Arkansas Administrative Code
Agency 054 - Arkansas Insurance Department
Rule 054.00.90-006 - Rule and Regulation 13: Long-Term Care Insurance
Universal Citation: AR Admin Rules 054.00.90-006
Current through Register Vol. 49, No. 2, February 2024
SECTION 1. PURPOSE
The purposes of this Regulation are to implement Act 642 of 1989, 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 Regulation is issued pursuant to the authority vested in the Commissioner under Act 642 of 1989, and Ark. Code Ann. §§ 23-61-108, and 25-15-202, et seq.
SECTION 3. APPLICABILITY AND SCOPE
Except as otherwise specifically provided, this Regulation applies to all long-term care insurance policies, contracts, certificates, riders or other evidence of coverage issued, delivered or issued for delivery, advertised, marketed or offered in this State on or after the effective date hereof, by insurers; fraternal benefit societies; nonprofit health, hospital and medical service corporations; prepaid health plans; health maintenance organizations; and all similar organizations.
SECTION 4. DEFINITIONS
For the purpose of this Regulation, the terms "long-term care insurance", "group long-term care insurance", "Commissioner", "applicant", "policy" and "certificate" shall have the meanings set forth in Section 4 of Act 642 of 1989.
SECTION 5. POLICY DEFINITIONS
No long-term care insurance policy issued, 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. "Medicare" shall be
defined as "The Health Insurance for the Aged Act, Titled XVIII of the Social
Security Amendments of 1965 as Then Constituted or Later Amended", or "Titled
I, Part I of Public Law
89-97, as Enacted by the Eighty-Ninth Congress of
the United States of America 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.
B.
"Mental or nervous disorder" shall not be defined to include more than
neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional
disease or disorder.
C. "Skilled
nursing care", "intermediate care", "personal care", "home care", and other
services shall be defined in relation to the level of skills required, the
nature of the care, and the setting in which care must be delivered.
D. All providers of services, including but
not limited to "skilled nursing facility", "extended care facility",
"intermediate care facility", convalescent nursing home", "personal care
facility", and "home care agency" shall be defined in relation to the services
and facilities required to be available and the licensure or degree status of
those providing or supervising the services. The definition may require that
the provider be appropriately licensed or certified.
SECTION 6. POLICY PRACTICES AND PROVISIONS
A. Renewability. The terms "guaranteed
renewable" and "nonconcellable" shall not be used in any individual long-term
care insurance policy without further explanatory language in accordance with
the disclosure requirements of Section 7 and of this Regulation.
(1) No such policy issued to an individual
shall contain renewal provisions less favorable to the insured than "guaranteed
renewable". However, the Commissioner may authorize nonrenewal on a statewide
basis, on terms and conditions deemed necessary by the Commissioner, to best
protect the interests of the insureds, if the insurer demonstrates:
(a) That renewal will jeopardize the
insurer's solvency; or
(b) That:
(i) The actual paid claims and expenses have
substantially exceeded the premium and investment income associated with the
policies; and
(ii) The policies
will continue to experience substantial and unexpected losses over their
lifetime; and
(iii) The projected
loss experience of the policies cannot be significantly improved or mitigated
through reasonable rate adjustments or other reasonable methods; and
(iv) The insurer has made repeated and good
faith attempts to stabilize loss experience of the policies, including the
timely filing for rate adjustments.
(2) The term "guaranteed renewable" may be
used only when:
(a) the insured has the right
to continue the long-term care insurance in force by the timely payment of
premiums, and
(b) 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
(c) the insurer 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 make any unilateral change in any provision of the
insurance policy or in the premium rate.
B. Limitations and Exclusions. No policy may
be delivered or issued for delivery in this State as long-term care insurance
if such policy limits or excludes coverage by type of illness, treatment,
medical condition or accident, except as follows:
(1) Pre-existing 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 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 an 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 programs (except Medicaid); any
state or federal workers' compensation, employer's liability or occupational
disease law; 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; and
(6) Subsection B. is not intended to prohibit
exclusions and limitations by type of provider or territorial
limitations.
C. Extension
of Benefits. Termination of long-term care insurance shall be without prejudice
to any benefits payable for institutionalization if such institutionalization
began while the long-term care insurance was in force and continues without
interruption after termination. Such 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 Rule 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
which maintains coverage under the existing group policy when such coverage
would otherwise terminate and which is subject only to the continued timely
payment of premium when due. Group policies which restrict provision of
benefits and services to, or contain incentives to use certain providers and/or
facilities may provide continuation benefits which are substantially equivalent
to the benefits of the existing group policy. However, the individual may
request lower benefits if he so desires. 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
under which an individual, whose coverage under a 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 (6) 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 or benefits, as requested
by the individual, which are lower than those provided under the group policy.
Where the group policy from which conversion is made restricts provision of
benefits and services to, or contains incentives to use certain providers
and/or facilities, the Commissioner, in making a determination as to the
substantial equivalency of benefits, shall take into consideration the
differences between managed and non-managed care plans including, but not
limited to, providers 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 or
conversion of coverage 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 resulted 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 which provides benefits on the basis of incurred
expenses, may contain a provision which 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 one hundred percent (100%) of incurred expenses. Such 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, any insured individual, who 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.
SECTION 7. REQUIRED DISCLOSURE PROVISIONS
A. Renewability. Individual long-term care
insurance policies shall contain a renewability provision. Such provision shall
be appropriately captioned, shall appear on the first page of the policy, and
shall clearly state the duration, where limited, of renewability and the
duration of the term of coverage for which the policy is issued and for which
it may be renewed. This provision shall not apply to policies which do not
contain a renewability provision, and under which the right to nonrenew is
reserved solely to the policyholder.
B. Riders and Endorsements. Except for riders
or endorsements by which the insurer effectuates a request made in writing by
the insured under the 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 which reduce or eliminate benefits or
coverage in the policy shall require signed acceptance by the individual
insured. After the date of policy issuance, 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, such premium charge shall be set forth in the policy, rider or
endorsement.
C. Payment of
Benefits. A long-term care insurance policy which 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 such terms
and an explanation of such terms in its accompanying outline of
coverage.
D. Limitations. If a
long-term care insurance policy or certificate contains any limitations with
respect to pre-existing conditions, such limitations shall appear as a separate
paragraph of the policy or certificate and shall be labeled as "Pre-existing
Condition Limitations."
E. Other
Limitations or Conditions on Eligibility for Benefits. Effective March 17,
1990, a long-term care insurance policy or certificate containing any
limitations or conditions for eligibility other than those prohibited in Act
642 of 1989, Act Section 6 (d) (2), shall set forth a description of such
limitations or conditions, including any required number of days of
confinement, in a separate paragraph "Limitations or Conditions on Eligibility
for Benefits."
SECTION 8. REQUIREMENTS FOR REPLACEMENT
A. Questions
Concerning Replacement. Individual and direct response solicited long-term care
insurance application forms shall include a question designed to elicit
information as to whether the proposed insurance policy is intended to replace
any other disability or long-term care insurance policy presently in force. A
suppplementary application or other form to be signed by the applicant
containing such a question may be used.
B. 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 disability or long-term
care coverage. One (1) copy of such 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 the language stated in Appendix 1 of this
Rule.
C. Direct Response
Solicitations. Insurers using direct response solicitation methods shall
deliver a notice regarding replacement of disability or long-term care coverage
to the applicant upon issuance of the policy. The required notice shall be the
language stated in Appendix 2 to this Rule.
SECTION 9. DISCRETIONARY POWERS OF COMMISSIONER
The Commissioner may, upon written request and after an administrative hearing, issue on order to modify or suspend a specific provision or provisions of this Regulation 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; and
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 10. 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 such benefits shall be determined
in accordance with Ark. Code Ann. §§
23-84-101
-111. Claims reserves must also be established in the case when such policy or
rider is in claim status. 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.
B. When long-term care benefits are provided
other than as in Subsection A. above, whether issued on an individual or group
policy basis, reserves shall be determined in accordance with all appropriate
provisions of Rule and Regulation 22, "Reserve Standards for Valuation Of I
ndividual Disability Policies" including, but not necessarily limited to,
Sections 2.1, 2.3(c) (5), 2.7, and 3.1 and 3.3 thereof.
SECTION 11. LOSS RATIO
Benefits under individual 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:
A. Statistical credibility
of incurred claims experience and earned premiums;
B. The period for which rates are computed to
provide coverage;
C. Experience and
projected trends;
D. Concentration
of experience within early policy duration;
E. Expected claim fluctuation;
F. Experience refunds, adjustments or
dividends;
G. Renewability
features;
H. All appropriate
expense factors;
I.
Interest;
J. Experimental nature of
the coverage;
K. Policy
reserves;
L. Mix of business by
risk classification; and
M. Product
features such as long elimination periods, high deductibles and high maximum
limits.
SECTION 12. FILING REQUIREMENT
Prior to an insurer or similar organization offering group long-term care insurance to a resident of this State pursuant to Section 5 of the Long-Term Care Minimum Standards Act, 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 13. STANDARD FORMAT OUTLINE OF COVERAGE
This Section of the Regulation implements, interprets and incorporates the provisions of Section 6(g) (1) (A) of Act 642 of 1989 in prescribing a standard format and the content of an outline of coverage.
A. The outline of coverage shall be a
freestanding document, using no smaller than ten (10) point type.
B. The outline of coverage shall contain no
material of an advertising nature.
C. Text which is capitalized or underscored
in the standard format outline of coverage may be emphasized by other means
which provide prominence equivalent to such 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 shall be
the language stated in Appendix 3 to this Rule.
SECTION 14. EFFECTIVE DATE
This Regulation shall be effective October 1, 1990.
SECTION 15. SEVERABILITY.
Any Section or provision of this Rule held by a court to be invalid or unconstitutional will not affect the validity of any other Section or provision.
APPENDIX 1
APPENDIX 2
APPENDIX 3
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