§ 89a.129. Permitted compensation arrangements.
(a) An insurer or other entity may provide commission or other compensation to a producer for the sale of a long-term care insurance policy or certificate only if the first year commission or other compensation is not greater than 50% of the first year premium.
(b) The commission or other compensation provided for a minimum of 5 subsequent (renewal) years may not exceed 10% of the renewal premium.
(c) When there is a replacement of an existing policy or duplication of coverage, an entity may not provide compensation to its producers and a producer may not receive compensation greater than the renewal compensation payable by the replacing or duplicative insurer.
(d) For purposes of this section, ‘‘compensation’’ includes pecuniary or nonpecuniary remuneration relating to the sale or renewal of the policy or certificate, including bonuses, gifts, prizes, awards and finders fees.
(e) Subsections (a) and (b) apply solely to producers who directly solicit applicants and insureds and who effect the sale of a policy or certificate and not to general agents or other entities who contract with or are otherwise employed by insurers.
APPENDIX A
RESCISSION REPORTING FORM FOR LONG-TERM CARE POLICIES FOR THE STATE OF
FOR THE REPORTING YEAR 20[
]Company Name:
Address:
Phone Number:
Due: March 1 annually
Instructions:
The purpose of this form is to report all rescissions of long-term care insurance policies or certificates. Those rescissions voluntarily effectuated by an insured are not required to be included in this report. Please furnish one form per rescission.
Policy
Form
#Policy
and
Certificate #Name
of
InsuredDate of
Policy
IssuanceDate/s
Claim/s
SubmittedDate of
Rescission
Detailed reason for rescission:
Signature
Name and Title (please type)
Date
Cross References This appendix cited in 31 Pa. Code § 89a.110 (relating to prohibition against postclaims underwriting).
APPENDIX B
LONG-TERM CARE INSURANCE PERSONAL WORKSHEET People buy long-term care insurance for many reasons. Some don’t want to use their own assets to pay for long-term care. Some buy insurance to make sure they can choose the type of care they get. Others don’t want their family to have to pay for care or don’t want to go on Medicaid. But long term care insurance may be expensive, and may not be right for everyone.
By Pennsylvania law, the insurance company must fill out part of the information on this worksheet and ask you to fill out the rest to help you and the company decide if you should buy this policy.
Premium Information
Policy Form Numbers
The premium for the coverage you are considering will be [$
per month, or $
per year,] [a one-time single premium of $
.]Type of Policy (noncancellable/guaranteed renewable):
The Company’s Right to Increase Premiums:
[The company cannot raise your rates on this policy.] [The company has a right to increase premiums on this policy form in the future, provided it raises rates for all policies in the same class in this State.] [Insurers shall use appropriate bracketed statement. Rate guarantees may not be shown on this form.]
Rate Increase History
The company has sold long-term care insurance since [year] and has sold this policy since [year]. [The company has never raised its rates for a long-term care policy it has sold in this State or another state.] [The company has not raised its rates for this policy form or similar policy forms in this State or another state in the last 10 years.] [The company has raised its premium rates on this policy form or similar policy forms in the last 10 years. Following is a summary of the rate increases.]
Questions Related to Your Income
How will you pay each year’s premium?
[ ] From my Income [ ] From my Savings/Investments
[ ] My Family will Pay
[ ] Have you considered whether you could afford to keep this policy if the premiums went up, for example, by 20%?]
What is your annual income? (check one)
[ ] Under $10,000 [ ] $[10-20,000] [ ] $[20-30,000] [ ] $[30-50,000] [ ] Over $50,000
How do you expect your income to change over the next 10 years? (check one)
[ ] No change [ ] Increase [ ] Decrease
If you will be paying premiums with money received only from your own income, a rule of thumb is that you may not be able to afford this policy if the premiums will be more than 7% of your income.
Will you buy inflation protection? (check one)
[ ] Yes [ ] No
If not, have you considered how you will pay for the difference between future costs and your daily benefit amount?
[ ] From my Income [ ] From my Savings/Investments [ ] My Family will Pay
The National average annual cost of care in [insert year] was [insert $ amount], but this figure varies across the country. In 10 years the National average annual cost would be about [insert $ amount] if costs increase 5% annually.
What elimination period are you considering? Number of days
Approximate cost $
for that period of care.How are you planning to pay for your care during the elimination period? (check one)
[ ] From my Income [ ] From my Savings/Investments [ ] My Family will Pay
Questions Related to Your Savings and Investments
Not counting your home, about how much are all of your assets (your savings and investments) worth? (check one)
[ ] Under $20,000 [ ] $20,000-$30,000
[ ] $30,000-$50,000 [ ] Over $50,000
How do you expect your assets to change over the next ten years? (check one)
[ ] Stay about the same [ ] Increase [ ] Decrease
If you are buying this policy to protect your assets and your assets are less than $30,000, you may wish to consider other options for financing your long-term care.
Disclosure Statement
[ ] The answers to the questions above describe my financial situation.
Or
[ ] I choose not to complete this information.
(Check one.) —
[ ] I acknowledge that the carrier and/or its producer (below) has reviewed this form with me including the premium, premium rate increase history and potential for premium increases in the future. [For direct mail situations, use the following: I acknowledge that I have reviewed this form including the premium, premium rate increase history and potential for premium increases in the future.] I understand the above disclosures. I understand that the rates for this policy may increase in the future. (This box must be checked).
Signed: (Applicant) (Date)
[[ ] I explained to the applicant the importance of completing this information.
Signed:
(Producer) (Date)
Producer’s Printed Name:
][In order for us to process your application, please return this signed statement to [name of company], along with your application.]
[My producer has advised me that this policy does not seem to be suitable for me. However, I still want the company to consider my application.
Signed:
]
(Applicant) (Date)The company may contact you to verify your answers.
Cross References This appendix cited in 31 Pa. Code § 89a.108 (relating to required disclosure of rating practices to consumers); and 31 Pa. Code § 89a.121 (relating to suitability).
APPENDIX C
THINGS YOU SHOULD KNOW BEFORE YOU BUY LONG-TERM CARE INSURANCE
Long-term care Insurance * A long-term care insurance policy may pay most of the costs for your care in a nursing home. Many policies also pay for care at home or other community settings. Since policies can vary in coverage, you should read this policy and make sure you understand what it covers before you buy it. * [You should not buy this insurance policy unless you can afford to pay the premiums every year.] [Remember that the company can increase premiums in the future.] * The personal worksheet includes questions designed to help you and the company determine whether this policy is suitable for your needs. Medicare * Medicare does not pay for most long-term care. Medicaid * Medicaid will generally pay for long-term care if you have very little income and few assets. You probably should not buy this policy if you are now eligible for Medicaid. * Many people become eligible for Medicaid after they have used up their own financial resources by paying for long-term care services. * When Medicaid pays your spouse’s healthcare service bills, you are allowed to keep your house and furniture, a living allowance, and some of your joint assets. * Your choice of long-term care services may be limited if you are receiving Medicaid. To learn more about Medicaid, contact your local or state Medicaid agency. Shopper’s Guide * Make sure the insurance company or producer gives you a copy of a book called the National Association of Insurance Commissioners’ ‘‘Shopper’s Guide to Long-Term Care Insurance.’’ Read it carefully. If you have decided to apply for long-term care insurance, you have the right to return the policy within 30 days and get back premium you have paid if you are dissatisfied for a reason or choose not to purchase the policy. Counseling * Free counseling and additional information about long-term care insurance are available through your state’s insurance counseling program. Contact your state insurance department or department on aging for more information about the senior health insurance counseling program in your state.
Cross References This appendix cited in 31 Pa. Code § 89a.121 (relating to suitability).
APPENDIX D
LONG-TERM CARE INSURANCE SUITABILITY LETTER Dear [Applicant]:
Your recent application for long-term care insurance included a “personal worksheet,” which asked questions about your finances and your reasons for buying long-term care insurance. For your protection, State law requires us to consider this information when we review your application, to avoid selling a policy to those who may not need coverage.
[Your answers indicate that long-term care insurance may not meet your financial needs. We suggest that you review the information provided along with your application, including the booklet “Shopper’s Guide to Long-Term Care Insurance” and the page titled “Things You Should Know Before Buying Long-Term Care Insurance.” Your state insurance department also has information about long-term care insurance and may be able to refer you to a counselor free of charge who can help you decide whether to buy this policy.]
[You chose not to provide financial information for us to review.]
We have suspended our final review of your application. If, after careful consideration, you still believe this policy is what you want, check the appropriate box below and return this letter to us within the next 60 days. We will then continue reviewing your application and issue a policy if you meet our medical standards.
If we do not hear from you within the next 60 days, we will close your file and not issue you a policy. You should understand that you will not have coverage until we hear back from you, approve your application and issue you a policy.
Please check one box and return in the enclosed envelope.
[ ] Yes, [although my worksheet indicates that long-term care insurance may not be a suitable purchase,] I wish to purchase this coverage. Please resume review of my application.
[ ] No. I have decided not to buy a policy at this time.
APPLICANT’S SIGNATURE DATE
Please return to [issuer] at [address] by [date].
Cross References This appendix cited in 31 Pa. Code § 89a.121 (relating to suitability).
APPENDIX E
CLAIMS DENIAL REPORTING FORM LONG-TERM CARE INSURANCE For the State of
For the Reporting Year of
Company Name:
Due: June 30 annually
Company Address:
Company NAIC Number:
Contact Person:
Phone Number:
Line of Business:
Individual
Group
Instructions
The purpose of this form is to report all long-term care claim denials under in force long-term care insurance policies. ‘‘Denied’’ means a claim that is not paid for a reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition.
State
DataNationwide Data1 1 Total Number of Long-Term Care Claims Reported 2 Total Number of Long-Term Care Claims Denied/Not Paid 3 Number of Claims Not Paid due to Preexisting Condition Exclusion 4 Number of Claims Not Paid due to Waiting (Elimination) Period Not Met 5 Net Number of Long-Term Care Claims Denied for Reporting Purposes (Line 2 Minus Line 3 Minus Line 4) 6 Percentage of Long-Term Care Claims Denied of Those Reported (Line 5 Divided By Line 1) 7 Number of Long-Term Care Claim Denied due to: 8 * Long-Term Care Services Not Covered under the Policy2 9 * Provider/Facility Not Qualified under the Policy3 10 * Benefit Eligibility Criteria Not Met4 11 * Other 1. The nationwide data may be viewed as a more representative and credible indicator where the data for claims reported and denied for your state are small in number.
2. Example—home health care claim filed under a nursing home only policy.
3. Example—a facility that does not meet the minimum level of care requirements or the licensing requirements as outlined in the policy.
4. Examples—a benefit trigger not met, certification by a licensed health care practitioner not provided, no plan of care.
Cross References This appendix cited in 31 Pa. Code § 89a.114 (relating to reporting requirements); and 31 Pa. Code § 89a.121 (relating to suitability).
APPENDIX F
RATE INFORMATION
Instructions: This form provides information to the applicant regarding premium rate schedules, rate schedule adjustments, potential rate revisions, and policyholder options in the event of a rate increase.
Insurers shall provide all of the following information to the applicant:
Long-Term Care Insurance
Potential Rate Increase Disclosure Form
1. [Premium Rate] [Premium Rate Schedules]: [Premium rate] [Premium rate schedules] that [is] [are] applicable to you and that will be in effect until a request is made and [filed] [approved] for an increase [is] [are] [on the application] [$ [lowbar][lowbar][lowbar][lowbar][lowbar]]
2. The [premium] [premium rate schedule] for this policy [will be shown on the schedule page of] [will be attached to] your policy.
3. Rate Schedule Adjustments:
The company will provide a description of when premium rate or rate schedule adjustments will be effective (for example, next anniversary date, next billing date, and the like) (fill in the blank):
.4. Potential Rate Revisions:
This policy is Guaranteed Renewable. This means that the rates for this product may be increased in the future. Your rates can NOT be increased due to your increasing age or declining health, but your rates may go up based on the experience of all policyholders with a policy similar to yours.
If you receive a premium rate or premium rate schedule increase in the future, you will be notified of the new premium amount and you will be able to exercise at least one of the following options:
* Pay the increased premium and continue your policy in force as is.
* Reduce your policy benefits to a level such that your premiums will not increase. (Subject to state law minimum standards.)
* Exercise your nonforfeiture option if purchased. (This option is available for purchase for an additional premium.)
* Exercise your contingent nonforfeiture rights.* (This option may be available if you do not purchase a separate nonforfeiture option.)
Turn the Page
* Contingent Nonforfeiture
If the premium rate for your policy goes up in the future and you didn’t buy a nonforfeiture option, you may be eligible for contingent nonforfeiture. Here’s how to tell if you are eligible:
If the premium rate for your policy goes up in the future and you didn’t buy a nonforfeiture option, you may be eligible for contingent nonforfeiture. Here’s how to tell if you are eligible:
You will keep some long-term care insurance coverage, if:
* Your premium after the increase exceeds your original premium by the percentage shown (or more) in the following table and
* You lapse (not pay more premiums) within 120 days of the increase.
The amount of coverage (that is, new lifetime maximum benefit amount) you will keep will equal the total amount of premiums you’ve paid since your policy was first issued. If you have already received benefits under the policy, so that the remaining maximum benefit amount is less than the total amount of premiums you’ve paid, the amount of coverage will be that remaining amount.
Except for this reduced lifetime maximum benefit amount, all other policy benefits will remain at the levels attained at the time of the lapse and will not increase thereafter.
Should you choose this Contingent Nonforfeiture option, your policy, with this reduced maximum benefit amount, will be considered ‘‘paid-up’’ with no further premiums due.
Example:
* You bought the policy at age 65 and paid the $1,000 annual premium for 10 years, so you have paid a total of $10,000 in premium.
* In the eleventh year, you receive a rate increase of 50%, or $500 for a new annual premium of $1,500, and you decide to lapse the policy (not pay more premiums).
* Your “paid-up” policy benefits are $10,000 (provided you have a least $10,000 of benefits remaining under your policy.)
Contingent Nonforfeiture
Cumulative Premium Increase over Initial Premium
That qualifies for Contingent Nonforfeiture
(Percentage increase is cumulative from date of original issue. It does NOT represent a one-time 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%
Cross References This appendix cited in 31 Pa. Code § 89a.108 (relating to required disclosure of rating practices to consumers).
APPENDIX G
LONG-TERM CARE INSURANCE REPLACEMENT AND LAPSE REPORTING FORM
For the State of For the Reporting Year of Company Name: Due: June 30 annually Company Address: Company NAIC Number: Contact Person: Phone Number: (
)
Instructions
The purpose of this form is to report on a statewide basis information regarding long-term care insurance policy replacements and lapses. Specifically, every insurer shall maintain records for each agent on that agent’s amount of long-term care insurance 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. The tables below should be used to report the ten percent (10%) of the insurer’s agents with the greatest percentages of replacements and lapses.
Listing of the 10% of Agents with the Greatest Percentage of Replacements
Agent’s Name Number of Policies Sold By This Agent Number of Policies Replaced By This Agent Number of Replacements As % of Number Sold By This Agent
Listing of the 10% of Agents with the Greatest Percentage of Lapses
Agent’s Name Number of Policies Sold By This Agent Number of Policies Lapsed By This Agent Number of Lapses As % of Number Sold By This Agent
Company Totals
Percentage of Replacement Policies Sold to Total Annual Sales
%
Percentage of Replacement Policies Sold to Policies In Force (as of the end of the preceding calendar year)
%Percentage of Lapsed Policies to Total Annual Sales
%
Percentage of Lapsed Policies to Policies In Force (as of the end of the preceding calendar year)
%
Cross References This appendix cited in 31 Pa. Code § 89a.114 (relating to reporting requirements).
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