Sec. 31.14.01.13. Nonforfeiture Benefit Requirement

A. This regulation does not apply to life insurance policies or riders containing accelerated death benefits for long-term care.

B. Required Option.

(1) An insurer may not deliver or issue a long-term care insurance policy in Maryland unless the option of purchasing a policy including a nonforfeiture benefit has been offered to the:

(a) Applicant, when the policy is an individual long-term care insurance policy;

(b) Group policyholder, when the policy is an employer group long-term care insurance policy;

(c) Group policyholder, when the policy is a group long-term care insurance policy issued to a professional, trade, or occupational association for its members, former members, or retired members, or a combination of members, former members or retired members, if the association:

(i) Is composed of individuals all of whom are or were actively engaged in the same profession, trade, or occupation; and

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

(d) Proposed certificate holder, when the group long-term care insurance policy is a policy other than one of the policies described in §B(1)(b)-(c) of this regulation.

(2) The offer of a nonforfeiture benefit required by §B(1) of this regulation may be in the form of a rider that is attached to the policy.

C. To comply with the requirement to offer a nonforfeiture benefit under §B of this regulation:

(1) A policy offered with nonforfeiture benefits shall have coverage elements, eligibility, benefit triggers, and benefit length that are the same as coverage to be issued without nonforfeiture benefits;

(2) The nonforfeiture benefit included in the offer shall be the benefit described in §F of this regulation; and

(3) The offer shall be in writing if the nonforfeiture benefit is not otherwise described in the Outline of Coverage or other materials given to the applicant.

D. Options if Nonforfeiture Offer is Rejected.

(1) If the offer required to be made under §B(1) of this regulation is rejected, the insurer shall provide the contingent benefit upon lapse described in §E of this regulation.

(2) Even if the offer under §B(1) of this regulation is accepted, for a policy with a fixed or limited premium paying period, the contingent benefit on lapse in §E(6) of this regulation shall still apply.

(3) The requirement of §D(2) of this regulation shall apply to:

(a) Except as provided in §D(3)(b) of this regulation, any long-term care insurance policy or certificate issued in Maryland on or after March 1, 2008; and

(b) Any certificate issued under an employer group long-term care insurance policy, if the certificate is issued on or after September 10, 2008.

E. Contingent Benefit Upon Lapse Provision.

(1) Except as provided in §E(6)(e) and (11) of this regulation, the requirements of this section become effective on April 1, 2003, and apply as follows:

(a) Except as provided in §E(1)(b) of this regulation, the provisions of this section apply to any long-term care insurance issued in this State on or after April 1, 2003; and

(b) The requirements of this section do not apply to certificates issued on or after April 1, 2003, under an employer group long-term care insurance policy which was in force before April 1, 2003.

(2) If the offer required to be made under §B(1) of this regulation is rejected, the insurer shall provide the contingent benefit upon lapse provided in this section.

(3) The contingent benefit on lapse shall be triggered each time:

(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 set forth in §E(5) of this regulation based on the insured's issue age; and

(b) The policy or certificate lapses within 120 days of the due date of the premium increase described in §E(3)(a) of this regulation.

(4) Unless otherwise required, policyholders shall be notified at least 30 days before the due date of the premium reflecting the rate increase described in §E(3)(a) of this regulation.

(5) The following table lists the triggers for a substantial premium increase:

Triggers for a Substantial Premium Increase
Issue Age	Percent Increase Over Initial Premium
29 and younger	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 older	10%

(6) Policies With a Fixed or Limited Premium Paying Period.

(a) A contingent benefit on lapse shall also be triggered for policies with a fixed or limited premium paying period every time:

(i) An insurer increases the premium rates to a level that results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth in §E(6)(c) of this regulation, based on the insured's age;

(ii) The policy or certificate lapses within 120 days of the due date of the premium that was increased as described in §E(6)(a)(i) of this regulation; and

(iii) The ratio in §E(9)(b) of this regulation is 40 percent or more.

(b) Unless otherwise required, policyholders shall be notified at least 30 days before the due date of the premium reflecting the rate increase.

(c) The following table lists the triggers for a substantial premium increase for a long-term care insurance policy with a fixed or limited premium paying period:

Triggers for a Substantial Premium Increase
Issue Age	Percent Increase Over Initial Premium
Under 65	50%
65-80	30%
Over 80	10%

(d) The contingent benefit upon lapse described in §E(6) of this regulation shall be in addition to the contingent benefit provided by §E(3) of this regulation and where both contingent benefits are triggered, the benefit provided shall be at the option of the insured.

(e) The requirements found in §E(6) of this regulation shall apply to:

(i) Except as provided in §E(6)(e)(ii) of this regulation, any long-term care insurance policy or certificate issued in Maryland on or after March 1, 2008; and

(ii) Any certificate issued under an employer group long-term care insurance policy, if the certificate is issued on or after September 10, 2008.

(7) On or before the effective date of a substantial premium increase as described in §E(3) and (5) of this regulation, the insurer shall:

(a) Offer to reduce policy benefits provided by the current coverage consistent with the requirements of Regulation .36 of this chapter so that required premium payments are not increased;

(b) Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of §F of this regulation; and

(c) Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period in §E(3)(b) of this regulation shall be deemed to be the election of the offer to convert in §E(7)(b) of this regulation, unless the automatic option in §E(9)(c) of this regulation applies.

(8) The conversion to a paid-up contract option in §E(7)(b) of this regulation may be elected at any time during the 120-day period in §E(3)(b) of this regulation.

(9) On or before the effective date of a substantial premium increase as described in §E(6)(a) and (c) of this regulation, the insurer shall:

(a) Offer to reduce policy benefits provided by the current coverage consistent with the requirements of Regulation .36 of this chapter so that required premium payments are not increased;

(b) Offer to convert the coverage to a paid-up status where the amount payable for each benefit is 90 percent of the amount payable in effect immediately before lapse times the ratio of the number of completed months of paid premiums divided by the number of months in the premium paying period; and

(c) Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period described in §E(6)(a)(ii) of this regulation shall be deemed to be the election of the offer to convert described in §E(9)(b) of this regulation, if the ratio is 40 percent or more.

(10) The option to convert coverage as described in §E(9)(b) of this regulation may be elected at any time during the 120-day period described in §E(6)(a)(ii) of this regulation.

(11) The requirements found in §E(9)-(10) of this regulation shall apply to:

(a) Except as provided in §E(11)(b) of this regulation, any long-term care insurance policy or certificate issued in Maryland on or after March 1, 2008; and

(b) Any certificate issued under an employer group long-term care insurance policy, if the certificate is issued on or after September 10, 2008.

(12) For any long-term care policy issued in Maryland on or after September 1, 2017:

(a) If the policy or certificate was issued at least 20 years before the effective date of the increase, a value of 0 percent shall be used in place of all values in the table in §E(6)(c) of this regulation; and

(b) Values above 100 percent in the table in §E(5) of this regulation shall be reduced to 100 percent.

F. Description of Nonforfeiture Benefits.

(1) Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse in accordance with §E(3) of this regulation, but not §E(6) of this regulation, are described in §F of this regulation.

(2) For purposes of this section, the nonforfeiture benefit shall be of a shortened benefit period providing paid-up long-term care insurance coverage after lapse.

(3) The shortened benefit period nonforfeiture benefit required by §F(2) of this regulation shall:

(a) Have the same benefit amounts and frequency in effect at the time of lapse but not increased after the time of lapse; and

(b) Be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as described in §F(4) of this regulation.

(4) Calculation of the Nonforfeiture Credit.

(a) Except as provided in §F(4)(c) of this regulation, the standard nonforfeiture credit shall be equal to 100 percent of the sum of all premiums paid, including the premiums paid before any changes in benefits.

(b) The insurer may offer other shortened benefit period options in addition to the option described in §F(4)(a) of this regulation, provided the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration.

(c) The minimum nonforfeiture credit may not be less than 30 times the daily nursing home benefit at the time of lapse.

(d) The calculation of the nonforfeiture credit shall be subject to the limitation described in §G of this regulation.

(5) The nonforfeiture benefit shall begin not later than the end of the third year following the policy or certificate issue date.

(6) The contingent benefit upon lapse shall be effective during the first 3 years the policy is in force, as well as after the first 3 years the policy is in force.

(7) Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

G. An insurer may limit benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid up status so that the benefits will not exceed the maximum benefits which would be payable if the policy or certificate had remained in premium paying status.

H. There shall be no difference in the minimum nonforfeiture benefits as required under this regulation for group and individual policies.

I. Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit upon lapse shall be subject to the loss ratio requirements of COMAR 31.14.02.05 or .06, whichever is applicable, treating the policy as a whole.

J. To determine whether contingent nonforfeiture upon lapse provisions are triggered under §E(3) or (6) of this regulation, a replacing insurer that purchased or otherwise assumed a block or blocks of long-term care insurance policies from another insurer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original insurer.

K. A nonforfeiture benefit for qualified long-term care insurance contracts shall be offered that meets the following requirements:

(1) The nonforfeiture provision shall be appropriately captioned;

(2) The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums; and

(3) The nonforfeiture provision shall provide at least one of the following:

(a) Reduced paid-up insurance;

(b) Extended term insurance;

(c) Shortened benefit period; or

(d) Other similar offerings approved by the Commissioner.

(4) The nonforfeiture benefit option provided by the insurer under this section shall comply with the requirements of §F of this regulation.