I

103D CONGRESS

1ST SESSION H. R. 438

To amend title XIX of the Social Security Act to establish Federal standards

for long-term care insurance policies.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mr. WYDEN introduced the following bill; which was referred to the Committee

on Energy and Commerce

MAY 3, 1993

Additional sponsor: Ms. SLAUGHTER

A BILL

To amend title XIX of the Social Security Act to establish

Federal standards for long-term care insurance policies.

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 1993’’.
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1 SEC. 2. ESTABLISHMENT OF FEDERAL STANDARDS FOR

2 LONG-TERM CARE INSURANCE POLICIES.

3 (a) IN GENERAL.—Title XIX of the Social Security

4 Act is amended by adding at the end the following new

5 section:

6 ‘‘LONG-TERM CARE INSURANCE STANDARDS

7 ‘‘SEC. 1931. (a) IMPLEMENTATION OF POLICY

8 STANDARDS.—

9 ‘‘(1) IN GENERAL.—

10 ‘‘(A) NEW ISSUES.—No long-term care in11 surance policy (as defined in subsection (i))

12 may be issued, sold, or offered for sale in a

13 State on or after the date specified in para14 graph (4) unless—

15 ‘‘(i) the Secretary determines that the

16 State has established a regulatory program

17 that—

18 ‘‘(I) provides for the application

19 and enforcement of the standards es20 tablished under paragraph (3), and

21 ‘‘(II) complies with the require22 ments of paragraph (5),

23 by the date specified in paragraph (4), and

24 the policy has been approved by the State

25 commissioner or superintendent of insur26 ance under such program; or
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1 ‘‘(ii) if the State has not established

2 such a program, the policy has been cer3 tified by the Secretary (in accordance with

4 such procedures as the Secretary estab5 lishes) as meeting the standards estab6 lished under paragraph (3).

7 For purposes of this paragraph, the advertising

8 or soliciting with respect to a policy, directly or

9 indirectly, shall be deemed the offering for sale

10 of the policy.

11 ‘‘(B) REVIEW OF STATE REGULATORY

12 PROGRAMS.—The Secretary periodically shall

13 review regulatory programs described in sub14 paragraph (A)(i) to determine if they continue

15 to provide for the application and enforcement

16 of the standards established under paragraph

17 (3).

18 ‘‘(2) SANCTIONS.—Any person who issues or re19 news a policy, on or after the date specified in para20 graph (4), in violation of paragraph (1), is subject

21 to a civil money penalty of not to exceed $25,000 for

22 each such violation. The provisions of section 1128A

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

24 other than subsection (b)) shall apply to a civil

25 money penalty under this paragraph in the same
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1 manner as such provisions apply to a penalty or pro2 ceeding under section 1128A(a).

3 ‘‘(3) PROMULGATION OF STANDARDS.—

4 ‘‘(A) IN GENERAL.—If, within 12 months

5 after the date of the enactment of this section,

6 the National Association of Insurance Commis7 sioners (in this section referred to as the

8 ‘NAIC’) promulgates model standards that in9 corporate the requirements of subsections (d)

10 through (h), such standards shall apply under

11 paragraph (1).

12 ‘‘(B) DEFAULT.—If the NAIC does not

13 promulgate the model standards under subpara14 graph (A) by the deadline established in that

15 paragraph, the Secretary shall promulgate,

16 within 12 months after such deadline, a regula17 tion that provides standards that incorporate

18 the requirements of subsections (d) through (h)

19 and such standards shall be applied under para20 graph (1).

21 ‘‘(C) CONSULTATION.—In establishing

22 standards under this paragraph, the NAIC or

23 Secretary shall consult with a working group

24 composed of representatives of issuers of long25 term care insurance policies, consumer groups,
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1 and other qualified individuals. Such represent2 atives shall be selected in a manner so as to as3 sure balanced representation among the inter4 ested groups.

5 ‘‘(D) RELATION TO STATE LAW.—Nothing

6 in this section shall be construed as preventing

7 a State from applying standards that provide

8 greater protection to policyholders of long-term

9 care insurance policies.

10 ‘‘(4) DEADLINE FOR APPLICATION OF STAND11 ARDS.—

12 ‘‘(A) IN GENERAL.—Subject to subpara13 graph (B), the date specified in this paragraph

14 for a State is—

15 ‘‘(i) the date the State adopts the

16 standards established under paragraph (3),

17 or

18 ‘‘(ii) 1 year after the date such stand19 ards are first established,

20 whichever is earlier.

21 ‘‘(B) STATE REQUIRING LEGISLATION.—In

22 the case of a State which the Secretary identi23 fies, in consultation with the NAIC, as—

24 ‘‘(i) requiring State legislation (other

25 than legislation appropriating funds) in
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1 order for the standards established under

2 paragraph (3) to be applied, but

3 ‘‘(ii) having a legislature which is not

4 scheduled to meet in 1995 in a legislative

5 session in which such legislation may be

6 considered,

7 the date specified in this paragraph is the first

8 day of the first calendar quarter beginning after

9 the close of the first legislative session of the

10 State legislature that begins on or after Janu11 ary 1, 1995. For purposes of the previous sen12 tence, in the case of a State that has a 2-year

13 legislative session, each year of such session

14 shall be deemed to be a separate regular session

15 of the State legislature.

16 ‘‘(5) ADDITIONAL REQUIREMENTS FOR AP17 PROVAL OF STATE REGULATORY PROGRAMS.—For

18 purposes of paragraph (1)(A)(i)(II), the require19 ments of this paragraph for a State regulatory pro20 gram are as follows:

21 ‘‘(A) CONSUMER ACCESS TO COMPLIANCE

22 INFORMATION.—

23 ‘‘(i) IN GENERAL.—The program

24 must provide for consumer access to com25 plaints filed with the State commissioner
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1 or superintendent of insurance with respect

2 to long-term care insurance policies.

3 ‘‘(ii) CONFIDENTIALITY.—The access

4 provided under clause (i) shall be limited

5 to the extent required to protect the con6 fidentiality of the identity of individual pol7 icyholders.

8 ‘‘(B) ACCESS TO OTHER INFORMATION.—

9 The program must provide for consumer access

10 to information reported under subsection (c)(4).

11 ‘‘(C) PROCESS FOR APPROVAL OF PRE12 MIUMS.—The program must provide for a proc13 ess for approving or disapproving proposed pre14 mium increases with respect to long-term care

15 insurance policies and must establish a policy

16 for the holding of public hearings prior to ap17 proval of such a premium increase. No such

18 premium increase shall be approved (or deemed

19 approved) unless the proposed increase is ac20 companied by an actuarial memorandum which

21 supports the increase and which contains such

22 information as may be required under the

23 standards under subsection (a)(3).

24 ‘‘(b) REGULATION OF SALES PRACTICES.—
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1 ‘‘(1) DUTY OF GOOD FAITH AND FAIR DEAL2 ING.—

3 ‘‘(A) IN GENERAL.—Each individual who

4 is selling or offering for sale a long-term care

5 insurance policy has the duty of good faith and

6 fair dealing to the purchaser or potential pur7 chaser of such a policy.

8 ‘‘(B) PROHIBITED PRACTICES.—An indi9 vidual is considered to have violated subpara10 graph (A) if the individual engages in any of

11 the following practices:

12 ‘‘(i) TWISTING.—Knowingly making

13 any misleading representation or incom14 plete or fraudulent comparison of any

15 health care insurance policy or insurers for

16 the purpose of inducing, or tending to in17 duce, any person to retain or effect a

18 change with respect to a long-term care in19 surance policy.

20 ‘‘(ii) HIGH PRESSURE TACTICS.—Em21 ploying any method of marketing having

22 the effect of, or intending to, induce the

23 purchase of long-term care insurance pol24 icy through undue pressure.
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1 ‘‘(iii) COLD LEAD ADVERTISING.—

2 Making use directly or indirectly of any

3 method of marketing which fails to disclose

4 in a conspicuous manner that a purpose of

5 the method of marketing is solicitation of

6 insurance and that contact will be made by

7 an insurance agent or insurance company.

8 ‘‘(2) COMPLETION OF MEDICAL HISTORIES PRO9 HIBITED.—A person who is selling or offering for

10 sale a long-term care insurance policy may not com11 plete the medical history portion of an application.

12 ‘‘(3) PROHIBITION OF SALE OR ISSUANCE TO

13 MEDICAID BENEFICIARIES.—A person may not

14 knowingly sell or issue a long-term care insurance

15 policy to an individual who is eligible for medical as16 sistance (other than only as a qualified medicare

17 beneficiary) under this title.

18 ‘‘(4) PROHIBITION OF SALE OR ISSUANCE OF

19 DUPLICATE SERVICE BENEFIT POLICIES.—A person

20 may not sell or issue a service-benefit long-term care

21 insurance policy—

22 ‘‘(A) knowing that the policy provides for

23 coverage that duplicates coverage already pro24 vided in another service-benefit long-term care
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1 insurance policy (unless the policy is intended

2 to replace such other policy), or

3 ‘‘(B) for the benefit of an individual unless

4 the individual (or a representative of the indi5 vidual) provides a written statement to the ef6 fect that the coverage (i) does not duplicate

7 other coverage in effect under a service-benefit

8 long-term care insurance policy or (ii) will re9 place another service-benefit long-term care in10 surance policy.

11 In this paragraph, the term ‘service-benefit long12 term care insurance policy’ means a long-term care

13 insurance policy which provides for benefits based on

14 the amount of expenses incurred, rather than on an

15 indemnity basis.

16 ‘‘(5) PROVISION OF OUTLINE OF COVERAGE.—

17 No person may sell or offer for a sale a long-term

18 care insurance policy without providing to the pur19 chaser or potential purchaser (or representative) an

20 outline of coverage that complies with the standards

21 established under subsection (a)(3).

22 ‘‘(6) INFORMATION ON FINANCIAL ARRANGE23 MENTS WITH GROUPS.—No person may sell or offer

24 for sale a long-term care insurance policy with re25 spect to a member of an organization with which the
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1 person (or the issuer of the policy) has a financial

2 arrangement of any type unless the person discloses

3 (in accordance with standards established under sub4 section (a)(3)) the nature of the financial arrange5 ment.

6 ‘‘(7) PENALTIES.—Any person who sells, offers

7 for sale, or issues a long-term care insurance policy

8 in violation of this subsection may be imprisoned not

9 more than 5 years, or fined in accordance with title

10 18, United States Code, and, in addition, is subject

11 to a civil money penalty of not to exceed $25,000 for

12 each such violation. The provisions of section 1128A

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

14 other than subsection (b)) shall apply to a civil

15 money penalty under this paragraph in the same

16 manner as such provisions apply to a penalty or pro17 ceeding under section 1128A(a).

18 ‘‘(c) ADDITIONAL RESPONSIBILITIES OF ISSUERS.—

19 ‘‘(1) REFUND OF PREMIUMS.—If an application

20 for a long-term care insurance policy (or for a cer21 tificate under a group long-term care insurance pol22 icy) is denied or an applicant returns a policy or cer23 tificate within 30 days of the date of its issuance

24 pursuant to subsection (h), the issuer shall refund to

25 the applicant, not later than 30 days after the date
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1 of the denial or return, any premiums paid with re2 spect to such a policy.

3 ‘‘(2) MAILING OF POLICY.—If an application

4 for a long-term care insurance policy (or for a cer5 tificate under a group long-term care insurance pol6 icy) is approved, the issuer shall transmit to the ap7 plicant the policy (or certificate) of insurance not

8 later than 30 days after the date of the approval.

9 ‘‘(3) INFORMATION ON DENIALS OF CLAIMS.—

10 If a claim under a long-term care insurance policy

11 is denied, the issuer shall, within 60 days of the date

12 of a written request by the policyholder or

13 certificateholder (or representative)—

14 ‘‘(A) provide a written explanation of the

15 reasons for the denial, and

16 ‘‘(B) make available all information di17 rectly relating to such denial.

18 No claim under such a policy may be denied on the

19 basis of a failure to disclose a condition at the time

20 of issuance of the policy if the application for the

21 policy failed to request information respecting the

22 condition.

23 ‘‘(4) REPORTING OF INFORMATION.—The is24 suer of a long-term care insurance policy shall peri25 odically (not less often than annually) report to the
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1 Commissioner or superintendent of insurance of

2 each State in which the policy is sold, and shall

3 make available to the Secretary, upon request, infor4 mation respecting—

5 ‘‘(A) the long-term care insurance policies

6 of the issuer that are in force,

7 ‘‘(B) the most recent premiums for such

8 policies and the premiums imposed for such

9 policies during the previous 5-year period,

10 ‘‘(C) the lapse rates, replacement rates,

11 and rescission rates for policies (by agent), and

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

13 claims submitted) for such policies.

14 Information under this paragraph shall be reported

15 in a format specified in the standards established

16 under subsection (a)(3) to carry out this subsection.

17 For purposes of subparagraph (C), there shall not

18 be included as a lapse of policy such a lapse due to

19 the death of the policyholder. For purposes of sub20 paragraph (D), there shall not be included as a de21 nied claim that is denied solely because of the failure

22 to meet a deductible, waiting period, or exclusionary

23 period.

24 ‘‘(5) ACCESS TO INFORMATION.—Each such is25 suer shall provide the Secretary and the Commis-
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1 sioner or superintendent of insurance of each State

2 in which the policy is sold such information as the

3 Secretary, Commissioner, or superintendent, may re4 quest.

5 ‘‘(6) PROVISION OF OUTLINE OF COVERAGE

6 FOR RENEWALS.—Each issuer of a long-term care

7 insurance policy shall provide, at the time of renewal

8 of such a policy, an outline of coverage that meets

9 the applicable standards established pursuant to this

10 section.

11 ‘‘(7) MEDICAL ASSESSMENTS FOR THE ELDER12 LY.—Before issuing a long-term care insurance pol13 icy to an applicant who is 75 years of age or older,

14 if the policy is not guaranteed issue the issuer shall

15 obtain one of the following:

16 ‘‘(A) A report of a physical examination.

17 ‘‘(B) An assessment of functional capacity.

18 ‘‘(C) Copies of medical records.

19 ‘‘(8) LIMITS ON COMPENSATION FOR SALE OF

20 POLICIES.—

21 ‘‘(A) IN GENERAL.—The issuer of a long22 term care insurance policy may not provide a

23 commission or other compensation to an agent

24 or other representative for the sale of such a

25 policy in an amount that exceeds 200 percent of
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1 the commission or other compensation paid for

2 selling or servicing such a policy in the second

3 or subsequent year.

4 ‘‘(B) COMPENSATION DEFINED.—In sub5 paragraph (A), the term ‘compensation’ in6 cludes pecuniary or nonpecuniary remuneration

7 of any kind relating to the sale or renewal of

8 the policy or certification, including deferred

9 compensation, bonuses, gifts, prizes, awards,

10 and finders fees.

11 ‘‘(9) CIVIL MONEY PENALTY.—Any issuer of a

12 long-term care insurance policy who—

13 ‘‘(A) fails to make a refund in accordance

14 with paragraph (1),

15 ‘‘(B) fails to transmit a policy in accord16 ance with paragraph (2),

17 ‘‘(C) fails to provide, make available, or re18 port information in accordance with paragraph

19 (3), (4), or (5),

20 ‘‘(D) fails to provide an outline of coverage

21 in violation of paragraph (6), or

22 ‘‘(E) issues a policy without obtaining cer23 tain information in violation of paragraph (7),

24 or
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1 ‘‘(F) provides a commission or compensa2 tion in violation of paragraph (8),

3 is subject to a civil money penalty of not to exceed

4 $25,000 for each such violation. The provisions of

5 section 1128A (other than the first sentence of sub6 section (a) and other than subsection (b)) shall

7 apply to a civil money penalty under this paragraph

8 in the same manner as such provisions apply to a

9 penalty or proceeding under section 1128A(a).

10 ‘‘(d) REQUIREMENTS RELATING TO RENEWABIL11 ITY.—

12 ‘‘(1) IN GENERAL.—No long-term care insur13 ance policy may be canceled or nonrenewed for any

14 reason other than nonpayment of premium or mate15 rial misrepresentation.

16 ‘‘(2) CONTINUATION AND CONVERSION RIGHTS

17 FOR GROUP POLICIES.—

18 ‘‘(A) IN GENERAL.—Each group long-term

19 care insurance policy shall provide covered indi20 viduals with a basis for continuation or conver21 sion in accordance with this paragraph.

22 ‘‘(B) BASIS FOR CONTINUATION.—For

23 purposes of subparagraph (A), a policy provides

24 a basis for continuation of coverage if the policy

25 maintains coverage under the existing group
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1 policy when such coverage would otherwise ter2 minate and which is subject only to the contin3 ued timely payment of premium when due. A

4 group policy which restricts provision of bene5 fits and services to or contains incentives to use

6 certain providers or facility, may provide con7 tinuation benefits which are substantially equiv8 alent to the benefits of the existing group pol9 icy.

10 ‘‘(C) BASIS FOR CONVERSION.—For pur11 poses of subparagraph (A), a policy provides a

12 basis for conversion of coverage if the policy en13 titles each individual—

14 ‘‘(i) whose coverage under the group

15 policy would otherwise be terminated for

16 any reason, and

17 ‘‘(ii) who has been continuously in18 sured under the policy (or group policy

19 which was replaced) for at least 6 months

20 before the date of the termination,

21 to issuance of a policy providing benefits iden22 tical to, substantially equivalent to, or in excess

23 of, those of the policy being terminated, without

24 evidence of insurability.
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1 ‘‘(D) TREATMENT OF SUBSTANTIAL

2 EQUIVALENCE.—In determining under this

3 paragraph whether benefits are substantially

4 equivalent, there shall be taken into consider5 ation the difference between managed care and

6 non-managed care plans.

7 ‘‘(E) GROUP REPLACEMENT OF POLI8 CIES.—If a group long-term care insurance pol9 icy is replaced by another long-term care insur10 ance policy purchased by the same policyholder,

11 the succeeding issuer shall offer coverage to all

12 persons covered under the old group policy on

13 its date of termination. Coverage under the new

14 group policy shall not result in any exclusion

15 for preexisting conditions that would have been

16 covered under the group policy being replaced.

17 ‘‘(3) UPGRADE FOR CURRENT POLICIES.—Each

18 long-term care insurance policy in effect as of the ef19 fective date of the standards established under sub20 section (a)(3) shall permit the policyholder to pur21 chase a policy that meets all such standards. In of22 fering such a policy, the issuer may impose addi23 tional underwriting restrictions only for benefits not

24 held under the previously issued policy.

25 ‘‘(e) BENEFIT STANDARDS.—
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1 ‘‘(1) USE OF STANDARD DEFINITIONS AND

2 TERMINOLOGY AND UNIFORM FORMAT.—Each long3 term care insurance policy shall, pursuant to stand4 ards established under subsection (a)(3)—

5 ‘‘(A) use uniform language and definitions,

6 and

7 ‘‘(B) use a uniform format for presenting

8 the outline of coverage under such a policy.

9 ‘‘(2) DISCLOSURE.—

10 ‘‘(A) OUTLINE OF COVERAGE.—The out11 line of coverage for each long-term care insur12 ance policy shall include at least the following:

13 ‘‘(i) A description of the principal

14 benefits and coverage under the policy.

15 ‘‘(ii) A statement of the principal ex16 clusions, reductions, and limitations con17 tained in the policy.

18 ‘‘(iii) A statement of the terms under

19 which the policy (or certificate) may be

20 continued in force or discontinued, the

21 terms for continuation or conversion, and

22 any reservation in the policy of a right to

23 change premiums.

24 ‘‘(iv) A statement that the outline of

25 coverage is a summary only, not a contract
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1 of insurance, and that the policy (or mas2 ter policy) contains the contractual provi3 sions that govern.

4 ‘‘(v) A statement of the value of the

5 policy (determined in accordance with

6 standard established to carry out this sub7 paragraph).

8 ‘‘(vi) A description of the terms, speci9 fied in subsection (h), under which a policy

10 or certificate may be returned and pre11 mium refunded.

12 ‘‘(vii) Information on national average

13 costs for nursing facility and home health

14 care and information (in graphic form) on

15 the relationship of the value of the benefits

16 provided under the policy to such national

17 average costs.

18 ‘‘(viii) A statement of the percentage

19 limit on annual premium increases that is

20 provided under the policy pursuant to

21 paragraph (8).

22 ‘‘(ix) Information (in graphic form)

23 on the projected effect of inflation on the

24 value of benefits provided under the policy

25 during a period of at least 20 years.
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1 ‘‘(B) CERTIFICATES.—A certificate issued

2 pursuant to a group long-term care insurance

3 policy shall include—

4 ‘‘(i) a description of the principal ben5 efits and coverage provided in the policy;

6 ‘‘(ii) a statement of the principal ex7 clusions, reductions, and limitations con8 tained in the policy; and

9 ‘‘(iii) A statement that the group mas10 ter policy determines governing contractual

11 provisions.

12 ‘‘(C) LONG-TERM CARE AS PART OF LIFE

13 INSURANCE.—In the case of a long-term care

14 insurance policy issued as a part of or a rider

15 on a life insurance policy, at the time of policy

16 delivery there shall be provided a policy sum17 mary that includes—

18 ‘‘(i) an explanation of how the long19 term care benefits interact with other com20 ponents of the policy (including deductions

21 from death benefits);

22 ‘‘(ii) an illustration of the amount of

23 benefits, the length of benefit, and the

24 guaranteed lifetime benefits (if any) for

25 each covered person; and
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1 ‘‘(iii) any exclusions, reductions, and

2 limitations on benefits of long-term care.

3 ‘‘(3) LIMITING CONDITIONS ON BENEFITS; MIN4 IMUM BENEFITS.—

5 ‘‘(A) IN GENERAL.—A long-term care in6 surance policy may not condition or limit eligi7 bility—

8 ‘‘(i) for benefits for a type of services

9 to the need for or receipt of any other

10 services,

11 ‘‘(ii) for any noninstitutional benefit

12 on the medical necessity for such benefit,

13 ‘‘(iii) for benefits furnished by li14 censed providers on compliance with condi15 tions which are in addition to those re16 quired for licensure under State law, or

17 ‘‘(iv) for custodial care (if covered

18 under the policy) only (I) to care provided

19 in facilities which provide a higher level of

20 care or (II) to care provided in facilities

21 which provide for 24-hour or other nursing

22 care not required in order to be licensed by

23 the State.
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1 ‘‘(B) HOME HEALTH CARE SERVICES.—If

2 a long-term care insurance policy provides bene3 fits for home health care services, the policy—

4 ‘‘(i) may not limit such benefits to

5 services provided by registered nurses or li6 censed practical nurses;

7 ‘‘(ii) may not require benefits for such

8 services to be provided by a nurse or thera9 pist that can be provided by a home health

10 aide or other licensed or certified home

11 care worker acting within the scope of the

12 worker’s licensure or certification;

13 ‘‘(iii) may not limit such benefits to

14 services provided by agencies or providers

15 certified under title XVIII; and

16 ‘‘(iv) must provide benefits for custo17 dial care, personal care services (including

18 home health aide and homemaker services),

19 home health services, and respite care in

20 an individual’s home.

21 ‘‘(C) NURSING FACILITY SERVICES.—If a

22 long-term care insurance policy provides bene23 fits for nursing facility services, the policy must

24 provide such benefits with respect to all nursing
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1 facilities (as defined in section 1919(a)) in the

2 State.

3 ‘‘(D) MINIMUM PERIOD OF COVERAGE.—

4 Each long-term care insurance policy shall pro5 vide benefits over a period of at least 12 con6 secutive months.

7 ‘‘(4) PROHIBITION OF DISCRIMINATION.—A

8 long-term care insurance policy may not treat bene9 fits under the policy in the case of an individual with

10 Alzheimer’s disease, with any related progressive de11 generative dementia of an organic origin, or with

12 any organic or inorganic mental illness differently

13 from an individual having another medical condition

14 for which benefits may be made available.

15 ‘‘(5) LIMITATION ON USE OF PREEXISTING

16 CONDITION LIMITS.—

17 ‘‘(A) INITIAL ISSUANCE.—

18 ‘‘(i) IN GENERAL.—Subject to clause

19 (ii), a long-term care insurance policy may

20 not exclude or condition benefits based on

21 a medical condition for which the policy22 holder received treatment or was otherwise

23 diagnosed before the issuance of the policy.

24 ‘‘(ii) 6-MONTH LIMIT.—A long-term

25 care insurance policy may exclude benefits
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1 under a policy, during its first 6 months,

2 based on a condition for which the policy3 holder received treatment or was otherwise

4 diagnosed during the 6 months before the

5 policy became effective.

6 ‘‘(B) REPLACEMENT POLICIES.—If a long7 term care insurance policy replaces another

8 long-term care insurance policy, the issuer of

9 the replacing policy shall waive any time periods

10 applicable to preexisting conditions, waiting pe11 riod, elimination periods and probationary peri12 ods in the new policy for similar benefits to the

13 extent such time was spent under the original

14 policy.

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

16 ‘‘(A) IN GENERAL.—Each long-term care

17 insurance policy—

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

19 level of, benefits (other than for nursing

20 facility services) available under the policy

21 based on a professional assessment of the

22 policyholder’s functional ability, and

23 ‘‘(ii) shall specify the level (or levels)

24 of functional impairment required under

25 such an assessment to obtain benefits
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1 other than for nursing facility services)

2 under the policy.

3 Such assessment may not be conducted by an

4 individual who has a direct or indirect owner5 ship or control interest, or direct or indirect af6 filiation or relationship with, the issuer of the

7 policy or an entity that provides services for

8 which benefits are available under the long-term

9 care insurance policy.

10 ‘‘(B) APPEALS PROCESS.—Each long-term

11 care insurance policy shall provide for an ap12 peals process, meeting standards established

13 under this subsection, for individuals who dis14 pute the results of an assessment conducted

15 under this paragraph.

16 ‘‘(7) INFLATION PROTECTION.—Each long-term

17 care insurance policy shall provide, at the time of

18 each annual renewal, for an increase of a specified

19 percentage (but not less than 5 percent) in the dol20 lar payment levels and the maximum payment limit

21 on benefit coverage above the levels or limit in effect

22 during the previous policy year. In applying this

23 paragraph, the increases shall be compounded annu24 ally and the policy may provide for rounding such an

25 increase to the nearest multiple of $1 (in the case
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1 of dollar payment levels) or $100 (in the case of the

2 maximum payment limit).

3 ‘‘(8) SPECIFICATION OF LIMITS ON PREMIUM

4 INCREASES.—Each long-term care insurance policy

5 shall specify a limit on the percentage increase in

6 premiums for a policy that may be made in any be7 tween one policy year and the subsequent policy

8 year.

9 ‘‘(f) NONFORFEITURE.—

10 ‘‘(1) IN GENERAL.—Each long-term care insur11 ance policy shall provide that if the policy lapses

12 after the policy has been in effect for a minimum pe13 riod (specified under the standards under subsection

14 (a)(3)), the policy will provide without payment of

15 any additional premiums benefits equal to—

16 ‘‘(A) a percentage (specified under such

17 standards) of the benefits otherwise available at

18 term, or

19 ‘‘(B) such other type of benefits as such

20 standards may provide.

21 ‘‘(2) ESTABLISHMENT OF STANDARDS.—The

22 standards under subsection (a)(3)—

23 ‘‘(A) may not provide more than 2 addi24 tional types of benefits under paragraph (1)(B),

25 and
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1 ‘‘(B) may provide that the percentage or

2 amount of benefits under paragraph (1) must

3 increase based upon the period of time in which

4 the policy was in effect.

5 ‘‘(g) LIMIT OF PERIOD OF CONTESTABILITY.—The

6 issuer of a long-term care insurance policy may not cancel

7 such a policy or deny a claim under the policy based on

8 fraud or misrepresentation relating to the issuance of the

9 policy unless notice of such fraud or misrepresentation is

10 provided within 6 months after the date of the issuance

11 of the policy.

12 ‘‘(h) RIGHT TO RETURN (FREE LOOK).—Each appli13 cant for a long-term care insurance policy shall have the

14 right to return the policy (or certificate) within 30 days

15 of the date of its delivery (and to have the premium re16 funded) if, after examination of the policy or certificate,

17 the applicant is not satisfied for any reason.

18 ‘‘(i) LONG-TERM CARE INSURANCE POLICY DE19 FINED.—

20 ‘‘(1) IN GENERAL.—In this section, except as

21 otherwise provided in this subsection, the term ‘long22 term care insurance policy’ means any insurance pol23 icy, certificate, or rider advertised, marketed, of24 fered, or designed to provide coverage for each cov25 ered person on an expense incurred, indemnity, pre-
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1 paid, or other basis, for one or more diagnostic, pre2 ventive, therapeutic, rehabilitative, maintenance or

3 personal care services, provided in a setting other

4 than an acute care unit of a hospital. Such term in5 cludes a group or individual annuity or life insur6 ance policy or rider which provides directly (or which

7 supplements) long-term care insurance.

8 ‘‘(2) POLICIES EXCLUDED.—Except as provided

9 in paragraph (4), the term ‘long-term care insurance

10 policy’ does not include any medicare supplemental

11 policy (as defined in section 1882(g)) and any insur12 ance which is offered primarily to provide—

13 ‘‘(A) basic hospital expense coverage, basic

14 medical-surgical expense coverage, hospital con15 finement indemnity coverage, or major medical

16 expense coverage,

17 ‘‘(B) disability income or related asset-pro18 tection coverage,

19 ‘‘(C) accident only coverage,

20 ‘‘(D) specified disease or specified accident

21 coverage, or

22 ‘‘(E) limited benefit health coverage.

23 ‘‘(3) TREATMENT OF CERTAIN LIFE INSURANCE

24 POLICIES.—Except as provided in paragraph (4), the
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1 term ‘long-term care insurance policy’ does not in2 clude life insurance policies—

3 ‘‘(A) which accelerate the death benefit

4 specifically for—

5 ‘‘(i) one or more of the qualifying

6 events of terminal illness,

7 ‘‘(ii) medical conditions requiring ex8 traordinary medical intervention, or

9 ‘‘(iii) permanent institutional confine10 ment;

11 ‘‘(B) which provide the option of a lump12 sum payment for those benefits; and

13 ‘‘(C) in which neither the benefits nor the

14 eligibility for the benefits is conditioned upon

15 the receipt of long-term care.

16 ‘‘(4) INCLUSION OF POLICIES MARKETED AS

17 LONG-TERM CARE INSURANCE.—The term ‘long18 term care insurance policy’ also means any product

19 which is advertised, marketed, or offered as long20 term care insurance.’’.

21 (b) STATE MEDICAID REQUIREMENT FOR REGU22 LATORY PROGRAM.—Section 1902(a) of the Social Secu23 rity Act (42 U.S.C. 1396(a)) is amended—

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

25 (54);
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1 (2) in the paragraph (55) inserted by section

2 4602(a)(3) of the Omnibus Budget Reconciliation

3 Act of 1990, by striking the period at the end and

4 inserting a semicolon;

5 (3) by redesignating the paragraph (55) in6 serted by section 4604(b)(3) of the Omnibus Budget

7 Reconciliation Act of 1990 as paragraph (56), by

8 transferring and inserting it after the paragraph

9 (55) inserted by section 4602(a)(3) of such Act, and

10 by striking the period at the end and inserting a

11 semicolon;

12 (4) by placing paragraphs (57) and (58), in13 serted by section 4751(a)(1)(C) of the Omnibus

14 Budget Reconciliation Act of 1990, immediately

15 after paragraph (56), as redesignated by paragraph

16 (3);

17 (5) in the paragraph (58) inserted by section

18 4751(a)(1)(C) of the Omnibus Budget Reconciliation

19 Act of 1990, by striking the period at the end and

20 inserting a semicolon;

21 (6) by redesignating the paragraph (58) in22 serted by section 4752(c)(1)(C) of the Omnibus

23 Budget Reconciliation Act of 1990 as paragraph

24 (59), by transferring and inserting it after the para25 graph (58) inserted by section 4751(a)(1)(C) of such
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1 Act, and by striking the period at the end and in2 serting ‘‘; and’’; and

3 (7) by inserting after paragraph (59), as so re4 designated, the following new paragraph:

5 ‘‘(60) establish, by the date specified in section

6 1931(a)(4), a State regulatory program, that meets

7 the requirements of section 1931(a)(1)(A)(i).’’.

8 (c) DENIAL OF MEDICAID FUNDS FOR FAILURE TO

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

10 the Social Security Act (42 U.S.C. 1396b(i)) is amend11 ed—

12 (1) in paragraph (10), by striking all that fol13 lows ‘‘1927(g)’’ and inserting a semicolon;

14 (2) in paragraph (12) by striking the period at

15 the end and inserting a semicolon;

16 (3) by redesignating the paragraph (14) in17 serted by section 4752(e) of the Omnibus Budget

18 Reconciliation Act of 1990 as paragraph (13), and

19 by striking the period at the end and inserting

20 ‘‘; or’’; and

21 (4) by inserting after paragraph (13), as so re22 designated, the following new paragraph.

23 ‘‘(14) with respect to any amount expended for

24 medical assistance for nursing facility services (fur25 nished on and after the date specified in section
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1 1931(a)(4)) during such period as the state has

2 failed to establish and maintain a regulatory pro3 gram that meets the requirements of section

4 1931(a)(1)(A)(i).’’.

5 (d) REPORT ON ASSESSMENT METHODS FOR FUNC6 TIONAL ABILITY.—Within 2 years after the date of the

7 enactment of this Act, the Secretary of Health and

8 Human Services shall submit to Congress a report on the

9 different methods that may be used to conduct assess10 ments of functional ability described in section

11 1931(e)(6)(A) of the Social Security Act (including the

12 methods used under section 1929(c) of such Act) and the

13 relative effectiveness of each of such methods.

14 (e) REPORT ON SOLVENCY PROTECTION.—Within 2

15 years after the date of the enactment of this Act, the Sec16 retary of Health and Human Services shall submit to Con17 gress a report on standards that may be applied to assure

18 the solvency of insurers with respect to long-term care in19 surance policies.

20 (f) STUDY OF STANDARD MEASURE OF VALUE FOR

21 LONG-TERM CARE INSURANCE POLICIES.—The Secretary

22 of Health and Human Services shall provide for a study

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

24 insurance policies. Within 2 years after the date of the
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1 enactment of this Act, the Secretary shall submit to Con2 gress a report on such study.

3 SEC. 3. FUNDING FOR LONG-TERM CARE INSURANCE IN4 FORMATION, COUNSELING, AND ASSISTANCE.

5 There are authorized to be appropriated to provide

6 information, counseling, and assistance relating to the

7 procurement of adequate and appropriate long-term care

8 insurance, $20,000,000 for each of fiscal years 1995,

9 1996, and 1997.

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