Current through Register Vol. 41, No. 3, September 23, 2024
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
§ 38.2-5210 of the Code of Virginia:
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 of this
section; 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.
When a group long-term care insurance policy is issued, the
offer required in § 38.2-5210 of the Code of Virginia shall be made to the
group policyholder. However, if the policy is issued as group long-term care
insurance as defined in § 38.2-3522.1 of the Code of Virginia other than
to a continuing care retirement community or other similar entity, the offer
shall be made to each proposed certificateholder.
C. If the offer required to be made under
§ 38.2-5210 of the Code of Virginia 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 upon lapse in subdivision D 4 of this section shall still
apply.
D.
1. After rejection of the offer required
under § 38.2-5210 of the Code of Virginia, for individual and group
policies without nonforfeiture benefits, 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
certificateholder, a certificate shall provide either the nonforfeiture benefit
or the contingent benefit upon lapse.
3. A contingent benefit upon 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 75 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 |
| 54 and under |
100% |
| 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 subdivision 6 b of this subsection is 40% or more. Unless otherwise
required, policyholders shall be notified at least 75 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 subdivision 3 of this subsection, 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 subdivision 3 of this subsection,
the insurer shall:
a. Offer to reduce policy
benefits provided by the current coverage consistent with
14VAC5-200-183 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 of this section. This option may be elected at any time during the
120-day period referenced in subdivision 3 of this subsection; and
c. Notify the policyholder or
certificateholder that a default or lapse at any time during the 120-day period
referenced in subdivision 3 of this subsection shall be deemed to be the
election of the offer to convert in subdivision 5 b of this subsection unless
the automatic option in subdivision 6 c of this subsection applies.
6. On or before the effective date
of a substantial premium increase as defined in subdivision 4 of this
subsection, the insurer shall:
a. Offer to
reduce policy benefits provided by the current coverage consistent with the
requirements of
14VAC5-200-183 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 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 subdivision 4 of this subsection; and
c. Notify the policyholder or
certificateholder that a default or lapse at any time during the 120-day period
referenced in subdivision 4 of this subsection shall be deemed to be the
election of the offer to convert in subdivision 6 b of this subsection if the
ratio is 40% or more.
7.
In the event the policy was issued at least 20 years prior to the effective
date of the premium rate increase, a value of 0% shall be used in place of all
values in the tables in subdivision 3 or 4 of this subsection.
E. Benefits continued as
nonforfeiture benefits, including contingent benefits upon lapse in accordance
with subdivision D 3 but not subdivision D 4 of this section, 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 1.0% per year prior to age 50,
and at least 3.0% per year at age 50 and beyond.
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 subdivision 3 of this
subsection.
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 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 of this section.
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 years as well as thereafter.
b. Notwithstanding subdivision 4 a of this
subsection, except that for a policy or certificate with a contingent benefit
upon lapse or 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. 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
14VAC5-200-150,
14VAC5-200-153, or
14VAC5-200-154, whichever is
applicable, treating the policy as a whole.
I. To determine whether contingent
nonforfeiture upon lapse provisions are triggered under subdivision D 3 or D 4
of this section, 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.
J. 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 commission 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
commission.
Statutory Authority: §§ 12.1-13, 38.2-223, and
38.2-5202 of the Code of Virginia.
