[31 Pa.B. 5553]
[Continued from previous Web Page] § 89a.110. Prohibition against postclaims underwriting.
(a) 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) 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. 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related to a medical condition for which coverage would otherwise be denied, the policy or certificate may not be rescinded for that condition.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, [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 questions is now, before a claim arises! If, for any reason, 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 80 years of age or older, the insurer shall obtain one of the following:
(i) A report of a physical examination.
(ii) An assessment of functional capacity.
(iii) An attending physician's statement.
(iv) 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 (relating to rescission reporting form for long-term care policies).
§ 89a.111. Minimum standards for home health and community care benefits in long-term care insurance policies.
(a) A long-term care insurance policy or certificate may not, if it provides benefits for home health care or community care services, limit or exclude benefits by requiring any of the following:
(1) That the insured or claimant would need care in a skilled nursing facility if home health or community care services were not provided.
(2) 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) Limiting eligible services to services provided by registered nurses or licensed practical nurses.
(4) Requiring that a nurse or therapist provide services covered by the policy that can be provided by a home health aide, or licensed or certified home care worker acting within the scope of the person licensure or certification.
(5) Excluding coverage for personal care services provided by a home health aide.
(6) Requiring that the provision of home health or community care services be at a level of certification or licensure greater than that required by the eligible service.
(7) Requiring that the insured or claimant have an acute condition before home health or community care services are covered.
(8) Limiting benefits to services provided by Medicare-certified agencies or providers.
(9) 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 1 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 does not apply to policies or certificates issued to residents of continuing care retirement communities.
(c) Home health or community 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.
§ 89a.112. 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 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 shall 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 of at least 5%.
(2) Guarantees the insured individual the right to periodically increase benefit levels without providing evidence of insurability or health status so long as the option for the previous period has not been declined. The amount of the additional benefit may not be less than the difference between the existing policy benefit and that benefit compounded annually at a rate of at least 5% for the period beginning with the purchase of the existing benefit and extending until the year in which the offer is made.
(3) Covers a specified percentage of actual or reasonable charges and does not include a maximum specified indemnity amount or limit.
(b) When the policy is issued to a group, the required offer in subsection (a) shall be made to the group policyholder; except, if the policy is issued to a group defined in section 1103 of the act (40 P. S. § 991.1103) other than to a continuing care retirement community, the offering shall be made to each proposed certificateholder.
(c) The offer in subsection (a) is not required of life insurance policies or riders containing accelerated long-term care benefits.
(d) Insurers shall include all of the information listed in this subsection or with the outline of coverage. An insurer may use a reasonable hypothetical, or a graphic demonstration, for the purposes of this disclosure. The information is as follows:
(1) 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 20 year period.
(2) Expected premium increases or additional premiums to pay for automatic or optional benefit increases.
(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) Inflation protection as provided in subsection (a)(1) 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. 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 policy(ies), and I reject inflation protection.§ 89a.113. 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 another accident and sickness or long-term care policy or certificate presently in force. A supplementary application or form to be signed by the applicant and agent, except when the coverage is sold without an agent, containing the questions may be used. With regard to a replacement policy issued to a group defined by section 1103 of the act (40 P. S. § 991.1103), 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 certificateholder 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 or health maintenance organization contract)?
(2) Did you have another long-term care insurance policy or certificate in force during the last 12 months?
(i) If so, with which company?
(ii) If that policy lapsed, when did it lapse?
(3) Are you covered by Medicaid? If you are eligible or covered by Medicaid, you may not need to purchase the policy since it may provide duplicate benefits.
(4) Do you intend to replace any of your medical or health insurance coverage with this policy [certificate]?
(b) Agents shall list 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 5 years that are no longer in force.
(c) 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 [ insurance company name]. Your new policy provides 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.
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. Commonwealth 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 you sign it, reread it carefully to be certain that all information has been properly recorded.
__________(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)
______
(Date)(d) 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 [insurance company name]. Your new policy provides 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. Commonwealth 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 30 days if any information is not correct and complete, or if any past medical history has been left out of the application.
[Company Name]
(e) 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, the name of the insured and policy number or address including zip code. Notice shall be made within 5 working days from the date the application is received by the insurer or the date the policy is issued, whichever is sooner.
(f) The insurer shall maintain records demonstrating delivery date of policies so that this date can be used to determine the commencement of the 30-day policy examination period. Delivery date shall be deemed the date the policy is received by the policyholder.
§ 89a.114. 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 to the Department by June 30 the 10% of its agents with the greatest percentages of lapses and replacements as measured by subsection (a).
(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 to the Department 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.
(e) Every insurer shall report annually to the Department 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.
(f) Every insurer shall report annually to the Department 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) (relating to claims denial reporting form long term care insurance).
(g) For purposes of this section:
(1) ''Policy'' means only long-term care insurance.
(2) Subject to paragraph (3), ''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 terms or conditions of the policy have been met.
(3) ''Denied'' means the insurer refuses to pay a claim for reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition.
(4) ''Report'' means on a Statewide basis.
(h) Reports required under this section shall be filed with the Commissioner.
§ 89a.115. Licensing.
A producer is not authorized to sell, solicit or negotiate with respect to long-term care insurance except as authorized by sections 601 and 621 of the act (40 P. S. §§ 231 and 251).
§ 89a.116. Reserve standards.
When long-term care benefits are provided, reserves shall be determined in accordance with sections 301.1 and 311.1 of the act (40 P. S. §§ 71.1 and 93) and Chapter 84a (relating to minimum reserve standards for individual and group health and accident insurance contracts).
§ 89a.117. Loss ratio.
(a) This section shall apply to all long-term care insurance policies or certificates except those covered under §§ 89a.109 and 89.118 (relating to initial filing requirements; and premium rate schedule increases).
(b) Benefits under long-term care insurance policies shall be deemed reasonable in relation to premiums provided the expected loss ratio is at least 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 the following:
(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.
(13) Product features such as long elimination periods, high deductibles and high maximum limits.
§ 89a.118. Premium rate schedule increases.
(a) This section shall apply as follows:
(1) Except as provided in paragraph (2), this section applies to a long-term care policy or certificate issued in this Commonwealth on or after _____ (Editor's Note: The blank refers to a date 6 months from the effective date of adoption of this proposal.).
(2) For certificates issued on or after _____ (Editor's Note: The blank refers to the effective date of adoption of this proposal.) under a group long-term care insurance policy as defined in section 1103 of the act (40 P. S. § 991.1103), which policy was in force on _____ (Editor's Note: The blank refers to the effective date of adoption of this proposal.), this section shall apply on the policy anniversary following _____ (Editor's Note: The blank refers to a date 12 months after the effective date of adoption of this proposal.).
(b) An insurer shall provide notice of a pending premium rate schedule increase, including an exceptional increase, to the Commissioner subject to the requirements of The Accident and Health Filing Reform Act (40 P. S. §§ 3801--3815) prior to the notice to the policyholders and shall include all of the following:
(1) Information required by § 89a.108 (relating to required disclosure of rating practices to consumers).
(2) Certification by a qualified actuary that:
(i) 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.
(ii) 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 the following:
(i) 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 assumptions that deviate from those used for pricing other forms currently available for sale.
(A) Annual values for the 5 years preceding and the 3 years following the valuation date shall be provided separately.
(B) The projections shall include the development of the lifetime loss ratio, unless the rate increase is an exceptional increase.
(C) The projections shall demonstrate compliance with subsection (c).
(D) For exceptional increases, the projected experience should be limited to the increases in claims expenses attributable to the approved reasons for the exceptional increase. If the Commissioner determines as provided in § 89a.103 (relating to definitions) that offsets may exist, the insurer shall use appropriate net projected experience.
(ii) Disclosure of how reserves have been incorporated in this rate increase whenever the rate increase will trigger contingent benefit upon lapse.
(iii) 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.
(iv) A statement that policy design, underwriting and claims adjudication practices have been taken into consideration.
(v) 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.
(5) Sufficient information for review subject to The Accident and Health Filing Reform Act (40 P. S. §§ 3801--3815) of the premium rate schedule increase by the Commissioner.
(c) Premium rate schedule increases shall be determined in accordance with the following requirements:
(1) Exceptional increases shall provide that 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 so 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:
(i) The accumulated value of the initial earned premium times 58%.
(ii) Eighty-five percent of the accumulated value of prior premium rate schedule increases on an earned basis.
(iii) The present value of future projected initial earned premiums times 58%.
(iv) Eighty-five percent of the present value of future projected premiums not in this subsection on an earned basis.
(3) If a policy form has both exceptional and other increases, the values in paragraph (2)(ii) and (iv) will also include 70% for exceptional rate increase amounts.
(4) The present and accumulated values used to determine rate increases shall use the maximum valuation interest rate for contract reserves as specified in Chapter 84a (relating to minimum reserve standards for individual and group health and accident insurance contracts). The actuary shall disclose as part of the actuarial memorandum the use of appropriate averages.
(d) For each rate increase that is implemented, the insurer shall file for review subject to The Accident and Health Filing Reform Act (40 P. S. §§ 3801--3815) by the Commissioner, updated projections, as defined in subsection (b)(3)(i), annually for the next 3 years and include a comparison of actual results to projected values. The Commissioner may extend the period to greater than 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 a premium rate in the revised premium rate schedule is greater than 200% of the comparable rate in the initial premium schedule, lifetime projections, as defined in subsection (b)(3)(i), shall be filed for review subject to The Accident and Health Filing Reform Act (40 P. S. §§ 3801--3815) by the Commissioner every 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) 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 premium rate schedule adjustments, or other measures to reduce the difference between the projected and actual experience. In determining whether the actual experience adequately matches the projected experience, consideration should be given to subsection (b)(3)(v), 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 the following:
(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).
(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 58% been used in the calculations described in subsection (c)(1)(i) and (iii)
(h) For a rate increase filing that meets the following criteria, the Commissioner will review, for all policies included in the filing, the projected lapse rates and past lapse rates during the 12 months following each increase to determine if significant adverse lapsation has occurred or is anticipated:
(1) The rate increase is not the first rate increase requested for the specific policy form.
(2) The rate increase is not an exceptional increase.
(3) The majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse.
(i) If 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.
(1) 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.
(iii) Provide that maximum benefits under a new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy.
(2) 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.
(ii) The maximum rate increase determined based only on the experience of the insureds originally issued the form plus 10%.
(j) 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), prohibit the insurer from either of the following:
(1) Filing and marketing comparable coverage for up to 5 years.
(2) Offering all other similar coverages and limiting marketing of new applications to the products subject to recent premium rate schedule increases.
(k) Subsections (a)--(j) do not apply to policies for which the long-term care benefits provided by the policy are incidental, as defined in § 89a.103 (relating to definitions), if the policy complies with the following conditions:
(1) The interest credited internally to determine cash value accumulations, including long-term care 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) An actuarial memorandum is filed with the Department that includes the following:
(i) A description of the basis on which the long-term care rates were determined.
(ii) A description of the basis for the reserves.
(iii) A summary of the type of policy, benefits, renewability, general marketing method and limits on ages of issuance.
(iv) A description and a table of each actuarial assumption used. For expenses, an insurer shall include percent of premium dollars per policy and dollars per unit of benefits.
(v) A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives.
(vi) The estimated average annual premium per policy and the average issue age.
(vii) 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 types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or a dependent will be underwritten and when underwriting occurs.
(viii) 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.
(l) Subsections (f) and (h) do not apply to group insurance policies as defined in section 1103 of the act (40 P. S. § 991.1103) when either:
(1) The policies insure 250 or more persons and the policyholder has 5,000 or more eligible employees of a single employer.
(2) The policyholder, and not the certificateholders, pays a material portion of the premium, which may not be less than 20% of the total premium for the group in the calendar year prior to the year a rate increase is filed.
§ 89a.119. Filing requirement.
Prior to an insurer or similar organization offering group long-term care insurance to a resident of this Commonwealth under section 621.2 of the act (40 P. S. § 756.2), 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 Commonwealth.
§ 89a.120. Standards for marketing.
(a) Every insurer, health care service plan or other entity marketing long-term care insurance coverage in this Commonwealth, directly or through its producers, shall:
(1) Establish marketing procedures and agent training requirements to assure that marketing activities, including a comparison of policies, by its agents or producers will be fair and accurate and 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 § 89a.108(c) (Appendices B and F) (relating to long term care insurance personal worksheet; and rate information) 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 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.
(6) Provide written notice to the prospective policyholder or certificateholder at solicitation that a senior insurance counseling program approved by the Commonwealth 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 § 89a.105(a)(3) (relating to policy practices and provisions).
(8) Provide an explanation of contingent benefit upon lapse provided for in § 89a.123(d)(3) (relating to nonforfeiture benefit requirement).
(b) The following acts and practices are prohibited:
(1) Twisting. Knowingly making misleading representation or fraudulent comparison of insurance policies or insurers for the purpose of inducing, or tending to induce, a person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert an insurance policy or to take out a policy of insurance with another insurer.
(2) High pressure tactics. Employing a 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 a 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.
(5) Other prohibited practices. Other practices prohibited by The Unfair Insurance Practices Act (40 P. S. §§ 1171.1--1171.15).
(c) With respect to the obligations in this subsection, the primary responsibility of an association, as defined in paragraph (2) of the ''group long-term care insurance'' definition in section 1103 of the act (40 P. S. § 991.1103), 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.
(1) Associations shall provide objective information regarding long-term care insurance policies or certificates endorsed or sold by the associations to ensure that members of the 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 Department the following material:
(i) The policy and certificate.
(ii) A corresponding outline of coverage.
(iii) Advertisements requested by the Department.
(3) The association shall disclose the following in a long-term care insurance solicitation:
(i) The specific nature and amount of the compensation arrangements (including the 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.
(ii) 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 do the following except that this does not apply to qualified long-term care insurance contracts:
(i) 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.
(ii) Actively monitor the marketing efforts of the insurer and its agents.
(iii) Review and approve all marketing materials or insurance communications used to promote sales or sent to members regarding the policies or certificates.
(7) Group long-term care insurance policies or certificates may not be issued to an association unless the insurer files with the Department the information required in this subsection.
(8) The insurer may not issue a long-term care policy or certificate to an association or continue to market that policy or certificate unless the insurer certifies annually that the association has complied with this subsection.
(9) Failure to comply with the filing and certification requirements of this section constitutes an unfair trade practice in violation of The Unfair Insurance Practices Act.
§ 89a.121. Suitability.
(a) Every insurer, nonprofit hospital plan and professional health services plan corporation or other entity marketing long-term care insurance (the issuer) shall meet the following conditions:
(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.
(3) Maintain a copy of its suitability standards and make them available for inspection upon request by the Commissioner.
(b) To determine whether the applicant meets the standards developed by the issuer, the agent and issuer shall develop procedures that take the items in paragraph (1) into consideration.
(1) The agent and issuer shall take the following into consideration:
(i) The ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage.
(ii) 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.
(iii) The values, benefits and costs of the applicant's existing insurance when compared to the values, benefits and costs of the recommended purchase or replacement.
(2) The issuer, and when an agent is involved, the agent shall make reasonable efforts to obtain the information in paragraph (1). The efforts shall include presentation to the applicant, at or prior to application of 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 (relating to long-term care insurance personal worksheet), in at least 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.
(c) The issuer shall use the suitability standards it has developed under this section in determining whether issuing long-term care insurance coverage to an applicant is appropriate.
(d) Agents shall use the suitability standards developed by the issuer in marketing long-term care insurance.
(e) 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 (relating to things you should know before you buy long-term care insurance), in at least 12 point type.
(f) 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 the one presented in Appendix D (relating to long-term care insurance suitability letter). 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.
(g) The issuer shall report annually to the Commissioner the total number of applications received from residents of this Commonwealth, 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.
§ 89a.122. 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 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.
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