806 KAR 17:081. Minimum standards for long-term care insurance policies

Link to law: http://www.lrc.ky.gov/kar/806/017/081.htm
Published: 2015

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      806 KAR 17:081.

Minimum standards for long-term care insurance policies.

 

      RELATES TO: KRS 304.1-040, 304.2-310,

304.6-070, 304.6-130-304.6-180, 304.9-080, 304.12-020, 304.12-030, 304.12-130,

304.14-120(2), 304.14-600-304.14-644, 304.15-310, 304.15-315, 304.18-120,

304.18-127, 304.29-600, 304.32-290, 304.38-220, 26 U.S.C. 7702B, 42 U.S.C.

1395x(r), 45 C.F.R. 160.103

      STATUTORY AUTHORITY: KRS 304.2-110(1),

304.14-615, 304.14-620, 304.32-250, 304.38-150

      NECESSITY, FUNCTION, AND CONFORMITY: KRS

304.2-110(1) authorizes the Executive Director of Insurance to promulgate

administrative regulations necessary for or as an aid to the effectuation of

any provision of the Kentucky Insurance Code. KRS 304.14-615(1) requires the Executive

Director of

Insurance to promulgate administrative regulations establishing minimum standards

for the manner, content, and sale of long-term care insurance policies. KRS

304.14-620 requires the Executive Director of Insurance to promulgate administrative regulations

to establish minimum standards for marketing practices, agent compensation,

agent testing, penalties, and reporting practices for long-term care insurance.

KRS 304.32-250 authorizes the Executive Director of Insurance to

promulgate reasonable administrative regulations necessary for the proper administration

of KRS Chapter 304.32. KRS 304.38-150 authorizes the Executive

Director of

Insurance to promulgate reasonable administrative regulations necessary for the

proper administration of KRS Chapter 304.38. EO 2008-507, effective June 16,

2008, established the Department of Insurance and the Commissioner of Insurance

as the head of the Department. This administrative regulation establishes

minimum standards for long-term care insurance.

 

      Section 1. Definitions. (1)

"Applicant" is defined in KRS 304.14-600(3).

      (2) "Attained age rating" means

a schedule of premiums starting from the issue date which increases age at

least one (1) percent per year prior to age fifty (50), and at least three (3)

percent per year beyond age fifty (50).

      (3) "Certificate" is defined in

KRS 304.14-600(4).

      (4) "Chronically-ill

individual", pursuant to 26 U.S.C. 7702B(c)(2):

      (a) Means any individual who has been

certified by a licensed health care practitioner as:

      1. Being unable to perform without substantial

assistance from another individual at least two (2) activities of daily living

for a period of at least ninety (90) days due to a loss of functional capacity;

or

      2. Requiring substantial supervision to

protect the individual from threats to health and safety due to severe

cognitive impairment; and

      (b) Shall not include an individual

otherwise meeting these requirements unless within the preceding twelve month

period a licensed health care practitioner has certified that the individual

meets these requirements.

      (5) "Claim" means a request for

payment of benefits under an in-force policy regardless of whether the benefit

claimed is covered under the policy or any terms or conditions of the policy

have been met.

      (6) "Cold lead advertising"

means the use of any method of marketing which fails to disclose in a clear,

easy to notice manner that a purpose of the method of marketing is solicitation

of insurance and contact will be made by an insurance agent or insurance company.

      (7) "Commissioner" means the

Commissioner of Insurance.

      (8) "Denied claim" means the

insurer refuses to pay a claim for any reason except for failure to meet the

waiting period or due to an applicable preexisting condition.

      (9) "Department" means the

Department of Insurance.

      (10) "Exceptional increase"

means a premium rate increase filed by an insurer as exceptional, which the

commissioner determines is necessary and justified due to:

      (a) Changes in Kentucky laws or

administrative regulations applicable to long-term care coverage; or

      (b) Increased and unexpected utilization

that affects the majority of insurers of similar products.

      (11) "Group long-term care

insurance" is defined in KRS 304.14-600(5).

      (12) "High pressure tactics"

means employing any method of marketing that may affect or induce the purchase

of insurance through force, fright, explicit or implied threat, or create undue

pressure to purchase or recommend the purchase of insurance.

      (13) "Incidental" is defined in

KRS 304.14-600(1).

      (14) "Individually-identifiable

information" means personal information gathered in connection with an

insurance transaction from which judgment may be made regarding an individual’s

character, habits, avocations, finances, occupation, general reputation,

credit, health or other personal characteristics including an individual’s

name, address, and medical record information.

      (15) "Insurer" is defined in

KRS 304.1-040.

      (16) "Interlocking

directorates" means two (2) separate boards of directors that have at

least one (1) director in common.

      (17) "Kentucky insurance code"

means the statutes referenced in KRS 304.1-010 and the administrative

regulations established in KAR Title 806.

      (18) "Licensed health care

practitioner" means a physician as defined in 42 U.S.C. 1395x(r),

registered nurse, licensed social worker, or other individual who meets the

requirements of 26 U.S.C. 7702B(c)(4).

      (19) "Limited distribution

channel" means a discrete entity, including a financial institution or

brokerage, through which a specialized product is made available to a purchaser

other than the general public.

      (20) "Long-term care benefits

classifications" means:

      (a) Institutional long-term care benefits

only;

      (b) Noninstitutional long-term care

benefits only; or

      (c) Comprehensive long-term care benefits.

      (21) "Long-term care insurance"

is defined in KRS 304.14-600(2).

      (22) "Maintenance or personal care

services" means care for which the primary purpose is the provision of

needed assistance with a disability as a result of which the individual is a chronically-ill

individual, including protection from threats to health and safety due to severe

cognitive impairment.

      (23) "Managed-care plan" means

a health care or assisted living arrangement designed to coordinate patient

care or control costs through utilization review, case management, or use of

specific provider networks.

      (24) "Misrepresentation" means

misrepresenting a material fact in selling or offering to sell a long-term care

insurance policy.

      (25) "Policy" is defined in KRS

304.14-600(6).

      (26) "Qualified actuary" means

a member in good standing of the American Academy of Actuaries.

      (27) "Qualified long-term care

insurance contract" or "federally tax-qualified long-term care

insurance contract" means:

      (a) An individual or group insurance contract

that meets the requirements of 26 U.S.C. 7702B(b) as follows:

      1. The insurance protection provided

under the contract shall be limited to coverage of qualified long-term care

services and the 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;

      2.a. The contract shall 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, as

amended, 42 U.S.C. 1395 et seq., or would be reimbursable except for the application

of a deductible or coinsurance amount;

      b. The requirements of this subparagraph

shall not apply to expenses that are reimbursable under 42 U.S.C. 1395 et seq.

as a secondary payor; and

      c. The 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;

      3. The contract shall be guaranteed

renewable, as established in 26 U.S.C. 7702B(b)(1)(C);

      4. The contract shall not provide for a

cash surrender value or other money that may be paid, assigned, pledged as collateral

for a loan, or borrowed except as required in subparagraph 5 of this paragraph;

      5. Refunds of premiums and policyholder

dividends or similar amounts under the contract shall be applied as a reduction

in future premiums or to increase future benefits, except that a refund upon

death of the insured, a complete surrender, or cancellation of the contract

shall not exceed the aggregate premiums paid under the contract; and

      6. The contract shall meet the consumer

protection provisions as established in 26 U.S.C. 7702B(g); or

      (b) The portion of a life insurance

contract that:

      1. Provides long-term care insurance

coverage by rider or as part of the contract; and

      2. Meets the requirements of 26 U.S.C.

7702B(b) and (e).

      (28) "Qualified long-term care

services" means services required in 26 U.S.C. 7702B(c)(1), including

necessary diagnostic, preventive, therapeutic, curative, treatment, mitigation

and rehabilitative services, and maintenance or personal care services which

are required by a chronically-ill individual, and provided pursuant to a plan

of care prescribed by a licensed health care practitioner.

      (29) "Similar policy forms"

means:

      (a) Long-term care insurance policies and

certificates issued by an insurer in the same long-term care benefit classification

as the policy form being considered; or

      (b) Certificates of groups, as identified

in KRS 304.14-600(5)(a) similar to other comparable certificates of groups that

meet the definition in KRS 304.14-600(5)(a) with the same long-term care

benefit classifications.

      (30) "Twisting" means knowingly

making a misleading representation or incomplete or fraudulent comparison of

insurance policies or insurers for the purpose of inducing, or tending to induce,

a person to:

      (a) Lapse, forfeit, surrender, terminate,

retain, pledge, assign, borrow on, or convert an insurance policy; or

      (b) Secure an insurance policy from

another insurer.

 

      Section 2. Policy Definitions. A

long-term care insurance policy delivered or issued for delivery in Kentucky

shall not include the following terms unless the terms are defined in the

policy and the definitions satisfy the following requirements:

      (1) "Activities of daily

living" means at least bathing, continence, dressing, eating, toileting,

and transferring.

      (2) "Acute condition" means

that the individual is medically unstable and requires frequent monitoring by

medical professionals, including physicians and registered nurses, in order to

maintain health status.

      (3) "Adult day care" means a

program for four (4) or more individuals, of social- or health-related, or

both, services provided during the day in a community group setting for the purpose

of supporting frail, impaired elderly or other disabled adults who may benefit

from care in a group setting outside the home.

      (4) "Bathing" means washing

oneself by sponge bath, or in a tub or shower, including the task of getting

into or out of the tub or shower.

      (5) "Cognitive impairment"

means a deficiency in a person’s short or long-term memory, orientation as to

person, place, and time, deductive or abstract reasoning, or judgment as it

relates to safety awareness.

      (6) "Continence" means the

ability to maintain control of bowel and bladder function, or, if unable to maintain

control of bowel or bladder function, the ability to perform associated

personal hygiene, including caring for catheter or colostomy bag.

      (7) "Dressing" means putting on

and taking off all items of clothing and any necessary braces, fasteners, or artificial

limbs.

      (8) "Eating" means feeding

oneself by getting food into the body from a receptacle, including a plate,

cup, or table, or by a feeding tube or intravenously.

      (9) "Hands-on assistance" means

minimal, moderate, or maximal physical assistance without which the individual

would not be able to perform the activity of daily living.

      (10) "Home health-care

services" means medical and nonmedical services, including homemaker

services, assistance with activities of daily living, and respite care services,

provided to ill, disabled, or infirmed persons in their residences.

      (11) "Medicare" means:

      (a) "The Health Insurance for the

Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then

Constituted or Later Amended;"

      (b) "Title I, Part I of Public Law

89-97, as Enacted by the Eighty-Ninth Congress of the United States of America

and popularly known as the Health Insurance for the Aged Act, as then

constituted and any later amendments or substitutes thereof;" or

      (c) Words similar to paragraph (a) and

(b) of this subsection.

      (12) "Mental or nervous

disorder" means neurosis, psychoneurosis, psychopathy, psychosis, or

mental or emotional disease or disorder.

      (13) "Personal care" means the

provision of hands-on services to assist an individual with activities of daily

living.

      (14) "Skilled nursing care",

"intermediate care", "personal care", "home care",

and other services shall be defined in relation to the level of skill required,

the nature of the care, and the setting in which care shall be delivered.

      (15) "Toileting" means getting

to and from the toilet, getting on and off the toilet, and performing

associated personal hygiene.

      (16) "Transferring" means

moving into or out of bed, chair, or wheelchair.

      (17)(a) "Skilled nursing facility",

"extended care facility", "intermediate care facility",

"convalescent nursing home", "personal care facility",

"assisted living facility", "home care agency",

"specialized care providers", and other providers of services shall

be defined in relation to the services and facilities required to be available

and the licensure, certification, registration, or degree status of those providing

or supervising the services; and

      (b) If the definition requires that the

provider be appropriately licensed, certified, or registered, the definition

shall also include the requirements that a provider shall meet in lieu of

licensure, certification or registration if the state in which the service is

provided:

      1. Does not require a provider of these

services to be licensed, certified or registered; or

      2. Licenses, certifies or registers the

provider of services under another name.

 

      Section 3. Policy Practices and

Provisions. (1) Renewability. The terms "guaranteed renewable" and

"noncancellable" shall not be used in an individual long-term care

insurance policy without further explanatory language in accordance with the

disclosure requirements of Section 6 of this administrative regulation.

      (a) A long-term care insurance policy

issued to an individual shall not contain renewal provisions other than

"guaranteed renewable" or "noncancellable."

      (b) The term "guaranteed

renewable" shall not be used unless:

      1. The insured has the right to continue

the long-term care insurance in force by the timely payment of premiums; and

      2. Except for a revision of rates on a

class basis, the insurer has no unilateral right to make a change in a

provision of the policy or rider while the insurance is in force, and shall not

decline to renew.

      (c) The term "noncancellable"

shall be not be used unless the insured has the right to continue the long-term

care insurance in force by the timely payment of premiums during the period in

which the insurer has no right to unilaterally make a change in a provision of

the insurance or in the premium rate.

      (d) The term "level premium"

shall not be used unless the insurer does not have the right to change the

premium.

      (e) In addition to the other requirements

of this subsection, a qualified long-term care insurance contract shall be

guaranteed renewable, pursuant to 26 U.S.C. 7702B(b)(1)(C).

      (2)(a) Limitations and exclusions. A

policy shall not be delivered or issued for delivery in Kentucky as long-term

care insurance if the policy limits or excludes coverage by type of illness,

treatment, medical condition, or accident, except as follows:

      1. Preexisting conditions or diseases in

accordance with KRS 304.14-615(3)(d);

      2. Mental or nervous disorders except for

Alzheimer's disease;

      3. Alcoholism and drug addiction;

      4. Illness, treatment, or medical condition

as a result of:

      a. War or act of war, whether declared or

undeclared;

      b. Participation in a felony, riot, or

insurrection;

      c. Service in the armed forces or

auxiliary units;

      d. Suicide, if sane or insane, attempted

suicide, or intentionally self-inflicted injury; or

      e. Except for fare-paying passengers,

aviation;

      5. a. Treatment provided in a government

facility, unless otherwise required by law;

      b. Services for which benefits are

available under:

      (i) Medicare or other governmental

program, except Medicaid;

      (ii) A state or federal workers'

compensation;

      (iii) Employer's liability or

occupational disease law; or

      (iv) A motor vehicle no-fault law;

      c. Services provided by a member of the

covered person's immediate family; and

      d. Services for which no charge is

normally made in the absence of insurance;

      6. Expenses for services or items

available or paid under another long-term care insurance or health insurance

policy; and

      7. If a qualified long-term care

insurance contract, expenses for services or items to the extent that the

expenses:

      a. Are reimbursable under 42 U.S.C. 1395

et seq.; or

      b. Would be reimbursable except for the

application of a deductible or coinsurance amount;

      (b)1. This subsection is not intended to

prohibit the delivery or issue for delivery of a long-term care policy with

exclusions and limitations by type of provider; and

      2. A long-term care insurer shall not

deny a claim because services are provided in a state other than the state of

policy issue under the following conditions, if the state other than the state

of policy issue:

      a. Does not have the provider licensing,

certification, or registration required in the policy and the provider

satisfies the policy requirements outlined for providers in lieu of licensure,

certification or registration; or

      b. Licenses, certifies or registers the

provider under another name; and

      (c) This subsection is not intended to

prohibit the delivery or issue for delivery of a long-term care policy with

territorial limitations.

      (3) Extension of benefits.

      (a) Termination of long-term care

insurance shall be without prejudice to any; benefits payable for

institutionalization if the institutionalization:

      1. Began while the long-term care

insurance was in force; and

      2. Continues without interruption after

termination.

      (b) The extension of benefits beyond the

period the long-term care insurance was in force may be:

      1. Limited to the:

      a. Duration of the benefit period, if

any; or

      b. Payment of the maximum benefits; and

      2. Subject to:

      a. Any policy waiting period; and

      b. All other applicable provisions of the

policy.

      (4) Continuation or conversion. Group

long-term care insurance issued in Kentucky on or after July 15, 2002 shall provide

a covered individual with a basis for continuation or conversion of coverage.

      (a) A basis for continuation shall be

identified as a policy provision, which provides for continued coverage under

the existing group policy if the coverage would otherwise terminate and be subject

to the continued timely payment of premium when due.

      1. Group policies that restrict provision

of benefits and services to, or contain incentives to use certain providers or

facilities, may provide continuation benefits that are substantially equivalent

to the benefits of the existing group policy; and

      2. The commissioner shall:

      a. Make a determination as to the

substantial equivalency of benefits as identified in subparagraph 1 of this

paragraph; and

      b. In making the determination identified

in clause a. of this subparagraph, take into consideration the differences

between managed-care and nonmanaged-care plans, including:

      (i) Provider system arrangements;

      (ii) Service availability;

      (iii) Benefit levels; and

      (iv) Administrative complexity.

      (b) A basis for conversion shall be

identified as a policy provision, which provides that an individual shall be

entitled to the issuance of a converted policy by the insurer under whose group

policy the individual is covered, without evidence of insurability, if the:

      1. Individual’s coverage under the group

policy would otherwise terminate or has been terminated for any reason,

including discontinuance of the group policy in its entirety or with respect to

an insured class; and

      2. Individual has been continuously

insured under the group policy and any group policy which it replaced, for at

least six months immediately prior to termination.

      (c)1. A converted policy shall be an

individual policy of long-term care insurance that provides benefits identical

to or benefits determined by the commissioner to be substantially similar to or

in excess of those provided under the group policy from which conversion is

made.

      2. If the group policy from which

conversion is made restricts provision of benefits and services to, or contains

incentives to use certain providers or facilities, the commissioner, in making

a determination as to the substantial similarity of benefits, shall take into

consideration the differences between managed-care and non managed-care plans,

including:

      a. Provider system arrangements;

      b. Service availability;

      c. Benefit levels; and

      d. Administrative complexity.

      (d)1. No later than thirty-one (31) days

after termination of coverage under the group policy, an individual who desires

a converted policy shall:

      a. Make written application for the

converted policy; and

      b. Pay the first premium that is due, if

any.

      2. A converted policy shall be:

      a. Issued effective on the day following

date of termination of coverage under the group policy; and

      b. Renewable annually.

      (e) The premium for a converted policy

shall be calculated on the basis of the insured’s age at inception of coverage

under the group policy:

      1. From which conversion is made unless

the group policy from which conversion is made replaced previous group coverage;

or

      2. Replaced, if the group policy from

which conversion is made replaced previous group coverage.

      (f) Continuation of coverage or issuance

of a converted policy shall be mandatory, except if:

      1. Termination of group coverage resulted

from an individual’s failure to make a required payment of premium or contribution

when due; or

      2. The terminating coverage is replaced

not later than thirty-one (31) days after termination, by group coverage

effective on the day following the date of termination of coverage:

      a. Providing benefits identical to or

benefits determined by the commissioner to be substantially equivalent to or in

excess of those provided by the terminating coverage; and

      b. The premium for which is calculated in

a manner consistent with the requirements of paragraph (e) of this subsection.

      (g) Notwithstanding any other provision

of this section, a converted policy issued to an individual who at conversion

is covered by another long-term care insurance policy that provides benefits on

the basis of incurred expenses, may contain a provision that results in a

reduction of benefits payable if:

      1. The benefits provided under the

additional coverage, together with the full benefits provided by the converted

policy, would result in payment of more than 100 percent of incurred expenses;

and

      2. The converted policy also provides for

a premium decrease or refund which reflects the reduction in benefits payable.

      (h) A converted policy may provide that

the benefits payable under the converted policy, together with the benefits payable

under the group policy from which conversion is made, shall not exceed those

that would have been payable had the individual’s coverage under the group

policy remained in force and effect.

      (i) Notwithstanding any other provision

of this section, an insured individual whose eligibility for group long-term

care coverage is based upon the individual’s relationship to another person

shall be entitled to continuation of coverage under the group policy upon

termination of the qualifying relationship by death or dissolution of marriage.

      (5) Discontinuance and replacement.

      (a) If a group long-term care policy is

replaced by another group long-term care policy issued to the same

policyholder, the succeeding insurer shall offer coverage to persons covered

under the previous group policy on its date of termination; and

      (b) Coverage provided or offered to

individuals by the insurer and premiums charged to persons under the new group

policy shall not:

      1. Result in an exclusion for preexisting

conditions that would have been covered under the group policy being replaced;

and

      2. Vary or depend on the individual’s:

      a. Health or disability status;

      b. Claim experience; or

      c. Use of long-term care services.

      (6)(a) The premium charged to an insured

for long-term care insurance shall not increase due to the:

      1. Increasing age of the insured at ages

beyond sixty-five (65); or

      2. Duration that the insured has been

covered under the policy.

      (b)1. The purchase of additional coverage

shall not be considered a premium rate increase; and

      2. For the calculation required under

Section 25(6) of this administrative regulation, the portion of the premium

attributable to the additional coverage shall be added to and considered part

of the initial annual premium.

      (c)1. A reduction in benefits shall not

be considered a premium change; and

      2. for the calculation required under

Section 25(6) of this administrative regulation, the initial annual premium

shall be based on the reduced benefits.

      (7) Electronic enrollment for group

policies.

      (a) A requirement that a signature of a

group long-term care insurance insured be obtained by an agent or insurer shall

be deemed satisfied if:

      1. The consent is obtained by telephonic

or electronic enrollment by the group policyholder or insurer;

      2. The telephonic or electronic

enrollment provides necessary and reasonable safeguards to assure the:

      a. Accuracy, retention, and prompt

retrieval of records; and

      b. Maintenance of the confidentiality of

personally-identifiable information pursuant to 806 KAR 3:210, 3:220 and 3:230.

      (b) A verification of enrollment

information shall be provided to an enrollee.

      (c) Upon request of the commissioner, an

insurer shall make available records that will demonstrate the insurer’s ability

to confirm enrollment and coverage amounts.

 

      Section 4. Unintentional Lapse. An

insurer offering long-term care insurance shall, as a protection against

unintentional lapse, comply with the following:

      (1)(a) Notice before lapse or termination.

      1. An individual long-term care policy or

certificate shall not be issued until the insurer has received from the

applicant a written:

      a. Designation of at least one (1)

person, in addition to the applicant, who shall receive notice of lapse or termination

of the policy or certificate for nonpayment of premium; or

      b. Waiver:

      1. Dated and signed by the applicant; and

      2. Electing not to designate additional

persons to receive notice.

      3. Designation shall not constitute

acceptance of any liability of the third party for services provided to the

insured.

      4. The form used for the written

designation shall provide space clearly designated for listing at least one (1)

person.

      5. The designation shall include each

person’s full name and home address.

      6. If an applicant elects not to

designate an additional person, the waiver shall contain the language as

established in HIPMC-LTC-10.

      7. The insurer shall notify the insured

of the right to change a written designation, at least once every two (2) years.

      (b)1. If a policy holder or certificate

holder pays premium for a long-term care insurance policy or certificate

through a payroll or pension deduction plan, the policy or certificate shall

not be required to meet the requirements of paragraph (a) of this subsection

until sixty (60) days after the policyholder or certificate holder is no longer

on the payment plan.

      2. The application or enrollment form for

the policy or certificate shall clearly indicate the payment plan selected by

the applicant.

      (c) Lapse or termination for nonpayment

of premium.

      1. An individual long-term care policy or

certificate shall not 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 any person designated

pursuant to paragraph (a) of this subsection, at the address provided by the insured

for purposes of receiving notice of lapse or termination.

      2. Notice of lapse or termination shall:

      a. Be given by first class U.S. mail,

postage prepaid;

      b. Not be given until thirty (30) days

after a premium is due and unpaid; and

      c. Be deemed to have been given as of

five (5) days after the date of mailing.

      (2) Reinstatement.

      (a) In addition to meeting the

requirements of subsection (1) of this section, a long-term care insurance

policy or certificate shall include a provision for reinstatement of coverage:

      1. When lapse occurs; and

      2. 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.

      (b) The reinstatement of coverage option

as identified in paragraph (a) of this subsection shall:

      1. Be available to the insured if

requested within five (5) months after termination; and

      2. Allow for the collection of past due

premium, if appropriate.

      (c) The standard of proof of cognitive

impairment or loss of functional capacity shall not be more stringent than the

benefit eligibility criteria for cognitive impairment or loss of functional

capacity as established in the policy and certificate.

 

      Section 5. Required Disclosure

Provisions. (1) Renewability.

      (a) An individual long-term care

insurance policy shall contain a renewability provision, which shall:

      1. Be appropriately captioned;

      2. Appear on the first page of the

policy; and

      3. State clearly that the coverage is

guaranteed renewable or noncancellable.

      (b) Paragraph (a) of this subsection

shall not apply to a life insurance policy with a long-term care insurance

rider:

      1. Which does not contain a renewability

provision; and

      2. Under which the right to nonrenew is

reserved solely to the policyholder.

      (c) Except for a long-term care insurance

policy for which an insurer does not have the right to change the premium, a

long-term care insurance policy or certificate shall include a statement that

premium rates may change.

      (2) Riders and endorsements.

      (a) Except for a rider or endorsement by

which an insurer effectuates a request made in writing by the insured under an

individual long-term care insurance policy, a rider or endorsement added to an

individual long-term care insurance policy after date of issue or at

reinstatement or renewal which reduces or eliminates benefits or coverage in

the policy shall require signed acceptance by the individual insured.

      (b) Except for increases in benefits or

coverage that are required by the Kentucky insurance code, a rider or

endorsement shall be agreed to in writing and signed by the insured, if the

rider or endorsement:

      1. Is issued after the date of policy

issue; and

      2. Increases benefits or coverage with a

concomitant increase in premium during the policy term.

      (c) If a separate additional premium is

charged for benefits provided in connection with a rider or endorsement, the

premium charged shall be disclosed in the policy, rider, or endorsement.

      (3) Payment of benefits. A long-term care

insurance policy which provides payment of benefits based on standards described

as usual and customary, reasonable and customary, or words of similar import

shall include:

      (a) A definition of these terms or words;

and

      (b) An explanation of these terms or

words in its accompanying outline of coverage.

      (4) Limitations. If a long-term care

insurance policy or certificate contains any limitations, which apply to

preexisting conditions, the limitations shall:

      (a) Appear as a separate paragraph of the

policy or certificate; and

      (b) Labeled as Preexisting Condition

Limitations.

      (5) Other limitations or conditions on

eligibility for benefits. Except for limitations or conditions prohibited in

KRS 304.14-615(4)(b), a long-term care insurance policy or certificate

containing a limitation or condition for eligibility shall:

      (a) Provide a description of the

limitations or conditions, including any required number of days of

confinement, in a separate paragraph of the policy or certificate; and

      (b) Label the paragraph as established in

paragraph (a) of this subsection as "Limitations or Conditions on

Eligibility for Benefits."

      (6) Disclosure of tax consequences. A

disclosure statement, as identified in paragraph (a) of this subsection, shall

be required for a life insurance policy which provides an accelerated benefit

for long-term care.

      (a) The disclosure statement shall:

      1. Be required:

      a. Upon application for the policy or

rider; and

      b. When the accelerated benefit payment

request is submitted;

      2. Disclose that:

      a. Receipt of the benefits may be

taxable; and

      b. Assistance from a personal tax advisor

is recommended; and

      3. Be prominently displayed on the first

page of the:

      a. Policy or rider; and

      b. Documents related to the policy or

rider.

      (b) This subsection shall not apply to a

qualified long-term care insurance contract.

      (7) Benefit triggers.

      (a)Activities of daily living and

cognitive impairment shall be:

      1. Used to measure an insured’s need for

long-term care;

      2. Described in the policy or certificate

in a separate paragraph; and

      3. Labeled "Eligibility for the

Payment of Benefits".

      (b) Any benefit triggers not identified

in paragraph (a) of this subsection shall also be explained in the benefit

triggers section of the policy or certificate.

      (c) If benefit triggers differ for

different benefits, an explanation of the trigger shall accompany each benefit

description.

      (d) If certification of a certain level

of functional dependency by an attending physician or other specified person is

required for determination of eligibility for benefits, the required

certification shall be disclosed.

      (8) A qualified long-term care insurance

contract shall include a disclosure statement:

      (a) In the policy and as established in

Outline of Coverage, HIPMC-LTC-7; and

      (b) Which states that the policy is

intended to be a qualified long-term care insurance contract under 29 U.S.C.

7702B(b).

      (9) A nonqualified long-term care

insurance contract shall include a disclosure statement:

      (a) In the policy and as established in

Outline of Coverage, HIPMC-LTC-7; and

      (b) Which states that the policy is not

intended to be a qualified long-term care insurance contract.

 

      Section 6. Required Disclosure of Rating

Practices to Consumers. (1) Except as provided in subsection (2) of this

section, this section shall apply to any long-term care policy or certificate

issued in Kentucky beginning January 15, 2003.

      (2) For a certificate issued on or after

July 15, 2002, under a group long-term care insurance policy as identified in

KRS 304.14-600(5)(a), which was in force July 15, 2002, the provisions of this

section shall apply on the policy anniversary following July 15, 2003.

      (3) Except for a policy for which no

applicable premium rate or rate schedule increases may be made, an insurer

shall provide the information listed in this subsection to the applicant when

application or enrollment occurs, unless the method of application does not allow

for delivery at that time:

      (a) A statement that the policy may be

subject to rate increases in the future;

      (b) An explanation of potential future

premium rate revisions and the policyholder’s or certificate holder’s option if

a premium rate is revised;

      (c) The premium rate or rate schedules

applicable to the applicant that shall be in effect until a request for an

increase is made;

      (d) A general explanation for applying

premium rate or rate schedule adjustments that shall include:

      1. A description of when premium rate or

rate schedule adjustments shall be effective, including the next anniversary

date or billing date; and

      2. If the premium rate or rate schedule

is changed, the right to a revised premium rate or rate schedule as provided in

paragraph (c) of this subsection; and

      (e)1. Information regarding each premium

rate increase on the policy form or similar policy forms during the past ten

(10) years for Kentucky or any other state that, at a minimum, shall identify:

      a. The policy forms for which premium

rates have been increased;

      b. The calendar years when the form was

available for purchase; and

      c. The amount or percent of each

increase. The percentage may be expressed as:

      (i) A percentage of the premium rate

prior to the increase; or

      (ii) If the rate increase is variable by

rating characteristics, the minimum and maximum percentages.

      2. The insurer may, in a fair manner,

provide additional explanatory information related to the rate increases.

      3. An insurer may exclude, from the

disclosure premium rate increases that occurred prior to the acquisition of and

only apply to:

      a. Blocks of business acquired from other

nonaffiliated insurers; or

      b. Long-term care policies acquired from

other nonaffiliated insurers.

      4. If an acquiring insurer files for a

rate increase on a long-term care policy form acquired from a nonaffiliated

insurer or block of policy forms acquired from a nonaffiliated insurer and if

those increases occurred prior to the acquisition on or before the later of

July 15, 2002 or the end of a twenty-four (24) month period following the acquisition

of the block of business or policies, the acquiring insurer may exclude that

rate increase from the disclosure.

      a. The rate increase that may be excluded

pursuant to this subparagraph shall be disclosed by the nonaffiliated selling

company in accordance with subparagraph 1 of this paragraph; and

      b. If the acquiring insurer files for a

subsequent rate increase, within the twenty-four (24) month period, on the same

policy form acquired from a nonaffiliated insurer or block of policy forms acquired

from a nonaffiliated insurer, the acquiring insurer shall make the disclosures

required by this paragraph, including disclosure of the earlier rate increase.

      (4) If the method of application does not

allow for delivery when application or enrollment occurs, the information

listed in subsection (3)(a) and (e) of this section shall be delivered to the

applicant no later than the date the policy or certificate is delivered.

      (5) An applicant shall sign an

acknowledgement that the insurer made the disclosure required under subsection

(3)(a) and (e) of this section:

      (a) When application occurs; or

      (b) If the method of application does not

allow signature when application occurs, no later than the delivery date of the

policy or certificate.

      (6) An insurer shall use forms

HIPMC-LTC-1 and HIPMC-LTC-2, to comply with the requirements of subsections (3)

and (5) of this section.

      (7) An insurer shall provide notice of an

upcoming premium rate schedule increase to a policyholder or certificate

holder, if applicable, at least forty-five (45) days prior to the implementation

of the premium rate schedule increase by the insurer.

      (8) The notice required, pursuant to

subsection (7) of this section, shall include the information required by

subsection (3) of this section when the rate increase is implemented.

 

      Section 7. Initial Filing Requirements.

(1) This section shall apply to a long-term care policy issued in Kentucky

beginning January 15, 2003.

      (2) An insurer shall provide the

information listed in this subsection to the commissioner in accordance with

the time period established in KRS 304.14-120(2), including:

      (a) A copy of the disclosure documents

required in Section 6 of this administrative regulation; and

      (b) An actuarial certification consisting

of at least the following:

      1. A statement that the:

      a. Initial premium rate schedule is

sufficient to cover anticipated costs under moderately adverse experience; and

      b. Premium rate schedule is reasonably

expected to be sustainable over the life of the form with no future premium

increases anticipated;

      2. A statement that the policy design and

coverage have been reviewed and considered;

      3. A statement that the underwriting and

claims adjudication processes have been reviewed and considered;

      4. A complete description of the basis

for contract reserves that are anticipated to be held under the form,

including:

      a. Sufficient detail or sample

calculations to depict completely the reserve amounts to be held;

      b. A statement that the assumptions used

for reserves contain reasonable margins for adverse experience;

      c. A statement that except for the

attained-age rating, if permitted, the net valuation premium for renewal years

does not increase; and

      d. A statement that the difference

between the gross premium and the net valuation premium for renewal years is

sufficient to cover expected renewal expenses, or if the statement cannot be

made, a complete description of the situations in which this does not occur;

      (i) An aggregate distribution of

anticipated issues may be used if the underlying gross premiums maintain a

reasonably consistent relationship; and

      (ii) If the gross premiums for certain

age groups appear to be inconsistent with this requirement, the commissioner

may request a demonstration as identified under subsection (3) of this section

based on a standard age distribution; and

      5.a. A statement that the premium rate schedule

is not less than the premium rate schedule for existing similar policy forms

currently also available from the insurer except for reasonable differences

attributable to benefits; or

      b. A comparison of the premium schedules

for similar policy forms that are currently available from the insurer with an

explanation of the differences.

      (3) The commissioner may request an

actuarial demonstration that benefits are reasonable in relation to premiums

which shall include:

      (a) Premium and claim experience on

similar policy forms, adjusted for any premium and benefit differences;

      (b) Relevant and creditable data from

other studies; or

      (c) Premium and claims experience, and

relevant and creditable data as identified in paragraphs (a) and (b) of this subsection.

 

      Section 8. Prohibition Against Postclaims

Underwriting. (1) Except for an application which is guaranteed issue, an application

for a long-term care insurance policy or certificate shall contain clear and

unambiguous questions designed to ascertain the health condition of the

applicant.

      (2)(a) If an application for long-term

care insurance contains a question which asks if the applicant has had

medication prescribed by a physician, it shall also ask the applicant to list

the medication that has been prescribed.

      (b) If at application, the medications

listed in the application were known by the insurer, or should have been known,

to be directly related to a medical condition for which coverage would be denied,

the policy or certificate shall not be rescinded for that condition.

      (3) Except for a policy or certificate

which is guaranteed issue:

      (a) The language shall be conspicuous and

located in close proximity to the applicant's signature block on an application

for a long-term care insurance policy or certificate: "Caution: If your answers

on this application, to the best of your knowledge and belief, are incorrect or

untrue, (insurer name) has the right to deny benefits or rescind your

policy."

      (b) The language identified in

HIPMC-LTC-10, or substantially similar language, shall be clear and easy to

read on the long-term care insurance policy or certificate when it is delivered.

      (c) Prior to issuance of a long-term care

policy or certificate to an applicant age eighty (80) or older, the insurer shall

obtain one (1) of the following:

      1. A report of a physical examination;

      2. An assessment of functional capacity;

      3. An attending physician's statement; or

      4. A copy of the medical records.

      (4) A copy of the completed application

or enrollment form, as applicable, shall be delivered to the insured no later

than the delivery date of the policy or certificate unless it was retained by

the applicant at application.

      (5) An insurer issuing long-term care

insurance benefits shall:

      (a) Except for a policy or certificate

rescission voluntarily effectuated by the insured, maintain a record of all

policy or certificate rescissions, both Kentucky and countrywide; and

      (b) Annually submit the information

identified in paragraph (a) of this subsection to the commissioner using

HIPMC-LTC-3.

 

      Section 9. Minimum Standards for Home

Health and Community Care Benefits in Long-term Care Insurance Policies. (1) A

long-term care insurance policy or certificate which provides benefits for home

health care or community care services shall not limit or exclude benefits by:

      (a) Requiring that the insured or

claimant would need care in a skilled nursing facility if home health care

services were not provided;

      (b) Requiring that the insured or

claimant first or simultaneously receive nursing or therapeutic services, or

both, in a home, community, or institutional setting before home health care

services are covered;

      (c) Limiting eligible services to

services provided by registered nurses or licensed practical nurses;

      (d) Requiring that a nurse or therapist

provide services covered by the policy that may be provided by a:

      1. Home health aide; or

      2. Other licensed or certified home care

worker acting within the worker’s scope of licensure or certification;

      (e) Excluding coverage for personal care

services provided by a home health aide;

      (f) Requiring that the provision of home

health care services be at a level of certification or licensure greater than

that required by the eligible service;

      (g) Requiring that the insured or

claimant have an acute condition before home health care services are covered;

      (h) Limiting benefits to services

provided by Medicare-certified agencies or providers; or

      (i) Excluding coverage for adult day care

services.

      (2)(a) A long-term care insurance policy

or certificate which includes home health or community care services shall

provide total home health or community care coverage that is a dollar amount

equivalent to at least one-half (1/2) of one (1) year's coverage available for

nursing home benefits under the policy or certificate, when covered home health

or community care services are received.

      (b) The requirement identified in

paragraph (a) of this subsection shall not apply to a policy or certificate

issued to a resident of a continuing care retirement community.

      (3) In determining maximum coverage under

the terms of a policy or certificate, home health care coverage may be applied

to the nonhome health care benefits provided in the policy or certificate.

 

      Section 10. Requirement to Offer

Inflation Protection. (1) In addition to any other inflation protection, an

insurer offering a long-term care insurance policy shall offer to the

policyholder, an option to purchase a policy that provides for benefit levels

to increase with benefit maximums or reasonable durations which are meaningful

to account for reasonably anticipated increases in the costs of long-term care

services covered by the policy and when the policy is purchased, the option to

purchase a policy with an inflation protection feature that is no less

favorable than one (1) of the following:

      (a) Increases benefit levels annually in

a manner that increases are compounded annually at a rate no less than five (5)

percent;

      (b) If the option for the previous period

has not been declined, guarantees the insured individual the right to

periodically increase benefit levels without providing evidence of insurability

or health status. The amount of the additional benefit shall not be less than

the difference between the existing policy benefit and that benefit compounded

annually at a rate of at least five (5) percent for the period:

      1. Beginning with the purchase of the

existing benefit; and

      2. Extending until the year in which the

offer is made; or

      (c)1. Covers a specified percentage of

actual or reasonable charges; and

      2. Does not include a maximum specified

indemnity amount or limit.

      (2) If a long-term care policy is issued

to a:

      (a) Group, the required offer in

subsection (1) of this section shall be made to the group policyholder; or

      (b) Group as defined in KRS

304.14-600(5)(d) other than to a continuing care retirement community, the

required offer in Subsection (1) of this section shall be made to each proposed

certificate holder.

      (3) The offer in subsection (1) of this

section shall not be required of life insurance policies or riders containing

accelerated long-term care benefits.

      (4) An insurer:

      (a) Shall disclose, in or with the

outline of coverage:

      1. A graphic comparison of the benefit

levels of a policy, which:

      a. Increases benefits over the policy

period; and

      b. Does not increase benefits over the

policy period; and

      2. Any expected premium increases or

additional premiums to pay for automatic or optional benefit increases;

      (b) Shall show the benefit levels as identified

in paragraph (a)1 of this subsection for a period of twenty (20) years or more;

and

      (c) May use a reasonable hypothetical, or

a graphic demonstration for the disclosure identified in paragraphs (a) and (b)

of this subsection.

      (5) Inflation protection benefit

increases under a policy which contains these benefits shall continue

regardless of an insured's:

      (a) Age;

      (b) Claim status;

      (c) Claim history; or

      (d) Length of time the person has been

insured under the policy.

      (6) An offer of inflation protection

which provides automatic benefit increases shall:

      (a) Include an offer of a premium which

the insurer expects to remain constant; and

      (b) Disclose in a conspicuous manner that

the premium may change in the future unless the premium is guaranteed to remain

constant.

      (7)(a) Inflation protection as identified

in subsection (1)(a) of this section shall be included in a long-term care

insurance policy unless an insurer obtains a rejection of inflation protection

signed by the policyholder as required in this subsection.

      (b) As established in HIPMC-LTC-10, the

rejection of inflation protection, which may be either in the application or in

a separate form, shall be considered a part of the application.

 

      Section 11. Requirements for Application

Forms and Replacement Coverage. (1)(a) Application forms shall include

questions designed to obtain information to determine if:

      1. The applicant has another long-term

care insurance policy or certificate in force on the date of application; or

      2. A long-term care insurance policy or

certificate is intended to replace:

      a. An accident and sickness policy or

certificate currently in force; or

      b. A long-term care policy or certificate

currently in force.

      (b) A supplementary application or other

form, containing the questions required by this section, may be used if signed

by the:

      1. Applicant; and

      2. Agent, if coverage is sold by an

agent.

      (c) If a replacement policy is issued to

a group, as defined by KRS 304.14-600(5)(a), the following questions shall be included

and may be modified only to the extent necessary to obtain information about a

health or long-term care insurance policy other than the group policy being

replaced if the certificate holder has been notified of the replacement.

      1. Do you have another long-term care

insurance policy or certificate in force, including a health-care service

contract or health maintenance organization contract?

      2. Did you have another long-term care

insurance policy or certificate in force during the last twelve (12) months?

      a. If yes, with which company?

      b. If that policy lapsed, when did it

lapse?

      3. Are you covered by Medicaid?

      4. Do you intend to replace any of your

medical or health insurance coverage with this policy or certificate?

      (2) An agent shall list other health

insurance policies sold by the agent to the applicant which:

      (a) Are currently in force; and

      (b) Were sold in the past five (5) years

and are no longer in force.

      (3) Solicitations other than direct

response.

      (a) Upon determining that a sale will

involve replacement, an insurer, which does not use direct response

solicitation methods or an agent of the insurer, shall provide the applicant

with a notice regarding replacement of accident and sickness or long-term care

coverage as established in the HIPMC-LTC-8.

      (b)1. One (1) copy of the notice

identified in this subsection shall be retained by the applicant; and

      2. A copy of the notice shall be signed

by the applicant and retained by the insurer.

      (c) The notice, as identified in this

subsection shall be provided prior to issuance or delivery of the individual

long-term care insurance policy.

      (4) Direct response solicitations. An

insurer which uses direct response solicitation methods shall deliver a notice

regarding replacement of accident and sickness or long-term care coverage to

the applicant:

      (a) If it is determined that a sale will

involve a replacement; and

      (b) As established in the HIPMC-LTC-9.

      (5)(a) If replacement is intended, the

replacing insurer shall provide written notification to the existing insurer of

the proposed replacement.

      (b) The existing policy shall be

identified by the:

      1. Insurer;

      2. Name of the insured; and

      3.a. Insured’s policy number; or

      b. Insured’s address, including ZIP code.

      (c) The notice shall be delivered within

five (5) business days of the date the application is received by the insurer

or the date the policy is issued, whichever is sooner.

      (6)(a) A life insurance policy which

accelerates benefits for long-term care shall comply with this section if the

policy being replaced is a long-term care insurance policy.

      (b) If the policy being replaced is a

life insurance policy, the insurer shall comply with the replacement

requirements of KRS 304.12-030 and 806 KAR 12:080.

      (c) If a life insurance policy which

accelerates benefits for long-term care is replaced by another life insurance

policy which accelerates benefits for long-term care, the replacing insurer

shall comply with the:

      1. Long-term care replacement

requirements as identified in paragraph (a) of this subsection; and

      2. Life insurance replacement

requirements as identified in paragraph (b) of this subsection.

 

      Section 12. Reporting Requirements. (1)

For each agent, an insurer shall maintain records, including an agent’s amount

of:

      (a) Replacement sales as a percent of the

agent's total annual sales; and

      (b) Lapses of long-term care insurance

policies sold as a percent of the agent's total annual sales.

      (2) An insurer shall use the HIPMC-LTC-11

to report to the department annually by June 30 the ten (10) percent of the insurer’s

agents with the greatest percentages of lapses and replacements based upon

information identified in subsection (1) of this section.

      (3) Reported replacement and lapse rates

shall not alone constitute a violation of the Kentucky insurance code or necessarily

imply wrongdoing. The reports, as referenced in subsections (1) and (2) of this

section, shall be used by the department to conduct a comprehensive review of

agent activities regarding the sale of long-term care insurance.

      (4) An insurer shall report to the

department annually by June 30 using HIPMC-LTC-11, the number of:

      (a) Lapsed long-term care insurance

policies as a percent of the insurer’s total:

      1. Annual sales; and

      2. Number of long-term care insurance

policies in force at the end of the preceding calendar year; and

      (b) Replacement long-term care insurance

policies sold as a percent of the insurer’s total:

      1. Annual sales; and

      2. Number of long-term care insurance

policies in force as of the preceding calendar year.

      (5) For qualified long-term care

insurance contracts an insurer shall file a report with the department annually

by June 30, containing the number of claims denied for each class of business,

expressed as a percentage of claims denied, using the HIPMC-LTC-4.

      (6) Reports required in this section

shall include information on a statewide basis.

 

      Section 13. Licensing. An agent shall not

be authorized to market, sell, solicit, or negotiate with respect to long-term

care insurance except as authorized by KRS 304.9-080(1).

 

      Section 14. Discretionary Powers of

Commissioner. Upon written request and after an administrative hearing pursuant

to KRS 304.2-310, the commissioner may issue an order to modify or suspend an

identified provision of this administrative regulation regarding a long-term

care insurance policy or certificate upon a written finding that:

      (1) The modification or suspension is in

the best interest of the insureds;

      (2) The purposes to be achieved may not

be effectively or efficiently achieved without the modification or suspension;

and

      (3)(a) The modification or suspension is

necessary to the development of an innovative and reasonable approach for insuring

long-term care;

      (b)1. The policy or certificate is issued

to residents of:

      a. A life care or continuing care

retirement community; or

      b. A residential community for the

elderly other than a life care or continuing care retirement community; and

      2. The modification or suspension is

reasonably related to the special needs or nature of the community as

identified in subparagraph 1 of this paragraph; or

      (c) The modification or suspension is

necessary to permit long-term care insurance to be sold as part of or in

conjunction with, another insurance product.

 

      Section 15. Reserve Standards. (1)(a) If

long-term care benefits are provided through the acceleration of benefits under

a group or individual life insurance policy or rider to a group or individual

life insurance policy, policy reserves for these benefits shall be determined

in accordance with KRS 304.6-130 to 304.6-180.

      (b) If the policy or rider is in claim

status, claim reserves shall be established.

      (c) Except for voluntary termination

rates or as established in paragraph (d) of this subsection, reserves for a

policy or rider subject to the requirements of this subsection shall be based

on:

      1. The multiple decrement model utilizing

relevant decrements; or

      2. Single decrement approximations, if

the:

      a. Calculation produces essentially

similar reserves;

      b. Reserve is clearly more conservative;

or

      c. Reserve is immaterial.

      (d) Calculations may consider the

reduction in life insurance benefits due to the payment of long-term care

benefits, except the reserves for the long-term care benefit and the life

insurance benefit shall not be less than the reserves for the life insurance

benefit assuming no long-term care benefit.

      (e) In the development and calculation of

reserves for a policy and rider subject to the requirements of this subsection,

consideration shall be given to the applicable policy provisions, marketing

methods, administrative procedures, and other considerations which have an

impact on projected claim costs, including:

      1. Definition of insured events;

      2. Covered long-term care facilities;

      3. Existence of home convalescence care

coverage;

      4. Definition of facilities;

      5. Existence or absence of barriers to

eligibility;

      6. Premium waiver provision;

      7. Renewability;

      8. Ability to raise premiums;

      9. Marketing method;

      10. Underwriting procedures;

      11. Claims adjustment procedures;

      12. Waiting period;

      13. Maximum benefit;

      14. Availability of eligible facilities;

      15. Margins in claim costs;

      16. Optional nature of benefit;

      17. Delay in eligibility for benefit;

      18. Inflation protection provisions; and

      19. Guaranteed insurability option.

      (f) An applicable valuation morbidity

table shall be certified as appropriate as a statutory valuation table by a

member of the American Academy of Actuaries.

      (2) If long-term care benefits are not

provided through the acceleration of benefits under a group or individual life

policy or rider to this policy, reserves shall be determined in accordance with

KRS 304.6-070.

 

      Section 16. Loss Ratio. (1) Except for a

policy or certificate that is subject to Sections 7 and 17 of this

administrative regulation, a long-term care insurance policy or certificate

shall comply with this section.

      (2)(a) Benefits under a long-term care

insurance policy shall be deemed reasonable in relation to premiums if the

expected loss ratio is:

      1. At least sixty (60) percent; and

      2. Calculated in a manner for adequate

reserving of the long-term care insurance risk.

      (b) In evaluating the expected loss

ratio, consideration shall be given to relevant factors, including:

      1. Statistical credibility of incurred

claims experience and earned premiums;

      2. The period for which rates are

computed to provide coverage;

      3. Experienced and projected trends;

      4. Concentration of experience within

early policy duration;

      5. Expected claim fluctuation;

      6. Experience refunds, adjustments, or

dividends;

      7. Renewability features;

      8. Expense factors, as appropriate;

      9. Interest;

      10. Experimental nature of the coverage;

      11. Policy reserves;

      12. Mix of business by risk

classification; and

      13. Product features including:

      a. Long elimination periods;

      b. High deductibles; and

      c. High maximum limits.

      (3) Subsection (2) of this section shall

not apply to a life insurance policy which accelerates benefits for long-term

care.

      (4) A life insurance policy which funds

long-term care benefits entirely by accelerating the death benefit shall be

considered to provide reasonable benefits in relation to premiums paid, if the

policy complies with the following:

      (a) The interest credited internally to

determine cash value accumulations, including long-term care, if any, are

guaranteed to be no less than the minimum guaranteed interest rate for cash

value accumulations without long-term care as identified in the policy;

      (b) The portion of the policy that

provides life insurance benefits meets the nonforfeiture requirements of KRS

304.15-310;

      (c) The policy meets the following

disclosure requirements:

      1. If an application for a long-term care

insurance contract or certificate is approved, the insurer shall deliver the contract

or certificate of insurance to the applicant no later than thirty (30) days

after the date of approval;

      2. When the policy is delivered, a policy

summary shall be delivered in accordance with KRS 304.14-615(9);

      3. If the long-term care inflation protection

option required by Section 10(1) of this administrative regulation is not available,

the policy summary shall state that long-term care inflation protection option

required by Section 10(1) of this administrative regulation is not available

under the policy;

      4. The policy summary required by

subparagraph 2 of this paragraph may be incorporated into a basic illustration

that meets the requirements of 806 KAR 12:140, Sections 8 and 9; and

      5. If a long-term care benefit, funded

through a life insurance product by the acceleration of the death benefit, is

in the benefit payment status, a monthly report shall be provided in accordance

with KRS 304.14-615(10);

      (d) Any policy illustration meets the

applicable requirements of 806 KAR 12:140, Section 3; and

      (e) An actuarial memorandum is filed with

the department, which includes:

      1. A description of the basis on which

the long-term care rates were determined;

      2. A description of the basis for the

reserves;

      3. A summary of the:

      a. Type of policy;

      b. Benefits;

      c. Renewability;

      d. General marketing method; and

      e. Limits on ages of issuance;

      4.a. A description and a table of each

actuarial assumption used; and

      b. For expenses, shall include the

percent of premium dollars per policy and dollars per unit of benefits, if any;

      5. A description and a table of the

anticipated policy reserves and additional reserves to be held in each future

year for active lives;

      6. The estimated average annual premium

per policy and the average issue age;

      7.a. A statement that:

      (i) Indicates if underwriting is

performed upon application; and

      (ii) If underwriting is used, includes a

description of the type of underwriting used, including medical underwriting or

functional assessment underwriting; and

      b. If related to a group policy, the

statement as established in clause a of this paragraph shall indicate:

      (i) If the enrollee or a dependent shall

be underwritten; and

      (ii) When underwriting shall occur; and

      8. For active lives and insureds in

long-term care status, a description of the long-term care policy provision on:

      a. Required premiums;

      b. Nonforfeiture values; and

      c. Reserves on the underlying life

insurance policy.

 

      Section 17. Premium Rate Schedule

Increases. (1)(a) Except as required in paragraph (b) of this subsection, this

section shall apply to a long-term care policy or certificate issued in Kentucky

beginning January 15, 2003.

      (b) For a certificate issued on or after

the effective date of this administrative regulation under a group long-term

care insurance policy in force on July 15, 2002, the provisions of this section

shall apply on the policy anniversary following July 15, 2003.

      (2) An insurer shall provide a notice of

a pending premium rate schedule increase, including an exceptional increase, to

the commissioner at least thirty (30) days prior to the notice issued to policyholders,

which shall include:

      (a) Information required by Section 6 of

this administrative regulation;

      (b) Certification by a qualified actuary

that:

      1. If the requested premium rate schedule

increase is implemented and the underlying assumptions, which reflect moderately

adverse conditions, are realized, no further premium rate schedule increases

are anticipated; and

      2. The premium rate filing is in

compliance with the provisions of this section;

      (c) An actuarial memorandum justifying

the rate schedule change request which includes:

      1. Lifetime projections of earned

premiums and incurred claims based on the filed premium rate schedule increase

and the method and assumptions used in determining the projected values,

including reflection of any assumptions that deviate from those used for pricing

other forms currently available for sale;

      a. Annual values for the five (5) years

preceding and the three (3) years following the valuation date shall be

provided separately;

      b. Unless the rate increase is an

exceptional increase, the projections shall include the development of the

lifetime loss ratio;

      c. The projections shall demonstrate

compliance with subsection (3) of this section; and

      d. For exceptional increases:

      (i) The projected experience shall be

limited to the increases in claims expenses attributable to the approved

reasons for the exceptional increase; and

      (ii) If the commissioner makes a

determination as required in subsection (12)(b) of this section that offsets

may exist, the insurer shall use appropriate net projected experience;

      2. If the rate increase triggers the

contingent benefit upon lapse, disclosure of how reserves have been

incorporated in this rate increase;

      3. Disclosure of the analysis performed

to determine:

      a. Why a rate adjustment is necessary;

      b. Which pricing assumptions were not

realized and why; and

      c. What actions taken by the company have

been relied on by the actuary;

      4. A statement that consideration was

given to:

      a. Policy design;

      b. Underwriting; and

      c. Claims adjudication practices; and

      5. If necessary to maintain consistent

premium rates for new certificates and certificates receiving a rate increase,

the insurer shall file composite rates reflecting projections of new

certificates;

      (d) A statement that renewal premium rate

schedules are not greater than new business premium rate schedules except for

differences attributable to benefits, unless sufficient justification is provided

to the commissioner; and

      (e) Sufficient information for review and

approval of the premium rate schedule increase by the commissioner.

      (3) Premium rate schedule increases shall

be determined in accordance with the following requirements:

      (a) Exceptional increases shall provide

that seventy (70) percent of the present value of projected additional premiums

from the exceptional increase shall be returned to policyholders in benefits;

      (b) Premium rate schedule increases shall

be calculated in a manner that the sum of the accumulated value of incurred

claims, without the inclusion of active life reserves, and the present value of

future projected incurred claims, without the inclusion of active life reserves,

shall not be less than the sum of the following:

      1. The accumulated value of the initial

earned premium multiplied by fifty-eight (58) percent;

      2. Eighty-five (85) percent of the

accumulated value of prior premium rate schedule increases on an earned basis;

      3. The present value of future projected

initial earned premiums multiplied by fifty-eight (58) percent; and

      4. Eighty-five (85) percent of the

present value of future projected premiums not included in subparagraph 3 of

this paragraph on an earned basis;

      (c) If a policy form has exceptional and

other increases, the values in paragraph (b)2 and 4 of this subsection shall

also include seventy (70) percent for exceptional rate increase amounts; and

      (d)1. All present and accumulated values

used to determine rate increases shall use the maximum valuation interest rate

for contract reserves as required by 806 KAR 6:080, Section 1(3)(a); and

      2. The actuary shall disclose as part of

the actuarial memorandum the use of any appropriate averages.

      (4) For each rate increase implemented,

an insurer shall file for review by the commissioner updated projections, as

identified in subsection (2)(c)1 of this section, annually for the next three

(3) years, which shall include a comparison of actual results to projected

values.

      (a) If actual results are not consistent

with projected values from prior projections, the commissioner may extend the period

to greater than three (3) years.

      (b) For group insurance policies that

meet the conditions in subsection (11) of this section, the projections

required by this subsection shall be provided to the policyholder in lieu of

filing with the commissioner.

      (5)(a) If a premium rate in the revised

premium rate schedule is greater than 200 percent of the comparable rate in the

initial premium schedule, lifetime projections, as established in subsection

(2)(c)1 of this section, shall be filed for review by the commissioner every

five (5) years following the end of the required period identified in subsection

(4) of this section.

      (b) For group insurance policies that

meet the conditions in subsection (11) of this section, the projections

required by this subsection shall be provided to the policyholder in lieu of

filing with the commissioner.

      (6)(a) If the commissioner has determined

that the actual experience following a rate increase does not adequately match

the projected experience and that the current projections under moderately

adverse conditions demonstrate that incurred claims will not exceed proportions

of premiums specified in subsection (3) of this section, the commissioner may

require the insurer to implement any of the following:

      1. Premium rate schedule adjustments; or

      2. Measures other than premium rate

schedule adjustments to reduce the difference between the projected and actual

experience.

      (b) In determining if the actual

experience adequately matches the projected experience, consideration shall be

given to subsection (2)(c)5 of this section, if applicable.

      (7) If the majority of the policies or

certificates to which the increase is applicable are eligible for the

contingent benefit upon lapse:

      (a) The insurer shall file:

      1. The original anticipated lifetime loss

ratio and the premium rate schedule increase that would have been calculated

according to subsection (3) of this section had the greater of the original

anticipated lifetime loss ratio or fifty-eight (58) percent been used in the

calculations described in subsection (3)(b)1 and 3 of this section; and

      2.a. A plan, subject to commissioner’s

approval, for improved administration or claims processing designed to

eliminate the potential for further deterioration of the policy form requiring

further premium rate schedule increases, or both; or

      b. Documentation, which demonstrates that

appropriate administration and claims processing have been implemented or are

in effect; or

      (b) If an insurer does not comply with paragraph

(a)2 of this subsection, the commissioner may impose the condition identified

in subsection (8) of this section.

      (8)(a) For a rate increase filing that

meets the following criteria, the commissioner shall review, for all policies

included in the filing, the projected lapse rates and past lapse rates during

the twelve (12) months following each increase to determine if significant

adverse lapse rates have occurred or are anticipated:

      1. The rate increase is not the first

rate increase requested for the specific policy form or forms;

      2. The rate increase is not an

exceptional increase; and

      3. The majority of the policies or

certificates to which the increase is applicable are eligible for the

contingent benefit upon lapse.

      (b) If significant adverse lapse rates

have occurred, are anticipated in the filing, or are evidenced in the actual

results as presented in the updated projections provided by the insurer

following the requested rate increase, the commissioner may determine that a

rate spiral exists.

      (c) Following a determination that a rate

spiral exists, the commissioner may require the insurer to offer, without underwriting,

to insureds subject to the rate increase the option to replace existing

coverage with one (1) or more comparable products offered by the insurer or an

affiliate of the insurer.

      1. The offer shall:

      a. Be subject to the approval of the

commissioner;

      b. Be based on actuarially sound

principles;

      c. Not be based on attained age; and

      d. Provide maximum benefits under a new

policy, which shall be:

      (i) Accepted by an insured; and

      (ii) Reduced by comparable benefits

already paid under the existing policy.

      2.a. The insurer shall maintain the

experience of all replacement insureds separate from the experience of insured's

originally issued the policy forms.

      b. If a rate increase on the policy form

is requested, the rate increase shall be limited to the lesser of:

      (i) The maximum rate increase which was

determined on the basis of the combined experience; and

      (ii) The maximum rate increase which was

determined on the basis of the experience of the insured's originally issued

the form plus ten (10) percent.

      (9) If the commissioner determines that

the insurer has exhibited a persistent practice of filing inadequate initial

premium rates for long-term care insurance, the commissioner may impose the

provisions of subsection (8) of this section and prohibit the insurer from:

      (a) Filing and marketing comparable coverage

for a period of up to five (5) years; or

      (b) Offering all other similar coverage's

and limiting marketing of new applications to the products subject to recent

premium rate schedule increases.

      (10) Subsections (1) through (9) of this

section shall not apply to a policy for which the long-term care benefits

provided by the policy are incidental, if the policy complies with all of the

following provisions:

      (a) The interest credited internally to

determine cash value accumulations, including long-term care, if any, are

guaranteed to be no less than the minimum guaranteed interest rate for cash

value accumulations without long-term care as identified in the policy;

      (b) The portion of the policy which

provides insurance benefits other than long-term care coverage meets the

nonforfeiture requirements, as applicable, in any of the following:

      1. KRS 304.15-310;

      2. KRS 304.15-315;

      3. 806 KAR 15:010; or

      4. 806 KAR 15:030;

      (c) The policy meets the disclosure

requirements of Section 16(4)(c) of this administrative regulation;

      (d) The portion of the policy, which

provides insurance benefits other than long-term care coverage meets the

requirements, as applicable, in the following:

      1. Policy illustrations as required in

806 KAR 12:140; and

      2. Disclosure requirements as required in

806 KAR 15:010 and 15:030; and

      (e) An actuarial memorandum is filed with

the department, which includes:

      1. A description of the basis for

determination of the long-term care rates;

      2. A description of the basis for the

reserves;

      3. A summary of the:

      a. Type of policy;

      b. Benefits;

      c. Renewability;

      d. Marketing method; and

      e. Limits on ages of issuance;

      4. A description and table of each

actuarial assumption used, including expenses, for which an insurer shall

include:

      a. Percent of premium dollars per policy;

and

      b. Dollars per unit of benefits, if any;

      5. A description and table of the:

      a. Anticipated policy reserves for active

lives; and

      b. Additional reserves to be held in each

future year for active lives;

      6.a. The estimated average annual premium

per policy; and

      b. The average issue age;

      7. A statement regarding the performance

or nonperformance of underwriting at application.

      a. The statement shall:

      (i) Indicate whether underwriting is

used; and

      (ii) If underwriting is used, include a

description of the type of underwriting used, including medical underwriting or

functional assessment underwriting; and

      b. If the statement relates to a group

policy, the statement shall indicate:

      (i) If the enrollee or dependent will be

underwritten; and

      (ii) When underwriting will occur; and

      8. A description of the effect of the

long-term care policy provision on the:

      a. Required premiums;

      b. Nonforfeiture values; and

      c. For active lives and for insured's in

long-term care claim status, reserves on the underlying insurance policy.

      (11) Subsections (6) and (8) of this

section shall not apply to insurance policies issued to a group identified in

KRS 304.14-600(5)(a) if the:

      (a)1. Policies insure 250 or more

persons; and

      2. Policyholder has 5,000 or more

eligible employees of a single employer; or

      (b) The policyholder, and not the certificate

holder, pays a material portion of the premium, which shall not be less than

twenty (20) percent of the total premium for the group in the calendar year

prior to the year a rate increase is filed.

      (12) For an exceptional increase, the

commissioner:

      (a) May request a review of the basis for

a request that an increase be considered an exceptional increase by:

      1. An independent actuary; or

      2. A professional actuarial body; and

      (b) In determining that the necessary

basis for an exceptional increase exists, shall determine any potential offsets

to higher claim costs.

      (13) Except as required in this section,

an exceptional increase shall be subject to the same requirements as any

premium rate schedule increase.

 

      Section 18. Filing Requirement for a

Group Policy Issued in Another State. Prior to offering group long-term care

insurance issued in another state to a resident of Kentucky pursuant to KRS

304.14-610, an insurer shall file with the commissioner evidence that the group

policy or certificate issued under the group policy has been approved by a

state having statutory or regulatory long-term care insurance requirements

substantially similar to requirements in Kentucky.

 

      Section 19. Filing Requirements for

Advertising. (1) An insurer providing long-term care insurance or benefits in

Kentucky shall provide a copy of a long-term care insurance advertisement intended

for use in Kentucky whether through written, radio, or television medium to the

commissioner for review in accordance with this administrative regulation and

KRS 304.12-020, 304.14-120, 304.14-620, and 806 KAR 12:010, 806 KAR 14:005, 806

KAR 14:007, Section 5(2);

      (2) An advertisement shall be retained by

the insurer for at least five (5) years from the date the advertisement was

first used.

      (3) The commissioner may exempt

advertising from the requirements of this section pursuant to KRS

304.14-120(4).

 

      Section 20. Standards for Marketing. (1)

An insurer marketing long-term care insurance coverage in Kentucky, directly or

through its agents, shall:

      (a) Establish marketing procedures and

agent training requirements to assure that:

      1. Marketing activities, including a

comparison of policies, by its agent, shall be fair and accurate; and

      2. Excessive insurance shall not be sold

or issued.

      (b) Display prominently by type, stamp,

or other appropriate means, on the first page of the outline of coverage and

policy, the notice as established in HIPMC-LTC-10.

      (c) Provide to the applicant a copy of

each disclosure form required in Section 6(5) and (6) of this administrative

regulation.

      (d) Inquire and make every reasonable

effort to identify:

      1. If a prospective applicant or enrollee

for long-term care insurance has accident and sickness or long-term care insurance;

and

      2. The type and amount of insurance

identified in subparagraph 1 of this paragraph.

      (e) For a qualified long-term care

insurance contract, not be required to make an inquiry into whether a

prospective applicant or enrollee for long-term care insurance has accident and

sickness insurance, in accordance with paragraph (d) of this section.

      (f) Establish auditable procedures for

verifying compliance with the requirements of this subsection.

      (g) At solicitation, provide:

      1. Written notice to the prospective

policyholder and certificate holder that the Kentucky State Health Insurance

Assistance Program is available; and

      2. The address and telephone number of

the program as identified in subparagraph 1 of this paragraph.

      (h) For a long-term care insurance policy

and certificate, use the terms, noncancellable or level premium, if the policy

or certificate conforms to Section 3(1)(c) and (d) of this administrative regulation.

      (i) Provide an explanation of:

      1. Contingent benefit upon lapse as

described in Section 25(6)(c) of this administrative regulation; and

      2. If applicable, the additional

contingent benefit upon lapse provided to all policies with fixed or limited

premium paying periods as described in Section 25(6)(d).

      (2) An insurer shall:

      (a) Comply with the requirements of KRS

Chapter 304.12; and

      (b) Not perform the following acts and

practices:

      1. Twisting;

      2. High pressure tactics;

      3. Cold lead advertising; and

      4. Misrepresentation.

      (3)(a) To comply with the requirements of

this subsection, an association, as defined in KRS 304.14-600(5)(b) shall have

the primary responsibility of educating its members concerning long-term care issues

in general:

      1. If endorsing or selling long-term care

insurance; and

      2. To ensure that its members make

informed decisions.

      (b) An association shall provide

objective information regarding long-term care insurance policies or

certificates endorsed or sold by the association to ensure that its members

receive a balanced and complete explanation of the features of the policy or

certificate that is endorsed or sold.

      (c) An insurer shall file with the

department the following:

      1. An insurance policy and, if

applicable, a certificate;

      2. An outline of coverage, which

corresponds to the filed policy or certificate; and

      3. Advertisements as requested by the

department pursuant to Section 19(1) of this administrative regulation.

      (d) An association shall disclose in a

long-term care insurance solicitation:

      1. The specific nature and amount of the

compensation arrangements, including fees, commissions, administrative fees,

and other forms of financial support, which the association receives from endorsement

or sale of the policy or certificate to its members; and

      2. A brief description of the process

used to select the policy and the insurer, which issued the policy.

      (e) If an association and insurer have

interlocking directorates or trustee arrangements, the association shall

disclose that fact to the association members.

      (f) The board of directors of an

association selling or endorsing a long-term care insurance policy or

certificate shall review and approve the:

      1. Insurance policy; and

      2. Compensation arrangements made with

the insurer.

      (g) Except for a qualified long-term care

insurance contract, an association shall:

      1. Upon a decision to endorse a long-term

care insurance contract, engage the services of a person with expertise in

long-term care insurance not affiliated with the insurer to:

      a. Conduct an examination of the policy,

including its benefits, features, and rates; and

      b. Update the examination, if a material

change is made to the contract;

      2. Actively monitor the marketing efforts

of the insurer and its agents; and

      3. Review and approve:

      a. Marketing materials; or

      b. Insurance communications other than

marketing materials, including communications:

      (i) Used to promote sales; or

      (ii) Sent to members regarding the policy

or certificate.

      (h) A group long-term care insurance

policy or certificate shall not be issued to an association unless the insurer

files with the commissioner the information required in this subsection.

      (i) Unless an insurer certifies annually

that an association has complied with the requirements established in this

subsection, an insurer shall not:

      1. Issue a long-term care policy or

certificate to the association; or

      2. Continue to market the policy or

certificate.

      (j) Failure to comply with the filing and

certification requirements of this section shall constitute an unfair trade practice

in violation of KRS 304.12-010.

 

      Section 21. Suitability. (1) This section

shall not apply to life insurance policies that accelerate benefits for

long-term care.

      (2) An insurer marketing long-term care

insurance shall:

      (a) Develop and use suitability standards

to determine if the purchase or replacement of long-term care insurance is appropriate

for the needs of the applicant;

      (b) Train an agent to use the suitability

standards identified in paragraph (a) of this subsection; and

      (c) Maintain a copy of the suitability

standards, which shall be available for inspection upon request by the

commissioner.

      (3)(a) To determine if an applicant meets

the suitability standards developed by the insurer, the agent and insurer shall

develop a procedure, which considers the:

      1. Applicant's ability to pay for the

proposed coverage and other pertinent financial information related to the

purchase of the coverage;

      2. Applicant’s goals or needs with respect

to:

      a. Long-term care; and

      b. Advantages and disadvantages of

insurance to meet the applicant’s goals or needs; and

      3. Values, benefits, and costs of the

applicant’s existing insurance, if any, as compared to the values, benefits,

and costs of the recommended purchase or replacement.

      (b) The insurer and, if an agent is

involved, the agent, shall make a reasonable effort to obtain the information

identified in paragraph (a) of this subsection using the HIPMC-LTC-1 Long-term

Care Insurance Personal Work Sheet, which shall:

      1. Be presented to the applicant at or

prior to application;

      2. Include not less than the information

identified in the format of the HIPMC-LTC-1;

      3. Be provided in no less than twelve

(12) point type; and

      4. Be filed with the commissioner.

      (c) The insurer may request additional

information from the applicant to comply with its suitability standards.

      (d) Except for a Long-term Care Personal

Work Sheet completed for the sale of employer group long-term care insurance to

employees and spouses of employees, a Long-term Care Personal Work Sheet shall

be completed and returned to the insurer prior to the insurer’s consideration

of the applicant for coverage.

      (e) An insurer or agent shall not sell or

disseminate information obtained from a Long-term Care Personal Work Sheet

outside the company or agency.

      (4) An insurer shall use the suitability

standards as identified in subsection(2) of this section to determine if the

issuance of long-term care insurance coverage is appropriate for an applicant.

      (5) An agent shall use the suitability

standards of an insurer in marketing long-term care insurance.

      (6) When the Long-term Care Personal Work

Sheet is provided to the applicant pursuant to subsection (3)(b) of this

section, the disclosure form entitled Things You Should Know Before You Buy

Long-term Care Insurance, HIPMC-LTC-5 shall be provided in at least twelve (12)

point type.

      (7)(a) If an insurer determines that the

applicant does not meet the financial suitability standards, or if the

applicant has declined to provide the information as identified in the

Long-term Care Personal Work Sheet, the insurer may reject the application or

send to the applicant, a:

      1. Long-term Care Suitability Letter,

HIPMC-LTC-6; or

      2. Letter, which is:

      a. Similar to the Long-term Care

Suitability Letter identified in Subparagraph 1 of this paragraph; and

      b. Approved by the commissioner.

      (b) If the applicant declined to provide

financial information, the insurer may verify the applicant’s intent using an

alternative method.

      (c) The applicant’s returned HIPMC-LTC-6

or a record of the alternative method of verification shall be maintained as

part of the applicant’s file.

      (8) For the previous calendar year, an

insurer shall report annually by June 30 to the commissioner:

      (a) The total number of applications for

long-term care insurance received from Kentucky residents;

      (b) Of the number reporting in paragraph

(a) of this subsection, the number of applicants who:

      1. Declined to provide information on the

personal worksheet;

      2. Did not meet the suitability

standards; and

      3. Chose to confirm after receiving a

suitability letter.

 

      Section 22. Prohibition Against

Preexisting Conditions and Probationary Periods in Replacement Policies or

Certificates. If a long-term care insurance policy or certificate replaces another

long-term care policy or certificate, the replacing insurer shall waive any

time periods applicable to preexisting conditions and probationary periods in

the new long-term care policy for similar benefits to the extent that similar

exclusions have been satisfied under the original policy.

 

      Section 23. Availability of New Services

or Providers. (1) (a) An insurer shall notify a policyholder of the

availability of a new long-term policy product, which provides coverage for new

long-term care services or providers material in nature and not previously available

to the general public through the insurer.

      (b) The notice shall be provided within

twelve (12) months of the date the new policy product is made available for

sale in Kentucky.

      (2) An insurer:

      (a) Shall not be required to provide the

notification identified in subsection (1) of this section:

      1. For a policy issued prior to January

1, 2009; or

      2. To a policyholder or certificate

holder who:

      a. Is currently eligible for benefits:

      (i) Within an elimination period; or

      (ii) On a claim;

      b. Previously had been in claim status;

or

      c. May not be eligible to apply for

coverage due to issue age limitations under the new policy; and

      (b) To add new services or providers, may

require a policyholder to meet eligibility requirements, including:

      1. Underwriting; and

      2. Payment of the required premium.

      (3) The insurer shall make the new

coverage available by:

      (a) 1. Adding a rider to the existing policy;

and

      2. Charging a separate premium for the

new rider based on the insured’s attained age;

      (b)1. Exchanging the existing policy or

certificate for a different policy or certificate with an issue age based on

the present age of the insured; and

      2. Recognizing past insured status by

granting premium credits, which shall be based on premiums paid or reserves

held for the prior policy or certificate, toward the premiums for the new

policy or certificate;

      (c) Exchanging the existing policy or

certificate for a new policy or certificate in which consideration for past

insured status shall be recognized by setting the premium for the new policy or

certificate at the issue age of the policy or certificate being exchanged; or

      (d) If filed and approved by the

commissioner, an alternative program developed by the insurer, which meets the

intent of this section.

      (4) The cost of a new policy or

certificate, as identified in subsection (3)(c) of this section, may recognize

the difference in reserves between the:

      (a) New policy or certificate; and

      (b) Original policy or certificate.

      (5) An insurer shall:

      (a) Not be required to notify a

policyholder of a new proprietary policy product, created and filed for use in

a limited distribution channel; and

      (b) Notify a policyholder of a new

proprietary policy product if a new long-term care product, which provides

coverage for new long-term care services or providers material in nature, is

made available to that limited distribution channel.

      (6)(a) A policy issued pursuant to this

section shall:

      1. Be considered an exchange; and

      2. Not be considered a replacement.

      (b) An exchange as identified in

paragraph (a) of this subsection shall not be subject to:

      1. Requirements of Sections 11 and 21 of

this administrative regulation; and

      2. Reporting requirements of Section

12(1) through (4) of this administrative regulation.

      (7) If the policy is:

      (a) Offered through an employer, labor

organization, professional, trade or occupational association, the notification

required in subsection (1) of this section shall be issued to the offering

entity; or

      (b) Issued to a group identified in KRS

304.14-600(5)(d), the notification required in Subsection (1) of this Section

shall be issued to each certificate holder.

      (8)(a) Pursuant to this section, an

insurer may offer a policy, rider, certificate or coverage change to a

policyholder or certificate holder.

      (b) Upon request, a policyholder may

apply for currently available coverage, which includes a new service or

provider.

      (c) To add a new service or provider, an

insurer may require a policyholder to meet eligibility requirements, including:

      1. Underwriting; and

      2. Payment of the required premium.

      (9) A life insurance policy or rider,

which includes accelerated long-term care benefits, shall not be subject to the

requirements of this section.

 

      Section 24. Right to Reduce Coverage and

Lower Premiums. (1)(a) A long-term care insurance policy and certificate shall

include a provision, which allows the policyholder or certificate holder to reduce

coverage and lower the policy or certificate premium in at least one (1) of the

following ways:

      1. Reducing the maximum benefit; or

      2. Reducing the daily, weekly or monthly

benefit amount.

      (b) An insurer may offer a reduction

option not identified in paragraph (a) of this subsection, which is consistent

with the:

      1. Policy or certificate design; or

      2. The insurer’s administrative

processes.

      (2) The provision, identified in

subsection (1) of this section, shall include:

      (a) A description of the ways in which

coverage may be reduced; and

      (b) The process for requesting and

implementing a reduction in coverage.

      (3) The age used to determine a premium

for the reduced coverage shall be based on the age used to determine a premium

for the current coverage.

      (4) An insurer may limit a reduction in

coverage to a plan or option:

      (a) Available for that policy form; and

      (b) For which benefits shall be available

after consideration of claims paid or payable.

      (5) If a policy or certificate is about

to lapse, the insurer shall provide a written reminder to the policyholder or

certificate holder of the right to reduce coverage and premiums in the notice

required by section 4(1)(c) of this administrative regulation.

      (6) A life insurance policy or rider,

which includes accelerated long-term care benefits shall not be subject to the

requirements of this Section.

      (7) The requirements of this section

shall apply to a long-term care policy issued in Kentucky on or after January

1, 2010.

 

      Section 25. Nonforfeiture Benefit

Requirement. (1) A life insurance policy or rider, which includes accelerated

long-term care benefits shall not be subject to the requirements of this

section.

      (2) Except as required in subsection (3)

of this section, a long-term care insurance policy shall not be delivered or

issued for delivery unless the policyholder or certificate holder has been

offered the option of purchasing a policy or certificate including a nonforfeiture

benefit.

      (a) The offer of a nonforfeiture benefit may

be in the form of a rider, which is attached to the policy.

      (b) If a policyholder or certificate

holder declines the nonforfeiture benefit identified in paragraph (a) of this

subsection, the insurer shall provide a contingent benefit upon lapse, which

shall be available for 120 days, following a substantial increase in premium

rate, as established in subsection (6) of this section.

      (3) If a group long-term care insurance

policy is issued:

      (a) The offer required in subsection (2)

of this section shall be made to the group policyholder; or

      (b) As group long-term care insurance as

defined in KRS 304.14-600(5)(d), other than to a continuing care retirement community

or other similar entity, the offer shall be made to each proposed certificate

holder.

      (4) A nonforfeiture benefit offer as

identified in subsection (2) of this section shall:

      (a) Include coverage elements,

eligibility, benefit triggers, and benefit length, which are identical to

coverage issued without nonforfeiture benefits;

      (b) Be the benefit described in

subsection (7) of this section; and

      (c) Be in writing if the nonforfeiture

benefit is not described in:

      1. The Outline of Coverage required under

KRS 304.14-615(7); or

      2. Materials other than the Outline of

Coverage, which are given to the prospective policyholder.

      (5) If the offer required under

subsection (2) of this section is:

      (a) Rejected, the insurer shall provide

the contingent benefit upon lapse described in this section; or

      (b) Accepted for a policy with a fixed or

limited premium paying period, the contingent benefit upon lapse in subsection

(6)(d) of this section shall apply.

      (6)(a) After rejection of the offer

required under subsection (2) of this section, the insurer shall provide a

contingent benefit upon lapse for a policy issued after July 15, 2002,

including:

      1. An individual policy without a

nonforfeiture benefit; and

      2. A group policy without a nonforfeiture

benefit.

      (b) If a group policyholder elects to

make the nonforfeiture benefit an option to the certificate holder, a

certificate shall provide either the nonforfeiture benefit or the contingent

benefit upon lapse.

      (c)1. A contingent benefit upon lapse

shall be triggered as identified in the following table if:

      a. An insurer increases the premium rates

to a level, which results in a cumulative increase of the annual premium equal

to or exceeding the percentage of the insured’s initial annual premium as

established in this paragraph based on the insured’s issue age; and

      b. The policy or certificate lapses within

120 days of the due date of the increased premium:



Triggers for a

Substantial Premium Increase







Issue Age





Percent Increase Over

Initial Premium







29 and under





200%







30-34





190%







35-39





170%







40-44





150%







45-49





130%







50-54





110%







55-59





90%







60





70%







61





66%







62





62%







63





58%







64





54%







65





50%







66





48%







67





46%







68





44%







69





42%







70





40%







71





38%







72





36%







73





34%







74





32%







75





30%







76





28%







77





26%







78





24%







79





22%







80





20%







81





19%







82





18%







83





17%







84





16%







85





15%







86





14%







87





13%







88





12%







89





11%







90 and over





10%





      2. Unless required by Section 6(7) of

this administrative regulation, a policyholder shall be notified at least

thirty (30) days prior to the due date of a premium reflecting the rate increase,

as identified in this paragraph.

      (d)1. A contingent benefit upon lapse

shall be triggered for a policy, which includes a fixed or limited premium

paying period, as identified in the following table, if:

      a. An insurer increases the premium rates

to a level, which results in a cumulative increase of the annual premium equal

to or exceeding the percentage of the insured’s initial annual premium as

established in this paragraph based on the insured’s issue age;

      b. The policy or certificate lapses

within 120 days of the due date of the premium, which increased; and

      c. The ratio in paragraph (f)2 of this

subsection is forty (40) percent or more:



Triggers for a Substantial Premium Increase







Issue Age





Percent Increase Over

Initial Premium







Under 65





50%







65-80





30%







Over 80





10%





 

      2. Unless an insurer provides notice as

established in Section 6(7) of this administrative regulation, a policyholder

shall be notified at least thirty (30) days prior to the due date of the

premium reflecting a rate increase by the insurer.

      3.a. An insurer shall be subject to this

paragraph and the contingent benefit upon lapse provision of paragraph (c) of

this subsection; and

      b. If a trigger as identified in

paragraph (c) of this subsection and a trigger as identified in this paragraph

are identified, the benefit provided shall be at the option of the insured.

      (e) On or before the effective date of a

substantial premium increase as established in paragraph (c) of this

subsection, an insurer shall:

      1. Offer to reduce policy benefits

provided by the current coverage without requiring additional underwriting to prevent

an increase in required premium payments;

      2.a. Offer to convert the coverage to a

paid-up status with a shortened benefit period in accordance with the terms of

subsection (7) of this section; and

      b. Allow this option to be elected by the

policyholder or certificate holder within the 120-day period identified in

paragraph (c) of this subsection; and

      3. Notify the policyholder or certificate

holder that a default or lapse, which occurs within the 120-day period

identified in paragraph (c) of this subsection shall be deemed to be an election

of the offer to convert as identified in subparagraph 2 of this paragraph

unless the automatic option in paragraph (f)3 applies.

      (f) On or before the effective date of a

substantial premium increase as identified in paragraph (d) of this subsection,

the insurer shall:

      1. Offer to reduce policy benefits

provided by the current coverage without requiring additional underwriting in

order that required premium payments are not increased;

      2.a. Offer to convert the coverage to a

paid-up status if the amount payable for each benefit is ninety (90) percent of

the payable amount, which was in effect immediately prior to lapse, multiplied

by the ratio of the number of completed months of paid premiums divided by the

number of months in the premium paying period; and

      b. Allow this option to be elected within

the 120-day period identified in paragraph (d) of this subsection; and

      3. Notify the policyholder or certificate

holder that a default or lapse, which occurs within the 120-day period

identified in paragraph (d) of this subsection shall be deemed to be an election

of the offer to convert in subparagraph 2 of this paragraph if the ratio is

forty (40) percent or more.

      (7) A benefit continued as a

nonforfeiture benefit, including a contingent benefit upon lapse in accordance

with subsection (6)(c) of this section, shall be provided as follows:

      (a)1. Pursuant to this subsection, a

nonforfeiture benefit shall include a shortened benefit period, which provides

paid-up long-term care insurance coverage after lapse.

      2. The same benefit, including amount and

frequency, in effect at lapse and not be increased in the future, shall be payable

for a qualifying claim, except the lifetime maximum dollars or days of benefits

shall be determined as established in paragraph (b) of this subsection.

      (b)1. A standard nonforfeiture credit

shall be equal to 100 percent of the sum of premiums paid, including the

premiums paid prior to a change in benefits.

      2. An insurer may offer an additional

shortened benefit period option, if the benefits for each duration equal or

exceed the standard nonforfeiture credit for that duration.

      3. The minimum nonforfeiture credit shall

not be less than thirty (30) times the daily nursing home benefit upon lapse.

      4. The calculation of a nonforfeiture

credit shall be subject to the limitation of subsection (8) of this section.

      (c)1.a. Except for a policy or

certificate with attained age rating, a nonforfeiture benefit shall begin no

later than the final day of the third year following the policy or certificate

issue date.

      b. A contingent benefit upon lapse shall

be effective on the date of policy or certificate issue.

      2. For a policy or certificate with

attained age rating, the nonforfeiture benefit shall begin on the earlier of

the end of the:

      a. Tenth year following the policy or

certificate issue date; or

      b. Second year following the date the

policy or certificate is no longer subject to attained age rating.

      (d) A nonforfeiture credit may be used up

to the limit identified in the policy or certificate for care and services qualifying

for benefits under the terms of the policy or certificate.

      (8) Benefits paid by an insurer when the

policy or certificate is in premium paying status and paid up status shall not

exceed the maximum benefits, which would be payable if the policy or

certificate had remained in premium paying status.

      (9) For a group and individual policy, an

insurer shall provide the minimum nonforfeiture benefit as required under this

section.

      (10)(a) Except as provided in subsection

(6) and paragraph (b) and (c) of this subsection, the requirements of this

section shall apply to a long-term care policy issued in Kentucky on or after

July 15, 2003.

      (b) The requirements of this section

shall not apply to a certificate issued on or after July 15, 2003 under a group

long-term care insurance policy, as identified in KRS 304.14-600(5)(a), which

was in force before July 15, 2003.

      (c) Except for a new certificate under a

group policy, as identified in KRS 304.14-600(5)(a), issued on July 16, 2003,

the requirements of subsections (5)(b) and (6)(d) and (f) of this section shall

apply to a long-term care insurance policy or certificate issued on and after

January 16, 2003.

      (11) A premium charged for a policy or

certificate, which contains a nonforfeiture benefit or a contingent benefit

upon lapse shall be subject to the loss ratio requirements established in

Section 16 or 17 of this administrative regulation, as applicable, treating the

policy as a whole.

      (12) To determine if a contingent benefit

upon lapse provision as identified in subsection (6)(c) or (d) of this section

is triggered, a replacing insurer, which purchased or assumed a block of

long-term care insurance policies from an insurer, shall calculate the percent

increase based on the initial annual premium paid by the insured on the date

the policy was purchased from the original insurer.

      (13) For a qualified long-term care

insurance contract, which is a level premium contract, the nonforfeiture

benefit offered by an insurer shall:

      (a) Be appropriately captioned;

      (b) Indicate that the nonforfeiture

benefit is available if a default in the premium payment occurs;

      (c) State that the amount of the benefit

may be adjusted subsequent to being initially granted, as necessary, to reflect

a change in claims, persistency, and interest as reflected in a change in a

rate for a premium paying contract approved by the commissioner for the

identical contract form; and

      (d) Provide at least one (1) of the

following:

      1. Reduced paid up insurance;

      2. Extended term insurance;

      3. Shortened benefit period; or

      4. An offering, which is:

      a. Similar to an offering as identified

in subparagraphs 1, 2, or 3 of this paragraph; and

      b. Approved by the commissioner.

 

      Section 26. Standards for Benefit

Triggers. (1) A long-term care insurance policy shall condition the payment of

benefits based upon a determination of the insured’s:

      (a) Ability to perform activities of

daily living; and

      (b) Cognitive impairment.

      (2) Eligibility for the payment of

benefits shall not be more restrictive than requiring:

      (a) A deficiency in the ability to

perform no more than three (3) activities of daily living; or

      (b) The presence of cognitive impairment.

      (3) (a) Activities of daily living shall

include no less than the activities defined in Section 2(1) of this

administrative regulation and the policy; and

      (b) To trigger covered benefits, an

insurer may use activities of daily living, which are:

      1. Described in paragraph (a) of this

subsection; and

      2. In addition to activities identified

in paragraph (a) if defined in the policy.

      (4)(a) An insurer may use a provision

other than activities of daily living as identified in subsection (3) of this

section to determine the date benefits are payable under a policy or certificate;

and

      (b) If a provision as established in

paragraph (a) of this subsection is used by the insurer, the provision shall

not:

      1. Restrict the requirements identified

in subsections (1), (2), and (3) of this section; and

      2. Be used in lieu of the requirements of

subsections (1), (2), and (3) of this section.

      (5) A determination of a deficiency, as

identified in this section, shall not be more restrictive than:

      (a) Requiring the hands on assistance of

another person to perform the prescribed activities of daily living as

identified in subsection (3) of this section; or

      (b) If the deficiency is due to the

presence of a cognitive impairment, supervision or verbal cueing by another

person is needed in order to protect the insured or others.

      (6) An assessment of an insured’s

activities of daily living and cognitive impairment shall be performed by a

licensed or certified professional, including a:

      (a) Physician;

      (b) Nurse; or

      (c) Social worker.

      (7) A long-term care insurance policy

shall include a clear description of the process for an appeal and resolution

of a benefit determination.

      (8) The requirements identified in this

section:

      (a) Except as provided in paragraph (b)

of this subsection, shall apply to a long-term care policy issued in Kentucky

on or after July 15, 2002; and

      (b) Shall not apply to a certificate

under a group long-term care insurance policy, as identified in KRS

304.14-600(5)(a), which was in force before July 15, 2003.

 

      Section 27. Additional Standards for

Benefit Triggers for Qualified Long-term Care Insurance Contracts. (1) A

qualified long-term care insurance contract shall pay for a qualified long-term

care service received by a chronically-ill individual if the service is

provided in accordance with a plan of care prescribed by a licensed health care

practitioner.

      (2) A qualified long-term care insurance

contract shall condition the payment of benefits on a certified determination

of the insured’s inability to perform activities of daily living for an

expected period of at least ninety (90) days due to:

      (a) A loss of functional capacity; or

      (b) Severe cognitive impairment.

      (3) A certification as required pursuant

to subsection (2) of this section:

      (a) Shall be performed by a licensed or

certified professional, including a licensed health care practitioner; and

      (b) May be performed at the direction of

an insurer, if the certification is reasonably necessary to determine payment

for a specific claim.

      (4) If a licensed health care

practitioner certified that an insured is unable to perform activities of daily

living for an expected period of time of at least ninety (90) days due to a

loss of functional capacity and the insured is in claim status:

      (a) The certification performed pursuant

to subsection (3)(b) of this section shall not be rescinded; and

      (b) An additional certification shall not

be performed until the ninety (90) day period has expired.

      (5) A qualified long-term care insurance

contract shall include a clear description of the process for the appeal and

resolution of a dispute regarding a benefit determination.

 

      Section 28. Standard Format and Content

of an Outline of Coverage. Pursuant to the requirements of KRS 304.14-615(7):

      (1) An outline of coverage shall:

      (a) Be a freestanding document, which is

printed in no less than ten (10) point type; and

      (b) Not contain material of an

advertising nature.

      (2) Text, which is capitalized or

underscored in the standard format outline of coverage, may be emphasized by

using a method, which provides prominence equivalent to the:

      (a) Capitalization; or

      (b) Underscoring.

      (3) Except as indicated, use of the text

and sequence of text shall be:

      (a) Mandatory; and

      (b) Consistent with the Outline of

Coverage, HIPMC-LTC-7.

      (5) The format to be used for the outline

of coverage shall be Consistent with the Outline of Coverage, HIPMC-LTC-7.

 

      Section 29. Requirement to Deliver

Shopper's Guide. (1) A long-term care insurance shopper's guide developed by

the National Association of Insurance Commissioners, which is available at www.naic.org, or a guide developed or approved by the commissioner,

shall be provided to a prospective applicant of a long-term care insurance

policy or certificate.

      (a) For agent solicitation, an agent

shall deliver the shopper's guide prior to the presentation of an application

or enrollment form.

      (b) For direct response solicitation, an

insurer shall deliver the shopper's guide in conjunction with an application or

enrollment form.

      (2) An insurer offering a life insurance

policy or rider, which includes accelerated long-term care benefits shall:

      (a) Not be required to provide a

shopper's guide as identified in subsection (1) of this section; and

      (b) Provide a policy summary, including

a:

      1. Statement, which establishes that a

long-term care inflation protection option as identified in Section 10 of this

administrative regulation is not available under the policy; and

      2. Items as identified and required under

KRS 304.14-615(9).

 

      Section 30. Penalties. An insurer or

agent, who is identified as violating a requirement of Kentucky Insurance Code

relating to the regulation or marketing of long-term care insurance shall be

subject to the greater of:

      (1) A fine of up to three (3) times the

amount of a commission paid for each policy involved in the violation or up to

$10,000; or

      (2) A penalty as identified in KRS

Chapter 304, subtitles 3, 9, 12, 14, 17, and 99, and this administrative

regulation.

 

      Section 31. Permitted Compensation

Arrangements. (1) Upon replacement the replacing insurer shall not provide compensation

to its agents or other producers greater than 200 percent of the renewal

compensation payable by the replacing insurer on renewal policies.

      (2) A commission or other compensation

provided in subsequent renewal years by the replacing insurer shall be:

      (a) The same as that provided in the

second year or period; and

      (b) Provided for a reasonable number of

renewal years.

      (3) If long-term care insurance is

provided under annuities or life insurance policies or riders, the requirements

of this section shall apply only to the commissions or other compensation

attributable to the long-term care insurance provided by these policies or

riders.

 

      Section 32. Incorporated by Reference.

(1) The following material is incorporated by reference:

      (a) "Long-term Care Insurance

Personal Worksheet, HIPMC-LTC-1", 09/2008;

      (b) "Long-term Care Insurance

Potential Rate Increase Disclosure Form, HIPMC-LTC-2", 09/2008;

      (c) "Rescission Reporting Form for

Long-term Care Policies, HIPMC-LTC-3", 09/2008;

      (d) "Claims Denial Reporting Form

for Long-term Care Insurance, HIPMC-LTC-4", 09/01;

      (e) "Things You Should Know Before

You Buy Long-term Care Insurance, HIPMC-LTC-5", 09/2008;

      (f) "Long-term Care Insurance

Suitability Letter, HIPMC-LTC-6", 09/2008;

      (h) "Outline of Coverage,

HIPMC-LTC-7", 09/2008;

      (i) "Notice to Applicant Regarding

Replacement of Individual Accident and Sickness or Long-term Care Insurance,

HIPMC-LTC-8", 09/2008;

      (j) "Notice to Applicant Regarding

Replacement of Accident and Sickness or Long-term Care Insurance,

HIPMC-LTC-9", 09/2008;

      (k) "Disclosures and Language for

Long-term Care Policies and Certificates, HIPMC-LTC-10", 09/2008; and

      (l) "Long-term Care insurance replacement

and lapse reporting form, HIPMC-LTC-11", 09/2008.

      (2) This material may be inspected,

copied, or obtained, subject to applicable copyright law, at the Kentucky

Department of Insurance, 215 West Main Street, Frankfort, Kentucky 40601,

Monday through Friday, 8 a.m. to 4:30 p.m. This material is also available on

the department’s Web site at http://insurance.ky.gov. (19 Ky.R. 1029; Am. 1756; eff. 2-8-93; 28 Ky.R.

1922; 2359; 29 Ky.R. 114; eff. 7-15-2002; TAm eff. 8-9-2007; 35 Ky.R. 1029;

1742; eff. 2-6-09.)