Chapter 239

2007 -- S 0638 SUBSTITUTE A

Enacted 07/03/07

 

A N A C T

RELATING TO INSURANCE -- LONG-TERM CARE INSURANCE

          

     Introduced By: Senators Walaska, McCaffrey, Bates, Paiva-Weed, and Goodwin

     Date Introduced: February 15, 2007

 

It is enacted by the General Assembly as follows:

 

     SECTION 1. Sections 27-34.2-1, 27-34.2-4, 27-34.2-6, 27-34.2-12, 27-34.2-14, 27-34.2-

16 and 27-34.2-19 of the General Laws in Chapter 27-34.2 entitled "Long-Term Care Insurance"

are hereby amended to read as follows:

 

     27-34.2-1. Purpose. -- The purpose of this chapter is to promote the public interest, to

promote the availability of long term care insurance policies, to protect applicants for long term

care insurance, as defined, from unfair or deceptive sales or enrollment practices, to establish

standards for long term care insurance, to facilitate public understanding and comparison of long

term care insurance policies, and to facilitate flexibility and innovation in the development of

long term care insurance coverage.

 

     27-34.2-4. Definitions. -- Unless the context requires otherwise, the following definitions

apply throughout the chapter:

      (1) "Applicant" means:

      (i) In the case of an individual long term care insurance policy, the person who seeks to

contract for benefits; and

      (ii) In the case of a group long term care insurance policy, the proposed certificate

holder;

      (2) "Certificate" means, for the purposes of this chapter, any certificate issued under a

group long term care insurance policy, which policy has been delivered or issued for delivery in

this state, except as provided for in section 27-34.2-5;

      (3) "Director" means the director of business regulation;

      (4) "Group long term care insurance" means a long term care insurance policy which is

delivered or issued for delivery in this state and issued to:

      (i) One or more employers or labor organizations, or to a trust, or to the trustees of a

fund established by one or more employers or labor organizations, or a combination of employers

and labor organizations, for employees or former employees or a combination of employees and

former employees, or for members or former members, or a combination of members and former

members, of the labor organizations; or

      (ii) Any professional, trade, or occupational association for its members or former or

retired members, or combination of members and former members, if that association:

      (A) Is composed of individuals all of whom are or were actively engaged in the same

profession, trade, or occupation; and

      (B) Has been maintained in good faith for purposes other than obtaining insurance; or

      (iii) An association, a trust, or the trustee(s) of a fund established, created, or maintained

for the benefit of members of one or more associations. Prior to advertising, marketing, or

offering that policy within this state, the association or associations, or the insurer of the

association or associations, shall file evidence with the director that the association or

associations have at the outset a minimum of one hundred (100) persons and have been organized

and maintained in good faith for purposes other than that of obtaining insurance, have been in

active existence for at least one year, and have a constitution and bylaws which provide that:

      (A) The association or associations hold regular meetings not less than annually to

further purposes of the members;

      (B) Except for credit unions, the association or associations collect dues or solicit

contributions from members; and

      (C) The members have voting privileges and representation on the governing board and

committees;

      (iv) Sixty (60) Thirty (30) days after that filing the association or associations will be

deemed to satisfy those organizational requirements, unless the director makes a finding that the

association or associations do not satisfy those organizational requirements; or

      (v) A group other than as described in paragraphs (i), (ii) and (iii) of this subdivision,

subject to a finding by the director that:

      (A) The issuance of the group policy is not contrary to the best interest of the public;

      (B) The issuance of the group policy would result in economies of acquisition or

administration; and

      (C) The benefits are reasonable in relation to the premiums charged;

      (5) "Issuer" means any domestic or foreign insurance company as defined in this title of

these general laws or any other entity legally authorized to issue or deliver long term care

insurance contracts pursuant to the provisions of this chapter.

      (6) (i) "Long term care insurance" means any insurance policy or rider advertised,

marketed, offered, or designed to provide coverage for not less than twelve (12) consecutive

months for each covered person on an expense incurred, indemnity, prepaid, or other basis, for

one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative,

maintenance, or personal care services provided in a setting other than an acute care unit of a

hospital. This term includes group and individual annuities and life insurance policies or riders

which provide directly or which supplement long term care insurance. This term also includes a

policy or rider that provides for payment of benefits based upon cognitive impairment or the loss

of functional capacity. Long term care insurance may be issued by insurers, fraternal benefit

societies, nonprofit health, hospital, and medical service corporations, prepaid health plans, health

maintenance organizations, or any similar organization to the extent that they are authorized to

issue life or health insurance. Long term care insurance shall not include any insurance policy

which was offered primarily to provide basic Medicare supplement coverage, basic hospital

expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity

coverage, major medical expense coverage, disability income protection coverage, accident only

coverage, specified disease or specified accident coverage, or limited benefit health coverage.

This list of excluded coverages is illustrative and is not intended to be all inclusive;

      (ii) With regard to life insurance, this term does not include life insurance policies which

accelerate the death benefit specifically for one or more of the qualifying events of terminal

illness, medical conditions requiring extraordinary medical intervention, or permanent

institutional confinement, and which provide the option of a lump sum payment for those benefits

and in which neither the benefits nor the eligibility for the benefits is conditioned upon the receipt

of long term care. Notwithstanding any other provision contained in this chapter, any product

advertised, marketed, or offered as long term care insurance shall be subject to the provisions of

this chapter;

      (7) "Policy" means, for the purposes of this chapter, any policy, contract, subscriber

agreement, rider, or endorsement delivered or issued for delivery in this state by an insurer,

fraternal benefit society, nonprofit health, hospital, or medical service corporation, prepaid health

plan, health maintenance organization, or any similar organization.

     (8)(i) "Qualified long-term care insurance contract" or "federally tax-qualified long-term

care insurance contract" means an individual or group insurance contract that meets the

requirements of section 7702B(b) of the Internal Revenue Code of 1986, as amended, et seq., as

follows:

     (A) The only insurance protection provided under the contract is coverage of qualified

long-term care services. A contract shall not fail to satisfy the requirements of this subparagraph

by reason of payments being made on a per diem or other periodic basis without regard to the

expenses incurred during the period to which the payments relate;

     (B) The contract does not pay or reimburse expenses incurred for services or items to the

extent that the expenses are reimbursable under Title XVIII of the Social Security Act

(Medicare), as amended, or would be so reimbursable but for the application of a deductible or

coinsurance amount. The requirements of this subparagraph do not apply to expenses that are

reimbursable under Title XVIII of the Social Security Act only as a secondary payor. A contract

shall not fail to satisfy the requirements of this subparagraph by reason of payments being made

on a per diem or other periodic basis without regard to the expenses incurred during the period to

which the payments relate;

     (C) The contract is guaranteed renewable, within the meaning of section 7702B(b)(1)(C)

of the Internal Revenue Code of 1986, as amended, et seq.;

     (D) The contract does not provide for a cash surrender value or other money that can be

paid, assigned, pledged as collateral for a loan, or borrowed except as provided in subdivision 27-

34.2-4(8)(i)(E);

     (E) All refunds of premiums, and all policyholder dividends or similar amounts, under

the contract are to be applied as a reduction in future premiums or to increase future benefits,

except that a refund on the event of death of the insured or a complete surrender or cancellation of

the contract cannot exceed the aggregate premiums paid under the contract; and

     (F) The contract meets the consumer protection provisions set forth in section 7702B(g)

of the Internal Revenue Code of 1986, as amended, et seq.

     (ii)_"Qualified long-term care insurance contract" or "federally tax-qualified long term

care insurance contract" also means the portion of a life insurance contract that provides long-

term care insurance coverage by rider or as part of the contract and that satisfied the requirements

of section 7702(B)(b) and (e) of the Internal Revenue Code of 1986, as amended, et seq.

 

     27-34.2-6. Disclosure and performance standards for long-term care insurance. -- (a)

The director may adopt regulations that establish:

      (1) Standards for full and fair disclosure setting forth the manner, content, and required

disclosures for the sale of long term care insurance policies, terms of renewability, initial and

subsequent conditions of eligibility, nonduplication of coverage provisions, coverage of

dependents, preexisting conditions, termination of insurance, continuation or conversion,

probationary periods, limitations, exceptions, reductions, elimination periods, requirements for

replacement, recurrent conditions, and definitions of terms; and

      (2) Reasonable rules and regulations that are necessary, proper, or advisable to the

administration of this chapter including the procedure for the filing or submission of policies

subject to this chapter. This provision may not abridge any other authority granted the director by

law.

      (b) No long term care insurance policy may:

      (1) Be cancelled, nonrenewed, or terminated on the grounds of the age or the

deterioration of the mental or physical health of the insured individual or certificate holder; or

      (2) Contain a provision establishing a new waiting period in the event existing coverage

is converted to or replaced by a new or other form within the same company, except with respect

to an increase in benefits voluntarily selected by the insured individual or group policyholder; or

      (3) Provide coverage for skilled nursing care only or provide more coverage for skilled

care in a facility than coverage for lower levels of care. The evaluation of the amount of coverage

shall be based on aggregate days of care covered for lower levels of care when compared to days

of care covered for skilled care.

      (c) A long term care policy must provide:

      (1) Home health care benefits that are at least fifty percent (50%) of those provided for

care in a nursing facility. The evaluation of the amount of coverage shall be based on aggregate

days of care covered for home health care when compared to days of care covered for nursing

home care; and

      (2) Home health care benefits which meet the National Association of Insurance

Commissioners' minimum standards for home health care benefits in long term care insurance

policies.

      (d) (1) No long term care insurance policy or certificate other than a policy or certificate

issued to a group as defined in section 27-34.2-4(4)(i) shall use a definition of "preexisting

condition" which is more restrictive than the following: "preexisting condition" means a condition

for which medical advice or treatment was recommended by, or received from a provider of

health care services, within six (6) months preceding the effective date of coverage of an insured

person;

      (2) No long term care insurance policy or certificate other than a policy or certificate

issued to a group as defined in section 27-34.2-4(4)(i) may exclude coverage for a loss or

confinement which is the result of a preexisting condition, unless the loss or confinement begins

within six (6) months following the effective date of coverage of an insured person;

      (3) The director may extend the limitation periods set forth in subdivisions (1) and (2) of

this subsection as to specific age group categories in specific policy forms upon findings that the

extension is in the best interest of the public;

      (4) The definition of "preexisting condition" does not prohibit an insurer from using an

application form designed to elicit the complete health history of an applicant, and, on the basis of

the answers on that application, from underwriting in accordance with that insurer's established

underwriting standards. Unless otherwise provided in the policy or certificate, a preexisting

condition, regardless of whether it is disclosed on the application, need not be covered until the

waiting period described in subdivision (2) of this subsection expires. No long term care

insurance policy or certificate may exclude or use waivers or riders of any kind to exclude, limit

or reduce coverage or benefits for specifically named or described preexisting diseases or

physical conditions beyond the waiting period described in subdivision (2) of this subsection,

unless the waiver or rider has been specifically approved by the director as set forth in section 27-

34.2-8. This shall not permit exclusion or limitation of benefits on the basis of Alzheimer's

disease, other dementias, or organic brain disorders.

      (e)(1) No long term care insurance policy may be delivered or issued for delivery in this

state if the policy:

      (1)(i) Conditions eligibility for any benefits on a prior hospitalization or

institutionalization requirement; or

      (2)(ii) Conditions eligibility for benefits provided in an institutional care setting on the

receipt of a higher level of institutional care.

     (iii) Conditions eligibility for any benefits other than waiver of premium, post-

confinement, post-acute care or recuperative benefits on a prior institutionalization requirement.

     (2)(i) A long-term care insurance policy containing post-confinement, post-acute care or

recuperative benefits shall clearly label in a separate paragraph of the policy or certificate entitled

"Limitations or Conditions on Eligibility for Benefits" such limitations or conditions, including

any required number of days of confinement.

     (ii) A long-term care insurance policy or rider that conditions eligibility of

noninstitutional benefits on the prior receipt of institutional care shall not require a prior

institutional stay of more than thirty (30) days.

     (3) No long-term insurance policy or rider that provides benefits only following

institutionalization shall condition such benefits upon admission to a facility for the same or

related conditions within a period of less than thirty (30) days after discharge from the institution.

      (f) The commissioner may adopt regulations establishing loss ratio standards for long

term care insurance policies provided that a specific reference to long term care insurance policies

is contained in the regulation.

      (g) Right to return Free look. Long term care insurance applicants shall have the right

to return the policy or certificate within thirty (30) days of its delivery and to have the premium

refunded if, after examination of the policy or certificate, the applicant is not satisfied for any

reason. Long term care insurance policies and certificates shall have a notice prominently printed

on the first page or attached to the policy or certificate stating in substance that the applicant shall

have the right to return the policy or certificate within thirty (30) days of its delivery and to have

the premium refunded if, after examination of the policy or certificate other than a certificate

issued pursuant to a policy issued to a group defined in section 27-34.2-4(4)(i), the applicant is

not satisfied for any reason. This subsection shall also apply to denials of applications and any

refund must be made within thirty (30) days of the return or denial.

      (h) (1) An outline of coverage shall be delivered to a prospective applicant for long term

care insurance at the time of initial solicitation through means which prominently direct the

attention of the recipient to the document and its purpose;

      (2) The commissioner shall prescribe a standard format, including style, arrangement,

and overall appearance, and the content of an outline of coverage;

      (3) In the case of insurance producer solicitations, an insurance producer must deliver

the outline of coverage prior to the presentation of an application or enrollment form;

      (4) In the case of direct response solicitations, the outline of coverage must be presented

in conjunction with any application or enrollment form;

     (5) In the case of a policy issued to a group defined in subdivision 27-34.2-4(4)(i) of this

act, an outline of coverage shall not be required to be delivered, provided that the information

described in subdivision 27-34.2-6(6)(i) through subdivision 27-34.2-6(6)(vi) is contained in

other materials relating to enrollment. Upon request, these other materials shall be made available

to the commissioner.

      (5) (6) The outline of coverage shall include:

      (i) A description of the principal benefits and coverage provided in the policy;

      (ii) A statement of the principal exclusions, reductions, and limitations contained in the

policy;

      (iii) A statement of the terms under which the policy or certificate, or both, may be

continued in force or discontinued, including any reservation in the policy of a right to change

premiums. Continuation or conversion provisions of group coverage shall be specifically

described;

      (iv) A statement that the outline of coverage is only a summary, not a contract of

insurance, and that the policy or group master policy contains governing contractual provisions;

      (v) A description of the terms under which the policy or certificate may be returned and

the premium refunded; and

      (vi) A brief description of the relationship of cost of care and benefits.

     (vii) A statement that discloses to the policyholder or certificate holder whether the

policy is intended to be a federally tax-qualified long-term care insurance contract under section

7702B(b) of the Internal Revenue Code of 1986, as amended, et seq.

      (i) A certificate issued pursuant to a group long term care insurance policy which policy

is delivered or issued for delivery in this state shall include:

      (1) A description of the principal benefits and coverage provided in the policy;

      (2) A statement of the principal exclusions, reductions, and limitations contained in the

policy; and

      (3) A statement that the group master policy determines governing contractual

provisions.

     (4) If an application for a long-term care insurance contract or certificate is approved, the

issuer shall deliver the contract or certificate of insurance to the applicant no later than thirty (30)

days after the date of approval.

      (j) At the time of policy delivery, a policy summary shall be delivered for an individual

life insurance policy which provides long-term care benefits within the policy or by rider. In the

case of direct response solicitations, the insurer shall deliver the policy summary upon the

applicant's request, but regardless of request shall make the delivery no later than at the time of

policy delivery. In addition to complying with all applicable requirements, the summary shall also

include:

      (1) An explanation of how the long term care benefit interacts with other components of

the policy, including deductions from death benefits;

      (2) An illustration of the amount of benefits, the length of benefits, and the guaranteed

lifetime benefits, if any, including a statement that any long-term care inflation projection option

required by section 27-34.2-13, is not available under the policy for each covered person;

      (3) Any exclusions, reductions, and limitations on benefits of long term care; and

      (4) If applicable to the policy type, the summary shall also include:

      (i) A disclosure of the effects of exercising other rights under the policy;

      (ii) A disclosure of guarantees related to long term care costs of insurance charges; and

      (iii) Current and projected maximum lifetime benefits.

     (5) The provisions of the policy summary listed above may be incorporated into a basic

illustration or into the life insurance policy summary which is required to be delivered in

accordance with chapter 27-4 and the rules and regulations promulgated under section 27-4-23.

      (k) Any time a long term benefit, funded through a life insurance vehicle by the

acceleration of the death benefit, is in benefit payment status, a monthly report shall be provided

to the policyholder. The report shall include:

      (1) Any long term care benefits paid out during the month;

      (2) An explanation of any changes in the policy, e.g. death benefits or cash values, due to

long term care benefits being paid out; and

      (3) The amount of long term care benefits existing or remaining.

      (l) Any policy or rider advertised, marketed, or offered as long term care or nursing

home insurance shall comply with the provisions of this chapter.

     (m) If a claim under a long-term care insurance contract is denied, the issuer shall, within

sixty (60) days of the date of a written request by the policyholder or certificate holder, or a

representative thereof:

     (1) Provide a written explanation of the reasons for the denial; and

     (2) Make available all information directly related to the denial.

 

     27-34.2-12. Unintentional policy lapse. (a) Each insurer offering long term care

insurance shall, as a protection against unintentional lapse comply with the following:

      (1) (i) No individual long term care policy or certificate shall be issued until the insurer

has received from the applicant either: a written designation of at least one person, in addition to

the applicant, who is to receive notice of lapse or termination of the policy or certificate for

nonpayment of premium, or a written waiver dated and signed by the applicant electing not to

designate additional persons to receive notice. The applicant has the right to designate at least one

person who is to receive the notice of termination, in addition to the insured. Designation shall

not constitute acceptance of any liability on the third party for services provided to the insured.

The form used for the written designation must provide space clearly designated for listing at

least one person. The designation shall include each person's full name and home address. In the

case of an applicant who elects not to designate an additional person, the waiver shall state:

"Protection against unintended lapse. I understand that I have the right to designate at least one

person other than myself to receive notice of lapse or termination of this long term care insurance

policy for nonpayment of premium. I understand that notice will not be given until thirty (30)

days after premium is due and unpaid. I elect NOT to designate any person to receive such

notice."

      (ii) The insurer shall notify the insured of the right to change this written designation, no

less than once every two (2) years;

      (2) When the policyholder or certificate holder pays a premium for a long term care

insurance policy or certificate through a payroll or pension deduction plan, the requirements

continued in subsection (1)(i) need not be met until sixty (60) days after the policyholder or

certificate holder is no longer on the payment plan. The application or enrollment form for those

policies or certificates shall clearly indicate the payment plan selected by the applicant;

      (3) No individual long term care policy or certificate shall lapse or be terminated for

nonpayment of premium unless the insurer, at least thirty (30) days before the effective date of

the lapse or termination, has given notice to the insured and to those persons designated pursuant

to subdivision (1) of this section at the address provided by the insured for purposes of receiving

notice of lapse or termination. Notice shall be given by first class United States mail, postage

prepaid; and notice may not be given until thirty (30) days after a premium is due and unpaid.

Notice shall be deemed to have been given as of five (5) days after the date of mailing.

     (b) Reinstatement. In addition to the requirement in subsection (a), a long-term care

insurance policy or certificate shall include a provision that provides for reinstatement of

coverage, in the event of lapse if the insurer is provided proof that the policyholder or certificate

holder was cognitively impaired or had a loss of functional capacity before the grace period

contained in the policy expired. This option shall be available to the insured if requested within

five (5) months after termination and shall allow for the collection of past due premium, where

appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not

be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of

functional capacity contained in the policy and certificate.

 

     27-34.2-14. Standards for marketing. -- (a) Every insurer, health care services plan, or

other entity marketing long term care insurance coverage in this state, directly or through its

producers, shall:

      (1) Establish marketing procedures to assure that any comparison of policies by its

agents or other insurance producers and agent training requirements will be fair and accurate;

      (2) Establish marketing procedures to assure excessive insurance is not sold or issued;

      (3) Display prominently by type, stamp or other appropriate means, on the first page of

the outline of coverage and policy the following:

      "Notice to buyer: This policy may not cover all of the costs associated with long term

care incurred by the buyer during the period of coverage. The buyer is advised to carefully review

all policy limitations."

      (4) Inquire and make every reasonable effort to identify whether a prospective applicant

or enrollee for long term care insurance already has long term care insurance and the types and

amounts of any insurance; and

      (5) Every insurer or entity marketing long term care insurance shall establish auditable

procedures for verifying compliance with this subsection.

     (6) If the state in which the policy or certificate is to be delivered or issued for delivery

has a senior insurance counseling program approved by the commissioner, the insurer shall, at

solicitation, provide written notice to the prospective policyholder and certificateholder that the

program is available and the name, address and telephone number of the program.

     (7) For long-term care health insurance policies and certificates, use the terms

"noncancellable" or "level premium" only when the policy or certificate conforms to section 6

A(3) of this regulation.

     (8) Provide an explanation of contingent benefit upon lapse and, if applicable, the

additional contingent benefit upon lapse provided to policies with fixed or limited premium

paying periods.

      (b) In addition to the practices prohibited in chapter 29 of this title, the following acts

and practices are prohibited:

      (1) Twisting. - Knowingly making any misleading representation or incomplete or

fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or

tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow

on or convert any insurance policy or to take out a policy of insurance with another insurer;

      (2) High pressure tactics. - Employing any method of marketing having the effect of or

tending to induce the purchase of insurance through force, fright, threat, whether explicit or

implied, or undue pressure to purchase or recommend the purchase of insurance; and

      (3) Cold lead advertising. - Making use directly or indirectly of any method of marketing

which fails to disclose in a conspicuous manner that a purpose of the method of marketing is

solicitation of insurance and that contact will be made by an insurance producer or insurance

company.

     (4) Misrepresentation of a material fact when selling or offering to sell a long-term care

insurance policy.

      (c) With respect to the obligations set forth in this section, the primary responsibility of

an association as described in section 27-34.2-4(4)(ii), when endorsing or selling long term care

insurance shall be to educate its members concerning long term care issued in general so that its

members can make informed decisions. Associations shall provide objective information

regarding long term care insurance policies or certificates endorsed or sold by those associations

to ensure that members of the associations are fully informed of the benefits and limitations in the

policies or certificates that are being endorsed or sold.

      (d) The insurer shall file with the insurance department the following material:

      (1) The policy and certificate;

      (2) A corresponding outline of coverage; and

      (3) All advertisements requested by the insurance department.

      (e) The association shall disclose in any long term care insurance solicitation:

      (1) The specific nature and amount of the compensation arrangements, including all fees,

commissions, administrative fees and other forms of financial support, that the association

receives from endorsement or sale of the policy or certificate to its members; and

      (2) A brief description or outline of the process under which the policies and the insurer

issuing the policies were selected.

      (f) If the association and the insurer have interlocking directories or trustee

arrangements, the association shall disclose that fact to its members.

      (g) The board of directors of associations selling or endorsing long term care insurance

policies or certificates shall review and approve the insurance policies as well as the

compensation arrangements made with the insurer.

      (h) The association shall also:

      (1) At the time of the association's decision to endorse, engage the services of a person

with expertise in long term care insurance not affiliated with the insurer to conduct an

examination of the policies, including benefits, features, and rates and update the examination

thereafter in the event of material change. The person may be a member of the staff of the

association;

      (2) Actively monitor the marketing efforts of the insurer and its insurance producers; and

      (3) Review and approve all marketing materials or other insurance communications used

to promote sales or sent to members regarding the policies or certificates.

     (4) Subdivisions (h)(1), (h)(2) and (h)(3) shall not apply to qualified long-term care

insurance contracts.

      (i) No group long term care insurance policy or certificate may be issued to an

association unless the insurer files with the director the information required in this section.

      (j) The insurer shall not issue a long term care policy or certificate to an association or

continue to market the policy or certificate unless the insurer certifies annually that the

association has complied with the requirements set forth in this section.

 

     27-34.2-16. Regulations. Authority to promulgate regulations. -- The director may

adopt reasonable rules and regulations for the implementation of this chapter. The director shall

issue reasonable regulations to promote premium adequacy and to protect the policymaker in the

event of substantial rate increases, and to establish minimum standards for producer education,

marketing practices, producer compensation, producer testing, penalties and reporting practices

for long-term care insurance.

 

     27-34.2-19. Nonforfeiture requirements. Nonforfeiture benefits. -- (a) Any issuer

who offers for purchase a long term care insurance contract shall include with the offer the option

for the purchaser to elect to purchase nonforfeiture benefits. All offers shall meet the following

requirements:

      (1) The nonforfeiture provision shall be appropriately captioned.

      (2) The nonforfeiture provisions shall provide at least one of the following:

      (i) Reduced paid-up insurance;

      (ii) Extended term insurance;

      (iii) Shortened benefit period;

      (iv) Other similar offerings approved by the director.

      (b) No long-term care insurance contract may be issued or delivered in this state until the

issuer has offered to the purchaser of the contract the option to purchase nonforfeiture benefits.

The failure to offer nonforfeiture benefits shall be considered a violation of this chapter and shall

subject the issuer to the enforcement remedies and other penalties contained within the chapter.

      (c) The director shall promulgate rules and regulations as deemed necessary and

appropriate to govern the terms of this section. (a) Except as provided in subsection (b), a long-

term care insurance policy may not be delivered or issued for delivery in this state unless the

policyholder or certificateholder has been offered the option of purchasing a policy or certificate

including a nonforfeiture benefit. The offer of a nonforfeiture benefit may be in the form of a

rider that is attached to the policy. In the event the policyholder or certificateholder declines the

nonforfeiture benefit, the insurer shall provide a contingent benefit upon lapse that shall be

available for a specified period of time following a substantial increase in premium rates.

     (b) When a group long-term care insurance policy is issued, the offer required in

subsection (a) shall be made to the group policyholder. However, if the policy is issued as group

long-term care insurance as defined in subdivision 27-34.2-4(4)(v), other than to a continuing

care retirement community or other similar entity, the offering shall be made to each proposed

certificateholder.

     (c) The commissioner shall promulgate regulations specifying the type or types of

nonforfeiture benefits to be offered as part of long-term care insurance policies and certificates,

the standards for nonforfeiture benefits, and the rules regarding contingent benefit upon lapse,

including a determination of the specified period of time during which a contingent benefit upon

lapse will be available and the substantial premium rate increase that triggers a contingent benefit

upon lapse as described in subsection 1.

 

     SECTION 2. Chapter 27-34.2 of the General Laws entitled "Long-Term Care Insurance"

is hereby amended by adding thereto the following sections:

 

     27-34.2-7.1. Incontestability period. (a) For a policy or certificate that has been in

force for less than six (6) months an insurer may rescind a long-term care insurance policy or

certificate or deny an otherwise valid long-term care insurance claim upon a showing of

misrepresentation that is material to the acceptance for coverage.

     (b) For a policy or certificate that has been in force for at least six (6) months, but less

than two (2) years, an insurer may rescind a long-term care insurance policy or certificate or deny

an otherwise valid long-term care insurance claim upon a showing of misrepresentation that is

both material to the acceptance for coverage and which pertains to the condition for which

benefits are sought.

     (c) After a policy or certificate has been in force for two (2) years it is not contestable

upon the grounds of misrepresentation alone; the policy or certificate may be contested only upon

a showing that the insured knowingly and intentionally misrepresented relevant facts relating to

the insured's health.

     (d) A long-term care insurance policy or certificate may be field issued if the

compensation to the field issuer is not based on the number of policies or certificates issued. For

the purposes of this section, "field issued" means a policy or certificate issued by a producer or a

third-party administrator pursuant to the underwriting authority granted to the producer or third-

party administrator by an insurer and using the insurer's underwriting guidelines.

     (e) If an insurer has paid benefits under the long-term care insurance policy or certificate,

the benefit payments may not be recovered by the insurer in the event that the policy or certificate

is rescinded.

     (f) In the event of the death of the insured, this section shall not apply to the remaining

death benefit of a life insurance policy that accelerates benefits for long-term care. In this

situation, the remaining death benefits under these policies shall be governed by chapter 27-4. In

all other situations, this section shall apply to life insurance policies that accelerate benefits for

long-term care.

 

     27-34.2-21. Producer training requirements. -- (a) On or after January 1, 2008, an

individual may not sell, solicit or negotiate long-term care insurance unless the individual is

licensed as an insurance producer for accident and health or sickness or life and has completed a

one-time training course. The training shall meet the requirements set forth in this section.

     (b) An individual already licensed and selling, soliciting or negotiating long-term care

insurance on the effective date of this act may not continue to sell, solicit or negotiate long-term

care insurance unless the individual has completed a one-time training course as set forth in the

section, within one year from the effective date of this act.

     (c) In addition to the one-time training course required in this section, an individual who

sells, solicits or negotiates long-term care insurance shall complete ongoing training as set forth

in this section.

     (d) The training requirements of this section may be approved as continuing education

courses.

     (e) The one-time training required by this section shall be no less than eight (8) hours and

the ongoing training required by this section shall be no less than four (4) hours every twenty-four

(24) months.

     (f) The training required under paragraph (a) shall consist of topics related to long-term

care insurance, long-term care services and, if applicable, qualified state long-term care

insurance. Partnership programs, including, but not limited to:

     (1) State and federal regulations and requirements and the relationship between qualified

state long-term care insurance partnership programs and other public and private coverage of

long-term services, including Medicaid;

     (2) Available long-term care services and providers;

     (3) Changes or improvements in long-term care services or providers;

     (4) Alternatives to the purchase of private long-term care insurance;

     (5) The effect of inflation on benefits and the importance of inflation protection; and

     (6) Consumer suitability standards and guidelines.

     (g) The training required by this section shall not include training that is insurer or

company product specific or that includes any sales or marketing information, materials, or

training, other than those required by state or federal law.

     (h) Insurers subject to this act shall obtain verification that a producer receives training

required by this section before a producer is permitted to sell, solicit or negotiate the insurer's

long-term care insurance products, maintain records subject to the state's record retention

requirements, and make that verification available to the commissioner upon request.

     (i) Insurers subject to this act shall maintain records with respect to the training of its

producers concerning the distribution of its partnership policies that will allow the state insurance

department to provide assurance to the state Medicaid agency that producers have received the

training contained in this section and that producers have demonstrated an understanding of the

partnership policies and their relationship to public and private coverage of long-term care,

including Medicaid, in this state. These records shall be maintained in accordance with the state's

record retention requirements and shall be made available to the commissioner upon request.

     (j) The satisfaction of these training requirements in any state shall be deemed to satisfy

the training requirements in this state.

 

     SECTION 3. Section 27-34.2-7 of the General Laws in Chapter 27-34.2 entitled "Long

Term Care Insurance" is hereby repealed.

 

     27-34.2-7. Policy provisions. -- (a) (1) No policy of long term care insurance shall be

delivered or issued for delivery to any person in this state unless:

      (i) The entire money and other considerations for the policy are expressed in it;

      (ii) The time at which the insurance takes effect and terminates is expressed in the

policy;

      (iii) The style, arrangement, and overall appearance of the policy give no undue

prominence to any portion of the text, and every printed portion of the text of the policy and of

any endorsements or attached papers is plainly printed in light faced type of a style in general use,

the size of which shall be uniform and not less than ten (10) point with a lower case unspaced

alphabet length not less than one hundred and twenty (120) point; the "text" includes all printed

matter except the name and address of the insurer, name or title of the policy, the brief description

if any, and captions and sub-captions;

      (iv) The exceptions and reductions of indemnity are set forth in the policy or group

certificate and, except those which are set forth in subsection (b) are printed, at the insurer's

option, either included with the benefit provision to which they apply or under an appropriate

caption such as "exceptions" or "exceptions and reductions"; provided, that if an exception or

reduction specifically applies only to a particular benefit of the policy, a statement of the

exception or reduction shall be included with the benefit provision to which it applies;

      (v) Each form, including riders and endorsements, shall be identified by a form number

in the lower left hand corner of the first page of the form; and

      (vi) It contains no provision purporting to make any portion of the charter, rules,

constitution, or by-laws of the insurer a part of the policy unless the portion is set forth in full in

the policy, except in the case of the incorporation of, or reference to, a statement of rates or

classification of risks, or short rate table filed with the director;

      (2) If any policy is issued by an insurer domiciled in this state for delivery to a person

residing in another state, and if the official having responsibility for the administration of the

insurance laws of the other state has advised the director that the policy is not subject to approval

or disapproval by the official, the director may, by ruling, require that the policy meet the

standards set forth in subdivision (1) of this subsection and in subsection (b) of this section.

      (b) (1) Except as provided in subdivision (3) of this subsection, each policy delivered or

issued for delivery to any person in this state shall contain the provisions specified in this

subsection in the words in which the provisions appear in this subsection; provided, that the

insurer may, at its option, substitute for one or more of the provisions corresponding provisions of

different wording approved by the director which are in each instance not less favorable in any

respect to the insured or the beneficiary. The provisions shall be preceded individually by the

caption appearing in this subsection or, at the option of the insurer, by any appropriate individual

or group captions or subcaptions that the director may approve:

      (i) A provision as follows:

      Entire contract; changes. This policy, including the endorsements and the attached

papers, if any, constitutes the entire contract of insurance. No change in this policy shall be valid

until approved by an executive officer of the insurer and unless the approval is endorsed on this

policy or attached to it. No agent has authority to change this policy or to waive any of its

provisions.

      (ii) A provision as follows:

      Grace period. A grace period of thirty-one (31) days will be granted for the payment of

each premium falling due after the first premium, during which grace period the policy shall

continue in force.

      (Each policy in which the insurer reserves the right to refuse renewal on an individual

basis shall provide, in substance, in a provision of the policy or in an endorsement on it or in a

rider attached to it, that subject to the right to terminate the policy upon nonpayment of premium

when due, the right to refuse renewal shall not be exercised before the renewal date occurring on,

or after and nearest, each anniversary, or in the case of lapse and reinstatement, at the renewal

date occurring on, or after and nearest, each anniversary of the last reinstatement, and that any

refusal of renewal shall be without prejudice to any claim originating while the policy is in force);

      (iii) A provision as follows:

      Reinstatement. If any renewal premium is not paid within the time granted the insured

for payment, a subsequent acceptance of premium by the insurer or by any agent duly authorized

by the insurer to accept the premium, without requiring in connection with the premium an

application for reinstatement, shall reinstate the policy; provided, that if the insurer of the agent

requires an application for reinstatement and issues a conditional receipt for the premium

tendered, the policy will be reinstated upon approval of the application by the insurer or, lacking

approval, upon the forty-fifth day following the date of the conditional receipt unless the insurer

has previously notified the insured in writing of its disapproval of the application. The reinstated

policy shall only cover claims arising more than ten (10) days after that date. In all other respects

the insured and insurer shall have the same rights under the reinstated policy as they had under

the policy immediately before the due date of the defaulted premium, subject to any provisions

endorsed on the policy or attached to it in connection with the reinstatement. Any premium

accepted in connection with a reinstatement shall be applied to a period for which the premium

has not been previously paid, but not to any period more than sixty (60) days prior to the date of

reinstatement.

      (iv) A provision as follows:

      Notice of claim. Written notice of a claim must be given to the insurer within twenty

(20) days after the occurrence or commencement of any loss covered by the policy, or as soon

after this as is reasonably possible. Notice given by or on behalf of the insured or the beneficiary

to the insurer, at (insert the location of any office that the insurer may designate for the purpose),

or to any authorized agent of the insurer, with information sufficient to identify the insured, shall

be deemed notice to the insurer.

      (v) A provision as follows:

      Claim forms. The insurer, upon receipt of a notice of claim, will furnish to the claimant

the forms that are usually furnished by it for filing proof of loss. If the forms are not furnished

within fifteen (15) days after the giving of the notice, the claimant shall be deemed to have

complied with the requirements of this policy as to proof of loss upon submitting, within the time

fixed in the policy for filing proofs of loss, written proof covering the occurrence, the character,

and the extent of the loss for which claim is made.

      (vi) A provision as follows:

      Proofs of loss. Written proof of loss must be furnished to the insurer at its office in case

of a claim for loss for which this policy provides any periodic payment contingent upon

continuing loss within ninety (90) days after the termination of the period for which the insurer is

liable, and in case of a claim for any other loss, within ninety (90) days after the date of the loss.

Failure to furnish the proof within the time required shall not invalidate nor reduce any claim if it

was not reasonably possible to give proof within that time, provided the proof is furnished as

soon as reasonably possible and in no event, except in the absence of legal capacity, later than

one year from the time proof is required.

      (vii) A provision as follows:

      Time of payment of claims. Indemnities payable under this policy for any loss, other

than loss for which this policy provides any periodic payment, will be paid immediately upon

receipt of due written proof of the loss. Subject to due written proof of loss, all accrued

indemnities for loss, for which this policy provides periodic payment, will be paid ...(insert period

for payment which must not be less frequently than monthly) and any balance remaining unpaid

upon the termination of liability will be paid immediately upon receipt of due written proof.

      (viii) A provision as follows:

      Payment of claims. Indemnity for loss of life, if applicable, will be payable in

accordance with the beneficiary designation and the provisions respecting the payment which

may be prescribed in this policy and effective at the time of payment. If no designation or

provision is then effective, the indemnity shall be payable to the estate of the insured. Any other

accrued indemnities unpaid at the insured's death may, at the option of the insurer, be paid either

to the beneficiary or to the estate. All other indemnities will be payable to the insured.

      (ix) A provision as follows:

      Physical examination and autopsy. The insurer at its own expense shall have the right

and opportunity to examine the person of the insured, when and as often as it may reasonably

require during the pendency of a claim under the policy, and to make an autopsy in the case of

death where it is not forbidden by law.

      (x) A provision as follows:

      Legal actions. No action at law or in equity shall be brought to recover on this policy

prior to the expiration of sixty (60) days after written proof of loss has been furnished in

accordance with the requirements of this policy. No action shall be brought after the expiration of

three (3) years after the time written proof of loss is required to be furnished.

      (2) Except as provided in subdivision (3) of this subsection, no policy delivered or issued

for delivery to any person in this state shall contain provisions respecting the matters set forth

below unless the provisions are in the words in which the provisions appear in this subsection;

provided, that the insurer may, at its option, use in lieu of any provision a corresponding

provision of different wording approved by the director which is not less favorable in any respect

to the insured or the beneficiary. Any provision contained in the policy shall be preceded

individually by the appropriate caption appearing in this paragraph or, at the option of the insurer,

by any appropriate individual or group captions or subcaptions as the director may approve:

      (i) A provision as follows:

      Change of occupation. If the insured is injured or contracts sickness after having

changed occupations to one classified by the insurer as more hazardous than that stated in this

policy, or while doing, for compensation, anything pertaining to an occupation classified as more

hazardous, the insurer will pay only that portion of the indemnities provided in this policy as the

premium paid would have purchased at the rates and within the limits fixed by the insurer for the

more hazardous occupation. If the insured changes occupations to one classified by the insurer as

less hazardous than that stated in this policy, the insurer, upon receipt of proof of the change of

occupation, will reduce the premium rate accordingly, and will return the excess pro rata

unearned premium from the date of the change of occupation or from the policy anniversary date

immediately preceding receipt of the proof, whichever is the more recent. In applying this

provision, the classification of occupational risk and the premium rates shall be such as have been

filed by the insurer prior to the occurrence of the loss for which the insurer is liable or prior to the

date of proof of the change in occupation with the state official having supervision of insurance in

the state where the insured resided at the time this policy was issued; but if the filing was not

required, then the classification of occupational risk and the premium rates shall be those last

made effective by the insurer in the state prior to the occurrence of the loss or prior to the date of

proof of change in occupation.

      (ii) A provision as follows:

      Misstatement of age. If the age of the insured has been misstated, all amounts payable

under this policy shall be such as the premium paid would have purchased at the correct age.

      (iii) A provision as follows:

      Unpaid premium. - Upon the payment of a claim under this policy, any premium then

due and unpaid or covered by any note or written order may be deducted from the payment.

      (iv) A provision as follows:

      Conformity with state statutes. Any provision of this policy which, on its effective date,

is in conflict with the statutes of the state in which the insured resides on that date is hereby

amended to conform to the minimum requirements of the statutes.

      (v) A provision as follows:

      Illegal occupation. The insurer shall not be liable for any loss to which a contributing

cause was the insured's commission of or attempt to commit a felony or to which a contributing

cause was the insured's being engaged in an illegal occupation.

      (vi) A provision as follows:

      Intoxicants and narcotics. The insurer shall not be liable for any loss sustained or

contracted in consequence of the insured's being intoxicated or under the influence of any

narcotic unless administered on the advice of a physician.

      (3) If any provision of this subsection is in whole or in part inapplicable to or

inconsistent with the coverage provided by a particular form of policy, the insurer, with the

approval of the director, shall omit from the policy any inapplicable provision or part of a

provision, and shall modify any inconsistent provision or part of the provision in such manner as

to make the provision as contained in the policy consistent with the coverage provided by the

policy;

      (4) The provisions which are the subject of subdivisions (1) and (2) of this subsection, or

any corresponding provisions which are used in lieu of the provisions in subdivisions (1) and (2)

of this subsection in accordance with this section, shall be printed in the consecutive order of the

provisions in this section or, at the option of the insurer, the provisions may appear as a unit in

any part of the policy, with other provisions to which it may be logically related; provided the

resulting policy shall not be in whole or in part unintelligible, uncertain, ambiguous, abstruse, or

likely to mislead a person to whom the policy is offered, delivered, or issued;

      (5) The word "insured" as used in this chapter, shall not be construed as preventing a

person other than the insured with a proper insurable interest from making application for and

owning a policy covering the insured or from being entitled under the policy to any indemnities,

benefits, and rights provided in the policy;

      (6) Any policy of a foreign or alien insurer, when delivered or issued for delivery to any

person in this state, may contain any provision which is not less favorable to the insured or the

beneficiary than the provisions of this chapter and which is prescribed or required by the law of

the state under which the insurer is organized;

      (7) Any policy of a domestic insurer may, when issued for delivery in any other state or

country, contain any provisions permitted or required by the laws of the other state or country.

      (c) (1) No policy provision which is not subject to subsection (b) of this section shall

make a policy, or any portion of a policy, less favorable in any respect to the insured or the

beneficiary than the provisions of the policy which are subject to this section;

      (2) A policy delivered or issued for delivery to any person in this state in violation of this

chapter shall be held valid but shall be construed as provided in this chapter. When any provision

in a policy subject to this chapter is in conflict with any provision of this chapter, the rights,

duties, and obligations of the insurer, the insured and the beneficiary shall be governed by the

provisions in this chapter.

      (d) (1) The insured shall not be bound by any statement made in an application for a

policy unless a copy of the application is attached to or endorsed on the policy when issued as a

part of the policy. If the policy delivered or issued for delivery to any person in this state shall be

reinstated or renewed, and the insured or the beneficiary or assignee of the policy shall make

written request to the insurer for a copy of the application, if any, for the reinstatement or

renewal, the insurer shall within fifteen (15) days after the receipt of the request at its home office

or any branch office of the insurer, deliver or mail to the person making the request a copy of the

application. If this copy shall not be delivered or mailed, the insurer shall be precluded from

introducing the application as evidence in any action or proceeding based upon or involving the

policy or its reinstatement or renewal;

      (2) No alteration of any written application for the policy shall be made by any person

other than the applicant without the applicant's written consent, except that insertions may be

made by the insurer, for administrative purposes only, in such manner as to indicate clearly that

the insertions are not to be ascribed to the applicant;

      (3) The falsity of any statement in the application for any policy covered by this chapter

may not bar the right to recovery under the policy unless the false statement materially affected

either the acceptance of the risk or the hazard assumed by the insurer.

      (e) The acknowledgement by any insurer of the receipt of notice given under any policy

covered by this chapter, or the furnishing of forms for filing proofs of loss, or the acceptance of

the proofs, or the investigation of any claim under the policy, shall not operate as a waiver of any

of the rights of the insurer in defense of any claim arising under the policy.

      (f) (1) For a policy or certificate that has been in force for less than six (6) months an

insurer may rescind a long term care insurance policy or certificate or deny an otherwise valid

long term care insurance claim upon a showing of misrepresentation that is material to the

acceptance for coverage.

      (2) For a policy or certificate that has been in force for at least six (6) months but less

than two (2) years an insurer may rescind a long term care insurance policy or certificate or deny

an otherwise valid long term care insurance claim upon a showing of misrepresentation that is

both material to the acceptance for coverage and which pertains to the condition for which

benefits are sought;

      (3) After a policy or certificate has been in force for two (2) years it is not contestable

upon the grounds of misrepresentation alone; the policy or certificate may be contested only upon

a showing that the insured knowingly and intentionally misrepresented relevant facts relating to

the insured's health;

      (4) (i) No long term care insurance policy or certificate may be field issued based on

medical or health status;

      (ii) For the purposes of this section, "field issued" means a policy or certificate issued by

an agent or a third party administrator pursuant to the underwriting authority granted to the agent

or third party administrator by an insurer;

      (5) If an insurer has paid benefits under the long term care insurance policy or certificate,

the benefit payments may not be recovered by the insurer in the event that the policy or certificate

is rescinded.

 

     SECTION 4. Section 40-8-22 of the General Laws in Chapter 40-8 entitled "Medical

Assistance" is hereby amended to read as follows:

 

     40-8-22. Protection of resources -- Long term care insurance. Protection of

resources Long-term care insurance partnership program. -- (a) The department of human

services shall, from January 1, 1994 to January 1, 1999, coordinate a pilot program entitled the

Rhode Island Partnership for Long Term Care whereby private insurance and funds may be

utilized to finance long term care. The department shall seek appropriate amendments to its state

plan for medical assistance under Title XIX, 42 U.S.C. section 1396 et seq., of the Social Security

Act (Medicaid), or waivers of state plan requirements, to allow protection of resources and

income pursuant to this section. The protection shall be provided, to the extent approved by the

federal Health Care Financing Administration centers for Medicare and Medicaid services, for

any purchaser of a precertified long-term care policy delivered, issued for delivery or renewal

renewed from January 1, 1994 to December 31, 1999, inclusive, or the termination of the

program, whichever is sooner, and shall last for the life of the purchaser. Notwithstanding any

provision of the general laws, the resources of such an individual, to the extent such resources are

equal to the amount of qualifying long-term care insurance benefits payments provided pursuant

to a policy of long-term care issuance precertified in accordance with department regulations and

chapter 34.2 of title 27, shall not be considered by the department in a determination of: (1) his or

her eligibility for Medicaid; (2) the amount of any Medicaid payment; or (3) in any subsequent

recovery by the state of a payment for medical services. Such precertified policies shall be known

as "Medicaid qualifying long-term care partnership policies".

      (b) The department shall count insurance benefit payments toward resource exclusion to

the extent such payments: (1) are for services covered under the state plan for medical assistance

including nursing home care, or formal services delivered to insureds in the community as part of

a care plan; (2) are for the lower of the actual charge or the amount paid by the insurance

company; and (3) are for services provided after the individual meets the coverage requirements

for long-term care benefits established by the department for this program. The department shall

adopt rules and regulations to implement the provisions of this section and relating to determining

eligibility of applicants for Medicaid and the coverage requirements for long-term care benefits.

 

     SECTION 5. This act shall take effect upon passage.

     

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LC01773/SUB A

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