II

104TH CONGRESS

2D SESSION S. 1658

To amend the Internal Revenue Code of 1986 to provide improved access

to quality long-term care services and to provide incentives for the

purchase of long-term care insurance, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 29, 1996

Mr. MCCONNELL introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

improved access to quality long-term care services and

to provide incentives for the purchase of long-term care

insurance, 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; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Family Choice in Long-Term Care Act’’.

6 (b) TABLE OF CONTENTS.—The table of contents is

7 as follows:

Sec. 1. Short title; table of contents.

TITLE I—TAX TREATMENT OF LONG-TERM CARE INSURANCE
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Sec. 101. Treatment of long-term care insurance or plans.

Sec. 102. Qualified long-term services as medical care.

Sec. 103. Qualified long-term care insurance contracts to be offered in cafeteria

plans.

Sec. 104. Inclusion in income of excessive long-term care benefits.

Sec. 105. Tax reserves for qualified long-term care insurance contracts.

Sec. 106. Certain exchanges of life insurance contracts for long-term care insurance contracts not taxable.

Sec. 107. Treatment of accelerated death benefits by recipient.

Sec. 108. Tax treatment of companies issuing qualified accelerated death benefit riders.

Sec. 109. Exclusion from gross income for amounts withdrawn from individual

retirement plans or 401(k) plans for long-term care insurance.

Sec. 110. Effective date.

TITLE II—LONG-TERM CARE INSURANCE STANDARDS

Sec. 200. Short title.

Sec. 201. National Long-Term Care Insurance Advisory Council.

Sec. 202. Policy requirements.

Sec. 203. Additional requirements for issuers of long-term care insurance policies.

Sec. 204. Relation to State Law.

Sec. 205. Uniform language and definitions.

Sec. 206. Consumer access to compliance.

Sec. 207. Effective dates.

TITLE III—PREVENTIVE HEALTH PRACTICES PROMOTION

Sec. 301. Distribution of information on recommended preventive health practices.

1 TITLE I—TAX TREATMENT OF

2 LONG-TERM CARE INSURANCE

3 SEC. 101. TREATMENT OF LONG-TERM CARE INSURANCE

4 OR PLANS.

5 (a) IN GENERAL.—Chapter 79 of the Internal Reve6 nue Code of 1986 (relating to definitions) is amended by

7 inserting after section 7702A the following new section:

8 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE

9 OR PLANS.

10 ‘‘(a) GENERAL RULE.—For purposes of this title—
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1 ‘‘(1) a qualified long-term care insurance con2 tract (as defined in subsection (b)) shall be treated

3 as an accident or health insurance contract,

4 ‘‘(2) any plan of an employer providing cov5 erage of qualified long-term care services shall be

6 treated as an accident or health plan with respect to

7 such services,

8 ‘‘(3) amounts received under such a contract or

9 plan with respect to qualified long-term care serv10 ices, including payments described in subsection

11 (b)(2)(A), shall be treated—

12 ‘‘(A) as amounts received for personal in13 juries or sickness, and

14 ‘‘(B) for purposes of section 105(c), as

15 amounts received for the permanent loss of a

16 function of the body, and as amounts computed

17 with reference to the nature of the injury, and

18 ‘‘(4) payments described in subsection (b)(2)(A)

19 shall be treated as payments made with respect to

20 qualified long-term care services.

21 Paragraph (3)(B) shall not apply in the case of amounts

22 attributable to (and not in excess of) deductions permitted

23 under section 213 (relating to medical and other expenses)

24 for any prior taxable year and also shall not apply for pur25 poses of section 105(f).
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1 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE

2 CONTRACT.—

3 ‘‘(1) IN GENERAL.—For purposes of this title,

4 the term ‘qualified long-term care insurance con5 tract’ means any insurance contract if—

6 ‘‘(A) the only insurance protection pro7 vided under such contract is coverage of quali8 fied long-term care services and benefits inci9 dental to such coverage;

10 ‘‘(B) such contract does not cover expenses

11 incurred for services or items to the extent that

12 such expenses are reimbursable under title

13 XVIII of the Social Security Act or would be so

14 reimbursable but for the application of a de15 ductible or coinsurance amount;

16 ‘‘(C) such contract or coverage is guaran17 teed renewable, or in the case of a group certifi18 cate, provides the insured individual with a

19 basis for continuation or conversion of coverage,

20 ‘‘(D) such contract does not have any cash

21 surrender value, and

22 ‘‘(E) all refunds of premiums, and all pol23 icyholder dividends or other amounts, under

24 such contract are to be applied as a reduction
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1 in future premiums or to increase future bene2 fits.

3 ‘‘(2) SPECIAL RULES.—

4 ‘‘(A) PER DIEM AND OTHER PAYMENTS

5 PERMITTED.—A contract that meets the re6 quirements of paragraph (1) shall be considered

7 to be a qualified long-term care insurance con8 tract regardless of whether payments under

9 such contract are being made on a per diem or

10 other periodic basis without regard to the ex11 penses incurred during the period to which the

12 payments relate.

13 ‘‘(B) REFUNDS OF PREMIUMS.—With re14 spect to a qualified long-term care insurance

15 contract, paragraph (1)(D) shall not apply to

16 any refund of premiums on surrender, cancella17 tion of the contract, or death of the policy18 holder.

19 ‘‘(C) CONTRACT MAY COVER MEDICARE

20 REIMBURSABLE EXPENSES WHERE MEDICARE

21 IS SECONDARY PAYOR.—With respect to a long22 term care insurance contract, paragraph (1)(B)

23 shall not apply to expenses which are reimburs24 able under title XVIII of the Social Security

25 Act only as a secondary payor.
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1 ‘‘(D) COORDINATION WITH OTHER

2 LAWS.—Nothing in this or any other Act shall

3 be construed or applied so as to prohibit the of4 fering of a qualified long-term care insurance

5 contract on the basis that such contract coordi6 nates benefits under the contract with those

7 provided under title XVIII of the Social Secu8 rity Act.

9 ‘‘(3) TREATMENT OF COVERAGE PROVIDED AS

10 PART OF A LIFE INSURANCE CONTRACT.—Except as

11 otherwise provided in regulations, in the case of cov12 erage with respect to qualified long-term care serv13 ices provided as part of a life insurance contract the

14 following rules shall apply:

15 ‘‘(A) APPLICATION OF GENERAL REQUIRE16 MENTS.—The requirements of this section shall

17 apply as if the portion of the contract providing

18 such long-term care services coverage was a

19 separate contract.

20 ‘‘(B) PREMIUMS AND CHARGES FOR

21 QUALIFIED LONG-TERM CARE COVERAGE.—Pre22 miums for coverage of qualified long-term care

23 services and charges against the life insurance

24 contract’s cash surrender value (within the

25 meaning of section 7702(f)(2)(A)) for such cov-
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1 erage shall be treated as premiums under a

2 qualified long-term care insurance contract.

3 ‘‘(C) APPLICATION OF SECTION 7702.—

4 Subsection (c)(2) of section 7702 (relating to

5 the guideline premium limitation) shall be ap6 plied, as of any date, by increasing the guide7 line premium limitation with respect to the life

8 insurance contract by an amount equal to—

9 ‘‘(i) by the sum of any charges (but

10 not premiums) described in subparagraph

11 (B) assessed to that date under the con12 tract, less

13 ‘‘(ii) any such charges the imposition

14 of which reduces the premiums paid for

15 the contract (within the meaning of section

16 7702(f)(1)).

17 ‘‘(D) APPLICATION OF SECTION

18 72(e)(4)(B).—Subsection (e)(4)(B) of section 72

19 (relating to certain amounts retained by the in20 surer) shall be applied as including charges de21 scribed in subparagraph (B).

22 ‘‘(E) APPLICATION OF SECTION 213.—No

23 deduction shall be allowed under subsection (a)

24 of section 213 for premiums and charges de25 scribed in subparagraph (B).
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1 For purposes of subparagraph (A), the term ‘por2 tion’ means only the terms and benefits under a life

3 insurance contract (whether provided by a rider or

4 addendum on, or other provision of, such contract)

5 that are in addition to the terms and benefits under

6 the contract without regard to the coverage of quali7 fied long-term care services and benefits incidental

8 to such coverage.

9 ‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For

10 purposes of this section:

11 ‘‘(1) IN GENERAL.—The term ‘qualified long12 term care services’ means necessary diagnostic, pre13 ventive, therapeutic, and rehabilitative services, and

14 maintenance or personal care services, which—

15 ‘‘(A) are required by an ill individual in a

16 qualified facility,

17 ‘‘(B) are provided pursuant to a plan of

18 care prescribed by a licensed health care practi19 tioner, or

20 ‘‘(C) are required by law or regulation.

21 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

22 ‘‘(A) IN GENERAL.—The term ‘chronically

23 ill individual’ means any individual who has

24 been certified by a licensed health care practi25 tioner as—
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1 ‘‘(i)(I) being unable to perform (with2 out substantial assistance from another in3 dividual) at least two activities of daily liv4 ing (as defined in subparagraph (B)), due

5 to a loss of functional capacity, or

6 ‘‘(II) having a level of disability simi7 lar (as determined by the Secretary in con8 sultation with the Secretary of Health and

9 Human Services) to the level of disability

10 described in subclause (I), or

11 ‘‘(ii) having a similar level of disabil12 ity due to cognitive impairment.

13 ‘‘(B) ACTIVITIES OF DAILY LIVING.—For

14 purposes of subparagraph (A), each of the fol15 lowing is an activity of daily living:

16 ‘‘(i) BATHING.—The overall complex

17 behavior of getting water and cleansing the

18 whole body, including turning on the water

19 for a bath, shower, or sponge bath, getting

20 to, in, and out of a tub or shower, and

21 washing and drying oneself.

22 ‘‘(ii) DRESSING.—The overall complex

23 behavior of getting clothes from closets

24 and drawers and then getting dressed.
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1 ‘‘(iii) TOILETING.—The act of going

2 to the toilet room for bowel and bladder

3 function, transferring on and off the toilet,

4 cleaning after elimination, and arranging

5 clothes.

6 ‘‘(iv) TRANSFER.—The process of get7 ting in and out of bed or in and out of a

8 chair or wheelchair.

9 ‘‘(v) EATING.—The process of getting

10 food from a plate or its equivalent into the

11 mouth.

12 ‘‘(vi) CONTINENCE.—The ability to

13 voluntarily control bowel and bladder func14 tion and to maintain a reasonable level of

15 personal hygiene.

16 ‘‘(vii) STATE REQUIRED.—Any other

17 activity of daily living as required by State

18 law or regulation which is not preempted

19 by Federal law or regulation.

20 ‘‘(C) NUMBER OF ACTIVITIES OF DAILY

21 LIVING.—A qualified long-term care insurance

22 contract may utilize fewer than the number of

23 activities of daily living described in subpara24 graph (B).
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1 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali2 fied facility’ means—

3 ‘‘(A) a nursing, rehabilitative, hospice,

4 service, or adult day care facility (including a

5 hospital, retirement home, nursing home, skilled

6 nursing facility, intermediate care facility, or

7 similar institution)—

8 ‘‘(i) which is licensed under State law,

9 or

10 ‘‘(ii) which is a certified facility for

11 purposes of title XVIII or XIX of the So12 cial Security Act, or

13 ‘‘(B) an individual’s home if a physician,

14 certifies that without home care the individual

15 would have to be cared for in a facility de16 scribed in subparagraph (A), except that such

17 home shall be treated as a qualified facility only

18 to the extent that the cost of such services is

19 not greater than the cost of similar services

20 provided in a facility described in subparagraph

21 (A).

22 ‘‘(4) MAINTENANCE OF PERSONAL CARE SERV23 ICES.—The term ‘maintenance of personal care serv24 ices’ means any care the primary purpose of which

25 is to provide needed assistance with any of the ac-
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1 tivities of daily living described in paragraph (2)(B).

2 Such term may include such services as adult day

3 care, homemaker and chore services, hospice serv4 ices, respite care, and services required by law or

5 regulation.

6 ‘‘(5) LICENSED HEALTH CARE PRACTI7 TIONER.—The term ‘licensed health care practi8 tioner’ means any physician (as defined in section

9 1861(r) of the Social Security Act) and any reg10 istered professional nurse, licensed social worker, or

11 other individual who meets such requirements as

12 may be prescribed by the Secretary.

13 ‘‘(d) SPECIAL RULES.—

14 ‘‘(1) CONTINUATION RULES NOT TO APPLY.—

15 The health care continuation rules contained in sec16 tion 4980B (and contained in part 6 of subtitle B

17 of title I of the Employee Retirement Income Secu18 rity Act of 1974 and in title XXII of the Public

19 Health Insurance Act) shall not apply to—

20 ‘‘(A) qualified long-term care insurance

21 contracts, or

22 ‘‘(B) plans described in subsection (a)(2).

23 ‘‘(2) EMPLOYER PLANS NOT TREATED AS DE24 FERRED COMPENSATION PLANS.—For purposes of

25 this title, a plan of an employer providing coverage
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1 of qualified long-term care services shall not be

2 treated as a plan which provides for deferred com3 pensation by reason of providing such coverage.

4 ‘‘(3) CONTRACTS COVERING PARENTS AND

5 GRANDPARENTS.—For purposes of this title, if a

6 qualified long-term care insurance contract pur7 chased by or provided to an individual provides cov8 erage with respect to one or more of the individual’s

9 parents or grandparents (or, in the case of a joint

10 return, of either spouse), such coverage and all pay11 ments made pursuant to such coverage shall be

12 treated in the same manner as if the parents or

13 grandparents were dependents (as defined in section

14 152) of the individual. For purposes of this para15 graph, the term ‘parent’ includes any stepmother or

16 stepfather, and the term ‘grandparent’ includes any

17 stepgrandfather or stepgrandmother, and any rela18 tionship that exists by virtue of a legal adoption

19 shall be recognized to the same extent as relation20 ships by blood.

21 ‘‘(4) WELFARE BENEFIT RULES NOT TO

22 APPLY.—For purposes of subpart D of part I of

23 subchapter D of chapter 1 (relating to treatment of

24 welfare benefit funds), qualified long-term care serv-
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1 ices shall not be treated as a welfare benefit or a

2 medical benefit.

3 ‘‘(5) DEDUCTIBILITY.—For purposes of this

4 title, no payment of a premium for a long-term care

5 insurance contract shall fail to be deductible in

6 whole or in part merely because the contract pro7 vides for level annual payments.

8 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

9 such regulations as may be necessary to carry out the re10 quirements of this section, including regulations to prevent

11 the avoidance of this section by providing qualified long12 term care services under a life insurance contract.’’

13 (b) CONFORMING AMENDMENT.—The table of sec14 tions for chapter 79 of such Code is amended by inserting

15 after the item relating to section 7702A the following new

16 item:

‘‘Sec. 7702B. Treatment of long-term care insurance or plans.’’

17 SEC. 102. QUALIFIED LONG-TERM SERVICES TREATED AS

18 MEDICAL CARE.

19 (a) GENERAL RULE.—Paragraph (1) of section

20 213(d) of the Internal Revenue Code of 1986 (defining

21 medical care) is amended—

22 (1) by striking ‘‘or’’ at the end of subparagraph

23 (B);

24 (2) by redesignating subparagraph (C) as sub25 paragraph (D); and
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1 (3) by inserting after subparagraph (B) the fol2 lowing new subparagraph:

3 ‘‘(C) for qualified long-term care services

4 (as defined in section 7702B(c)), or’’.

5 (b) CONFORMING AMENDMENTS.—

6 (1) Subparagraph (D) of section 213(d)(1) of

7 such Code (as redesignated by subsection (a)) is

8 amended by striking ‘‘subparagraphs (A) and (B)’’

9 and inserting ‘‘subparagraphs (A), (B), and (C)’’.

10 (2) Paragraph (6) of section 213(d) of such

11 Code is amended—

12 (A) in the matter preceding subparagraph

13 (A), by striking ‘‘subparagraphs (A) and (B)’’

14 and inserting ‘‘subparagraphs (A), (B), and

15 (C)’’; and

16 (B) in subparagraph (A) by striking

17 ‘‘paragraph (1)(C)’’ and inserting ‘‘paragraph

18 (1)(D)’’.

19 (3) Paragraph (7) of section 213(d) of such

20 Code is amended by striking ‘‘subparagraphs (A)

21 and (B)’’ and inserting ‘‘subparagraphs (A), (B),

22 and (C)’’.
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1 SEC. 103. QUALIFIED LONG-TERM CARE INSURANCE CON2 TRACTS PERMITTED TO BE OFFERED IN CAF3 ETERIA PLANS.

4 Paragraph (2) of section 125(d) of the Internal Reve5 nue Code of 1986 (relating to the exclusion of deferred

6 compensation) is amended by adding at the end thereof

7 the following new subparagraph:

8 ‘‘(D) EXCEPTION FOR LONG-TERM CARE

9 INSURANCE CONTRACTS.—For purposes of sub10 paragraph (A), a plan shall not be treated as

11 providing deferred compensation by reason of

12 providing any long-term care insurance contract

13 (as defined in section 7702B(b)) if—

14 ‘‘(i) the employee may elect to con15 tinue the insurance upon cessation of par16 ticipation in the plan, and

17 ‘‘(ii) the amount paid or incurred dur18 ing any taxable year for such insurance

19 does not exceed the premium which would

20 have been payable for such year under a

21 level premium structure.’’

22 SEC. 104. INCLUSION IN INCOME OF EXCESSIVE LONG23 TERM CARE BENEFITS.

24 (a) IN GENERAL.—Part II of subchapter B of chap25 ter 1 of the Internal Revenue Code of 1986 (relating to
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1 items specifically included in gross income) is amended by

2 adding at the end thereof the following new section:

3 ‘‘SEC. 91. EXCESSIVE LONG-TERM CARE BENEFITS.

4 ‘‘(a) GENERAL RULE.—Gross income for the taxable

5 year of any individual includes excessive long-term care

6 benefits received by or for the benefit of such individual

7 during the taxable year.

8 ‘‘(b) EXCESSIVE LONG-TERM CARE BENEFITS.—

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, the term ‘excessive long-term care benefits’

11 means the excess (if any) of—

12 ‘‘(A) the aggregate amount from all poli13 cies which is not includable in the gross income

14 of the individual for the taxable year by reason

15 of the amendments made by the Family Choice

16 in Long-Term Care Act; and

17 ‘‘(B) the aggregate of $200 for each day

18 during the taxable year that such individual—

19 ‘‘(i) was a chronically ill individual (as

20 defined in section 7702B(c)(2)), and

21 ‘‘(ii) was confined to a qualified facil22 ity (as defined in section 7702B(c)(3)).

23 ‘‘(2) INFLATION ADJUSTMENT.—In the case of

24 any taxable year beginning after 1996, the amount
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1 described in paragraph (1)(B) shall be equal to the

2 sum of—

3 ‘‘(A) the amount in effect under paragraph

4 (1)(B) for the preceding calendar year (after

5 application of this subparagraph), plus

6 ‘‘(B) the product of the amount referred to

7 in subparagraph (A) multiplied by the cost-of8 living adjustment for the calendar year under

9 paragraph (3).

10 ‘‘(3) COST-OF-LIVING ADJUSTMENT.—For pur11 poses of paragraph (2), the cost-of-living adjustment

12 for any calendar year is the percentage (if any) by

13 which the cost index under paragraph (4) for the

14 preceding calendar year exceeds such index for the

15 second preceding calendar year.

16 ‘‘(4) COST INDEX.—The Secretary, in consulta17 tion with the Secretary of Health and Human Serv18 ices, shall before January 1, 1997, establish a cost

19 index to measure increases in the cost of nursing

20 home and similar facilities. The Secretary may from

21 time to time revise such index to the extent nec22 essary to accurately measure any increase or de23 creases in such costs.

24 ‘‘(5) ROUNDING.—If any dollar amount deter25 mined under this subsection is not a multiple of $10,
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1 such dollar amount shall be rounded to the nearest

2 multiple of $10 (or, if such dollar amount is a mul3 tiple of $5, such dollar amount shall be increased to

4 the next higher multiple of $10).

5 ‘‘(6) COMPUTATION OF DAILY AMOUNT.—For

6 purposes of this section, the aggregate for each day

7 may be determined by using an average daily

8 amount for the month, computed by dividing the

9 amount of benefits for the month by the number of

10 days in the month.’’

11 (b) CLERICAL AMENDMENT.—The table of sections

12 for such part II of subchapter B of chapter 1 of such Code

13 is amended by adding at the end the following new item:

‘‘Sec. 91. Excessive long-term care benefits.

14 SEC. 105. TAX RESERVES FOR QUALIFIED LONG-TERM

15 CARE INSURANCE CONTRACTS.

16 (a) IN GENERAL.—Subparagraph (A) of section

17 807(d)(3) of the Internal Revenue Code of 1986 (relating

18 to tax reserve methods) is amended—

19 (1) by redesignating clause (iv) as clause (v);

20 and

21 (2) by inserting after clause (iii) the following

22 new clause:

23 ‘‘(iv) QUALIFIED LONG-TERM CARE

24 INSURANCE CONTRACTS.—In the case of
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1 any qualified long-term care insurance con2 tract (as defined in section 7702B(b))—

3 ‘‘(I) the reserve method pre4 scribed by the National Association of

5 Insurance Commissioners which cov6 ers such contract (as of the date of is7 suance), or

8 ‘‘(II) if no reserve method has

9 been prescribed by the National Asso10 ciation of Insurance Commissioners

11 which covers such contract, a 1-year

12 full preliminary term method.’’

13 (b) CONFORMING AMENDMENTS.—

14 (1) Clause (iii) of section 807(d)(3)(A) of such

15 Code is amended by striking ‘‘noncancellable acci16 dent and health insurance contract,’’ and inserting

17 ‘‘noncancellable accident and health insurance con18 tract (other than qualified long-term care insurance

19 contracts (as defined in section 7702B(b)),’’.

20 (2) Clause (v) of section 807(d)(3)(A) of such

21 Code (as redesignated by subsection (a)) is amended

22 by striking ‘‘or (iii)’’ each place that such appears

23 and inserting ‘‘(iii), or (iv)’’.
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1 SEC. 106. CERTAIN EXCHANGES OF LIFE INSURANCE CON2 TRACTS FOR LONG-TERM CARE INSURANCE

3 CONTRACTS NOT TAXABLE.

4 Subsection (a) of section 1035 of the Internal Reve5 nue Code of 1986 (relating to certain exchanges of insur6 ance contracts) is amended by striking the period at the

7 end of paragraph (3) and inserting ‘‘; or’’, and by adding

8 at the end thereof the following new paragraph:

9 ‘‘(4) a contract of life insurance or an endow10 ment or annuity contract for a long-term care insur11 ance contract (as defined in section 7702B(b)).’’

12 SEC. 107. TREATMENT OF ACCELERATED DEATH BENEFITS

13 BY RECIPIENT.

14 (a) IN GENERAL.—Section 101 of the Internal Reve15 nue Code of 1986 (relating to certain death benefits) is

16 amended by adding at the end the following new sub17 section:

18 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

19 DEATH BENEFITS.—

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, the following amounts shall be treated as an

22 amount paid by reason of the death of an insured:

23 ‘‘(A) Any amount received under a life in24 surance contract on the life of an insured who

25 is a terminally ill individual.
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1 ‘‘(B) Any amount received under a life in2 surance contract on the life of an insured who

3 is a chronically ill individual (as determined in

4 such manner as the Secretary may prescribe)

5 but only if such amount is received under a

6 rider or other provision of such contract which

7 is treated as a qualified long-term care insur8 ance contract under section 7702B.

9 ‘‘(2) TREATMENT OF VIATICAL SETTLE10 MENTS.—

11 ‘‘(A) IN GENERAL.—In the case of a life

12 insurance contract on the life of an insured de13 scribed in paragraph (1), if—

14 ‘‘(i) any portion of such contract is

15 sold to any viatical settlement provider, or

16 ‘‘(ii) any portion of the death benefit

17 is assigned to such a provider,

18 the amount paid for such sale or assignment

19 shall be treated as an amount paid under the

20 life insurance contract by reason of the death of

21 such insured.

22 ‘‘(B) VIATICAL SETTLEMENT PROVIDER.—

23 The term ‘viatical settlement provider’ means

24 any person regularly engaged in the trade or

25 business of purchasing, or taking assignments
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1 of, life insurance contracts on the lives of

2 insureds described in paragraph (1) if—

3 ‘‘(i) such person is licensed for such

4 purposes in the State in which the insured

5 resides, or

6 ‘‘(ii) in the case of an insured who re7 sides in a State not requiring the licensing

8 of such persons for such purposes—

9 ‘‘(I) such person meets the re10 quirements of sections 8 and 9 of the

11 Viatical Settlements Model Act of the

12 National Association of Insurance

13 Commissioners, and

14 ‘‘(II) meets the requirements of

15 the Model Regulations of the National

16 Association of Insurance Commis17 sioners (relating to standards for eval18 uation of reasonable payments) in de19 termining amounts paid by such per20 son in connection with such purchases

21 or assignments.

22 ‘‘(3) DEFINITIONS.—For purposes of this sec23 tion—

24 ‘‘(A) TERMINALLY ILL INDIVIDUAL.—The

25 term ‘terminally ill individual’ means an indi-
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1 vidual who has been certified by a physician as

2 having an illness or physical condition which

3 can reasonably be expected to result in death in

4 24 months or less after the date of the certifi5 cation.

6 ‘‘(B) PHYSICIAN.—The term ‘physician’

7 has the meaning given to such term by section

8 1861(r)(1) of the Social Security Act (42

9 U.S.C. 1395x(r)(1)).

10 ‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI11 CIES.—This subsection shall not apply in the case of

12 any amount paid to any taxpayer other than the in13 sured if such taxpayer has an insurable interest with

14 respect to the life of the insured by reason of the in15 sured being a director, officer, or employee of the

16 taxpayer or by reason of the insured being finan17 cially interested in any trade or business carried on

18 by the taxpayer.’’

19 (b) EFFECTIVE DATE.—The amendment made by

20 subsection (a) shall apply to amounts received after De21 cember 31, 1995.
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1 SEC. 108. TAX TREATMENT OF COMPANIES ISSUING QUALI2 FIED ACCELERATED DEATH BENEFIT RID3 ERS.

4 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID5 ERS TREATED AS LIFE INSURANCE.—Section 818 of the

6 Internal Revenue Code of 1986 (relating to other defini7 tions and special rules) is amended by adding at the end

8 the following new subsection:

9 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

10 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

11 this part—

12 ‘‘(1) IN GENERAL.—Any reference to a life in13 surance contract will be treated as including a ref14 erence to a qualified accelerated death benefit rider

15 on such contract.

16 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE17 FIT RIDERS.—For purposes of this subsection the

18 term ‘qualified accelerated death benefit rider’

19 means any rider on a life insurance contract if the

20 only payments under the rider are payments meeting

21 the requirements of section 101(g).

22 ‘‘(3) EXCEPTION FOR LONG-TERM CARE RID23 ERS.—Paragraph (1) shall not apply to any rider

24 which is treated as a long-term care insurance con25 tract under section 7702B.’’

26 (b) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendment made by

2 this section shall take effect on January 1, 1996.

3 (2) ISSUANCE OF RIDER NOT TREATED AS MA4 TERIAL CHANGE.—For purposes of applying sections

5 101(f), 7702, and 7702A of the Internal Revenue

6 Code of 1986 to any contract—

7 (A) the issuance of a qualified accelerated

8 death benefit rider (as defined in section 818(g)

9 of such Code (as added by this Act)), and

10 (B) the addition of any provision required

11 to conform an accelerated death benefit rider to

12 the requirements of such section 818(g),

13 shall not be treated as a modification or material

14 change in such contract.

15 SEC. 109. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

16 WITHDRAWN FROM INDIVIDUAL RETIRE17 MENT PLANS OR 401(k) PLANS FOR LONG18 TERM CARE INSURANCE.

19 (a) IN GENERAL.—Part III of subchapter B of

20 chapter 1 of the Internal Revenue Code of 1986 (relating

21 to items specifically excluded from gross income) is

22 amended—

23 (1) by redesignating section 137 as section 138;

24 and
27

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1 (2) by inserting after section 136 the following

2 new section:

3 ‘‘SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

4 ACCOUNTS AND SECTION 401(k) PLANS FOR

5 LONG-TERM CARE INSURANCE.

6 ‘‘(a) GENERAL RULE.—The amount includible in the

7 gross income of an individual for the taxable year by rea8 son of qualified distributions during such taxable year

9 shall not exceed the excess of—

10 ‘‘(1) the amount which would (but for this sec11 tion) be so includible by reason of such distributions,

12 over

13 ‘‘(2) the aggregate premiums paid by such indi14 vidual during such taxable year for any long-term

15 care insurance contract (as defined in section

16 7702B(b)) for the benefit of such individual or the

17 spouse of such individual.

18 ‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of

19 this section, the term ‘qualified distribution’ means any

20 distribution to an individual from an individual retirement

21 account or a section 401(k) plan if such individual has

attained the age of 591 22 ⁄2 on or before the date of the dis23 tribution (and, in the case of a distribution used to pay

24 premiums for the benefit of the spouse of such individual,
28

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such spouse has attained age 591 1 ⁄2 on or before the date

2 of the distribution).

3 ‘‘(c) DEFINITIONS.—For purposes of this section:

4 ‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The

5 term ‘individual retirement account’ has the mean6 ing given such term by section 408(a).

7 ‘‘(2) SECTION 401(K) PLAN.—The term ‘section

8 401(k) plan’ means any employer plan which meets

9 the requirements of section 401(a) and which in10 cludes a qualified cash or deferred arrangement (as

11 defined in section 401(k)).

12 ‘‘(d) SPECIAL RULES FOR SECTION 401(k) PLANS.—

13 ‘‘(1) WITHDRAWALS CANNOT EXCEED ELEC14 TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR

15 DEFERRED ARRANGEMENT.—This section shall not

16 apply to any distribution from a section 401(k) plan

17 to the extent the aggregate amount of such distribu18 tions for the use described in subsection (a) exceeds

19 the aggregate employer contributions made pursuant

20 to the employee’s election under section 401(k)(2).

21 ‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI22 FICATION.—A plan shall not be treated as failing to

23 satisfy the requirements of section 401, and an ar24 rangement shall not be treated as failing to be a

25 qualified cash or deferred arrangement (as defined
29

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1 in section 401(k)(2)), merely because under the plan

2 or arrangement distributions are permitted which

3 are excludable from gross income by reason of this

4 section.’’

5 (b) CONFORMING AMENDMENTS.—

6 (1) Section 401(k) of such Code is amended by

7 adding at the end the following new paragraph:

8 ‘‘(11) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

for payment of long-term care premiums, see section

137.’’

9 (2) Section 408(d) of such Code is amended by

10 adding at the end the following new paragraph:

11 ‘‘(8) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

from individual retirement accounts for payment of

long-term care premiums, see section 137.’’

12 (3) The table of sections for such part III if

13 amended by striking the last item and inserting the

14 following new items:

‘‘Sec. 137. Distributions from individual retirement accounts and

section 401(k) plans for long-term care insurance.

‘‘Sec. 138. Cross references to other Acts.’’

15 SEC. 110. EFFECTIVE DATE.

16 (a) IN GENERAL.—Except as provided in subsection

17 (b), the amendments made by this title shall apply to long18 term care insurance policies issued in taxable years begin19 ning after the date of the enactment of this Act.
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1 (b) CONTINUATION OF EXISTING POLICIES.—In the

2 case of any long-term care insurance policy issued before

3 January 1, 1997, which met the long-term care insurance

4 requirements of the State in which the policy was sitused

5 at the time the policy was issued—

6 (1) such policy shall be treated for purposes of

7 the Internal Revenue Code of 1986 as a long-term

8 care insurance contract (as defined in section

9 7702B(b) of such Code), and

10 (2) services provided under such policy shall be

11 treated for such purposes as qualified long-term care

12 services (as defined in section 7702B(c) of such

13 Code).

14 (c) EXCHANGES OF EXISTING POLICIES.—If, after

15 the date of enactment of this Act and before January 1,

16 1996, a policy providing for long-term care insurance cov17 erage is exchanged solely for a long-term care insurance

18 contract (as defined in section 7702B(b) of the Internal

19 Revenue Code of 1986), no gain or loss shall be recognized

20 on the exchange. If, in addition to a long-term care insur21 ance contract, money or other property is received in the

22 exchange, then any gain shall be recognized to the extent

23 of the sum of the money and the fair market value of the

24 other property received. For purposes of this subsection,

25 the cancellation of a policy providing for long-term care
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1 insurance coverage and reinvestment of the cancellation

2 proceeds in a qualified long-term care insurance contract

3 within 60 days thereafter shall be treated as an exchange.

4 (d) ISSUANCE OF CERTAIN RIDERS PERMITTED.—

5 For purposes of determining whether section 7702 or

6 7702A of the Internal Revenue Code of 1986 applies to

7 any contract, the issuance, whether before, on, or after

8 December 31, 1995, of a rider on a life insurance contract

9 providing long-term care insurance coverage shall not be

10 treated as a modification or material change of such con11 tract.

12 (e) TREASURY TO SPECIFY TAX TREATMENT OF

13 LONG-TERM CARE CONTRACTS WHICH DO NOT MEET

14 STANDARDS.—Not later than October 1, 1996, the Sec15 retary of the Treasury shall submit to the Congress a re16 port detailing the Department of the Treasury’s interpre17 tation of the treatment under the Internal Revenue Code

18 of 1986 of contracts which provide long-term care services

19 but which are not long-term care insurance contracts (as

20 defined by section 7702B(b) of such Code).

21 TITLE II—LONG-TERM CARE

22 INSURANCE STANDARDS

23 SEC. 200. SHORT TITLE.

24 This title may be cited as the ‘‘Long-Term Care In25 surance Standards Amendments of 1995’’.
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1 SEC. 201. NATIONAL LONG-TERM CARE INSURANCE ADVI2 SORY COUNCIL.

3 (a) APPOINTMENT.—Congress shall appoint an advi4 sory board to be known as the National Long-Term Care

5 Insurance Advisory Council (hereafter referred to in this

6 title as the ‘‘Advisory Council’’).

7 (b) MEMBERSHIP.—The Advisory Council shall con8 sist of 5 members, each of whom has substantial expertise

9 in matters relating to the provision and regulation of long10 term care insurance or long-term care financing and deliv11 ery systems.

12 (c) DUTIES.—The Advisory Council shall—

13 (1) provide advice, recommendations, and as14 sistance to Congress on matters relating to long15 term care insurance as specified in this title and as

16 otherwise required by the Secretary of Health and

17 Human Services (hereafter referred to in this title as

18 the ‘‘Secretary’’);

19 (2) collect, analyze, and disseminate informa20 tion relating to long-term care insurance in order to

21 increase the understanding of insurers, providers,

22 consumers, and regulatory bodies of the issues relat23 ing to, and to facilitate improvements in, such insur24 ance, and to carry out the educational program es25 tablished under subsection (e);
33

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1 (3) develop for congressional consideration pro2 posed models, standards, requirements, and proce3 dures relating to long-term care insurance, as appro4 priate; and

5 (4) monitor the development of the long-term

6 care insurance market, advise Congress concerning

7 the need for statutory changes, and establish a data

8 collection system in accordance with subsection (f).

9 (d) ADMINISTRATION.—In order to carry out its re10 sponsibilities under this section, the Advisory Council is

11 authorized to—

12 (1) consult individuals and public and private

13 entities with experience and expertise in matters re14 lating to long-term care insurance;

15 (2) conduct meetings and hold hearings;

16 (3) conduct research (either directly or under

17 grant or contract);

18 (4) collect, analyze, publish, and disseminate

19 data and information (either directly or under grant

20 or contract); and

21 (5) develop model formats and procedures for

22 insurance products, and develop proposed standards,

23 rules, and procedures for regulatory programs, as

24 appropriate.

25 (e) EDUCATIONAL PROGRAM.—
34

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1 (1) ESTABLISHMENT.—The Advisory Council,

2 in consultation with the Secretary, shall establish a

3 program designed to educate the public on—

4 (A) the risks of incurring catastrophic

5 long-term health care costs;

6 (B) types of long-term care services avail7 able;

8 (C) coverage limitations of Federal pro9 grams for long-term care;

10 (D) private sector options for long-term

11 care planning; and

12 (E) methods for assessing the quality and

13 cost of long-term care services and obtaining

14 consumer information regarding long-term care

15 such as facility inspection information, service

16 certification, client complaints, special care

17 units/programs, or other items raised by public

18 demand.

19 (2) DISSEMINATION OF INFORMATION.—Edu20 cational information developed under the program

21 established under paragraph (1) shall be dissemi22 nated through collaborative arrangements with pro23 viders of long-term services or health care services,

24 entities serving the aged, or others willing to partici25 pate.
35

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1 (f) LONG-TERM CARE DATA COLLECTION SYS2 TEM.—

3 (1) IN GENERAL.—The Advisory Council, in

4 consultation with the Secretary and the National As5 sociation of Insurance Commissioners, shall establish

6 a data collection system for public and private long7 term care services to be utilized—

8 (A) to assess the costs of long-term care

9 services and predict the future costs of such

10 services;

11 (B) to determine the types of long-term

12 care services provided and predict the future

13 need for such services;

14 (C) to determine how long-term care re15 lates to the medical problems experienced by

16 the elderly; and

17 (D) in any other manner determined ap18 propriate by the Advisory Council.

19 (2) REPORT.—Not later than 2 years after the

20 date of enactment of this Act and annually there21 after, the Advisory Council shall prepare and submit

22 to the appropriate committees of Congress a report

23 that shall include—

24 (A) a description of the data collection sys25 tem described in paragraph (1);
36

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1 (B) a description of the types of data col2 lected using such system and an analysis of

3 such data;

4 (C) a description of the sources of the

5 data;

6 (D) a description of the manner in which

7 the data was collected; and

8 (E) any other information determined ap9 propriate by such Advisory Council.

10 (g) AUTHORIZATION OF APPROPRIATIONS.—There

11 are authorized to be appropriated, for the activities of the

12 Advisory Council, $1,500,000 for fiscal year 1996, and for

13 each subsequent fiscal year.

14 SEC. 202. POLICY REQUIREMENTS.

15 Section 7702B of the Internal Revenue Code of 1986

16 (as added by section 101) is amended by adding at the

17 end thereof the following new subsection:

18 ‘‘(f) CONSUMER PROTECTION PROVISIONS.—

19 ‘‘(1) IN GENERAL.—The requirements of this

20 subsection are met with respect to any contract if

21 any long-term care insurance policy issued under the

22 contract meets—

23 ‘‘(A) the requirements of the model regula24 tion and model Act described in paragraph (2),
37

S 1658 IS

1 ‘‘(B) the disclosure requirement of para2 graph (3), and

3 ‘‘(C) the requirements relating to

4 nonforfeitability under paragraph (4).

5 ‘‘(2) REQUIREMENTS OF MODEL REGULATION

6 AND ACT.—

7 ‘‘(A) IN GENERAL.—The requirements of

8 this paragraph are met with respect to any pol9 icy if such policy meets:

10 ‘‘(i) MODEL REGULATIONS.—The fol11 lowing requirements of the model regula12 tion:

13 ‘‘(I) Section 7A (relating to guar14 anteed renewal or noncancellability),

15 and the requirements of section 6B of

16 the model Act relating to such section

17 7A.

18 ‘‘(II) Section 7B (relating to pro19 hibitions on limitations and exclu20 sions).

21 ‘‘(III) Section 7C (relating to ex22 tension of benefits).

23 ‘‘(IV) Section 7D (relating to

24 continuation or conversion of cov25 erage).
38

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1 ‘‘(V) Section 7E (relating to dis2 continuance and replacement of poli3 cies).

4 ‘‘(VI) Section 8 (relating to unin5 tentional lapse).

6 ‘‘(VII) Section 9 (relating to dis7 closure), other than section 9F there8 of.

9 ‘‘(VIII) Section 10 (relating to

10 prohibitions against post-claims un11 derwriting).

12 ‘‘(IX) Section 11 (relating to

13 minimum standards).

14 ‘‘(X) Section 12 (relating to re15 quirement to offer inflation protec16 tion), except that any requirement for

17 a signature on a rejection of inflation

18 protection shall permit the signature

19 to be on an application or on a sepa20 rate form.

21 ‘‘(XI) Section 23 (relating to pro22 hibition against preexisting conditions

23 and probationary periods in replace24 ment policies or certificates).
39

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1 ‘‘(ii) MODEL ACT.—The following re2 quirements of the model Act:

3 ‘‘(I) Section 6C (relating to pre4 existing conditions).

5 ‘‘(II) Section 6D (relating to

6 prior hospitalization).

7 ‘‘(B) DEFINITIONS.—For purposes of this

8 paragraph:

9 ‘‘(i) MODEL PROVISIONS.—The terms

10 ‘model regulation’ and ‘model Act’ mean

11 the long-term care insurance model regula12 tion, and the long-term care insurance

13 model Act, respectively, promulgated by

14 the National Association of Insurance

15 Commissioners (as adopted in January of

16 1993).

17 ‘‘(ii) COORDINATION.—Any provision

18 of the model regulation or model Act de19 scribed under clause (i) or (ii) of subpara20 graph (A) shall be treated as including any

21 other provision of such regulation or Act

22 necessary to implement the provision.

23 ‘‘(3) TAX DISCLOSURE REQUIREMENT.—The re24 quirement of this paragraph is met with respect to
40

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1 any policy if such policy meets the requirements of

2 section 4980D(d)(1).

3 ‘‘(4) NONFORFEITURE REQUIREMENTS.—

4 ‘‘(A) IN GENERAL.—The requirements of

5 this paragraph are met with respect to any level

6 premium long-term care insurance policy if the

7 issuer of such policy offers to the policyholder,

8 including any group policyholder, a

9 nonforfeiture provision.

10 ‘‘(B) REQUIREMENTS OF PROVISION.—The

11 nonforfeiture provision required under subpara12 graph (A) shall meet the following require13 ments:

14 ‘‘(i) The nonforfeiture provision shall

15 be appropriately captioned.

16 ‘‘(ii) The nonforfeiture provision shall

17 provide for a benefit available in the event

18 of a default in the payment of any pre19 miums and the amount of the benefit may

20 be adjusted subsequent to being initially

21 granted only as necessary to reflect

22 changes in claims, persistency, and interest

23 as reflected in changes in rates for pre24 mium paying policies approved by the Sec25 retary for the same policy form.
41

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1 ‘‘(iii) The nonforfeiture provision shall

2 provide for at least one of the following:

3 ‘‘(I) Reduced paid-up insurance.

4 ‘‘(II) Extended term insurance.

5 ‘‘(III) Shortened benefit period.

6 ‘‘(IV) Other similar offerings ap7 proved by the Secretary.

8 ‘‘(5) LONG-TERM CARE INSURANCE POLICY DE9 FINED.—For purposes of this subsection, the term

10 ‘long-term care insurance policy’ has the meaning

11 given such term by section 4980C(e).’’

12 SEC. 203. ADDITIONAL REQUIREMENTS FOR ISSUERS OF

13 LONG-TERM CARE INSURANCE POLICIES.

14 (a) IN GENERAL.—Chapter 43 of the Internal Reve15 nue Code of 1986 (relating to qualified pension, etc. plans)

16 is amended by adding at the end the following new section:

17 ‘‘SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR LONG18 TERM CARE INSURANCE POLICIES.

19 ‘‘(a) GENERAL RULE.—There is hereby imposed on

20 any person failing to meet the requirements of subsection

21 (c) or (d) a tax in the amount determined under sub22 section (b).

23 ‘‘(b) AMOUNT OF TAX.—
42

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1 ‘‘(1) IN GENERAL.—For purposes of subsection

2 (a), the amount of the tax shall not exceed the

3 greater of—

4 ‘‘(A) 3 times the amount of any commis5 sions paid for each policy involved in the viola6 tion, or

7 ‘‘(B) $10,000.

8 ‘‘(2) WAIVER.—In the case of a failure which is

9 due to reasonable cause and not to willful neglect,

10 the Secretary may waive part or all of the tax im11 posed by subsection (a) to the extent that payment

12 of the tax would be excessive relative to the failure

13 involved.

14 ‘‘(c) ADDITIONAL RESPONSIBILITIES.—The require15 ments of this subsection are as follows:

16 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.—

17 ‘‘(A) MODEL REGULATION.—The following

18 requirements of the model regulation must be

19 met:

20 ‘‘(i) Section 13 (relating to application

21 forms and replacement coverage).

22 ‘‘(ii) Section 14 (relating to reporting

23 requirements), except that the issuer shall

24 also report at least annually the number of

25 claims denied during the reporting period
43

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1 for each class of business (expended as a

2 percentage of claims denied), other than

3 claims denied for failure to meet the

4 waiving period or because of any applicable

5 preexisting condition.

6 ‘‘(iii) Section 20 (relating to filing re7 quirements for marketing).

8 ‘‘(iv) Section 21 (relating to standards

9 for marketing), including inaccurate com10 pletion of medical histories, other than sec11 tion 21C(1), 21C(3), and 21C(6) thereof,

12 except that—

13 ‘‘(I) in addition to such require14 ments, no person shall in selling or of15 fering to sell a long-term care insur16 ance policy, misrepresent a material

17 fact;

18 ‘‘(II) no such requirements shall

19 include a requirement to inquire or

20 identify whether a prospective appli21 cant or enrollee for long-term care in22 surance has accident and sickness in23 surance; and

24 ‘‘(III) the association shall dis25 close in any long-term care insurance
44

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1 solicitation the amount of compensa2 tion that the association receives from

3 endorsement or sale of the policy or

4 certificate to its members, expressed

5 as a percentage of annual premium

6 generated by such policies.

7 ‘‘(v) Section 22 (relating to appro8 priateness of recommended purchase).

9 ‘‘(vi) Section 24 (relating to standard

10 format outline of coverage).

11 ‘‘(vii) Section 25 (relating to require12 ment to deliver shopper’s guide).

13 ‘‘(B) MODEL ACT.—The following require14 ments of the model Act must be met:

15 ‘‘(i) Section 6F (relating to right to

16 return), except that such section shall also

17 apply to denials of applications and any re18 fund shall be made within 30 days of the

19 return or denial.

20 ‘‘(ii) Section 6G (relating to outline of

21 coverage).

22 ‘‘(iii) Section 6H (relating to require23 ments for certificates under group plans).

24 ‘‘(iv) Section 6I (relating to policy

25 summary).
45

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1 ‘‘(v) Section 6J (relating to monthly

2 reports on accelerated death benefits).

3 ‘‘(vi) Section 7 (relating to incontest4 ability period).

5 ‘‘(C) DEFINITIONS.—For purposes of this

6 paragraph, the terms ‘model regulation’ and

7 ‘model Act’ shall have the meanings given such

8 terms by section 7702B(f)(2)(B).

9 ‘‘(2) DELIVERY OF POLICY.—If an application

10 for a long-term care insurance policy (or for a cer11 tificate under a group long-term care insurance pol12 icy) is approved, the issuer shall deliver to the appli13 cant (or policyholder or certificate holder) the policy

14 (or certificate) of insurance not later than 30 days

15 after the date of the approval or the date on which

16 the first premium is received, whichever is later.

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

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

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

20 of a written request by the policyholder or certificate

21 holder (or representative)—

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

23 reasons for the denial, and

24 ‘‘(B) make available all information di25 rectly relating to such denial, except in cases
46

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1 where such issuer would be prohibited from pro2 viding information regarding claims denial

3 under confidentiality statutes or other Federal

4 or State laws.

5 ‘‘(d) DISCLOSURE.—The requirements of this sub6 section are met if either of the following statements,

7 whichever is applicable, is prominently displayed on the

8 front page of any long-term care insurance policy and in

9 the outline of coverage required under subsection

10 (c)(1)(B)(ii):

11 ‘‘(1) A statement that: ‘This policy is intended

12 to be a qualified long-term care insurance contract

13 under section 7702B(b) of the Internal Revenue

14 Code of 1986.’.

15 ‘‘(2) A statement that: ‘This policy is not in16 tended to be a qualified long-term care insurance

17 contract under section 7702B(b) of the Internal

18 Revenue Code of 1986.’.

19 ‘‘(e) LONG-TERM CARE INSURANCE POLICY DE20 FINED.—

21 ‘‘(1) IN GENERAL.—For purposes of this sec22 tion, the term ‘long-term care insurance policy’

23 means any insurance policy or rider advertised, mar24 keted, offered, or designed to provide coverage for

25 not less than 12 consecutive months for each covered
47

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1 person on an expense incurred, indemnity, prepaid,

2 or other basis for one or more necessary diagnostic,

3 preventive, therapeutic, rehabilitative, maintenance,

4 or personal care services, provided in a setting other

5 than an acute care unit of a hospital. Such term

6 includes group and individual annuities and life in7 surance policies or riders which provide directly or

8 which supplement long-term care insurance. Such

9 term also includes a policy or rider which provides

10 for payment of benefits based upon cognitive impair11 ment or the loss of functional capacity.

12 ‘‘(2) ISSUANCE.—As defined in paragraph (1),

13 a long-term insurance policy may be issued by insur14 ers, fraternal benefit societies, nonprofit health, hos15 pital and medical service corporations, prepaid

16 health plans, health maintenance organizations, or

17 any similar organization to the extent they are oth18 erwise authorized to issue life or health insurance.

19 ‘‘(3) LIMITATIONS.—The term ‘long-term care

20 insurance policy’ shall not include any insurance pol21 icy which is offered primarily to provide basic medi22 care supplemental coverage, basic hospital expense

23 coverage, basic medical-surgical expense coverage,

24 hospital confinement indemnity coverage, major

25 medical expense coverage, disability income or relat-
48

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1 ed asset-protection coverage, accident only coverage,

2 specified disease or specified accident coverage, or

3 limited benefit health coverage. With respect to life

4 insurance, such term shall not include life insurance

5 policies which accelerate the death benefit specifi6 cally for one or more of the qualifying events of ter7 minal illness, medical conditions requiring extraor8 dinary medical intervention, or permanent institu9 tional confinement, and which provide the option of

10 a lump-sum payment for those benefits and in which

11 neither the benefits nor the eligibility for the bene12 fits is conditioned upon the receipt of long-term

13 care.’’

14 (b) CLERICAL AMENDMENT.—The table of sections

15 for chapter 43 of the Internal Revenue Code of 1986 is

16 amended by adding at the end the following new item:

‘‘Sec. 4980C. Failure to meet requirements for long-term care insurance policies.’’

17 SEC. 204. RELATION TO STATE LAW.

18 Insurance policies which have been deemed in compli19 ance with the requirements of this title and the Internal

20 Revenue Code of 1986 (as amended by this title) by the

21 State Insurance Commissioner in the State of domicile

22 shall be deemed approved for sale in any other State. No

23 State may prohibit an insurance carrier from selling out-
49

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1 side the State of domicile long-term care insurance policies

2 which have been approved in the State of domicile.

3 SEC. 205. UNIFORM LANGUAGE AND DEFINITIONS.

4 (a) RECOMMENDATIONS.—The Advisory Council

5 shall develop recommendations for the use of uniform lan6 guage and definitions in long-term care insurance policies

7 (as defined in section 4980C(e) of the Internal Revenue

8 Code of 1986) for approval by Congress.

9 (b) USE OF NONUNIFORM LANGUAGE.—Rec10 ommendations under subsection (a) may permit the use

11 of nonuniform language to the extent required to take into

12 account differences among States in the licensing of nurs13 ing facilities and other providers of long-term care.

14 SEC. 206. CONSUMER ACCESS TO COMPLIANCE INFORMA15 TION.

16 (a) IN GENERAL.—A State regulatory program must

17 provide for consumer access to complaints filed with the

18 State commissioner or superintendent of insurance with

19 respect to long-term care insurance policies.

20 (b) CONFIDENTIALITY.—The access provided under

21 subsection (a) shall be limited to the extent required to

22 protect the confidentiality of the identity of individual pol23 icyholders.
50

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1 SEC. 207. EFFECTIVE DATES.

2 (a) CONTRACTS.—The amendments made by section

3 202 shall apply to long-term care insurance contracts is4 sued in taxable years beginning after the date of enact5 ment of this Act.

6 (b) ACTIONS TAKEN.—The amendments made by

7 section 202 shall apply to actions taken in taxable years

8 beginning after the date of enactment of this Act.

9 TITLE III—PREVENTIVE HEALTH

10 PRACTICES PROMOTION

11 SEC. 301. DISTRIBUTION OF INFORMATION ON REC12 OMMENDED PREVENTIVE HEALTH PRAC13 TICES.

14 (a) IN GENERAL.—Section 1804 of the Social Secu15 rity Act (42 U.S.C. 1396b–2) is amended—

16 (1) in the heading, by inserting ‘‘AND DIS17 TRIBUTION OF PREVENTIVE HEALTH INFORMATION’’

18 after ‘‘MEDICARE BENEFITS’’;

19 (2) by inserting ‘‘(a)’’ after ‘‘SEC. 1804.’’; and

20 (3) by adding at the end the following new sub21 section:

22 ‘‘(b)(1) The Secretary shall develop (and, from time

23 to time, shall revise) a summary of recommended preven24 tive health care practices for elderly individuals entitled

25 to benefits under this title.
51

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1 ‘‘(2) The summary shall be developed in consultation

2 with national physician, consumer, and other health3 related groups and shall be based on recommendations of

4 any appropriate task force or similar group established by

5 the Secretary.

6 (3) The Secretary shall provide for the distribution

7 of—

8 ‘‘(A) the summary developed under paragraph

9 (1) to each individual at the time of the individual’s

10 first becoming eligible for benefits under part A

11 under section 226(a), or section 1818, as part of

12 other materials sent to such an individual at such a

13 time, and

14 ‘‘(B) the summary developed under paragraph

15 (1) to individuals entitled to benefits under this title

16 in conjunction with general mailings sent under this

17 title to such individuals.’’

18 (b) DEVELOPMENT OF SUMMARY AND FORM.—The

19 Secretary of Health and Human Services shall initially de20 velop the summary described in section 1804(b) of the So21 cial Security Act (as added by subsection (a)) not later

22 than April 1, 1996, and shall first provide for the distribu23 tion of such summaries by not later than October 1, 1996.

Æ