II

103D CONGRESS

1ST SESSION S. 203

To amend the Public Health Service Act to improve the quality of longterm care insurance through the establishment of Federal standards,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 26 (legislative day, JANUARY 5), 1993

Mr. KENNEDY (for himself, Mr. HATCH, Mr. METZENBAUM, Mr. SIMON, Mr.

WELLSTONE, Mr. WOFFORD, Mr. DURENBERGER, and Mr. BINGAMAN)

introduced the following bill; which was read twice and referred to the

Committee on Labor and Human Resources

A BILL

To amend the Public Health Service Act to improve the

quality of long-term care insurance through the establishment of Federal standards, and for other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Long-Term Care In5 surance Improvement and Accountability Act’’.
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1 SEC. 2. ESTABLISHMENT OF FEDERAL STANDARDS FOR

2 LONG-TERM CARE INSURANCE.

3 (a) IN GENERAL.—The Public Health Service Act is

4 amended—

5 (1) by redesignating title XXVII (42 U.S.C.

6 300cc et seq.) as title XXVIII; and

7 (2) by inserting after title XXVI the following

8 new title:

9 ‘‘TITLE XXVII—LONG-TERM CARE

10 INSURANCE STANDARDS

11 ‘‘PART A—PROMULGATION OF STANDARDS AND MODEL

12 BENEFITS

13 ‘‘SEC. 2701. STANDARDS.

14 ‘‘(a) APPLICATION OF STANDARDS.—

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

16 date of the enactment of this title, the National As17 sociation of Insurance Commissioners (hereafter in

18 this title referred to as the ‘NAIC’) promulgates

19 model standards that incorporate the requirements

20 of this title, such standards shall apply as provided

21 in this title.

22 ‘‘(2) DEFAULT.—If the NAIC does not promul23 gate the model standards under paragraph (1) by

24 the deadline established in that paragraph, the Sec25 retary shall promulgate, within 12 months after such

26 deadline, a regulation that provides standards that
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1 incorporate the requirements of this title and such

2 standards shall apply as provided for in this title.

3 ‘‘(3) RELATION TO STATE LAW.—Nothing in

4 this title shall be construed as preventing a State

5 from applying standards that provide greater protec6 tion to policyholders of long-term care insurance

7 policies than the standards promulgated under this

8 title, except that such State standards may not be

9 inconsistent or in conflict with any of the require10 ments of this title.

11 ‘‘(b) DEADLINE FOR APPLICATION OF STAND12 ARDS.—

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

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

15 ‘‘(A) the date the State adopts the stand16 ards established under subsection (a)(1); or

17 ‘‘(B) the date that is 1 year after the first

18 day of the first regular legislative session that

19 begins after the date such standards are first

20 established under subsection (a)(2);

21 whichever is earlier.

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

23 case of a State which the Secretary identifies, in

24 consultation with the NAIC, as—
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1 ‘‘(A) requiring State legislation (other than

2 legislation appropriating funds) in order for the

3 standards established under subsection (a) to be

4 applied; but

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

6 scheduled to meet within 1 year following the

7 beginning of the next regular legislative session

8 in which such legislation may be considered;

9 the date specified in this subsection is the first day

10 of the first calendar quarter beginning after the

11 close of the first legislative session of the State legis12 lature that begins on or after January 1, 1994. For

13 purposes of the previous sentence, in the case of a

14 State that has a 2-year legislative session, each year

15 of such session shall be deemed to be a separate reg16 ular session of the State legislature.

17 ‘‘(c) ITEMS INCLUDED IN STANDARDS.—The stand18 ards promulgated under subsection (a) shall include—

19 ‘‘(1) minimum Federal standards for long-term

20 care insurance consistent with the provisions of this

21 title;

22 ‘‘(2) standards for the enhanced protection of

23 consumers with long-term care insurance;

24 ‘‘(3) procedures for the modification of the

25 standards established under paragraph (1) in a
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1 manner consistent with future laws to expand exist2 ing Federal or State long-term care benefits or es3 tablish a comprehensive Federal or State long-term

4 care benefit program; and

5 ‘‘(4) other activities determined appropriate by

6 Congress.

7 ‘‘(d) CONSULTATION.—In establishing standards and

8 models of benefits under this section, the Secretary shall

9 provide for and consult with an advisory committee to be

10 chosen by the Secretary, and composed of—

11 ‘‘(1) three individuals who are representatives

12 of carriers;

13 ‘‘(2) three individuals who are representatives

14 of consumer groups;

15 ‘‘(3) three representatives who are representa16 tives of providers of long-term care services;

17 ‘‘(4) three other individuals who are not rep18 resentatives of carriers or of providers of long-term

19 care services and who have expertise in the delivery

20 and financing of such services; and

21 ‘‘(5) the Secretary of Veterans Affairs.

22 ‘‘(e) DUTIES.—The advisory committee established

23 under subsection (d) shall—
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1 ‘‘(1) recommend the appropriate inflationary

2 index to be used with respect to the inflation protec3 tion benefit portion of the standards;

4 ‘‘(2) recommend the uniform needs assessment

5 mechanism to be used in determining the eligibility

6 of individuals for benefits under a policy;

7 ‘‘(3) recommend appropriate standards for ben8 efits under section 2715(c); and

9 ‘‘(4) perform such other activities as deter10 mined appropriate by the Secretary.

11 ‘‘(f) ADMINISTRATIVE PROVISIONS.—The following

12 provisions of section 1886(e)(6) of the Social Security Act

13 shall apply to the advisory committee chosen under sub14 section (d) in the same manner as such provisions apply

15 under such section:

16 ‘‘(1) Subparagraph (C) (relating to staffing and

17 administration).

18 ‘‘(2) Subparagraph (D) (relating to compensa19 tion of members).

20 ‘‘(3) Subparagraph (F) (relating to access to

21 information).

22 ‘‘(4) Subparagraph (G) (relating to use of

23 funds).

24 ‘‘(5) Subparagraph (H) (relating to periodic

25 GAO audits).
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1 ‘‘(6) Subparagraph (J) (relating to requests for

2 appropriations).

3 ‘‘PART B—ESTABLISHMENT AND IMPLEMENTATION OF

4 LONG-TERM CARE INSURANCE POLICY STANDARDS

5 ‘‘SEC. 2711. IMPLEMENTATION OF POLICY STANDARDS.

6 ‘‘(a) IN GENERAL.—

7 ‘‘(1) REGULATORY PROGRAM.—No long-term

8 care policy (as defined in section (2721)) may be is9 sued, sold, or offered for sale as a long-term care in10 surance policy in a State on or after the date speci11 fied in section 2701(b) unless—

12 ‘‘(A) the Secretary determines that the

13 State has established a regulatory program

14 that—

15 ‘‘(i) provides for the application and

16 enforcement of the standards established

17 under section 2701(a); and

18 ‘‘(ii) complies with the requirements

19 of subsection (b);

20 by the date specified in section 2701(b), and

21 the policy has been approved by the State com22 missioner or superintendent of insurance under

23 such program; or

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

25 a program, or if the State’s regulatory program
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1 has been decertified, the policy has been cer2 tified by the Secretary (in accordance with such

3 procedures as the Secretary may establish) as

4 meeting the standards established under section

5 2701(a) by the date specified in section

6 2701(b).

7 For purposes of this subsection, the advertising or

8 soliciting with respect to a policy, directly or indi9 rectly, shall be deemed the offering for sale of the

10 policy.

11 ‘‘(2) REVIEW OF STATE REGULATORY PRO12 GRAMS.—The Secretary periodically shall review reg13 ulatory programs described in paragraph (1)(A) to

14 determine if they continue to provide for the applica15 tion and enforcement of the standards and proce16 dures established under section 2701(a) and (b). If

17 the Secretary determines that a State regulatory

18 program no longer meets such standards and re19 quirements, before making a final determination, the

20 Secretary shall provide the State an opportunity to

21 adopt such a plan of correction as would permit the

22 program to continue to meet such standards and re23 quirements. If the Secretary makes a final deter24 mination that the State regulatory program, after

25 such an opportunity, fails to meet such standards
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1 and requirements, the Secretary shall assume re2 sponsibility under paragraph (1)(B) with respect to

3 certifying policies in the State and shall exercise full

4 authority under section 2701 for carriers, agents, or

5 associations or its subsidiary in the State plans in

6 the State.

7 ‘‘(b) ADDITIONAL REQUIREMENTS FOR APPROVAL

8 OF STATE REGULATORY PROGRAMS.—For purposes of

9 subsection (a)(1)(A)(ii), the requirements of this sub10 section for a State regulatory program are as follows:

11 ‘‘(1) ENFORCEMENT.—The enforcement under

12 the program—

13 ‘‘(A) shall be designed in a manner so as

14 to secure compliance with the standards within

15 30 days after the date of a finding of non16 compliance with such standards; and

17 ‘‘(B) shall provide for notice in the annual

18 report required under paragraph (5) to the Sec19 retary of cases where such compliance is not se20 cured within such 30-day period.

21 ‘‘(2) PROCESS.—The enforcement process

22 under each State regulatory program shall provide

23 for—
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1 ‘‘(A) procedures for individuals and enti2 ties to file written, signed complaints respecting

3 alleged violations of the standards;

4 ‘‘(B) responding on a timely basis to such

5 complaints;

6 ‘‘(C) the investigation of—

7 ‘‘(i) those complaints which have a

8 reasonable probability of validity, and

9 ‘‘(ii) such other alleged violations of

10 the standards as the program finds appro11 priate; and

12 ‘‘(D) the imposition of appropriate sanc13 tions (which include, in appropriate cases, the

14 imposition of a civil money penalty as provided

15 for in section 2718) in the case of a carrier,

16 agent, or association or its subsidiary deter17 mined to have violated the standards.

18 ‘‘(3) CONSUMER ACCESS TO COMPLIANCE IN19 FORMATION.—

20 ‘‘(A) IN GENERAL.—A State regulatory

21 program must provide for consumer access to

22 complaints filed with the State commissioner or

23 superintendent of insurance with respect to

24 long-term care insurance policies.
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1 ‘‘(B) CONFIDENTIALITY.—The access pro2 vided under subparagraph (A) shall be limited

3 to the extent required to protect the confiden4 tiality of the identity of individual policyholders.

5 ‘‘(4) PROCESS FOR APPROVAL OF PREMIUMS.—

6 ‘‘(A) IN GENERAL.—Each State regulatory

7 program shall—

8 ‘‘(i) provide for a process for approv9 ing or disapproving proposed premium in10 creases or decreases with respect to long11 term care insurance policies; and

12 ‘‘(ii) establish a policy for receipt and

13 consideration of public comments before

14 approving such a premium increase or de15 crease.

16 ‘‘(B) CONDITIONS FOR APPROVAL.—No

17 premium increase shall be approved (or deemed

18 approved) under subparagraph (A) unless the

19 proposed increase is accompanied by an actuar20 ial memorandum which—

21 ‘‘(i) includes a description of the as22 sumptions that justify the increase;

23 ‘‘(ii) contains such information as

24 may be required under the Standards; and

25 ‘‘(iii) is made available to the public.
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1 ‘‘(C) APPLICATION.—Except as provided in

2 subparagraph (D), this paragraph shall not

3 apply to a group long-term care insurance pol4 icy issued to a group described in section

5 4(E)(1) of the NAIC Long Term Care Insur6 ance Model Act (effective January 1991), ex7 cept that such group policy shall, pursuant to

8 guidelines developed by the NAIC, provide no9 tice to policyholders and certificate holders of

10 any premium change under such group policy.

11 ‘‘(D) EXCEPTION.—Subparagraph (C)

12 shall not apply to—

13 ‘‘(i) group conversion policies;

14 ‘‘(ii) the group continuation feature of

15 a group policy if the insurer separately

16 rates employee and continuation coverages;

17 and

18 ‘‘(iii) group policies where the func19 tion of the employer is limited solely to col20 lecting premiums (through payroll deduc21 tions or dues checkoff) and remitting them

22 to the insurer.

23 ‘‘(E) CONSTRUCTION.—Nothing in this

24 paragraph shall be construed as preventing the

25 NAIC from promulgating standards, or a State
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1 from enacting and enforcing laws, with respect

2 to premium rates or loss ratios for all, including

3 group, long-term care insurance policies.

4 ‘‘(5) ANNUAL REPORTS.—Each State regu5 latory program shall provide for annual reports to be

6 submitted to the Secretary on the implementation

7 and enforcement of the standards in the State, in8 cluding information concerning violations in excess

9 of 30 days.

10 ‘‘(6) ACCESS TO OTHER INFORMATION.—The

11 State regulatory program must provide for consumer

12 access to actuarial memoranda provided under para13 graph (4).

14 ‘‘(7) DEFAULT.—In the case of a State without

15 a regulatory program approved under subsection (a),

16 the Secretary shall provide for the enforcement ac17 tivities described in subsection (c).

18 ‘‘(c) SECRETARIAL ENFORCEMENT AUTHORITY.—

19 ‘‘(1) IN GENERAL.—The Secretary shall exer20 cise authority under this section in the case of a

21 State that does not have a regulatory program ap22 proved under this section.

23 ‘‘(2) COMPLAINTS AND INVESTIGATIONS.—The

24 Secretary shall establish procedures—
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1 ‘‘(A) for individuals and entities to file

2 written, signed complaints respecting alleged

3 violations of the requirements of this title;

4 ‘‘(B) for responding on a timely basis to

5 such complaints; and

6 ‘‘(C) for the investigation of—

7 ‘‘(i) those complaints that have a rea8 sonable probability of validity; and

9 ‘‘(ii) such other alleged violations of

10 the requirements of this title as the Sec11 retary determines to be appropriate.

12 In conducting investigations under this subsection,

13 agents of the Secretary shall have reasonable access

14 necessary to enable such agents to examine evidence

15 of any carrier, agent, or association or its subsidiary

16 being investigated.

17 ‘‘(3) HEARINGS.—

18 ‘‘(A) IN GENERAL.—Prior to imposing an

19 order described in paragraph (4) against a car20 rier, agent, or association or its subsidiary

21 under this section for a violation of the require22 ments of this title, the Secretary shall provide

23 the carrier, agent, association or subsidiary

24 with notice and, upon request made within a

25 reasonable time (of not less than 30 days, as
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1 established by the Secretary by regulation) of

2 the date of the notice, a hearing respecting the

3 violation.

4 ‘‘(B) CONDUCT OF HEARING.—Any hear5 ing requested under subparagraph (A) shall be

6 conducted before an administrative law judge.

7 If no hearing is so requested, the Secretary’s

8 imposition of the order shall constitute a final

9 and unappealable order.

10 ‘‘(C) AUTHORITY IN HEARINGS.—In con11 ducting hearings under this paragraph—

12 ‘‘(i) agents of the Secretary and ad13 ministrative law judges shall have reason14 able access necessary to enable such agents

15 and judges to examine evidence of any car16 rier, agent, or association or its subsidiary

17 being investigated; and

18 ‘‘(ii) administrative law judges, may,

19 if necessary, compel by subpoena the at20 tendance of witnesses and the production

21 of evidence at any designated place or

22 hearing.

23 In case of contumacy or refusal to obey a sub24 poena lawfully issued under this subparagraph

25 and upon application of the Secretary, an ap-
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1 propriate district court of the United States

2 may issue an order requiring compliance with

3 such subpoena and any failure to obey such

4 order may be punished by such court as a con5 tempt thereof.

6 ‘‘(D) ISSUANCE OF ORDERS.—If an admin7 istrative law judge determines in a hearing

8 under this paragraph, upon the preponderance

9 of the evidence received, that a carrier, agent,

10 or association or its subsidiary named in the

11 complaint has violated the requirements of this

12 title, the administrative law judge shall state

13 the findings of fact and issue and cause to be

14 served on such carrier, agent, association, or

15 subsidiary an order described in paragraph (4).

16 ‘‘(4) CEASE AND DESIST ORDER WITH CIVIL

17 MONEY PENALTY.—

18 ‘‘(A) IN GENERAL.—Subject to the provi19 sions of subparagraphs (B) through (F), an

20 order under this paragraph—

21 ‘‘(i) shall require the agent, associa22 tion or its subsidiary, or a carrier—

23 ‘‘(I) to cease and desist from

24 such violations; and
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1 ‘‘(II) to pay a civil penalty in an

2 amount not to exceed $15,000 in the

3 case of each agent, and not to exceed

4 $25,000 for each association or its

5 subsidiary or a carrier for each such

6 violation; and

7 ‘‘(ii) may require the agent, associa8 tion or its subsidiary, or a carrier to take

9 such other remedial action as is appro10 priate.

11 ‘‘(B) CORRECTIONS WITHIN 30 DAYS.—No

12 order shall be imposed under this paragraph by

13 reason of any violation if the carrier, agent, or

14 association or its subsidiary establishes to the

15 satisfaction of the Secretary that—

16 ‘‘(i) such violation was due to reason17 able cause and was not intentional and was

18 not due to willful neglect; and

19 ‘‘(ii) such violation is corrected within

20 the 30-day period beginning on the earliest

21 date the carrier, agent, association, or sub22 sidiary knew, or exercising reasonable dili23 gence could have known, that such a viola24 tion was occurring.
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1 ‘‘(C) WAIVER BY SECRETARY.—In the case

2 of a violation under this title that is due to rea3 sonable cause and not to willful neglect, the

4 Secretary may waive part or all of the civil

5 money penalty imposed under subparagraph

6 (A)(i)(II) to the extent that payment of such

7 penalty would be grossly excessive relative to

8 the violation involved and to the need for deter9 rence of violations.

10 ‘‘(D) ADMINISTRATIVE APPELLATE RE11 VIEW.—The decision and order of an adminis12 trative law judge under this paragraph shall be13 come the final agency decision and order of the

14 Secretary unless, within 30 days, the Secretary

15 modifies or vacates the decision and order, in

16 which case the decision and order of the Sec17 retary shall become a final order under this

18 paragraph.

19 ‘‘(E) JUDICIAL REVIEW.—A carrier, agent,

20 or association or its subsidiary or any other in21 dividual adversely affected by a final order is22 sued under this paragraph may, within 45 days

23 after the date the final order is issued, file a pe24 tition in the Court of Appeals for the appro25 priate circuit for review of the order.
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1 ‘‘(F) ENFORCEMENT OF ORDERS.—If a

2 carrier, agent, or association or its subsidiary

3 fails to comply with a final order issued under

4 this paragraph against the carrier, agent, asso5 ciation or subsidiary after opportunity for judi6 cial review under subparagraph (E), the Sec7 retary shall file a suit to seek compliance with

8 the order in any appropriate district court of

9 the United States. In any such suit, the validity

10 and appropriateness of the final order shall not

11 be subject to review.

12 ‘‘(d) DEMONSTRATION GRANT PROGRAM.—

13 ‘‘(1) IN GENERAL.—The Secretary may award

14 grants to States for the establishment of demonstra15 tion programs to improve the enforcement within

16 such States of long-term care insurance standards

17 applicable under this title.

18 ‘‘(2) APPLICATION.—To be eligible to receive a

19 grant under paragraph (1), a State shall prepare

20 and submit to the Secretary an application at such

21 time, in such manner, and containing such informa22 tion as the Secretary may require, including a de23 scription of the program for which the State intends

24 to use the amounts provided under the grant.
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1 ‘‘(3) MINIMUM AMOUNT OF GRANTS.—The

2 amount of a grant awarded under this subsection

3 shall not be less than $100,000.

4 ‘‘(4) EVALUATION.—A State that receives a

5 grant under this subsection shall comply with such

6 evaluation procedures as the Secretary shall by regu7 lation establish. The Secretary shall utilize such

8 evaluations to conduct an overall evaluation of the

9 results of the demonstration programs established

10 under this section.

11 ‘‘(5) AUTHORIZATION OF APPROPRIATIONS.—

12 There are authorized to be appropriated to carry out

13 this subsection, $5,000,000 for each of the fiscal

14 years 1993 through 1997.

15 ‘‘SEC. 2712. REGULATION OF SALES PRACTICES.

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

17 ‘‘(1) IN GENERAL.—Each agent (as defined in

18 section 2733) or association that is selling or offer19 ing for sale a long-term care insurance policy has

20 the duty of good faith and fair dealing to the pur21 chaser or potential purchaser of such a policy.

22 ‘‘(2) PROHIBITED PRACTICES.—An agent or as23 sociation is considered to have violated paragraph

24 (1) if the agent or association engages in any of the

25 following practices:
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1 ‘‘(A) TWISTING.—

2 ‘‘(i) IN GENERAL.—Knowingly making

3 any misleading representation (including

4 the inaccurate completion of medical his5 tories) or incomplete or fraudulent com6 parison of any long-term care insurance

7 policy or insurers for the purpose of induc8 ing, or tending to induce, any person to re9 tain or effect a change with respect to a

10 long-term care insurance policy.

11 ‘‘(ii) POLICY REPLACEMENT FORM.—

12 With respect to any person who elects to

13 replace or effect a change in a long-term

14 care insurance policy, the individual that is

15 selling such policy shall ensure that such

16 person completes a policy replacement

17 form developed by the NAIC. A copy of

18 such form shall be provided to such person

19 and additional copies shall be delivered by

20 the selling individual to the old policy is21 suer and the new issuer and kept on file

22 for inspection by the State regulatory

23 agency.

24 ‘‘(B) HIGH PRESSURE TACTICS.—Employ25 ing any method of marketing having the effect
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1 of, or intending to, induce the purchase of long2 term care insurance policy through force, fright,

3 threat or undue pressure, whether explicit or

4 implicit.

5 ‘‘(C) COLD LEAD ADVERTISING.—Making

6 use directly or indirectly of any method of mar7 keting which fails to disclose in a conspicuous

8 manner that a purpose of the method of mar9 keting is solicitation of insurance and that con10 tact will be made by an insurance agent or in11 surance company.

12 ‘‘(D) OTHERS.—Engaging in such other

13 practices determined inappropriate under guide14 lines issued by the NAIC.

15 ‘‘(b) FINANCIAL STANDARDS.—The NAIC shall de16 velop recommended financial minimum standards (includ17 ing both income and asset criteria) for the purpose of ad18 vising individuals considering the purchase of a long-term

19 care insurance policy.

20 ‘‘(c) PROHIBITION OF SALE OR ISSUANCE TO MEDIC21 AID BENEFICIARIES.—An agent, an association, or a car22 rier may not knowingly sell or issue a long-term care in23 surance policy to an individual who is eligible for medical

24 assistance under title XIX of the Social Security Act.
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1 ‘‘(d) PROHIBITION OF SALE OR ISSUANCE OF DUPLI2 CATE SERVICE BENEFIT POLICIES.—An agent, associa3 tion or its subsidiary, or a carrier may not sell or issue

4 a service-benefit long-term care insurance policy to an in5 dividual—

6 ‘‘(1) knowing that the policy provides for cov7 erage that duplicates coverage already provided in

8 another service-benefit long-term care insurance pol9 icy held by such individual (unless the policy is in10 tended to replace such other policy); or

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

12 individual (or a representative of the individual) pro13 vides a written statement to the effect that the cov14 erage—

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

16 effect under a service-benefit long-term care in17 surance policy; or

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

19 long-term care insurance policy.

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

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

22 which provides for benefits based on the type and amount

23 of services furnished.

24 ‘‘(e) PROHIBITION BASED ON ELIGIBILITY FOR

25 OTHER BENEFITS.—A carrier may not sell or issue a
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1 long-term care insurance policy that reduces, limits or co2 ordinates the benefits provided under the policy on the

3 basis that the policyholder has or is eligible for other long4 term care insurance coverage or benefits.

5 ‘‘(f) PROVISION OF OUTLINE OF COVERAGE.—No

6 agent, association or its subsidiary, or carrier may sell or

7 offer for a sale a long-term care insurance policy without

8 providing to the purchaser or potential purchaser (or rep9 resentative) an outline of coverage that complies with the

10 standards established under section 2701(a).

11 ‘‘(g) PENALTIES.—Any agent who sells, offers for

12 sale, or issues a long-term care insurance policy in viola13 tion of this section may be imprisoned not more than 5

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

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

16 of not to exceed $15,000 for each such violation. Any asso17 ciation or its subsidiary or carrier that sells, offers for

18 sale, or issues a long-term care insurance policy in viola19 tion of this section may be fined in accordance with title

20 18, United States Code, and in addition, is subject to a

21 civil money penalty of not to exceed $25,000 for each vio22 lation.

23 ‘‘(h) AGENT TRAINING AND CERTIFICATION RE24 QUIREMENTS.—The NAIC, shall establish requirements
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1 for long-term care insurance agent training and certifi2 cation that—

3 ‘‘(1) specify requirements for training insurance

4 agents who desire to sell or offer for sale long-term

5 care insurance policies; and

6 ‘‘(2) specify procedures for certifying agents

7 who have completed such training and who are as

8 qualified to sell or offer for sale long-term care in9 surance policies.

10 ‘‘SEC. 2713. ADDITIONAL RESPONSIBILITIES FOR CAR11 RIERS.

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

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

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

15 or an applicant returns a policy or certificate within 30

16 days of the date of its issuance pursuant to subsection

17 2717, the carrier shall refund directly to the applicant,

18 or in the case of an employer to whomever remits the pre19 mium, and not by delivery by the agent, not later than

20 30 days after the date of the denial or return, any pre21 miums paid with respect to such a policy (or certificate).

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

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

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

25 carrier shall provide the applicant, or in the case of a
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1 group plan the employer, the policy (or certificate) of in2 surance not later than 30 days after the date of the ap3 proval.

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

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

6 the carrier shall, within 30 days of the date of a written

7 request by the policyholder or certificate holder (or rep8 resentative)—

9 ‘‘(1) provide a written explanation of the rea10 sons for the denial; and

11 ‘‘(2) make available all medical and patient

12 records directly relating to such denial.

13 Except as provided in subsection (e) of section 2715, no

14 claim under such a policy may be denied on the basis of

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

16 of the policy if the application for the policy failed to re17 quest information respecting the condition.

18 ‘‘(d) REPORTING OF INFORMATION.—A carrier that

19 issues one or more long-term care insurance policies shall

20 periodically (not less often than annually) report, in a

21 form and in a manner determined by the NAIC, to the

22 Commissioner, superintendent or director of insurance of

23 each State in which the policy is delivered, and shall make

24 available to the Secretary, upon request, information in

25 a form and manner determined by the NAIC concerning—
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1 ‘‘(1) the long-term care insurance policies of the

2 carrier that are in force;

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

4 and the premiums imposed for such policies since

5 their initial issuance;

6 ‘‘(3) the lapse rate, replacement rate, and re7 scission rates by policy;

8 ‘‘(4) the names of that 10 percent of its agents

9 that—

10 ‘‘(A) have the greatest lapse and replace11 ment rate; and

12 ‘‘(B) have produced at least $50,000 of

13 long-term care insurance sales in the previous

14 year; and

15 ‘‘(5) the claims denied (expressed as a number

16 and as a percentage of claims submitted) by policy.

17 Information required under this subsection shall be re18 ported in a format specified in the standards established

19 under section 2701(a). For purposes of paragraph (3),

20 there shall be included (but reported separately) data con21 cerning lapses due to the death of the policyholder. For

22 purposes of paragraph (4), there shall not be included as

23 a claim any claim that is denied solely because of the fail24 ure to meet a deductible, waiting period, or exclusionary

25 period.
28

•S 203 IS

1 ‘‘(e) STANDARDS ON COMPENSATION FOR SALE OF

2 POLICIES.—

3 ‘‘(1) IN GENERAL.—A carrier that issues one or

4 more long-term care insurance policies may provide

5 a commission or other compensation to an agent or

6 other representative for the sale of such a policy only

7 if the first year commission or other first year com8 pensation to be paid does not exceed 200 percent of

9 the commission or other compensation paid for sell10 ing or servicing the policy in the second year, or if

11 the first year commission or other compensation to

12 be paid does not exceed 50 percent of the premium

13 paid on the first year policy, until the NAIC promul14 gates mandatory standards concerning compensation

15 for the sale of such policies.

16 ‘‘(2) SUBSEQUENT YEARS.—The commission or

17 other compensation provided for the sale of long18 term care insurance policies in years subsequent to

19 the first year of the policy shall be the same as that

20 provided in the second subsequent year and shall be

21 provided for no fewer than 5 subsequent years.

22 ‘‘(3) LIMITATION.—No carrier shall provide

23 compensation to its agents for the sale of a long24 term care insurance policy and no agent shall receive

25 compensation greater than the renewal compensation
29

•S 203 IS

1 payable by the replacing carrier on renewal policies

2 if an existing policy is replaced.

3 ‘‘(4) COMPENSATION DEFINED.—As used in

4 this subsection, the term ‘compensation’ includes pe5 cuniary or nonpecuniary remuneration of any kind

6 relating to the sale or renewal of the policy, includ7 ing but not limited to deferred compensation, bo8 nuses, gifts, prizes, awards, and finders fees.

9 ‘‘SEC. 2714. RENEWABILITY STANDARDS FOR ISSUANCE,

10 AND BASIC FOR CANCELLATION OF POLI11 CIES.

12 ‘‘(a) IN GENERAL.—No long-term care insurance pol13 icy may be canceled or nonrenewed for any reason other

14 than nonpayment of premium, material misrepresentation

15 or fraud.

16 ‘‘(b) CONTINUATION AND CONVERSION RIGHTS FOR

17 GROUP POLICIES.—

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

19 insurance policy shall provide covered individuals

20 with a basis for continuation or conversion in ac21 cordance with this subsection.

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

23 of paragraph (1), a policy provides a basis for con24 tinuation of coverage if the policy maintains cov25 erage under the existing group policy when such cov-
30

•S 203 IS

1 erage would otherwise terminate and which is sub2 ject only to the continued timely payment of pre3 mium when due. A group policy which restricts pro4 vision of benefits and services to or contains incen5 tives to use certain providers or facility, may provide

6 continuation benefits which are substantially equiva7 lent to the benefits of the existing group policy.

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

9 paragraph (1), a policy provides a basis for conver10 sion of coverage if the policy entitles each individ11 ual—

12 ‘‘(A) whose coverage under the group pol13 icy would otherwise be terminated for any rea14 son; and

15 ‘‘(B) who has been continuously insured

16 under the policy (or group policy which was re17 placed) for at least 6 months before the date of

18 the termination;

19 to issuance of a policy providing benefits identical to,

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

21 the policy being terminated, without evidence of in22 surability.

23 ‘‘(4) TREATMENT OF SUBSTANTIAL EQUIVA24 LENCE.—In determining under this subsection

25 whether benefits are substantially equivalent, consid-
31

•S 203 IS

1 eration should be given to the difference between

2 managed care and non-managed care plans.

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

4 group long-term care insurance policy is replaced by

5 another long-term care insurance policy purchased

6 by the same policyholder, the succeeding issuer shall

7 offer coverage to all persons covered under the old

8 group policy on its date of termination. Coverage

9 under the new group policy shall not result in any

10 exclusion for preexisting conditions that would have

11 been covered under the group policy being replaced.

12 ‘‘(c) STANDARDS FOR ISSUANCE.—

13 ‘‘(1) IN GENERAL.—

14 ‘‘(A) GUARANTEE.—An agent, association

15 or carrier that sells or issues long-term care in16 surance policies shall guarantee that such poli17 cies shall be sold or issued to an individual, or

18 eligible individual in the case of a group plan,

19 if such individual meets the minimum medical

20 underwriting requirements of such policy.

21 ‘‘(B) PREMIUM FOR CONVERTED POL22 ICY.—If a group policy from which conversion

23 is made is a replacement for a previous group

24 policy, the premium for the converted policy

25 shall be calculated on the basis of the insured’s
32

•S 203 IS

1 age at the inception of coverage under the

2 group policy from which conversion is made.

3 Where the group policy from which conversion

4 is made replaced previous group coverage, the

5 premium for the converted policy shall be cal6 culated on the basis of the insured’s age at in7 ception of coverage under the group policy re8 placed.

9 ‘‘(2) UPGRADE FOR CURRENT POLICIES.—The

10 NAIC shall establish standards, including those pro11 viding guidance on medical underwriting and age

12 rating, with respect to the access of individuals to

13 policies offering upgraded benefits.

14 ‘‘(d) EFFECT OF INCAPACITATION.—

15 ‘‘(1) IN GENERAL.—

16 ‘‘(A) PROHIBITION.—Except as provided

17 in paragraph (2), a long-term care insurance

18 policy in effect as of the effective date of the

19 standards established under section 2701(a)

20 may not be canceled for nonpayment if the pol21 icy holder is determined by a long-term care

22 provider, physician or other health care pro23 vider, independent of the issuer of the policy, to

24 be cognitively or mentally incapacitated so as to

25 not make payments in a timely manner.
33

•S 203 IS

1 ‘‘(B) REINSTATEMENT.—A long-term care

2 policy shall include a provision that provides for

3 the reinstatement of such coverage, in the event

4 of lapse, if the insurer is provided with proof of

5 cognitive or mental incapacitation. Such rein6 statement option shall remain available for a

7 period of not less than 5 months after termi8 nation and shall allow for the collection of past

9 due premium.

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

11 care insurance policy may be canceled under para12 graph (1) for nonpayment if—

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

14 excess of 30 days; and

15 ‘‘(B) notice of intent to cancel is provided

16 to the policyholder or designated representative

17 of the policy holder not less than 30 days prior

18 to such cancellation, except that notice may not

19 be provided until the expiration of 30 days after

20 a premium is due and unpaid.

21 Notice under this paragraph shall be deemed to have

22 been given as of 5 days after the mailing date.

23 ‘‘SEC. 2715. BENEFIT STANDARDS.

24 ‘‘(a) USE OF STANDARD DEFINITIONS AND TERMI25 NOLOGY, UNIFORM FORMAT, AND STANDARD BENE-
34

•S 203 IS

1 FITS.—Each long-term care insurance policy shall, with

2 respect to services, providers or facilities, pursuant to

3 standards established under section 2701(a)—

4 ‘‘(1) use uniform language and definitions, ex5 cept that such language and definitions may take

6 into account the differences between States with re7 spect to definitions and terminology used for long8 term care services and providers;

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

10 outline of coverage under such a policy; and

11 ‘‘(3) provide coverage for at least one standard

12 benefits package that shall include the limitations on

13 the amount of payments per day and the lengths of

14 covered stays for nursing facility and home health

15 care services;

16 as prescribed under guidelines issued by the NAIC and

17 periodically updated.

18 ‘‘(b) DISCLOSURE.—

19 ‘‘(1) OUTLINE OF COVERAGE.—

20 ‘‘(A) REQUIREMENT.—Each carrier that

21 sells or offers for sale a long-term care insur22 ance policy shall provide an outline of coverage

23 under such policy that meets the applicable

24 standards established pursuant to section

25 2701(a), complies with the requirements of sub-
35

•S 203 IS

1 paragraph (B), and is in a uniform format as

2 prescribed in guidelines issued by the NAIC

3 and periodically updated.

4 ‘‘(B) CONTENTS.—The outline of coverage

5 for each long-term care insurance policy shall

6 include at least the following:

7 ‘‘(i) A description of the principal

8 benefits and coverage under the policy.

9 ‘‘(ii) A statement of the principal ex10 clusions, reductions, and limitations con11 tained in the policy.

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

13 which the policy (or certificate) may be

14 continued in force or discontinued, the

15 terms for continuation or conversion, and

16 any reservation in the policy of a right to

17 change premiums.

18 ‘‘(iv) A statement, in bold face type

19 on the face of the document in language

20 that is understandable to an average indi21 vidual, that the outline of coverage is a

22 summary only, not a contract of insurance,

23 and that the policy (or master policy) con24 tains the contractual provisions that gov25 ern, except that such summary shall sub-
36

•S 203 IS

1 stantially and accurately reflect the con2 tents of the policy or the master policy.

3 ‘‘(v) A description of the terms, speci4 fied in section 2717, under which a policy

5 or certificate may be returned and pre6 mium refunded.

7 ‘‘(vi) Information on national average

8 costs for nursing facility and home health

9 care and information (in graphic form) on

10 the relationship of the value of the benefits

11 provided under the policy to such national

12 average costs and State average costs,

13 where available.

14 ‘‘(vii) A statement of the percentage

15 limit on annual premium increases that is

16 provided under the policy pursuant to this

17 section.

18 ‘‘(2) CERTIFICATES.—A certificate issued pur19 suant to a group long-term care insurance policy

20 shall include—

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

22 and coverage provided in the policy;

23 ‘‘(B) a statement of the principal exclu24 sions, reductions, and limitations contained in

25 the policy; and
37

•S 203 IS

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

2 policy determines governing contractual provi3 sions.

4 ‘‘(3) LONG-TERM CARE AS PART OF LIFE IN5 SURANCE.—In the case of a long-term care insur6 ance policy issued as a part of, or a rider on, a life

7 insurance policy, at the time of policy delivery there

8 shall be provided a policy summary that includes—

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

10 care benefits interact with other components of

11 the policy (including deductions from death

12 benefits);

13 ‘‘(B) an illustration of the amount of bene14 fits, the length of benefit, and the guaranteed

15 lifetime benefits (if any) for each covered per16 son; and

17 ‘‘(C) any exclusions, reductions, and limi18 tations on benefits of long-term care.

19 ‘‘(4) ADDITIONAL INFORMATION.—The NAIC

20 shall develop recommendations with respect to in21 forming consumers of the long-term economic viabil22 ity of carriers issuing long-term care insurance poli23 cies.

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

25 BENEFITS.—
38

•S 203 IS

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

2 policy may not condition or limit eligibility—

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

4 the need for or receipt of any other services;

5 ‘‘(B) for any benefit on the medical neces6 sity for such benefit;

7 ‘‘(C) for benefits furnished by licensed or

8 certified providers in compliance with conditions

9 which are in addition to those required for li10 censure or certification under State law, except

11 that if no State licensure or certification laws

12 exists, in compliance with qualifications devel13 oped by the NAIC; or

14 ‘‘(D) for residential care (if covered under

15 the policy) only—

16 ‘‘(i) to care provided in facilities

17 which provide a higher level of care; or

18 ‘‘(ii) to care provided in facilities

19 which provide for 24-hour or other nursing

20 care not required in order to be licensed by

21 the State.

22 ‘‘(2) HOME HEALTH CARE OR COMMUNITY23 BASED SERVICES.—If a long-term care insurance

24 policy provides benefits for the payment of specified
39

•S 203 IS

1 home health care or community-based services, the

2 policy—

3 ‘‘(A) may not limit such benefits to serv4 ices provided by registered nurses or licensed

5 practical nurses;

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

7 services to be provided by a nurse or therapist

8 that can be provided by a home health aide or

9 licensed or certified home care worker, except

10 that if no State licensure or certification laws

11 exists, in compliance with qualifications devel12 oped by the NAIC;

13 ‘‘(C) may not limit such benefits to serv14 ices provided by agencies or providers certified

15 under title XVIII of the Social Security Act;

16 and

17 ‘‘(D) must provide, at a minimum, benefits

18 for personal care services (including home

19 health aide and home care worker services as

20 defined by the NAIC) home health services,

21 adult day care, and respite care in an individ22 ual’s home or in another setting in the commu23 nity, or any of these benefits on a respite care

24 basis.
40

•S 203 IS

1 ‘‘(3) NURSING FACILITY SERVICES.—If a long2 term care insurance policy provides benefits for the

3 payment of specified nursing facility services, the

4 policy must provide such benefits with respect to all

5 nursing facilities (as defined in section 1919(a) of

6 the Social Security Act or until such time as subse7 quently provided for by the NAIC in establishing

8 uniform language and definitions under section

9 2715(a)(1)) in the State.

10 ‘‘(4) PER DIEM POLICIES.—

11 ‘‘(A) DEFINITION.—For purposes of this

12 title, the term ‘per diem long-term care insur13 ance policy’ means a long-term care insurance

14 policy (or certificate under a group long-term

15 care insurance policy) that provides for benefit

16 payments on a periodic basis due to cognitive

17 impairment or loss of functional capacity with18 out regard to the expenses incurred or services

19 rendered during the period to which the pay20 ments relate.

21 ‘‘(B) LIMITATION.—No per diem long-term

22 care insurance policy (or certificate) may condi23 tion, limit or otherwise exclude benefit pay24 ments based on the receipt of any type services
41

•S 203 IS

1 from any type providers of long-term care serv2 ice providers.

3 ‘‘(d) PROHIBITION OF DISCRIMINATION.—A long4 term care insurance policy may not treat benefits under

5 the policy in the case of an individual with Alzheimer’s

6 disease, with any related progressive degenerative demen7 tia of an organic origin, with any organic or inorganic

8 mental illness, or with mental retardation or any other

9 cognitive or mental impairment differently from an indi10 vidual having another medical condition for which benefits

11 may be made available.

12 ‘‘(e) LIMITATION ON USE OF PREEXISTING CONDI13 TION LIMITS.—

14 ‘‘(1) INITIAL ISSUANCE.—

15 ‘‘(A) IN GENERAL.—Subject to subpara16 graph (B), a long-term care insurance policy

17 may not exclude or condition benefits based on

18 a medical condition for which the policyholder

19 received treatment or was otherwise diagnosed

20 before the issuance of the policy.

21 ‘‘(B) 6-MONTH LIMIT.—

22 ‘‘(i) IN GENERAL.—No long-term care

23 insurance policy or certificate issued under

24 this title shall utilize a definition of ‘pre25 existing condition’ that is more restrictive
42

•S 203 IS

1 than the following: The term ‘preexisting

2 condition’ means a condition for which

3 medical advice or treatment was rec4 ommended by, or received from a provider

5 of health care services, within 6 months

6 preceding the effective date of coverage of

7 an insured individual.

8 ‘‘(ii) PROHIBITION ON EXCLUSION OF

9 COVERAGE.—No long-term care insurance

10 policy or certificate may exclude coverage

11 for a loss or confinement that is the result

12 of a preexisting condition unless such loss

13 or confinement begins within 6 months fol14 lowing the effective date of the coverage of

15 the insured individual.

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

17 care insurance policy replaces another long-term

18 care insurance policy, the issuer of the replacing pol19 icy shall waive any time periods applicable to pre20 existing conditions, waiting period, elimination peri21 ods and probationary periods in the new policy for

22 similar benefits to the extent such time was spent

23 under the original policy.

24 ‘‘(f) ELIGIBILITY FOR BENEFITS.—
43

•S 203 IS

1 ‘‘(1) LONG-TERM CARE POLICIES.—Each long2 term care insurance policy shall—

3 ‘‘(A) describe the level of benefits available

4 under the policy; and

5 ‘‘(B) specify in clear, understandable

6 terms, the level (or levels) of physical, cognitive,

7 or mental impairment required in order to re8 ceive benefits under the policy.

9 ‘‘(2) FUNCTIONAL ASSESSMENT.—In order to

10 submit a claim under any long-term care insurance

11 policy, each claimant shall have a professional func12 tional assessment of his or her physical, cognitive,

13 and mental abilities. Such initial assessment shall be

14 conducted by an individual or entity, meeting the

15 qualifications established by the NAIC to assure the

16 professional competence and credibility of such indi17 vidual or entity and that such individual meets any

18 applicable State licensure and certification require19 ments. The individual or entity conducting such as20 sessment may not control, or be controlled by, the

21 issuer of the policy. For purposes of this paragraph

22 and paragraph (4), the term ‘control’ means the di23 rect or indirect possession of the power to direct the

24 management and policies of a person. Control is pre25 sumed to exist, if any person directly or indirectly,
44

•S 203 IS

1 owns, controls, holds with the power to vote, or

2 holds proxies representing 10 percent of the voting

3 securities of another person.

4 ‘‘(3) CLAIMS REVIEW.—Except as provided in

5 paragraph (1), each long-term care insurance policy

6 shall be subject to final claims review by the carrier

7 pursuant to the terms of the long-term care insur8 ance policy.

9 ‘‘(4) APPEALS PROCESS.—

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

11 insurance policy shall provide for a timely and

12 independent appeals process, meeting standards

13 established by the NAIC, for individuals who

14 dispute the results of the claims review, con15 ducted under paragraph (3), of the policy16 holder’s functional assessment, conducted under

17 paragraph (2).

18 ‘‘(B) INDEPENDENT ASSESSMENT.—An

19 appeals process under this paragraph shall in20 clude, at the request of the claimant, an inde21 pendent assessment of the claimant’s physical,

22 cognitive or mental abilities.

23 ‘‘(C) CONDUCT.—An independent assess24 ment under subparagraph (B) shall be con25 ducted by an individual or entity meeting the
45

•S 203 IS

1 qualifications established by the NAIC to as2 sure the professional competence and credibility

3 of such individual or entity and any applicable

4 State licensure and certification requirements

5 and may not be conducted—

6 ‘‘(i) by an individual who has a direct

7 or indirect significant or controlling inter8 est in, or direct affiliation or relationship

9 with, the issuer of the policy;

10 ‘‘(ii) by an entity that provides serv11 ices to the policyholder or certificateholder

12 for which benefits are available under the

13 long-term care insurance policy; or

14 ‘‘(iii) by an individual or entity in con15 trol of, or controlled by, the issuer of the

16 policy.

17 ‘‘(5) STANDARD ASSESSMENTS.—Not later than

18 2 years after the date of enactment of this title, the

19 advisory committee established under section

20 2701(d) shall recommend uniform needs assessment

21 mechanisms for the determination of eligibility for

22 benefits under such assessments.

23 ‘‘(g) INFLATION PROTECTION.—

24 ‘‘(1) OPTION TO PURCHASE.—A carrier may

25 not offer a long-term care insurance policy unless
46

•S 203 IS

1 the carrier also offers to the proposed policyholder,

2 including each group policyholder, the option to pur3 chase a policy that provides for increases in benefit

4 levels, with benefit maximums or reasonable dura5 tions that are meaningful, to account for reasonably

6 anticipated increases in the costs of long-term care

7 services covered by the policy. A carrier may not

8 offer to a policyholder an inflation protection feature

9 that is less favorable to the policyholder than one

10 following:

11 ‘‘(A) With respect to policies that provide

12 for automatic periodic increases in benefits, the

13 policy provides for an annual increase in bene14 fits in a manner so that such increases are

15 computed annually at a rate of not less than 5

16 percent.

17 ‘‘(B) With respect to policies that provide

18 for periodic opportunities to elect an increase in

19 benefits, the policy guarantees that the insured

20 individual will have the right to periodically in21 crease the benefit levels under the policy with22 out providing evidence of insurability or health

23 status so long as the option for the previous pe24 riod was not declined. The amount of any such
47

•S 203 IS

1 additional benefit may not be less than the dif2 ference between—

3 ‘‘(i) the existing policy benefit; and

4 ‘‘(ii) such existing benefit compounded

5 annually at a rate of at least 5 percent for

6 the period beginning on the date on which

7 the existing benefit is purchased and ex8 tending until the year in which the offer of

9 increase is made.

10 ‘‘(C) With respect to service benefit poli11 cies, the policy covers a specified percentage of

12 the actual or reasonable charges and does not

13 include a maximum specified indemnity amount

14 or limit.

15 ‘‘(2) EXCEPTION.—The requirements of para16 graph (1) shall not apply to life insurance policies or

17 riders containing accelerated long-term care benefits.

18 ‘‘(3) REQUIRED INFORMATION.—Carriers shall

19 include the following information in or together with

20 the outline of coverage provided under this title:

21 ‘‘(A) A graphic comparison of the benefit

22 levels of a policy that increases benefits over the

23 policy period with a policy that does not in24 crease benefits. Such comparison shall show
48

•S 203 IS

1 benefit levels over not less than a 20-year pe2 riod.

3 ‘‘(B) Any expected premium increases or

4 additional premiums required to pay for any

5 automatic or optional benefit increases, whether

6 the individual who purchases the policy obtains

7 the inflation protection initially or whether such

8 individual delays purchasing such protection

9 until a future time.

10 ‘‘(4) CONTINUATION OF PROTECTION.—Infla11 tion protection benefit increases under this sub12 section under a policy that contains such protection

13 shall continue without regard to an insured’s age,

14 claim status or claim history, or the length of time

15 the individual has been insured under the policy.

16 ‘‘(5) CONSTANT PREMIUM.—An offer of infla17 tion protection under this subsection that provides

18 for automatic benefit increases shall include an offer

19 of a premium that the carrier expects to remain con20 stant. Such offer shall disclose in a conspicuous

21 manner that the premium may change in the future

22 unless the premium is guaranteed to remain con23 stant.

24 ‘‘(6) REJECTION.—Inflation protection under

25 this subsection shall be included in a long-term care
49

•S 203 IS

1 insurance policy unless a carrier obtains a written

2 rejection of such protection signed by the policy3 holder.

4 ‘‘SEC. 2716. NONFORFEITURE.

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

6 policy (or certificate) shall provide that if the policy lapses

7 after the policy has been in effect for a minimum period

8 (specified under the standards under section 2701(a)), the

9 policy will provide, without payment of any additional pre10 miums, nonforfeiture benefits as determined appropriate

11 by the NAIC.

12 ‘‘(b) ESTABLISHMENT OF STANDARDS.—The stand13 ards under section 2701(a) shall provide that the percent14 age or amount of benefits under subsection (a) must in15 crease based upon the policyholder’s equity in the policy.

16 ‘‘SEC. 2717. LIMIT OF PERIOD OF CONTESTABILITY AND

17 RIGHT TO RETURN.

18 ‘‘(a) CONTESTABILITY.—A carrier may not cancel or

19 renew a long-term care insurance policy or deny a claim

20 under the policy based on fraud or intentional misrepre21 sentation relating to the issuance of the policy unless no22 tice of such fraud or misrepresentation is provided within

23 a time period to be determined by the NAIC.

24 ‘‘(b) RIGHT TO RETURN.—Each applicant for a long25 term care insurance policy shall have the right to return
50

•S 203 IS

1 the policy (or certificates) within 30 days of the date of

2 its delivery (and to have the premium refunded) if, after

3 examination of the policy or certificate, the applicant is

4 not satisfied for any reason.

5 ‘‘SEC. 2718. CIVIL MONEY PENALTY.

6 ‘‘(a) CARRIER.—Any carrier, association or its sub7 sidiary that sells or offers for sale a long-term care insur8 ance policy and that—

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

10 section 2713(a);

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

12 with section 2713(b);

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

14 information in accordance with subsections (c) or (d)

15 of section 2713;

16 ‘‘(4) provides a commission or compensation in

17 violation of section 2713(e);

18 ‘‘(5) fails to provide an outline of coverage in

19 violation of section 2715(b)(1); or

20 ‘‘(6) issues a policy without obtaining certain

21 information in violation of section 2715(f);

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

23 for each such violation.

24 ‘‘(b) AGENTS.—Any agent that sells or offers for sale

25 a long-term care insurance policy and that—
51

•S 203 IS

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

2 section 2713(a);

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

4 with section 2713(b);

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

6 information in accordance with subsections (c) or (d)

7 of section 2713;

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

9 violation of section 2715(b)(1); or

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

11 information in violation of section 2715(f);

12 is subject to a civil money penalty of not to exceed $15,000

13 for each such violation.

14 ‘‘PART C—LONG-TERM CARE INSURANCE POLICIES,

15 DEFINITION AND ENDORSEMENTS

16 ‘‘SEC. 2721. LONG-TERM CARE INSURANCE POLICY DE17 FINED.

18 ‘‘(a) IN GENERAL.—As used in this section, the term

19 ‘long-term care insurance policy’ means any insurance pol20 icy, rider or certificate advertised, marketed, offered or de21 signed to provide coverage for not less than 12 consecutive

22 months for each covered person on an expense incurred,

23 indemnity prepaid or other basis, for one or more nec24 essary diagnostic, preventive, therapeutic, rehabilitative,

25 maintenance or personal care services, provided in a set-
52

•S 203 IS

1 ting other than an acute care unit of a hospital. Such term

2 includes—

3 ‘‘(1) group and individual annuities and life in4 surance policies, riders or certificates that provide

5 directly, or that supplement long-term care insur6 ance; and

7 ‘‘(2) a policy, rider or certificates that provides

8 for payment of benefits based on cognitive impair9 ment or the loss of functional capacity.

10 ‘‘(b) ISSUANCE.—Long-term care insurance policies

11 may be issued by—

12 ‘‘(1) carriers;

13 ‘‘(2) fraternal benefit societies;

14 ‘‘(3) nonprofit health, hospital, and medical

15 service corporations;

16 ‘‘(4) prepaid health plans;

17 ‘‘(5) health maintenance organizations; or

18 ‘‘(6) any similar organization to the extent they

19 are otherwise authorized to issue life or health insur20 ance.

21 ‘‘(c) POLICIES EXCLUDED.—The term ‘long-term

22 care insurance policy’ shall not include any insurance pol23 icy, rider or certificate that is offered primarily to provide

24 basic Medicare supplement coverage, basic hospital ex25 pense coverage, basic medical-surgical expense coverage,
53

•S 203 IS

1 hospital confinement indemnity coverage, major medical

2 expense coverage, disability income or related asset-protec3 tion coverage, accident only coverage, specified disease or

4 specified accident coverage, or limited benefit health cov5 erage. With respect to life insurance, such term shall not

6 include life insurance policies, riders or certificates that

7 accelerate the death benefit specifically for one or more

8 of the qualifying events of terminal illness, medical condi9 tions requiring extraordinary medical intervention, or per10 manent institutional confinement, and that provide the op11 tion of a lump-sum payment for those benefits and in

12 which neither the benefits nor the eligibility for the bene13 fits is conditioned upon the receipt of long-term care.

14 ‘‘(d) APPLICATIONS.—Notwithstanding any other

15 provision of this title, this title shall apply to any product

16 advertised, marketed or offered as a long-term insurance

17 policy, rider or certificate.

18 ‘‘SEC. 2722. CODE OF CONDUCT WITH RESPECT TO EN19 DORSEMENTS.

20 ‘‘Not later than 1 year after the date of enactment

21 of this title the NAIC shall issue guidelines that shall

22 apply to organizations and associations, other than em23 ployers and labor organizations that do not accept com24 pensation, and their subsidiaries that provide endorse25 ments of long-term care insurance policies, or that permit
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1 such policies to be offered for sale through the organiza2 tion or association. Such guidelines shall include at mini3 mum the following:

4 ‘‘(1) In endorsing or selling long-term care in5 surance policies, the primary responsibility of an or6 ganization or association shall be to educate their

7 members concerning such policies and assist such

8 members in making informed decisions. Such organi9 zations and associations may not function primarily

10 as sales agents for insurance companies.

11 ‘‘(2) Organizations and associations shall pro12 vide objective information regarding long-term care

13 insurance policies sold or endorsed by such organiza14 tions and associations to ensure that members of

15 such organizations and associations have a balanced

16 and complete understanding of both the strengths

17 and weaknesses of the policies that are being en18 dorsed or sold.

19 ‘‘(3) Organizations and associations selling or

20 endorsing long-term care insurance policies shall dis21 close in marketing literature provided to their mem22 bers concerning such policies the manner in which

23 such policies and the insurance company issuing

24 such policies were selected. If the organization or as25 sociation and the insurance company have interlock-
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1 ing directorates, the organization or association shall

2 disclose such fact to their members.

3 ‘‘(4) Organizations and associations selling or

4 endorsing long-term care insurance policies shall dis5 close in marketing literature provided to their mem6 bers concerning such policies the nature and amount

7 of the compensation arrangements (including all

8 fees, commissions, administrative fees and other

9 forms of financial support that the organization or

10 association receives) from the endorsement or sale of

11 the policy to its members.

12 ‘‘(5) The Boards of Directors of organizations

13 and associations selling or endorsing long-term care

14 insurance policies, if such organizations and associa15 tions have a Board of Directors, shall review and ap16 prove such insurance policies, the compensation ar17 rangements and the marketing materials used to

18 promote sales of such policies.

19 ‘‘PART D—MISCELLANEOUS PROVISIONS

20 ‘‘SEC. 2731. FUNDING FOR LONG-TERM CARE INSURANCE

21 INFORMATION, COUNSELING, AND ASSIST22 ANCE.

23 ‘‘(a) IN GENERAL.—The Secretary, acting through

24 the Public Health Service, may award grants to States,

25 and national organizations with demonstrated experience
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1 in long-term care insurance, for the establishment of pro2 grams to provide information, counseling, and assistance

3 relating to the procurement of adequate and appropriate

4 long-term care insurance.

5 ‘‘(b) APPLICATION.—To be eligible to receive a grant

6 under subsection (a), a State or national organization

7 shall prepare and submit to the Secretary an application

8 at such time, in such manner, and containing such infor9 mation as the Secretary may require, including a descrip10 tion of the program for which the State or organization

11 intends to use the amounts provided under the grant.

12 ‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—

13 ‘‘(1) IN GENERAL.—There are authorized to be

14 appropriate for grants to States under subsection

15 (a), $10,000,000 for each of the fiscal years 1994

16 through 1996.

17 ‘‘(2) NATIONAL ORGANIZATIONS.—There are

18 authorized to be appropriate for grants to national

19 organizations under subsection (a), $1,000,000 for

20 each of the fiscal years 1994 through 1996.

21 ‘‘SEC. 2732. DEFINITIONS.

22 ‘‘As used in this title:

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

24 ‘‘(A) prior to 2 years after the date of en25 actment of this Act, an individual who sells or
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1 offers for sale a long-term care insurance policy

2 subject to the requirements of this title and is

3 licensed or required to be licensed under State

4 law for such purpose; and

5 ‘‘(B) after the date referred to in subpara6 graph (A), an individual who meets the training

7 and certification requirements established under

8 section 2712(f).

9 ‘‘(2) ASSOCIATION.—The term ‘association’ in10 cludes the association and its subsidiaries.

11 ‘‘(3) CARRIER.—The term ‘carrier’ means any

12 person that offers a health benefit plan, whether

13 through insurance or otherwise, including a licensed

14 insurance company, a prepaid hospital or medical

15 service plan, a health maintenance organization, a

16 self-insured carrier, a reinsurance carrier, and a

17 multiple employer welfare arrangement (a combina18 tion of employers associated for the purpose of pro19 viding health benefit plan coverage for their employ20 ees).’’.

21 (b) CONFORMING AMENDMENTS.—

22 (1) Sections 2701 through 2714 of the Public

23 Health Service Act (42 U.S.C. 300cc through

24 300cc–15) are redesignated as sections 2801

25 through 2814, respectively.
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1 (2)(A) Sections 465(f) and 497 of such Act (42

2 U.S.C. 286(f) and 289(f)) are amended by striking

3 out ‘‘2701’’ each place that such appears and insert4 ing in lieu thereof ‘‘2801’’.

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