REPORT TITLE:
Long-Term Care Insurance



DESCRIPTION:
Enacts the 1998 LTC Insurance Model Act and Model Regulations;
allows insurers to publicize LTC policies to employees; enacts
recommendations of JLC; appropriates funds for LTC actuarial
study and JLC expenses.  (CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        131
THE SENATE                              S.B. NO.           S.D. 3
TWENTIETH LEGISLATURE, 1999                                H.D. 3
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO LONG-TERM CARE.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1                              PART I
 
 2      SECTION 1.  Long-term care is an issue of immense
 
 3 importance.  Providing adequate care for the aged and disabled is
 
 4 an economic burden for many people.  The legislature finds that
 
 5 long-term care insurance policies offer a means of alleviating
 
 6 that load.  The legislature believes that the ideal setting to
 
 7 provide long-term care insurance is through the workplace and
 
 8 that the State should encourage the offering of long-term care
 
 9 insurance in order to provide a modicum of financial security.
 
10 This Act is a recommendation of the Joint Legislative Committee
 
11 on Long-Term Care, as contained in its report to the 1999
 
12 legislature, Miscellaneous Communication No. 9, dated December 1,
 
13 1999.
 
14      The purpose of this Act is to increase the number of
 
15 long-term care insurance policies in effect in Hawaii and to
 
16 conform Hawaii's long-term care insurance statutes to the July
 
17 1998 Long-Term Care Insurance Model Act and Model Regulation of
 
18 the National Association of Insurance Commissioners.
 
19                              PART II
 

 
Page 2                                                     131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
 2 a new article to chapter 431, to be appropriately designated and
 
 3 to read as follows:
 
 4               "ARTICLE  LONG-TERM CARE INSURANCE
 
 5            PART I.  LONG-TERM CARE INSURANCE MODEL ACT
 
 6      §431:  -101  Purpose.  The purpose of this article is to
 
 7 promote the public interest, to promote the availability of
 
 8 long-term care insurance policies, to protect applicants for
 
 9 long-term care insurance, as defined, from unfair or deceptive
 
10 sales or enrollment practices, to establish standards for
 
11 long-term care insurance, to facilitate public understanding and
 
12 comparison of long-term care insurance policies, and to
 
13 facilitate flexibility and innovation in the development of
 
14 long-term care insurance coverage.  (1998 NAIC Act Sec. 1)
 
15      §431:  -102  Scope.  The requirements of this article shall
 
16 apply to policies delivered or issued for delivery in this State
 
17 on or after July 1, 2000.  This article is not intended to
 
18 supersede the obligations of entities subject to this article to
 
19 comply with the substance of other applicable insurance laws
 
20 insofar as they do not conflict with this article, except that
 
21 laws and regulations designed and intended to apply to Medicare
 
22 supplement insurance policies shall not be applied to long-term
 
23 care insurance.  (1998 NAIC Act Sec. 2)
 

 
Page 3                                                     131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      §431:  -103  Short title.  This article may be known and
 
 2 cited as the "Long-Term Care Insurance Act."  (1998 NAIC Act
 
 3 Sec. 3)
 
 4      §431:  -104  Definitions.  As used in this article, unless
 
 5 the context requires otherwise, the definitions in this section
 
 6 apply throughout this article.
 
 7      "Applicant" means:
 
 8      (1)  In the case of an individual long-term care insurance
 
 9           policy, the person who seeks to contract for benefits;
 
10           and
 
11      (2)  In the case of a group long-term care insurance policy,
 
12           the proposed certificate holder.
 
13      "Certificate" means, for the purposes of this article, any
 
14 certificate issued under a group long-term care insurance policy,
 
15 which policy has been delivered or issued for delivery in this
 
16 State.
 
17      "Group long-term care insurance" means a long-term care
 
18 insurance policy which is delivered or issued for delivery in
 
19 this State and issued to:
 
20      (1)  One or more employers or labor organizations, or a
 
21           trust or to the trustees of a fund established by one
 
22           or more employers or labor organizations, or a
 
23           combination thereof, for employees or former employees
 

 
Page 4                                                     131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           or a combination thereof or for members or former
 
 2           members or a combination thereof, of the labor
 
 3           organizations; or
 
 4      (2)  Any professional, trade, or occupational association
 
 5           for its members or former or retired members, or
 
 6           combination thereof, if the association:
 
 7           (A)  Is composed of individuals all of whom are or were
 
 8                actively engaged in the same profession, trade, or
 
 9                occupation; and
 
10           (B)  Has been maintained in good faith for purposes
 
11                other than obtaining insurance; or
 
12      (3)  An association or a trust or the trustees of a fund
 
13           established, created, or maintained for the benefit of
 
14           members of one or more associations.  Prior to
 
15           advertising, marketing, or offering the policy within
 
16           this State, the association or the insurer of the
 
17           association shall file evidence with the commissioner
 
18           that the association has at the outset a minimum of one
 
19           hundred persons; has been organized and maintained in
 
20           good faith for purposes other than that of obtaining
 
21           insurance; has been in active existence for at least
 
22           one year; and has a constitution and bylaws which
 
23           provide that:
 

 
Page 5                                                     131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           (A)  The association holds regular meetings not less
 
 2                than annually to further purposes of the members;
 
 3           (B)  Except for credit unions, the association collects
 
 4                dues or solicits contributions from members; and
 
 5           (C)  The members have voting privileges and
 
 6                representation on the governing board and
 
 7                committees.
 
 8           Thirty days after the filing the association will be
 
 9           deemed to satisfy the organizational requirements
 
10           unless the commissioner makes a finding that the
 
11           association does not satisfy those organizational
 
12           requirements; or
 
13      (4)  A group other than as described in paragraphs (1), (2),
 
14           and (3), subject to a finding by the commissioner that:
 
15           (A)  The issuance of the group policy is not contrary
 
16                to the best interest of the public;
 
17           (B)  The issuance of the group policy would result in
 
18                economies of acquisition or administration; and
 
19           (C)  The benefits are reasonable in relation to the
 
20                premiums charged.
 
21      "HIPAA" means the Health Insurance Portability and
 
22 Accountability Act of 1996, P.L. 104-191.
 
23      "Long-term care insurance" means any insurance policy or
 

 
Page 6                                                     131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 rider advertised, marketed, offered, or designed to provide
 
 2 coverage for not less than twelve consecutive months for each
 
 3 covered person on an expense incurred, indemnity, prepaid, or
 
 4 other basis, for one or more necessary or medically necessary
 
 5 diagnostic, preventive, therapeutic, rehabilitative, maintenance,
 
 6 or personal care services, provided in a setting other than an
 
 7 acute care unit of a hospital.  The term includes group and
 
 8 individual annuities and life insurance policies or riders that
 
 9 provide directly or that supplement long-term care insurance.
 
10 The term also includes a policy or rider that provides for
 
11 payment of benefits based upon cognitive impairment or loss of
 
12 functional capacity.
 
13      Long-term care insurance shall not include any insurance
 
14 policy which is offered primarily to provide basic Medicare
 
15 supplement coverage, basic hospital expense coverage, basic
 
16 medical-surgical expense coverage, hospital confinement indemnity
 
17 coverage, major medical expense coverage, disability income or
 
18 related asset-protection coverage, accident only coverage,
 
19 specified disease or specified accident coverage, or limited
 
20 benefit health coverage.
 
21      With regard to life insurance, this term does not include
 
22 life insurance policies which accelerate the death benefit
 
23 specifically for one or more of the qualifying events of terminal
 

 
Page 7                                                     131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 illness, medical conditions requiring extraordinary medical
 
 2 intervention, or permanent institutional confinement, and which
 
 3 provide the option of a lump-sum payment for those benefits and
 
 4 in which neither the benefits nor the eligibility for the
 
 5 benefits is conditioned upon the receipt of long-term care.
 
 6      Notwithstanding any other provision contained herein, any
 
 7 product advertised, marketed, or offered as long-term care
 
 8 insurance shall be subject to this article.
 
 9      "NAIC" means the National Association of Insurance
 
10 Commissioners.
 
11      "Policy" means, for the purposes of this article, any
 
12 policy, contract, subscriber agreement, rider, or endorsement
 
13 delivered or issued for delivery in this State by an insurer;
 
14 fraternal benefit society; nonprofit health, hospital, or medical
 
15 service corporation; prepaid health plan; health maintenance
 
16 organization; or any similar organization.  (1998 NAIC Act Sec. 5
 
17 & Reg. Sec. 5)
 
18      §431:  -105  Extraterritorial jurisdiction; group policies.
 
19 No group long-term insurance coverage may be offered to a
 
20 resident of this State under a group policy issued in another
 
21 state to a group described in paragraph (4) under the definition
 
22 of "group long-term care insurance" in section 431:  -104, unless
 
23 this State or another state having statutory and regulatory long-
 

 
Page 8                                                     131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 term care insurance requirements substantially similar to those
 
 2 adopted in this State has made a determination that these
 
 3 requirements have been met.  (1998 NAIC Act Sec. 5)
 
 4      §431:  -106  Rules.  The commissioner may adopt rules that
 
 5 include standards for full and fair disclosure setting forth the
 
 6 manner, content, and required disclosures for the sale of long-
 
 7 term care insurance policies, terms of renewability, initial and
 
 8 subsequent conditions of eligibility, non-duplication of coverage
 
 9 provisions, coverage of dependents, preexisting conditions,
 
10 termination of insurance, continuation or conversion,
 
11 probationary periods, limitations, exceptions, reductions,
 
12 elimination periods, requirements for replacement, recurrent
 
13 conditions, and definition of terms.  (1998 NAIC Act Sec. 6A)
 
14      §431:  -107  Basic standards.(a)  No long-term care
 
15 insurance policy may:
 
16      (1)  Be canceled, nonrenewed, or otherwise terminated on the
 
17           grounds of the age or the deterioration of the mental
 
18           or physical health of the insured individual or
 
19           certificate holder;
 
20      (2)  Contain a provision establishing a new waiting period
 
21           if existing coverage is converted to or replaced by a
 
22           new or other form within the same company, except with
 
23           respect to an increase in benefits voluntarily selected
 

 
Page 9                                                     131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           by the insured individual or group policyholder; or
 
 2      (3)  Provide coverage for skilled nursing care only or
 
 3           provide significantly more coverage for skilled care in
 
 4           a facility than coverage for lower levels of care.
 
 5           (1998 NAIC Act Sec. 6B)
 
 6      §431:  -108  Preexisting conditions-group and individual
 
 7 policies.(a)  No long-term care insurance policy or certificate
 
 8 other than a policy or certificate thereunder issued to a group
 
 9 as defined in paragraph (1) of the definition of "group long-term
 
10 care insurance" in section 431:  -104 shall use a definition of
 
11 "preexisting condition" which is more restrictive than the
 
12 following:  "Preexisting condition" means a condition for which
 
13 medical advice or treatment was recommended by, or received from
 
14 a provider of health care services within six months preceding
 
15 the effective date of coverage of an insured person.
 
16      (b)  No long-term care insurance policy or certificate other
 
17 than a policy or certificate thereunder issued to a group as
 
18 defined in paragraph (1) of the definition of "group long-term
 
19 care insurance" in section 431:  -104 may exclude coverage for a
 
20 loss or confinement which is the result of a preexisting
 
21 condition unless the loss or confinement begins within six months
 
22 following the effective date of coverage of an insured person.
 
23      (c)  The commissioner may extend the limitation periods in
 

 
Page 10                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 subsections (a) and (b) as to specific age group categories in
 
 2 specific policy forms upon findings that the extension is in the
 
 3 best interest of the public.
 
 4      (d)  The definition of "preexisting condition" does not
 
 5 prohibit an insurer from using an application form designed to
 
 6 elicit the complete health history of an applicant, and, on the
 
 7 basis of the answers on that application, from underwriting in
 
 8 accordance with that insurer's established underwriting
 
 9 standards.  Unless otherwise provided in the policy or
 
10 certificate, a preexisting condition, regardless of whether it is
 
11 disclosed on the application, need not be covered until the
 
12 waiting period described in subsection (b) expires.  No long-term
 
13 care insurance policy or certificate may exclude or use waivers
 
14 or riders of any kind to exclude, limit, or reduce coverage or
 
15 benefits for specifically named or described preexisting diseases
 
16 or physical conditions beyond the waiting period described in
 
17 subsection (b).  (1998 NAIC Act Sec. 6C)
 
18      §431:  -109  Prior hospitalization; prior
 
19 institutionalization.(a)  No long-term care insurance policy
 
20 may be delivered or issued for delivery in this State if the
 
21 policy:
 
22      (1)  Conditions eligibility for any benefits on a prior
 
23           hospitalization requirement;
 

 
Page 11                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (2)  Conditions eligibility for benefits provided in an
 
 2           institutional care setting on the receipt of a higher
 
 3           level of institutional care; or
 
 4      (3)  Conditions eligibility for any benefits other than
 
 5           waiver of premium, post-confinement, post-acute care,
 
 6           or recuperative benefits on a prior
 
 7           institutionalization requirement.
 
 8      (b)  A long-term care insurance policy containing post-
 
 9 confinement, post-acute care, or recuperative benefits shall
 
10 clearly label, in a separate paragraph of the policy or
 
11 certificate, entitled "Limitations or Conditions on Eligibility
 
12 for Benefits," such limitations or conditions including any
 
13 required number of days of confinement.
 
14      (c)  A long-term care insurance policy that conditions
 
15 eligibility of non-institutional benefits on the prior receipt of
 
16 institutional care shall not require a prior institutional stay
 
17 of more than thirty days.  (1998 NAIC Act Sec. 6D)
 
18      §431:  -110  Loss ratio standards; factors; commissioner
 
19 approval.  The commissioner may adopt rules establishing loss
 
20 ratio standards for long-term care insurance policies; provided
 
21 that a specific reference to long-term care insurance policies is
 
22 contained in the rule.  (1998 NAIC Act Sec. 6E & Reg. Sec. 17) 
 
23      §431:  -111  Right to return; free look provision.  Long-
 

 
Page 12                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 term care insurance applicants shall have the right to return the
 
 2 policy or certificate within thirty days of its delivery and to
 
 3 have the premium refunded if, after examination of the policy or
 
 4 certificate, the applicant is not satisfied for any reason.
 
 5 Long-term care insurance policies and certificates shall have a
 
 6 notice prominently printed on the first page or attached thereto
 
 7 stating in substance that the applicant shall have the right to
 
 8 return the policy or certificate within thirty days of its
 
 9 delivery and to have the premium refunded if, after examination
 
10 of the policy or certificate, other than a certificate issued
 
11 pursuant to a policy issued to a group defined in paragraph (1)
 
12 of the definition of "group long-term care insurance" in section
 
13 431:  -104, the applicant is not satisfied for any reason.  (1998
 
14 NAIC Act Sec. 6F)
 
15      §431:  -112  Outline of coverage required.(a)  An outline
 
16 of coverage shall be delivered to a prospective applicant for
 
17 long-term care insurance at the time of initial solicitation
 
18 through means that prominently direct the attention of the
 
19 recipient to the document and its purpose.  The commissioner
 
20 shall prescribe a standard format, including style, arrangement,
 
21 and overall appearance, and the content of an outline of
 
22 coverage.  In the case of agent solicitations, an agent shall
 
23 deliver the outline of coverage prior to the presentation of an
 

 
Page 13                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 application or enrollment form.  In the case of direct response
 
 2 solicitation, the outline of coverage shall be presented in
 
 3 conjunction with any application or enrollment form.  In the case
 
 4 of a policy issued to a group defined in paragraph (1) of the
 
 5 definition of "group long-term care insurance" in section
 
 6 431:   -104, an outline of coverage shall not be required to be
 
 7 delivered; provided that the information described subsection (b)
 
 8 is contained in other materials relating to enrollment.  Upon
 
 9 request, these other materials shall be made available to the
 
10 commissioner.
 
11      (b)  The outline of coverage shall include:
 
12      (1)  A description of the principal benefits and coverage
 
13           provided in the policy;
 
14      (2)  A statement of the principal exclusions, reductions,
 
15           and limitations contained in the policy;
 
16      (3)  A statement of the terms under which the policy or
 
17           certificate, or both, may be continued in force or
 
18           discontinued, including any reservation in the policy
 
19           of a right to change premium.  Continuation or
 
20           conversion provisions of group coverage shall be
 
21           specifically described;
 
22      (4)  A statement that the outline of coverage is a summary
 
23           only, not a contract of insurance, and that the policy
 

 
Page 14                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           or group master policy contains governing contractual
 
 2           provisions;
 
 3      (5)  A description of the terms under which the policy or
 
 4           certificate may be returned and premium refunded; and
 
 5      (6)  A brief description of the relationship of costs of
 
 6           care and benefits.  (1998 NAIC Act Sec. 6G)
 
 7      §431:  -113  Group policy certificate requirements.  A
 
 8 certificate issued pursuant to a group long-term care insurance
 
 9 policy which is delivered or issued for delivery in this State
 
10 shall include:
 
11      (1)  A description of the principal benefits and coverage
 
12           provided in the policy;
 
13      (2)  A statement of the principal exclusions, reductions,
 
14           and limitations contained in the policy; and
 
15      (3)  A statement that the group master policy determines
 
16           governing contractual provisions.  (1998 NAIC Act Sec.
 
17           6H)
 
18      §431:  -114  Life insurance policies offering long-term care
 
19 benefits.(a)  At the time of policy delivery, a policy summary
 
20 shall be delivered for an individual life insurance policy that
 
21 provides long-term care benefits within the policy.  In the case
 
22 of direct response solicitations, the insurer shall deliver the
 
23 policy summary upon the applicant's request, but regardless of
 

 
Page 15                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 request shall make delivery no later than at the time of policy
 
 2 delivery.  In addition to complying with all applicable
 
 3 requirements, the policy summary shall also include:
 
 4      (1)  An explanation of how the long-term care benefit
 
 5           interacts with other components of the policy,
 
 6           including deductions from death benefits;
 
 7      (2)  An illustration of the amount of benefits, the length
 
 8           of benefit, and the guaranteed lifetime benefits if
 
 9           any, for each covered person;
 
10      (3)  Any exclusions, reductions, and limitations on benefits
 
11           of long-term care; 
 
12      (4)  A statement that any long-term care inflation
 
13           protection option required by 431:  -220 is not
 
14           available under this policy;
 
15      (5)  If applicable to the policy type, the summary shall
 
16           also include a disclosure of the effects of exercising
 
17           other rights under the policy, a disclosure of
 
18           guarantees related to long-term care costs of insurance
 
19           charges, and current and projected maximum lifetime
 
20           benefits; and
 
21      (6)  The provisions of the policy summary listed above may
 
22           be incorporated into a basic illustration required to
 
23           be delivered or into the life insurance policy summary
 

 
Page 16                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           which is required to be delivered.
 
 2      (b)  Any time a long-term care benefit funded through a life
 
 3 insurance vehicle by the acceleration of the death benefit is in
 
 4 benefit payment status, a monthly report shall be provided to the
 
 5 policyholder.  The report shall include:
 
 6      (1)  Any long-term care benefits paid out during the month;
 
 7      (2)  An explanation of any changes in the policy, for
 
 8           example death benefits or cash values, due to long-term
 
 9           care benefits being paid out; and
 
10      (3)  The amount of long-term care benefits existing or
 
11           remaining. 
 
12      (c)  Any policy advertised, marketed, or offered as long-
 
13 term care or nursing home insurance shall comply with this
 
14 article.  (1998 NAIC Act Sec. 6I-K)
 
15      §431:   -115  Incontestability period-group and individual
 
16 policies.(a)  For a policy or certificate that has been in
 
17 force for less than six months an insurer may rescind a long-term
 
18 care insurance policy or certificate or deny an otherwise valid
 
19 long-term care insurance claim upon a showing of
 
20 misrepresentation that is material to the acceptance of coverage.
 
21      (b)  For a policy or certificate that has been in force at
 
22 least six months but less than two years, an insurer may rescind
 
23 a long-term care insurance policy or certificate or deny an
 

 
Page 17                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 otherwise valid long-term care insurance claim upon a showing of
 
 2 misrepresentation that is both material to the acceptance of
 
 3 coverage and which pertains to the condition for which benefits
 
 4 are sought.
 
 5      (c)  After a policy or certificate has been in force for two
 
 6 years it is not contestable solely upon the grounds of
 
 7 misrepresentation alone.  The policy or certificate may be
 
 8 contested only upon a showing that the insured knowingly and
 
 9 intentionally misrepresented relevant facts relating to the
 
10 insured's health.
 
11      (d)  No long-term care insurance policy or certificate may
 
12 be field issued based on medical or health status.  For purposes
 
13 of this subsection, "field issued" means a policy or certificate
 
14 issued by an agent or a third-party administrator pursuant to the
 
15 underwriting authority granted to the agent or third party
 
16 administrator by an insurer.
 
17      (e)  If an insurer has paid benefits under the long-term
 
18 care insurance policy or certificate, the benefit payments may
 
19 not be recovered by the insurer if the policy or certificate is
 
20 rescinded.
 
21      (f)  In the event of the death of the insured, this section
 
22 shall not apply to the remaining death benefit of a life
 
23 insurance policy that accelerates benefits for long-term care.
 

 
Page 18                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 In this situation, the remaining death benefits under these
 
 2 policies shall be governed by article 10D of this chapter.  In
 
 3 all other situations, this section shall apply to life insurance
 
 4 policies that accelerate benefits for long-term care.  (1998 NAIC
 
 5 Act Sec. 7)
 
 6      §431:  -116  Nonforfeiture benefits.(a)  Except as
 
 7 provided in subsection (b), a long-term care insurance policy
 
 8 shall not be delivered or issued for delivery in this State
 
 9 unless the policyholder or certificate holder has been offered an
 
10 option to purchase a policy or certificate that includes a
 
11 nonforfeiture benefit.  The offer of a nonforfeiture benefit may
 
12 be in the form of a rider that is attached to the policy.  If the
 
13 policyholder or certificate holder declines the nonforfeiture
 
14 benefit, the insurer shall provide a contingent benefit upon
 
15 lapse that shall be available for a specified period of time
 
16 following a substantial increase in premium rates.
 
17      (b)  For a group long-term care insurance policy, the offer
 
18 of a nonforfeiture benefit under subsection (a) shall be made to
 
19 the group policyholder.  However, if the policy is issued as a
 
20 group long-term care insurance, other than to a continuing care
 
21 retirement community or other similar entity, the offering shall
 
22 be made to each proposed certificate holder.
 
23      (c)  The commissioner shall adopt rules to specify the type
 

 
Page 19                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 of nonforfeiture benefits to be offered as part of long-term care
 
 2 insurance policies or certificates, the standards for
 
 3 nonforfeiture benefits, and the rules for contingent benefit upon
 
 4 lapse, including a determination of the specified period of time
 
 5 during which a contingent benefit upon lapse shall be available
 
 6 and the substantial premium rate increase that triggers a
 
 7 contingent benefit upon lapse as provided in subsection (a).
 
 8 (1998 NAIC Act Sec. 8)
 
 9      §431:  -117  Authority to promulgate regulations.  The
 
10 commissioner may issue reasonable regulations to promote premium
 
11 adequacy and to protect the policyholder in the event of
 
12 substantial rate increases, and to establish minimum standards
 
13 for marketing practices, agent compensation, agent testing,
 
14 penalties, and reporting practices for long-term care insurance.
 
15 (1998 NAIC Act Sec. 9)
 
16        PART II.  LONG-TERM CARE INSURANCE MODEL REGULATION
 
17      §431:  -201  Policy definitions.  (a)  No long-term care
 
18 insurance policy delivered or issued for delivery in this State
 
19 shall use the terms set forth in this section, unless the terms
 
20 are defined in the policy and the definitions satisfy the
 
21 following requirements:
 
22      "Activities of daily living" means at least bathing,
 
23 continence, dressing, eating, toileting, and transferring.
 

 
Page 20                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      "Acute condition" means that the individual is medically
 
 2 unstable.  This individual requires frequent monitoring by
 
 3 medical professionals such as physicians and registered nurses,
 
 4 in order to maintain the individual's health status.
 
 5      "Adult day care" means a program for six or more
 
 6 individuals, of social and health-related services provided
 
 7 during the day in a community group setting for the purpose of
 
 8 supporting frail, impaired elderly or other disabled adults who
 
 9 can benefit from care in a group setting outside the home.
 
10      "Bathing" means washing oneself by sponge bath, or in either
 
11 a tub or shower, including the task of getting into or out of the
 
12 tub or shower.
 
13      "Cognitive impairment" means a deficiency in a person's
 
14 short- or long-term memory, orientation as to person, place, and
 
15 time, deductive or abstract reasoning, or judgment as it relates
 
16 to safety awareness.
 
17      "Continence" means the ability to maintain control of bowel
 
18 and bladder function, or when unable to maintain control of bowel
 
19 or bladder function, the ability to perform associated personal
 
20 hygiene (including caring for catheter or colostomy bag).
 
21      "Dressing" means putting on and taking off all items of
 
22 clothing and any necessary braces, fasteners, or artificial
 
23 limbs.
 

 
Page 21                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      "Eating" means feeding oneself by getting food into the body
 
 2 from a receptacle (such as a plate, cup, or table) or by a
 
 3 feeding tube or intravenously.
 
 4      "Hands-on assistance" means physical assistance (minimal,
 
 5 moderate, or maximal) without which the individual would not be
 
 6 able to perform the activity of daily living.
 
 7      "Home health care services" means medical and nonmedical
 
 8 services, provided to ill, disabled, or infirm persons in their
 
 9 residences.  These services may include homemaker services,
 
10 assistance with activities of daily living, and respite care
 
11 services.
 
12      "Medicare" shall be defined as "The Health Insurance for the
 
13 Aged Act, Title XVIII of the Social Security Amendments of 1965
 
14 as Then Constituted or Later Amended," or Title I, Part I of
 
15 Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the
 
16 United States of America and popularly known as the Health
 
17 Insurance for the Aged Act, as then constituted and any later
 
18 amendments or substitutes thereof," or words of similar import.
 
19      "Mental or nervous disorder" means neurosis, psychoneurosis,
 
20 psychopathy, psychosis, or mental or emotional disease or
 
21 disorder, and shall not be defined beyond these terms.
 
22      "Personal care" means the provision of hands-on services to
 
23 assist an individual with activities of daily living.
 

 
Page 22                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      "Skilled nursing care," "intermediate care," "personal
 
 2 care," "home care," and other services shall be defined in
 
 3 relation to the level of skill required, the nature of the care
 
 4 and the setting in which care must be delivered.
 
 5      "Toileting" means getting to and from the toilet, getting on
 
 6 and off the toilet, and performing associated personal hygiene.
 
 7      "Transferring" means moving into or out of a bed, chair or
 
 8 wheelchair.  
 
 9      (b)  All providers of services, including but not limited to
 
10 a "skilled nursing facility," "extended care facility,"
 
11 "intermediate care facility," "convalescent nursing home,"
 
12 "personal care facility," and "home care agency" shall be defined
 
13 in relation to the services and facilities required to be
 
14 available and the licensure or degree status of those providing
 
15 or supervising the services.  The definition may require that the
 
16 provider be appropriately licensed or certified.  (1998 NAIC Reg.
 
17 Sec. 5)
 
18      §431:  -202  Renewability.(a)  The terms "guaranteed
 
19 renewable" and "noncancellable" shall not be used in any
 
20 individual long-term care insurance policy without further
 
21 explanatory language in accordance with the disclosure
 
22 requirements of section 431:  -211.  A policy issued to an
 
23 individual shall not contain renewal provisions other than
 

 
Page 23                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 guaranteed renewable or noncancellable.  
 
 2      (b)  The term "guaranteed renewable" may be used only when
 
 3 the insured has the right to continue the long-term care
 
 4 insurance in force by the timely payment of premiums and when the
 
 5 insurer has no unilateral right to make any change in any
 
 6 provision of the policy or rider while the insurance is in force,
 
 7 and cannot decline to renew, except that rates may be revised by
 
 8 the insurer on a class basis.
 
 9      (c)  The term "noncancellable" means the insured has the
 
10 right to continue the long-term care insurance in force by the
 
11 timely payment of premiums during which period the insurer has no
 
12 right to unilaterally make any change in any provision of the
 
13 insurance or in the premium rate.  (NAIC Reg. Sec. 6A)
 
14      §431:  -203  Limitations and exclusions.(a)  A policy may
 
15 not be delivered or issued for delivery in this State as long-
 
16 term care insurance if the policy limits or excludes coverage by
 
17 type of illness, treatment, medical condition or accident, except
 
18 as follows:
 
19      (1)  Preexisting conditions or diseases;
 
20      (2)  Mental or nervous disorders; however, this shall not
 
21           permit exclusion or limitation of benefits on the basis
 
22           of Alzheimer's Disease; 
 
23      (3)  Alcoholism and drug addiction;
 

 
Page 24                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (4)  Illness, treatment, or medical condition arising out
 
 2           of:
 
 3           (A)  War or act of war, whether declared or undeclared;
 
 4           (B)  Participation in a felony, riot, or insurrection;
 
 5           (C)  Service in the armed forces or units auxiliary
 
 6                thereto;
 
 7           (D)  Suicide (sane or insane), attempted suicide, or
 
 8                intentionally self-inflicted injury; or
 
 9           (E)  Aviation (this exclusion applies only to non-fare-
 
10                paying passengers); or
 
11      (5)  Treatment provided in a government facility (unless
 
12           required by law), services for which benefits are
 
13           available under Medicare or other governmental program
 
14           (except Medicaid) any state or federal workers'
 
15           compensation, employer's liability or occupational
 
16           disease law, or any motor vehicle insurance law,
 
17           services provided by a member of the covered person's
 
18           immediate family and services for which no charge is
 
19           normally made in the absence of insurance.
 
20      (b)  This section is not intended to prohibit exclusions and
 
21 limitations by type of provider or territorial limitations.
 
22 (1998 NAIC Reg. Sec. 6B)
 
23      §431:  -204  Extension of benefits.  Termination of long-
 

 
Page 25                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 term care insurance shall be without prejudice to any benefits
 
 2 payable for institutionalization if the institutionalization
 
 3 began while the long-term care insurance was in force and
 
 4 continues without interruption after termination.  The extension
 
 5 of benefits beyond the period the long-term care insurance was in
 
 6 force may be limited to the duration of the benefit period, if
 
 7 any, or to payment of the maximum benefits and may be subject to
 
 8 any policy waiting period, and all other applicable provisions of
 
 9 the policy.  (1998 NAIC Reg. Sec. 6C)
 
10      §431:  -205  Continuation or conversion.(a)  Group
 
11 long-term care insurance issued in this State beginning July 1,
 
12 2000, shall provide covered individuals with a basis for
 
13 continuation or conversion of coverage.
 
14      (b)  For purposes of this section, for "a basis for
 
15 continuation of coverage" means a policy provision that maintains
 
16 coverage under the existing group policy when the coverage would
 
17 otherwise terminate and which is subject only to the continued
 
18 timely payment of premium when due.  Group policies that restrict
 
19 provision of benefits and services to, or contain incentives to
 
20 use certain providers or facilities may provide continuation
 
21 benefits that are substantially equivalent to the benefits of the
 
22 existing group policy.  The commissioner shall make a
 
23 determination as to the substantial equivalency of benefits, and
 

 
Page 26                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 in doing so, shall take into consideration the differences
 
 2 between managed care and non-managed care plans, including but
 
 3 not limited to, provider system arrangements, service
 
 4 availability, benefit levels, and administrative complexity.
 
 5      (c)  For purposes of this section, "a basis for conversion
 
 6 of coverage" means a policy provision that entitles an
 
 7 individual, whose coverage under the group policy would otherwise
 
 8 terminate or has been terminated for any reason including
 
 9 discontinuance of the group policy in its entirety or with
 
10 respect to an insured class, and who has been continuously
 
11 insured under the group policy or any group policy that it
 
12 replaced for at least six months immediately prior to termination
 
13 shall be entitled to the issuance of a converted policy by the
 
14 insurer under whose group policy the individual is covered,
 
15 without evidence of insurability.
 
16      (d)  For purposes of this section, "converted policy" means
 
17 an individual policy of long-term care insurance providing
 
18 benefits identical to or benefits determined by the commissioner
 
19 to be substantially equivalent to or in excess of those provided
 
20 under the group policy from which conversion is made.  Where the
 
21 group policy from which conversion is made restricts provision of
 
22 benefits and services to, or contains incentives to use certain
 
23 providers or facilities, the commissioner, in making a
 

 
Page 27                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 determination as to substantial equivalency of benefits, shall
 
 2 take into consideration the differences between managed care and
 
 3 non-managed care plans, including but not limited to, provider
 
 4 system arrangements, service availability, benefit levels, and
 
 5 administrative complexity.
 
 6      (e)  Written application for the converted policy shall be
 
 7 made and the first premium, if any, shall be paid as directed by
 
 8 the insurer no later that thirty-one days after termination of
 
 9 coverage under the group policy.  The converted policy shall be
 
10 issued effective on the day following the termination of coverage
 
11 under the group policy, and shall be renewable annually.
 
12      (f)  Unless the group policy from which conversion is made
 
13 is replaced previous group policy coverage, the premium for the
 
14 converted policy shall be calculated on the basis of the
 
15 insured's age at inception of coverage under the group policy
 
16 from which conversion is made.  Where the group policy from which
 
17 conversion is made replaced a previous group coverage, the
 
18 premium for the converted policy shall be calculated on the basis
 
19 of the insured's age at inception of coverage under the group
 
20 policy replaced.
 
21      (g)  Continuation of coverage or issuance of a converted
 
22 policy shall be mandatory, except where:
 
23      (1)  Termination of group coverage resulted from an
 

 
Page 28                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           individual's failure to make any required payment of
 
 2           premium or contribution when due; or
 
 3      (2)  The terminating coverage is replaced not later than
 
 4           thirty-one days after termination by another group
 
 5           coverage effective on the day following the termination
 
 6           of coverage:
 
 7           (A)  Providing benefits or benefits determined by the
 
 8                commissioner to be identical substantially
 
 9                equivalent to or in excess of those provided by
 
10                the terminating coverage; and
 
11           (B)  The premium for which is calculated in a manner
 
12                consistent with the requirements of subsection
 
13                (f).
 
14      (h)  Notwithstanding any other provision of this section, a
 
15 converted policy issued to an individual who at the time of
 
16 conversion is covered by another long-term care insurance policy
 
17 that provides benefits on the basis of incurred expenses, may
 
18 contain a provision that results in a reduction of benefits
 
19 payable if the benefits provided under the additional coverage,
 
20 together with the full benefits provided by the converted policy,
 
21 would result in payment of more that one hundred per cent of
 
22 incurred expenses.  The provision shall only be included in the
 
23 converted policy if the converted policy also provides for a
 

 
Page 29                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 premium decrease or refund which reflects the reduction in
 
 2 benefits payable. 
 
 3      (i)  The converted policy may provide that the benefits
 
 4 payable under the converted policy, together with the benefits
 
 5 payable under the group policy from which conversion is made,
 
 6 shall not exceed those that would have been payable had the
 
 7 individual's coverage under the group policy remained in force
 
 8 and effect. 
 
 9      (j)  Notwithstanding any other provision of this section, an
 
10 insured individual whose eligibility for group long-term care
 
11 coverage is based upon the individual's relationship to another
 
12 person shall be entitled to continuation of coverage under the
 
13 group policy upon termination of the qualifying relationship by
 
14 death or dissolution of marriage or reciprocal beneficiary
 
15 relationship.
 
16      (k)  For purposes of this section "managed care plan" is a
 
17 health care or assisted living arrangement designed to coordinate
 
18 patient care or control costs through utilization review, case
 
19 management, or use of specific provider networks.  (1998 NAIC
 
20 Reg. Sec. 6D)
 
21      §431:  -206  Discontinuance and replacement.  If a group
 
22 long-term care insurance policy is replaced by another group
 
23 long-term care insurance policy issued to the same policyholder,
 

 
Page 30                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 the succeeding insurer shall offer coverage to all persons
 
 2 covered under the previous group policy on its date of
 
 3 termination.  Coverage provided or offered to individuals by the
 
 4 insurer and premiums charged to person under the new group policy
 
 5 shall not:
 
 6      (1)  Result in an exclusion for preexisting conditions that
 
 7           would have been covered under the group policy being
 
 8           replaced; and 
 
 9      (2)  Vary or otherwise depend on the individual's health or
 
10           disability status, claim experience, or use of long-
 
11           term care services.  (1998 NAIC Reg. Sec. 6E)
 
12      §431:  -207  Premiums charged-group and individual policies.
 
13 (a)  The premium charged to an insured shall not increase due to
 
14 either:
 
15      (1)  Increasing age of the insured at ages beyond sixty-
 
16           five; or
 
17      (2)  The duration the insured has been covered under the
 
18           policy.
 
19      (b)  The purchase of additional coverage shall not be
 
20 considered a premium rate increase, but for purposes of the
 
21 calculation required under section 431:  -233, the portion of the
 
22 premium attributable to the additional coverage shall be added to
 
23 and considered part of the initial annual premium.
 

 
Page 31                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (c)  A reduction of benefits shall not be considered a
 
 2 premium change, but for purpose of calculation required under
 
 3 section 431:  -233, the initial annual premium shall be based on
 
 4 reduced benefits.  (1998 NAIC Reg. Sec. 6F)
 
 5      §431:  -208  Unintentional lapse.(a)  Each insurer
 
 6 offering long-term care insurance, as a protection against
 
 7 unintentional lapse, shall comply with this section.
 
 8      (b)  No individual long-term care policy or certificate
 
 9 shall be issued until the insurer has received from the applicant
 
10 a written designation of at least one person, in addition to the
 
11 applicant, who is to receive notice of lapse or termination of
 
12 the policy or certificate for nonpayment of premium, or a written
 
13 waiver dated and signed by the applicant electing not to
 
14 designate additional persons to receive notice.  The applicant
 
15 has the right to designate at least one person who is to receive
 
16 the notice of termination, in addition to the insured.
 
17 Designation shall not constitute acceptance of any liability on
 
18 the third party for services provided to the insured.  The form
 
19 used for the written designation shall provide space clearly
 
20 designated for listing at least one person.  The designation
 
21 shall include each person's full name and home address.
 
22      (c)  In the case of an applicant who elects not to designate
 
23 an additional person, the waiver shall state:
 

 
Page 32                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      "Protection Against Unintended Lapse.  I understand that I
 
 2 have the right to designate at least one person other than myself
 
 3 to receive notice of lapse or termination of this long-term care
 
 4 insurance policy for nonpayment of premium.  I understand that
 
 5 notice will not be given until thirty (30) days after a premium
 
 6 is due and unpaid.  I elect NOT to designate a person to receive
 
 7 this notice."
 
 8      (d)  The insurer shall notify the insured of the right to
 
 9 change this written designation, no less often than every two
 
10 years.
 
11      (e)  When the policyholder or certificate holder pays
 
12 premium for a long-term care insurance policy or certificate
 
13 through a payroll or pension deduction plan, the notice
 
14 requirement contained in subsection (c) need not be met until
 
15 sixty days after the policyholder or certificate holder is no
 
16 longer on a payment plan.  The application or enrollment form for
 
17 these policies or certificates shall clearly indicate the payment
 
18 plan selected by the applicant.  (1998 NAIC Reg. Sec. 7A)
 
19      §431:  -209  Lapse or termination for nonpayment of premium.
 
20 No individual long-term care policy or certificate shall lapse or
 
21 be terminated for nonpayment of premium unless the insurer, at
 
22 least thirty days before the effective date of the lapse or
 
23 termination, has given notice to the insured and to those persons
 

 
Page 33                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 designated in section 431:  -208 at the address provided by the
 
 2 insured for purposes of receiving notice of lapse or termination.
 
 3 Notice shall be given by first class United States mail, postage
 
 4 prepaid and notice may not be given until thirty days after a
 
 5 premium is unpaid.  Notice shall be deemed to have been given as
 
 6 of five days after the date of mailing.  (1998 NAIC Reg. Sec. 7A)
 
 7      §431:  -210  Reinstatement.  In addition to the requirements
 
 8 of sections 431:  -208 and 431:  -209, a long-term care insurance
 
 9 policy or certificate shall include a provision that provides for
 
10 reinstatement of coverage, in the event of lapse if the insurer
 
11 is provided proof that the policyholder or certificate holder was
 
12 cognitively impaired or had a loss of functional capacity before
 
13 the grace period contained in the policy expired.  This option
 
14 shall be available to the insured if requested within five months
 
15 after termination and shall allow for the collection of past due
 
16 premium, where appropriate.  The standard of proof of cognitive
 
17 impairment or loss of functional capacity shall not be more
 
18 stringent than the benefit eligibility criteria on cognitive
 
19 impairment or the loss of functional capacity contained in the
 
20 policy and certificate.  (1998 NAIC Reg. Sec. 7B)
 
21      §431:  -211  Disclosure; renewability.  Individual long-term
 
22 care insurance policies shall contain a renewability provision.
 
23 The provision shall be appropriately captioned, shall appear on
 

 
Page 34                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 the first page of the policy, and shall clearly state the
 
 2 duration, where limited, of renewability and the duration of the
 
 3 term of coverage for which the policy is issued and for which it
 
 4 may be renewed.  This provision shall not apply to policies that
 
 5 do not contain a nonrenewability provision, and under which the
 
 6 right to nonrenew is reserved solely to the policyholder.  (1998
 
 7 NAIC Reg. Sec. 8A)
 
 8      §431:  -212  Disclosure; riders and endorsements.(a)
 
 9 Except for riders or endorsements by which the insurer
 
10 effectuates a request made in writing by the insured under an
 
11 individual long-term care insurance policy, all riders or
 
12 endorsements added to an individual long-term care insurance
 
13 policy after the date of issue or at reinstatement or renewal
 
14 that reduce or eliminate benefits or coverage in the policy shall
 
15 require signed acceptance by the individual insured.
 
16      (b)  After the date of policy issuance, any rider or
 
17 endorsement that increases benefits or coverage with a
 
18 concomitant increase in premium during the policy term shall be
 
19 agreed to in writing by the insured, except if the increased
 
20 benefits or coverages are required by law. 
 
21      (c)  Where a separate additional premium is charged for
 
22 benefits provided in connection with riders or endorsements, the
 
23 premium charge shall be set forth in the policy, rider, or
 

 
Page 35                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 endorsement.  (1998 NAIC Reg. Sec. 8B)
 
 2      §431:  -213  Disclosure; payment of benefits.  A long-term
 
 3 care insurance policy that provides for the payment of benefits
 
 4 based on standards described as "usual and customary,"
 
 5 "reasonable and customary," or similar words or phrases shall
 
 6 include a definition of these terms and an explanation of the
 
 7 terms in its accompanying outline of coverage. (1998 NAIC Reg.
 
 8 Sec. 8C)
 
 9      §431:  -214  Disclosure; limitations.  If a long-term care
 
10 insurance policy or certificate contains any limitations with
 
11 respect to preexisting conditions, the limitations shall appear
 
12 as a separate paragraph of the policy or certificate and shall be
 
13 labeled as "Preexisting Condition Limitations."  (1998 NAIC Reg.
 
14 Sec. 8D)
 
15      §431:  -215  Disclosure; other limitations and conditions on
 
16 eligibility for benefits.  A long-term care insurance policy or
 
17 certificate containing any limitations or conditions for
 
18 eligibility other than those prohibited in section 431:  -109
 
19 shall set forth a description of the limitations or conditions,
 
20 including any required number of days of confinement, in a
 
21 separate paragraph of the policy or certificate and shall be
 
22 labeled as "Limitations or Conditions on Eligibility of Benefits.
 
23 (1998 NAIC Reg. Sec. 8E)
 

 
Page 36                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      §431:  -216  Disclosure of tax consequences.  With regard to
 
 2 life insurance policies that provide for an accelerated benefit
 
 3 for long-term care, a disclosure is required at the time of
 
 4 application for the policy and at the time the accelerated
 
 5 benefit payment request is submitted that receipt of these
 
 6 accelerated benefits may be taxable, and that assistance should
 
 7 be sought from a personal tax advisor.  The disclosure statement
 
 8 shall be prominently displayed on the first page of the policy
 
 9 and any other related documents.  (1998 NAIC Reg. Sec. 8F)
 
10      §431:  -217  Disclosure; benefit triggers.  Activities of
 
11 daily living and cognitive impairment shall be used to measure an
 
12 insured's need for long-term care and shall be described in the
 
13 policy or certificate in a separate paragraph and shall be
 
14 labeled "Eligibility for the Payment of Benefits."  Any
 
15 additional benefit triggers shall also be explained in this
 
16 section.  If these benefit triggers differ for different
 
17 benefits, explanation of the trigger shall accompany each benefit
 
18 description.  If an attending physician or other specified person
 
19 must certify a certain level of functional dependency in order to
 
20 be eligible for benefits, this too shall be specified.  (1998
 
21 NAIC Reg. 8G)
 
22      §431:  -218  Prohibition against post-claims underwriting.
 
23 (a)  All applications for long-term care insurance policies or
 

 
Page 37                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 certificates except those that are guaranteed issue shall contain
 
 2 clear and unambiguous questions designed to ascertain the health
 
 3 condition of the applicant.
 
 4      (b)  If an application for long-term care insurance contains
 
 5 a question that asks whether the applicant has had medication
 
 6 prescribed by a physician, it must also ask the applicant to list
 
 7 the medication that has been prescribed.
 
 8      (c)  If the medications listed in the application were known
 
 9 by the insurer, or should have been known at the time of
 
10 application, to be directly related to a medical condition for
 
11 which coverage would otherwise be denied, then the policy or
 
12 certificate shall not be rescinded for that condition.
 
13      (d)  Except for policies or certificates which are
 
14 guaranteed issue:
 
15      (1)  The following language shall be set out conspicuously
 
16           and in close conjunction with the applicant's signature
 
17           block on an application for a long-term care insurance
 
18           policy or certificate:
 
19           "CAUTION:  If your answers on this application are
 
20           incorrect or untrue, the (company) has the right to
 
21           deny benefits or rescind your policy.";
 
22      (2)  The following language, or language substantially
 
23           similar to the following, shall be set out
 

 
Page 38                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           conspicuously on the long-term care insurance policy or
 
 2           certificate at the time of delivery:
 
 3           "CAUTION:  The issuance of this long-term care
 
 4           insurance (policy) (certificate) is based upon your
 
 5           responses to the questions on your application.  A copy
 
 6           of your (application) (enrollment form) (is enclosed)
 
 7           (was retained by you when you applied).  If your
 
 8           answers are incorrect or untrue, the company has the
 
 9           right to deny benefits or rescind your policy.  The
 
10           best time to clear up any questions is now, before a
 
11           claim arises!  If, for any reason, any of your answers
 
12           are incorrect, contact the company at this address:
 
13           (insert address)."; and 
 
14      (3)  Prior to issuance of a long-term care policy or
 
15           certificate to an applicant age eighty or older, the
 
16           insurer shall obtain one of the following:
 
17           (A)  A report of a physical examination;
 
18           (B)  An assessment of functional capacity;
 
19           (c)  An attending physician's statement; or
 
20           (D)  Copies of medical records.
 
21      (d)  A copy of the completed application or enrollment form,
 
22 whichever is applicable, shall be delivered to the insured no
 
23 later than at the time of delivery of the policy or certificate
 

 
Page 39                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 unless it was retained by the applicant at the time of
 
 2 application.
 
 3      (e)  Every insurer or other entity selling or issuing long-
 
 4 term care insurance benefits shall maintain a record of all
 
 5 policy or certificate rescissions, both state and countrywide,
 
 6 except those that the insured voluntarily effectuated.  Every
 
 7 insurer shall annually furnish this information to the insurance
 
 8 commissioner in the format prescribed by the National Association
 
 9 of Insurance Commissioners in Appendix A to the July 1998 NAIC
 
10 Long-Term Care Insurance Model Regulations.  (1998 NAIC Reg.
 
11 Sec. 9)
 
12      §431:  -219  Minimum standards for home health and community
 
13 care benefits.  (a)  A long-term care insurance policy or
 
14 certificate shall not, if it provides benefits for home health
 
15 care or community care services, limit or exclude benefits by:
 
16      (1)  Requiring that the insured or claimant would need care
 
17           in a skilled nursing facility if home health care
 
18           services were not provided;
 
19      (2)  Requiring that the insured or claimant first or
 
20           simultaneously receive nursing or therapeutic services,
 
21           or both, in a home, community, or institutional setting
 
22           before home health care services are covered;
 
23      (3)  Limiting eligible services to services provided by
 

 
Page 40                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           registered nurses or licensed practical nurses;
 
 2      (4)  Requiring that a nurse or therapist provide services
 
 3           covered by the policy that can be provided by a home
 
 4           health aide, or other licensed or certified home care
 
 5           worker acting within the scope of the person's
 
 6           licensure or certification;
 
 7      (5)  Excluding coverage for personal care services provided
 
 8           by a home health aide;
 
 9      (6)  Requiring that the provision of home health care
 
10           services be at a level of certification or licensure
 
11           greater than that required by the eligible service;
 
12      (7)  Requiring that the insured or claimant have an acute
 
13           condition before home health care services are covered;
 
14      (8)  Limiting benefits to services provided by Medicare-
 
15           certified agencies or providers; or
 
16      (9)  Excluding coverage for adult day care service.
 
17      (b)  A long-term care insurance policy or certificate, if it
 
18 provides for home health or community care services, shall
 
19 provide total home health or community care coverage that is a
 
20 dollar amount equivalent to at least one-half of one year's
 
21 coverage available for nursing home benefits under the policy or
 
22 certificate, at the time covered home health or community care
 
23 services are being received.  This requirement shall not apply to
 

 
Page 41                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 policies or certificates issued to residents of continuing care
 
 2 retirement communities.
 
 3      (c)  Home health care coverage may be applied to nonhome
 
 4 health care benefits provided in the policy or certificate when
 
 5 determining maximum coverage under the terms of the policy or
 
 6 certificate.  (1998 NAIC Reg. Sec. 10)
 
 7      §431:  -220  Requirement to offer inflation protection;
 
 8 group and individual policies.(a)  No insurer may offer a long-
 
 9 term care insurance policy unless the insurer also offers to the
 
10 policyholder in addition to any other inflation protection the
 
11 option to purchase a policy that provides for benefit levels to
 
12 increase with benefit maximums or reasonable durations which are
 
13 meaningful to account for reasonably anticipated increases in the
 
14 costs of long-term care services covered by the policy.  Insurers
 
15 shall offer to each policyholder, at the time of purchase, the
 
16 option to purchase a policy with an inflation protection feature
 
17 no less favorable than one of the following:
 
18      (1)  Increases benefit levels annually in a manner so that
 
19           the increases are compounded annually at a rate not
 
20           less that five per cent;
 
21      (2)  Guarantees the insured individual the right to
 
22           periodically increase benefit levels without providing
 
23           evidence of insurability or health status so long as
 

 
Page 42                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           the option for the previous period has not been
 
 2           declined.  The amount of the additional benefit shall
 
 3           be no less than the difference between the existing
 
 4           policy benefit and that benefit compounded annually at
 
 5           a rate of at least five per cent for the period
 
 6           beginning with the purchase of the existing benefit and
 
 7           extending until the year in which the offer is made; or
 
 8      (3)  Covers a specified percentage of actual or reasonable
 
 9           charges and does not include a maximum specified
 
10           indemnity amount or limit.
 
11      (b)  Where the policy is issued to a group, the required
 
12 offer in subsection (a) shall be made to the group policyholder;
 
13 except if the policy is issued to a group defined in paragraph
 
14 (4) under the definition of "group long-term care insurance" in
 
15 section 431:  -104 other than to a continuing care retirement
 
16 community, the offering shall be made to each certificate holder. 
 
17      (c)  The offer in subsection (a)(2) shall not be required of
 
18 life insurance policies or riders containing accelerated long-
 
19 term care benefits.  
 
20      (d)  Insurers shall include the following information in or
 
21 with the outline of coverage:
 
22      (1)  A graphic comparison of the benefit levels of a policy
 
23           that increases benefits over the policy period with a
 

 
Page 43                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           policy that does not increase benefits.  The graphic
 
 2           comparison shall show benefit levels over at least a
 
 3           twenty year period.
 
 4      (2)  Any expected premium increases or additional premiums
 
 5           to pay for automatic or optional benefit increases.
 
 6      (e)  Inflation protection benefit increases under a policy
 
 7 which contains these benefits shall continue without regard to an
 
 8 insured's age, claim status or claim history, or the length of
 
 9 time the person has been insured under the policy
 
10      (f)  An offer of inflation protection that provides for
 
11 automatic benefit increases shall include an offer of a premium
 
12 which the insurer expects to remain constant.  The offer shall
 
13 disclose in a conspicuous manner that the premium may change in
 
14 the future unless the premium is guaranteed to remain constant.
 
15      (g)  Inflation protection in subsection (a)(2) shall be
 
16 included in a long-term care insurance policy unless the insurer
 
17 obtains a rejection of inflation protection signed by the
 
18 policyholder as required in subsection (h).
 
19      (h)  The rejection shall be considered a part of the
 
20 application and shall state:
 
21      "I have reviewed the outline of coverage and the graphs that
 
22 compare the benefits and premiums of this policy with and without
 
23 inflation protection.  Specifically, I have reviewed
 

 
Page 44                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 Plans _________________, and I REJECT INFLATION PROTECTION."
 
 2 (1998  NAIC Reg. Sec. 11)
 
 3      §431:  -221  Requirements for application forms and
 
 4 replacement coverage.(a)  Application forms shall include
 
 5 questions designed to elicit information as to whether, as of the
 
 6 date of application, the applicant has another long-term care
 
 7 insurance policy or certificate in force or whether a long-term
 
 8 care policy or certificate is intended to replace any other
 
 9 accident and sickness or long-term care policy or certificate
 
10 presently in force.  A supplementary application or other form to
 
11 be signed by the applicant and agent, except where the coverage
 
12 is sold without an agent, containing the questions may be used.
 
13 With regard to a replacement policy issued to a group defined by
 
14 paragraph (1) under the definition of "group long-term care
 
15 insurance in section 431:  -104, the following questions may be
 
16 modified only to the extent necessary to elicit information about
 
17 health and long-term care insurance policies other than the group
 
18 policy being replaced; provided that the certificate holder has
 
19 been notified of the replacement:
 
20      (1)  Do you have another long-term care insurance policy or
 
21           certificate in force (including a health care service
 
22           contract or health maintenance organization contract)?
 
23      (2)  Did you have another long-term care insurance policy or
 

 
Page 45                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           certificate in force during the last twelve months?
 
 2           (A)  If so, with which company?
 
 3           (B)  If that policy lapsed, when did it lapse?
 
 4      (3)  Are you covered by Medicaid?
 
 5      (4)  Do you intend to replace any of your medical or health
 
 6           insurance coverage with this policy (certificate)?
 
 7      (b)  Agents shall list any other health insurance policies
 
 8 they have sold to the applicant, and the agent shall list
 
 9 policies sold that are still in force and list policies sold in
 
10 the past five years that are no longer in force.
 
11      (c)  Upon determining that a sale will involve replacement,
 
12 an insurer; other than an insurer using direct response
 
13 solicitation methods, or its agent; shall furnish the applicant,
 
14 prior to issuance or delivery of the individual long-term care
 
15 insurance policy, a notice regarding replacement of accident and
 
16 sickness or long-term care coverage.  One copy of the notice
 
17 shall be retained by the applicant and an additional copy signed
 
18 by the applicant shall be retained by the insurer.  The required
 
19 notice shall be provided in the same manner as shown in Section
 
20 12(C) of the July 1998 NAIC Long-Term Care Insurance Model
 
21 Regulation.
 
22      (d)  Insurers using direct response solicitation methods
 
23 shall deliver a notice regarding replacement of accident and
 

 
Page 46                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 sickness or long-term care coverage to the applicant upon
 
 2 issuance of the policy.  The required notice shall be provided in
 
 3 the same manner as shown in Section 12(D) of the July 1998 NAIC
 
 4 Long-Term Care Insurance Model Regulation.
 
 5      (e)  Where replacement is intended, the replacing insurer
 
 6 shall notify, in writing, the existing insurer of the proposed
 
 7 replacement.  The existing policy shall be identified by the
 
 8 insurer, name of the insured, and policy number or address
 
 9 including zip code.  Notice shall be made within five working
 
10 days from the date the application is received by the insurer or
 
11 the date the policy is issued, whichever is sooner.
 
12      (f)  Life insurance policies that accelerate benefits for
 
13 long-term care shall comply with this section if the policy being
 
14 replaced is a long-term care insurance policy.  If the policy
 
15 being replaced is a life insurance policy, the insurer shall
 
16 comply with the replacement requirements for life insurance
 
17 policies.  If a life insurance policy that accelerates benefits
 
18 for long-term care is replaced by another policy, the replacing
 
19 insurer shall comply with both the long-term care and the life
 
20 insurance replacement requirements.  (1998 NAIC Reg. Sec. 12)
 
21      §431:  -222  Reporting requirements.(a)  Every insurer
 
22 shall maintain records for each agent of the agent's amount of
 
23 replacement sales as a per cent of the agent's total annual sales
 

 
Page 47                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 and the amount of lapses of long-term care insurance policies
 
 2 sold by the agent as a per cent of the agent's total annual
 
 3 sales.
 
 4      (b)  Every insurer shall report annually by June 30 the ten
 
 5 per cent of its agents with the greatest percentages of lapses
 
 6 and replacements as measured in subsection (a).
 
 7      (c)  Reported replacement and lapse rates do not alone
 
 8 constitute a violation of insurance laws or necessarily imply
 
 9 wrongdoing.  The reports are for the purpose of reviewing more
 
10 closely agent activities regarding the sale of long-term care
 
11 insurance.
 
12      (d)  Every insurer shall report annually by June 30 the
 
13 number of lapsed policies as a per cent of its total annual sales
 
14 and as a per cent of its total number of policies in force as of
 
15 the end of the preceding calendar year.
 
16      (e)  Every insurer shall report annually by June 30 the
 
17 number of replacement policies sold as a per cent of its total
 
18 annual sales and as a per cent of its total number of policies in
 
19 force as of the end of the preceding calendar year;
 
20      (f)  For purposes of this section, "policy" means only
 
21 long-term care insurance and "report" means on a statewide basis.
 
22 (1998 NAIC Reg. Sec. 13)
 
23      §431:  -223  Discretionary powers of the commissioner.  The
 

 
Page 48                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 commissioner may upon written request and after an administrative
 
 2 hearing, issue an order to modify or suspend a specific provision
 
 3 or provisions of this part with respect to a specific long-term
 
 4 care insurance policy or certificate upon a written finding that:
 
 5      (1)  The modification or suspension would be in the best
 
 6           interest of the insureds;
 
 7      (2)  The purposes to be achieved could not be effectively or
 
 8           efficiently achieved without the modification or
 
 9           suspension; and 
 
10      (3)  One of the following conditions have been met:
 
11           (A)  The modification or suspension is necessary to the
 
12                development of an innovative and reasonable
 
13                approach for insuring long-term care;
 
14           (B)  The policy or certificate is to be issued to
 
15                residents of a life care or continuing care
 
16                retirement community or some other residential
 
17                community for the elderly and the modification or
 
18                suspension is reasonably related to the special
 
19                needs or nature of the community; or
 
20           (C)  The modification or suspension is necessary to
 
21                permit long-term care insurance to be sold as part
 
22                of, or in conjunction with, another insurance
 
23                product.  (1998 NAIC Reg. Sec. 15)
 

 
Page 49                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      §431:  -224  Reserve standards; life insurance policies or
 
 2 riders.(a)  When long-term care benefits are provided through
 
 3 the acceleration of benefits under group or individual life
 
 4 policies or riders to these policies, the policy reserves for the
 
 5 benefits shall be determined in accordance with section
 
 6 431:5-307.  Claim reserves shall also be established in the case
 
 7 where the policy or rider is in claim status.
 
 8      (b)  Reserves for policies subject to this section shall be
 
 9 based on the multiple decrement model utilizing all relevant
 
10 decrements except for voluntary termination rates.  Single
 
11 decrement approximations are acceptable if the calculation
 
12 produces essentially similar reserves, if the reserve is clearly
 
13 more conservative, or if the reserve is immaterial.  The
 
14 calculations may take into account the reduction in life
 
15 insurance benefits due to the payment of long-term care benefits.
 
16 However, in no event shall the reserves for the long-term care
 
17 benefit and the life insurance benefit be less than the reserves
 
18 for the life insurance benefit assuming no long-term care
 
19 benefit.
 
20      (c)  In the development and calculation of reserves for
 
21 policies and riders subject to this section, due regard shall be
 
22 given to applicable policy provisions, marketing methods,
 
23 administrative procedures, and all other considerations which
 

 
Page 50                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 have an impact on projected claim costs, including but not
 
 2 limited to the following:
 
 3      (1)  Definition of insured events;
 
 4      (2)  Covered long-term care facilities;
 
 5      (3)  Existence of home convalescence care coverage;
 
 6      (4)  Definition of facilities;
 
 7      (5)  Existence or absence of barriers to eligibility;
 
 8      (6)  Premium waiver provision;
 
 9      (7)  Renewability;
 
10      (8)  Ability to raise premiums;
 
11      (9)  Marketing method;
 
12     (10)  Underwriting procedures;
 
13     (11)  Claims adjustment procedures;
 
14     (12)  Waiting period;
 
15     (13)  Maximum benefit;
 
16     (14)  Availability of eligible facilities;
 
17     (15)  Margins in claim costs;
 
18     (16)  Optional nature of benefit;
 
19     (17)  Delay in eligibility for benefit;
 
20     (18)  Inflation protection provisions; and
 
21     (19)  Guaranteed insurability option.
 
22      (d)  Any applicable valuation morbidity table shall be
 
23 certified as appropriate as a statutory valuation table by a
 

 
Page 51                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 member of the American Academy of Actuaries.  (1998 NAIC Reg.
 
 2 Sec. 16A)
 
 3      §431:  -225  Reserve standards; insurance other than life.
 
 4 When long-term care benefits are provided through insurance other
 
 5 than as in section 431:  -224, reserves shall be determined by a
 
 6 table certified as appropriate as a statutory valuation table by
 
 7 a member of the American Academy of Actuaries and filed with the
 
 8 commissioner.  (1998 NAIC Reg. Sec. 16B)
 
 9      §431:  -226  Loss ratio.(a)  Benefits under long-term care
 
10 insurance policies shall be deemed reasonable in relation to
 
11 premiums; provided that the expected loss ratio is at least sixty
 
12 per cent, calculated in a manner that provides for adequate
 
13 reserving of the long-term care insurance risk.  In evaluating
 
14 the expected loss ratio due consideration shall be given to all
 
15 relevant factors, including:
 
16      (1)  Statistical credibility of incurred claims experience
 
17           and earned premiums;
 
18      (2)  The period for which rates are computed to provide
 
19           coverage;
 
20      (3)  Experienced and projected trends;
 
21      (4)  Concentration of experience within early policy
 
22           duration;
 
23      (5)  Expected claim fluctuation;
 

 
Page 52                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (6)  Experience refunds, adjustments, or dividends;
 
 2      (7)  Renewability features;
 
 3      (8)  All appropriate expense factors;
 
 4      (9)  Interest;
 
 5     (10)  Experimental nature of the coverage;
 
 6     (11)  Policy reserves; 
 
 7     (12)  Mix of business by risk classification, if applicable;
 
 8           and
 
 9     (13)  Product features such as long elimination periods, high
 
10           deductibles, and high maximum limits.
 
11      (b)  For purposes of this section, the commissioner shall
 
12 consult with a qualified long-term care actuary.
 
13      (c)  Subsection (a) shall not apply to life insurance
 
14 policies that accelerate benefits for long-term care.  A life
 
15 insurance policy that funds long-term care benefits entirely by
 
16 accelerating the death benefit is considered to provide
 
17 reasonable benefits in relation to premiums paid, if the policy
 
18 complies with all of the following provisions:
 
19      (1)  The interest credited internally to determine cash
 
20           value accumulations, including long-term care, if any,
 
21           are guaranteed not to be less than the minimum
 
22           guaranteed interest rate for cash value accumulations
 
23           without long-term care set forth in the policy;
 

 
Page 53                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (2)  The portion of the policy that provides life insurance
 
 2           benefits meets the nonforfeiture requirements for life
 
 3           insurance;
 
 4      (3)  The policy meets the disclosure requirements of section
 
 5           431:  -114 as applicable; 
 
 6      (4)  Any policy illustration that meets the applicable
 
 7           requirements for policy illustration;
 
 8      (5)  An actuarial memorandum is filed with the insurance
 
 9           division that includes:
 
10           (A)  A description of the basis on which the long-term
 
11                care rates were determined;
 
12           (B)  A description of the basis for the reserves;
 
13           (C)  A summary of the type of policy, benefits,
 
14                renewability, general marketing method, and limits
 
15                on ages of issuance;
 
16           (D)  A description and a table of each actuarial
 
17                assumption used.  For expenses, an insurer shall
 
18                include per cent of premium dollars per policy and
 
19                dollars per unit of benefits, if any;
 
20           (E)  A description and a table of the anticipated
 
21                policy reserves and additional reserves to be held
 
22                in each future year for active lives;
 
23           (F)  The estimated average annual premium per policy
 

 
Page 54                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1                and the average issue age;
 
 2           (G)  A statement as to whether underwriting is
 
 3                performed at the time of application.  The
 
 4                statement shall indicate whether underwriting is
 
 5                used, and if used, the statement shall include a
 
 6                description of the type or types of underwriting
 
 7                used such as medical underwriting or functional
 
 8                assessment underwriting.  Concerning a group
 
 9                policy, the statement shall indicate whether the
 
10                enrollee or any dependent will be underwritten and
 
11                when underwriting occurs; and
 
12           (H)  A description of the effect of the long-term care
 
13                policy provision on the required premiums,
 
14                nonforfeiture values and reserves on the
 
15                underlying life insurance policy, both for active
 
16                lives and those in long-term care claim status.
 
17                (1998 NAIC Reg. Sec. 17)
 
18      §431:  -227  Filing requirements.  Prior to an insurer or
 
19 similar organization offering group long-term care insurance to a
 
20 resident of this State pursuant to section 431:   -105, it shall
 
21 file with the commissioner evidence that the group policy or
 
22 certificate thereunder has been approved by a state having
 
23 statutory or regulatory long-term care insurance requirements
 

 
Page 55                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 substantially similar to those adopted in this State.  (1998 NAIC
 
 2 Reg. Sec. 18) 
 
 3      §431:  -228  Filing requirements.  (a)  Every insurer,
 
 4 health care service plan, or other entity providing long-term
 
 5 care insurance or benefits in this State shall provide a copy of
 
 6 any long-term care insurance advertisement intended for use in
 
 7 this State whether through written, radio, or television medium
 
 8 to the commissioner for review or approval by the commissioner to
 
 9 the extent it may be reviewed under state law.  In addition, all
 
10 advertisements shall be retained by the insurer, health care
 
11 service plan, or other entity for at least three years from the
 
12 date the advertisement was first used.
 
13      (c)  The commissioner may exempt from the requirements of
 
14 this section any advertising form or material when, in the
 
15 commissioner's opinion, this requirement may not reasonably be
 
16 applied.  (1998 NAIC Reg. Sec. 19) 
 
17      §431:  -229  Standards for marketing.(a)  Every insurer,
 
18 health care service plan, or other entity marketing long-term
 
19 care insurance coverage in this State, directly or through
 
20 producers, shall:
 
21      (1)  Establish marketing procedures to assure that any
 
22           comparison of policies by its agents or other producers
 
23           will be fair and accurate;
 

 
Page 56                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (2)  Establish marketing procedures to assure excessive
 
 2           insurance is not sold or issued;
 
 3      (3)  Display prominently by type, stamp, or other
 
 4           appropriate means, on the first page of the outline of
 
 5           coverage and policy the following:
 
 6           "Notice to buyer: This policy may not cover all of the
 
 7           costs associated with long-term care incurred by the
 
 8           buyer during the period of coverage.  The buyer is
 
 9           advised to review carefully all policy limitations.";
 
10      (4)  Inquire and otherwise make every reasonable effort to
 
11           identify whether a prospective applicant or enrollee
 
12           for long-term care insurance currently has long-term
 
13           care insurance and the types and amounts of any such
 
14           insurance;
 
15      (5)  Every insurer or entity marketing long-term care
 
16           insurance shall establish auditable procedures for
 
17           verifying compliance with subsection (a);
 
18      (6)  If the state in which the policy or certificate is to
 
19           be delivered or issued for delivery has a senior
 
20           insurance counseling program approved by the
 
21           commissioner, the insurer, at solicitation, shall
 
22           provide written notice to the prospective policyholder
 
23           or certificate holder of a state senior insurance
 

 
Page 57                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           counseling program including the name, address, and
 
 2           telephone number of the program; and
 
 3      (7)  For long-term care health insurance policies and
 
 4           certificates, use the terms "noncancellable" or "level
 
 5           premium" only when the policy or certificate conforms
 
 6           to section 431:  -202.
 
 7      (b)  In addition to the acts or practices prohibited in
 
 8 article 13 of this chapter, all of the following acts and
 
 9 practices are prohibited:
 
10      (1)  Twisting.  Knowingly making any misleading
 
11           representation or incomplete or fraudulent comparison
 
12           of any insurance policies or insurers for the purpose
 
13           of inducing, or tending to induce, any person to lapse,
 
14           forfeit, surrender, terminate, retain, pledge, assign,
 
15           borrow on, or convert any insurance policy or to take
 
16           out a policy of insurance with another insurer.
 
17      (2)  High pressure tactics.  Employing any method of
 
18           marketing having the effect of or tending to induce the
 
19           purchase of insurance through force, fright, threat,
 
20           whether explicit or implied, or undue pressure to
 
21           purchase or recommend purchase of insurance.
 
22      (3)  Cold lead advertising.  Making use directly or
 
23           indirectly of any method of marketing which fails to
 

 
Page 58                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           disclose in a conspicuous manner that a purpose of the
 
 2           method of marketing is solicitation of insurance and
 
 3           that contact will be made by an insurance agent or
 
 4           insurance company.  (1998 NAIC Reg. Sec. 20A & 20B)
 
 5      §431:  -230  Standards of marketing-certain group policies.
 
 6 (a)  With respect to the obligations set forth in this section,
 
 7 the primary responsibility of an association as defined in
 
 8 paragraph (2) of the definition of "group long-term care
 
 9 insurance" under section 431:  -104, when endorsing or selling
 
10 long-term care insurance, shall be to educate its members
 
11 concerning long-term care issues in general so that its members
 
12 can make informed decisions.  Associations shall provide
 
13 objective information regarding long-term care insurance policies
 
14 or certificates endorsed or sold through the association to
 
15 ensure that members of the association receive a balanced and
 
16 complete explanation of the features in the policies or
 
17 certificates that are being endorsed or sold.
 
18      (b)  The insurer shall file the following information with
 
19 the commissioner:
 
20      (1)  The policy and certificate;
 
21      (2)  A corresponding outline of coverage; and
 
22      (3)  All advertisements requested by the commissioner.
 
23      (c)  The association shall disclose in any long-term care
 

 
Page 59                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 insurance solicitation:
 
 2      (1)  The specific nature and amount of the compensation
 
 3           arrangements (including all fees, commissions,
 
 4           administrative fees, and other forms of financial
 
 5           support) that the association receives from endorsement
 
 6           or sale of the policy or certificate to its members;
 
 7           and
 
 8      (2)  A brief description of the process under which the
 
 9           policies and the insurer issuing the policies were
 
10           selected.
 
11      (d)  If the association and the insurer have interlocking
 
12 directorates or trustee arrangements, the association shall
 
13 disclose that fact to its members.
 
14      (e)  The board of directors of an association endorsing or
 
15 selling long-term care insurance policies or certificates shall
 
16 review and approve the insurance policies as well as the
 
17 compensation arrangements made with the insurer.
 
18      (f)  The association shall also:
 
19      (1)  At the time of the association's decision to endorse,
 
20           engage the services of a person with expertise in
 
21           long-term care insurance not affiliated with the
 
22           insurer to conduct an examination of the policies,
 
23           including benefits, features, and rates, and update the
 

 
Page 60                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           examination thereafter in the event of material change;
 
 2      (2)  Actively monitor the marketing efforts of the insurer
 
 3           and its agents; and
 
 4      (3)  Review and approve all marketing materials or other
 
 5           insurance communications used to promote sales or sent
 
 6           to members regarding the policies or certificates.
 
 7      (g)  No group long-term care insurance policy or certificate
 
 8 may be issued to an association unless the insurer files with the
 
 9 commissioner the information required in this section.
 
10      (h)  The insurer shall not issue a long-term care policy or
 
11 certificate to an association or continue to market such a policy
 
12 or certificate unless the insurer certifies annually that the
 
13 association has complied with the requirements set forth in this
 
14 section.
 
15      (i)  Failure to comply with the filing and certification
 
16 requirements of this section constitutes an unfair trade practice
 
17 in violation of article 13 of this chapter.  (1998 NAIC Reg. Sec.
 
18 20C)
 
19      §431:  -231  Suitability.(a)  This section shall not apply
 
20 to life insurance policies that accelerate benefits for long-term
 
21 care.
 
22      (b)  Every insurer, health care service plan, or other
 
23 entity marketing long-term care insurance (the "issuer") shall:
 

 
Page 61                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (1)  Develop and use suitability standards to determine
 
 2           whether the purchase or replacement of long-term care
 
 3           insurance is appropriate for the needs of the
 
 4           applicant;
 
 5      (2)  Train its agents in the use of its suitability
 
 6           standards; and
 
 7      (3)  Maintain a copy of its suitability standards and make
 
 8           them available for inspection upon request by the
 
 9           commissioner.
 
10      (c)  To determine whether the applicant meets the standards
 
11 developed by the issuer, the agent and issuer shall develop
 
12 procedures that take the following into consideration:
 
13      (1)  The ability to pay for the proposed coverage and other
 
14           pertinent financial information related to the purchase
 
15           of the coverage;
 
16      (2)  The applicant's goals or needs with respect to
 
17           long-term care and the advantages and disadvantages of
 
18           insurance to meet these goals or needs; and
 
19      (3)  The values, benefits, and costs of the applicant's
 
20           existing insurance, if any, when compared to the
 
21           values, benefits, and costs of the recommended purchase
 
22           or replacement.
 
23 The issuer, and where an agent is involved, the agent shall make
 

 
Page 62                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 reasonable efforts to obtain the information set out above.  The
 
 2 efforts shall include presentation to the applicant, at or prior
 
 3 to application, the "Long-Term Care Insurance Personal
 
 4 Worksheet."  The personal worksheet used by the issuer shall
 
 5 contain, at a minimum, information in the format contained in
 
 6 Appendix B of the July 1998 NAIC Long-Term Care Insurance Model
 
 7 Regulations in not less than twelve point type.  The issuer may
 
 8 request the applicant to provide additional information to comply
 
 9 with its suitability standards.  A copy of the issuer's personal
 
10 worksheet shall be filed with the commissioner.
 
11      (d)  A completed personal worksheet shall be returned to the
 
12 issuer prior to the issuer's consideration of the applicant for
 
13 coverage, except the personal worksheet need not be returned for
 
14 sales of employer group long-term care insurance to employees and
 
15 their spouses.
 
16      (e)  The sale or dissemination outside the company or agency
 
17 by the issuer or agent of information obtained through the
 
18 personal worksheet in Appendix B of the July 1998 NAIC Long-Term
 
19 Care Insurance Model Regulations is prohibited.
 
20      (f)  The issuer shall use the suitability standards it has
 
21 developed pursuant to this section in determining whether issuing
 
22 long-term care insurance coverage to a particular applicant is
 
23 appropriate.  The agents shall use the suitability standards
 

 
Page 63                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 developed by the issuer in marketing long-term care insurance.   
 
 2      (g)  At the same time as the personal worksheet is provided
 
 3 to the applicant, the disclosure form entitled "Things You Should
 
 4 Know Before You Buy Long-Term Care Insurance" shall be provided.
 
 5 The form shall be in the format contained in Appendix C to the
 
 6 July 1998 NAIC Model Long-Term Care Insurance Model Regulation,
 
 7 in not less than twelve point type.
 
 8      (h)  If the issuer determines that the applicant does not
 
 9 meet its financial suitability standards, or if the applicant has
 
10 declined to provide the information, the issuer may reject the
 
11 application.  In the alternative, the issuer shall send the
 
12 applicant a letter similar to the July 1998 NAIC Long-Term Care
 
13 Insurance Model Regulations, Appendix D.  However, if the
 
14 applicant has declined to provide financial information, the
 
15 issuer may use some other method to verify the applicant's
 
16 intent.  Either the applicant's returned letter or a record of
 
17 the alternate method of verification shall be made part of the
 
18 applicant's file.
 
19      (i)  The issuer shall report annually to the commissioner
 
20 the total number of applications received from residents of this
 
21 State, the number of those who declined to provide information on
 
22 a personal worksheet, the number of applicants who did not meet
 
23 the suitability standards, and the number of those who chose to
 

 
Page 64                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 confirm after receiving a suitability letter.  (1998 NAIC Reg.
 
 2 Sec. 21)
 
 3      §431:  -232  Prohibition against preexisting conditions and
 
 4 probationary periods in replacement policies and certificates.
 
 5 If a long-term care insurance policy or certificate replaces
 
 6 another long-term care insurance policy or certificate, the
 
 7 replacing issuer shall waive any time periods applicable to
 
 8 preexisting conditions and probationary periods in the new
 
 9 long-term care policy for similar benefits to the extent that
 
10 similar exclusions have been satisfied under the original policy.
 
11 (1998 NAIC Reg. Sec. 22)
 
12      §431:  -233  Nonforfeiture benefit requirement.(a)  This
 
13 section does not apply to life insurance policies containing
 
14 accelerated long-term care benefits.
 
15      (b)  To comply with the requirement to offer a nonforfeiture
 
16 benefit pursuant to section 431:  -116, the following shall be
 
17 met:
 
18      (1)  A policy or certificate offered with nonforfeiture
 
19           benefits shall have coverage elements, eligibility,
 
20           benefit triggers, and benefit length that are the same
 
21           as coverage to be issued without nonforfeiture
 
22           benefits.  The nonforfeiture benefit included in the
 
23           offer shall be the benefit described in subsection (h);
 

 
Page 65                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           and
 
 2      (2)  The offer shall be in writing if the nonforfeiture
 
 3           benefit is not otherwise described in the outline of
 
 4           coverage or other materials given to the prospective
 
 5           policyholder.
 
 6      (c)  If the offer required to be made under section
 
 7 431:   -116 is rejected, the insurer shall provide the contingent
 
 8 benefit upon lapse described in this section.
 
 9      (d)  After rejection of the offer required under section
 
10 431:  -116, for individual and group policies without
 
11 nonforfeiture benefits issued after June 30, 2000, the insurer
 
12 shall provide a contingent benefit upon lapse. 
 
13      (e)  If a group policyholder elects to make the
 
14 nonforfeiture benefit an option to the certificate holder, a
 
15 certificate shall provide either the nonforfeiture benefit or the
 
16 contingent benefit upon lapse.
 
17      (f)  The contingent benefit on lapse shall be triggered
 
18 every time an insurer increases the premium rates to a level
 
19 which results in a cumulative increase of the annual premium
 
20 equal to or exceeding the percentage of the insured's initial
 
21 annual premium set forth in the table below based on the
 
22 insured's issue age, and the policy or certificate lapses within
 
23 one hundred twenty days of the due date of the premium so
 

 
Page 66                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 increased.  Unless otherwise required, policyholders and
 
 2 certificate holders shall be notified at least thirty days prior
 
 3 to the due date of the premium reflecting the rate increase.
 
 4            Triggers for a Substantial Premium Increase
 
 5                                        Per Cent Increase Over
 
 6      Issue Age                             Initial Premium   
 
 7      29 and under                              200%
 
 8      30-34                                     190%
 
 9      35-39                                     170%
 
10      40-44                                     150%
 
11      45-49                                     130%
 
12      50-54                                     110%
 
13      55-59                                     90%
 
14      60                                        70%
 
15      61                                        66%
 
16      62                                        62%
 
17      63                                        58%
 
18      64                                        54%
 
19      65                                        50%
 
20      66                                        48%
 
21      67                                        46%
 
22      68                                        44%
 
23      69                                        42%
 

 
Page 67                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      70                                        40%
 
 2      71                                        38%
 
 3      72                                        36%
 
 4      73                                        34%
 
 5      74                                        32%
 
 6      75                                        30%
 
 7      76                                        28%
 
 8      77                                        26%
 
 9      78                                        24%
 
10      79                                        22%
 
11      80                                        20%
 
12      81                                        19%
 
13      82                                        18%
 
14      83                                        17%
 
15      84                                        16%
 
16      85                                        15%
 
17      86                                        14%
 
18      87                                        13%
 
19      88                                        12%
 
20      89                                        11%
 
21      90 and over                               10%
 
22      (g)  On or before the effective date of a substantial
 
23 premium increase as defined in subsection (f), the insurer shall:
 

 
Page 68                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (1)  Offer to reduce policy benefits provided by the current
 
 2           coverage without the requirement of additional
 
 3           underwriting so that required premium payments are not
 
 4           increased;
 
 5      (2)  Offer to convert the coverage to a paid-up status with
 
 6           a shortened benefit period in accordance with the terms
 
 7           of subsection (h).  This option may be elected at any
 
 8           time during the one hundred twenty day period
 
 9           referenced in subsection (f); and
 
10      (3)  Notify the policyholder and certificate holder that a
 
11           default or lapse at any time during the one hundred
 
12           twenty day period under subsection (f) shall be deemed
 
13           to be the election offer to convert in paragraph (2).
 
14      (h)  Benefits continued as nonforfeiture benefits, including
 
15 contingent benefits upon lapse, are described in this subsection,
 
16 as follows:
 
17      (1)  For purposes of this subsection, attained age rating is
 
18           defined as a schedule of premiums starting from the
 
19           issue date which increases age at least one per cent
 
20           per year prior to age fifty, and at least three per
 
21           cent per year beyond age fifty;
 
22      (2)  For purposes of this subsection, the nonforfeiture
 
23           benefit shall be of a shortened benefit period
 

 
Page 69                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           providing paid-up long-term care insurance coverage
 
 2           after lapse.  The same benefits (amounts and frequency
 
 3           in effect at the time of lapse but not increased
 
 4           thereafter) shall be payable for a qualifying claim,
 
 5           but the lifetime maximum dollars or days of benefits
 
 6           shall be determined as provided in paragraph (3);
 
 7      (3)  The standard nonforfeiture credit shall be equal to one
 
 8           hundred per cent of the sum of all premiums paid,
 
 9           including the premiums paid prior to any changes in
 
10           benefits.  The insurer may offer additional shortened
 
11           benefit period options, as long as the benefits for
 
12           each duration equal or exceed the standard forfeiture
 
13           credit for that duration.  However, the minimum
 
14           nonforfeiture credit shall not be less than thirty
 
15           times the daily nursing home benefit at the time of
 
16           lapse.  In either event, the calculation of the
 
17           nonforfeiture credit is subject to the limitation of
 
18           subsection (i);
 
19      (4)  The nonforfeiture benefit and contingent benefit upon
 
20           lapse shall begin not later than the end of the third
 
21           year following the policy or certificate issue date.
 
22           Notwithstanding the preceding sentence, except for a
 
23           policy or certificate with a contingent benefit upon
 

 
Page 70                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           lapse or a policy or certificate with attained age
 
 2           rating, the nonforfeiture benefit shall begin the
 
 3           earlier of:
 
 4           (A)  The end of the tenth year following the policy or
 
 5                certificate issue date; or
 
 6           (B)  The end of the second year following the date the
 
 7                policy or certificate is no longer subject to
 
 8                attained age rating; and
 
 9      (5)  Nonforfeiture credits may be used for all care and
 
10           services qualifying for benefits under the terms of the
 
11           policy or certificate, up to the limits specified in
 
12           the policy or certificate.
 
13      (i)  All benefits paid by the insurer while the policy or
 
14 certificate is in premium paying status and in paid up status
 
15 shall not exceed the maximum benefits which would be payable if
 
16 the policy or certificate had remained in premium paying status.
 
17      (j)  There shall be no difference in the minimum
 
18 nonforfeiture benefits as required under this section for group
 
19 and individual policies.
 
20      (k)  The requirements set forth in this section shall become
 
21 effective July 1, 2000, and shall apply as follows:
 
22      (1)  This section shall apply to any long-term care policy
 
23           issued in this State after June 30, 2000; and
 

 
Page 71                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      (2)  For certificates issued after June 30, 2000, under a
 
 2           group long-term care insurance policy as defined in in
 
 3           paragraph (1) under the definition of "group long-term
 
 4           care insurance" in section 431:  -104, which policy was
 
 5           in force on July 1, 2000, this section shall not apply.
 
 6      (l)  Premiums charged for a policy or certificate containing
 
 7 nonforfeiture benefits or contingent benefit on lapse shall be
 
 8 subject to the loss ratio requirements of section 431:  -226
 
 9 treating the policy as a whole.
 
10      (m)  To determine whether contingent nonforfeiture upon
 
11 lapse provisions are triggered under subsection (f), a replacing
 
12 insurer that purchases or assumes a block or blocks of long-term
 
13 care insurance policies from another insurer shall calculate the
 
14 percentage increase based on the initial annual premium paid by
 
15 the insured when the policy was first purchased from the original
 
16 insurer.  (NAIC Act 8 & Reg. Sec. 23)
 
17      §431:  -234  Standards for benefit triggers.(a)  A
 
18 long-term care insurance policy shall condition the payment of
 
19 benefits on a determination of the insured's ability to perform
 
20 activities of daily living and on cognitive impairment.
 
21 Eligibility for the payment of benefits shall not be more
 
22 restrictive than requiring either a deficiency in the ability to
 
23 perform not more than three of the activities of daily living or
 

 
Page 72                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 the presence of cognitive impairment.
 
 2      (b)  Activities of daily living shall include at least the
 
 3 following as defined in section 431:  -201 and the policy:
 
 4 bathing, continence, dressing, eating, toileting, and
 
 5 transferring.  Insurers may use activities of daily living to
 
 6 trigger covered benefits in addition to those contained in the
 
 7 preceding sentence as long as they are defined in the policy.
 
 8      (c)  An insurer may use additional provisions for the
 
 9 determination of when benefits are payable under a policy or
 
10 certificate, however the provisions shall not restrict and are
 
11 not in lieu of the requirements under subsections (a) and (b).
 
12      (d)  For purposes of this section the determination of a
 
13 deficiency shall not be more restrictive than:
 
14      (1)  Requiring the hands-on assistance of another person to
 
15           perform the prescribed activities of daily living; or
 
16      (2)  If the deficiency is due to the presence of a cognitive
 
17           impairment, supervision or verbal cueing by another
 
18           person is needed in order to protect the insured or
 
19           others.  
 
20      (e)  Assessments of activities of daily living and cognitive
 
21 impairment shall be performed by licensed or certified
 
22 professionals, such as physicians, nurses, or social workers.
 
23      (f)  Long-term care insurance policies shall include a clear
 

 
Page 73                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 description of the process for appealing and resolving benefit
 
 2 determinations.
 
 3      (g)  The requirements set forth in this section shall be
 
 4 effective July 1, 2000, and shall apply as follows:
 
 5      (1)  Except as provided in paragraph (2), this section
 
 6           applies to a long-term care policy issued in this State
 
 7           after the June 30, 2000;
 
 8      (2)  For certificates issued after June 30, 2000, under a
 
 9           group long-term care insurance policy as defined in
 
10           paragraph (1) under the definition of "group long-term
 
11           care insurance" in section 431:  -104, which policy was
 
12           in force on July 1, 2000, this section shall not apply.
 
13           (1998 NAIC Reg. Sec. 24)
 
14      §431:  -235  Standards format outline of coverage; group and
 
15 individual policies.(a)  This section implements, interprets,
 
16 and makes specific, the provisions of section 431:  -112 in
 
17 prescribing a standard format and the content of an outline of
 
18 coverage, as follows:
 
19      (1)  The outline of coverage shall be a free-standing
 
20           document, using no smaller than ten-point type;
 
21      (2)  The outline of coverage shall contain no material of an
 
22           advertising nature;
 
23      (3)  Text that is capitalized or underscored in the standard
 

 
Page 74                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           format outline of coverage may be emphasized by other
 
 2           means that provide prominence equivalent to the
 
 3           capitalization or underscoring;
 
 4      (4)  Use of the text and sequence of text of the standard
 
 5           format outline of coverage is mandatory, unless
 
 6           otherwise specifically indicated; and
 
 7      (5)  The format for outline of coverage shall be
 
 8           substantially similar to the Outline of Coverage in
 
 9           section 25 of the July 1998 NAIC Long-Term Care
 
10           Insurance Model Regulation.  (1998 NAIC Reg. Sec. 25)
 
11      §431:  -236  Delivery of shopper's guide; group and
 
12 individual policies.(a)  A long-term care insurance shopper's
 
13 guide in the format developed by the National Association of
 
14 Insurance Commissioners, or a guide developed or approved by the
 
15 commissioner, shall be provided to all prospective applicants of
 
16 a long-term care insurance policy or certificate.
 
17      (b)  In the case of agent solicitations, an agent shall
 
18 deliver the shopper's guide prior to the presentation of an
 
19 application or enrollment form.
 
20      (c)  In the case of direct response solicitations, the
 
21 shopper's guide must be presented in conjunction with application
 
22 or enrollment form.
 
23      (d)  Life insurance policies containing accelerated long-
 

 
Page 75                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 term care benefits are not required to furnish the
 
 2 above-referenced guide, but shall furnish the policy summary
 
 3 required under sections 431:  -106 to 431:  -114.  (1998 NAIC
 
 4 Reg. Sec. 26)
 
 5                   PART III.  FEDERAL CONFORMITY
 
 6      §431:  -301  Group long-term care insurance policies
 
 7 conformance to HIPAA and Internal Revenue Code.(a)  Every group
 
 8 long-term care insurance policy sold after June 30, 2000, may
 
 9 conform to subtitle C of the Health Insurance Portability and
 
10 Accountability Act of 1996, P.L. No. 104-191, as amended, and to
 
11 section 7702B of the Internal Revenue Code of 1986, as amended;
 
12 provided that if it does not conform, then it shall not qualify
 
13 for federal or state income tax benefits.
 
14      (b)  A group long-term care insurance policy may provide
 
15 coverage, at a minimum, for "qualified long-term care services",
 
16 as defined in subtitle C of the Health Insurance Portability and
 
17 Accountability Act of 1996, P.L. No. 104-191, as amended, and in
 
18 section 7702B of the Internal Revenue Code of 1986, as amended.
 
19      (c)  For the purpose of subsection (b) and for the purpose
 
20 of describing examples of services typically found in this State,
 
21 coverage shall be one or more of the following services or any
 
22 combination of services:
 
23      (1)  Home health care services, as defined in section
 

 
Page 76                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           431:  -201;
 
 2      (2)  Adult day care, as defined in section 431:  -201;
 
 3      (3)  Adult residential care home, as defined in section
 
 4           321-15.1;
 
 5      (4)  Extended care adult residential care home, as defined
 
 6           in section 323D-2;
 
 7      (5)  Nursing home, as defined in section 457B-2;
 
 8      (6)  Skilled nursing facilities and intermediate care
 
 9           facilities, as referenced in section 321-11(10);
 
10      (7)  Hospices, as referenced in section 321-11;
 
11      (8)  Assisted living facility, as defined in section 323D-2;
 
12      (9)  Personal care, as defined in section 431:  -201;
 
13     (10)  Respite care, as defined in section 333F-1; and
 
14     (11)  Any other care as provided by rule of the commissioner.
 
15      §431:  -302  Individual long-term care insurance policy
 
16 coverages.(a)  Every individual long-term care insurance policy
 
17 sold after June 30, 2000, shall provide coverage for one or more
 
18 of the types of care enumerated under section 431:  -301(c).
 
19      (b)  An individual long-term care insurance policy sold
 
20 after June 30, 2000, shall not be required to conform to subtitle
 
21 C of the Health Insurance Portability and Accountability Act of
 
22 1996, P.L. No. 104-191, as amended, and to section 7702B of the
 
23 Internal Revenue Code of 1986, as amended; provided that if it
 

 
Page 77                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 does not conform, then it shall not qualify for federal or state
 
 2 income tax benefits.
 
 3      §431:  -303  Conflict with HIPAA.  If a conflict occurs
 
 4 between a provision of this article and the federal Health
 
 5 Insurance Portability and Accountability Act of 1996, P.L.
 
 6 104-191, as amended, the provision shall be deemed amended to
 
 7 comply with that federal Act and any related regulations, to the
 
 8 extent that a particular policy is intended to qualify for
 
 9 federal income tax benefits.
 
10      §431:  -304  Disclosure of qualification for tax benefits.
 
11 (a)  Every policy that is intended to be a qualified long-term
 
12 care insurance contract as provided in the federal Health
 
13 Insurance Portability and Accountability Act of 1996, P.L. 104-
 
14 191, as amended, shall be identified as such by prominently
 
15 displaying and printing on page one of the policy form and the
 
16 outline of coverage and in the application the following words:
 
17 "This contract for long-term care insurance is intended to be a
 
18 federally qualified long-term care insurance contract and may
 
19 qualify you for federal and state tax benefits."
 
20      (b)  Every policy that is not intended to be a qualified
 
21 long-term care insurance contract as provided in the federal
 
22 Health Insurance Portability and Accountability Act of 1996, P.L.
 
23 104-191, as amended, shall be identified as such by prominently
 

 
Page 78                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 displaying and printing on page one of the policy form and the
 
 2 outline of coverage and in the application the following words:
 
 3 "This contract for long-term care insurance is not intended to be
 
 4 a federally qualified long-term care insurance contract and is
 
 5 not intended to qualify you for federal and state tax benefits."
 
 6   PART IV.  UNIVERSAL AVAILABILITY OF LONG-TERM CARE INSURANCE
 
 7      §431:  -401  Publicizing of policies.  For purposes of
 
 8 section 371-   , upon request by an employer, labor organization,
 
 9 retiree organization, or other entity specified under the
 
10 definition of "group long-term care insurance" in section
 
11 431:   -104, an insurer that is subject to this part shall be
 
12 allowed, if it chooses, to publicize a long-term care policy and
 
13 may sell and underwrite that policy.
 
14      §431:  -402  Purchase of policy and payment of premiums on
 
15 an individual's behalf.  An insurer shall allow a person to
 
16 purchase an individual or group long-term care insurance policy
 
17 and pay the premiums for an individual or group long-term care
 
18 insurance policy that covers the person, the person's spouse, or
 
19 reciprocal beneficiary, as well as their parents and
 
20 grandparents, and in-law parents and grandparents.  Nothing in
 
21 this section shall preclude an insurer from underwriting such a
 
22 policy."
 
23      SECTION 3.  Chapter 371, Hawaii Revised Statutes, is amended
 

 
Page 79                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 by adding a new section to be appropriately designated and to
 
 2 read as follows:
 
 3      "§371-    Employers and entities offering long-term care
 
 4 insurance policies.  (a)  No later than July 1, 2000, every
 
 5 employer, labor organization, retiree organization, or other
 
 6 entity specified under the definition of "group long-term care
 
 7 insurance" under section 431:   -104, may apply the guidelines
 
 8 set out in Title 29, Code of Federal Regulations, section
 
 9 2510.3-1(j), as amended, if the employer chooses to offer group
 
10 or group-type long-term care insurance as a benefit to employees
 
11 in compliance with the federal Employee Retirement Income
 
12 Security Act of 1974.
 
13      (b)  Beginning July 1, 2000, every insurer, if it chooses,
 
14 shall be allowed by every employer, labor organization, retiree
 
15 organization, or other entity specified under the definition of
 
16 "group long-term care insurance", if they choose, to publicize
 
17 one or more long-term care insurance policies that are made
 
18 available under section 431:   -401.
 
19      (c)  This section shall not be construed to affect the
 
20 marketing by insurers of individual long-term care insurance
 
21 policies to an employer, labor organization, retiree
 
22 organization, or other entity specified under the definition of
 
23 "group long-term care insurance" under section 431:   -104."
 

 
Page 80                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      SECTION 4.  Section 87-23.5, Hawaii Revised Statutes, is
 
 2 amended by amending subsections (a) and (b) to read as follows:
 
 3      "(a)  The board [of trustees] shall determine the benefits
 
 4 of a long-term care benefits plan for employee-beneficiaries,
 
 5 their spouses or reciprocal beneficiaries, as well as their
 
 6 parents and grandparents, and in-law parents and grandparents,
 
 7 and qualified-beneficiaries.  The plan shall comply with [the
 
 8 provisions of] article [10A, part V,]      , of chapter 431[,
 
 9 upon initial plan implementation only].
 
10      (b)  Notwithstanding any other law to the contrary, [such]
 
11 the benefits shall be available only to employee-beneficiaries,
 
12 their spouses or reciprocal beneficiaries, as well as their
 
13 parents and grandparents, and in-law parents and grandparents,
 
14 and qualified-beneficiaries who enroll between the ages of twenty
 
15 and eighty-five.  Eligible persons must comply with the plan's
 
16 age, enrollment, medical underwriting, and contribution
 
17 requirements."
 
18      SECTION 5.  Section 431:2-201.5, Hawaii Revised Statutes, is
 
19 amended by amending subsection (a) to read as follows:
 
20      "(a)  The provisions of the Health Insurance Portability and
 
21 Accountability Act of 1996, P.L. 104-191, as it relates to group
 
22 and individual health insurance[,] and to long-term care
 
23 insurance to the extent provided in article    of chapter 431,
 

 
Page 81                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 shall apply to title 24, except:
 
 2      (1)  Where state law provides greater health benefits or
 
 3           coverage than the Health Insurance Portability and
 
 4           Accountability Act of 1996, P.L. 104-191 then the state
 
 5           law shall be applicable;
 
 6      (2)  This section shall not be applicable or affect life
 
 7           insurance, endowment, or annuity contracts, or any
 
 8           supplemental contract thereto, described in
 
 9           section 431:10A-101(4);
 
10      (3)  The following definitions shall be used when applying
 
11           the Health Insurance Portability and Accountability Act
 
12           of 1996, P.L. 104-191:
 
13           (A)  "Employee" means an employee who works on a full-
 
14                time basis with a normal workweek of twenty hours
 
15                or more;
 
16           (B)  "Group health issuer" means all persons offering
 
17                benefits under group health plans, but shall not
 
18                include those persons offering benefits exempted
 
19                from title I of the Health Insurance Portability
 
20                and Accountability Act of 1996, P.L. 104-191 under
 
21                section 706(c) of the Employee Retirement Income
 
22                Security Act of 1974 and sections 2747 and 2791(c)
 
23                of the Public Health Service Act; and
 

 
Page 82                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1           (C)  "Small employer" means an employer who employs
 
 2                between one and no more than fifty employees;
 
 3      (4)  All group health issuers shall offer group health plans
 
 4           to small employers whose employees live, work, or
 
 5           reside in the group health issuer's service areas;
 
 6           provided that the commissioner may exempt a group
 
 7           health issuer if the commissioner determines that the
 
 8           group health issuer does not have the capacity to
 
 9           deliver services adequately to enrollees of additional
 
10           groups given its obligation to existing employer
 
11           groups; and
 
12      (5)  A group health issuer shall be prohibited from imposing
 
13           any preexisting condition exclusion."
 
14      SECTION 6.  Section 432:1-102, Hawaii Revised Statutes, is
 
15 amended by amending subsection (a) to read as follows:
 
16      "(a)  Part III of article 10A, and article      of chapter
 
17 431 shall apply to nonprofit medical indemnity or hospital
 
18 service associations.  Such associations shall be exempt from the
 
19 provisions of part I of article 10A; provided that such exemption
 
20 is in compliance with applicable federal statutes and
 
21 regulations."
 
22                             PART III
 
23                JOINT LEGISLATIVE COMMITTEE SUNSET
 

 
Page 83                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1      SECTION 7.  Act 339, Session Laws of Hawaii 1997, is amended
 
 2 by amending section 4 to read as follows:
 
 3      "SECTION 4.  The joint legislative committee shall submit a
 
 4 report of its findings and recommendations to the legislature by
 
 5 December 1, 1998.  The joint legislative committee shall cease to
 
 6 exist on June 30, [1999.] 2000.
 
 7                              PART IV
 
 8      SECTION 8.  Chapter 431:10A, Part V, Hawaii Revised
 
 9 Statutes, is repealed.
 
10                              PART V
 
11                          ACTUARIAL STUDY
 
12      SECTION 9.  The joint legislative committee on long-term
 
13 care shall contract for a study on the feasibility and
 
14 advisability of establishing a state-sponsored universal program
 
15 of long-term care that offers comprehensive, protective coverage
 
16 to the largest numbers of people through either a mandatory
 
17 tax-based or voluntary premium funding approach.  The study shall
 
18 include, but not be limited to, alternative models of:
 
19      (1)  Front-end universal program in which coverage would
 
20           begin either with:
 
21           (A)  The first two years of nursing home care or
 
22                comparable type care; or
 
23           (B)  One and a half years or other length of time, of
 

 
Page 84                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1                community or home care covered by the program,
 
 2           with a reliance upon private insurance for the
 
 3           remaining years; 
 
 4      (2)  Back-end universal program in which coverage would
 
 5           begin on the 366th day of disability and include
 
 6           nursing home care or comparable care, or community or
 
 7           home care, or any combination of these, with the first
 
 8           year to be covered out of pocket or by privately
 
 9           purchased long-term care insurance; or
 
10      (3)  Comprehensive universal program to provide lifetime
 
11           full coverage, regardless of private insurance
 
12           coverage.
 
13      The study shall further include an analysis of the
 
14 provisions of House Bill No. 31, H.D. 1 and H.D. 2, Regular
 
15 Session of 1993, that proposed the "Hawaii Family Hope Program
 
16 Act", and make recommendations on legislation for introduction in
 
17 the 2000 regular session, including figures for the amount of a
 
18 tax to be imposed and a premium to be collected.
 
19      For purposes of this study, the joint legislative committee
 
20 on long-term care may contract with one or more of the same
 
21 consultants and advisers, excluding legal consultants, who
 
22 provided services to the the Executive Office on Aging for its
 
23 reports, "Financing Long Term Care, A Report to the Hawaii State
 

 
Page 85                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 Legislature", dated January, 1991, and "The Long Term Care
 
 2 Advisory Board, Report to the Hawaii State Legislature", dated
 
 3 February, 1992; provided that procurement of services from the
 
 4 same consultants and advisers shall be exempt from any of the
 
 5 provisions of the the Hawaii Public Procurement Code, as provided
 
 6 by section 103D-102(b)(6), Hawaii Revised Statutes, on the basis
 
 7 that this study is an update of those reports to design a state-
 
 8 sponsored universal long-term care model that accounts for
 
 9 current statistics and the condition of the State's economy.
 
10 Inasmuch as the groundwork for this follow-up study has been laid
 
11 in those previous reports by the same consultants and advisers,
 
12 the legislature finds that contracting with new consultants and
 
13 advisers would triple the cost of the study and would be
 
14 unnecessary duplication of work.  The legislature further finds
 
15 that the same consultants and advisers are qualified to conduct
 
16 this follow-up study.
 
17      SECTION 10.  The consultants hired under section 11 of this
 
18 Act shall submit a report of findings and recommendations to the
 
19 governor and the legislature not later than November 15, 1999.
 
20 Based on that report, the joint legislative committee on
 
21 long-term care shall draft legislation, with the advice of the
 
22 consultants, for introduction in the regular session of 2000;
 
23 provided that the services of the consultants for advising in
 

 
Page 86                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 drafting the legislation shall be considered as a part of their
 
 2 services under section 11.
 
 3      SECTION 11.  There is appropriated out of the general
 
 4 revenues of the State of Hawaii, the sum of $100,000, or so much
 
 5 thereof as may be necessary for fiscal year 1999-2000, for the
 
 6 joint legislative committee on long-term care to hire consultants
 
 7 to conduct a study on the feasibility and advisability of
 
 8 establishing a state-sponsored universal program of long-term
 
 9 care that offers comprehensive, protective coverage.
 
10      SECTION 12.  The sum appropriated by section 11 of this Act
 
11 shall be expended by the joint legislative committee on long-term
 
12 care. 
 
13      SECTION 13.  There is appropriated out of the general
 
14 revenues of the State of Hawaii the following sums, or so much
 
15 thereof as may be necessary, for fiscal year 1999-2000 for
 
16 expenses of the joint legislative committee on long-term care to
 
17 conduct one public briefing each on Oahu, Kauai, and Maui, and
 
18 two public briefings on Hawaii, on the findings and
 
19 recommendations of the actuarial study undertaken pursuant to
 
20 section 11 of this Act.
 
21      House of Representatives          $5,000
 
22      Senate                            $5,000SECTION 14.  The
 
23 sums appropriated by section 13 shall be expended by the house of
 

 
Page 87                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 3
                                                        C.D. 1


 1 representatives and the senate respectively.
 
 2                              PART VI
 
 3      SECTION 15.  In codifying this Act, the revisor of statutes
 
 4 shall insert the number of this Act in section 7 of this Act.
 
 5 The revisor of statutes also shall place a derivation table at
 
 6 the front of the new article added to chapter 431, Hawaii Revised
 
 7 Statutes, by section 2 of this Act, showing the Hawaii Revised
 
 8 Statutes section number and the National Association of Insurance
 
 9 Commissioner (NAIC) Model Act section number or Regulation (Reg)
 
10 section number.  These references in the new article shall be
 
11 deleted from the text of the Act when codified.
 
12      SECTION 16.  If any provision of this Act, or the
 
13 application thereof to any person or circumstance is held
 
14 invalid, the invalidity does not affect other provisions or
 
15 applications of the Act which can be given effect without the
 
16 invalid provision or application, and to this end the provisions
 
17 of this Act are severable.
 
18      SECTION 17.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 18.  This Act shall take effect on July 1, 2000;
 
21 provided that sections 7, and 9 to 18 shall take effect on
 
22 July 1, 1999.