFITS. Because the costs of long-term care services will likely increase
over time, you should consider whether and how the benefits of this plan may be
adjusted. As applicable, indicate the following:
(a) That the benefit level will not increase
over time;
(b) Any automatic
benefit adjustment provisions;
(c)
Whether the insured will be guaranteed the option to buy additional benefits
and the basis upon which benefits will be increased over time if not by a
specified amount or percentage;
(d)
If there is such a guarantee, include whether additional underwriting or health
screening will be required, the frequency and amounts of the upgrade options,
and any significant restrictions or limitations;
(e) And finally, describe whether there will
be any additional premium charge imposed, and how that is to be
calculated.
12.
ALZHEFMER'S DISEASE AND OTHER ORGANIC BRAIN DISORDERS.
State that the policy provides coverage for insureds clinically
diagnosed as having Alzheimer's disease or related degenerative and dementing
illnesses. Specifically describe each benefit screen or other policy provision
which provides preconditions to the availability of policy benefits for such an
insured.
13. PREMIUM.
(a) State the total annual premium for the
policy;
(b) If the premium varies
with an applicant's choice among benefit options, indicate the portion of
annual premium which corresponds to each benefit option.
14. ADDITIONAL FEATURES.
(a) Indicate if medical underwriting is
used;
(b) Describe other important
features.
15. CONTACT
THE STATE SENIOR HEALTH INSURANCE ASSISTANCE PROGRAM IF YOU HAVE GENERAL
QUESTIONS REGARDING LONG-TERM CARE INSURANCE. CONTACT THE INSURANCE COMPANY IF
YOU HAVE SPECIFIC QUESTIONS REGARDING YOUR LONG-TERM CARE INSURANCE POLICY OR
CERTIFICATE.
Section
32.
Requirement to Deliver Shopper's Guide
A. A long-term care insurance shopper's guide
in the format developed by the National Association of Insurance Commissioners,
or a guide developed or approved by the Commissioner, shall be provided to all
prospective applicants of a long-term care insurance policy or certificate.
(1) In the case of agent solicitations, an
agent must deliver the shopper's guide prior to the presentation of an
application or enrollment form.
(2)
In the case of direct response solicitations, the shopper's guide must be
presented in conjunction with any application or enrollment form.
Section 33.
Penalties
In addition to any other penalties provided by the laws of this
state any insurer and any agent found to have violated any requirement of this
state relating to the rule of long-term care insurance or the marketing of such
insurance shall be subject to a fine of up to three (3) times the amount of any
commissions paid for each policy involved in the violation or up to $10,000,
whichever is greater.
Section
34.
Effective Date
The effective date of this Rule shall be July 1, 2008.
(Signed by Julie Benafield Bowman)
__________________________
JULIE BENAFIELD BOWMAN INSURANCE COMMISSIONER
(May 27, 2008)
________________________
DATE
APPENDIX A
RESCISSION REPORTING FORM FOR LONG-TERM CARE POLICIES
FOR THE STATE OF_______________
FOR THE REPORTING YEAR 20[ ]
Click
here to view image
APPENDIX B
Long-term Care Insurance Personal Worksheet
Click
here to view image
Click
here to view image
APPENDIX C
Things You Should Know Before You Buy Long-Term Care
Insurance
The 2006 NAIC version of this form is required to
be used on or after January 1, 2009. Prior to January 1, 2009, the 2000 NAIC
version of this form shall continue to be used
Long-Term * A long-term care insurance policy may
pay most of the costs for your care in a
Care nursing home. Many policies also pay for care
at home or other community
Insurance settings. Since policies can vary in
coverage, you should read this policy and make sure you understand what it
covers before you buy it.
* [You should not buy this insurance policy unless
you can afford to pay the premiums every year.] [Remember that the company can
increase premiums in the future.]
Note: For single premium policies, delete this
bullet; for noncancellable policies, delete the second sentence only.
* The personal worksheet includes questions designed to help you
and the company determine whether this policy is suitable for your
needs.
Medicare * Medicare does not pay for
most long-term care.
Medicaid * Medicaid will generally pay for long-term
care if you have very little income and few assets. You probably should
not buy this policy if you are now eligible for Medicaid.
* Many people become eligible for Medicaid after they have used
up their own financial resources by paying for long-term care services.
* When Medicaid pays your spouse's nursing home bills, you are
allowed to keep your house and furniture, a living allowance, and some of your
joint assets.
* Your choice of long-term care services may be limited if you
are receiving Medicaid. To learn more about Medicaid, contact your local or
state Medicaid agency.
Shopper's * Make sure the insurance company or agent
gives you a copy of a book called the
GuideNational Association of Insurance
Commissioners' "Shopper's Guide to Long-
Term Care Insurance." Read it carefully. If you have decided to
apply for long-term care insurance, you have the right to return the policy
within 30 days and get back any premium you have paid if you are dissatisfied
for any reason or choose not to purchase the policy.
Counseling * Free counseling and additional
information about long-term care insurance are available through your state's
insurance counseling program. Contact your state insurance department or
department on aging for more information about the senior health insurance
counseling program in your state.
Facilities * Some long-term care insurance contracts
provide for benefit payments in certain facilities only if they are licensed or
certified, such as in assisted living centers. However, not all states regulate
these facilities in the same way. Also, many people move to a different state
from where they purchased their long-term care insurance policy. Read the
policy carefully to determine what types of facilities qualify for benefit
payments, and to determine that payment for a covered service will be made if
you move to a state that has a different licensing scheme for facilities than
the one in which you purchased the policy.
APPENDIX D
Long-Term Care Insurance Suitability Letter
Dear [Applicant]:
Your recent application for long-term care insurance included a
"personal worksheet," which asked questions about your finances and your
reasons for buying long-term care insurance. For your protection, state law
requires us to consider this information when we review your application, to
avoid selling a policy to those who may not need coverage.
Your answers indicate that long-term care insurance may not meet
your financial needs. We suggest that you review the information provided along
with your application, including the booklet "Shopper's Guide to Long-Term Care
Insurance" and the page titled "Things You Should Know Before Buying Long-Term
Care Insurance." Your state insurance department also has information about
long-term care insurance and may be able to refer you to a counselor free of
charge who can help you decide whether to buy this policy.
You chose not to provide any financial information for us to
review.
Note: Choose the paragraph that applies.
We have suspended our final review of your application. If, after
careful consideration, you still believe this policy is what you want, check
the appropriate box below and return this letter to us within the next 60 days.
We will then continue reviewing your application and issue a policy if you meet
our medical standards.
If we do not hear from you within the next 60 days, we will close
your file and not issue you a policy. You should understand that you will not
have any coverage until we hear back from you, approve your application and
issue you a policy.
Please check one box and return in the enclosed
envelope.
[] Yes, [although my worksheet indicates that long-term care
insurance may not be a suitable purchase,] I wish to purchase this coverage.
Please resume review of my application.
Note: Delete the phrase in brackets if the applicant did not
answer the questions about income.
[] No. I have decided not to buy a policy at this time.
APPLICANT'S SIGNATURE DATE
Please return to [issuer] at [address] by
[date].
APPENDIX E
Claims Denial Reporting Form Long-Term Care
Insurance
For the State of__________________________
For the Reporting Year of________________
Company Name: __________________________________________Due: June
30 annually
Company Address:
_____________________________________________________________
Company NAIC Number:
________________________________________________________
Contact Person:_____________________________Phone
Number:______________________
Line of Business: Individual Group
Instructions
The purpose of this form is to report all long-term care claim
denials under in force long-term care insurance policies. "Denied" means a
claim that is not paid for any reason other than for claims not paid for
failure to meet the waiting period or because of an applicable preexisting
condition.
|
State Data
|
Nationwide
Data1
|
|
1
|
Total Number of Long-Term Care Claims Reported
|
|
2
|
Total Number of Long-Term Care Claims Denied/Not
Paid
|
|
3
|
Number of Claims Not Paid due to Preexisting Condition
Exclusion
|
|
4
|
Number of Claims Not Paid due to Waiting (Elimination)
Period Not Met
|
|
5
|
Net Number of Long-Term Care Claims Denied for Reporting
Purposes (Line 2 Minus Line 3 Minus Line 4)
|
|
6
|
Percentage of Long-Term Care Claims Denied of Those
Reported (Line 5 Divided By Line 1)
|
|
7
|
Number of Long-Term Care Claim Denied due to:
|
|
8
|
* Long-Term Care Services Not Covered under the
Policy2
|
|
9
|
* Provider/Facility Not Qualified under the
Policy3
|
|
10
|
* Benefit Eligibility Criteria Not
Met4
|
|
11
|
* Other
|
1. The nationwide data may be viewed as a more representative and
credible indicator where the data for claims reported and denied for your state
are small in number.
2. Example-home health care claim filed under a nursing home only
policy.
3. Example-a facility that does not meet the minimum level of
care requirements or the licensing requirements as outlined in the
policy.
4. Examples-a benefit trigger not met, certification by a
licensed health care practitioner not provided, no plan of care.
APPENDIX F
The 2006 NAIC version of this form is required to
be used on or after January 1, 2009. Prior to January 1, 2009, the 2000 NAIC
version of this form shall continue to be used
Instructions:
This form provides information to the applicant regarding premium
rate schedules, rate schedule adjustments, potential rate revisions, and
policyholder options in the event of a rate increase.
Insurers shall provide all of the following
information to the applicant:
Long-Term Care Insurance Potential Rate Increase
Disclosure Form
1. [Premium Rate] [Premium Rate Schedules]:
[Premium rate] [Premium rate schedules] that [is] [are] applicable to you and
that will be in effect until a request is made and approved for an increase
[is] [are] [on the application] [$_____])
2. The [premium] [premium rate schedule] for this policy
[will be shown on the schedule page of] [will be attached to] your
policy.
3. Rate Schedule Adjustments:
The company will provide a description of when premium rate or
rate schedule adjustments will be effective (e.g., next anniversary date, next
billing date, etc.) (fill in the blank):
4. Potential Rate Revisions:
This policy is Guaranteed Renewable. This means that
the rates for this product may be increased in the future. Your rates can NOT
be increased due to your increasing age or declining health, but your rates may
go up based on the experience of all policyholders with a policy similar to
yours.
If you receive a premium rate or premium rate schedule
increase in the future, you will be notified of the new premium amount and you
will be able to exercise at least one of the following options:
* Pay the increased premium and continue your policy in force as
is.
* Reduce your policy benefits to a level such that your premiums
will not increase. (Subject to state law minimum standards.)
* Exercise your nonforfeiture option if purchased. (This option
is available for purchase for an additional premium.)
* Exercise your contingent nonforfeiture rights.* (This option
may be available if you do not purchase a separate nonforfeiture
option.)
* Contingent
Nonforfeiture
If the premium rate for your policy goes up in the future and you
didn't buy a nonforfeiture option, you may be eligible for contingent
nonforfeiture. Here's how to tell if you are eligible: You will keep some
long-term care insurance coverage, if:
* Your premium after the increase exceeds your original premium
by the percentage shown (or more) in the following table; and
* You lapse (not pay more premiums) within 120 days of the
increase.
The amount of coverage (i.e., new lifetime maximum benefit
amount) you will keep will equal the total amount of premiums you've paid since
your policy was first issued. If you have already received benefits under the
policy, so that the remaining maximum benefit amount is less than the total
amount of premiums you've paid, the amount of coverage will be that remaining
amount.
Except for this reduced lifetime maximum benefit amount, all
other policy benefits will remain at the levels attained at the time of the
lapse and will not increase thereafter.
Should you choose this Contingent Nonforfeiture option, your
policy, with this reduced maximum benefit amount, will be considered "paid-up"
with no further premiums due.
Example:
* You bought the policy at age 65 and paid the $1,000 annual
premium for 10 years, so you have paid a total of $10,000 in premium.
* In the eleventh year, you receive a rate increase of 50%, or
$500 for a new annual premium of $1,500, and you decide to lapse the policy
(not pay any more premiums).
* Your "paid-up" policy benefits are $10,000 (provided you have a
least $10,000 of benefits remaining under your policy.)
Contingent
Nonforfeiture
Cumulative Premium Increase over Initial
Premium
That qualifies for Contingent Nonforfeiture
(Percentage increase is cumulative from date of original issue.
It does NOT represent a one-time increase.)
|
Issue Age
29 and under
|
Percent Increase Over Initial Premium
200%
|
|
30-34
|
190%
|
|
35-39
|
170%
|
|
40-44
|
150%
|
|
45-49
|
130%
|
|
50-54
|
110%
|
|
55-59
|
90%
|
|
60
|
70%
|
|
61
|
66%
|
|
62
|
62%
|
|
63
|
58%
|
|
64
|
54%
|
|
65
|
50%
|
|
66
|
48%
|
|
67
|
46%
|
|
68
|
44%
|
|
69
|
42%
|
|
70
|
40%
|
|
71
|
38%
|
|
72
|
36%
|
|
73
|
34%
|
|
74
|
32%
|
|
75
|
30%
|
|
76
|
28%
|
|
77
|
26%
|
|
78
|
24%
|
|
79
|
22%
|
|
80
|
20%
|
|
81
|
19%
|
|
82
|
18%
|
|
83
|
17%
|
|
84
|
16%
|
|
85
|
15%
|
|
86
|
14%
|
|
87
|
13%
|
|
88
|
12%
|
|
89
|
11%
|
|
90 and over
|
10%
|
[The following contingent nonforfeiture disclosure need only be
included for those limited pay policies to which Sections 28D(4) and 28D(6) of
Rule 13 are applicable].
In addition to the contingent nonforfeiture benefits described
above, the following reduced "paid-up" contingent nonforfeiture benefit is an
option in all policies that have a fixed or limited premium payment period,
even if you selected a nonforfeiture benefit when you bought your policy. If
both the reduced "paid-up" benefit AND the contingent benefit described above
are triggered by the same rate increase, you can chose either of the two
benefits.
You are eligible for the reduced "paid-up" contingent
nonforfeiture benefit when all three conditions shown below are met:
1. The premium you are required to pay after the increase exceeds
your original premium by the same percentage or more shown in the chart
below;
Triggers for a Substantial Premium
Increase
|
Issue Age
|
Percent Increase Over Initial Premium
|
|
Under 65
|
50%
|
|
65-80
|
30%
|
|
Over 80
|
10%
|
2. You stop paying your premiums within 120 days of when the
premium increase took effect; AND
3. The ratio of the number of months you already paid premiums is
40% or more than the number of months you originally agreed to pay.
If you exercise this option your coverage will be converted to
reduced "paid-up" status. That means there will be no additional premiums
required. Your benefits will change in the following ways:
a. The total lifetime amount of benefits your reduced paid up
policy will provide can be determined by multiplying 90% of the lifetime
benefit amount at the time the policy becomes paid up by the ratio of the
number of months you already paid premiums to the number of months you agreed
to pay them.
b. The daily benefit amounts you purchased will also be adjusted
by the same ratio.
If you purchased lifetime benefits, only the daily benefit
amounts you purchased will be adjusted by the applicable ratio.
Example:
* You bought the policy at age 65 with an annual premium payable
for 10 years.
* In the sixth year, you receive a rate increase of 35% and you
decide to stop paying premiums.
* Because you have already paid 50% of your total premium
payments and that is more than the 40% ratio, your "paid-up" policy benefits
are.45 (.90 times.50) times the total benefit amount that was in effect when
you stopped paying your premiums. If you purchased inflation protection, it
will not continue to apply to the benefits in the reduced "paid-up"
policy.
APPENDIX G
Long-Term Care Insurance Replacement and Lapse Reporting
Form
Click
here to view image
