I

103D CONGRESS

1ST SESSION H. R. 132

To amend the Social Security Act to protect consumers through the

establishment of standards for long-term care insurance policies.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mrs. COLLINS of Illinois introduced the following bill; which was referred to

the Committee on Energy and Commerce

A BILL

To amend the Social Security Act to protect consumers

through the establishment of 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; TABLE OF CONTENTS.

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

5 ‘‘Long-Term Care Insurance Standards and Consumer

6 Protection Act of 1993’’.

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

8 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Establishment of national standards for long-term care insurance.
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‘‘TITLE XXI—LONG-TERM CARE INSURANCE STANDARDS

‘‘PART A—GENERAL REQUIREMENT; ESTABLISHMENT OF STANDARDS

‘‘Subpart 1—Establishment and Application of Standards

‘‘Sec. 2101. General requirement.

‘‘Sec. 2102. Establishment of standards.

‘‘Sec. 2103. Deadline for application of standards in States.

‘‘Sec. 2104. Relation to State law.

‘‘Sec. 2105. Steering committee on long-term care insurance standards.

‘‘Subpart 2—Code of Conduct for Endorsements; Agent Training and

Certification Programs

‘‘Sec. 2111. Guidelines for code of conduct with respect to endorsements.

‘‘Sec. 2112. Requirements for agent training and certification programs.

‘‘Subpart 3—Definitions

‘‘Sec. 2116. Long-term care insurance policy.

‘‘Sec. 2117. Other terms.

‘‘PART B—STANDARDS

‘‘Subpart 1—Policy Standards

‘‘Sec. 2121. Use of standard definitions and terminology and uniform format.

‘‘Sec. 2122. Minimum benefits; limiting conditions on benefits.

‘‘Sec. 2123. Prohibition of discrimination against individuals with Alzheimer’s and related diseases.

‘‘Sec. 2124. Limitation on use of preexisting condition limits.

‘‘Sec. 2125. Use of functional assessment.

‘‘Sec. 2126. Requirements for premiums and premium increases.

‘‘Sec. 2127. Inflation protection.

‘‘Sec. 2128. Nonforfeiture benefits.

‘‘Sec. 2129. Designation of representatives.

‘‘Sec. 2130. Renewal and policy upgrades.

‘‘Subpart 2—Sales Practices

‘‘Sec. 2131. Certification of training of sales agents.

‘‘Sec. 2132. Duty of good faith and fair dealing.

‘‘Sec. 2133. Financial guidelines.

‘‘Sec. 2134. Prohibition of sale or issuance to medicaid beneficiaries.

‘‘Sec. 2135. Prohibition of sale or issuance of duplicate policies.

‘‘Sec. 2136. Provision of outline of coverage and other information.

‘‘Sec. 2137. Information on financial arrangements with groups.

‘‘Subpart 3—Carrier Standards

‘‘Sec. 2141. Refund of premiums (free look).

‘‘Sec. 2142. Mailing of policy.

‘‘Sec. 2143. Prompt payment.

‘‘Sec. 2144. Information on claims denials.

‘‘Sec. 2145. Limitation on rescission, cancellation, or nonrenewal or denial

of claims.
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‘‘Sec. 2146. Reporting of information; access to information.

‘‘Sec. 2147. Provision of outline of coverage for renewals.

‘‘PART C—ENFORCEMENT OF STANDARDS

‘‘Subpart 1—General Provisions

‘‘Sec. 2151. Secretarial enforcement authority.

‘‘Sec. 2152. Complaints and investigations.

‘‘Sec. 2153. Hearings.

‘‘Sec. 2154. Cease and desist order with civil money penalty.

‘‘Sec. 2155. Establishment of toll-free telephone hotline.

‘‘Subpart 2—Conditions for Approval of State Regulatory Programs

‘‘Sec. 2161. General requirement.

‘‘Sec. 2162. Enforcement.

‘‘Sec. 2163. Toll-free telephone system.

‘‘Sec. 2164. Publication of information.

‘‘Sec. 2165. Process for approval of premiums.

‘‘Sec. 2166. Annual reports.

‘‘Sec. 2167. Increase in funding for long-term care insurance, information,

counseling, and assistance through State regulatory programs.

Sec. 3. Study of standard measure of value for long-term care insurance policies.

Sec. 4. Waiver of paperwork requirements.

1 SEC. 2. ESTABLISHMENT OF NATIONAL STANDARDS FOR

2 LONG-TERM CARE INSURANCE.

3 The Social Security Act is amended by adding at the

4 end the following new title:

5 ‘‘TITLE XXI—LONG-TERM CARE INSURANCE

6 STANDARDS

7 ‘‘PART A—GENERAL REQUIREMENT; ESTABLISHMENT

8 OF STANDARDS

9 ‘‘Subpart 1—Establishment and Application of

10 Standards

11 ‘‘GENERAL REQUIREMENT

12 ‘‘SEC. 2101. (a) APPROVED REGULATORY STATES.—

13 No long-term care insurance policy (as defined in section
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1 2116) may be issued, sold, or offered for sale in a State

2 which has a regulatory program that the Secretary has

3 approved consistent with the requirements of subpart 2

4 of part C, on or after the date specified in section 2103,

5 unless the policy has been certified by the State commis6 sioner of insurance under such program as meeting the

7 standards established under such program in the State.

8 ‘‘(b) OTHER STATES.—No long-term care insurance

9 policy may be issued, sold, or offered for sale in a State

10 that does not have such an approved regulatory program,

11 on or after the date specified in section 2103, unless the

12 policy has been certified by the Secretary (in accordance

13 with such procedures as the Secretary may establish by

14 regulation) as meeting the standards established under

15 section 2102.

16 ‘‘(c) TREATMENT OF ADVERTISING AND SOLICIT17 ING.—For purposes of this section, the advertising or so18 liciting with respect to a policy, directly or indirectly, shall

19 be deemed the offering for sale of the policy.

20 ‘‘ESTABLISHMENT OF STANDARDS

21 ‘‘SEC. 2102. (a) APPLICATION OF STANDARDS.—

22 ‘‘(1) NAIC.—If, within 12 months after the

23 date of the enactment of this title, the National As24 sociation of Insurance Commissioners promulgates

25 model standards that incorporate the requirements

26 of part B and subpart 2 of part C, such standards
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1 shall apply under section 2101, effective on the date

2 specified in section 2103(a).

3 ‘‘(2) SUBSEQUENT STANDARDS.—If the NAIC

4 modifies the model standards previously established

5 under this subsection in a manner consistent with

6 the requirements of part B and subpart 2 of part C,

7 such modified standards shall apply under section

8 2101, effective as of the date specified in section

9 2103(a).

10 ‘‘(3) USE OF TERM ‘STANDARDS’.—In this title,

11 the term ‘Standards’ means all standards estab12 lished under this section that apply in a State under

13 section 2101 and includes, with respect to subpart

14 2 of part C, standards to carry out the requirements

15 for State regulatory programs under such subpart.

16 ‘‘(b) DEFAULT.—If the NAIC does not promulgate

17 the model standards under subsection (a) by the deadline

18 established in that subsection, the Secretary shall promul19 gate, within 12 months after such deadline, a regulation

20 that provides standards that incorporate the requirements

21 of part B and subpart 2 of part C and such standards

22 shall apply under section 2101.

23 ‘‘(c) BALANCE IN STANDARDS.—The standards for

24 long-term care insurance established under this title shall

25 reflect a balance between—
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1 ‘‘(1) the goal of protecting consumers through

2 assuring they are appropriately informed and receive

3 adequate value for their purchase, and

4 ‘‘(2) the goal of allowing the appropriate devel5 opment of long-term care insurance products and

6 the market for such products.

7 ‘‘DEADLINE FOR APPLICATION OF STANDARDS IN STATES

8 ‘‘SEC. 2103. (a) IN GENERAL.—For purposes of this

9 part, with respect to initial standards or subsequent stand10 ards established under section 2102, the date specified in

11 this section for a State is whichever of the following is

12 earlier:

13 ‘‘(1) The date the State adopts such initial or

14 subsequent standards.

15 ‘‘(2) 1 year after the first day of the first legis16 lative session of the State legislature that begins

17 after the date such initial or subsequent standards

18 are established.

19 ‘‘(b) TREATMENT OF STATES WITH 2-YEAR LEGIS20 LATIVE SESSIONS.—In applying subsection (a)(2) in the

21 case of a State that has a 2-year legislative session, each

22 year of such session shall be deemed to be a separate ses23 sion of the State legislature.

24 ‘‘RELATION TO STATE LAW

25 ‘‘SEC. 2104. (a) PREEMPTION.—Except as provided

26 in subsection (b), the Standards established under section
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1 2102 preempt provisions of State law which conflict with

2 such Standards.

3 ‘‘(b) STRICTER STANDARDS PERMITTED.—A State

4 may apply standards that provide greater protection to

5 policyholders of long-term care insurance policies than the

6 Standards so long as such standards are not inconsistent

7 or in conflict with any of the requirements of this title.

8 ‘‘STEERING COMMITTEE ON LONG-TERM CARE

9 INSURANCE STANDARDS

10 ‘‘SEC. 2105. (a) ESTABLISHMENT.—

11 ‘‘(1) IN GENERAL.—The NAIC shall establish a

12 Steering Committee on Long-Term Care Insurance

13 Standards (in this section referred to as the ‘Com14 mittee’).

15 ‘‘(2) SECRETARIAL ESTABLISHMENT.—In case

16 the Secretary is required to promulgate standards

17 under section 2102(b)—

18 (A) the Secretary shall establish a Steering

19 Committee on Long-Term Care Insurance

20 Standards (in this section referred to as the

21 ‘Committee’), and

22 (B) any subsequent reference in this sec23 tion to the NAIC is deemed a reference to the

24 Secretary.

25 ‘‘(b) COMPOSITION.—
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1 ‘‘(1) IN GENERAL.—The Committee shall be

2 composed of 11 individuals to be appointed by the

3 NAIC as follows:

4 ‘‘(A) 3 individuals who are representative

5 of consumer groups and who have substantial

6 knowledge and expertise on the issue of long7 term care insurance.

8 ‘‘(B) 3 individuals who are representative

9 of the long-term care insurance carriers.

10 ‘‘(C) 1 individual who is representative of

11 agents who sell long-term care insurance.

12 ‘‘(D) 1 individual who is representative of

13 providers of long-term care services.

14 ‘‘(E) 1 individual who is a counselor or

15 consultant to purchasers of long-term care in16 surance.

17 ‘‘(F) 2 individuals who are experts in long18 term care insurance who are from universities

19 or independent institutions and are not rep20 resentative of consumer groups, carriers,

21 agents, or providers.

22 ‘‘(2) TERMS.—Members of the Committee shall

23 be appointed for terms of 3 years, except that the

24 initial members shall be appointed for staggered

25 terms as determined appropriate by the NAIC.
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1 ‘‘(c) FUNCTIONS.—

2 ‘‘(1) IN GENERAL.—The Committee shall make

3 detailed recommendations to (and otherwise advise)

4 the NAIC concerning—

5 ‘‘(A) the minimum standards for long-term

6 care insurance consistent with the provisions of

7 this title; and

8 ‘‘(B) the modification of such standards

9 consistent with future laws to expand existing

10 Federal or State long-term care benefits or en11 hance protection of consumers.

12 ‘‘(2) GENERAL CONSULTATION REQUIRE13 MENT.—NAIC shall carry out its activities under

14 this title in consultation with the Committee.

15 ‘‘(d) SUPPORT.—The NAIC shall provide such assist16 ance as may be necessary for the operation of the Commit17 tee, which assistance may include per diem compensation

18 and travel expenses for members of the Committee while

19 serving on the business of the Committee.

20 ‘‘(e) COMMITTEE AUTHORITY.—The Committee

21 may—

22 ‘‘(1) seek such assistance and support as may

23 be required in the performance of its duties from ap24 propriate Federal departments and agencies, and
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1 ‘‘(2) prescribe such rules and regulations as it

2 deems necessary with respect to the internal organi3 zation and operation of the Committee.

4 ‘‘(f) ANNUAL REPORT.—Not later than March 31 of

5 each year, the NAIC is requested to prepare and submit

6 to the Congress a report concerning the activities of the

7 NAIC and of the Committee under this title during the

8 previous year.

9 ‘‘Subpart 2—Code of Conduct for Endorsements; Agent

10 Training and Certification Programs

11 ‘‘GUIDELINES FOR CODE OF CONDUCT WITH RESPECT TO

12 ENDORSEMENTS

13 ‘‘SEC. 2111. Not later than 1 year after the date of

14 enactment of this title, the NAIC shall issue guidelines

15 that shall apply to organizations and associations and

16 their subsidiaries that provide endorsements of long-term

17 care insurance policies, or that permit such policies to be

18 offered for sale through the organization or association or

19 subsidiary. Such guidelines shall include, at a minimum,

20 the following:

21 ‘‘(1) In endorsing or selling long-term care in22 surance policies, the primary responsibility of an or23 ganization or association or its subsidiary shall be to

24 educate their members concerning such policies and

25 assist such members in making informed decisions.
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1 Such organizations and associations and their sub2 sidiaries may not function primarily as sales agents

3 for insurance companies.

4 ‘‘(2) Organizations and associations and their

5 subsidiaries shall provide objective information re6 garding long-term care insurance policies sold or en7 dorsed by such organizations, associations, and sub8 sidiaries to ensure that members of such organiza9 tions, associations, and subsidiaries have a balanced

10 and complete understanding of both the strengths

11 and weaknesses of the policies that are being en12 dorsed or sold.

13 ‘‘(3) Organizations and associations and their

14 subsidiaries selling or endorsing long-term care in15 surance policies shall disclose, in marketing lit16 erature concerning such policies that is provided to

17 their members, the manner in which such policies

18 and the insurance company issuing such policies

19 were selected. If the organization, association, or

20 subsidiary and the insurance company have inter21 locking directorates, the organization, association, or

22 subsidiary shall disclose such fact to their members.

23 ‘‘(4) Organizations and associations and their

24 subsidiaries selling or endorsing long-term care in25 surance policies shall disclose, in marketing lit-
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1 erature concerning such policies that is provided to

2 their members, the precise nature and amount of the

3 compensation arrangements (including all fees, com4 missions, administrative fees and other forms of fi5 nancial support) that the organization, association,

6 or subsidiary receives from the endorsement or sale

7 of the policies to its members. The Boards of Direc8 tors of organizations and associations and their sub9 sidiaries selling or endorsing long-term care insur10 ance policies shall review and approve the compensa11 tion arrangements relating to such policies.

12 ‘‘(5) Organizations and associations and their

13 subsidiaries selling or endorsing long-term care in14 surance policies to their members also—

15 ‘‘(A) shall disclose, in summary form, the

16 most recent information available pertaining to

17 the financial status (including solvency) of the

18 carrier;

19 ‘‘(B) shall make periodic actuarial or inde20 pendent examinations of the policies, including

21 their benefits, features, and rates;

22 ‘‘(C) shall actively monitor the marketing

23 efforts, with respect to its members, of the car24 rier and its agents;
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1 ‘‘(D) shall review and approve all market2 ing materials or other insurance communica3 tions used to promote sales among, or sent to,

4 members regarding such policies; and

5 ‘‘(E) shall file with the State insurance

6 commissioner of the State in which they are

7 based—

8 ‘‘(i) a copy of the policies,

9 ‘‘(ii) a copy of the outline of coverage

10 which accompanies such policies,

11 ‘‘(iii) a copy of each advertising and

12 other marketing materials utilized in con13 nection with the sale or endorsement of

14 such policies, and

15 ‘‘(iv) a statement of compliance with

16 all the requirements of this section.

17 ‘‘REQUIREMENTS FOR AGENT TRAINING AND

18 CERTIFICATION PROGRAMS

19 ‘‘SEC. 2112. (a) ESTABLISHMENT.—The NAIC shall

20 establish requirements for long-term care insurance agent

21 training and certification that—

22 ‘‘(1) specify requirements for a training pro23 gram, either as part of a life-health insurance train24 ing program or as a separate long-term care insur25 ance training program, to train insurance agents
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1 who desire to sell or offer for sale long-term care in2 surance policies;

3 ‘‘(2) specify that the agent must pass either—

4 ‘‘(A) a comprehensive examination on long5 term care insurance coverage and appropriate

6 sales techniques, or

7 ‘‘(B) an equally comprehensive long-term

8 care insurance portion of another examination

9 required by a State in order for the agent to

10 sell another insurance product in the State;

11 ‘‘(3) specify procedures for certifying agents

12 who have completed such program as qualified to

13 sell or offer for sale long-term care insurance poli14 cies; and

15 ‘‘(4) specify, on or after 18 months after the

16 date of establishment of such requirements, that no

17 one without a certification may sell or offer for sale

18 a long-term care insurance policy.

19 ‘‘(b) ADMINISTRATION.—The program established

20 under subsection (a) shall be administered in each State

21 through the State insurance commissioner.

22 ‘‘(c) CONTINUING EDUCATION REQUIREMENTS.—

23 ‘‘(1) ESTABLISHMENT.—The NAIC shall con24 sider the appropriateness of establishing, and may

25 establish, continuing education requirements for
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1 agents who continue to sell long-term care insurance

2 policies.

3 ‘‘(2) APPLICATION OF REQUIREMENTS.—For

4 purposes of this title, if the NAIC has established a

5 continuing education requirement under paragraph

6 (1), an individual shall not be considered to be cer7 tified under a training and certification program es8 tablished under this section unless the individual

9 meets such continuing education requirement.

10 ‘‘Subpart 3—Definitions

11 ‘‘LONG-TERM CARE INSURANCE POLICY

12 ‘‘SEC. 2116. (a) IN GENERAL.—In this title, except

13 as otherwise provided in this section, the term ‘long-term

14 care insurance policy’ means any insurance policy, certifi15 cate, or rider advertised, marketed, offered, or designed

16 to provide coverage for each covered individual on an ex17 pense incurred, indemnity, prepaid, service-benefit, or

18 other basis, for one or more diagnostic, preventive, thera19 peutic, rehabilitative, maintenance or personal care serv20 ices, provided in a setting other than an acute care unit

21 of a hospital. Such term includes a group or individual

22 annuity or life insurance policy or rider which provides di23 rectly (or which supplements) long-term care insurance

24 described in the previous sentence.
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1 ‘‘(b) POLICIES EXCLUDED.—Except as provided in

2 subsections (c) and (d), in this title the term ‘long-term

3 care insurance policy’ does not include any medicare sup4 plemental policy (as defined in section 1882(g)) and any

5 insurance which is offered primarily to provide—

6 ‘‘(1) basic hospital expense coverage, basic med7 ical-surgical expense coverage, hospital confinement

8 indemnity coverage, or major medical expense cov9 erage,

10 ‘‘(2) disability income or related asset-protec11 tion coverage,

12 ‘‘(3) accident only coverage,

13 ‘‘(4) specified disease or specified accident cov14 erage, or

15 ‘‘(5) limited benefit health coverage.

16 ‘‘(c) INCLUSION OF POLICIES MARKETED AS LONG17 TERM CARE INSURANCE.—In this title, the term ‘long18 term care insurance policy’ also includes any product

19 which is advertised, marketed, or offered as long-term care

20 insurance.

21 ‘‘(d) DISCLOSURE REQUIREMENTS FOR CERTAIN

22 DISABILITY INCOME POLICIES AND LIFE INSURANCE

23 POLICIES.—

24 ‘‘(1) IN GENERAL.—In this title, the term ‘long25 term care insurance policy’ includes—
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1 ‘‘(A) a policy described in subsection (b)(2)

2 under which the eligibility or amount of benefits

3 are based on an assessment of functional ability

4 (based on activities of daily living or otherwise),

5 or

6 ‘‘(B) a life insurance policy described in

7 paragraph (3),

8 if the disclosure requirements of paragraph (2) are

9 not met.

10 ‘‘(2) DISCLOSURE REQUIREMENTS.—The disclo11 sure requirements of this paragraph for a policy are

12 that—

13 ‘‘(A) the policy discloses (in a form and

14 manner specified in the Standards) the fact

15 that the policy is not a long-term care insur16 ance policy;

17 ‘‘(B) the policy outlines how the benefits in

18 the policy differ from the benefits required to

19 be provided under the Standards of a long-term

20 care insurance policy; and

21 ‘‘(C) in the case of a life-insurance policy

22 described in subsection (c), at the time of policy

23 delivery there is provided to the purchaser and

24 the beneficiary a policy summary that in25 cludes—
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1 ‘‘(i) an explanation of how the long2 term care benefits interact with other com3 ponents of the policy (including deductions

4 from death benefits);

5 ‘‘(ii) a description of the amount and

6 length of benefits and the guaranteed life7 time benefits (if any) for each covered indi8 vidual; and

9 ‘‘(iii) any exclusions, reductions, and

10 limitations on benefits of long-term care.

11 ‘‘(3) CERTAIN LIFE INSURANCE POLICIES.—A

12 life insurance policy described in this paragraph is

13 one—

14 ‘‘(A) which accelerates the death benefit

15 specifically for—

16 ‘‘(i) one or more of the qualifying

17 events of terminal illness,

18 ‘‘(ii) medical conditions requiring ex19 traordinary medical intervention, or

20 ‘‘(iii) permanent institutional confine21 ment;

22 ‘‘(B) which provides the option of a lump23 sum payment for those benefits; or

24 ‘‘(C) which provides benefits based on the

25 use of nursing facility care.
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1 ‘‘OTHER TERMS

2 ‘‘SEC. 2117. In this title:

3 ‘‘(1) AGENT.—The term ‘agent’ means—

4 ‘‘(A) prior to 1 year after the date of the

5 establishment of the agent training and certifi6 cation requirements of section 2112, an individ7 ual who sells or offers for sale a long-term care

8 insurance policy subject to the requirements of

9 section 2101; and

10 ‘‘(B) after the date referred to in subpara11 graph (A), an individual certified under a train12 ing and certification program established under

13 section 2112.

14 ‘‘(2) APPROVED REGULATORY PROGRAM.—The

15 term ‘approved regulatory program’ means a regu16 latory program in a State that the Secretary has ap17 proved consistent with the requirements of subpart

18 2 of part C.

19 ‘‘(3) APPROVED REGULATORY STATE; NON20 REGULATORY STATE.—The term ‘approved regu21 latory State’ means a State with an approved regu22 latory program (as defined in paragraph (2)) and

23 the term ‘nonregulatory State’ means a State other

24 than an approved regulatory State.
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1 ‘‘(4) CARRIER.—The term ‘carrier’ means any

2 person that issues a long-term care insurance policy,

3 including a licensed insurance company, a prepaid

4 hospital or medical service plan, a health mainte5 nance organization, and a multiple small employer

6 welfare arrangement.

7 ‘‘(5) STATE COMMISSIONER OF INSURANCE.—

8 The term ‘State commissioner of insurance’ includes

9 a State superintendent of insurance.

10 ‘‘(6) STEERING COMMITTEE.—The term ‘steer11 ing committee’ means the Steering Committee on

12 Long-Term Care Insurance Standards established

13 under section 2104(a).

14 ‘‘(7) NAIC.—The term ‘NAIC’ means the Na15 tional Association of Insurance Commissioners.

16 ‘‘PART B—STANDARDS

17 ‘‘Subpart 1—Policy Standards

18 ‘‘USE OF STANDARD DEFINITIONS AND TERMINOLOGY

19 AND UNIFORM FORMAT

20 ‘‘SEC. 2121. Each long-term care insurance policy

21 shall, pursuant to the Standards—

22 ‘‘(1) use uniform language and definitions for

23 description of benefits, coverage, providers of cov24 ered services, facilities at which covered services are

25 rendered, and eligibility for benefits, including defi-
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1 nitions of ‘home and community care services’ and

2 of ‘nursing facility services’, and

3 ‘‘(2) use a uniform format and simple, easily

4 understood English for presenting the marketing

5 material and outline of coverage under such a policy.

6 In establishing the Standards that specify the language

7 and definitions under paragraph (1), such language and

8 definitions shall take into account the definitions and ter9 minology used by States in relation to long-term care serv10 ices and providers.

11 ‘‘MINIMUM BENEFITS; LIMITING CONDITIONS ON

12 BENEFITS

13 ‘‘SEC. 2122. (a) MINIMUM BENEFITS.—In general.—

14 A long-term care insurance policy shall provide benefits

15 either—

16 ‘‘(1) for nursing facility services, but not for

17 home and community care services, and be labeled

18 prominently as a ‘nursing home care’ policy;

19 ‘‘(2) for home and community care services, but

20 not for nursing facility services, and be labeled

21 prominently as a ‘home and community care’ policy;

22 or

23 ‘‘(3) for both nursing facility services and home

24 and community care services, and be labeled promi25 nently as a ‘comprehensive long-term care’ policy.
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1 ‘‘(b) RESTRICTIONS ON CONDITIONS.—A long-term

2 care insurance policy may not condition or limit eligi3 bility—

4 ‘‘(1) for benefits for a type of services to the

5 need for or receipt of any other services, including

6 prior hospitalization;

7 ‘‘(2) for any benefit solely on the medical neces8 sity for such benefit;

9 ‘‘(3) for benefits furnished by licensed or cer10 tified providers on compliance with conditions which

11 are in addition to those required for licensure or cer12 tification under State law;

13 ‘‘(4) for nursing facility services (if covered

14 under the policy) only—

15 ‘‘(A) to care provided in facilities which

16 provide a specified level of care; or

17 ‘‘(B) to care provided in facilities which

18 provide for 24-hour or other nursing care not

19 required in order to be licensed by the State; or

20 ‘‘(5) for benefits on the continued payment of

21 premiums during periods when the policyholder or

22 certificate holder is eligible for benefits under the

23 long-term care insurance policy.

24 ‘‘(c) HOME AND COMMUNITY CARE SERVICES.—
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1 ‘‘(1) SERVICES INCLUDED.—Home and commu2 nity care services under a long-term care insurance

3 policy shall include—

4 ‘‘(A) home-based services (described in

5 paragraph (2)) which are provided in a place of

6 residence used as the individual’s home (or, in

7 the case of services described in subparagraphs

8 (C), (F), and (G) of that paragraph, which may

9 be provided outside the individual’s residence),

10 and

11 ‘‘(B) community-based services (described

12 in paragraph (3)).

13 ‘‘(2) HOME-BASED SERVICES.—The home-based

14 services described in this paragraph are as follows:

15 ‘‘(A) Nursing care provided by or under

16 the supervision of a registered professional

17 nurse.

18 ‘‘(B) Services which—

19 ‘‘(i) are furnished by a homemaker/

20 home health aide who has successfully

21 completed a training and competency eval22 uation program that meets minimum

23 standards established by the Secretary

24 under section 1891(a)(3)(D), and
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1 ‘‘(ii)(I) are related to the inability of

2 the policyholder or certificate holder to

3 perform activities of daily living or instru4 mental activities of daily living, or (II) in

5 the case of an individual described in sec6 tion 2123, consist of providing supervision.

7 ‘‘(C) Personal assistance services furnished

8 by an individual who has successfully completed

9 a training and competency evaluation program

10 that meets minimum standards established by

11 the Secretary.

12 ‘‘(D) Medical social services.

13 ‘‘(E) Physical, occupational, or respiratory

14 therapy or speech-language pathology.

15 ‘‘(F) Provision of, or assistance with, med16 ical supplies (other than drugs and biologicals),

17 assistive technologies, and equipment that assist

18 in the performance of activities of daily living.

19 ‘‘(G) Patient and caregiver (including fam20 ily caregiver) education and training to develop

21 skills necessary to permit the individual to re22 main in the home setting.

23 ‘‘(H) Respite care.

24 ‘‘(I) Such other home-based items and

25 services as the Secretary may approve.
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1 ‘‘(3) COMMUNITY-BASED SERVICES.—The com2 munity-based services described in this paragraph

3 are as follows:

4 ‘‘(A) Adult day care services provided by

5 an adult day care program that meets such

6 standards (including the provision of at least 1

7 meal a day and the provision of necessary

8 transportation) established by the Secretary.

9 ‘‘(B) In the case of individuals with chron10 ic mental illness, day treatment or other partial

11 hospitalization services, psychosocial rehabilita12 tion services, and clinic services (whether or not

13 furnished in a facility), but not including indi14 vidual therapy.

15 ‘‘(C) Such other community-based items

16 and services as the Secretary may approve.

17 ‘‘(4) LIMITATIONS ON CONDITIONS.—If a long18 term care insurance policy provides benefits for

19 home and community care services, the policy—

20 ‘‘(A) may not limit such benefits to serv21 ices provided by registered nurses, licensed

22 practical nurses, occupational, physical, or

23 speech therapists, or social workers;

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

25 services to be provided by a nurse or therapist
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1 that can be provided by a home health aide or

2 licensed or certified home care worker acting

3 within the scope of the worker’s licensure or

4 certification;

5 ‘‘(C) may not limit such benefits to serv6 ices provided by agencies or providers certified

7 under title XVIII;

8 ‘‘(D) may not limit or exclude benefits for

9 such services by requiring that the policyholder

10 have an acute condition before home and com11 munity care services are covered; and

12 ‘‘(E) shall provide at least 365 days of

13 benefits for such services.

14 ‘‘(d) NURSING FACILITY SERVICES.—

15 ‘‘(1) TYPES OF SERVICES.—Nursing facility

16 services under a long-term care insurance policy

17 shall include the following:

18 ‘‘(A) Nursing care provided by or under

19 the supervision of a registered professional

20 nurse.

21 ‘‘(B) Bed and board in connection with the

22 furnishing of such nursing care.

23 ‘‘(C) Physical, occupational, or respiratory

24 therapy, or speech-language pathology, fur-
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1 nished by the facility or by others under ar2 rangements with them made by the facility.

3 ‘‘(D) Medical social services.

4 ‘‘(E) Such drugs, biologicals, supplies, ap5 pliances, and equipment, furnished for use in

6 the facility as are ordinarily furnished by such

7 facility for the care and treatment of residents.

8 ‘‘(F) Medical services provided by an in9 tern or resident-in-training of a hospital with

10 which the facility has in effect a transfer agree11 ment (meeting the requirements of section

12 1861(l)), under a teaching program of such

13 hospital approved as provided in the last sen14 tence of section 1861(b), and other diagnostic

15 or therapeutic services provided by a hospital

16 with which the facility has such an agreement

17 in effect.

18 ‘‘(G) Such other services necessary to the

19 health of the residents as are generally provided

20 by nursing facilities.

21 ‘‘(2) MINIMUM DURATION.—If a long-term care

22 insurance policy provides benefits for nursing facility

23 services—

24 ‘‘(A) the policy shall provide such benefits

25 with respect to all nursing facilities (as defined
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1 in section 1919(a) or as subsequently provided

2 for by the NAIC in establishing uniform lan3 guage and definitions under section 2121(1)) in

4 the State, and

5 ‘‘(B) the policy shall provide not less than

6 365 days of such benefits with respect to all

7 such nursing facilities.

8 ‘‘PROHIBITION OF DISCRIMINATION AGAINST INDIVID9 UALS WITH ALZHEIMER’S AND RELATED DISEASES

10 ‘‘SEC. 2123. A long-term care insurance policy may

11 not provide benefits under the policy for an individual with

12 Alzheimer’s disease, with any related progressive degen13 erative dementia of an organic origin, or with any mental

14 disorder of a demonstrable organic origin, that are any

15 less advantageous than the benefits for an individual hav16 ing another medical condition for which benefits may be

17 made available.

18 ‘‘LIMITATION ON USE OF PREEXISTING CONDITION

19 LIMITS

20 ‘‘SEC. 2124. (a) INITIAL ISSUANCE.—

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

22 long-term care insurance policy may not exclude or

23 condition benefits based on a medical condition for

24 which the policyholder received treatment or was

25 otherwise diagnosed before the date of issuance of

26 the policy.
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1 ‘‘(2) 6-MONTH LIMIT.—A long-term care insur2 ance policy may exclude benefits under a policy, dur3 ing its first 6 months, based on a condition for

4 which the policyholder received treatment or was

5 otherwise diagnosed during the 6 months before the

6 policy became effective.

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

8 insurance policy replaces another long-term care insurance

9 policy, the replacing policy shall waive any time periods

10 (including waiting periods, elimination periods, and proba11 tionary periods) applicable to preexisting conditions in the

12 new policy for similar benefits to the extent such time was

13 spent under the original policy.

14 ‘‘USE OF FUNCTIONAL ASSESSMENT

15 ‘‘SEC. 2125. (a) IN GENERAL.—If a long-term care

16 insurance policy limits the eligibility for, or level of, bene17 fits, the policy—

18 ‘‘(1) shall specify that eligibility for, and the

19 level of, benefits available under the policy are to be

20 based on a functional assessment (described in sub21 section (c)); and

22 ‘‘(2) shall specify the level (or levels) of phys23 ical, cognitive, or mental impairment required under

24 such an assessment to obtain benefits under the pol25 icy.
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1 ‘‘(b) CONDUCT OF ASSESSMENT.—Such assessment

2 may not be conducted by a person who has a direct or

3 indirect ownership or control relation with the carrier issu4 ing the policy.

5 ‘‘(c) UNIFORM ASSESSMENT INSTRUMENT AND UNI6 FORM FORMULAS.—

7 ‘‘(1) UNIFORM ASSESSMENT.—The functional

8 assessment referred to in subsection (a) must—

9 ‘‘(A) be based on a professional assessment

10 of the policyholder’s physical, cognitive, and

11 mental abilities, and

12 ‘‘(B) be conducted in accordance with a

13 standard, reproducible, uniform assessment in14 strument and methodology designated under

15 the Standards.

16 ‘‘(2) UNIFORM FORMULAS.—Benefits shall be

17 determined in accordance with an eligibility formula

18 specified in the Standards and based on the assess19 ment described in paragraph (1).

20 ‘‘(d) APPEALS PROCESS.—Each long-term care in21 surance policy shall provide for an appeals process, meet22 ing the Standards, for individuals who dispute the results

23 of an assessment conducted under this section, including

24 any determination of eligibility, level of functional impair25 ment, or level of benefits.
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1 ‘‘REQUIREMENTS FOR PREMIUMS AND PREMIUM

2 INCREASES

3 ‘‘SEC. 2126. (a) INITIAL ISSUANCE.—The premiums

4 charged for the initial issuance of a long-term care insur5 ance policy shall be established in accordance with a sys6 tem that ensures that premiums—

7 ‘‘(1) accurately reflect the true lifetime cost of

8 such a policy (in order to minimize premium rate in9 creases),

10 ‘‘(2) are fully supported by an actuarial memo11 randum, and

12 ‘‘(3) utilize lapse rates and other assumptions

13 in accordance with guidelines as specified in the

14 Standards,

15 and that discloses the specifics of the assumptions utilized.

16 ‘‘(b) ADDITIONAL SYSTEM REQUIREMENTS.—The

17 standards established to carry out subsection (a) may in18 clude—

19 ‘‘(1) requirements and restrictions on the origi20 nal pricing structure and methodology;

21 ‘‘(2) a requirement that policies (particularly

22 indemnity policies) be non-cancellable and have pre23 miums that are fixed and level, except in the specific

24 cases of—
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1 ‘‘(A) verified, substantial changes in mor2 tality and morbidity rates,

3 ‘‘(B) changes in medical technology which

4 have a major actuarial impact, and

5 ‘‘(C) changes in government specified eligi6 bility requirements, covered services, and defini7 tions which have a major actuarial impact; and

8 ‘‘(3) a requirement that policies (particularly

9 service-benefit policies) have guaranteed annual and

10 lifetime limits on premium rate increases, to be set

11 forth in such Standards.

12 ‘‘(c) RENEWALS.—Except as provided in subsection

13 (d)—

14 ‘‘(1) PROHIBITION ON INCREASES IN FIRST 3

15 YEARS.—No increase in premiums shall be allowable

16 during the first 3 years of a policy’s duration.

17 ‘‘(2) REQUIREMENTS FOR CERTAIN PREMIUM

18 INCREASES FOR INDIVIDUALS UNDER AGE 70.—In

19 the case of a policyholder or certificateholder who is

20 under the age of 70, a proposed premium increase

21 for renewal of the policy that would result either—

22 ‘‘(A) in the premium exceeding twice the

23 original premium amount, or
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1 ‘‘(B) in a premium increase, over any 3-

2 year period, exceeding 30 percent of the pre3 mium in effect at the beginning of such period,

4 shall not be granted unless the requirements of sec5 tion 2165(a)(3) are met.

6 ‘‘(3) REQUIREMENTS FOR PREMIUM INCREASES

7 FOR INDIVIDUALS BETWEEN 70 AND 80 YEARS OF

8 AGE.—In the case of a policyholder or

9 certificateholder who is at least 70 years of age but

10 under the age of 80, no proposed premium increase

11 for renewal of the policy shall be granted if the pro12 posed premium increase would result either—

13 ‘‘(A) in a premium increase, over any 3-

14 year period, exceeding 15 percent of the pre15 mium in effect at the beginning of the period,

16 or

17 ‘‘(B) in a premium increase, over the 10-

18 year period ending upon attaining age 80, ex19 ceeding 50 percent of the premium in effect at

20 the earliest time covered during such period.

21 ‘‘(4) PROHIBITION ON PREMIUM INCREASES

22 FOR INDIVIDUALS 80 YEARS OF AGE OR OLDER.—In

23 the case of a policyholder or certificate holder of a

24 long-term care insurance policy who is 80 years of
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1 age or older, the premiums for such policy may not

2 be increased.

3 ‘‘(d) SPECIAL RULES IN CASE OF INFLATION PRO4 TECTION.—In the case of a policy that includes inflation

5 protection benefits, the requirements of subsection (c)

6 shall not apply to any proposed or expected premium in7 creases if the increases are consistent with the increases

8 attributable to such inflation protection as scheduled with9 in the policy and were illustrated in a conspicuous manner

10 in the outline of coverage provided at the time of purchase.

11 ‘‘INFLATION PROTECTION

12 ‘‘SEC. 2127. (a) OPTIONAL RIDER AT TIME OF INI13 TIAL ISSUANCE.—

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

15 each long-term care insurance policy shall provide

16 for inflation protection in accordance with paragraph

17 (3).

18 ‘‘(2) OPTION.—Paragraph (1) shall not apply

19 if, at the time of initial sale, the policy purchaser,

20 after being provided the information described in

21 section 2136(b)(9), executes a written waiver of such

22 inflation protection.

23 ‘‘(3) CHOICE AMONG TYPES OF INFLATION PRO24 TECTION.—

25 ‘‘(A) IN GENERAL.—In satisfying the re26 quirement of paragraph (1), each policy shall
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1 provide the policyholder with a choice of the in2 flation protection described in subparagraph

3 (B) and the choice of any other inflation protec4 tion structure which the NAIC finds to be ap5 propriate and acceptable.

6 ‘‘(B) SPECIFIED INFLATION PROTEC7 TION.—The inflation protection described in

8 this subparagraph is protection that provides,

9 at the time of each annual renewal of a policy,

10 for an increase of a specified percentage (but

11 not less than 5 percent) in the dollar payment

12 levels and the maximum payment limit on bene13 fit coverage above the levels or limit in effect

14 during the previous policy year. In applying this

15 subparagraph, the increases shall be

16 compounded annually and the policy may pro17 vide for rounding such an increase to the near18 est multiple of $1 (in the case of dollar pay19 ment levels) or $100 (in the case of the maxi20 mum payment limit).

21 ‘‘(b) NAIC DETERMINATION.—The NAIC shall study

22 the issue of inflation protection to determine which types

23 of protection are appropriate and acceptable, and whether

24 it is appropriate to require that all long-term care insur25 ance policies must include provisions for protection
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1 against inflation. If the NAIC determines that protection

2 against inflation should be a required feature of every

3 long-term care insurance policy, the NAIC shall determine

4 the characteristics and structure of not more than 3 types

5 of inflation protection, at least one of which must be in6 cluded in every such policy sold, effective 6 months after

7 the date of designation of such types of protection.

8 ‘‘NONFORFEITURE BENEFITS

9 ‘‘SEC. 2128. (a) IN GENERAL.—Each long-term care

10 insurance policy or certificate shall provide that if the pol11 icy lapses after the policy has been in effect for at least

12 a minimum period of time (specified in the Standards),

13 the policy will provide, without payment of any additional

14 premiums, benefits of a type and amount (specified in the

15 Standards) to the policyholder or certificate holder of the

16 lapsed policy.

17 ‘‘(b) STANDARDS.—The Standards shall provide that

18 the benefits under subsection (a) must increase based

19 upon the period of time in which premiums were being

20 received under the policy.

21 ‘‘DESIGNATION OF REPRESENTATIVES

22 ‘‘SEC. 2129. (a) IN GENERAL.—The carrier issuing

23 a long-term care insurance policy—

24 ‘‘(1) at the time of issuance of the policy shall

25 require the applicant or policyholder either—
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1 ‘‘(A) to designate 1 or more representa2 tives whom the carrier shall notify in the event

3 that the policyholder fails to pay premiums, or

4 ‘‘(B) to provide a written waiver (signed

5 and dated by the applicant or policyholder) of

6 the right to make such designation; and

7 ‘‘(2) shall permit the policyholder to make or

8 alter such a designation not less frequently than an9 nually at the time of renewal.

10 ‘‘(b) NO LEGAL OBLIGATION TO PAY PREMIUMS.—

11 An individual designated as a representative under sub12 section (a) is not under any legal obligation to pay for

13 premiums or to otherwise act in the event of a notification

14 under this section.

15 ‘‘RENEWAL AND POLICY UPGRADES

16 ‘‘SEC. 2130. (a) IN GENERAL.—No long-term care

17 insurance policy may be rescinded, canceled, or

18 nonrenewed for any reason other than nonpayment of pre19 mium (subject to subsection (d) and any nonforfeiture

20 rights under section 2128) or fraud or material misrepre21 sentation (subject to subsections (c), (d), and (e) of sec22 tion 2145).

23 ‘‘(b) CONTINUATION AND CONVERSION RIGHTS FOR

24 GROUP POLICIES.—

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

26 insurance policy shall provide covered individuals
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1 with a basis for continuation or conversion in ac2 cordance with this subsection.

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

4 of paragraph (1), a policy provides a basis for con5 tinuation of coverage if the policy maintains cov6 erage under the existing group policy when such cov7 erage would otherwise terminate and which is sub8 ject only to the continued timely payment of pre9 mium when due. A group policy which restricts pro10 vision of benefits and services to or contains incen11 tives to use certain providers or facilities, may pro12 vide continuation benefits which are substantially

13 equivalent to the benefits of the existing group pol14 icy.

15 ‘‘(3) BASIS FOR CONVERSION.—For purposes of

16 paragraph (1), a policy provides a basis for conver17 sion of coverage if the policy entitles each individ18 ual—

19 ‘‘(A) whose coverage under the group pol20 icy would otherwise be terminated for any rea21 son; and

22 ‘‘(B) who has been continuously insured

23 under the policy (or group policy which was re24 placed) for at least 6 months before the date of

25 the termination;
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1 to issuance of a policy providing benefits identical to,

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

3 the policy being terminated, without evidence of in4 surability.

5 ‘‘(4) TREATMENT OF SUBSTANTIAL EQUIVA6 LENCE.—In determining under this subsection

7 whether benefits are substantially equivalent, consid8 eration should be given to the difference between

9 managed care and non-managed care plans.

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

11 group long-term care insurance policy is replaced by

12 another long-term care insurance policy purchased

13 by the same policyholder, the succeeding carrier

14 shall offer coverage to all persons covered under the

15 old group policy on its date of termination. Coverage

16 under the new group policy shall not result in any

17 exclusion for preexisting conditions that would have

18 been covered under the group policy being replaced.

19 ‘‘(6) PREMIUMS FOR REPLACEMENT OR CON20 VERSION.—In the case of a converted policy or a re21 placement policy issued by the same carrier that had

22 issued a previous policy and issued to the same

23 group or its successor, or issued to any individual

24 covered by the previous group policy, the premium

25 shall be calculated on the basis of the insured’s age
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1 at the inception of coverage under the earliest pre2 vious policy which became the basis for the con3 verted or replaced policy in the case of benefits

4 which are the same as benefits that were provided

5 under any earlier policy.

6 ‘‘(c) GUARANTEED ISSUANCE.—

7 ‘‘(1) IN GENERAL.—A carrier that sells or is8 sues long-term care insurance policies shall guaran9 tee that such policies shall be sold or issued to an

10 individual if such individual meets the minimum

11 medical underwriting requirements of such policy.

12 ‘‘(2) POLICY UPGRADES.—

13 ‘‘(A) RIGHT TO PURCHASE POLICY THAT

14 CONFORMS TO STANDARDS.—Each long-term

15 care insurance policy in effect as of the effective

16 date of the Standards established under section

17 2102 shall permit the policyholder to purchase

18 a policy that meets all such standards and the

19 carrier shall directly inform each such policy20 holder of the right to purchase an upgraded

21 policy under this paragraph.

22 ‘‘(B) RIGHT TO PURCHASE SUPPLEMENTAL

23 UPGRADES.—

24 ‘‘(i) IN GENERAL.—If a carrier of a

25 long-term care insurance policy provides
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1 for the issuance of policies with benefits

2 that are greater than the benefits pre3 viously provided under such policies, sub4 ject to clause (ii), the policyholder of a

5 long-term care insurance policy previously

6 issued by that carrier and still in force has

7 the right to purchase a policy that provides

8 for such upgraded benefits and the carrier

9 shall directly inform each such policyholder

10 of the existence of such an upgraded policy

11 and the right to purchase an upgraded pol12 icy under this paragraph.

13 ‘‘(ii) LIMITATION.—Clause (i) shall

14 not apply to a policyholder who is eligible

15 (or was eligible at any time within the pre16 vious 3 months) for benefits under the

17 long-term care insurance policy.

18 ‘‘(C) LIMITATION ON MEDICAL UNDER19 WRITING OF UPGRADED POLICIES REQUIRED

20 UNDER FEDERAL OR STATE LAW.—With re21 spect to a policy that offers upgraded benefits

22 in accordance with a new Federal or State re23 quirement, the carrier issuing the policy may

24 not impose additional medical underwriting cri25 teria, except that—
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1 ‘‘(i) the carrier may establish a pre2 mium that is higher than the premium for

3 the previously issued policy only for the

4 benefits in the upgraded policy that exceed

5 the benefits in the previously issued policy,

6 to the extent consistent with a methodol7 ogy developed by the NAIC, and

8 ‘‘(ii) the carrier may impose addi9 tional medical underwriting criteria that is

10 not more stringent than that used for new

11 prospective purchasers—

12 ‘‘(I) in relation to benefits to the

13 extent they were not included in the

14 previously issued policy, and

15 ‘‘(II) in cases where the State in16 surance commissioner determines that

17 the absence of such underwriting

18 would result in adverse selection of in19 sured risks.

20 ‘‘(D) LIMITATION ON MEDICAL UNDER21 WRITING ON SUPPLEMENTAL UPGRADES.—With

22 respect to an upgraded long-term care insur23 ance policy that offers benefits that are greater

24 than the benefits required under Federal or
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1 State requirements, the carrier issuing the pol2 icy—

3 ‘‘(i) except as provided in clause (ii),

4 may not impose additional medical under5 writing criteria in relation to benefits that

6 are the same as the benefits under the pre7 viously issued policy and the premiums

8 charged with respect to such benefits may

9 not be greater than the premiums charged

10 with respect to such benefits under the

11 previously issued policy, but

12 ‘‘(ii) may impose additional medical

13 underwriting criteria in cases where the

14 State insurance commissioner determines

15 that the absence of such underwriting

16 would result in adverse selection of insured

17 risks.

18 ‘‘(E) APPROVAL OF HIGHER PREMIUMS

19 REQUIRED.—In the case of a carrier that in20 tends to offer upgraded policies at premiums

21 that are higher than the premiums charged for

22 their existing policies, such carrier must have

23 such higher premiums approved through the

24 process specified in section 2165.
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1 ‘‘(F) CREDIT TOWARD NONFORFEITURE

2 BENEFIT.—In the case that a policy is replaced

3 with an upgraded policy, the upgraded policy

4 shall provide for credit designed to assure re5 tention of a policyholder’s equity, according to

6 a formula specified by the NAIC, toward the

7 nonforfeiture benefit for periods of coverage

8 under the previous long-term care insurance

9 policy issued by the same carrier.

10 ‘‘(d) EFFECT OF INCAPACITATION.—

11 ‘‘(1) IN GENERAL.—Except as provided in para12 graph (2), a long-term care insurance policy in effect

13 as of the effective date of the Standards established

14 under section 2102 may not be canceled for

15 nonpayment if the policy holder is determined by a

16 long-term care provider, physician or other health

17 care provider, in accordance with a uniform assess18 ment under section 2125, to be cognitively, mentally,

19 or physically incapacitated.

20 ‘‘(2) PERMITTED CANCELLATION.—A long-term

21 care insurance policy may be canceled under para22 graph (1) for nonpayment if—

23 ‘‘(A) the period of such nonpayment is in

24 excess of 30 days; and
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1 ‘‘(B) notice of intent to cancel (and right

2 of reinstatement under paragraph (3)) is re3 ceived by all representatives designated by the

4 policyholder or certificate holder (in accordance

5 with section 2129) after the expiration of the

6 period specified in subparagraph (A) and not

7 less than 30 days prior to such cancellation.

8 ‘‘(3) REINSTATEMENT.—If a long-term care in9 surance policy lapses or is canceled for nonpayment

10 under this subsection, the policy may be reinstated

11 without any loss in the policyholder’s equity (for

12 purposes of a nonforfeiture benefit) if the policy13 holder pays all premiums owing within a period

14 (specified in the standards and of not less than 6

15 months) after the date of the lapse or cancellation.

16 ‘‘Subpart 2—Sales Practices

17 ‘‘CERTIFICATION OF TRAINING OF SALES AGENTS

18 ‘‘SEC. 2131. A person may not sell or offer for sale

19 a long-term care insurance policy unless the person has

20 been certified under the State regulatory program (or, in

21 nonregulatory States, by the Secretary) as having received

22 training (in accordance with section 2112) with respect

23 to such policies in accordance with the Standards.

24 ‘‘DUTY OF GOOD FAITH AND FAIR DEALING

25 ‘‘SEC. 2132. (a) IN GENERAL.—Each person who is

26 selling or offering for sale a long-term care insurance pol-
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1 icy has the duty of good faith and fair dealing to the pur2 chaser or potential purchaser of such a policy.

3 ‘‘(b) PROHIBITED PRACTICES.—A person is consid4 ered to have violated subsection (a) if the person engages

5 in any of the following practices:

6 ‘‘(1) TWISTING.—

7 ‘‘(A) IN GENERAL.—Knowingly making

8 any misleading representation or incomplete or

9 fraudulent comparison of any long-term care in10 surance policy or carrier for the purpose of in11 ducing, or tending to induce, any person to re12 tain or effect a change with respect to a long13 term care insurance policy.

14 ‘‘(B) POLICY REPLACEMENT FORM.—With

15 respect to any person who elects to replace or

16 effect a change in a long-term care insurance

17 policy, the individual that is selling such policy

18 shall ensure that such person completes a policy

19 replacement form developed by the NAIC. A

20 copy of such form shall be retained by the sell21 ing individual and additional copies shall be de22 livered by the selling individual to the old policy

23 carrier, the new carrier, and the State insur24 ance commissioner.
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1 ‘‘(2) HIGH PRESSURE TACTICS.—Employing

2 any method of marketing having the effect of, or in3 tending to, induce the purchase of long-term care in4 surance policy through undue pressure.

5 ‘‘(3) COLD LEAD ADVERTISING.—Making use

6 directly or indirectly of any method of marketing

7 which fails to disclose in a conspicuous manner that

8 a purpose of the method of marketing is solicitation

9 of insurance and that contact will be made by an in10 surance agent or insurance company.

11 ‘‘(4) ADDITIONAL PRACTICES.—Such sales

12 practices as the Secretary may specify in regula13 tions.

14 ‘‘(c) PERIODIC REPORTS AND ADDITIONAL UNFAIR

15 SALES PRACTICES.—The NAIC shall periodically report

16 to the Secretary on improper sales practices that should

17 be treated (under subsection (b)(4)) as violations of sub18 section (a). Any additional unfair sales practices specified

19 in regulations referred to in subsection (b)(4) shall only

20 apply to activities occurring after the date of promulgation

21 of the regulations.

22 ‘‘(d) PROHIBITION OF COMPLETION OF MEDICAL

23 HISTORIES.—A person who is selling or offering for sale

24 a long-term care insurance policy may not complete the

25 medical history portion of an application for any other in-
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1 dividual (other than a relative of the person). Except as

2 provided in the previous sentence, the medical history por3 tion of such application may be completed by any individ4 ual (including the applicant, an immediate relative of the

5 applicant, or the applicant’s physician).

6 ‘‘FINANCIAL GUIDELINES

7 ‘‘SEC. 2133. The NAIC, simultaneously with the es8 tablishment of the Standards, shall develop recommended

9 minimum financial guidelines (including income, assets,

10 and other criteria) that an individual should meet before

11 purchasing a long-term care insurance policy. Such guide12 lines also shall include a requirement that every prospec13 tive purchaser is provided, before a purchase of a long14 term care policy, a written statement, in prominent type15 face, that long-term care insurance is not an appropriate

16 product for every consumer to purchase and that a pro17 spective purchaser should consider whether the pur18 chaser’s financial situation necessitates such a purchase.

19 ‘‘PROHIBITION OF SALE OR ISSUANCE TO MEDICAID

20 BENEFICIARIES

21 ‘‘SEC. 2134. A person may not knowingly sell or issue

22 a long-term care insurance policy to an individual who is

23 eligible for medical assistance (other than only as a quali24 fied medicare beneficiary) under title XIX.
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1 ‘‘PROHIBITION OF SALE OR ISSUANCE OF DUPLICATE

2 POLICIES

3 ‘‘SEC. 2135. (a) IN GENERAL.—A person may not

4 sell or issue a long-term care insurance policy—

5 ‘‘(1) knowing that the policy provides for cov6 erage that, when combined with coverage provided in

7 a service-benefit long-term care insurance policy (as

8 defined in subsection (b)) in effect for the benefit of

9 the same individual, would result in greater than

10 100 percent reimbursement for covered services (un11 less the policy is intended to replace such other pol12 icy), or

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

14 individual (or a representative of the individual) pro15 vides a written statement to the effect that the cov16 erage—

17 ‘‘(A) does not duplicate other coverage in

18 effect under a service-benefit long-term care in19 surance policy, or

20 ‘‘(B) will replace another service-benefit

21 long-term care insurance policy.

22 ‘‘(b) SERVICE-BENEFIT LONG-TERM CARE INSUR23 ANCE POLICY DEFINED.—In subsection (a), the term

24 ‘service-benefit long-term care insurance policy’ means a

25 long-term care insurance policy which provides benefits
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1 which are a percentage of the actual or reasonable cost

2 of the services furnished.

3 ‘‘PROVISION OF OUTLINE OF COVERAGE AND OTHER

4 INFORMATION

5 ‘‘SEC. 2136. (a) OUTLINE OF COVERAGE.—A person

6 may not sell or offer for a sale a long-term care insurance

7 policy for the benefit of an individual without providing

8 to the purchaser or potential purchaser (or representa9 tive), before such purchase, with—

10 ‘‘(1) a copy of the guidelines developed under

11 section 2133 and an explanation of such guidelines;

12 ‘‘(2) the consumer guide on the purchase of

13 long-term care insurance policies (written by the

14 NAIC), which shall include a personal assessment

15 form to assist in determining the purchaser’s finan16 cial and other need for long-term care insurance;

17 and

18 ‘‘(3) an outline of coverage that includes the in19 formation required under subsection (b).

20 In applying this subsection in the case of a group long21 term care insurance policy, the carrier issuing the policy

22 is responsible for the provision of the outline and informa23 tion to each certificate holder before the policy takes effect

24 with respect to that certificate holder.

25 ‘‘(b) CONTENTS OF OUTLINE OF COVERAGE.—The

26 outline of coverage for each long-term care insurance pol-
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1 icy shall be in a uniform format, utilizing simple, easily

2 understood English, as prescribed in guidelines issued by

3 the NAIC. Each outline shall include (in accordance with

4 the Standards) at least the following:

5 ‘‘(1) A description of the principal benefits and

6 coverage (including any inflation protection) under

7 the policy, how such benefits and coverage compare

8 to the range of potential benefits and coverage avail9 able under such policies, and the eligibility criteria

10 (if any) for such benefits.

11 ‘‘(2) A statement of the principal exclusions, re12 ductions, and limitations contained in the policy.

13 ‘‘(3) A statement of the terms under which the

14 policy (or certificate in the case of a group policy)

15 may be continued in force or discontinued and the

16 terms for continuation or conversion.

17 ‘‘(4) A statement that the outline of coverage is

18 a summary only, not a contract of insurance, and

19 that the policy (or, in the case of a certificate, the

20 group policy under which the certificate is issued)

21 contains the contractual provisions that govern.

22 ‘‘(5) A description of the terms, specified in

23 section 2141, under which a policy may be returned

24 and the premium refunded.
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1 ‘‘(6) Information (supplied either by the NAIC

2 or by the Secretary) on national average nursing

3 home lengths of stay and percentage of the popu4 lation that requires nursing facility or home care

5 services, broken down by age groups.

6 ‘‘(7) A statement of whether the carrier has a

7 right to increase premiums and, if such right exists,

8 the extent to which such premiums may be increased

9 and the circumstances under which such an increase

10 may occur.

11 ‘‘(8) Information (supplied either by the State

12 commissioner of insurance or the Secretary) on the

13 average costs and range of costs for home care and

14 nursing facility care in the State of residence and in15 formation (in graphic form) on the relationship of

16 the benefits provided under the policy to such State

17 average costs.

18 ‘‘(9) Information (in graphic form) on the pro19 jected effect of inflation on the value of benefits pro20 vided under the policy during a period of at least 20

21 years, except that such information need not cover

22 a period beyond the age of 85.

23 ‘‘(c) CERTIFICATES.—A certificate issued pursuant

24 to a group long-term care insurance policy shall include—
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1 ‘‘(1) a description of the principal benefits and

2 coverage provided in the policy;

3 ‘‘(2) a statement of the principal exclusions, re4 ductions, and limitations contained in the policy; and

5 ‘‘(3) a statement that the group master policy

6 determines governing contractual provisions.

7 ‘‘(d) LONG-TERM CARE AS PART OF LIFE INSUR8 ANCE.—In the case of a long-term care insurance policy

9 issued as a part of or a rider on a life insurance policy,

10 at the time of policy delivery there shall be provided a pol11 icy summary that includes—

12 ‘‘(1) an explanation of how the long-term care

13 benefits interact with other components of the policy

14 (including deductions from death benefits);

15 ‘‘(2) an illustration of the amount of benefits,

16 the length of benefit, and the guaranteed lifetime

17 benefits (if any) for each covered person;

18 ‘‘(3) principal exclusions, reductions, and limi19 tations on benefits of long-term care; and

20 ‘‘(4) a description of the tax consequences of

21 redeeming the life insurance policy to pay for long22 term care.

23 ‘‘(e) ENFORCEMENT OF REPRESENTATIONS OF AD24 DITIONAL BENEFITS.—If a purchaser of a long-term care
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1 insurance policy establishes, by a preponderance of the evi2 dence, that—

3 ‘‘(1) an agent sold, offered for sale, or issued

4 a long-term care insurance policy,

5 ‘‘(2) the agent represented that the policy con6 tained benefits which are in addition to the benefits

7 otherwise provided under the policy, and

8 ‘‘(3) the purchaser of the policy reasonably re9 lied upon such misrepresentations in purchasing the

10 policy,

11 then the carrier issuing the policy is liable to the purchaser

12 either for the cost of purchasing the services that would

13 have been covered if the benefits had been included in the

14 policy or for the provision of the additional benefits so rep15 resented. The carrier may recover the costs incurred under

16 this subsection from the agent whose actions gave rise to

17 such expenses.

18 ‘‘INFORMATION ON FINANCIAL ARRANGEMENTS WITH

19 GROUPS

20 ‘‘SEC. 2137. A person may not sell or offer for sale

21 a long-term care insurance policy to a member of an orga22 nization with which the person (or the carrier issuing the

23 policy) has a financial arrangement of any type unless the

24 person discloses (in accordance with the Standards) the

25 nature of the financial arrangement.
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1 ‘‘Subpart 3—Carrier Standards

2 ‘‘REFUND OF PREMIUMS (FREE LOOK)

3 ‘‘SEC. 2141. If an application for a long-term care

4 insurance policy (or for a certificate under a group long5 term care insurance policy) is denied or an applicant re6 turns a policy or certificate within 30 days of the date

7 of its issuance, the carrier shall refund directly to the ap8 plicant, not later than 30 days after the date of the denial

9 or return, any premiums paid with respect to such a pol10 icy.

11 ‘‘MAILING OF POLICY

12 ‘‘SEC. 2142. If an application for a long-term care

13 insurance policy (or for a certificate under a group long14 term care insurance policy) is approved, the carrier shall

15 transmit to the applicant the policy of insurance not later

16 than 30 days after the date of the approval.

17 ‘‘PROMPT PAYMENT

18 ‘‘SEC. 2143. A carrier issuing a long-term care insur19 ance policy shall make payment promptly to satisfy claims

20 filed under such policy.

21 ‘‘INFORMATION ON CLAIMS DENIALS

22 ‘‘SEC. 2144. If a claim under a long-term care insur23 ance policy is denied or results in less than full payment,

24 the carrier shall, within 30 days of the date of the denial

25 or partial payment—
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1 ‘‘(1) provide to the policyholder and to the per2 son submitting the claim a written explanation of

3 the reasons for the denial or partial payment;

4 ‘‘(2) make available to such person all informa5 tion directly relating to such denial or partial pay6 ment; and

7 ‘‘(3) inform the individual of the process estab8 lished under section 2145(f) for the appeal of the

9 claim denial.

10 ‘‘LIMITATION ON RESCISSION, CANCELLATION, OR

11 NONRENEWAL OR DENIAL OF CLAIMS

12 ‘‘SEC. 2145. (a) LIMITATION.—

13 ‘‘(1) IN GENERAL.—A carrier may rescind, can14 cel, or nonrenew a long-term care insurance policy or

15 certificate, or deny an otherwise valid claim under

16 such policy, only in accordance with this section.

17 ‘‘(2) TIMELY RESOLUTION OF INSURABILITY

18 QUESTIONS.—Before issuing a long-term care insur19 ance policy or certificate with respect to coverage of

20 an individual, the carrier shall resolve all reasonable

21 questions relating to the insurability of the individ22 ual (including, if the carrier underwrites such cov23 erage, the completion of such underwriting). No

24 claim under a long-term care insurance policy may

25 be denied on the basis of a failure to disclose infor26 mation at the time of delivery (and issuance for de-
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1 livery) of the policy if the application for the policy

2 failed to request such information.

3 ‘‘(b) NONPAYMENT OF PREMIUMS.—A carrier may

4 cancel or nonrenew a long-term care insurance policy or

5 certificate for nonpayment of premiums, except as pro6 vided in section 2130(d).

7 ‘‘(c) MISREPRESENTATION RELATING TO INSURABIL8 ITY.—A carrier may cancel or nonrenew a long-term care

9 insurance policy or certificate, or deny an otherwise valid

10 claim under such policy or certificate based upon mis11 representation of facts relating to the insurability of the

12 individual, only—

13 ‘‘(1) based upon clear and convincing evi14 dence—

15 ‘‘(A) of misrepresentation of information

16 material to the acceptance for coverage, and

17 ‘‘(B) which involves a chronic condition or

18 dates of treatment before the date of the policy

19 application; and

20 ‘‘(2) if the carrier notifies the policyholder of

21 the carrier’s intention to cancel or nonrenew the pol22 icy or certificate or deny the claim not later than—

23 ‘‘(A) 60 days after the date the carrier dis24 covers the misrepresentation, or
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1 ‘‘(B) 6 months (or 2 years in the case of

2 clear and convincing evidence that the misrepre3 sentation pertains to the condition for which

4 benefits are sought) after the date of issuance

5 of the policy or certificate,

6 whichever is earlier.

7 ‘‘(d) FRAUD RELATING TO INSURABILITY.—A carrier

8 may rescind, cancel, or nonrenew a long-term care insur9 ance policy or certificate, or deny an otherwise valid claim

10 under such policy or certificate based upon fraud relating

11 to the insurability of the individual, only—

12 ‘‘(1) based upon clear and convincing evi13 dence—

14 ‘‘(A) of fraud consisting of the knowing

15 and intentional misstatement of information

16 material to the acceptance for coverage, and

17 ‘‘(B) which involves a chronic condition or

18 dates of treatment before the date of the policy

19 application; and

20 ‘‘(2) if the carrier notifies the policyholder of

21 the carrier’s intention to rescind, cancel, or

22 nonrenew the policy or certificate or deny the claim

23 not later than 60 days after the date the carrier dis24 covers the fraud.
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1 ‘‘(e) FRAUD OR MISREPRESENTATION RELATING TO

2 A GROUP POLICY.—In the case of a policyholder or certifi3 cate holder who is insured as part of a group, within 2

4 years after the date of issuance of the policy or certificate,

5 a carrier may rescind, cancel, or nonrenew the policy or

6 certificate, or deny an otherwise valid claim under such

7 policy, based upon fraud or misrepresentation of facts re8 lating to that individual’s status as a member of the group

9 or other relationship to that group at the time of initial

10 coverage of that individual under the policy or certificate.

11 ‘‘(f) APPEALS PROCESS.—A policyholder or certifi12 cate holder whose policy or certificate has been rescinded,

13 canceled, or nonrenewed, or whose claim has been fully

14 or partly denied, or whose claim has not been acted upon

15 with reasonable promptness shall have the right to a re16 view of such rescission, cancellation, nonrenewal, or denial

17 under a process specified in the Standards and shall be

18 granted an opportunity for a fair hearing by the carrier

19 in any case where the amount in controversy is at least

20 $500. The Standards may provide for an appeal to the

21 State commissioner of insurance in an appropriate State.

22 ‘‘REPORTING OF INFORMATION; ACCESS TO INFORMATION

23 ‘‘SEC. 2146. (a) REPORTING OF INFORMATION.—

24 Each carrier issuing a long-term care insurance policy

25 shall periodically (not less often than annually) report to

26 the Commissioner or superintendent of insurance of each
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1 State in which the policy is sold, and shall make available

2 to the Secretary, upon request, information respecting the

3 following:

4 ‘‘(1) The long-term care insurance policies of

5 the carrier that are in force.

6 ‘‘(2) Utilization of benefits and payment of

7 claims under the policy.

8 ‘‘(3) The ages of individuals purchasing the pol9 icy.

10 ‘‘(4) Advertising and other marketing material

11 utilized in connection with the sale of such policies,

12 including a copy of each such item.

13 ‘‘(5) Total premiums written and premiums

14 earned in the previous year.

15 ‘‘(6) The most recent premiums for such poli16 cies and the premiums imposed for such policies

17 during the previous 5-year period.

18 ‘‘(7) The absolute numbers and rates of lapse,

19 replacement, and rescission for each of its various

20 types of policies (and by agent for those agents who

21 sold at least 10 such policies and are in the highest

22 20th percentile of agents for that carrier with re23 spect to each such rate). For purposes of this para24 graph, there shall be a separate category for a lapse

25 due to the death of the policyholder.
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1 ‘‘(8) The number of claims denied for such poli2 cies and the ratio of claims denied to claims submit3 ted for such policies. For purposes of this para4 graph, there shall not be included as a claim submit5 ted or denied any claim that is denied solely because

6 of the failure to meet a deductible, waiting period,

7 or exclusionary period.

8 ‘‘(9) Complaints received with respect to such

9 policies, and the resolution of such complaints.

10 ‘‘(10) The number of claims under such policies

11 being appealed to the commissioner of insurance of

12 the State and cases being litigated in response to de13 nials of claims or other policy disputes.

14 ‘‘(11) The number of denied claims that are re15 versed on appeal to the commissioner of insurance or

16 through litigation (as a percentage of claim denials

17 so appealed or being litigated) for such policies.

18 ‘‘(12) Such other information as is specified in

19 the Standards.

20 Information under this subsection shall be reported in a

21 format specified in the Standards.

22 ‘‘(b) ACCESS TO INFORMATION.—Each such carrier

23 shall make available to the Secretary and the Commis24 sioner or superintendent of insurance of each State in
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1 which the policy is sold such additional information as the

2 Secretary, Commissioner, or superintendent, may request.

3 ‘‘(c) AVAILABILITY OF INFORMATION.—The State

4 commissioner of insurance of each State shall make infor5 mation under this section available, upon request, to the

6 NAIC and, to the extent consistent with other laws, to

7 other interested parties.

8 ‘‘PROVISION OF OUTLINE OF COVERAGE FOR RENEWALS

9 ‘‘SEC. 2147. Each carrier issuing a long-term care

10 insurance policy shall provide, at the time of renewal of

11 such a policy or, in the case of a policy issued through

12 a group, the anniversary date of purchase of the policy

13 an outline of coverage described in section 2136 to each

14 policyholder.

15 ‘‘PART C—ENFORCEMENT OF STANDARDS

16 ‘‘Subpart 1—General Provisions

17 ‘‘SECRETARIAL ENFORCEMENT AUTHORITY

18 ‘‘SEC. 2151. (a) IN GENERAL.—The Secretary shall

19 exercise authority under this section in the case of a non20 regulatory State.

21 ‘‘(b) LOSS OF STATUS.—If an association or its sub22 sidiary or a carrier is determined under this section not

23 to be in compliance with applicable Standards in a non24 regulatory State and is not determined to have come into

25 compliance with such applicable Standards at the end of

26 the 6-month period beginning on the date of the initial
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1 determination of such noncompliance, any long-term care

2 insurance policy issued, sold, or offered for sale by such

3 association or its subsidiary or carrier in such State shall

4 be considered to be issued, sold, or offered for sale in viola5 tion of section 2101(a).

6 ‘‘COMPLAINTS AND INVESTIGATIONS

7 ‘‘SEC. 2152. (a) IN GENERAL.—The Secretary shall

8 establish procedures—

9 ‘‘(1) for individuals and entities to file written,

10 signed complaints respecting alleged violations of the

11 requirements of part B,

12 ‘‘(2) for responding on a timely basis to such

13 complaints, and

14 ‘‘(3) for the investigation of—

15 ‘‘(A) those complaints which, on their face,

16 have a substantial probability of validity, and

17 ‘‘(B) such other alleged violations of the

18 requirements of part B as the Secretary deter19 mines to be appropriate.

20 ‘‘(b) CONDUCT OF INVESTIGATIONS.—In conducting

21 investigations under this section, the Secretary shall have

22 reasonable access to examine evidence of any person or

23 entity being investigated.

24 ‘‘(c) TREATMENT OF CARRIER VIOLATIONS.—For

25 purposes of this subpart, a carrier whose policy was sold,

26 offered for sale, or issued by an agent in violation of sub-
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1 part 2 of part B and who had any reason to know of such

2 violation but did not act immediately to correct such viola3 tion in good faith, shall be deemed to have violated the

4 provisions of such subpart.

5 ‘‘HEARINGS

6 ‘‘SEC. 2153. (a) IN GENERAL.—Before imposing an

7 order described in section 2154 against a person or entity

8 under this section for a violation of the requirements of

9 part B, the Secretary shall provide the person or entity

10 with notice and, upon request made within a reasonable

11 time (of not less than 30 days, as established by the Sec12 retary by regulation) of the date of the notice, a hearing

13 respecting the violation. If no hearing is so requested, the

14 Secretary shall impose a final and unappealable order.

15 ‘‘(b) CONDUCT OF HEARING.—Any hearing so re16 quested shall be conducted before an administrative law

17 judge under section 201. If no hearing is so requested,

18 the Secretary’s imposition of the order shall constitute a

19 final and unappealable order.

20 ‘‘(c) AUTHORITY IN HEARINGS.—

21 ‘‘(1) IN GENERAL.—In conducting hearings

22 under this section—

23 ‘‘(A) the Secretary and administrative law

24 judges shall have reasonable access to examine

25 evidence of any person or entity being inves26 tigated, and
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1 ‘‘(B) administrative law judges, may, if

2 necessary, compel by subpoena the attendance

3 of witnesses and the production of evidence at

4 any designated place or hearing.

5 ‘‘(2) ENFORCEMENT OF SUBPOENAS.—In case

6 of contumacy or refusal to obey a subpoena lawfully

7 issued under this subsection and upon application of

8 the Secretary, an appropriate district court of the

9 United States may issue an order requiring compli10 ance with such subpoena and any failure to obey

11 such order may be punished by such court as a con12 tempt thereof.

13 ‘‘(d) ISSUANCE OF ORDERS.—If the administrative

14 law judge determines, upon the preponderance of the evi15 dence received, that a person or entity named in the com16 plaint has violated the requirements of part B, the admin17 istrative law judge shall state the findings of fact and issue

18 and cause to be served on such person or entity an order

19 described in section 2154 which includes the findings and

20 the basis of the order.

21 ‘‘CEASE AND DESIST ORDER WITH CIVIL MONEY PENALTY

22 ‘‘SEC. 2154. (a) CEASE AND DESIST ORDER.—

23 ‘‘(1) IN GENERAL.—Subject to the succeeding

24 provisions of this section, the order under this sec25 tion—

26 ‘‘(A) shall require the person or entity—
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1 ‘‘(i) to cease and desist from such vio2 lations, and

3 ‘‘(ii) to pay a civil penalty in an

4 amount not to exceed $25,000 (or $15,000

5 in the case of a violation by an agent) for

6 each such violation; and

7 ‘‘(B) may require the person or entity to

8 take such other remedial action as is appro9 priate.

10 ‘‘(2) AMOUNT OF CIVIL PENALTY.—The amount

11 of a civil penalty under paragraph (1)(A)(ii) may

12 take into account the penalties imposed by a State

13 with respect to the same such violation.

14 ‘‘(3) PROCEDURES FOR CIVIL PENALTY.—The

15 provisions of section 1128A (other than the first

16 sentence of subsection (a) and other than subsection

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

18 subsection in the same manner as such provisions

19 apply to a penalty or proceeding under section

20 1128A(a).

21 ‘‘(b) CRIMINAL PENALTY FOR MULTIPLE AGENT

22 VIOLATIONS.—In the case of an agent who has committed

23 multiple violations of the requirements of subpart 2 of

24 part B, such agent also may be imprisoned not more than
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1 5 years, or fined in accordance with title 18, United States

2 Code, or both.

3 ‘‘(c) CORRECTIONS WITHIN 30 DAYS.—No order

4 shall be imposed under this section by reason of any viola5 tion if the person or entity establishes to the satisfaction

6 of the Secretary by clear and convincing evidence that—

7 ‘‘(1) such violation was due to reasonable cause

8 and was not intentional and was not due to willful

9 neglect, and

10 ‘‘(2) such violation is corrected within the 30-

11 day period beginning on the earliest date the person

12 or entity knew, or exercising reasonable diligence

13 should have known, that such a violation was occur14 ring.

15 ‘‘(d) WAIVER BY SECRETARY.—In the case of a viola16 tion which is due to reasonable cause and is not inten17 tional or due to willful neglect, the Secretary may waive

18 part or all of the civil money penalty imposed by sub19 section (a)(1)(A)(ii) to the extent that payment of such

20 penalty would be grossly excessive relative to the violation

21 involved and to the need for deterrence of violations.

22 ‘‘(e) REVIEW BY THE SECRETARY.—The decision and

23 order of an administrative law judge under this section

24 shall become the final agency decision and order of the

25 Secretary unless, within 30 days, the Secretary modifies
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1 or vacates the decision and order, in which case the deci2 sion and order of the Secretary shall become a final order

3 under this section.

4 ‘‘(f) JUDICIAL REVIEW.—A person or entity ad5 versely affected by a final order issued under this section

6 may, within 45 days after the date the final order is is7 sued, file a petition in the Court of Appeals for the appro8 priate circuit for review of the order.

9 ‘‘(g) ENFORCEMENT OF ORDERS.—If a person or en10 tity fails to comply with a final order issued under this

11 section against the person or entity after opportunity for

12 judicial review under subsection (f), the Secretary shall file

13 a suit to seek compliance with the order in any appropriate

14 district court of the United States. In any such suit, the

15 validity and appropriateness of the final order shall not

16 be subject to review.

17 ‘‘ESTABLISHMENT OF TOLL-FREE TELEPHONE HOTLINE

18 ‘‘SEC. 2155. In the case of a nonregulatory State,

19 the Secretary shall provide for the establishment of the

20 toll-free telephone information and complaint system de21 scribed in section 2163 in carrying out this subpart in the

22 State.
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1 ‘‘Subpart 2—Conditions for Approval of State

2 Regulatory Programs

3 ‘‘GENERAL REQUIREMENT

4 ‘‘SEC. 2161. (a) IN GENERAL.—The Secretary may

5 not approve a State regulatory program for purposes of

6 this title, unless the Secretary determines that the pro7 gram—

8 ‘‘(1) provides for the application and enforce9 ment of the Standards under part B; and

10 ‘‘(2) complies with the requirements of this sub11 part.

12 ‘‘(b) PERIODIC REVIEW OF STATE REGULATORY

13 PROGRAMS.—The Secretary periodically shall review State

14 regulatory programs to determine if they continue to meet

15 the requirements for approval under subsection (a) and

16 may determine whether a long-term care insurance policy

17 meets the applicable requirements of part B. If the Sec18 retary determines that a State regulatory program no

19 longer meets such requirements or is no longer in compli20 ance, before making a final determination that a State

21 regulatory program no longer meets such requirements,

22 the Secretary shall provide the State a hearing and an

23 opportunity of 6 months (or, in the case in which State

24 legislation is required in order for the State to be in com25 pliance with such requirements, such longer period as is
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1 necessary to enact such legislation) to adopt such a plan

2 of correction as would permit the program to continue to

3 meet such requirements. If the Secretary makes a final

4 determination that the State regulatory program, after

5 such a hearing and opportunity, fails to meet such require6 ments, the Secretary shall assume responsibility under

7 section 2101(b) with respect to certifying policies in the

8 State and shall exercise full authority under subpart 1 of

9 this part for persons and entities in the State.

10 ‘‘ENFORCEMENT

11 ‘‘SEC. 2162. (a) IN GENERAL.—The enforcement

12 process under each State regulatory program shall be de13 signed in a manner so as to secure compliance with the

14 Standards within 30 days after the date of a finding of

15 noncompliance with such Standards.

16 ‘‘(b) PROCESS.—The enforcement process under each

17 State regulatory program shall provide for—

18 ‘‘(1) procedures for individuals and entities to

19 file written, signed complaints respecting alleged vio20 lations of the Standards;

21 ‘‘(2) responding on a timely basis to such com22 plaints;

23 ‘‘(3) the investigation of—

24 ‘‘(A) those complaints which, on their face,

25 have a substantial probability of validity, and
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1 ‘‘(B) such other alleged violations of the

2 Standards as the program finds appropriate;

3 ‘‘(4) notice and opportunity for a hearing be4 fore executing sanctions;

5 ‘‘(5) the imposition of appropriate sanctions

6 (which include, in appropriate cases, the imposition

7 of a civil money penalty) in the case of a person or

8 entity determined to have violated the Standards;

9 and

10 ‘‘(6) an annual report to the Secretary on de11 tails concerning complaints filed under the process,

12 including the disposition of, and actions resulting

13 from, such complaints and cases where compliance

14 was not secured under subsection (a).

15 ‘‘(c) UNIFORM METHODOLOGY FOR RECORDING

16 COMPLAINTS.—The process under subsection (b) shall

17 provide for the recording of consumer complaints filed

18 under subsection (b)(1) in accordance with a uniform

19 methodology developed by the NAIC or the Secretary.

20 ‘‘TOLL-FREE TELEPHONE SYSTEM

21 ‘‘SEC. 2163. (a) IN GENERAL.—Each State regu22 latory program shall provide a toll-free telephone system

23 which provides—

24 ‘‘(1) for a system for the provision of informa25 tion concerning (A) how to file a complaint under

26 the process described in section 2162, (B) on com-
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1 plaints received under such process respecting par2 ticular long-term care insurance policies or carriers,

3 and (C) the compliance of particular long-term care

4 insurance policies or carriers with the requirements

5 of this title;

6 ‘‘(2) information to employers and consumers

7 about carriers that offer long-term care insurance

8 policies in the area covered by the regulatory author9 ity; and

10 ‘‘(3) information on how to obtain counseling to

11 evaluate the benefits, coverage, conditions, exclu12 sions, and cost of such policies.

13 ‘‘(b) ACCESS TO INFORMATION ON COMPLAINTS.—

14 ‘‘(1) IN GENERAL.—Each State regulatory pro15 gram shall provide, through the toll-free telephone

16 system under subsection (a), for consumer access to

17 complaints filed with the State commissioner or su18 perintendent of insurance with respect to long-term

19 care insurance policies. Any such disclosure of com20 plaint information shall be accompanied by a general

21 disclaimer stating that no representations are being

22 made as to the merits of such a complaint. Any com23 plaint that has resulted in a final order in favor of

24 an agent or issuer of a policy shall be removed from
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1 the records of complaints to which consumers have

2 access.

3 ‘‘(2) CONFIDENTIALITY.—The access provided

4 under paragraph (1) shall be limited to the extent

5 required to protect the confidentiality of the identity

6 of individual policyholders consistent with State law.

7 ‘‘PUBLICATION OF INFORMATION

8 ‘‘SEC. 2164. Each State regulatory program shall

9 publish annually a summary—

10 ‘‘(1) by carrier, of (A) the types of long-term

11 health care policies issued and (B) the types of com12 plaints filed concerning such policies, and

13 ‘‘(2) of the information reported by policy

14 under section 2146.

15 ‘‘PROCESS FOR APPROVAL OF PREMIUMS

16 ‘‘SEC. 2165. (a) IN GENERAL.—Each State regu17 latory program shall—

18 ‘‘(1) provide for a process for approving or dis19 approving proposed premium increases with respect

20 to long-term care insurance policies;

21 ‘‘(2) provide for the receipt and consideration of

22 public comments before approving or disapproving

23 such a premium increase;

24 ‘‘(3) provide, in the case of a proposed premium

25 increase described in section 2126(c)(2) or

26 2130(c)(2)(E), for—
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1 ‘‘(A) a public hearing at least 30 days be2 fore the date of approval or disapproval of any

3 such increase; and

4 ‘‘(B) for notice to be sent to each policy5 holder who would be affected by such proposed

6 increase at least 30 days before the date of the

7 public hearing under subparagraph (A).

8 ‘‘(b) CONDITIONS FOR APPROVAL.—No such pre9 mium increase shall be approved (or deemed approved) un10 less the proposed increase is accompanied by an actuarial

11 memorandum which—

12 ‘‘(1) includes a description of the assumptions

13 which justify the increase,

14 ‘‘(2) fully supports the increase,

15 ‘‘(3) contains such information as may be re16 quired under the Standards,

17 ‘‘(4) is made available to the public, and

18 ‘‘(5) is certified by an actuary who has no fi19 nancial relationship with the carrier applying for the

20 increase.

21 ‘‘(c) SECRETARIAL AUTHORITY.—In the case of a

22 State without an approved regulatory program, the Sec23 retary shall provide for the activities described in sub24 sections (a) and (b).
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1 ‘‘ANNUAL REPORTS

2 ‘‘SEC. 2166. Each State regulatory program shall

3 provide for annual reports to the Secretary on the imple4 mentation and enforcement of the Standards in the State.

5 ‘‘INCREASE IN FUNDING FOR LONG-TERM CARE INSUR6 ANCE, INFORMATION, COUNSELING, AND ASSISTANCE

7 THROUGH STATE REGULATORY PROGRAMS

8 ‘‘SEC. 2167. In addition to amounts otherwise au9 thorized to be appropriated, there are authorized to be ap10 propriated, under section 4360(f) of the Omnibus Budget

11 Reconciliation Act of 1990, $10,000,000 for each of fiscal

12 years 1994, 1995, and 1996, to fund grant programs

13 under such section for the purpose of providing informa14 tion, counseling, and assistance relating to long-term care

15 benefits under this title and the procurement of adequate

16 and appropriate long-term care insurance.’’.

17 SEC. 3. STUDY OF STANDARD MEASURE OF VALUE FOR

18 LONG-TERM CARE INSURANCE POLICIES.

19 The Secretary of Health and Human Services shall

20 provide for the conduct of a study to develop a standard

21 measure of value for long-term care insurance policies.

22 Not later than 2 years after the date of the enactment

23 of this title, the Secretary shall prepare and submit to the

24 appropriate committees of Congress a report concerning

25 such study.
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1 SEC. 4. WAIVER OF PAPERWORK REQUIREMENTS.

2 Chapter 35 of title 44, United States Code, and Exec3 utive Order 12291 shall not apply to information and reg4 ulations required for purposes of carrying out this Act and

5 the amendments made by this Act.

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