North Dakota Administrative Code
Title 45 - Insurance, Commissioner of
Article 45-06 - Accident and Health Insurance
Chapter 45-06-05.1 - LONG-TERM CARE INSURANCE MODEL REGULATION
Section 45-06-05.1-24 - Nonforfeiture benefit requirement

Universal Citation: ND Admin Code ยง 45-06-05.1-24

Current through Supplement No. 394, October, 2024

1. This section does not apply to life insurance policies or riders containing accelerated long-term care benefits.

2. To comply with the requirement to offer a nonforfeiture benefit pursuant to the provisions of North Dakota Century Code section 26.1-45-14:

a. 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 5; and

b. 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.

3. If the offer required to be made under North Dakota Century Code section 26.1-45-14 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 paying period, the contingent benefit on lapse in subdivision d of subsection 4 still applies.

4.

a. After rejection of the offer required under North Dakota Century Code section 26.1-45-14, 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.

b. 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.

c. 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 one hundred twenty days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least thirty days prior to the due date of the premium reflecting the rate increase.

Triggers for a Substantial Premium Increase

Issue Age

Percentage 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%

d. A contingent benefit on lapse also must 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 one hundred twenty days of the due date of the premium so increased, and the ratio in paragraph 2 of subdivision f is forty percent or more. Unless otherwise required, policyholders must be notified at least thirty 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 is in addition to the contingent benefit provided by subdivision c and where both are triggered, the benefit provided must be at the option of the insured.

e. On or before the effective date of a substantial premium increase as defined in subdivision c, the insurer shall:
(1) Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased;

(2) Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of subsection 5. This option may be elected at any time during the one hundred twenty-day period referenced in subdivision c; and

(3) Notify the policyholder or certificate holder that a default or lapse at any time during the one hundred twenty-day period referenced in subdivision c shall be deemed to be the election of the offer to convert in paragraph 2 unless the automatic option in paragraph 3 of subdivision f applies.

f. On or before the effective date of a substantial premium increase as defined in subdivision d. the insurer shall:
(1) Offer to reduce policy benefits provided by the current coverage so that required premium payments are not increased:

(2) Offer to convert the coverage to a paid-up status where the amount payable for each benefit is ninety percent 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 one hundred twenty-day period referenced in subdivision d; and

(3) Notify the policyholder or certificate holder that a default or lapse at any time during the one hundred twenty-day period referenced in subdivision d is deemed to be the election of the offer to convert in paragraph 2 if the ratio is forty percent or more.

g. For any long-term care policy issued in this state on or after March 1, 2020:
(1) If the policy or certificate was issued at least twenty years before the effective date of the increase, a value of zero percent must be used in place of all values in the above table; and

(2) Values above one hundred percent in the table in subdivision c must be reduced to one hundred percent.

5. Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse in accordance with subdivision c of subsection 4 but not subdivision d of subsection 4, are described in this subsection:

a. 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, and at least three percent per year beyond age fifty.

b. 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 subdivision c.

c. The standard nonforfeiture credit will be equal to one hundred percent 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 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 6.

d.
(1) 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 years as well as thereafter.

(2) Notwithstanding paragraph 1, for a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:
(a) The end of the tenth year following the policy or certificate issue date; or

(b) The end of the second year following the date the policy or certificate is no longer subject to attained age rating.

e. 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.

6. 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.

7. There shall be no difference in the minimum nonforfeiture benefits as required under this section for group and individual policies.

8. The requirements set forth in this section shall become effective twelve months after adoption of this provision and shall apply as follows:

a. Except as provided in subdivisions b and c, 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 regulation.

b. For certificates issued on or after the effective date of this section, under a group long-term care insurance policy as defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01, which policy was in force at the time this amended regulation became effective, the provisions of this section shall not apply.

c. The last sentence in subsection 3 and subdivisions d and f of subsection 4 apply to any long-term care insurance policy or certificate issued in this state after six months after their adoption, except new certificates on a group policy as defined in subdivision a of subsection 3 of North Dakota Century Code section 26.1-45-01 one year after adoption.

9. Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse shall be subject to the requirements of section 45-06-05.1-17 or 45-06-05.1-18, treating the policy as a whole.

10. To determine whether contingent nonforfeiture upon lapse provisions are triggered under subdivision c or d of subsection 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.

11. A nonforfeiture benefit for qualified long-term care insurance contracts that are level premium contracts shall be offered that meets the following requirements:

a. The nonforfeiture provision shall be appropriately captioned;

b. 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

c. The nonforfeiture provision shall provide at least one of the following:
(1) Reduced paid-up insurance;

(2) Extended term insurance;

(3) Shortened benefit period; or

(4) Other similar offerings approved by the commissioner.

General Authority: NDCC 28-32-02

Law Implemented: NDCC 26.1-45

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