H. B. 4326
(By Delegates H. White, Hrutkay
and R. M. Thompson)
[Introduced February 5, 2004
; referred to the
Committee on Banking and Insurance then the Judiciary.]
A BILL to amend and reenact §33-15A-4, §33-15A-5, §33-15A-6 and
§33-15A-7 of the code of West Virginia, 1931, as amended; and
to amend said code by adding thereto four new sections,
designated §33-15A-8, §33-15A-9, §33-15A-10 and §33-15A-11,
all relating
to the regulation of long-term care insurance
policies; defining terms; establishing extraterritorial
jurisdiction; summarizing disclosure and performance standards
for long-term care insurance; instituting and regulating an
incontestability period; disclosing nonforfeiture benefits;
providing the commissioner authority to promulgate
regulations; defining severability; providing penalties; and
establishing an effective date.
Be it enacted by the Legislature of West Virginia:
That
§33-15A-4, §33-15A-5, §33-15A-6 and §33-15A-7 of the code
of West Virginia, 1931, as amended
, be amended and reenacted; and
that said code be amended by adding thereto four new sections, designated
§33-15A-8, §33-15A-9, §33-15A-10 and §33-15A-11, all
to
read as follows:
ARTICLE 15A. WEST VIRGINIA LONG-TERM CARE INSURANCE ACT.
§33-15A-4. Definitions.
Unless the context requires otherwise, the definitions in this
section apply throughout this article.
(a) "Long-term care insurance" means any insurance policy or
rider advertised, marketed, offered or designed to provide
benefits
coverage
for not less than
twenty-four
twelve
consecutive months
for each covered person on an expense incurred, indemnity, prepaid
or other basis; for one or more necessary or medically necessary
diagnostic, preventive, therapeutic, rehabilitative, maintenance or
personal care services, provided in a setting other than an acute
care unit of a hospital. The term includes group and individual,
annuities and life insurance
policies or riders
whether
that
provide directly or supplement long-term care insurance. The term
also includes a policy or rider that provides for payment of
benefits based upon cognitive impairment or the loss of functional
capacity. The term shall also include qualified long-term care
insurance contracts. Long-term care insurance may be
issued by
insurers; fraternal benefit societies; nonprofit health, hospital,
and medical service corporations; prepaid health plans; health
maintenance organizations
, prepaid limited health service
organizations
or any similar organization
. Any
to the extent they are otherwise authorized to issue life or health insurance.
Long-term care insurance shall not include any
insurance policy
which
that
is offered primarily to provide basic medicare
supplement coverage, basic hospital expense coverage, basic
medical-surgical expense coverage, hospital confinement indemnity
coverage, major medical expense coverage, disability income
protection
or related asset-protection
coverage, accident only
coverage, specified disease or specified accident coverage, or
limited benefit health coverage
.
which also contains
With regard
to life insurance, this term does not include life insurance
policies that accelerate the death benefit specifically for one or
more of the qualifying events of terminal illness, medical
conditions requiring extraordinary medical intervention or
permanent institutional confinement, and that provide the option of
a lump-sum payment for those benefits and where neither the
benefits nor the eligibility for the benefits is conditioned upon
the receipt of long-term care. Notwithstanding any other provision
of this article, any product advertised, marketed or offered as
long-term care insurance
benefits for at least six months
shall
comply with
be subject to
the provisions of this
article
.
(b) "Applicant" means:
(1) In the case of an individual long-term care insurance
policy, the person who seeks to contract for benefits; and
(2) In the case of a group long-term care insurance policy,
the proposed certificate holder.
(c) "Certificate" means, for the purposes of this
article
, any
certificate issued under a group long-term care insurance policy,
which policy has been delivered or issued for delivery in this
state.
(d) "Commissioner" means the insurance commissioner of this
state.
(e) "Group long-term care insurance" means a long-term care
insurance policy
which
that
is delivered or issued for delivery in
this state and issued to:
(1) One or more employers or labor organizations, or to a
trust or to the trustees of a fund established by one or more
employers or labor organizations, or a combination thereof, for
employees or former employees or a combination thereof or for
members or former members or a combination thereof, of the labor
organizations; or
(2) Any professional, trade or occupational association for
its members or former or retired members, or combination thereof,
if the association:
(A) Is composed of individuals all of whom are or were
actively engaged in the same profession, trade or occupation; and
(B) Has been maintained in good faith for purposes other than
obtaining insurance; or
(3) An association or a trust or the
trustee or
trustees of a
fund established, created or maintained for the benefit of members
of one or more associations. Prior to advertising, marketing or
offering the policy within this state, the association or
associations, or the insurer of the association or associations,
shall file evidence with the commissioner that the association or
associations have at the outset a minimum of one hundred persons
and have been organized and maintained in good faith for the
purposes other than that of obtaining insurance; have been in
active existence for at least one year; and have a constitution and
bylaws
which
that
provide that:
(A) The association or associations hold regular meetings not
less than annually to further purposes of the members;
(B) Except for credit unions, the association or associations
collect dues or solicit contributions from members; and
(C) The members have voting privileges and representation on
the governing board and committees.
Thirty days after the filing the association or associations
will be deemed to satisfy
such
the
organizational requirements,
unless the commissioner makes a finding that the association or
associations do not satisfy those organizational requirements.
(4) A group other than as described in subdivisions (1), (2)
and (3), subsection (e) of this section, subject to a finding by
the commissioner that:
(A) The issuance of the group policy is not contrary to the
best interest of the public;
(B) The issuance of the group policy would result in economies
of acquisition or administration;
and
(C) The benefits are reasonable in relation to the premiums
charged.
(f) "Policy" means, for the purposes of this
article
, any
policy, contract, subscriber agreement, rider or endorsement
delivered or issued for delivery in this state by an insurer;
fraternal benefit society; nonprofit health, hospital, or medical
service corporation; prepaid health plan; health maintenance
organization
, prepaid limited health service organization
or any
similar organization.
(g) (1) "Qualified long-term care insurance contract" or
"federally tax qualified long-term care insurance contract" means
an individual or group insurance contract that meets the
requirements of section 7702B(b) of the Internal Revenue Code of
1986, as amended, as follows:
(A) The only insurance protection provided under the contract
is coverage of qualified long-term care services. A contract shall
not fail to satisfy the requirements of this paragraph by reason of
payments being made on a per diem or other periodic basis without
regard to the expenses incurred during the period to which the
payments relate;
(B) The contract does not pay or reimburse expenses incurred
for services or items to the extent that the expenses are
reimbursable under Title XVIII of the Social Security Act, as
amended, or would be so reimbursable but for the application of a
deductible or coinsurance amount. The requirements of this
subparagraph do not apply to expenses that are reimbursable under
Title XVIII of the Social Security Act only as a secondary payor.
A contract shall not fail to satisfy the requirements of this
subparagraph by reason of payments being made on a per diem or
other periodic basis without regard to the expenses incurred during
the period to which the payments relate;
(C) The contract is guaranteed renewable, within the meaning
of section 7702B(b)(1)(C) of the Internal Revenue Code of 1986, as
amended;
(D) The contract does not provide for a cash surrender value
or other money that can be paid, assigned, pledged as collateral
for a loan, or borrowed except as provided in paragraph E,
subdivision (1), subsection (g) of this section.
(E) All refunds of premiums and all policyholder dividends or
similar amounts under the contract are to be applied as a reduction
in future premiums or to increase future benefits, except that a
refund on the event of death of the insured or a complete surrender
or cancellation of the contract cannot exceed the aggregate
premiums paid under the contract; and
(F) The contract meets the consumer protection provisions set
forth in Section 7702B(g) of the Internal Revenue Code of 1986, as
amended.
(2) "Qualified long-term care insurance contract" or
"federally tax-qualified long-term care insurance contract" also
means the portion of a life insurance contract that provides
long-term care insurance coverage by rider or as part of the
contract and that satisfies the requirements of Sections 7702B(b)
and (e) of the Internal Revenue Code of 1986, as amended.
§33-15A-5. Extraterritorial jurisdiction - Group long-term care
insurance.
(a)
No group long-term care insurance coverage may be offered
to a resident of this state under a group policy issued in another
state to a group described in subdivision (4), subsection (e),
section four of this
article
unless this state or another state
having statutory and regulatory long-term care insurance
requirements substantially similar to those adopted in this state
has made a determination that such requirements have been met.
(b) Any such group policy form and any group certification
form issued under the group, shall be filed with the commissioner
for informational purposes with evidence of the determination
required by subsection (a) of this section.
§33-15A-6. Disclosure and performance standards for long-term care
insurance.
(a) The commissioner may adopt
rules and
regulations that
include standards for full and fair disclosure setting forth the
manner, content and required disclosures for the sale of long-term
care insurance policies, terms of renewability, initial and
subsequent conditions of eligibility, nonduplication of coverage
provisions, coverage of dependents, preexisting conditions,
termination of insurance, continuation or conversion, probationary
periods, limitations, exceptions, reductions, elimination periods,
requirements for replacement, recurrent conditions and definitions
of terms.
(b) No long-term care insurance policy may:
(1) Be canceled, nonrenewed or otherwise terminated on the
grounds of the age or the deterioration of the mental or physical
health of the insured individual or certificate holder;
or
(2) Contain a provision establishing a new waiting period in
the event existing coverage is converted to or replaced by a new or
other form within the same company, except with respect to an
increase in benefits voluntarily selected by the insured individual
or group policyholder; or
(3) Provide coverage for skilled nursing care only or provide
significantly more coverage for skilled care in a facility than
coverage for lower levels of care.
(c) Preexisting condition:
(1) No long-term care insurance policy or certificate other
than a policy or certificate thereunder issued to a group as
defined in subdivision (1), subsection (e), section four of this
article
shall use a definition of "preexisting condition"
which
that
is more restrictive than the following: Preexisting condition
means a condition for which medical advice or treatment was
recommended by, or received from a provider of health care
services, within six months preceding the effective date of
coverage of an insured person.
(2) No long-term care insurance policy or certificate other
than a policy or certificate thereunder issued to a group as
defined in subdivision (1), subsection (e), section four of this
article
may exclude coverage for a loss or confinement
which
that
is the result of a preexisting condition unless
such
the
loss
or
confinement begins within six months following the effective date
of coverage of an insured person.
(3) The commissioner may extend the limitation periods set
forth in subdivision (1) and (2), subsection (c) of this section as
to specific age group categories in specific policy forms upon
findings that the extension is in the best interest of the public.
(4) The definition of "preexisting condition" does not
prohibit an insurer from using an application form designed to
elicit
a
the
complete health history of an applicant, and, on the
basis of the answers on that application, from underwriting in accordance with that insurer's established underwriting standards.
Unless otherwise provided in the policy or certificate, a
preexisting condition, regardless of whether it is disclosed on the
application, need not be covered until the waiting period described
in subdivision (2), subsection (c) of this section expires. No
long-term care insurance policy or certificate may exclude or use
waivers or riders of any kind to exclude, limit or reduce coverage
or benefits for specifically named or described preexisting
diseases or physical conditions beyond the waiting period described
in subdivision (2), subsection (c) of this section.
(d) Prior hospitalization/institutionalization:
(1) Effective July 1, 1990, no No long-term care insurance
policy may be delivered or issued for delivery in this state if
such
the
policy:
(A) Conditions eligibility for any benefits on a prior
hospitalization requirement;
or
(B) Conditions eligibility for benefits provided in an
institutional care setting on the receipt of a higher level of
institutional care
.
; or
(C) Conditions eligibility for any benefits other than waiver
of premium, post-confinement, post-acute care or recuperative
benefits on a prior institutionalization requirement.
(2)
(A)
Effective July 1, 1990, a A long-term care insurance
policy containing any limitations or conditions for eligibility other than those prohibited above in paragraph (1)
post-confinement, post-acute care or recuperative benefits
shall
clearly label in a separate paragraph of the policy or certificate
entitled "Limitations or Conditions on Eligibility for Benefits"
such limitations or conditions, including any required number of
days of confinement.
(A) A long-term care insurance policy containing a benefit
advertised, marketed or offered as a home health care or home care
benefit may not condition receipt of benefits on a prior
institutionalization requirement.
(B) A long-term care insurance policy
which
or rider that
conditions eligibility of noninstitutional benefits on the prior
receipt of institutional care shall not require a prior
institutional stay of more than thirty days.
for which benefits
are paid
(3) No long-term care insurance policy
which
or rider that
provides benefits only following institutionalization shall
condition such benefits upon admission to a facility for the same
or related conditions within a period of less than thirty days
after discharge from the institution.
(e) The commissioner may adopt regulations rules establishing
loss ratio standards for long-term care insurance policies provided
that a specific reference to long-term care insurance policies is
contained in the regulation rule.
(f) Right to return - free look:
(1)
Individual long-term
Long-term care insurance
policyholders
applicants
shall have the right to return the policy
or
certificate
within
ten
thirty
days of its delivery and to have
the premium refunded if, after examination of the policy
or
certificate,
the
applicant
policyholder is not satisfied for any
reason. Individual long-term care insurance policies shall have a
notice prominently printed on the first page of the policy or
attached thereto stating in substance that the policyholder shall
have the right to return the policy within ten days of its delivery
and to have the premium refunded if, after examination of the
policy, the policyholder is not satisfied for any reason.
(2) A person insured under a long-term care insurance policy
issued pursuant to a direct response solicitation shall have the
right to return the policy within thirty days of its delivery and
to have the premium refunded if, after examination, the insured
person
is not satisfied for any reason. Long-term care insurance
policies
issued pursuant to a direct response solicitation
and
certificates
shall have a notice prominently printed on the first
page or attached thereto stating in substance that the
insured
person
applicant
shall have the right to return the policy
or
certificate
within thirty days of its delivery and to have the
premium refunded if
,
after examination
the insured person
of the
policy or certificate, other than a certificate issued pursuant to a policy issued to a group defined in subdivision (1), subsection
(e), section four of this article, the applicant
is not satisfied
for any reason.
(2) This subsection shall also apply to denials of
applications and any refund must be made within thirty days of the
return or denial.
(g) Outline of coverage:
(1) An outline of coverage shall be delivered to a prospective
applicant for long-term care insurance at the time of initial
solicitation through means
which
that
prominently direct the
attention of the recipient to the document and its purpose.
(A) The commissioner shall prescribe a standard format,
including style, arrangement and overall appearance, and the
content of an outline of coverage.
(B) In the case of agent solicitations, an agent
must
deliver
the outline of coverage prior to the presentation of an application
or enrollment form.
(C) In the case of direct response solicitations, the outline
of coverage
must
be presented in conjunction with any application
or enrollment form.
(D) In the case of a policy issued to a group defined in
subdivision (1), subsection (e), section four of this article, an
outline of coverage shall not be required to be delivered, provided
that the information described in paragraphs (A) through (F), subdivision (2) of this subsection, is contained in other materials
relating to enrollment. Upon request, these other materials shall
be made available to the commissioner.
(2) The outline of coverage shall include:
(A) A description of the principal benefits and coverage
provided in the policy;
(B) A statement of the principal exclusions, reductions, and
limitations contained in the policy;
(C) A statement of the terms under which the policy or
certificate, or both, may be continued in force or discontinued,
including any reservation in the policy of a right to change
premium. Continuation or conversion provisions of group coverage
shall be specifically described;
(D) A statement that the outline of coverage is a summary
only, not a contract of insurance, and that the policy or group
master policy contain governing contractual provisions;
(E) A description of the terms under which the policy or
certificate may be returned and premium refunded;
and
(F) A brief description of the relationship of cost of care
and benefits;
and
(G) A statement that discloses to the policyholder or
certificate holder whether the policy is intended to be a federally
tax-qualified long-term care insurance contract under 7702(B)(b) of
the Internal Revenue Code of 1986, as amended.
(h) A certificate issued pursuant to a group long-term care
insurance policy
which
policy that is delivered or issued for
delivery in this state shall include:
(1) A description of the principal benefits and coverage
provided in the policy;
(2) A statement of the principal exclusions, reductions and
limitations contained in the policy; and
(3) A statement that the group master policy determines
governing contractual provisions.
(i)
Any policy advertising, marketing or offering long-term
care or nursing home insurance benefits shall comply with the
provisions of this act.
If an applicant for a long-term care
insurance contract or certificate is approved, the issuer shall
deliver the contract or certificate of insurance to the applicant
no later than thirty days after the date of approval.
(j) At the time of policy delivery, a policy summary shall be
delivered for an individual life insurance policy that provides
long-term care benefits within the policy or by rider. In the case
of direct response solicitations, the insurer shall deliver the
policy summary upon the applicant's request, but regardless of
request shall make delivery no later than at the time of policy
delivery. In addition to complying with all applicable
requirements, the summary shall also include:
(1) An explanation of how the long-term care benefit interacts
with other components of the policy, including deductions from
death benefits;
(2) An illustration of the amount of benefits, the length of
benefit, and the guaranteed lifetime benefits if any, for each
covered person;
(3) Any exclusions, reductions and limitations on benefits of
long-term care;
(4) A statement that any long-term care inflation protection
option required by section eight of the commissioner's rule
relating to long-term care insurance is not available under this
policy;
(5) If applicable to the policy type, the summary shall also
include:
(A) A disclosure of the effects of exercising other rights
under the policy;
(B) A disclosure of guarantees related to long-term care costs
of insurance charges; and
(C) Current and projected maximum lifetime benefits.
(k) Any time a long-term care benefit, funded through a life
insurance vehicle by the acceleration of the death benefit, is in
benefit payment status, a monthly report shall be provided to the
policyholder. The report shall include:
(1) Any long-term care benefits paid out during the month;
(2) An explanation of any changes in the policy, for example
death benefits or cash values, due to long-term care benefits being
paid out; and
(3) The amount of long-term care benefits existing or
remaining.
(l) If a claim under a long-term care insurance contract is
denied, the issuer shall, within sixty days of the date of a
written request by the policyholder or certificate holder, or a
representative thereof:
(1) Provide a written explanation of the reasons for the
denial; and
(2) Make available all information directly related to the
denial.
(m) Any policy or rider advertised, marketed or offered as
long-term care or nursing home insurance shall comply with the
provisions of this article.
§33-15A-7. Incontestability period.
(a) For a policy or certificate that has been in force for
less than six months an insurer may rescind a long-term care
insurance policy or certificate or deny an otherwise valid
long-term care insurance claim upon a showing of misrepresentation
that is material to the acceptance for coverage.
(b) For a policy or certificate that has been in force for at
least six months but less than two years, an insurer may rescind a long-term care insurance policy or certificate or deny an otherwise
valid long-term care insurance claim upon a showing of
misrepresentation that is
both
material to the acceptance for
coverage
and
which pertains to the condition for which benefits are
sought.
(c) After a policy or certificate has been in force for two
years it is not contestable upon the grounds of misrepresentation
alone. The policy or certificate may be contested only upon a
showing that the insured knowingly and intentionally misrepresented
relevant facts relating to the insured's health.
(d) No long-term care insurance policy or certificate may be
field issued based on medical or health status. For purposes of
this subsection, "field issued" means a policy or certificate
issued by an agent or a third-party administrator pursuant to the
underwriting authority granted to the agent or third party
administrator by an insurer.
(e) If an insurer has paid benefits under the long-term care
insurance policy or certificate, the benefit payments may not be
recovered by the insurer in the event that the policy or
certificate is rescinded.
(f) In the event of the death of the insured, this section
shall not apply to the remaining death benefit of a life insurance
policy that accelerates benefits for long-term care. In this
situation, the remaining death benefits under these policies shall be governed by section four, article thirteen of this chapter. In
all other situations, this section shall apply to life insurance
policies that accelerate benefits for long-term care.
§33-15A-8. Nonforfeiture benefits.
(a) Except as provided in subsection (b) of this section, a
long-term care insurance policy may not be delivered or issued for
delivery in this state unless the policyholder or certificate
holder has been offered the option of purchasing a policy or
certificate including a nonforfeiture benefit. The offer of a
nonforfeiture benefit may be in the form of a rider that is
attached to the policy. In the event the policyholder or
certificate holder declines the nonforfeiture benefit, the insurer
shall provide a contingent benefit upon lapse that shall be
available for a specified period of time following a substantial
increase in premium rates.
(b) When a group long-term care insurance policy is issued,
the offer required in subsection (a) of this section shall be made
to the group policyholder. However, if the policy is issued as
group long-term care insurance as defined in subdivision (4),
subsection (e), section four of this article, other than to a
continuing care retirement community or other similar entity, the
offering shall be made to each proposed certificate holder.
(c) The commissioner may promulgate rules pursuant to article
twenty-nine-a of this code specifying the type or types of nonforfeiture benefits to be offered as part of long-term care
insurance policies and certificates, the standards for
nonforfeiture benefits, and the rules regarding contingent benefit
upon lapse, including a determination of the specified period of
time during which a contingent benefit upon lapse will be available
and the substantial premium rate increase that triggers a
contingent benefit upon lapse as described in subsection (a) of
this section.
§33-15A-9. Authority to promulgate rules.
The commissioner may issue reasonable rules pursuant to
article twenty-nine-a of this code to promote premium adequacy and
to protect the policyholder in the event of substantial rate
increases, and to establish minimum standards for marketing
practices, agent compensation, agent testing, penalties and
reporting practices for long-term care insurance.
§33-15A-
10
. Severability.
If any provision of this article or the application thereof to
any person or circumstance is for any reason held to be invalid,
the remainder of the article and application of such provision to
other persons or circumstances shall not be affected thereby.
§33-15A-11. Penalties.
In addition to any other penalties provided by the laws of
this state, any insurer and any agent found to have violated any
requirement of this state relating to the regulation of long-term care insurance or the marketing of such insurance shall be subject
to a fine of up to three times the amount of any commissions paid
for each policy involved in the violation or up to ten thousand
dollars, whichever is greater.
NOTE: The purpose of this bill is to modernize the long-term
care insurance act within the insurance code. The changes will
protect consumers purchasing long-term care insurance and will make
this article consistent with the National Association of Insurance
Commissioners model act.
Strike-throughs indicate language that would be stricken from
the present law and underscoring indicates new language that would
be added
.
§§33-15A-8, 9, 10 and 11 are new; therefore, strike-throughs
and underscoring have been omitted.
§33-15-7 is completely rewritten; therefore, strike-throughs
and underscoring have been omitted.