REPORT TITLE:
Long-Term Care Insurance


DESCRIPTION:
Enacts Long-Term Care Insurance Model Act and model regulations;
appropriates funds for a long-term care insurance actuary;
appropriates funds for a long-term care volunteer ombudsman
program; and appropriates funds for a long-term care managed care
waiver.  (SD3)

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


                   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 burden.  The legislature believes that the ideal setting to
 
 7 provide long-term care insurance is through the employment
 
 8 workplace and that the State should encourage the offering of
 
 9 long-term care insurance in order to provide a modicum of
 
10 financial security.
 
11      The purpose of this part and parts II, III, and IV of this
 
12 Act are to increase the number of long-term care insurance
 
13 policies in effect in Hawaii and to conform Hawaii's long-term
 
14 care insurance statutes to the Model Long Term Care Act of 1998.
 
15      This part and parts II, III, and IV of this Act also enact
 
16 the Long-Term Care Insurance Model Act of 1998, of the National
 
17 Association of Insurance Commissioners.
 
18                              PART II
 

 
Page 2                                                     131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
 2 a new part to chapter 431:10A, to be designated as part V, and to
 
 3 read as follows:
 
 4                "PART V.  LONG-TERM CARE INSURANCE
 
 5      SUBPART A.  MODEL LONG-TERM CARE INSURANCE ACT OF 1998
 
 6      §431:10A-501  Definitions.  As used in this part, unless the
 
 7 context requires otherwise:
 
 8      "Applicant" means:
 
 9      (1)  In the case of an individual long-term care insurance
 
10           policy, the person who seeks to contract for benefits;
 
11           and
 
12      (2)  In the case of a group long-term care insurance policy,
 
13           the proposed certificate holder.
 
14      "Certificate" means any certificate issued under a group
 
15 long-term care insurance policy, which policy has been delivered
 
16 or issued for delivery in this State.
 
17      "Commissioner" means the insurance commissioner.
 
18      "Group long-term care insurance" means a long-term care
 
19 insurance policy delivered or issued for delivery in this State
 
20 and issued to:
 
21      (1)  One or more employers or labor organizations, or a
 
22           trust or the trustees of a fund established by one or
 

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

 
 
 
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 1           one year; and has a constitution and bylaws which
 
 2           provide that:
 
 3           (A)  The association holds regular meetings at least
 
 4                annually to further purposes of the members;
 
 5           (B)  Except for credit unions, the association collects
 
 6                dues or solicits contributions from members; and
 
 7           (C)  The members have voting privileges and
 
 8                representation on the governing board and
 
 9                committees.
 
10           Thirty days after the filing the association will be
 
11           deemed to satisfy the organizational requirements
 
12           unless the commissioner makes a finding that the
 
13           association does not satisfy those organizational
 
14           requirements;
 
15      (4)  An organization of retirees that is organized and
 
16           maintained for the purpose of obtaining benefits for
 
17           its members;
 
18      (5)  A group other than as described in paragraphs (1), (2),
 
19           and (3), subject to a finding by the commissioner that:
 
20           (A)  The issuance of the group policy is not contrary
 
21                to the best interest of the public;
 
22           (B)  The issuance of the group policy would result in
 

 
 
 
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 1                economies of acquisition or administration; and
 
 2           (C)  The benefits are reasonable in relation to the
 
 3                premiums charged.
 
 4      "Long-term care insurance" means any insurance policy or
 
 5 rider advertised, marketed, offered, or designed to provide
 
 6 coverage for not less than twelve consecutive months for each
 
 7 covered person on an expense incurred, indemnity, prepaid, or
 
 8 other basis, for one or more necessary or medically necessary
 
 9 diagnostic, preventive, therapeutic, rehabilitative, maintenance,
 
10 or personal care services, provided in a setting other than an
 
11 acute care unit of a hospital.  The term includes group and
 
12 individual annuities and life insurance policies or riders that
 
13 provide directly or that supplement long-term care insurance.
 
14 The term also includes a policy or rider that provides for
 
15 payment of benefits based upon cognitive impairment or loss of
 
16 functional capacity.  Long-term care insurance may be issued by
 
17 insurers, fraternal benefit societies, nonprofit health,
 
18 hospital, and medical service corporations, prepaid health plans,
 
19 health maintenance organizations, or any similar organization to
 
20 the extent that they are authorized under this part to issue
 
21 long-term care insurance.  Long-term care insurance shall not
 
22 include any insurance policy offered primarily to provide basic
 

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 medicare supplement coverage, basic hospital expense coverage,
 
 2 basic medical-surgical expense coverage, hospital confinement
 
 3 indemnity coverage, major medical expense coverage, disability
 
 4 income or related asset-protection coverage, accident only
 
 5 coverage, specified disease or specified accident coverage, or
 
 6 limited benefit health coverage.  With regard to life insurance,
 
 7 the term does not include life insurance policies that accelerate
 
 8 the death benefit specifically for one or more of the qualifying
 
 9 events of terminal illness, medical conditions requiring
 
10 extraordinary medical intervention, or permanent institutional
 
11 confinement, and which provide the option of a lump-sum payment
 
12 for those benefits and in which neither the benefits nor the
 
13 eligibility for the benefits is conditioned upon the receipt of
 
14 long-term care.  Notwithstanding any other provision in this
 
15 part, any product advertised, marketed, or offered as long-term
 
16 care insurance, including nursing home insurance, shall be
 
17 subject to this part.
 
18      "Policy" means any policy, contract, subscriber agreement,
 
19 rider, or endorsement delivered or issued for delivery in this
 
20 State by an insurer, fraternal benefit society, nonprofit health,
 
21 hospital, or medical service corporation, prepaid health plan,
 
22 health maintenance organization, or any similar organization.
 

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      §431:10A-502  Prohibitions.(a)  No insurance policy may be
 
 2 advertised, marketed, or offered as long-term care or nursing
 
 3 home insurance unless it complies with this part.
 
 4      (b)  No group long-term care insurance may be offered to a
 
 5 resident of this State under a group policy issued in another
 
 6 state to a group described in paragraph (4) of the definition of
 
 7 "group long-term care insurance" unless this State, or another
 
 8 state having statutory and regulatory long-term care insurance
 
 9 requirements substantially similar to those adopted in this
 
10 State, has made a determination that the requirements have been
 
11 met. 
 
12      §431:10A-503  Disclosure and performance standards; rules.
 
13 The commissioner may adopt rules under chapter 91 that include
 
14 standards for full and fair disclosure setting forth the manner,
 
15 content, and required disclosures for the sale of long-term care
 
16 insurance policies, terms of renewability, initial and subsequent
 
17 conditions of eligibility, nonduplication of coverage provisions,
 
18 coverage of dependents, preexisting conditions, termination of
 
19 insurance, continuation or conversion, probationary periods,
 
20 limitations, exceptions, reductions, elimination periods,
 
21 requirements for replacement, recurrent conditions, and
 
22 definitions of terms.
 

 
 
 
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 1      §431:10A-504  Policy standards.(a)  No long-term care
 
 2 insurance policy may:
 
 3      (1)  Be canceled, nonrenewed, or otherwise terminated on the
 
 4           grounds of the age or the deterioration of the mental
 
 5           or physical health of the insured individual or
 
 6           certificate holder;
 
 7      (2)  Contain a provision establishing a new waiting period
 
 8           if existing coverage is converted to or replaced by a
 
 9           new or other form within the same company, except with
 
10           respect to an increase in benefits voluntarily selected
 
11           by the insured individual or group policyholder; or
 
12      (3)  Provide coverage for skilled nursing care only or
 
13           provide significantly more coverage for skilled nursing
 
14           care in a facility than coverage for lower levels of
 
15           care.
 
16      (b)  No long-term care insurance policy or certificate other
 
17 than a policy or certificate thereunder issued to a group meeting
 
18 the requirements of paragraph (1) of the definition of "group
 
19 long-term care insurance" shall use a definition of preexisting
 
20 condition which is more restrictive than the following:
 
21 "preexisting condition" means a condition for which medical
 
22 advice or treatment was recommended by or received from a
 

 
 
 
Page 9                                                     131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 provider of health care services within six months preceding the
 
 2 effective date of coverage of an insured person.
 
 3      (c)  No long-term care insurance policy or certificate other
 
 4 than a policy or certificate thereunder issued to a group meeting
 
 5 the requirements of paragraph (1) of the definition of "group
 
 6 long-term care insurance" may exclude coverage for a loss or
 
 7 confinement which is the result of a preexisting condition unless
 
 8 the loss or confinement begins within six months following the
 
 9 effective date of coverage of an insured person.
 
10      (d)  The commissioner may extend the limitation periods in
 
11 subsections (b) and (c) as to specific age group categories in
 
12 specific policy forms upon findings that the extension is in the
 
13 best interest of the public.
 
14      (e)  The definition of "preexisting condition" does not
 
15 prohibit an insurer from using an application form designed to
 
16 elicit the complete health history of an applicant, and, on the
 
17 basis of the answers on that application, from underwriting in
 
18 accordance with that insurer's established underwriting
 
19 standards.  Unless otherwise provided in the policy or
 
20 certificate, a preexisting condition, regardless of whether it is
 
21 disclosed on the application or not, need not be covered until
 
22 the waiting period described in subsection (c) expires.  No long-
 

 
 
 
Page 10                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 term care insurance policy or certificate may exclude or use
 
 2 waivers or riders of any kind to exclude, limit, or reduce
 
 3 coverage or benefits for specifically named or described
 
 4 preexisting diseases or physical conditions beyond the waiting
 
 5 period described in subsection (c).
 
 6      §431:10A-505  Prior hospitalization; prior
 
 7 institutionalization.(a)  No long-term care insurance policy
 
 8 may be delivered or issued for delivery in this State if the
 
 9 policy:
 
10      (1)  Conditions eligibility for any benefits on a prior
 
11           hospitalization requirement;
 
12      (2)  Conditions eligibility for benefits provided in an
 
13           institutional care setting on the receipt of a higher
 
14           level of institutional care; or
 
15      (3)  Conditions eligibility for any benefits other than
 
16           waiver of premium, post-confinement, post-acute care,
 
17           or recuperative benefits on a prior
 
18           institutionalization requirement.
 
19      (b)  A long-term care insurance policy containing post-
 
20 confinement, post-acute care, or recuperative benefits shall
 
21 contain a clear label, in a separate paragraph of the policy or
 
22 certificate, entitled "limitations or conditions on eligibility
 

 
 
 
Page 11                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 for benefits," setting forth the limitations or conditions as set
 
 2 forth in subsection (a), including any required number of days of
 
 3 confinement.
 
 4      (c)  A long-term care insurance policy or rider that
 
 5 conditions eligibility of noninstitutional benefits on the prior
 
 6 receipt of institutional care shall not require a prior
 
 7 institutional stay of more than thirty days.
 
 8      §431:10A-506  Loss ratio standards; factors; commissioner
 
 9 approval.(a)  The commissioner shall adopt rules establishing
 
10 loss ratio standards after sufficient actuarial experience has
 
11 accumulated for long-term care insurance policies.  For all
 
12 policies, the loss ratio standards shall provide for reasonable
 
13 benefits in relation to premiums.  Benefits shall be deemed
 
14 reasonable in relation to premiums if the expected loss ratio is
 
15 at least sixty per cent, calculated in a manner that provides for
 
16 adequate reserving of the long-term care insurance risk.  In
 
17 establishing loss ratio standards, the commissioner shall
 
18 consider all relevant factors, including but not limited to:
 
19      (1)  Statistical credibility of incurred claims experience
 
20           and earned premiums;
 
21      (2)  The period for which rates are computed to provide
 
22           coverage;
 

 
 
 
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 1      (3)  Experienced and projected trends;
 
 2      (4)  Concentration of experience within early policy
 
 3           duration;
 
 4      (5)  Expected claim fluctuation;
 
 5      (6)  Experience regarding refunds, adjustments, or
 
 6           dividends;
 
 7      (7)  Renewability features;
 
 8      (8)  All appropriate expense factors;
 
 9      (9)  Interest;
 
10     (10)  Experimental nature of the coverage, if applicable;
 
11     (11)  Policy reserves; 
 
12     (12)  Mix of business by risk classification, if applicable;
 
13           and
 
14     (13)  Product features, including but not limited to,
 
15           elimination periods, co-payments, high deductibles, and
 
16           high maximum limits.
 
17      (b)  For purposes of subsection (a), no long-term care
 
18 insurance policy shall be sold without the prior approval of the
 
19 commissioner.  An insurer issuing a long-term care insurance
 
20 policy shall file with the commissioner for approval a sample
 
21 policy, proposed premium rates, actuarial analyses, expected loss
 
22 ratios, and other information relevant to items enumerated under
 

 
 
 
Page 13                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 subsection (a) or as requested by the commissioner, to justify
 
 2 those premium rates and to determine compliance with this part.
 
 3 Prior to the adoption of rules, the commissioner shall decide
 
 4 whether or not to approve the filings based on information
 
 5 contained in the filings, notwithstanding the absence of
 
 6 sufficient actuarial experience; provided that the commissioner
 
 7 may approve the filings if the estimates and data are actuarially
 
 8 credible without necessarily relying on actuarial experience.
 
 9 For purposes of this subsection, the commissioner may assess a
 
10 reasonable fee for the filing.
 
11      (c)  Subsection (a) shall not apply to life insurance
 
12 policies that accelerate benefits for long-term care.  A life
 
13 insurance policy that funds long-term care benefits entirely by
 
14 accelerating the death benefit shall be considered to provide
 
15 reasonable benefits in relation to premiums paid, if the policy
 
16 complies with all of the following provisions:
 
17      (1)  The interest credited internally to determine cash
 
18           value accumulations, including long-term care, if any,
 
19           are guaranteed not to be less than the minimum
 
20           guaranteed interest rate for cash value accumulations
 
21           without long-term care set forth in the policy;
 
22      (2)  The portion of the policy that provides life insurance
 

 
 
 
Page 14                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           benefits meets the nonforfeiture requirements for life
 
 2           insurance;
 
 3      (3)  The policy meets the disclosure requirements of section
 
 4           431:10D-102, 431:10D-201, or 431:10D-305, as
 
 5           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;
 

 
 
 
Page 15                                                    131
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 1           (F)  The estimated average annual premium per policy
 
 2                and the average issue age;
 
 3           (G)  A statement as to whether underwriting is
 
 4                performed at the time of application and shall
 
 5                indicate whether underwriting is used, and if
 
 6                used, shall include a description of the type or
 
 7                types of underwriting used; provided that in cases
 
 8                involving a group policy, the statement shall
 
 9                indicate whether the enrollee or dependent will be
 
10                underwritten and when underwriting occurs; and
 
11           (H)  A description of the effect of long-term care
 
12                policy provision on the required premiums,
 
13                nonforfeiture values and reserves on the
 
14                underlying life insurance policy, both for active
 
15                lives and those in long-term care claim status.
 
16      §431:10A-507  Right to return; free look provision.  Long-
 
17 term care applicants shall have the right to return the policy or
 
18 certificate within thirty days of its delivery and to have the
 
19 premium refunded if, after examination of the policy or
 
20 certificate, the applicant is not satisfied for any reason.
 
21 Long-term care insurance policies and certificates shall have a
 
22 notice prominently printed on the first page or attached thereto
 

 
 
 
Page 16                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 stating in substance that the applicant shall have the right to
 
 2 return the policy or certificate within thirty days of its
 
 3 delivery and to have the premium refunded if, after examination
 
 4 of the policy or certificate, other than a certificate issued
 
 5 pursuant to a policy issued to a group defined in paragraph (1)
 
 6 of the definition of "group long-term care insurance", the
 
 7 applicant is not satisfied for any reason.
 
 8      §431:10A-508  Outline of coverage required.(a)  An outline
 
 9 of coverage shall be delivered to a prospective applicant for
 
10 long-term care insurance at the time of initial solicitation
 
11 through means that prominently direct the attention of the
 
12 recipient to the document and its purpose.  In the case of agent
 
13 solicitations, an agent shall deliver the outline of coverage
 
14 before the presentation of an application or enrollment form.  In
 
15 the case of direct response solicitation, the outline of coverage
 
16 shall be presented with any application or enrollment form.
 
17      (b)  For a group long-term care insurance policy under
 
18 paragraph (1) of the definition of "group long-term care
 
19 insurance", an outline of coverage under subsection (c) shall not
 
20 be required to be delivered; provided that the information
 
21 enumerated under subsection (c) is contained in other materials
 
22 relating to enrollment, which shall be made available upon
 

 
 
 
Page 17                                                    131
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 1 request to the commissioner.
 
 2      (c)  The outline of coverage shall include:
 
 3      (1)  A description of the principal benefits and coverage
 
 4           provided in the policy;
 
 5      (2)  A statement of the principal exclusions, reductions,
 
 6           and limitations contained in the policy;
 
 7      (3)  A statement of the terms under which the policy or
 
 8           certificate, or both, may be continued in force or
 
 9           discontinued, including any reservation in the policy
 
10           of a right to change premiums.  Continuation or
 
11           conversion provisions of group coverage shall be
 
12           specifically described;
 
13      (4)  A statement that the outline of coverage is a summary
 
14           only, not a contract of insurance, and that the policy
 
15           or group master policy contains governing contractual
 
16           provisions;
 
17      (5)  A description of the terms under which the policy or
 
18           certificate may be returned and premium refunded; and
 
19      (6)  A brief description of the relationship of costs of
 
20           care and benefits.
 
21      (d)  The commissioner may prescribe a standard format,
 
22 including style, arrangement, and overall appearance, and the
 

 
 
 
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 1 content of an outline of coverage.
 
 2      §431:10A-509  Group policy certificate requirements.  A
 
 3 certificate issued for a group long-term care insurance policy
 
 4 shall include:
 
 5      (1)  A description of the principal benefits and coverages
 
 6           in the policy;
 
 7      (2)  A statement of the principal exclusions, reductions,
 
 8           and limitations contained in the policy; and
 
 9      (3)  A statement that the group master policy determines
 
10           governing contractural provisions.
 
11      §431:10A-510  Life insurance policies offering long-term
 
12 care benefits.(a)  At the time of policy delivery, a policy
 
13 summary shall be delivered for an individual life insurance
 
14 policy that provides long-term care benefits within the policy or
 
15 by rider.  In the case of direct response solicitations, the
 
16 insurer shall deliver the policy summary at the time of the
 
17 applicant's request, but regardless of request shall deliver the
 
18 policy summary no later than at the time of policy delivery.  The
 
19 policy summary shall comply with the requirements of section
 
20 431:10A-508 and shall also include:
 
21      (1)  An explanation of how the long-term care benefit
 
22           interacts with other components of the policy,
 

 
 
 
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 1           including deductions from death benefits;
 
 2      (2)  An illustration of the amount of benefits, the length
 
 3           of benefits, and the guaranteed lifetime benefits if
 
 4           any, for each covered person;
 
 5      (3)  Any exclusions, reductions, and limitations on benefits
 
 6           of long-term care; and
 
 7      (4)  If applicable to the policy type, a disclosure of the
 
 8           effects of exercising other rights under the policy, a
 
 9           disclosure of guarantees related to long-term care
 
10           costs of insurance charges, and current and projected
 
11           maximum lifetime benefits.
 
12      (b)  If a long-term care benefit funded through a life
 
13 insurance vehicle by the acceleration of the death benefit is in
 
14 benefit payment status, a monthly report shall be provided to the
 
15 policyholder.  The report shall include:
 
16      (1)  A description of and the amount of any long-term care
 
17           benefits paid out during the month;
 
18      (2)  An explanation of any changes in the policy due to
 
19           long-term care benefits being paid out; and
 
20      (3)  The amount of long-term care benefits existing or
 
21           remaining. 
 
22      §431:10A-511  Incontestability period.(a)  For a policy or
 

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 certificate that has been in effect for less than six months, an
 
 2 insurer may rescind a long-term care insurance policy or
 
 3 certificate or deny a valid long-term care insurance claim upon
 
 4 showing by the insurer of a misrepresentation that material to
 
 5 the acceptance of coverage.
 
 6      (b)  For a policy that has been in effect for six months or
 
 7 more, but less than two years, an insurer may rescind a long-term
 
 8 care insurance policy or certificate or deny an otherwise valid
 
 9 long-term care insurance claim upon a showing misrepresentation
 
10 that:
 
11      (1)  Is material to the acceptance for coverage; and
 
12      (2)  Pertains to the condition for which benefits are
 
13           sought.
 
14      (c)  For a policy that has been in effect for two years or
 
15 more, an insurer shall not contest the policy on the grounds of
 
16 misrepresentation alone; provided that the policy may be
 
17 contested only upon a showing by the insurer that the insured
 
18 knowingly and intentionally misrepresented relevant facts
 
19 relating to the insured's health.
 
20      (d)  No long-term care insurance policy may be field issued
 
21 based on medical or health status.  For purposes of this
 
22 subsection, "field issued" means a policy or certificate issued
 

 
 
 
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 1 by an agent or a third-party administrator pursuant to
 
 2 underwriting authority granted to the agent or third party
 
 3 administrator by an insurer.
 
 4      (e)  If an insurer has paid benefits under the long-term
 
 5 care insurance policy certificate, the benefit payments shall not
 
 6 be recovered by the insurer if the policy or certificate is
 
 7 rescinded.
 
 8      (f)  This section shall apply to life insurance policies
 
 9 that accelerate death benefits for long-term care; provided that
 
10 in the case of death of an insured who received accelerated death
 
11 benefits, this section shall not apply to the remaining death
 
12 benefit, except that the remaining death benefit shall be subject
 
13 to sections 431:10D-109 and 431:10D-110.
 
14      §431:10A-512  Nonforfeiture benefits.(a)  Except as
 
15 provided in subsection (b), a long-term care insurance policy may
 
16 not be delivered or issued for delivery unless the policyholder
 
17 or certificate holder has been offered an option to purchase a
 
18 policy or certificate that includes a nonforfeiture benefit.  The
 
19 offer of a nonforfeiture benefit may be in the form of a rider
 
20 that is attached to the policy.  If the policyholder or
 
21 certificate holder declines the nonforfeiture benefit, the
 
22 insurer shall provide a contingent benefit upon lapse that shall
 

 
 
 
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 1 be available for a specified period of time following a
 
 2 substantial increase in premium rates.
 
 3      (b)  For a group long-term care insurance policy, the offer
 
 4 of a nonforfeiture benefit under subsection (a) shall be made to
 
 5 the group policyholder if the group is a continuing care
 
 6 retirement community or similar entity; provided that the offer
 
 7 of a nonforfeiture benefit for a group long-term care insurance
 
 8 policy shall be made to each proposed certificate holder in all
 
 9 other cases.
 
10      (c)  The commissioner shall adopt rules to specify the type
 
11 of nonforfeiture benefits to be offered as part of long-term care
 
12 insurance policies or certificates, the standards for
 
13 nonforfeiture benefits, and the rules for contingent benefit upon
 
14 lapse, including a determination of the specified period of time
 
15 during which a contingent benefit upon lapse shall be available
 
16 and the substantial premium rate increase that triggers a
 
17 contingent benefit upon lapse as provided in subsection (a).
 
18      §431:10A-513  Rules.  The commissioner shall adopt necessary
 
19 rules under chapter 91 to implement this part, to promote premium
 
20 adequacy, and to establish minimum standards for marketing
 
21 practices, compensation arrangements, and reporting practices for
 
22 long-term care insurance.
 

 
 
 
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 1      §431:10A-514  Exceptions.  Nothing in this part shall limit
 
 2 or restrict the sale or offering for sale in this State of
 
 3 insurance which provides long-term care benefits in
 
 4 noninstitutional settings, including a private residence.
 
 5      §431:10A-515  Penalties.  In addition to any other penalties
 
 6 provided by law, any insurer or agent found in violation of this
 
 7 part or the marketing of long-term care insurance policies shall
 
 8 be subject to an administrative fine to be levied by the
 
 9 commissioner in an amount of three times the amount of any
 
10 commission paid for each policy involved, up to $10,000,
 
11 whichever is greater.
 
12              SUBPART B.  UNIVERSAL AVAILABILITY OF 
 
13                     LONG-TERM CARE INSURANCE
 
14      §431:10A-601  Definitions.  As used in this part:
 
15      "Activities of daily living" means at least bathing,
 
16 continence, dressing, eating, toileting, and transferring.
 
17      "Acute condition" means that the individual is medically
 
18 unstable.  This individual requires frequent monitoring by
 
19 medical professionals in order to maintain the individual's
 
20 health.
 
21      "Adult day care" means a program for six or more
 
22 individuals, of social and health-related services provided
 

 
 
 
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 1 during the day in a community group setting for the purpose of
 
 2 supporting frail, impaired elderly or other disabled adults who
 
 3 can benefit from care in a group setting outside the home.
 
 4      "Bathing" means washing oneself by sponge bath, in a tub or
 
 5 shower, and includes getting in or out of the tub or shower.
 
 6      "Cognitive impairment" means a deficiency in a person's
 
 7 short or long-term memory, orientation as to person, place, and
 
 8 time, deductive or abstract reasoning, or judgment as it relates
 
 9 to safety awareness.
 
10      "Continence" means the ability to maintain control of bowel
 
11 and bladder function, or when unable to maintain control of bowel
 
12 or bladder function, the ability to perform associated personal
 
13 hygiene, including caring for catheter or colostomy bag.
 
14      "Dressing" means putting on and taking of all items of
 
15 clothing and any necessary braces, fasteners, or artificial
 
16 limbs.
 
17      "Eating" means feeding oneself by getting food into the body
 
18 from a receptacle including a plate, cup, or table, or by a
 
19 feeding tube or intravenously.
 
20      "Hands-on assistance" means physical assistance, whether
 
21 minimal, moderate, or maximal, without which the individual would
 
22 not be able to perform the activity of daily living.
 

 
 
 
Page 25                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      "HIPAA" refers to the Health Insurance Portability and
 
 2 Accountability Act of 1996, P.L. 104-96.
 
 3      "Home health care services" means medical and nonmedical
 
 4 services, provided to ill, disabled, or infirm persons in their
 
 5 residences.  These services may include homemaker services,
 
 6 assistance with activities of daily living, and respite care
 
 7 services.
 
 8      "Mental or nervous disorder" means neurosis, psychoneurosis,
 
 9 psychopathy, psychosis, or mental or emotional disease or
 
10 disorder, and shall not be defined beyond these terms.
 
11      "NAIC" refers to the National Association of Insurance
 
12 Commissioners.
 
13      "Personal care" means the provision of hands-on services to
 
14 assist an individual with activities of daily living.
 
15      "Skilled nursing care," "intermediate care," "personal
 
16 care," "home care," and other services shall be defined in
 
17 relation to the level of skill required, the nature of the care,
 
18 and the setting in which care must be delivered.
 
19      "Toileting" means getting to and from the toilet, getting on
 
20 and off the toilet, and performing associated personal hygiene.
 
21      "Transferring" means moving into or out of a bed, chair, or
 
22 wheelchair.
 

 
 
 
Page 26                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      §431:10A-602  Group long-term care insurance policies to
 
 2 conform to HIPAA and Internal Revenue Service.(a) Every group
 
 3 long-term care insurance policy sold beginning July 15, 1999,
 
 4 shall conform to subtitle C of the Health Insurance Portability
 
 5 and Accountability Act of 1996, P.L. No. 104-191, as amended, and
 
 6 to section 7702B of the Internal Revenue Code of 1986, as
 
 7 amended.
 
 8      (b)  A group long-term care insurance policy shall provide
 
 9 coverage, at a minimum, for "qualified long-term care services",
 
10 as defined in subtitle C of the Health Insurance Portability and
 
11 Accountability Act of 1996, P.L. No. 104-191, as amended, and in
 
12 section 7702B of the Internal Revenue Code of 1986, as amended.
 
13      (c)  For purpose of subsection (b) and for purpose of
 
14 describing examples of services typically found in this State,
 
15 coverage includes the following services or any combination of
 
16 services:
 
17      (1)  Home health care services, as defined in section
 
18           431:10A-601;
 
19      (2)  Adult day care, as defined in section 431:10A-601;
 
20      (3)  Adult residential care home, as defined in section
 
21           321-15.1;
 
22      (4)  Extended care adult residential care home, as defined
 

 
 
 
Page 27                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           in section 323D-2;
 
 2      (5)  Nursing home, as defined in section 457B-2;
 
 3      (6)  Skilled nursing facilities and intermediate care
 
 4           facilities, as referenced in section 321-11(10);
 
 5      (7)  Hospices, as referenced in section 321-11;
 
 6      (8)  Assisted living facility, as defined in section 323D-2;
 
 7      (9)  Personal care, as defined in section 431:10A-601;
 
 8     (10)  Respite care, as defined in section 333F-1; and
 
 9     (11)  Any other care as provided by rule of the commissioner.
 
10      (d)  A group long-term care insurance policy may be sold
 
11 prior to July 15, 1999; provided that the coverages shall be
 
12 amended in accordance with this part, if necessary.  All policies
 
13 shall be issued with a written explanation that the coverage may
 
14 be subject to modification as a result of this part.
 
15      §431:10A-603  Individual long-term care insurance policy
 
16 coverages.(a)  Every individual long-term care insurance policy
 
17 sold beginning July 15, 1999, shall provide coverage for one or
 
18 more of the types of care enumerated under section
 
19 431:10A-602(c).
 
20      (b)  An individual long-term care insurance policy sold
 
21 beginning July 15, 1999, shall not be required to conform to
 
22 section 431:10A-602(a) and (b); provided that if it does not
 

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 conform, then it shall not qualify for federal or state income
 
 2 tax benefits.
 
 3      (d)  An individual long-term care insurance policy may be
 
 4 sold prior to July 15, 1999; provided that the coverages shall be
 
 5 amended in accordance with this part, if necessary.  All policies
 
 6 shall be issued with a written explanation that the coverage may
 
 7 be subject to modification as a result of this part.
 
 8      §431:10A-604  Employers and others to offer long-term care
 
 9 insurance policies; no employer contributions.(a)  No later
 
10 than January 1, 2000, every employer, labor organization, retiree
 
11 organization, or other entity specified under the definition of
 
12 "group long-term care insurance", shall offer a group long-term
 
13 care insurance policy that complies with section 431:10A-602 to
 
14 its employees or members, as appropriate; provided that employees
 
15 or members shall not be required to purchase a policy.
 
16      (b)  In the absence of an agreement between an employer and
 
17 employee, or organization and member, or other entity and member,
 
18 as appropriate, contributions to the payment of premiums for a
 
19 policy purchased by an employee or member under subsection (a)
 
20 shall not be required of the employer, organization, or entity,
 
21 as appropriate.
 
22      (c)  An agreement under subsection (b) shall specify a
 

 
 
 
Page 29                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 percentage of the premium to be contributed, and the method of
 
 2 payment of the premium by the employee or member, and by the
 
 3 employer, organization, or entity that is acceptable to the
 
 4 insurer providing the policy; provided if the insurer requires
 
 5 withholding of premiums from wages, any expense incurred by the
 
 6 employer, organization, or entity for the withholding shall be
 
 7 reimbursed by the insurer without added cost to the premium.
 
 8      §431:10A-605  Availability of policies. For purposes of
 
 9 section 431:10A-604, all insurers that are subject to this part
 
10 shall make available upon request a group long-term care
 
11 insurance policy to every employer, labor organization, retiree
 
12 organization, or other entity specified under the definition of
 
13 "group long-term care insurance"; provided that an individual
 
14 long-term care insurance policy under section 431A10A-603 may be
 
15 substituted for a group long-term care insurance policy if a
 
16 group policy is not available to the particular group by a
 
17 particular insurer solely for the reason of the number of
 
18 employees or members in that particular group.
 
19      §431:10A-606  Purchase of policy and payment of premiums on
 
20 an individual's behalf.  An individual or group long-term care
 
21 insurance policy shall allow a person to purchase a policy and
 
22 pay the premiums for an individual or group long-term care
 

 
 
 
Page 30                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 insurance policy that covers the person, the person's spouse, or
 
 2 reciprocal beneficiary, as well as their parents and
 
 3 grandparents, including in-laws.
 
 4      §431:10A-607  Age-graded premiums.(a)  Premiums for an
 
 5 individual or group long-term care insurance policy shall be
 
 6 graded by age, along with other underwriting criteria as
 
 7 determined by the insurance commissioner, of the applicant at the
 
 8 time of purchase of the policy.  Premiums shall be fixed over the
 
 9 life of the policy; provided that the commissioner may allow an
 
10 adjustment in premiums if the commissioner finds that an
 
11 adjustment is necessary for the addition of benefits, solvency of
 
12 the insurer in the line of long-term care insurance, or loss
 
13 ratio purposes.
 
14      (b)  Reasonable underwriting criteria other than age may be
 
15 utilized with the approval of the insurance commissioner;
 
16 provided that the criteria shall not result to average risks as a
 
17 whole in denying long-term care insurance or in assessing
 
18 unreasonable premiums.
 
19      §431:10A-608  Conflict with HIPA.  If a conflict occurs
 
20 between a provision of part V of chapter 431:10A, as amended, and
 
21 the federal Health Insurance Portability and Accountability Act
 
22 of 1996, P.L. 104-191, as amended, the provision shall be deemed
 

 
 
 
Page 31                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 amended to comply with that federal law and any related
 
 2 regulations, to the extent that a particular policy is intended
 
 3 to qualify for federal income tax benefits.
 
 4      §431:10A-609  Terminology interchangeable.  For purposes of
 
 5 this part, the term "group long-term care insurance" refers to a
 
 6 means of marketing or method of issuance of a long-term care
 
 7 insurance policy, without regard to substantive differences in
 
 8 the policy.
 
 9               SUBPART C.  HIPAA CONSUMER PROTECTION
 
10      §431:10A-701  Policy practices and provision; renewability;
 
11 individual policies.(a)  The terms guaranteed renewable and
 
12 noncancellable shall not be used in any individual long-term care
 
13 insurance policy without further explanatory language in
 
14 accordance with section        .
 
15      (b)  A policy issued to an individual shall not contain
 
16 renewal provisions other than guaranteed renewable or
 
17 noncancellable.
 
18      (c)  As used in this section, the term "guaranteed
 
19 renewable" means the insured has a right to continue the long-
 
20 term care insurance in force by the timely payment of premiums
 
21 and when the insurer has no unilateral right to make any change
 
22 in any provision of the policy or rider while the insurance is in
 

 
 
 
Page 32                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 force, and cannot decline to renew, except that rates may be
 
 2 revised by the insurer on a class basis.
 
 3      (d)  As used in this section, the term "noncancellable"
 
 4 means the insured has the right to continue the long-term care
 
 5 insurance in force by the timely payment of premiums during which
 
 6 period the insurer has no right to unilaterally make any change
 
 7 in any provision of the insurance or premium rate.
 
 8      §431:10A-702  Policy practices and provision; limitations
 
 9 and exclusions; group and individual policies.(a)  A policy may
 
10 not be delivered or issued for delivery in this State as long-
 
11 term care insurance if the policy limits or excludes coverage by
 
12 type of illness, treatment, medical condition, or accident,
 
13 except as follows:
 
14      (1)  Preexisting conditions;
 
15      (2)  Mental or nervous disorders; provided that coverage for
 
16           Alzheimer's Disease shall not be limited or excluded;
 
17      (3)  Alcoholism or drug addiction;
 
18      (4)  Illness, treatment, or medical condition arising out
 
19           of:
 
20           (A)  War or act of war, whether declared or undeclared;
 
21           (B)  Participation in a felony, riot, or insurrection;
 
22           (C)  Service in the armed forces or units auxiliary
 

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1                thereto;
 
 2           (D)  Suicide, whether sane or insane, attempted
 
 3                suicide, or intentionally self-inflicted injury;
 
 4                or
 
 5      (5)  Treatment provided in a government facility, unless
 
 6           required by law, services for which benefits are
 
 7           available under Medicare or other governmental program,
 
 8           except Medicaid, any state or federal workers'
 
 9           compensation, employer's liability or occupational
 
10           disease law, or any motor vehicle insurance law,
 
11           services provided by a member of the covered person's
 
12           immediate family and services for which no charge is
 
13           normally made in the absence of insurance.
 
14      (b)  This section is not intended to prohibit exclusions and
 
15 limitations by type of provider or territorial limitations.
 
16      §431:10A-703  Policy practices and provision; extension of
 
17 benefits; group and individual policies.  Termination of
 
18 long-term care insurance shall be without prejudice to any
 
19 benefits payable for institutionalization if the
 
20 institutionalization began while the long-term care insurance was
 
21 in force and continues without interruption after termination.
 
22 The extension of benefits beyond the period the long-term care
 

 
 
 
Page 34                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 insurance was in force may be limited to the duration of the
 
 2 benefit period, if any, or to payment of the maximum benefits and
 
 3 may be subject to any policy waiting period, and all other
 
 4 applicable provisions of the policy.  
 
 5      §431:10A-704  Policy practices and provision; continuation
 
 6 or conversion; group policies.(a)  All group long-term care
 
 7 insurance issued in this State shall provide covered individuals
 
 8 with a basis for continuation or conversion of coverage.
 
 9      (b)  A policy provision that provides for a basis for
 
10 continuation of coverage is one that maintains coverage under the
 
11 existing group policy when the coverage would otherwise terminate
 
12 and which is subject only to the continued timely payment when
 
13 due.  Group policies that restrict provision of benefits and
 
14 services to, or contain incentives to use certain providers or
 
15 facilities may provide continuation of benefits that are
 
16 substantially equivalent to the benefits of the existing group
 
17 policy.  The commissioner shall make a determination as to the
 
18 substantial equivalency of benefits, and in doing so, shall take
 
19 into consideration the differences between managed care and non-
 
20 managed care plans, including but not limited to, provider system
 
21 arrangements or networks, service availability, benefit levels,
 
22 and administrative complexity.
 

 
 
 
Page 35                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

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

 
 
 
Page 36                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 levels, and administrative complexity.
 
 2      (e)  The insured shall make written application for the
 
 3 converted policy.  The first premium, if any, shall be due and
 
 4 paid as directed by the insurer no later that thirty-one days
 
 5 after termination of coverage under the group policy.  The
 
 6 converted policy shall be issued effective on the day following
 
 7 the termination of coverage under the group policy, and shall be
 
 8 renewable annually.
 
 9      (f)  The premium for the converted policy shall be
 
10 calculated on the basis of the insured's age at inception of
 
11 coverage under the group policy from which conversion is made;
 
12 provided that where the group policy from which conversion is
 
13 made is a replacement to a previous group policy, the premium
 
14 shall be calculated on the basis of the insured's age at
 
15 inception of the previous group policy.
 
16      (g)  Continuation of coverage or issuance of a converted
 
17 policy shall be mandatory except in the following circumstances:
 
18      (1)  Termination of group coverage resulted from an
 
19           individual's failure to make any required payment of
 
20           premium or contribution when due; or
 
21      (2)  The termination of group coverage is replaced by
 
22           another group coverage effective on the day following
 

 
 
 
Page 37                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           the termination of coverage and all the following
 
 2           requirements are met:
 
 3           (A)  Replacement occurs no later than thirty-one days
 
 4                after termination;
 
 5           (B   The replacement group coverage provides benefits
 
 6                that are identical or substantially equivalent to
 
 7                or in excess of those provided by the previous
 
 8                group coverage; and
 
 9           (C)  The premium for the new group coverage is
 
10                calculated in a manner consistent with subsection
 
11                (f).
 
12      (h)  Notwithstanding any other provision of this section, a
 
13 converted policy issued to an individual who at the time of
 
14 conversion is covered by another long-term care insurance policy
 
15 that provides benefits on the basis of incurred expenses, may
 
16 contain a provision that results in a reduction of benefits
 
17 payable if the benefits provided under the additionally coverage,
 
18 together with the full benefits provided by the converted policy,
 
19 would result in payment of more that one hundred per cent of
 
20 incurred expenses.  The provision shall only be included in the
 
21 converted policy if the converted policy also provides for a
 
22 premium decrease or refund which reflects the reduction in
 

 
 
 
Page 38                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 benefits payable. 
 
 2      (i)  The converted policy may provide that the benefits
 
 3 payable under the converted policy, together with the benefits
 
 4 payable under the group policy from which conversion is made,
 
 5 shall not exceed those that would have been payable had the
 
 6 individual's coverage under the group policy remained in force
 
 7 and effect. 
 
 8      (j)  Notwithstanding any other provision of this section, an
 
 9 insured individual whose eligibility for group long-term care
 
10 coverage is based upon the individual's relationship to another
 
11 person shall be entitled to continuation of coverage under the
 
12 group policy upon termination of the qualifying relationship by
 
13 death or dissolution of marriage.
 
14      (k)  As used in this section "managed care plan" means a
 
15 health care or assisted living arrangement designed to coordinate
 
16 patient care or control costs through utilization review, case
 
17 management, or use of specific provider networks.
 
18      §431:10A-705  Policy practices and provision; discontinuance
 
19 and replacement; group policies. If a group long-term care
 
20 insurance policy is replaced by another group long-term care
 
21 insurance policy issued to the same policyholder, the succeeding
 
22 insurer shall offer coverage to all persons covered under the
 

 
 
 
Page 39                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 previous group policy on its date of termination.  Coverage
 
 2 provided or offered to individuals by the insurer and premiums
 
 3 charged to a person under the new group policy shall not:
 
 4      (1)  Result in an exclusion for preexisting conditions that
 
 5           would have been covered under the group policy being
 
 6           replaced; and 
 
 7      (2)  Vary or otherwise depend on the individual's health or
 
 8           disability status, claim experience, or use of long-
 
 9           term care services.
 
10      §431:10A-706  Unintentional lapse; prevention; group and
 
11 individual policies.(a) Every insurer offering long-term care
 
12 insurance shall comply with this section to prevent an
 
13 unintentional lapse.
 
14      (b)  No long-term care policy or certificate shall be issued
 
15 until the insurer has received from the applicant with a written
 
16 designation of at least one person, in addition to the applicant,
 
17 who is to receive notice of lapse or termination of the policy or
 
18 certificate for nonpayment of premium, or a written waiver dated
 
19 and signed by the applicant electing not to designate at least
 
20 one person who is to receive the notice of termination, in
 
21 addition to the insured.  Designation shall not constitute
 
22 acceptance of any liability on the third party for services
 

 
 
 
Page 40                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 provided to the insured.  The form used for the written
 
 2 designation shall provide space clearly designated for listing at
 
 3 least one person.  The designation shall include the person's
 
 4 full name and home address.
 
 5      (c)  When an applicant decides to waive the applicant's
 
 6 right to designate another person, the waiver shall state:
 
 7      "Protection Against Unintended Lapse.  I understand that I
 
 8 have the right to designate at least one person other than myself
 
 9 to receive notice of lapse or termination of this long-term care
 
10 insurance policy for nonpayment of premium.  I understand that
 
11 notice will not be given until thirty (30) days after a premium
 
12 is due and unpaid.  I elect NOT to designate a person to receive
 
13 this notice"
 
14      (d)  The insurer shall notify the insured of the right to
 
15 change this written designation, no less often that every two
 
16 years.
 
17      (e)  The thirty day requirement in section 431:10A-707 shall
 
18 not be applicable if payment for a long-term care insurance
 
19 policy or certificate is made through a payroll or pension
 
20 deduction plan.  If payment is made through a payroll or pension
 
21 deduction plan, the notice requirement shall be extended to sixty
 
22 days after the insured is no longer on a payroll or pension
 

 
 
 
Page 41                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 deduction plan.  The insurer shall clearly indicate whether
 
 2 payment is being made through a plan.
 
 3      §431:10A-707  Lapse or termination for nonpayment of
 
 4 premium; group and individual policies. No policy or
 
 5 certificate shall lapse or terminate for nonpayment of premiums
 
 6 unless the insurer, at least thirty days before the effective
 
 7 date of the lapse or termination, has given notice to the insured
 
 8 and to those persons designated in section 431:10A-706(b) at the
 
 9 address provided by the insured for purposes of receiving notice
 
10 of lapse or termination.  Notice shall be given by first class
 
11 United States mail, postage prepaid; provided that the notice
 
12 shall not be given until the thirty or sixty day requirements
 
13 under section 431:10A-706(e).  Notice shall be deemed to have
 
14 been given as of five days after the date of mailing.
 
15      §431:10A-708  Reinstatement; group and individual policies.
 
16 (a)  A long-term care insurance policy or certificate shall
 
17 include a provision that provides for reinstatement of coverage,
 
18 in the event of lapse if the insurer is provided proof that the
 
19 insured was cognitively impaired or had a loss of functional
 
20 capacity before the grace period contained in the policy expired.
 
21 This option shall be available to the insured if requested within
 
22 five months after termination and shall allow for the collection
 

 
 
 
Page 42                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 of past due premium, where appropriate.  The standard of proof of
 
 2 cognitive impairment of loss of functional capacity shall not be
 
 3 more stringent than the benefit eligibility criteria on cognitive
 
 4 impairment or the loss of functional capacity contained in the
 
 5 policy or certificate.
 
 6      (b)  This section shall be in conformance with HIPAA or any
 
 7 related regulations.
 
 8      §431:10A-709  Disclosure standards; renewability; individual
 
 9 policies.  All individual long-term care insurance policies shall
 
10 contain a renewability provision.  The provision shall be
 
11 appropriately captioned, shall appear on the first page of the
 
12 policy, and shall clearly state the duration of renewability and
 
13 the duration of the term of coverage for which the policy is
 
14 issued and for which it may be renewed; provided that this
 
15 section shall not apply to policies that are part of or combined
 
16 with a life insurance policy and do not contain a nonrenewability
 
17 provision, and under which the right to nonrenew is reserved
 
18 solely to the policyholder.
 
19      §431:10A-710  Disclosure standards; riders and endorsements;
 
20 individual policies.(a)  All riders or endorsements added to an
 
21 individual long-term care insurance policy after the date or
 
22 issue, upon reinstatement, or renewal that reduce or eliminate
 

 
 
 
Page 43                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 benefits or coverage in the policy shall require the insured to
 
 2 sign a written acceptance.  This subsection shall not apply if
 
 3 the insured makes a written request to the insurer for a rider or
 
 4 endorsement.
 
 5      (b)  After the date of issuance, any rider or endorsement
 
 6 that increases benefits or coverage with a concomitant increase
 
 7 in premium during the policy term shall be agreed to in writing
 
 8 by the insured, unless the increase in benefits or coverage is
 
 9 required by law. 
 
10      (c)  If a separate additional premium is charged for
 
11 benefits or coverage provided in connection with a rider or
 
12 endorsement, the premium charge shall be set forth in the policy,
 
13 rider, or endorsement. 
 
14      §431:10A-711  Disclosure standards; payment of benefits;
 
15 group and individual policies.  A long-term care insurance policy
 
16 that provides for payment of benefits based on standards
 
17 described as "usual and customary," "reasonable and customary,"
 
18 or similar words or phrases shall include a definition of these
 
19 terms and an explanation of the terms in its accompanying outline
 
20 of coverage.
 
21      §431:10A-712  Disclosure standards; preexisting conditions
 
22 limitation; group and individual policies.  If a long-term care
 

 
 
 
Page 44                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 insurance policy or certificate contains any limitations with
 
 2 respect to preexisting conditions, the limitations shall appear
 
 3 as a separate paragraph of the policy or certificate and shall be
 
 4 labeled as "Preexisting Condition Limitations."
 
 5      §431:10A-713  Disclosure standards; other limitations and
 
 6 conditions on eligibility for benefits; group and individual
 
 7 policies.  A long-term care insurance policy or certificate
 
 8 containing any limitations or conditions for eligibility other
 
 9 than those prohibited in sections 431:10A-702 and 431:10A-712
 
10 shall set forth a description of the limitations or conditions,
 
11 including any required number of days of confinement, in a
 
12 separate paragraph of the policy or certificate and shall be
 
13 labeled as "Limitations or Conditions on Eligibility of
 
14 Benefits."
 
15      §431:10A-714  Prohibition against post claims underwriting;
 
16 group and individual policies.(a)  All applications for long-
 
17 term care insurance policies or certificates, except a policy or
 
18 certificate which is guaranteed issue, shall contain clear and
 
19 unambiguous questions designed to ascertain the health condition
 
20 of the applicant.
 
21      (b)  If an application for long-term care insurance contains
 
22 a question that asks whether the applicant has had medication
 

 
 
 
Page 45                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 prescribed by a physician, it shall also ask the applicant to
 
 2 list the medication that has been prescribed.
 
 3      (c)  If the medications listed in the application were known
 
 4 by the insurer, or should have been known at the time of
 
 5 application, to be directly related to a medical condition for
 
 6 which coverage would otherwise be denied, then the policy or
 
 7 certificate shall not be rescinded for that condition.
 
 8      (d)  A copy of the completed application or enrollment form
 
 9 shall be delivered to the insured no later than at the time of
 
10 delivery of the policy or certificate unless it was retained by
 
11 the applicant at the time of application.
 
12      (e)  Every insurer or other entity selling or issuing long-
 
13 term care insurance benefits shall maintain a record of all
 
14 policy or certificate rescissions, both state and countrywide,
 
15 except those that the insured voluntarily effectuated.  Every
 
16 insurer shall annually furnish this information to the insurance
 
17 commissioner in the format prescribed by the National Association
 
18 of Insurance Commissioners.
 
19      §431:10A-715  Minimum standards for home health and
 
20 community care benefits; group and individual policies.  (a)  A
 
21 long-term care insurance policy or certificate that provides
 
22 benefits for home health care of community care services shall
 

 
 
 
Page 46                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 not limit or exclude benefits by:
 
 2      (1)  Requiring that the insured would need care in a skilled
 
 3           nursing facility if home health care services were not
 
 4           provided;
 
 5      (2)  Requiring that the insured first or simultaneously
 
 6           receive nursing or therapeutic services, or both, in a
 
 7           home, community, or institutional setting before home
 
 8           health care services are covered;
 
 9      (3)  Limiting eligible services provided by registered
 
10           nurses or licensed practical nurses;
 
11      (4)  Requiring that a nurse or therapist provide services
 
12           covered by the policy or certificate that can be
 
13           provided by a home health aide, or other licensed or
 
14           certified home care worker acting within the scope of
 
15           licensure or certification;
 
16      (5)  Excluding coverage for personal care services provided
 
17           by a home health aide;
 
18      (6)  Requiring that the provision of home health care
 
19           services be at a level of certification or licensure
 
20           greater that that required by the eligible service;
 
21      (7)  Requiring that the insured or claimant have an acute
 
22           condition before home health care services are covered;
 

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      (8)  Limiting benefits to services provided by Medicare-
 
 2           certified agencies or providers; or 
 
 3      (9)  Excluding coverage for adult day care service.
 
 4      (b)  A long-term care insurance policy or certificate, if it
 
 5 provides for home health or community care services, shall
 
 6 provide total home health or community care coverage that is a
 
 7 dollar amount equivalent to at least one-half of one year's
 
 8 coverage available for nursing home benefits under the policy or
 
 9 certificate, at the time covered home health or community care
 
10 services are being received.  This subsection shall not apply to
 
11 policies or certificates issued to residents of continuing care
 
12 retirement communities.
 
13      (c)  Home health care coverage may be applied to non-home
 
14 health care benefits provided in the policy or certificate when
 
15 determining maximum coverage under the terms of the policy or
 
16 certificate; provided that this subsection shall not imply that
 
17 home health care may be restricted to a period of time.
 
18      §431:10A-716  Requirement to offer inflation protection;
 
19 group and individual policies.(a)  No insurer may offer a long-
 
20 term care insurance policy unless the insurer also offers to the
 
21 policyholder, in addition to any other inflation protection, the
 
22 option to purchase a policy that provides for benefit levels to
 

 
 
 
Page 48                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 increase with benefit maximums or reasonable duration which are
 
 2 meaningful to account for reasonably anticipated increases in the
 
 3 costs of long-term care services covered by the policy.  The
 
 4 insurer shall offer to each policyholder, at the time of
 
 5 purchase, the option to purchase a policy with an inflation
 
 6 protection feature no less favorable than one of the following:
 
 7      (1)  Increases benefit levels annually in a manner so that
 
 8           the increases are compounded annually at a rate not
 
 9           less that five per cent;
 
10      (2)  Guarantees the insured individual the right to
 
11           periodically increase benefit levels without providing
 
12           evidence of insurability or health status so long as
 
13           the option for the previous period has not been
 
14           declined.  The amount of the additional benefit shall
 
15           be no less than the difference between the existing
 
16           policy benefit and that benefit compounded annually at
 
17           a rate of at least five per cent for the period
 
18           beginning with the purchase of the existing benefit and
 
19           extending until the year in which the offer is made; or
 
20      (3)  Covers a specified percentage of actual or reasonable
 
21           charges and does not include a maximum specified
 
22           indemnity amount or limit.
 

 
 
 
Page 49                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      (b)  Where the policy is issued to a group, the required
 
 2 offer in subsection (a) shall be made to the group policyholder;
 
 3 provided that if the policy is issued to a group described in the
 
 4 definition of "group long-term care insurance", other than to a
 
 5 continuing care retirement community, the offering shall be made
 
 6 to each certificate holder. 
 
 7      (c)  This section shall not apply to life insurance policies
 
 8 or riders containing accelerated long-term care benefits.  
 
 9      (d)  Every insurer shall include the following information
 
10           in the outline of coverage or with the outline of
 
11           coverage:
 
12           (1)  A graphic comparison of the benefit levels of a
 
13                policy that increases benefits over the policy
 
14                period with a policy that does not increase
 
15                benefits for one of the following duration
 
16                periods:
 
17                (A)  At least a twenty year period;
 
18                (B)  Until attained age; or
 
19                (C)  Throughout period of coverage; and
 
20           (2)  Any expected premium increases or additional
 
21                premiums to pay for automatic or optional benefit
 
22                increases.
 

 
 
 
Page 50                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      (e)  Inflation protection benefit increases under a policy
 
 2 which contains these benefits shall continue without regard to an
 
 3 insured's age, claim status or claim history, or the length of
 
 4 time the person has been insured under the policy
 
 5      (f)  An offer of inflation protection that provides for
 
 6 automatic benefit increases shall include an offer of a premium
 
 7 which the insurer expects to remain constant.  The offer shall
 
 8 disclose in a conspicuous manner that the premium may change in
 
 9 the future unless the premium is guaranteed to remain constant.
 
10      (g)  Inflation protection shall be included in a long-term
 
11 care insurance policy unless the insurer obtains a rejection of
 
12 inflation protection signed by the policyholder as required in
 
13 subsection (h).
 
14      (h)  The rejection shall be considered part of the
 
15 application and shall state:
 
16      "I have reviewed the outline of coverage and the graphs that
 
17 compare the benefits and premiums of this policy with and without
 
18 inflation protection.  Specifically, I have reviewed Plans    ,
 
19 and I REJECT INFLATION PROTECTION.
 
20             SUBPART D.  NON-HIPAA CONSUMER PROTECTION
 
21      §431:10A-801  Disclosure standards; disclosure of tax
 
22 consequences; individual policies.  If a life insurance policy
 

 
 
 
Page 51                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 provides for an accelerated benefit for long-term care, the
 
 2 insurer shall make a written disclosure at the time of
 
 3 application for the policy or rider and at the time the
 
 4 accelerated benefit payment request is submitted that receiving
 
 5 accelerated benefits may have taxable consequences and that
 
 6 assistance should be sought from a personal tax advisor.  The
 
 7 disclosure statement shall be prominently displayed on the first
 
 8 page of the policy or rider and any other related documents.
 
 9      §431:10A-802  Disclosure standards; disclosure of tax
 
10 qualified policy; group and individual policies.  Any long-term
 
11 care insurance policy or certificate that is intended to be a tax
 
12 qualified long-term care insurance policy shall contain a written
 
13 disclosure by the insurer that the policy is intended to meet the
 
14 tax qualifications for a long-term care insurance policy under
 
15 the tax provisions of the HIPAA.  The disclosure shall inform the
 
16 applicant the policy is intended to be a tax qualified policy and
 
17 that the applicant should consult a personal tax advisor before
 
18 purchasing a tax qualified policy to determine the tax
 
19 consequences to the applicant.
 
20      §431:10A-803  Disclosure standards; benefit trigger; group
 
21 and individual policies. Activities of daily living and
 
22 cognitive impairment shall be used to measure an insured's long-
 

 
 
 
Page 52                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 term care and shall be described in the policy or certificate in
 
 2 a separate paragraph.  The paragraph shall be labeled
 
 3 "Eligibility for the Payment of Benefits."  Any additional
 
 4 benefit triggers shall also be explained in this section.  If
 
 5 these benefit triggers differ for different benefits, an
 
 6 explanation of the trigger shall accompany each benefit
 
 7 description.  If an attending physician or other specified person
 
 8 must certify a certain level of functional dependency in order to
 
 9 be eligible for benefits, this requirement shall also be
 
10 specified.
 
11      §431:10A-804  Standards for benefit triggers; group and
 
12 individual policies.(a)  A long-term care insurance policy
 
13 shall condition the payment of benefits on a determination of the
 
14 insured's ability to perform activities of daily living and on
 
15 cognitive impairment.  Eligibility for the payment of benefits
 
16 shall not be more restrictive than requiring either:
 
17      (1)  A presence of cognitive impairment; or
 
18      (2)  A deficiency in the ability to perform not more than:
 
19           (A)  Two activities of daily living for a period of
 
20                ninety days for tax qualified policies; or
 
21           (B)  Three activities of daily living for nontax
 
22                qualified policies.
 

 
 
 
Page 53                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      (b)  Activities of daily living shall include at least:
 
 2 bathing, continence, dressing, eating, toileting, and
 
 3 transferring.  Other activities of daily living may be used to
 
 4 trigger covered benefits in addition to those contained in this
 
 5 subsection as long as the additional activities of daily living
 
 6 are described in the policy.
 
 7      (c)  An insurer may use additional provisions for the
 
 8 determination of when benefits are payable under a policy or
 
 9 certificate; provided that these additional provisions do not
 
10 restrict or replace the requirements under subsections (a) and
 
11 (b).
 
12      (d)  For purposes of this section, the determination of a
 
13 deficiency shall not be more restrictive than:
 
14      (1)  Requiring 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 a physician, nurse, or social worker.
 

 
 
 
Page 54                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      (f)  Every long-term care insurance policy shall include a
 
 2 clear description of the process for appealing and resolving
 
 3 benefit determinations.
 
 4      (g)  This section shall not apply to certificates issued on
 
 5 or after July 15, 1999, if a group long-term care insurance
 
 6 policy was in force on that date.
 
 7      §431:10A-805  Prohibition against preexisting conditions and
 
 8 probationary periods in replacement policies and certificates;
 
 9 group and individual policies.  If a long-term care insurance
 
10 policy or certificate replaces another long-term care insurance
 
11 policy or certificate, the replacing issuer shall waive any time
 
12 periods applicable to preexisting conditions and probationary
 
13 periods in the new long-term care policy for similar benefits to
 
14 the extent that similar exclusions have been satisfied under the
 
15 original policy.
 
16      §431:10A-806  Nonforfeiture benefit requirement; group and
 
17 individual policies.(a)  No long-term care insurance policy or
 
18 certificate shall be delivered or issued in this State unless the
 
19 policyholder or certificateholder has been offered the option of
 
20 purchasing a policy or certificate that includes a nonforfeiture
 
21 benefit.  A policy or certificate that includes a nonforfeiture
 
22 benefit shall have coverage elements, eligibility, benefit
 

 
 
 
Page 55                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 triggers, and benefit length that are the same as a policy or
 
 2 certificate issued or delivered without nonforfeiture benefits.  
 
 3      (b)  The offer shall be in writing if the nonforfeiture
 
 4 benefit is not described in the outline of coverage or other
 
 5 materials provided to a prospective applicant. 
 
 6      (c)  If the offer is rejected, the insurer shall provide the 
 
 7 contingent benefit upon lapse.  The contingent benefit upon lapse
 
 8 shall be triggered every time an insurer increases the premium
 
 9 rates to a level which results in a cumulative increase of the
 
10 annual premium equal to or exceeding the percentage of the
 
11 insured's initial annual premium set forth below based on the
 
12 insured's issue age, and the policy or certificate lapses within
 
13 one hundred twenty days of the due date of the premium so
 
14 increased.  Unless otherwise required, policyholders and
 
15 certificateholders shall be notified at least thirty days prior
 
16 to the due date of the premium reflecting the rate increase as
 
17 established by rules.
 
18      (d)  If a group policyholder elects to make the
 
19 nonforfeiture benefit an option of the certificateholder, a
 
20 certificate shall provide either the nonforfeiture benefit or the
 
21 contingent benefit upon lapse.
 
22      (e)  On or before the effective date of a substantial
 

 
 
 
Page 56                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

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

 
 
 
Page 57                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           after lapse.  The same benefits will be payable for a
 
 2           qualifying claim, but the lifetime maximum dollars or
 
 3           days of benefits shall be determined as provided in
 
 4           paragraph (3);
 
 5      (3)  The standard nonforfeiture credit will be equal to one
 
 6           hundred per cent of the sum of all premiums paid,
 
 7           including premiums paid prior to any changes in
 
 8           benefits.
 
 9      (4)  The nonforfeiture benefit and contingent benefit upon
 
10           lapse shall begin no later than the end of the third
 
11           year following the policy or certificate issue date;
 
12           provided that for a policy or certificate with a
 
13           contingent benefit upon lapse or a policy or
 
14           certificate with attained age rating, the nonforfeiture
 
15           benefit shall begin the earlier of:
 
16           (A)  The end of the tenth year following the policy or
 
17                certificate issue date; or
 
18           (B)  The end of the second year following the date the
 
19                policy or certificate is no longer subject to
 
20                attained age rating; and
 
21      (5)  Nonforfeiture credits may be used for all care and
 
22           services qualifying for benefits under the terms of the
 

 
 
 
Page 58                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           policy or certificate, up to the limits specified in
 
 2           the policy or certificate.
 
 3      (g)  All benefits paid by the insurer while the policy or
 
 4 certificate is in premium paying status and in paid up status
 
 5 shall not exceed the maximum benefits which would be payable if
 
 6 the policy or certificate had remained in premium paying status.
 
 7      (h)  There shall be no difference in the minimum
 
 8 nonforfeiture benefits as required under this section for group
 
 9 and individual policies.
 
10      (i)  The provisions of this section shall apply to any long-
 
11 term care policy issued or delivered in this State after the
 
12 effective date of this part and parts I, III, and IV of this Act.
 
13      (j)  Premiums charged for a policy or certificate containing
 
14 nonforfeiture benefits or contingent benefit on lapse shall be
 
15 subject to the loss ratio requirements under section 431:10A-506
 
16      (k)  A replacing insurer that purchases or assumes a block
 
17 or blocks of long-term care insurance policies from another
 
18 insurer shall calculate the percentage increase based on the
 
19 initial annual premium paid by the insured when the policy was
 
20 first purchased from the original insurer.
 
21       SUBPART E.  HIPAA LONG-TERM CARE INSURER REQUIREMENTS
 
22      §431:10A-901  Requirements for application forms and
 

 


 

Page 59                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 replacement coverage; group and individual policies.(a)
 
 2 Application forms shall include questions designed to elicit
 
 3 information as to whether, as of the date of application, the
 
 4 applicant has another long-term care insurance policy or
 
 5 certificate in force or whether a long-term care policy or
 
 6 certificate is intended to replace any other accident and
 
 7 sickness or long-term care policy or certificate presently in
 
 8 force.  A supplementary application or other form to be signed by
 
 9 the applicant and agent, except where the coverage is sold
 
10 without an agent, containing the questions may be used.  
 
11      (b)  The following questions shall be used to satisfy
 
12 subsection (a):
 
13      (1)  Do you have another long-term care insurance policy or
 
14           certificate in force, including a health care service
 
15           contract or health maintenance organization contract?
 
16      (2)  Did you have another long-term care insurance policy or
 
17           certificate in force during the last twelve months?
 
18           (A)  If so, with which company?
 
19           (B)  If that policy lapsed, when did it lapse?
 
20      (3)  Are you covered by Medicaid?
 
21      (4)  Do you intend to replace any of your medical or health
 
22           insurance coverage with this policy or certificate?
 

 
Page 60                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      (c)  An agent shall list any other health insurance policies
 
 2 that the agent has sold to the applicant and the agent shall list
 
 3 the policies sold that are still in force and list policies sold
 
 4 in the past five years that are no longer in force.
 
 5      (d)  A replacement policy shall include questions as set
 
 6 forth in subsection (b); provided that the questions in that
 
 7 subsection may be modified only to the extent necessary to elicit
 
 8 information about health or long-term care insurance policies
 
 9 other than the group policy being replaced; provided that the
 
10 certificateholder has been notified of the replacement.
 
11      (e)  Upon determining that a sale will involve replacement,
 
12 an insurer who does not use direct response solicitation methods
 
13 or its agent shall furnish the applicant, prior to issuance or
 
14 delivery of the individual long-term care insurance policy, a
 
15 notice regarding the replacement of accident and sickness or
 
16 long-term care insurance coverage.  One copy of the notice shall
 
17 be retained by the applicant and an additional copy that is
 
18 signed by the applicant shall be retained by the insurer.
 
19      (f)  Upon determining that a sale will involve replacement,
 
20 an insurer who uses direct response solicitation methods or its
 
21 agent shall deliver a notice regarding replacement of accident
 
22 and sickness or long-term care insurance coverage upon issuance
 

 
 
 
Page 61                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 of the policy.
 
 2      (g)  Where replacement is intended, the replacing insurer
 
 3 shall notify, in writing, the existing insurer of the proposed
 
 4 replacement.  The existing policy shall be identified by the
 
 5 insurer, name of the insured, and policy number or address
 
 6 including zip code.  Notice shall be made within five working
 
 7 days from the date the application is received by the insurer or
 
 8 the date the policy is issued, whichever occurs first.
 
 9      (h)  Life insurance policies that accelerate benefits for
 
10 long-term care shall comply with this section if the policy being
 
11 replaced is a long-term care insurance policy.  If the policy
 
12 being replaced is a life insurance policy, the insurer shall
 
13 comply with the replacement requirement of the NAIC Replacement
 
14 Life and Annuities Model Regulations.  If a life insurance policy
 
15 that accelerates benefits for long-term care is replaced by
 
16 another policy, the replacing insurer shall comply with both the
 
17 long-term care and the life insurance replacement requirements.  
 
18      (i)  The notice forms required by subsections (e) and (f)
 
19 shall substantially comply with the form requirements of this
 
20 section.
 
21      §431:10A-902  Reporting requirements; group and individual
 
22 policies.(a)  Every insurer shall maintain records for each
 

 
 
 
Page 62                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 agent of the agent's amount of replacement sales as a per cent of
 
 2 the agent's total annual sales and the amount of lapses of long-
 
 3 term care insurance policies sold by the agent as a per cent of
 
 4 the agent's total annual sales.
 
 5      (b)  Every insurer shall report annually by June 30 of each
 
 6 year all of the following:
 
 7      (1)  The ten per cent of its agents with the greatest
 
 8           percentages of lapses and replacements as measured in
 
 9           subsection (a);
 
10      (2)  The number of lapsed policies as a per cent of its
 
11           total annual sales and as a per cent of its total
 
12           number of policies in force as of the end of the
 
13           preceding calendar year;
 
14      (3)  The number of replacement policies sold as a per cent
 
15           of its total annual sales and as a per cent of its
 
16           total number of policies in force as of the end of the
 
17           preceding calendar year;
 
18      (4)  The number of claims denied during the previous
 
19           calendar year for each class of business, expressed as
 
20           a percentage of claims denied; provided that the claims
 
21           denied shall not include claims denied for failure to
 
22           meeting the waiting period or because of any applicable
 

 
 
 
Page 63                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           preexisting condition.
 
 2      (c)  For purposes of this section, "report" means on a
 
 3 statewide basis.
 
 4      §431:10A-903  Filing requirements; advertising; group and
 
 5 individual policies.  (a)  Any entity providing long-term care
 
 6 insurance or benefits shall provide a copy of any long-term care
 
 7 insurance advertisement intended for use in this State whether
 
 8 through written or electronic medium to the commissioner.  
 
 9      (b)  Any advertisement used in this State shall be retained
 
10 by the entity for at least three years from the date the
 
11 advertisement was first used.
 
12      (c)  The commissioner may exempt from the requirements of
 
13 this section any advertising when, in the commissioner's opinion,
 
14 this requirement may not reasonably be applied.   
 
15      §431:10A-904  Standards for marketing; group and individual
 
16 policies.(a)  Any entity offering long-term care insurance
 
17 coverage in this State, directly or through producers, shall:
 
18      (1)  Establish marketing procedures to assure that any
 
19           comparison of policies by its agents or other producers
 
20           will be fair and accurate;
 
21      (2)  Establish marketing procedures to assure excessive
 
22           insurance is not sold or issued;
 

 
 
 
Page 64                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      (3)  Display prominently by type, stamp, or other
 
 2           appropriate means, on the first page of the outline of
 
 3           coverage and policy:
 
 4           "Notice to buyer: This policy may not cover all of the
 
 5           costs associated with long-term care incurred by the
 
 6           buyer during the period of coverage.  The buyer is
 
 7           advised to review carefully all policy limitations."
 
 8      (4)  Inquire and otherwise make every reasonable effort to
 
 9           identify whether a prospective applicant or enrollee
 
10           for long-term care insurance currently has accident and
 
11           sickness or long-term care insurance and the types and
 
12           amounts of any such insurance;
 
13      (5)  Every entity marketing long-term care insurance shall
 
14           establish procedures for audits to verify compliance
 
15           with this subsection;
 
16      (6)  Provide written notice to the prospective policyholder
 
17           or certificateholder of a state senior insurance
 
18           counseling program including the name, address, and
 
19           telephone number of the program; provided that the
 
20           program has been approved by the commissioner; and
 
21      (7)  Use the terms "noncancellable" or "level premium" only
 
22           when the policy or certificate conforms to section
 

 
 
 
Page 65                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           431:10A-504.
 
 2      (b)  In addition to the acts or practices prohibited in
 
 3 chapter 431, article 13, all of the following are prohibited:
 
 4      (1)  Twisting.  Knowingly making any misleading
 
 5           representation or incomplete or fraudulent comparison
 
 6           of any insurance policies or insurers for the purpose
 
 7           of inducing, or tending to induce, any person to lapse,
 
 8           forfeit, surrender, terminate, retain, pledge, assign,
 
 9           borrow on, or convert any insurance policy or to take
 
10           out a policy of insurance with another insurer.
 
11      (2)  High pressure tactics.  Employing any method of
 
12           marketing having the effect of or tending to induce the
 
13           purchase of insurance through force, fright, threat,
 
14           whether explicit or implied, or undue pressure to
 
15           purchase or recommend purchase of insurance.
 
16      (3)  Cold lead advertising.  Making use directly or
 
17           indirectly of any method of marketing which fails to
 
18           disclose in a conspicuous manner that a purpose of the
 
19           method of marketing is solicitation of insurance and
 
20           that contact will be made by an insurance agent or
 
21           insurance company.
 
22      §431:10A-905  Standards of marketing; certain group
 

 


 

Page 66                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 policies.(a)  Every association or trust defined in paragraph
 
 2 (3) in the definition of "group long-term care insurance", when
 
 3 endorsing or selling long-term care insurance, shall educate its
 
 4 members concerning long-term care issues in general so that its
 
 5 members can make informed decisions.  The association or trust
 
 6 shall provide objective information regarding long-term care
 
 7 insurance policies or certificates endorsed or sold through the
 
 8 association or trust to ensure that members of the association or
 
 9 trust receive a balanced and complete explanation of the features
 
10 in the policies or certificates being endorsed or sold.
 
11      (b)  Where an association or trust is endorsing or selling a
 
12 long-term care insurance policy or certificate, the insurer shall
 
13 file the following information with the commissioner:
 
14      (1)  The policy or certificate;
 
15      (2)  A corresponding outline of coverage; and
 
16      (3)  Any advertisements requested by the commissioner.
 
17      (c)  The association or trust shall disclose in any long-
 
18 term care insurance solicitation:
 
19      (1)  The specific nature and amount of the comparison
 
20           arrangements (including all fees, commissions,
 
21           administrative fees, and other forms of financial
 
22           support) that the association or trust receives from
 

 
Page 67                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           endorsement or sale of the policy or certificate of its
 
 2           members; and
 
 3      (2)  A brief description of the process under which the
 
 4           policies and the insurer issuing the policies were
 
 5           selected.
 
 6      (d)  If the association or trust and insurer have
 
 7 interlocking directorates or trustees arrangements, the
 
 8 association or trust shall disclose this fact to its members.
 
 9      (e)  The board of directors of an association or the
 
10 trustees of a trust endorsing or selling long-term care insurance
 
11 policies or certificates shall review and approve the insurance
 
12 policies as well as the compensation arrangements with the
 
13 insurer.
 
14      (f)  The association or trust shall also:
 
15      (1)  At the time of the association's or trust's decision to
 
16           endorse, engage the services of a person with a
 
17           expertise in long-term care insurance not affiliated
 
18           with the insurer to conduct an examination of the
 
19           policies, including its benefits, features, and rates,
 
20           and update the examination thereafter in the event of
 
21           material change;
 
22      (2)  Actively monitor the marketing efforts of the insurer
 

 
 
 
Page 68                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1           and its agents; and
 
 2      (3)  Review and approve all marketing materials or other
 
 3           insurance communications used to promote sales or sent
 
 4           to members regarding the policies or certificates.
 
 5      (g)  No group long-term care insurance policy or certificate
 
 6 may be issued to an association unless the insurer files with the
 
 7 commissioner the information required in this section.
 
 8      (h)  The insurer shall not issue a long-term care policy or
 
 9 certificate to an association or trust, or continue to market the
 
10 policy or certificate unless the insurer certifies annually that
 
11 the association has complied with the requirements of this
 
12 section.
 
13      (i)  Failure to comply with the filing and certification
 
14 requirements of this section constitutes an unfair trade practice
 
15 under chapter 431, article 13.
 
16      §431:10A-906  Delivery of shopper's guide; group and
 
17 individual policies.(a)  Each prospective applicant of a long-
 
18 term care insurance policy or certificate shall be provided with
 
19 a copy of a long-term care shopper's guide in a format developed
 
20 by the NAIC or approved by the commissioner.  
 
21      (b)  If solicitation is done through an agent, the agent
 
22 shall deliver a shopper's guide prior to presentation of the
 

 
 
 
Page 69                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 application or enrollment form.
 
 2      (c)  If solicitation is done through a direct response
 
 3 solicitation, the shopper's guide shall be presented in
 
 4 conjunction with any application or enrollment form.  
 
 5      (d)  Life insurance policies or riders containing
 
 6 accelerated long-term care benefits are not required to furnish a
 
 7 shopper's guide but shall furnish a policy summary as required by
 
 8 this part.
 
 9      §431:10A-907  Standards format outline of coverage; group
 
10 and individual policies.(a)  The outline of coverage shall:
 
11      (1)  Be a free-standing document, using at least ten-point
 
12           type;
 
13      (2)  Not contain material that is advertising in nature; and
 
14      (3)  Emphasize material through underscoring,
 
15           capitalization, or other means that provides prominence
 
16           equivalent to underscoring or capitalization.
 
17      (b)  Every outline of coverage shall be substantially
 
18 similar to the outline of coverage in section 431:10A-905, or as
 
19 approved by the commissioner.
 
20      §431:10A-908  Suitability; group and individual policies.
 
21 (a)  This section shall not apply to life insurance policies that
 
22 accelerate benefits for long-term care.
 

 
 
 
Page 70                                                    131
                                     S.B. NO.           S.D. 3
                                                        
                                                        

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

 
 
 
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 1           or replacement.
 
 2 The issuer or agent shall make reasonable efforts to obtain the
 
 3 information.  The efforts shall include presentation to the
 
 4 applicant, at or prior to application, of the "Long-Term Care
 
 5 Insurance Personal Worksheet."  The worksheet shall contain at a
 
 6 minimum information contained in Appendix B and C of the NAIC
 
 7 Long-Term Care Insurance Model Regulations, July 1998, and shall
 
 8 be set out in at least twelve point type.  A copy of the issuer's
 
 9 personal worksheet shall be filed with the commissioner.
 
10      (d)  Nothing in this section shall restrict an issuer from
 
11 requesting more information to comply with this section.
 
12      (e)  A completed worksheet shall be returned to the issuer
 
13 prior to the issuer's consideration of the applicant for
 
14 coverage, except the personal worksheet need not be returned for
 
15 sales of employer group long-term care insurance to employees and
 
16 their dependents.
 
17      (f)  Any information contained in the personal worksheet
 
18 shall not be sold or disseminated outside of the issuer's company
 
19 or agency.
 
20      (g)  The issuer shall use the suitability standards it has
 
21 developed pursuant to this section in determining the
 
22 appropriateness of long-term care insurance coverage for a
 

 
 
 
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 1 particular applicant.  The agent of the issuer shall use the
 
 2 suitability standards developed by the issuer.
 
 3      (h)  If the issuer determines that the applicant does not
 
 4 meet its financial suitability standards, or if the applicant has
 
 5 declined to provide the information, the issuer may reject the
 
 6 application.  In the alternative, the issuer shall send the
 
 7 applicant a letter similar to the NAIC Long-Term Care Insurance
 
 8 Model Regulations July 1998, Appendix D.  If the applicant has
 
 9 declined to provide financial information, the issuer may use
 
10 some other method to verify the applicant's intent.  Either the
 
11 applicant's returned letter or a record of the alternate method
 
12 of verification shall be made part of the applicant's file.
 
13      (i)  The issuer shall report annually to the commissioner
 
14 the total number of applications received from residents of this
 
15 State, the number of those who declined to provide information on
 
16 a personal worksheet, the number of applicants who did not meet
 
17 the suitability standards, and the number of those who chose to
 
18 confirm after receiving the suitability letter.
 
19               SUBPART F.  NON-HIPAA LONG-TERM CARE 
 
20                       INSURER REQUIREMENTS
 
21      §431:10A-1001  Filing requirements; group policies.  An
 
22 insurer offering long-term care insurance destined for use or
 

 
 
 
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 1 application in this State shall file with the commissioner
 
 2 evidence that the group policy or certificate thereunder has been
 
 3 approved by a state having statutory or regulatory long-term care
 
 4 insurance requirements substantially similar to this part.
 
 5      §431:10A-1002  Reserve standards; life insurance policies or
 
 6 riders; group and individual policies.(a)  If long-term care
 
 7 benefits are provided through the acceleration of benefits under
 
 8 a group or individual life policy or rider, the policy reserves
 
 9 for the benefits shall be determined in accordance with section
 
10 431:5-307.  Claim reserves shall also be established in the case
 
11 where the policy or rider is in claim status.
 
12      (b)  Reserves for policies or riders subject to this section
 
13 shall be based on the multiple decrement model utilizing all
 
14 relevant decrements except for voluntary termination rates.
 
15 Single decrement approximations are acceptable if the calculation
 
16 produces essentially similar reserves, if the reserve is clearly
 
17 more conservative, or if the reserve is immaterial.  The
 
18 calculations may take into account the reduction in life
 
19 insurance benefits due to the payment of long-term care benefits;
 
20 provided that the reserves for the long-term care benefit and the
 
21 life insurance benefit shall not be less than the reserves for
 
22 the life insurance benefit assuming no long-term care benefit.
 

 
 
 
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 1      (c)  In the development and calculation of reserves for
 
 2 policies and riders subject to this subsection, due regard shall
 
 3 be given to applicable policy provisions, marketing methods,
 
 4 administrative procedures, and all other considerations which
 
 5 have an impact on projected claim costs, including but not
 
 6 limited to the following:
 
 7      (1)  Definition of insured events;
 
 8      (2)  Covered long-term care facilities;
 
 9      (3)  Existence of home convalescence care coverage;
 
10      (4)  Definition of facilities;
 
11      (5)  Existence or absence of barriers to eligibility;
 
12      (6)  Premium waiver provision;
 
13      (7)  Renewability;
 
14      (8)  Ability to raise premiums;
 
15      (9)  Marketing method;
 
16     (10)  Underwriting procedures;
 
17     (11)  Claims adjustment procedures;
 
18     (12)  Waiting period;
 
19     (13)  Maximum benefit;
 
20     (14)  Availability of eligible facilities;
 
21     (15)  Margins in claim costs;
 
22     (16)  Optional nature of benefit;
 

 
 
 
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 1     (17)  Delay in eligibility requirements;
 
 2     (18)  Inflation protection; and
 
 3     (19)  Guaranteed insurability option.
 
 4      (c)  Any applicable valuation morbidity table shall be
 
 5 certified as appropriate as a statutory valuation table by a
 
 6 member of the American Academy of Actuaries.
 
 7      §431:10A-1003  Reserve standards; insurance other than life;
 
 8 group and individual policies.  When long-term care benefits are
 
 9 provided through insurance other than life insurance, the
 
10 reserves shall be determined by a table certified as appropriate
 
11 as a statutory valuation table by a member of the American
 
12 Academy of Actuaries and approved by the commissioner."
 
13                             PART III
 
14      SECTION 3.  Section 87-23.5, Hawaii Revised Statutes, is
 
15 amended by amending subsections (a) and (b) to read as follows:
 
16      "(a)  The board [of trustees] shall determine the benefits
 
17 of a long-term care benefits plan for employee-beneficiaries,
 
18 their spouses or reciprocal beneficiaries, as well as their
 
19 parents and grandparents, including in-laws, and qualified-
 
20 beneficiaries.  The plan shall comply with [the provisions of]
 
21 article 10A, part V, of chapter 431[, upon initial plan
 
22 implementation only].
 

 
 
 
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 1      (b)  Notwithstanding any other law to the contrary, [such]
 
 2 the benefits shall be available only to employee-beneficiaries,
 
 3 their spouses or reciprocal beneficiaries, as well as their
 
 4 parents and grandparents, including in-laws, and qualified-
 
 5 beneficiaries who enroll between the ages of twenty and eighty-
 
 6 five.  Eligible persons must comply with the plan's age,
 
 7 enrollment, medical underwriting, and contribution requirements."
 
 8      SECTION 4.  Section 432:1-102, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (a) to read as follows:
 
10      "(a)  Part III and part V of article 10A of chapter 431
 
11 shall apply to nonprofit medical indemnity or hospital service
 
12 associations.  Such associations shall be exempt from the
 
13 provisions of part I of article 10A; provided that such exemption
 
14 is in compliance with applicable federal statutes and
 
15 regulations."
 
16      SECTION 5.  Section 431:2-201.5, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "[[]§431:2-201.5[]]  Conformity to federal law.(a)  The
 
19 provisions of the Health Insurance Portability and Accountability
 
20 Act of 1996, P.L. 104-191, as it relates to group and individual
 
21 health insurance, and as to long-term care insurance to the
 
22 extent provided in part V of article 10A, chapter 431, shall
 

 
 
 
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 1 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)
 

 
 
 
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 1                of the Public Health Service Act; and
 
 2           (C)  "Small employer" means an employer who employs
 
 3                between one and no more than fifty employees;
 
 4      (4)  All group health issuers shall offer group health plans
 
 5           to small employers whose employees live, work, or
 
 6           reside in the group health issuer's service areas;
 
 7           provided that the commissioner may exempt a group
 
 8           health issuer if the commissioner determines that the
 
 9           group health issuer does not have the capacity to
 
10           deliver services adequately to enrollees of additional
 
11           groups given its obligation to existing employer
 
12           groups; and
 
13      (5)  A group health issuer shall be prohibited from imposing
 
14           any preexisting condition exclusion.
 
15      (b)  The insurance commissioner may adopt rules to
 
16 implement, clarify, or conform title 24 to the Health Insurance
 
17 Portability and Accountability Act of 1996, P.L. 104-191.
 
18      (c)  The adoption of the Health Insurance Portability and
 
19 Accountability Act of 1996, P.L. 104-191 for the purposes of
 
20 title 24 is not an adoption for any purposes for income taxes
 
21 under chapter 235[.]; except as specifically provided in part V
 
22 of article 10A, chapter 431."
 

 
 
 
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 1      SECTION 6.  Section 431:16-205, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (g) to read as follows:
 
 3      "(g)  Member insurer means any insurer licensed or who holds
 
 4 a certificate of authority to transact in this State any kind of
 
 5 insurance for which coverage is provided under section
 
 6 431:16-203, and includes any insurer whose license or certificate
 
 7 of authority in this State may have been suspended, revoked, not
 
 8 renewed, or voluntarily withdrawn, but does not include:
 
 9      (1)  A nonprofit hospital or medical service organization;
 
10           provided that the organization is not offering long-
 
11           term care insurance;
 
12      (2)  A health maintenance organization;
 
13      (3)  A fraternal benefit society;
 
14      (4)  A mandatory state pooling plan;
 
15      (5)  A mutual assessment company or any entity that operates
 
16           on an assessment basis;
 
17      (6)  An insurance exchange; or
 
18      (7)  Any entity similar to any of the above."
 
19      SECTION 7.  The insurance commissioner shall request the
 
20 Internal Revenue Service for a ruling on whether this part and
 
21 parts I, II, and IV of this Act conform to the Health Insurance
 
22 Portability and Accountability Act of 1996, P.L. No. 104-191, as
 

 
 
 
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 1 amended.
 
 2                              PART IV
 
 3      SECTION 8.  There is appropriated out of the general
 
 4 revenues of the State of Hawaii the sum of $         , or so much
 
 5 thereof as may be necessary for fiscal year 1999-2000, for the
 
 6 insurance division to hire a qualified long-term care insurance
 
 7 actuary and to increase its staff to enable it to adequately
 
 8 review long-term care insurance filings.
 
 9      SECTION 9.  The sum appropriated under section 8 shall be
 
10 expended by the department of commerce and consumer affairs for
 
11 the purposes of this Part.
 
12      SECTION 10.  Chapter 431:10A, Part V, Hawaii Revised
 
13 Statutes, is repealed.
 
14      SECTION 11.  If the provisions of this part or parts I, II,
 
15 and III of this Act, or the application thereof to any person or
 
16 circumstance is held invalid, the invalidity does not affect
 
17 other provisions or applications of these parts which can be
 
18 given effect without the invalid provision or application, and to
 
19 this end the provisions of these parts are severable.
 
20                              PART V
 
21      SECTION 12.  The legislature finds that the long term care
 
22 ombudsman program is a federally mandated program which is funded
 

 
 
 
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 1 through the Older Americans Act of 1965.  The program is charged
 
 2 with the responsibility of serving as an advocate for 6,780
 
 3 residents living in 46 licensed nursing facilities and 542 adult
 
 4 residential care homes; especially those who may be unable or
 
 5 afraid to speak for themselves.  Situated within the executive
 
 6 office on aging, this statewide program requires the ombudsman to
 
 7 visit all facilities.  The program is currently staffed by two
 
 8 full-time program specialists.
 
 9      The program's primary function is to respond, investigate
 
10 and assist in resolving complaints and requests for information
 
11 or assistance.  Outreach to residents in these facilities and
 
12 homes is an essential component of the program since the
 
13 residents served are usually frail and dependent with physical,
 
14 mental, or emotional needs.  Often, their dependency on others
 
15 for care presents the potential for reluctance in speaking out
 
16 when they are the recipients of inappropriate care.  Outreach to
 
17 these residents is particularly crucial in order to assure them
 
18 that they do have external supports should they need them.
 
19      It was recently pointed out at the Governor's Conference on
 
20 Adult Residential Care Homes that the long term care options in
 
21 Hawaii are expanding.  There is an increase in assisted living
 
22 and expanded care facilities.  While there is much supervision
 

 
 
 
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 1 and family involvement in nursing homes, in a care home the only
 
 2 supervision is from the care home operator.  Current regulations
 
 3 require the department of health to notify the care home operator
 
 4 one month in advance before surveying the home for renewal of its
 
 5 license.  Presently the long term care ombudsman is the only one
 
 6 allowed to enter a care home without an appointment. 
 
 7      Some of these homes are now receiving special waivers to
 
 8 accept residents at a higher acuity level who are also less
 
 9 likely to be able to speak for themselves.  In order to assure
 
10 proper services for these elderly residents, the long term care
 
11 ombudsman program's jurisdiction will increase.
 
12      As the State's elderly population continues to grow, the two
 
13 full-time staff members of the program will be unable to provide
 
14 the necessary outreach services.  Forty-six states have developed
 
15 a successful volunteer component to their long term care
 
16 ombudsman programs.  The American Association of Retired Persons
 
17 has developed a training manual specifically for the long term
 
18 care ombudsman program which many states have used as a starting
 
19 point.  According to the Legal Counsel for the Elderly's 1995
 
20 Report, "the presence and work of the volunteers make a major
 
21 contribution towards the enhancement of the quality of life for
 
22 residents of long term care facilities."
 

 
 
 
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 1      The purpose of this part is to appropriate funds to
 
 2 establish a long term care volunteer ombudsman program to ensure
 
 3 that quality outreach services are provided to the increasing
 
 4 number of elderly people residing in long term care facilities in
 
 5 the State.
 
 6      SECTION 13.  There is appropriated out of the general
 
 7 revenues of the State of Hawaii the sum of $90,721, or so much
 
 8 thereof as may be necessary for fiscal year 1999-2000, to
 
 9 establish a long term care volunteer ombudsman program, to
 
10 include but not be limited to a volunteer coordinator, clerk
 
11 steno, ground and air travel, training, and miscellaneous
 
12 volunteer reimbursements.
 
13      SECTION 14.  The sum appropriated shall be expended by the
 
14 department of health for the purposes of this part.
 
15                              PART VI
 
16      SECTION 15.  The legislature finds that long-term care is a
 
17 critical issue of particular importance to Hawaii, where there is
 
18 a shortage of nursing home beds, and where home and
 
19 community-based programs are fragmented and non-existent in some
 
20 areas.  To address these growing concerns, the State needs to
 
21 examine alternative ways to administer long-term care, which will
 
22 minimize the need for new long-term care beds and control
 

 
 
 
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 1 ever-increasing costs, while providing a more favorable
 
 2 environment for Hawaii's elderly.
 
 3      The legislature further finds that one viable option is the
 
 4 non-institutional means of providing long-term care.
 
 5 Establishing such a long-term care demonstration project will
 
 6 offer Medicaid recipients the opportunity for home and
 
 7 community-based services, and address the need to decrease the
 
 8 burden on the State, hospitals, nursing facilities, and the
 
 9 elderly and their families.
 
10      The legislature believes that the State's MedQuest program
 
11 has demonstrated that savings can be accomplished in an acute
 
12 care Medicaid program by using managed care companies to deliver
 
13 high quality care.  A comparable model for long-term care would
 
14 be based on an integration of home and community-based services
 
15 and long-term nursing facility care and acute care systems,
 
16 respect for the dignity of the elderly, integration of financing
 
17 and delivery of services, consumer involvement in planning and
 
18 monitoring, and improvements in the quality of care.
 
19      The 1998 legislature appropriated $40,000 to begin the
 
20 development of a managed long-term care demonstration project,
 
21 with matching funds of $40,000 to be provided by the federal
 
22 government.  Much remains to be done on this vital project.
 

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1      The purpose of this part is to continue the design and
 
 2 implementation of a managed long-term care demonstration project.
 
 3      SECTION 16.  There is appropriated out of the general
 
 4 revenues of the State of Hawaii the sum of $        , or so much
 
 5 thereof as may be necessary for fiscal year 1999-2000, to
 
 6 establish a long-term care managed care waiver; provided that the
 
 7 funds shall be used to:
 
 8      (1)  Review and update current information gathered to date
 
 9           on state Medicaid managed care programs for the
 
10           provision of long-term care services; and
 
11      (2)  Develop a planning document for the design and
 
12           implementation of a Medicaid managed long-term care
 
13           demonstration project, to include:
 
14           (A)  Identification of preliminary resource needs;
 
15           (B)  Development of a workplan for the design and
 
16                implementation of a Medicaid managed long-term
 
17                care demonstration project; and
 
18           (C)  Development of a list of changes to current
 
19                infrastructure that may be necessary to
 
20                accommodate a Medicaid managed long-term care
 
21                demonstration project.
 
22      SECTION 17.  The sum appropriated shall be expended by the
 

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        
                                                        

 
 1 department of human services for the purposes of this part.
 
 2                             PART VII
 
 3      SECTION 18.  Statutory material to be repealed is bracketed.
 
 4 New statutory material is underscored.
 
 5      SECTION 19.  This Act shall take effect on July 1, 1999.