I

104TH CONGRESS

1ST SESSION H. R. 1221

To amend the Public Health Service Act to establish Federal standards

for long-term care insurance policies, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 14, 1995

Mr. WYDEN (for himself, Mrs. MORELLA, Mr. KENNEDY of Massachusetts,

and Mr. REGULA) introduced the following bill; which was referred to the

Committee on Commerce

A BILL

To amend the Public Health Service Act to establish Federal

standards for long-term care insurance policies, and for

other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Long-Term Care In5 surance Consumer Protection Act of 1995’’.

6 SEC. 2. ESTABLISHMENT OF FEDERAL STANDARDS FOR

7 LONG-TERM CARE INSURANCE POLICIES.

8 The Public Health Service Act (42 U.S.C. 201 et

9 seq.) is amended by adding at the end the following:
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1 ‘‘TITLE XXVII—LONG-TERM CARE

2 INSURANCE STANDARDS

3 ‘‘SEC. 2701. IMPLEMENTATION OF POLICY STANDARDS.

4 ‘‘(a) IN GENERAL.—

5 ‘‘(1) NEW ISSUES.—No long-term care insur6 ance policy (as defined in section 2709) may be is7 sued, sold, or offered for sale in a State on or after

8 the date specified in subsection (d) unless—

9 ‘‘(A) the Secretary determines that the

10 State has established a regulatory program

11 that—

12 ‘‘(i) provides for the application and

13 enforcement of the standards established

14 under subsection (c); and

15 ‘‘(ii) complies with the requirements

16 of subsection (e);

17 by the date specified in subsection (d), and the

18 policy has been approved by the State commis19 sioner or superintendent of insurance under

20 such program; or

21 ‘‘(B) if the State has not established such

22 a program, the policy has been certified by the

23 Secretary (in accordance with such procedures

24 as the Secretary establishes) as meeting the

25 standards established under subsection (c).
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1 For purposes of this subsection, the advertising or

2 soliciting with respect to a policy, directly or indi3 rectly, shall be deemed the offering for sale of the

4 policy.

5 ‘‘(2) REVIEW OF STATE REGULATORY PRO6 GRAMS.—The Secretary periodically shall review reg7 ulatory programs described in paragraph (1)(A) to

8 determine if they continue to provide for the applica9 tion and enforcement of the standards established

10 under subsection (c).

11 ‘‘(b) SANCTIONS.—Any person who issues or renews

12 a policy, on or after the date specified in subsection (d),

13 in violation of subsection (a), is subject to a civil money

14 penalty of not to exceed $25,000 for each such violation.

15 The provisions of section 1128A of the Social Security Act

16 (other than the first sentence of subsection (a) and other

17 than subsection (b)) shall apply to a civil money penalty

18 under this subsection in the same manner as such provi19 sions apply to a penalty or proceeding under such section

20 1128A(a).

21 ‘‘(c) PROMULGATION OF STANDARDS.—

22 ‘‘(1) IN GENERAL.—If, within 12 months after

23 the date of the enactment of this title, the National

24 Association of Insurance Commissioners (in this title

25 referred to as the ‘NAIC’) promulgates model stand-
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1 ards that incorporate the requirements of sections

2 2704 through 2708, such standards shall apply

3 under subsection (a).

4 ‘‘(2) DEFAULT.—If the NAIC does not promul5 gate the model standards under paragraph (1) by

6 the deadline established in that subsection, the Sec7 retary shall promulgate, within 12 months after such

8 deadline, a regulation that provides standards that

9 incorporate the requirements of sections 2704

10 through 2708 and such standards shall be applied

11 under subsection (a).

12 ‘‘(3) CONSULTATION.—In establishing stand13 ards under this subsection, the NAIC or Secretary

14 shall consult with a working group composed of rep15 resentatives of issuers of long-term care insurance

16 policies, consumer groups, and other qualified indi17 viduals. Such representatives shall be selected in a

18 manner so as to assure balanced representation

19 among the interested groups.

20 ‘‘(4) RELATION TO STATE LAW.—Nothing in

21 this title shall be construed as preventing a State

22 from applying standards that provide greater protec23 tion to policyholders of long-term care insurance

24 policies.
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1 ‘‘(d) DEADLINE FOR APPLICATION OF STAND2 ARDS.—

3 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

4 the date specified in this subsection for a State is—

5 ‘‘(A) the date the State adopts the stand6 ards established under subsection (c); or

7 ‘‘(B) 1 year after the date such standards

8 are first established;

9 whichever is earlier.

10 ‘‘(2) STATE REQUIRING LEGISLATION.—In the

11 case of a State which the Secretary identifies, in

12 consultation with the NAIC, as—

13 ‘‘(A) requiring State legislation (other than

14 legislation appropriating funds) in order for the

15 standards established under subsection (c) to be

16 applied; but

17 ‘‘(B) having a legislature which is not

18 scheduled to meet in 1997 in a legislative ses19 sion in which such legislation may be consid20 ered;

21 the date specified in this subsection is the first day

22 of the first calendar quarter beginning after the

23 close of the first legislative session of the State legis24 lature that begins on or after January 1, 1997. For

25 purposes of the previous sentence, in the case of a
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1 State that has a 2-year legislative session, each year

2 of such session shall be deemed to be a separate reg3 ular session of the State legislature.

4 ‘‘(e) ADDITIONAL REQUIREMENTS FOR APPROVAL OF

5 STATE REGULATORY PROGRAMS.—For purposes of sub6 section (a)(1)(A)(ii), the requirements of this subsection

7 for a State regulatory program are as follows:

8 ‘‘(1) CONSUMER ACCESS TO COMPLIANCE IN9 FORMATION.—

10 ‘‘(A) IN GENERAL.—The program must

11 provide for consumer access to complaints filed

12 with the State commissioner or superintendent

13 of insurance with respect to long-term care in14 surance policies.

15 ‘‘(B) CONFIDENTIALITY.—The access pro16 vided under subparagraph (A) shall be limited

17 to the extent required to protect the confiden18 tiality of the identity of individual policyholders.

19 ‘‘(2) ACCESS TO OTHER INFORMATION.—The

20 program must provide for consumer access to infor21 mation reported under section 2703(d).

22 ‘‘(3) PROCESS FOR APPROVAL OF PREMIUMS.—

23 The program must provide for a process for approv24 ing or disapproving proposed premium increases

25 with respect to long-term care insurance policies and
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1 must establish a policy for the holding of public

2 hearings prior to approval of such a premium in3 crease. No such premium increase shall be approved

4 (or deemed approved) unless the proposed increase

5 is accompanied by an actuarial memorandum which

6 supports the increase and which contains such infor7 mation as may be required under the standards

8 under section 2701(c).

9 ‘‘SEC. 2702. REGULATION OF SALES PRACTICES.

10 ‘‘(a) DUTY OF GOOD FAITH AND FAIR DEALING.—

11 ‘‘(1) IN GENERAL.—Each individual who is sell12 ing or offering for sale a long-term care insurance

13 policy has the duty of good faith and fair dealing to

14 the purchaser or potential purchaser of such a pol15 icy.

16 ‘‘(2) PROHIBITED PRACTICES.—An individual is

17 considered to have violated paragraph (1) if the indi18 vidual engages in any of the following practices:

19 ‘‘(A) TWISTING.—Knowingly making any

20 misleading representation or incomplete or

21 fraudulent comparison of any health care insur22 ance policy or insurers for the purpose of induc23 ing, or tending to induce, any person to retain

24 or effect a change with respect to a long-term

25 care insurance policy.
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1 ‘‘(B) HIGH PRESSURE TACTICS.—Employ2 ing any method of marketing having the effect

3 of, or intending to, induce the purchase of long4 term care insurance policy through undue pres5 sure.

6 ‘‘(C) COLD LEAD ADVERTISING.—Making

7 use directly or indirectly of any method of mar8 keting which fails to disclose in a conspicuous

9 manner that a purpose of the method of mar10 keting is solicitation of insurance and that con11 tact will be made by an insurance agent or in12 surance company.

13 ‘‘(b) COMPLETION OF MEDICAL HISTORIES PROHIB14 ITED.—A person who is selling or offering for sale a long15 term care insurance policy may not complete the medical

16 history portion of an application.

17 ‘‘(c) PROHIBITION OF SALE OR ISSUANCE TO MEDIC18 AID BENEFICIARIES.—A person may not knowingly sell or

19 issue a long-term care insurance policy to an individual

20 who is eligible for medical assistance (other than only as

21 a qualified medicare beneficiary) under title XIX of the

22 Social Security Act.

23 ‘‘(d) PROHIBITION OF SALE OR ISSUANCE OF DUPLI24 CATE SERVICE BENEFIT POLICIES.—A person may not
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1 sell or issue a service-benefit long-term care insurance pol2 icy—

3 ‘‘(1) knowing that the policy provides for cov4 erage that duplicates coverage already provided in

5 another service-benefit long-term care insurance pol6 icy (unless the policy is intended to replace such

7 other policy); or

8 ‘‘(2) for the benefit of an individual unless the

9 individual (or a representative of the individual) pro10 vides a written statement to the effect that the cov11 erage (A) does not duplicate other coverage in effect

12 under a service-benefit long-term care insurance pol13 icy or (B) will replace another service-benefit long14 term care insurance policy.

15 In this subsection, the term ‘service-benefit long-term care

16 insurance policy’ means a long-term care insurance policy

17 which provides for benefits based on the amount of ex18 penses incurred, rather than on an indemnity basis.

19 ‘‘(e) PROVISION OF OUTLINE OF COVERAGE.—No

20 person may sell or offer for a sale a long-term care insur21 ance policy without providing to the purchaser or potential

22 purchaser (or representative) an outline of coverage that

23 complies with the standards established under section

24 2701(c).
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1 ‘‘(f) INFORMATION ON FINANCIAL ARRANGEMENTS

2 WITH GROUPS.—No person may sell or offer for sale a

3 long-term care insurance policy with respect to a member

4 of an organization with which the person (or the issuer

5 of the policy) has a financial arrangement of any type un6 less the person discloses (in accordance with standards es7 tablished under section 2701(c)) the nature of the finan8 cial arrangement.

9 ‘‘(g) PENALTIES.—Any person who sells, offers for

10 sale, or issues a long-term care insurance policy in viola11 tion of this section may be imprisoned not more than 5

12 years, or fined in accordance with title 18, United States

13 Code, and, in addition, is subject to a civil money penalty

14 of not to exceed $25,000 for each such violation. The pro15 visions of section 1128A of the Social Security Act (other

16 than the first sentence of subsection (a) and other than

17 subsection (b)) shall apply to a civil money penalty under

18 this subsection in the same manner as such provisions

19 apply to a penalty or proceeding under such section

20 1128A(a).

21 ‘‘SEC. 2703. ADDITIONAL RESPONSIBILITIES OF ISSUERS.

22 ‘‘(a) REFUND OF PREMIUMS.—If an application for

23 a long-term care insurance policy (or for a certificate

24 under a group long-term care insurance policy) is denied

25 or an applicant returns a policy or certificate within 30
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1 days of the date of its issuance pursuant to section 2708,

2 the issuer shall refund to the applicant, not later than 30

3 days after the date of the denial or return, any premiums

4 paid with respect to such a policy.

5 ‘‘(b) MAILING OF POLICY.—If an application for a

6 long-term care insurance policy (or for a certificate under

7 a group long-term care insurance policy) is approved, the

8 issuer shall transmit to the applicant the policy (or certifi9 cate) of insurance not later than 30 days after the date

10 of the approval.

11 ‘‘(c) INFORMATION ON DENIALS OF CLAIMS.—If a

12 claim under a long-term care insurance policy is denied,

13 the issuer shall, within 60 days of the date of a written

14 request by the policyholder or certificateholder (or rep15 resentative)—

16 ‘‘(1) provide a written explanation of the rea17 sons for the denial; and

18 ‘‘(2) make available all information directly re19 lating to such denial.

20 No claim under such a policy may be denied on the basis

21 of a failure to disclose a condition at the time of issuance

22 of the policy if the application for the policy failed to re23 quest information respecting the condition.

24 ‘‘(d) REPORTING OF INFORMATION.—The issuer of

25 a long-term care insurance policy shall periodically (not
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1 less often than annually) report to the Commissioner or

2 superintendent of insurance of each State in which the

3 policy is sold, and shall make available to the Secretary,

4 upon request, information respecting—

5 ‘‘(1) the long-term care insurance policies of the

6 issuer that are in force;

7 ‘‘(2) the most recent premiums for such policies

8 and the premiums imposed for such policies during

9 the previous 5-year period;

10 ‘‘(3) the lapse rates, replacement rates, and re11 scission rates for policies (by agent); and

12 ‘‘(4) the claims denied (as a percentage of

13 claims submitted) for such policies.

14 Information under this subsection shall be reported in a

15 format specified in the standards established under section

16 2701(c) to carry out this section. For purposes of para17 graph (3), there shall not be included as a lapse of policy

18 such a lapse due to the death of the policyholder. For pur19 poses of paragraph (4), there shall not be included as a

20 denied claim that is denied solely because of the failure

21 to meet a deductible, waiting period, or exclusionary pe22 riod.

23 ‘‘(e) ACCESS TO INFORMATION.—Each such issuer

24 shall provide the Secretary and the Commissioner or su25 perintendent of insurance of each State in which the policy
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1 is sold such information as the Secretary, Commissioner,

2 or superintendent, may request.

3 ‘‘(f) PROVISION OF OUTLINE OF COVERAGE FOR RE4 NEWALS.—Each issuer of a long-term care insurance pol5 icy shall provide, at the time of renewal of such a policy,

6 an outline of coverage that meets the applicable standards

7 established pursuant to this title.

8 ‘‘(g) MEDICAL ASSESSMENTS FOR THE ELDERLY.—

9 Before issuing a long-term care insurance policy to an ap10 plicant who is 75 years of age or older, if the policy is

11 not guaranteed issue the issuer shall obtain one of the fol12 lowing:

13 ‘‘(1) A report of a physical examination.

14 ‘‘(2) An assessment of functional capacity.

15 ‘‘(3) Copies of medical records.

16 ‘‘(h) LIMITS ON COMPENSATION FOR SALE OF POLI17 CIES.—

18 ‘‘(1) IN GENERAL.—The issuer of a long-term

19 care insurance policy may not provide a commission

20 or other compensation to an agent or other rep21 resentative for the sale of such a policy in an

22 amount that exceeds 200 percent of the commission

23 or other compensation paid for selling or servicing

24 such a policy in the second or subsequent year.
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1 ‘‘(2) COMPENSATION DEFINED.—In paragraph

2 (1), the term ‘compensation’ includes pecuniary or

3 nonpecuniary remuneration of any kind relating to

4 the sale or renewal of the policy or certification, in5 cluding deferred compensation, bonuses, gifts,

6 prizes, awards, and finders fees.

7 ‘‘(i) CIVIL MONEY PENALTY.—Any issuer of a long8 term care insurance policy who—

9 ‘‘(1) fails to make a refund in accordance with

10 subsection (a);

11 ‘‘(2) fails to transmit a policy in accordance

12 with subsection (b);

13 ‘‘(3) fails to provide, make available, or report

14 information in accordance with subsection (c), (d),

15 or (e);

16 ‘‘(4) fails to provide an outline of coverage in

17 violation of subsection (f);

18 ‘‘(5) issues a policy without obtaining certain

19 information in violation of subsection (g); or

20 ‘‘(6) provides a commission or compensation in

21 violation of subsection (h),

22 is subject to a civil money penalty of not to exceed $25,000

23 for each such violation. The provisions of section 1128A

24 of the Social Security Act (other than the first sentence

25 of subsection (a) and other than subsection (b)) shall
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1 apply to a civil money penalty under this subsection in

2 the same manner as such provisions apply to a penalty

3 or proceeding under such section 1128A(a).

4 ‘‘SEC. 2704. REQUIREMENTS RELATING TO RENEWABILITY.

5 ‘‘(a) IN GENERAL.—No long-term care insurance pol6 icy may be canceled or nonrenewed for any reason other

7 than nonpayment of premium or material misrepresenta8 tion.

9 ‘‘(b) CONTINUATION AND CONVERSION RIGHTS FOR

10 GROUP POLICIES.—

11 ‘‘(1) IN GENERAL.—Each group long-term care

12 insurance policy shall provide covered individuals

13 with a basis for continuation or conversion in ac14 cordance with this subsection.

15 ‘‘(2) BASIS FOR CONTINUATION.—For purposes

16 of paragraph (1), a policy provides a basis for con17 tinuation of coverage if the policy maintains cov18 erage under the existing group policy when such cov19 erage would otherwise terminate and which is sub20 ject only to the continued timely payment of pre21 mium when due. A group policy which restricts pro22 vision of benefits and services to or contains incen23 tives to use certain providers or facility, may provide

24 continuation benefits which are substantially equiva25 lent to the benefits of the existing group policy.
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1 ‘‘(3) BASIS FOR CONVERSION.—For purposes of

2 paragraph (1), a policy provides a basis for conver3 sion of coverage if the policy entitles each individ4 ual—

5 ‘‘(A) whose coverage under the group pol6 icy would otherwise be terminated for any rea7 son; and

8 ‘‘(B) who has been continuously insured

9 under the policy (or group policy which was re10 placed) for at least 6 months before the date of

11 the termination;

12 to issuance of a policy providing benefits identical to,

13 substantially equivalent to, or in excess of, those of

14 the policy being terminated, without evidence of in15 surability.

16 ‘‘(4) TREATMENT OF SUBSTANTIAL EQUIVA17 LENCE.—In determining under this subsection

18 whether benefits are substantially equivalent, there

19 shall be taken into consideration the difference be20 tween managed care and non-managed care plans.

21 ‘‘(5) GROUP REPLACEMENT OF POLICIES.—If a

22 group long-term care insurance policy is replaced by

23 another long-term care insurance policy purchased

24 by the same policyholder, the succeeding issuer shall

25 offer coverage to all persons covered under the old
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1 group policy on its date of termination. Coverage

2 under the new group policy shall not result in any

3 exclusion for preexisting conditions that would have

4 been covered under the group policy being replaced.

5 ‘‘(c) UPGRADE FOR CURRENT POLICIES.—Each long6 term care insurance policy in effect as of the effective date

7 of the standards established under section 2701(c) shall

8 permit the policyholder to purchase a policy that meets

9 all such standards. In offering such a policy, the issuer

10 may impose additional underwriting restrictions only for

11 benefits not held under the previously issued policy.

12 ‘‘SEC. 2705. BENEFIT STANDARDS.

13 ‘‘(a) USE OF STANDARD DEFINITIONS AND TERMI14 NOLOGY AND UNIFORM FORMAT.—Each long-term care

15 insurance policy shall, pursuant to standards established

16 under section 2701(c)—

17 ‘‘(1) use uniform language and definitions; and

18 ‘‘(2) use a uniform format for presenting the

19 outline of coverage under such a policy.

20 ‘‘(b) DISCLOSURE.—

21 ‘‘(1) OUTLINE OF COVERAGE.—The outline of

22 coverage for each long-term care insurance policy

23 shall include at least the following:

24 ‘‘(A) A description of the principal benefits

25 and coverage under the policy.
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1 ‘‘(B) A statement of the principal exclu2 sions, reductions, and limitations contained in

3 the policy.

4 ‘‘(C) A statement of the terms under which

5 the policy (or certificate) may be continued in

6 force or discontinued, the terms for continu7 ation or conversion, and any reservation in the

8 policy of a right to change premiums.

9 ‘‘(D) A statement that the outline of cov10 erage is a summary only, not a contract of in11 surance, and that the policy (or master policy)

12 contains the contractual provisions that govern.

13 ‘‘(E) A statement of the value of the policy

14 (determined in accordance with standard estab15 lished to carry out this paragraph).

16 ‘‘(F) A description of the terms, specified

17 in section 2708, under which a policy or certifi18 cate may be returned and premium refunded.

19 ‘‘(G) Information on national average costs

20 for nursing facility and home health care and

21 information (in graphic form) on the relation22 ship of the value of the benefits provided under

23 the policy to such national average costs.
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1 ‘‘(H) A statement of the percentage limit

2 on annual premium increases that is provided

3 under the policy pursuant to subsection (h).

4 ‘‘(I) Information (in graphic form) on the

5 projected effect of inflation on the value of ben6 efits provided under the policy during a period

7 of at least 20 years.

8 ‘‘(2) CERTIFICATES.—A certificate issued pur9 suant to a group long-term care insurance policy

10 shall include—

11 ‘‘(A) a description of the principal benefits

12 and coverage provided in the policy;

13 ‘‘(B) a statement of the principal exclu14 sions, reductions, and limitations contained in

15 the policy; and

16 ‘‘(C) a statement that the group master

17 policy determines governing contractual provi18 sions.

19 ‘‘(3) LONG-TERM CARE AS PART OF LIFE IN20 SURANCE.—In the case of a long-term care insur21 ance policy issued as a part of or a rider on a life

22 insurance policy, at the time of policy delivery there

23 shall be provided a policy summary that includes—

24 ‘‘(A) an explanation of how the long-term

25 care benefits interact with other components of
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1 the policy (including deductions from death

2 benefits);

3 ‘‘(B) an illustration of the amount of bene4 fits, the length of benefit, and the guaranteed

5 lifetime benefits (if any) for each covered per6 son; and

7 ‘‘(C) any exclusions, reductions, and limi8 tations on benefits of long-term care.

9 ‘‘(c) LIMITING CONDITIONS ON BENEFITS; MINIMUM

10 BENEFITS.—

11 ‘‘(1) IN GENERAL.—A long-term care insurance

12 policy may not condition or limit eligibility—

13 ‘‘(A) for benefits for a type of services to

14 the need for or receipt of any other services;

15 ‘‘(B) for any noninstitutional benefit on

16 the medical necessity for such benefit;

17 ‘‘(C) for benefits furnished by licensed pro18 viders on compliance with conditions which are

19 in addition to those required for licensure under

20 State law; or

21 ‘‘(D) for custodial care (if covered under

22 the policy) only (i) to care provided in facilities

23 which provide a higher level of care or (ii) to

24 care provided in facilities which provide for 24-
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1 hour or other nursing care not required in order

2 to be licensed by the State.

3 ‘‘(2) HOME HEALTH CARE SERVICES.—If a

4 long-term care insurance policy provides benefits for

5 home health care services, the policy—

6 ‘‘(A) may not limit such benefits to serv7 ices provided by registered nurses or licensed

8 practical nurses;

9 ‘‘(B) may not require benefits for such

10 services to be provided by a nurse or therapist

11 that can be provided by a home health aide or

12 other licensed or certified home care worker

13 acting within the scope of the worker’s licensure

14 or certification;

15 ‘‘(C) may not limit such benefits to serv16 ices provided by agencies or providers certified

17 under title XVIII of the Social Security Act;

18 and

19 ‘‘(D) must provide benefits for custodial

20 care, personal care services (including home

21 health aide and homemaker services), home

22 health services, and respite care in an individ23 ual’s home.

24 ‘‘(3) NURSING FACILITY SERVICES.—If a long25 term care insurance policy provides benefits for
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1 nursing facility services, the policy must provide

2 such benefits with respect to all nursing facilities (as

3 defined in section 1919(a) of the Social Security

4 Act) in the State.

5 ‘‘(4) MINIMUM PERIOD OF COVERAGE.—Each

6 long-term care insurance policy shall provide benefits

7 over a period of at least 12 consecutive months.

8 ‘‘(5) PROHIBITION OF DISCRIMINATION.—A

9 long-term care insurance policy may not treat bene10 fits under the policy in the case of an individual with

11 Alzheimer’s disease, with any related progressive de12 generative dementia of an organic origin, or with

13 any organic or inorganic mental illness differently

14 from an individual having another medical condition

15 for which benefits may be made available.

16 ‘‘(e) LIMITATION ON USE OF PREEXISTING CONDI17 TION LIMITS.—

18 ‘‘(1) INITIAL ISSUANCE.—

19 ‘‘(A) IN GENERAL.—Subject to subpara20 graph (B), a long-term care insurance policy

21 may not exclude or condition benefits based on

22 a medical condition for which the policyholder

23 received treatment or was otherwise diagnosed

24 before the issuance of the policy.
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1 ‘‘(B) 6-MONTH LIMIT.—A long-term care

2 insurance policy may exclude benefits under a

3 policy, during its first 6 months, based on a

4 condition for which the policyholder received

5 treatment or was otherwise diagnosed during

6 the 6 months before the policy became effective.

7 ‘‘(2) REPLACEMENT POLICIES.—If a long-term

8 care insurance policy replaces another long-term

9 care insurance policy, the issuer of the replacing pol10 icy shall waive any time periods applicable to pre11 existing conditions, waiting period, elimination peri12 ods and probationary periods in the new policy for

13 similar benefits to the extent such time was spent

14 under the original policy.

15 ‘‘(f) USE OF FUNCTIONAL ASSESSMENT.—

16 ‘‘(1) IN GENERAL.—Each long-term care insur17 ance policy—

18 ‘‘(A) shall determine eligibility for, and

19 level of, benefits (other than for nursing facility

20 services) available under the policy based on a

21 professional assessment of the policyholder’s

22 functional ability; and

23 ‘‘(B) shall specify the level (or levels) of

24 functional impairment required under such an
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1 assessment to obtain benefits other than for

2 nursing facility services) under the policy.

3 Such assessment may not be conducted by an indi4 vidual who has a direct or indirect ownership or con5 trol interest, or direct or indirect affiliation or rela6 tionship with, the issuer of the policy or an entity

7 that provides services for which benefits are avail8 able under the long-term care insurance policy.

9 ‘‘(2) APPEALS PROCESS.—Each long-term care

10 insurance policy shall provide for an appeals process,

11 meeting standards established under this section, for

12 individuals who dispute the results of an assessment

13 conducted under this subsection.

14 ‘‘(g) INFLATION PROTECTION.—Each long-term care

15 insurance policy shall provide, at the time of each annual

16 renewal, for an increase of a specified percentage (but not

17 less than 5 percent) in the dollar payment levels and the

18 maximum payment limit on benefit coverage above the lev19 els or limit in effect during the previous policy year. In

20 applying this subsection, the increases shall be

21 compounded annually and the policy may provide for

22 rounding such an increase to the nearest multiple of $1

23 (in the case of dollar payment levels) or $100 (in the case

24 of the maximum payment limit).
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1 ‘‘(h) SPECIFICATION OF LIMITS ON PREMIUM IN2 CREASES.—Each long-term care insurance policy shall

3 specify a limit on the percentage increase in premiums for

4 a policy that may be made in any between one policy year

5 and the subsequent policy year.

6 ‘‘SEC. 2706. NONFORFEITURE.

7 ‘‘(a) IN GENERAL.—Each long-term care insurance

8 policy shall provide that if the policy lapses after the policy

9 has been in effect for a minimum period (specified under

10 the standards under section 2701(c)), the policy will pro11 vide without payment of any additional premiums benefits

12 equal to—

13 ‘‘(1) a percentage (specified under such stand14 ards) of the benefits otherwise available at term; or

15 ‘‘(2) such other type of benefits as such stand16 ards may provide.

17 ‘‘(b) ESTABLISHMENT OF STANDARDS.—The stand18 ards under section 2701(c)—

19 ‘‘(1) may not provide more than 2 additional

20 types of benefits under subsection (a)(2); and

21 ‘‘(2) may provide that the percentage or

22 amount of benefits under subsection (a) must in23 crease based upon the period of time in which the

24 policy was in effect.
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1 ‘‘SEC. 2707. LIMIT OF PERIOD OF CONTESTABILITY.

2 ‘‘The issuer of a long-term care insurance policy may

3 not cancel such a policy or deny a claim under the policy

4 based on fraud or misrepresentation relating to the issu5 ance of the policy unless notice of such fraud or misrepre6 sentation is provided within 6 months after the date of

7 the issuance of the policy.

8 ‘‘SEC. 2708. RIGHT TO RETURN (FREE LOOK).

9 ‘‘Each applicant for a long-term care insurance policy

10 shall have the right to return the policy (or certificate)

11 within 30 days of the date of its delivery (and to have

12 the premium refunded) if, after examination of the policy

13 or certificate, the applicant is not satisfied for any reason.

14 ‘‘SEC. 2709. LONG-TERM CARE INSURANCE POLICY DE15 FINED.

16 ‘‘(a) IN GENERAL.—In this title, except as otherwise

17 provided in this section, the term ‘long-term care insur18 ance policy’ means any insurance policy, certificate, or

19 rider advertised, marketed, offered, or designed to provide

20 coverage for each covered person on an expense incurred,

21 indemnity, prepaid, or other basis, for one or more diag22 nostic, preventive, therapeutic, rehabilitative, maintenance

23 or personal care services, provided in a setting other than

24 an acute care unit of a hospital. Such term includes a

25 group or individual annuity or life insurance policy or
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1 rider which provides directly (or which supplements) long2 term care insurance.

3 ‘‘(b) POLICIES EXCLUDED.—Except as provided in

4 subsection (d), the term ‘long-term care insurance policy’

5 does not include any medicare supplemental policy (as de6 fined in section 1882(g) of the Social Security Act) and

7 any insurance which is offered primarily to provide—

8 ‘‘(1) basic hospital expense coverage, basic med9 ical-surgical expense coverage, hospital confinement

10 indemnity coverage, or major medical expense cov11 erage;

12 ‘‘(2) disability income or related asset-protec13 tion coverage;

14 ‘‘(3) accident only coverage;

15 ‘‘(4) specified disease or specified accident cov16 erage; or

17 ‘‘(5) limited benefit health coverage.

18 ‘‘(c) TREATMENT OF CERTAIN LIFE INSURANCE

19 POLICIES.—Except as provided in subsection (d), the term

20 ‘long-term care insurance policy’ does not include life in21 surance policies—

22 ‘‘(1) which accelerate the death benefit specifi23 cally for—

24 ‘‘(A) one or more of the qualifying events

25 of terminal illness;
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1 ‘‘(B) medical conditions requiring extraor2 dinary medical intervention; or

3 ‘‘(C) permanent institutional confinement;

4 ‘‘(2) which provide the option of a lump-sum

5 payment for those benefits; and

6 ‘‘(3) in which neither the benefits nor the eligi7 bility for the benefits is conditioned upon the receipt

8 of long-term care.

9 ‘‘(d) INCLUSION OF POLICIES MARKETED AS LONG10 TERM CARE INSURANCE.—The term ‘long-term care in11 surance policy’ also means any product which is adver12 tised, marketed, or offered as long-term care insurance.’’.

13 SEC. 3. AMENDMENTS TO THE MEDICAID PROGRAM.

14 (a) STATE MEDICAID REQUIREMENT FOR REGU15 LATORY PROGRAM.—Section 1902(a) of the Social Secu16 rity Act (42 U.S.C. 1396(a)) is amended—

17 (1) by striking ‘‘and’’ at the end of paragraph

18 (61);

19 (2) by striking the period at the end of para20 graph (62) and inserting ‘‘; and’’; and

21 (3) by inserting after paragraph (62) the fol22 lowing new paragraph:

23 ‘‘(63) establish, by the date specified in section

24 2701(d) of the Public Health Service Act, a State
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1 regulatory program, that meets the requirements of

2 section 2701(a)(1)(A) of such Act.’’.

3 (b) DENIAL OF MEDICAID FUNDS FOR FAILURE TO

4 ESTABLISH REGULATORY PROGRAM.—Section 1903(i) of

5 the Social Security Act (42 U.S.C. 1396b(i)) is amend6 ed—

7 (1) by striking ‘‘or’’ at the end of paragraph

8 (14);

9 (2) by striking the period at the end of para10 graph (15) and inserting ‘‘; or’’; and

11 (3) by inserting after paragraph (15) the fol12 lowing new paragraph.

13 ‘‘(16) with respect to any amount expended for

14 medical assistance for nursing facility services (fur15 nished on and after the date specified in section

16 2701(d) of the Public Health Service Act) during

17 such period as the state has failed to establish and

18 maintain a regulatory program that meets the re19 quirements of section 2701(a)(1)(A) of such Act.’’.

20 SEC. 4. REPORTS AND STUDY.

21 (a) REPORT ON ASSESSMENT METHODS FOR FUNC22 TIONAL ABILITY.—Within 2 years after the date of the

23 enactment of this Act, the Secretary of Health and

24 Human Services shall submit to Congress a report on the

25 different methods that may be used to conduct assess-
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1 ments of functional ability described in section 2705(f)(1)

2 of the Public Health Service Act (including the methods

3 used under section 1929(c) of the Social Security Act) and

4 the relative effectiveness of each of such methods.

5 (b) REPORT ON SOLVENCY PROTECTION.—Within 2

6 years after the date of the enactment of this Act, the Sec7 retary of Health and Human Services shall submit to Con8 gress a report on standards that may be applied to assure

9 the solvency of insurers with respect to long-term care in10 surance policies.

11 (c) STUDY OF STANDARD MEASURE OF VALUE FOR

12 LONG-TERM CARE INSURANCE POLICIES.—The Secretary

13 of Health and Human Services shall provide for a study

14 to develop a standard measure of value for long-term care

15 insurance policies. Within 2 years after the date of the

16 enactment of this Act, the Secretary shall submit to Con17 gress a report on such study.

18 SEC. 5. FUNDING FOR LONG-TERM CARE INSURANCE IN19 FORMATION, COUNSELING, AND ASSISTANCE.

20 There are authorized to be appropriated to provide

21 information, counseling, and assistance relating to the

22 procurement of adequate and appropriate long-term care

23 insurance, $20,000,000 for each of fiscal years 1997,

24 1998, and 1999.

Æ
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