[32 Pa.B. 1475]
[Continued from previous Web Page] § 89a.114. Reporting requirements.
(a) Every insurer shall maintain records for each producer of that producer's amount of replacement sales as a percent of the producer's total annual sales and the amount of lapses of long-term care insurance policies sold by the producer as a percent of the producer's total annual sales.
(b) Every insurer shall report annually to the Department by June 30 the 10% of its producers with the greatest percentages of lapses and replacements as measured by subsection (a). (See Appendix G (relating to long-term care insurance replacement and lapse reporting form).)
(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 producer 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. (See Appendix G.).
(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. (See Appendix G.)
(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. (See 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 September 16, 2002.
(2) For certificates issued on or after March 16, 2002, 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 March 16, 2002, this section shall apply on the policy anniversary following March 17, 2003.
(b) An insurer shall provide notice of a pending premium rate schedule increase, including an exceptional increase, to the Commissioner subject 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 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 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 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 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 or forms.
(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 1104 of the act (40 P. S. § 991.1104), 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 producer training requirements to assure that marketing activities, including a comparison of policies, by its 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 producer 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 or producer.
(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 producers 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 producer and issuer shall develop procedures that take the items in paragraph (1) into consideration.
(1) The producer 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 a producer is involved, the producer 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 producer 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) Producers 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.
§ 89a.123. Nonforfeiture benefit requirement.
(a) Nonforfeiture benefits shall be offered under the following:
(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).
(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.
(b) If the offer made for nonforfeiture benefits is rejected, the insurer shall provide the contingent benefit upon lapse described in this section.
(c) After rejection of the offer for nonforfeiture benefits for individual and group policies without nonforfeiture benefits issued after March 16, 2002, the insurer shall provide a contingent benefit upon lapse.
(1) If 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.
(2) 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 in this paragraph 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 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 Premium29 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% (3) On or before the effective date of a substantial premium increase as defined in paragraph (2), the insurer shall meet the following conditions:
(i) Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased.
(ii) 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 during the 120-day period referenced in subsection (d)(3).
(iii) Notify the policyholder or certificateholder that a default or lapse during the 120-day period referenced in subsection (d)(3) shall be deemed to be the election of the offer to convert in subsection (d)(4).
(d) Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse, are described in this subsection as follows:
(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% per year prior to age 50, and at least 3% per year beyond age 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 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 be at least 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) The nonforfeiture benefit shall begin by the end of the 3rd year following the policy or certificate issue date. The contingent benefit upon lapse shall be effective during the first 3 years as well as thereafter. For a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of either the end of the 10th year following the policy or certificate issue date or the end of the 2nd year following the date the policy or certificate is no longer subject to attained age rating.
(5) Nonforfeiture credits may be used for the care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.
(e) The 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.
(f) There may not be a difference in the minimum nonforfeiture benefits as required under this section for group and individual policies.
(g) The requirements in this section are effective March 17, 2003, and apply as follows:
(1) Except as provided in paragraph (2), this section applies to a long-term care policy issued in this Commonwealth on or after March 16, 2002.
(2) For certificates issued on or after March 9 2002, 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 March 16, 2002, this section does not apply.
(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 § 89a.117 (relating to loss ratio) treating the policy as a whole.
(i) To determine whether contingent nonforfeiture upon lapse provisions are triggered under subsection (d)(3), a replacing insurer that purchased or otherwise assumed 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 all of 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 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.
(3) The nonforfeiture provision shall provide at least one of the following:
(i) Reduced paid-up insurance.
(ii) Extended term insurance.
(iii) Shortened benefit period.
(iv) Other similar offerings approved by the Commissioner.
§ 89a.124. 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 may not be more restrictive than requiring either a deficiency in the ability to perform not more than three of the activities of daily living or the presence of cognitive impairment.
(b) Insurers may use activities of daily living to trigger covered benefits in addition to those contained in paragraphs (1)--(6) as long as they are defined in the policy. Activities of daily living shall include at least the following as defined in § 89a.104 (relating to policy definitions) and in the policy:
(1) Bathing.
(2) Continence.
(3) Dressing.
(4) Eating.
(5) Toileting.
(6) Transferring.
(c) An insurer may use additional provisions for the determination of when benefits are payable under a policy or certificate. The provisions may not restrict, and are not in lieu of, the requirements in subsections (a) and (b).
(d) For purposes of this section, the determination of a deficiency may not be more restrictive than either of the following:
(1) Requiring the supervisory or hands-on assistance of another person to perform the prescribed activities of daily living.
(2) If the deficiency is due to the presence of a cognitive impairment, supervision or verbal cueing by another person is needed 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 in this section become effective March 16, 2003, and apply as follows:
(1) Except as provided in paragraph (2), this section applies to a long-term care policy issued in this Commonwealth on or after March 16, 2002.
(2) For certificates issued on or after March 16, 2002, under a group long-term care insurance policy as defined in section 1103 of the act (40 P. S. § 991.1103) that was in force on March 16, 2002, this section does not apply.
§ 89a.125. Additional standards for benefit triggers for qualified long-term care insurance contracts.
(a) For purposes of this section, the following definitions apply:
Chronically ill individual--Has the meaning prescribed for this term by section 7702B(c)(2) of the Internal Revenue Code of 1986 (26 U.S.C.A. § 7702B(c)(2)).
(i) Under this provision, a chronically ill individual means an individual who has been certified by a licensed health care practitioner as either of the following:
(A) Being unable to perform (without substantial assistance from another individual) at least two activities of daily living for at least 90 days due to a loss of functional capacity.
(B) Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.
(ii) The term does not include an individual otherwise meeting these requirements unless within the preceding 12-month period a licensed health care practitioner has certified that the individual meets these requirements.
Licensed health care practitioner--A physician, as defined in section 1861(r)(1) of the Social Security Act (42 U.S.C.A. § 1395x(r)(1)), a registered professional nurse, licensed social worker or other individual who meets requirements prescribed by the Secretary of the United States Treasury.
Maintenance or personal care services--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).
Qualified long-term care services--Services that meet the requirements of section 7702(C)(1) of the Internal Revenue Code of 1986 (26 U.S.C.A. § 7702(C)(1)) 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 under a plan of care prescribed by a licensed health care practitioner.
(b) A qualified long-term care insurance contract shall pay only for qualified long-term care services received by a chronically ill individual provided under 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 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 under 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 United States Treasury.
(e) Certifications required under 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 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 90-day 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.
§ 89a.126. Standard format outline of coverage.
(a) This section implements, interprets and makes specific section 1111 of the act (40 P. S. § 911.1111) in prescribing a standard format and the content of an outline of coverage.
(b) The outline of coverage shall:
(1) Be a free-standing document, using no smaller than 10-point type.
(2) 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) The standard format for outline of coverage is as follows:
[COMPANY NAME]
[ADDRESS--CITY & 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 producers] Neither [insert company name] nor its producers 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) [Noninstitutional 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) Noneligible facilities and provider.
(c) Noneligible levels of care (for example, unlicensed providers, care or treatment provided by a family member, and the like).
(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 9 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. ALZHEIMER'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 HEALTH INSURANCE ASSISTANCE PROGRAM LISTED IN THE BROCHURE IF YOU HAVE GENERAL QUESTIONS REGARDING LONG-TERM CARE INSURANCE. CONTACT THE INSURANCE COMPANY (INSERT INSURANCE COMPANY NAME AND PHONE NUMBER) IF YOU HAVE SPECIFIC QUESTIONS REGARDING YOUR LONG-TERM CARE INSURANCE POLICY OR CERTIFICATE.
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