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.)
