Sec. 31.14.01.04. Policy Practices and Provisions

A. Renewability and Premium Charges.

(1) Renewability Provision.

(a) Individual long-term care insurance policies shall contain an appropriately captioned renewability provision on the first page of the policy form.

(b) The renewability provision shall clearly state that the coverage is guaranteed renewable or noncancellable.

(c) Section A(1)(a) of this regulation is not applicable to policies that do not contain a renewability provision and under which the right to nonrenew is reserved solely to the policyholder.

(2) A long-term care insurance policy or certificate, other than one where the insurer does not have the right to change the premium, shall include a statement that premium rates may change.

(3) An individual long-term care policy may not be issued on any basis other than on a noncancellable or a guaranteed renewable basis.

(4) The premiums for a noncancellable policy shall be level for the duration of the policy and may not vary by policy duration or by the attained age of the insured.

(5) An insurer may not charge a renewal premium rate for a long-term care policy which exceeds by more than 15 percent any premium charged for the policy during the preceding 12 months.

(6) With the approval of the Commissioner, the insurer may charge a renewal premium exceeding a 15 percent increase upon a showing that a larger increase is necessary because of utilization of policy benefits greatly in excess of the expected rate.

(7) Premium Rate Increases.

(a) The premium charged to an insured may not increase due to either:

(i) The increasing age of the insured; or

(ii) The duration the insured has been covered under the policy.

(b) The purchase of additional coverage may not be considered a premium rate increase, but for purposes of the calculation required under Regulation .13 of this chapter, the portion of the premium attributable to the additional coverage shall be added to and considered part of the initial annual premium.

(c) A reduction in benefits may not be considered a premium change, but for the purposes of the calculation required under Regulation .13 of this chapter, the initial annual premium shall be based on the reduced benefits.

(8) The term "level premium" may only be used when the insurer does not have the right to change the premium.

(9) In addition to the other requirements of this section, a qualified long-term care insurance contract shall be guaranteed renewable, within the meaning of §7702(b)(1)(C) of the Internal Revenue Code of 1986, as amended.

B. Limitations and Exclusions.

(1) Long-term care insurance policies may not:

(a) Be cancelled, nonrenewed, or otherwise terminated on the grounds of the age or of the deterioration of the mental or physical health of the insured individual or certificate holder;

(b) Except with respect to an increase in benefits voluntarily selected by an insured individual or a group policyholder, contain a provision establishing a new waiting period if existing coverage is converted to or replaced by a new or other form of long-term care coverage in the same or another insurer;

(c) Limit coverage to skilled nursing care only, or provide an increased level of coverage in a facility for skilled care greater than the coverage for lower levels of care.

(2) A long-term care policy may not be delivered or issued for delivery in the State if the policy limits or excludes coverage by type of illness, treatment, medical condition, or accident, except as follows:

(a) Preexisting conditions or diseases to the extent permitted in §C of this regulation;

(b) Mental and nervous disorders, except that there may be no limitation or exclusion for Alzheimer's disease or senile dementia disorders;

(c) Alcoholism and drug addiction;

(d) Illness, treatment, or medical conditions arising out of:

(i) War or act of war, whether declared or undeclared,

(ii) Participation in a felony, riot, or insurrection,

(iii) Service in the armed forces,

(iv) Attempted suicide or intentionally self-inflicted injury, whether sane or insane, or

(v) Aviation when the covered person is not a fare-paying passenger;

(e) Services provided by a member of the covered person's immediate family;

(f) Services provided or available under a workers' compensation, employer's liability, or occupational disease law;

(g) Treatment provided in a government facility, unless otherwise required by law;

(h) Services for which benefits are available under Medicare or other governmental programs, except Medicaid; or

(i) In the case of a qualified long-term care insurance contract, expenses for services or items to the extent that the expenses are reimbursable under Title XVIII of the Social Security Act, or would be reimbursable under Title XVIII of the Social Security Act but for the application of a deductible or coinsurance amount.

(3) Section B(2) of this regulation does not prohibit limitations by territory.

(4) Section B(2) of this regulation does not prohibit exclusions and limitations by type of provider, but a long-term care insurer may not deny a claim because services are provided in a state other than the state of policy issue under the following conditions:

(a) When the state, other than the state of policy issue, does not have the provider licensing, certification, or registration required in the policy, but where the provider satisfies the policy requirements outlined for providers instead of licensure, certification or registration; or

(b) When the state, other than the state of policy issue, licenses, certifies or registers the provider under another name.

C. Preexisting Condition.

(1) A long-term care insurance policy or certificate may not exclude coverage for a loss or confinement which results from a preexisting condition unless the loss or confinement begins within 6 months following the effective date of coverage of the covered person.

(2) The definition of "preexisting condition" does not prohibit an insurer from using an application form designed to elicit the health history of an applicant and, on the basis of the answers on the application, from underwriting the risk in accordance with the insurer's established underwriting standards.

(3) A preexisting condition, regardless of whether it is disclosed on an application form, may not be excluded beyond the 6-month waiting period, or the period provided in the policy, if shorter.

(4) A long-term care insurance policy or certificate may not exclude, or use waivers or riders of any kind to exclude, limit, or reduce coverage or benefits for specifically named or described preexisting conditions beyond the 6-month waiting period.

D. A long-term care insurance policy may not be delivered or issued for delivery in the State if the policy conditions eligibility for benefits on:

(1) A requirement for earlier hospitalization; or

(2) The earlier receipt of a higher level of institutional care.

E. A long-term care insurance policy may provide for coordination of benefits with other long-term care coverage in force on the same covered person.

F. Termination.

(1) A long-term care insurance policy may be terminated by the insurer only:

(a) For nonpayment of premiums;

(b) Within the contestable period for material misrepresentation in the application; or

(c) For fraud in the application.

(2) An insurer may not terminate a long-term care insurance policy for nonpayment of premiums unless the insurer provides 30 days written notice to the:

(a) Covered person, and in the case of an individual policy, to the covered person and the policyowner if different; and

(b) Individual designated by the covered person or the policyholder to receive notice of termination.

G. Extension of Benefits. Termination of long-term care insurance shall be without prejudice to any benefits payable for institutionalization if the institutionalization began while the long-term care insurance was in force and continues without interruption after termination. The extension of benefits beyond the period the long-term care insurance was in force may be:

(1) Limited by the duration of the benefit period, if any, or by the payment of the maximum benefits under the policy; and

(2) Subject to any policy waiting period and all other applicable provisions of the policy.

H. Continuation or Conversion.

(1) Group long-term care insurance policies issued or delivered in this State shall provide covered individuals with the rights of continuation or conversion of coverage.

(2) Continuation of coverage may be provided by the right of the certificate holder to maintain coverage under the existing group policy subject only to the continued timely payment of premiums.

(3) A group policy that restricts benefits and services to certain providers or facilities under a managed care or preferred provider arrangement, or that contains incentives to use certain providers or facilities, may provide continuation benefits that are substantially equivalent to the benefits of the existing group policy. In determining whether the benefits of a converted policy are substantially equivalent to the original coverage, the Commissioner shall consider the difference between managed care and nonmanaged care plans.

(4) Conversion Policy.

(a) Written application for the conversion policy shall be made and the first premium due, if any, shall be paid as directed by the insurer not later than 31 days after termination of coverage under the group policy.

(b) The conversion policy shall be issued effective on the day following the termination of coverage under the group policy and shall be renewable annually.

(5) Premium for Conversion Policies.

(a) Unless the group policy from which conversion is made replaced previous group coverage, the premium for an individual policy issued as a conversion from a group policy shall be calculated on the basis of the insured's age at inception of the coverage under the group policy from which conversion is made.

(b) If the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured's age at inception of coverage under the group policy replaced.

(6) Continuation of coverage or issuance of a converted policy shall be mandatory, except if:

(a) Termination of group coverage results from an individual's failure to make any required payment of premium or contribution when due; or

(b) The terminating coverage is replaced not later than 31 days after termination, by group coverage effective on the day following the termination of coverage, if the:

(i) Benefits for the replacement group coverage are identical to, or determined by the Commissioner to be substantially equivalent to or in excess of, those provided by the terminating coverage; and

(ii) Premium for the replacement group coverage is calculated in a manner consistent with the requirements of §H(5) of this regulation.

(7) A converted policy, issued to an individual who at the time of conversion is covered by another long-term care insurance policy which provides benefits on the basis of incurred expenses, may contain a provision which results in a reduction of benefits payable if 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. If this provision is included in the converted policy, the policy shall also provide for a decrease in premiums or a partial refund reflecting the reduction in benefits payable.

(8) A converted policy may provide that the benefits payable under the converted policy, together with the benefits payable under the extension of benefits of the group policy from which conversion is made, do not exceed the benefits that would have been payable had the individual's coverage under the group policy remained in full force and effect.

(9) An insured individual whose eligibility for individual or group long-term care coverage is based upon the individual's relationship to another person is entitled to continuation of coverage under the individual or group policy upon termination of the qualifying relationship by death or dissolution of marriage or otherwise.

I. Discontinuance and Replacement. If a group long-term care policy is replaced by another group long-term care policy issued to the same policyholder within 12 months of the termination of the previous policy, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination and to all persons who could qualify for reinstatement under the previous policy. Coverage provided or offered to individuals by the insurer and premiums charged to persons under the new group policy may not:

(1) Result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced; and

(2) Vary or otherwise depend on the individual's health or disability status, claim experience, or use of long-term care services.

J. Right to Return Policy.

(1) Except for an employer-employee group policy, a long-term care policy shall provide that the policyholder or certificate holder may return the policy or certificate to the insurer or agent within 30 days after receipt of the policy or certificate, and obtain a full refund of premium paid. A statement to this effect shall be printed in a prominent manner on the first page of the policy or certificate.

(2) The statement required under §J(1) of this regulation shall read as follows:

"NOTICE TO BUYER: YOU MAY SURRENDER THIS (POLICY) (CERTIFICATE) OF LONG-TERM CARE INSURANCE WITHOUT PENALTY OR OBLIGATION WITHIN 30 DAYS FROM THE DATE OF DELIVERY OF THE (POLICY) (CERTIFICATE). IF YOU DECIDE TO SURRENDER THIS (POLICY) (CERTIFICATE), YOU MUST PROVIDE NOTICE OF THE SURRENDER TO THE INSURER OR ITS AGENT. ANY ATTEMPT BY THE INSURER TO OBTAIN A WAIVER OF YOUR RIGHT TO SURRENDER IS UNLAWFUL. YOUR NOTICE OF SURRENDER WILL CAUSE THIS (POLICY) (CERTIFICATE) TO BE VOID AND WITHOUT BENEFIT FROM ITS BEGINNING. SURRENDER ENTITLES YOU TO A REFUND OF ALL MONIES WITHIN 30 BUSINESS DAYS AFTER RECEIPT BY THE INSURER OR ITS AGENT OF NOTICE OF SURRENDER."

(3) This section does not apply to any "cafeteria plan" issued under §125 of the Internal Revenue Service Code.

K. Electronic Enrollment for Group Policies.

(1) In the case of employer group long-term care insurance, any requirement that a signature of an insured be obtained by an insurance producer or insurer shall be deemed satisfied if the:

(a) Consent is obtained by telephonic or electronic enrollment by the group policyholder or insurer;

(b) Telephonic or electronic enrollment provides necessary and reasonable safeguards to ensure the accuracy, retention, and prompt retrieval of records; and

(c) Telephonic or electronic enrollment provides necessary and reasonable safeguards to ensure that the confidentiality of individually identifiable information is maintained.

(2) If the consent is obtained by telephonic or electronic enrollment as described in §K(1)(a) of this regulation, a verification of enrollment information shall be provided to the enrollee.

(3) The insurer shall make available, upon request of the Commissioner, records that demonstrate the insurer's ability to confirm enrollment and coverage amounts.