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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 203 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 203

 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.

_______________________________________________________________________

                   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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Long-Term Care Insurance Improvement 
and Accountability Act''.

SEC. 2. ESTABLISHMENT OF FEDERAL STANDARDS FOR LONG-TERM CARE 
              INSURANCE.

    (a) In General.--The Public Health Service Act is amended--
            (1) by redesignating title XXVII (42 U.S.C. 300cc et seq.) 
        as title XXVIII; and
            (2) by inserting after title XXVI the following new title:

           ``TITLE XXVII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

``SEC. 2701. STANDARDS.

    ``(a) Application of Standards.--
            ``(1) NAIC.--If, within 12 months after the date of the 
        enactment of this title, the National Association of Insurance 
        Commissioners (hereafter in this title referred to as the 
        `NAIC') promulgates model standards that incorporate the 
        requirements of this title, such standards shall apply as 
        provided in this title.
            ``(2) Default.--If the NAIC does not promulgate the model 
        standards under paragraph (1) by the deadline established in 
        that paragraph, the Secretary shall promulgate, within 12 
        months after such deadline, a regulation that provides 
        standards that incorporate the requirements of this title and 
        such standards shall apply as provided for in this title.
            ``(3) Relation to state law.--Nothing in this title shall 
        be construed as preventing a State from applying standards that 
        provide greater protection to policyholders of long-term care 
        insurance policies than the standards promulgated under this 
        title, except that such State standards may not be inconsistent 
        or in conflict with any of the requirements of this title.
    ``(b) Deadline for Application of Standards.--
            ``(1) In general.--Subject to paragraph (2), the date 
        specified in this subsection for a State is--
                    ``(A) the date the State adopts the standards 
                established under subsection (a)(1); or
                    ``(B) the date that is 1 year after the first day 
                of the first regular legislative session that begins 
                after the date such standards are first established 
                under subsection (a)(2);
        whichever is earlier.
            ``(2) State requiring legislation.--In the case of a State 
        which the Secretary identifies, in consultation with the NAIC, 
        as--
                    ``(A) requiring State legislation (other than 
                legislation appropriating funds) in order for the 
                standards established under subsection (a) to be 
                applied; but
                    ``(B) having a legislature which is not scheduled 
                to meet within 1 year following the beginning of the 
                next regular legislative session in which such 
                legislation may be considered;
        the date specified in this subsection is the first day of the 
        first calendar quarter beginning after the close of the first 
        legislative session of the State legislature that begins on or 
        after January 1, 1994. For purposes of the previous sentence, 
        in the case of a State that has a 2-year legislative session, 
        each year of such session shall be deemed to be a separate 
        regular session of the State legislature.
    ``(c) Items Included in Standards.--The standards promulgated under 
subsection (a) shall include--
            ``(1) minimum Federal standards for long-term care 
        insurance consistent with the provisions of this title;
            ``(2) standards for the enhanced protection of consumers 
        with long-term care insurance;
            ``(3) procedures for the modification of the standards 
        established under paragraph (1) in a manner consistent with 
        future laws to expand existing Federal or State long-term care 
        benefits or establish a comprehensive Federal or State long-
        term care benefit program; and
            ``(4) other activities determined appropriate by Congress.
    ``(d) Consultation.--In establishing standards and models of 
benefits under this section, the Secretary shall provide for and 
consult with an advisory committee to be chosen by the Secretary, and 
composed of--
            ``(1) three individuals who are representatives of 
        carriers;
            ``(2) three individuals who are representatives of consumer 
        groups;
            ``(3) three representatives who are representatives of 
        providers of long-term care services;
            ``(4) three other individuals who are not representatives 
        of carriers or of providers of long-term care services and who 
        have expertise in the delivery and financing of such services; 
        and
            ``(5) the Secretary of Veterans Affairs.
    ``(e) Duties.--The advisory committee established under subsection 
(d) shall--
            ``(1) recommend the appropriate inflationary index to be 
        used with respect to the inflation protection benefit portion 
        of the standards;
            ``(2) recommend the uniform needs assessment mechanism to 
        be used in determining the eligibility of individuals for 
        benefits under a policy;
            ``(3) recommend appropriate standards for benefits under 
        section 2715(c); and
            ``(4) perform such other activities as determined 
        appropriate by the Secretary.
    ``(f) Administrative Provisions.--The following provisions of 
section 1886(e)(6) of the Social Security Act shall apply to the 
advisory committee chosen under subsection (d) in the same manner as 
such provisions apply under such section:
            ``(1) Subparagraph (C) (relating to staffing and 
        administration).
            ``(2) Subparagraph (D) (relating to compensation of 
        members).
            ``(3) Subparagraph (F) (relating to access to information).
            ``(4) Subparagraph (G) (relating to use of funds).
            ``(5) Subparagraph (H) (relating to periodic GAO audits).
            ``(6) Subparagraph (J) (relating to requests for 
        appropriations).

``Part B--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

``SEC. 2711. IMPLEMENTATION OF POLICY STANDARDS.

    ``(a) In General.--
            ``(1) Regulatory program.--No long-term care policy (as 
        defined in section (2721)) may be issued, sold, or offered for 
        sale as a long-term care insurance policy in a State on or 
        after the date specified in section 2701(b) unless--
                    ``(A) the Secretary determines that the State has 
                established a regulatory program that--
                            ``(i) provides for the application and 
                        enforcement of the standards established under 
                        section 2701(a); and
                            ``(ii) complies with the requirements of 
                        subsection (b);
                by the date specified in section 2701(b), and the 
                policy has been approved by the State commissioner or 
                superintendent of insurance under such program; or
                    ``(B) if the State has not established such a 
                program, or if the State's regulatory program has been 
                decertified, the policy has been certified by the 
                Secretary (in accordance with such procedures as the 
                Secretary may establish) as meeting the standards 
                established under section 2701(a) by the date specified 
                in section 2701(b).
        For purposes of this subsection, the advertising or soliciting 
        with respect to a policy, directly or indirectly, shall be 
        deemed the offering for sale of the policy.
            ``(2) Review of state regulatory programs.--The Secretary 
        periodically shall review regulatory programs described in 
        paragraph (1)(A) to determine if they continue to provide for 
        the application and enforcement of the standards and procedures 
        established under section 2701(a) and (b). If the Secretary 
        determines that a State regulatory program no longer meets such 
        standards and requirements, before making a final 
        determination, the Secretary shall provide the State an 
        opportunity to adopt such a plan of correction as would permit 
        the program to continue to meet such standards and 
        requirements. If the Secretary makes a final determination that 
        the State regulatory program, after such an opportunity, fails 
        to meet such standards and requirements, the Secretary shall 
        assume responsibility under paragraph (1)(B) with respect to 
        certifying policies in the State and shall exercise full 
        authority under section 2701 for carriers, agents, or 
        associations or its subsidiary in the State plans in the State.
    ``(b) Additional Requirements for Approval of State Regulatory 
Programs.--For purposes of subsection (a)(1)(A)(ii), the requirements 
of this subsection for a State regulatory program are as follows:
            ``(1) Enforcement.--The enforcement under the program--
                    ``(A) shall be designed in a manner so as to secure 
                compliance with the standards within 30 days after the 
                date of a finding of noncompliance with such standards; 
                and
                    ``(B) shall provide for notice in the annual report 
                required under paragraph (5) to the Secretary of cases 
                where such compliance is not secured within such 30-day 
                period.
            ``(2) Process.--The enforcement process under each State 
        regulatory program shall provide for--
                    ``(A) procedures for individuals and entities to 
                file written, signed complaints respecting alleged 
                violations of the standards;
                    ``(B) responding on a timely basis to such 
                complaints;
                    ``(C) the investigation of--
                            ``(i) those complaints which have a 
                        reasonable probability of validity, and
                            ``(ii) such other alleged violations of the 
                        standards as the program finds appropriate; and
                    ``(D) the imposition of appropriate sanctions 
                (which include, in appropriate cases, the imposition of 
                a civil money penalty as provided for in section 2718) 
                in the case of a carrier, agent, or association or its 
                subsidiary determined to have violated the standards.
            ``(3) Consumer access to compliance information.--
                    ``(A) In general.--A State regulatory program must 
                provide for consumer access to complaints filed with 
                the State commissioner or superintendent of insurance 
                with respect to long-term care insurance policies.
                    ``(B) Confidentiality.--The access provided under 
                subparagraph (A) shall be limited to the extent 
                required to protect the confidentiality of the identity 
                of individual policyholders.
            ``(4) Process for approval of premiums.--
                    ``(A) In general.--Each State regulatory program 
                shall--
                            ``(i) provide for a process for approving 
                        or disapproving proposed premium increases or 
                        decreases with respect to long-term care 
                        insurance policies; and
                            ``(ii) establish a policy for receipt and 
                        consideration of public comments before 
                        approving such a premium increase or decrease.
                    ``(B) Conditions for approval.--No premium increase 
                shall be approved (or deemed approved) under 
                subparagraph (A) unless the proposed increase is 
                accompanied by an actuarial memorandum which--
                            ``(i) includes a description of the 
                        assumptions that justify the increase;
                            ``(ii) contains such information as may be 
                        required under the Standards; and
                            ``(iii) is made available to the public.
                    ``(C) Application.--Except as provided in 
                subparagraph (D), this paragraph shall not apply to a 
                group long-term care insurance policy issued to a group 
                described in section 4(E)(1) of the NAIC Long Term Care 
                Insurance Model Act (effective January 1991), except 
                that such group policy shall, pursuant to guidelines 
                developed by the NAIC, provide notice to policyholders 
                and certificate holders of any premium change under 
                such group policy.
                    ``(D) Exception.--Subparagraph (C) shall not apply 
                to--
                            ``(i) group conversion policies;
                            ``(ii) the group continuation feature of a 
                        group policy if the insurer separately rates 
                        employee and continuation coverages; and
                            ``(iii) group policies where the function 
                        of the employer is limited solely to collecting 
                        premiums (through payroll deductions or dues 
                        checkoff) and remitting them to the insurer.
                    ``(E) Construction.--Nothing in this paragraph 
                shall be construed as preventing the NAIC from 
                promulgating standards, or a State from enacting and 
                enforcing laws, with respect to premium rates or loss 
                ratios for all, including group, long-term care 
                insurance policies.
            ``(5) Annual Reports.--Each State regulatory program shall 
        provide for annual reports to be submitted to the Secretary on 
        the implementation and enforcement of the standards in the 
        State, including information concerning violations in excess of 
        30 days.
            ``(6) Access to other information.--The State regulatory 
        program must provide for consumer access to actuarial memoranda 
        provided under paragraph (4).
            ``(7) Default.--In the case of a State without a regulatory 
        program approved under subsection (a), the Secretary shall 
        provide for the enforcement activities described in subsection 
        (c).
    ``(c) Secretarial Enforcement Authority.--
            ``(1) In general.--The Secretary shall exercise authority 
        under this section in the case of a State that does not have a 
        regulatory program approved under this section.
            ``(2) Complaints and investigations.--The Secretary shall 
        establish procedures--
                    ``(A) for individuals and entities to file written, 
                signed complaints respecting alleged violations of the 
                requirements of this title;
                    ``(B) for responding on a timely basis to such 
                complaints; and
                    ``(C) for the investigation of--
                            ``(i) those complaints that have a 
                        reasonable probability of validity; and
                            ``(ii) such other alleged violations of the 
                        requirements of this title as the Secretary 
                        determines to be appropriate.
        In conducting investigations under this subsection, agents of 
        the Secretary shall have reasonable access necessary to enable 
        such agents to examine evidence of any carrier, agent, or 
        association or its subsidiary being investigated.
            ``(3) Hearings.--
                    ``(A) In general.--Prior to imposing an order 
                described in paragraph (4) against a carrier, agent, or 
                association or its subsidiary under this section for a 
                violation of the requirements of this title, the 
                Secretary shall provide the carrier, agent, association 
                or subsidiary with notice and, upon request made within 
                a reasonable time (of not less than 30 days, as 
                established by the Secretary by regulation) of the date 
                of the notice, a hearing respecting the violation.
                    ``(B) Conduct of hearing.--Any hearing requested 
                under subparagraph (A) shall be conducted before an 
                administrative law judge. If no hearing is so 
                requested, the Secretary's imposition of the order 
                shall constitute a final and unappealable order.
                    ``(C) Authority in hearings.--In conducting 
                hearings under this paragraph--
                            ``(i) agents of the Secretary and 
                        administrative law judges shall have reasonable 
                        access necessary to enable such agents and 
                        judges to examine evidence of any carrier, 
                        agent, or association or its subsidiary being 
                        investigated; and
                            ``(ii) administrative law judges, may, if 
                        necessary, compel by subpoena the attendance of 
                        witnesses and the production of evidence at any 
                        designated place or hearing.
                In case of contumacy or refusal to obey a subpoena 
                lawfully issued under this subparagraph and upon 
                application of the Secretary, an appropriate district 
                court of the United States may issue an order requiring 
                compliance with such subpoena and any failure to obey 
                such order may be punished by such court as a contempt 
                thereof.
                    ``(D) Issuance of orders.--If an administrative law 
                judge determines in a hearing under this paragraph, 
                upon the preponderance of the evidence received, that a 
                carrier, agent, or association or its subsidiary named 
                in the complaint has violated the requirements of this 
                title, the administrative law judge shall state the 
                findings of fact and issue and cause to be served on 
                such carrier, agent, association, or subsidiary an 
                order described in paragraph (4).
            ``(4) Cease and desist order with civil money penalty.--
                    ``(A) In general.--Subject to the provisions of 
                subparagraphs (B) through (F), an order under this 
                paragraph--
                            ``(i) shall require the agent, association 
                        or its subsidiary, or a carrier--
                                    ``(I) to cease and desist from such 
                                violations; and
                                    ``(II) to pay a civil penalty in an 
                                amount not to exceed $15,000 in the 
                                case of each agent, and not to exceed 
                                $25,000 for each association or its 
                                subsidiary or a carrier for each such 
                                violation; and
                            ``(ii) may require the agent, association 
                        or its subsidiary, or a carrier to take such 
                        other remedial action as is appropriate.
                    ``(B) Corrections within 30 days.--No order shall 
                be imposed under this paragraph by reason of any 
                violation if the carrier, agent, or association or its 
                subsidiary establishes to the satisfaction of the 
                Secretary that--
                            ``(i) such violation was due to reasonable 
                        cause and was not intentional and was not due 
                        to willful neglect; and
                            ``(ii) such violation is corrected within 
                        the 30-day period beginning on the earliest 
                        date the carrier, agent, association, or 
                        subsidiary knew, or exercising reasonable 
                        diligence could have known, that such a 
                        violation was occurring.
                    ``(C) Waiver by secretary.--In the case of a 
                violation under this title that is due to reasonable 
                cause and not to willful neglect, the Secretary may 
                waive part or all of the civil money penalty imposed 
                under subparagraph (A)(i)(II) to the extent that 
                payment of such penalty would be grossly excessive 
                relative to the violation involved and to the need for 
                deterrence of violations.
                    ``(D) Administrative appellate review.--The 
                decision and order of an administrative law judge under 
                this paragraph shall become the final agency decision 
                and order of the Secretary unless, within 30 days, the 
                Secretary modifies or vacates the decision and order, 
                in which case the decision and order of the Secretary 
                shall become a final order under this paragraph.
                    ``(E) Judicial review.--A carrier, agent, or 
                association or its subsidiary or any other individual 
                adversely affected by a final order issued under this 
                paragraph may, within 45 days after the date the final 
                order is issued, file a petition in the Court of 
                Appeals for the appropriate circuit for review of the 
                order.
                    ``(F) Enforcement of orders.--If a carrier, agent, 
                or association or its subsidiary fails to comply with a 
                final order issued under this paragraph against the 
                carrier, agent, association or subsidiary after 
                opportunity for judicial review under subparagraph (E), 
                the Secretary shall file a suit to seek compliance with 
                the order in any appropriate district court of the 
                United States. In any such suit, the validity and 
                appropriateness of the final order shall not be subject 
                to review.
    ``(d) Demonstration Grant Program.--
            ``(1) In general.--The Secretary may award grants to States 
        for the establishment of demonstration programs to improve the 
        enforcement within such States of long-term care insurance 
        standards applicable under this title.
            ``(2) Application.--To be eligible to receive a grant under 
        paragraph (1), a State shall prepare and submit to the 
        Secretary an application at such time, in such manner, and 
        containing such information as the Secretary may require, 
        including a description of the program for which the State 
        intends to use the amounts provided under the grant.
            ``(3) Minimum amount of grants.--The amount of a grant 
        awarded under this subsection shall not be less than $100,000.
            ``(4) Evaluation.--A State that receives a grant under this 
        subsection shall comply with such evaluation procedures as the 
        Secretary shall by regulation establish. The Secretary shall 
        utilize such evaluations to conduct an overall evaluation of 
        the results of the demonstration programs established under 
        this section.
            ``(5) Authorization of appropriations.--There are 
        authorized to be appropriated to carry out this subsection, 
        $5,000,000 for each of the fiscal years 1993 through 1997.

``SEC. 2712. REGULATION OF SALES PRACTICES.

    ``(a) Duty of Good Faith and Fair Dealing.--
            ``(1) In general.--Each agent (as defined in section 2733) 
        or association that is selling or offering for sale a long-term 
        care insurance policy has the duty of good faith and fair 
        dealing to the purchaser or potential purchaser of such a 
        policy.
            ``(2) Prohibited practices.--An agent or association is 
        considered to have violated paragraph (1) if the agent or 
        association engages in any of the following practices:
                    ``(A) Twisting.--
                            ``(i) In general.--Knowingly making any 
                        misleading representation (including the 
                        inaccurate completion of medical histories) or 
                        incomplete or fraudulent comparison of any 
                        long-term care insurance policy or insurers for 
                        the purpose of inducing, or tending to induce, 
                        any person to retain or effect a change with 
                        respect to a long-term care insurance policy.
                            ``(ii) Policy replacement form.--With 
                        respect to any person who elects to replace or 
                        effect a change in a long-term care insurance 
                        policy, the individual that is selling such 
                        policy shall ensure that such person completes 
                        a policy replacement form developed by the 
                        NAIC. A copy of such form shall be provided to 
                        such person and additional copies shall be 
                        delivered by the selling individual to the old 
                        policy issuer and the new issuer and kept on 
                        file for inspection by the State regulatory 
                        agency.
                    ``(B) High pressure tactics.--Employing any method 
                of marketing having the effect of, or intending to, 
                induce the purchase of long-term care insurance policy 
                through force, fright, threat or undue pressure, 
                whether explicit or implicit.
                    ``(C) Cold lead advertising.--Making use directly 
                or indirectly of any method of marketing which fails to 
                disclose in a conspicuous manner that a purpose of the 
                method of marketing is solicitation of insurance and 
                that contact will be made by an insurance agent or 
                insurance company.
                    ``(D) Others.--Engaging in such other practices 
                determined inappropriate under guidelines issued by the 
                NAIC.
    ``(b) Financial Standards.--The NAIC shall develop recommended 
financial minimum standards (including both income and asset criteria) 
for the purpose of advising individuals considering the purchase of a 
long-term care insurance policy.
    ``(c) Prohibition of Sale or Issuance to Medicaid Beneficiaries.--
An agent, an association, or a carrier may not knowingly sell or issue 
a long-term care insurance policy to an individual who is eligible for 
medical assistance under title XIX of the Social Security Act.
    ``(d) Prohibition of Sale or Issuance of Duplicate Service Benefit 
Policies.--An agent, association or its subsidiary, or a carrier may 
not sell or issue a service-benefit long-term care insurance policy to 
an individual--
            ``(1) knowing that the policy provides for coverage that 
        duplicates coverage already provided in another service-benefit 
        long-term care insurance policy held by such individual (unless 
        the policy is intended to replace such other policy); or
            ``(2) for the benefit of an individual unless the 
        individual (or a representative of the individual) provides a 
        written statement to the effect that the coverage--
                    ``(A) does not duplicate other coverage in effect 
                under a service-benefit long-term care insurance 
                policy; or
                    ``(B) will replace another service-benefit long-
                term care insurance policy.
In this subsection, the term `service-benefit long-term care insurance 
policy' means a long-term care insurance policy which provides for 
benefits based on the type and amount of services furnished.
    ``(e) Prohibition Based on Eligibility for Other Benefits.--A 
carrier may not sell or issue a long-term care insurance policy that 
reduces, limits or coordinates the benefits provided under the policy 
on the basis that the policyholder has or is eligible for other long-
term care insurance coverage or benefits.
    ``(f) Provision of Outline of Coverage.--No agent, association or 
its subsidiary, or carrier may sell or offer for a sale a long-term 
care insurance policy without providing to the purchaser or potential 
purchaser (or representative) an outline of coverage that complies with 
the standards established under section 2701(a).
    ``(g) Penalties.--Any agent who sells, offers for sale, or issues a 
long-term care insurance policy in violation of this section may be 
imprisoned not more than 5 years, or fined in accordance with title 18, 
United States Code, and, in addition, is subject to a civil money 
penalty of not to exceed $15,000 for each such violation. Any 
association or its subsidiary or carrier that sells, offers for sale, 
or issues a long-term care insurance policy in violation of this 
section may be fined in accordance with title 18, United States Code, 
and in addition, is subject to a civil money penalty of not to exceed 
$25,000 for each violation.
    ``(h) Agent Training and Certification Requirements.--The NAIC, 
shall establish requirements for long-term care insurance agent 
training and certification that--
            ``(1) specify requirements for training insurance agents 
        who desire to sell or offer for sale long-term care insurance 
        policies; and
            ``(2) specify procedures for certifying agents who have 
        completed such training and who are as qualified to sell or 
        offer for sale long-term care insurance policies.

``SEC. 2713. ADDITIONAL RESPONSIBILITIES FOR CARRIERS.

    ``(a) Refund of Premiums.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is denied or an applicant returns a policy or 
certificate within 30 days of the date of its issuance pursuant to 
subsection 2717, the carrier shall refund directly to the applicant, or 
in the case of an employer to whomever remits the premium, and not by 
delivery by the agent, not later than 30 days after the date of the 
denial or return, any premiums paid with respect to such a policy (or 
certificate).
    ``(b) Mailing of Policy.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is approved, the carrier shall provide the applicant, 
or in the case of a group plan the employer, the policy (or 
certificate) of insurance not later than 30 days after the date of the 
approval.
    ``(c) Information on Denials of Claims.--If a claim under a long-
term care insurance policy is denied, the carrier shall, within 30 days 
of the date of a written request by the policyholder or certificate 
holder (or representative)--
            ``(1) provide a written explanation of the reasons for the 
        denial; and
            ``(2) make available all medical and patient records 
        directly relating to such denial.
Except as provided in subsection (e) of section 2715, no claim under 
such a policy may be denied on the basis of a failure to disclose a 
condition at the time of issuance of the policy if the application for 
the policy failed to request information respecting the condition.
    ``(d) Reporting of Information.--A carrier that issues one or more 
long-term care insurance policies shall periodically (not less often 
than annually) report, in a form and in a manner determined by the 
NAIC, to the Commissioner, superintendent or director of insurance of 
each State in which the policy is delivered, and shall make available 
to the Secretary, upon request, information in a form and manner 
determined by the NAIC concerning--
            ``(1) the long-term care insurance policies of the carrier 
        that are in force;
            ``(2) the most recent premiums for such policies and the 
        premiums imposed for such policies since their initial 
        issuance;
            ``(3) the lapse rate, replacement rate, and rescission 
        rates by policy;
            ``(4) the names of that 10 percent of its agents that--
                    ``(A) have the greatest lapse and replacement rate; 
                and
                    ``(B) have produced at least $50,000 of long-term 
                care insurance sales in the previous year; and
            ``(5) the claims denied (expressed as a number and as a 
        percentage of claims submitted) by policy.
Information required under this subsection shall be reported in a 
format specified in the standards established under section 2701(a). 
For purposes of paragraph (3), there shall be included (but reported 
separately) data concerning lapses due to the death of the 
policyholder. For purposes of paragraph (4), there shall not be 
included as a claim any claim that is denied solely because of the 
failure to meet a deductible, waiting period, or exclusionary period.
    ``(e) Standards on Compensation for Sale of Policies.--
            ``(1) In general.--A carrier that issues one or more long-
        term care insurance policies may provide a commission or other 
        compensation to an agent or other representative for the sale 
        of such a policy only if the first year commission or other 
        first year compensation to be paid does not exceed 200 percent 
        of the commission or other compensation paid for selling or 
        servicing the policy in the second year, or if the first year 
        commission or other compensation to be paid does not exceed 50 
        percent of the premium paid on the first year policy, until the 
        NAIC promulgates mandatory standards concerning compensation 
        for the sale of such policies.
            ``(2) Subsequent years.--The commission or other 
        compensation provided for the sale of long-term care insurance 
        policies in years subsequent to the first year of the policy 
        shall be the same as that provided in the second subsequent 
        year and shall be provided for no fewer than 5 subsequent 
        years.
            ``(3) Limitation.--No carrier shall provide compensation to 
        its agents for the sale of a long-term care insurance policy 
        and no agent shall receive compensation greater than the 
        renewal compensation payable by the replacing carrier on 
        renewal policies if an existing policy is replaced.
            ``(4) Compensation defined.--As used in this subsection, 
        the term `compensation' includes pecuniary or nonpecuniary 
        remuneration of any kind relating to the sale or renewal of the 
        policy, including but not limited to deferred compensation, 
        bonuses, gifts, prizes, awards, and finders fees.

``SEC. 2714. RENEWABILITY STANDARDS FOR ISSUANCE, AND BASIC FOR 
              CANCELLATION OF POLICIES.

    ``(a) In General.--No long-term care insurance policy may be 
canceled or nonrenewed for any reason other than nonpayment of premium, 
material misrepresentation or fraud.
    ``(b) Continuation and Conversion Rights for Group Policies.--
            ``(1) In general.--Each group long-term care insurance 
        policy shall provide covered individuals with a basis for 
        continuation or conversion in accordance with this subsection.
            ``(2) Basis for continuation.--For purposes of paragraph 
        (1), a policy provides a basis for continuation of coverage if 
        the policy maintains coverage under the existing group policy 
        when such coverage would otherwise terminate and which is 
        subject only to the continued timely payment of premium when 
        due. A group policy which restricts provision of benefits and 
        services to or contains incentives to use certain providers or 
        facility, may provide continuation benefits which are 
        substantially equivalent to the benefits of the existing group 
        policy.
            ``(3) Basis for conversion.--For purposes of paragraph (1), 
        a policy provides a basis for conversion of coverage if the 
        policy entitles each individual--
                    ``(A) whose coverage under the group policy would 
                otherwise be terminated for any reason; and
                    ``(B) who has been continuously insured under the 
                policy (or group policy which was replaced) for at 
                least 6 months before the date of the termination;
        to issuance of a policy providing benefits identical to, 
        substantially equivalent to, or in excess of, those of the 
        policy being terminated, without evidence of insurability.
            ``(4) Treatment of substantial equivalence.--In determining 
        under this subsection whether benefits are substantially 
        equivalent, consideration should be given to the difference 
        between managed care and non-managed care plans.
            ``(5) Group replacement of policies.--If a group long-term 
        care insurance policy is replaced by another long-term care 
        insurance policy purchased by the same policyholder, the 
        succeeding issuer shall offer coverage to all persons covered 
        under the old group policy on its date of termination. Coverage 
        under the new group policy shall not result in any exclusion 
        for preexisting conditions that would have been covered under 
        the group policy being replaced.
    ``(c) Standards for Issuance.--
            ``(1) In general.--
                    ``(A) Guarantee.--An agent, association or carrier 
                that sells or issues long-term care insurance policies 
                shall guarantee that such policies shall be sold or 
                issued to an individual, or eligible individual in the 
                case of a group plan, if such individual meets the 
                minimum medical underwriting requirements of such 
                policy.
                    ``(B) Premium for converted policy.--If a group 
                policy from which conversion is made is a replacement 
                for a previous group policy, the premium for the 
                converted policy shall be calculated on the basis of 
                the insured's age at the inception of coverage under 
                the group policy from which conversion is made. Where 
                the group policy from which conversion is made replaced 
                previous group coverage, the premium for the converted 
                policy shall be calculated on the basis of the 
                insured's age at inception of coverage under the group 
                policy replaced.
            ``(2) Upgrade for current policies.--The NAIC shall 
        establish standards, including those providing guidance on 
        medical underwriting and age rating, with respect to the access 
        of individuals to policies offering upgraded benefits.
    ``(d) Effect of Incapacitation.--
            ``(1) In general.--
                    ``(A) Prohibition.--Except as provided in paragraph 
                (2), a long-term care insurance policy in effect as of 
                the effective date of the standards established under 
                section 2701(a) may not be canceled for nonpayment if 
                the policy holder is determined by a long-term care 
                provider, physician or other health care provider, 
                independent of the issuer of the policy, to be 
                cognitively or mentally incapacitated so as to not make 
                payments in a timely manner.
                    ``(B) Reinstatement.--A long-term care policy shall 
                include a provision that provides for the reinstatement 
                of such coverage, in the event of lapse, if the insurer 
                is provided with proof of cognitive or mental 
                incapacitation. Such reinstatement option shall remain 
                available for a period of not less than 5 months after 
                termination and shall allow for the collection of past 
                due premium.
            ``(2) Permitted cancellation.--A long-term care insurance 
        policy may be canceled under paragraph (1) for nonpayment if--
                    ``(A) the period of such nonpayment is in excess of 
                30 days; and
                    ``(B) notice of intent to cancel is provided to the 
                policyholder or designated representative of the policy 
                holder not less than 30 days prior to such 
                cancellation, except that notice may not be provided 
                until the expiration of 30 days after a premium is due 
                and unpaid.
        Notice under this paragraph shall be deemed to have been given 
        as of 5 days after the mailing date.

``SEC. 2715. BENEFIT STANDARDS.

    ``(a) Use of Standard Definitions and Terminology, Uniform Format, 
and Standard Benefits.--Each long-term care insurance policy shall, 
with respect to services, providers or facilities, pursuant to 
standards established under section 2701(a)--
            ``(1) use uniform language and definitions, except that 
        such language and definitions may take into account the 
        differences between States with respect to definitions and 
        terminology used for long-term care services and providers;
            ``(2) use a uniform format for presenting the outline of 
        coverage under such a policy; and
            ``(3) provide coverage for at least one standard benefits 
        package that shall include the limitations on the amount of 
        payments per day and the lengths of covered stays for nursing 
        facility and home health care services;
as prescribed under guidelines issued by the NAIC and periodically 
updated.
    ``(b) Disclosure.--
            ``(1) Outline of coverage.--
                    ``(A) Requirement.--Each carrier that sells or 
                offers for sale a long-term care insurance policy shall 
                provide an outline of coverage under such policy that 
                meets the applicable standards established pursuant to 
                section 2701(a), complies with the requirements of 
                subparagraph (B), and is in a uniform format as 
                prescribed in guidelines issued by the NAIC and 
                periodically updated.
                    ``(B) Contents.--The outline of coverage for each 
                long-term care insurance policy shall include at least 
                the following:
                            ``(i) A description of the principal 
                        benefits and coverage under the policy.
                            ``(ii) A statement of the principal 
                        exclusions, reductions, and limitations 
                        contained in the policy.
                            ``(iii) A statement of the terms under 
                        which the policy (or certificate) may be 
                        continued in force or discontinued, the terms 
                        for continuation or conversion, and any 
                        reservation in the policy of a right to change 
                        premiums.
                            ``(iv) A statement, in bold face type on 
                        the face of the document in language that is 
                        understandable to an average individual, that 
                        the outline of coverage is a summary only, not 
                        a contract of insurance, and that the policy 
                        (or master policy) contains the contractual 
                        provisions that govern, except that such 
                        summary shall substantially and accurately 
                        reflect the contents of the policy or the 
                        master policy.
                            ``(v) A description of the terms, specified 
                        in section 2717, under which a policy or 
                        certificate may be returned and premium 
                        refunded.
                            ``(vi) Information on national average 
                        costs for nursing facility and home health care 
                        and information (in graphic form) on the 
                        relationship of the value of the benefits 
                        provided under the policy to such national 
                        average costs and State average costs, where 
                        available.
                            ``(vii) A statement of the percentage limit 
                        on annual premium increases that is provided 
                        under the policy pursuant to this section.
            ``(2) Certificates.--A certificate issued pursuant to a 
        group long-term care insurance policy shall include--
                    ``(A) a description of the principal benefits and 
                coverage provided in the policy;
                    ``(B) a statement of the principal exclusions, 
                reductions, and limitations contained in the policy; 
                and
                    ``(C) a statement that the group master policy 
                determines governing contractual provisions.
            ``(3) Long-term care as part of life insurance.--In the 
        case of a long-term care insurance policy issued as a part of, 
        or a rider on, a life insurance policy, at the time of policy 
        delivery there shall be provided a policy summary that 
        includes--
                    ``(A) an explanation of how the long-term care 
                benefits interact with other components of the policy 
                (including deductions from death benefits);
                    ``(B) an illustration of the amount of benefits, 
                the length of benefit, and the guaranteed lifetime 
                benefits (if any) for each covered person; and
                    ``(C) any exclusions, reductions, and limitations 
                on benefits of long-term care.
            ``(4) Additional information.--The NAIC shall develop 
        recommendations with respect to informing consumers of the 
        long-term economic viability of carriers issuing long-term care 
        insurance policies.
    ``(c) Limiting Conditions on Benefits; Minimum Benefits.--
            ``(1) In general.--A long-term care insurance policy may 
        not condition or limit eligibility--
                    ``(A) for benefits for a type of services to the 
                need for or receipt of any other services;
                    ``(B) for any benefit on the medical necessity for 
                such benefit;
                    ``(C) for benefits furnished by licensed or 
                certified providers in compliance with conditions which 
                are in addition to those required for licensure or 
                certification under State law, except that if no State 
                licensure or certification laws exists, in compliance 
                with qualifications developed by the NAIC; or
                    ``(D) for residential care (if covered under the 
                policy) only--
                            ``(i) to care provided in facilities which 
                        provide a higher level of care; or
                            ``(ii) to care provided in facilities which 
                        provide for 24-hour or other nursing care not 
                        required in order to be licensed by the State.
            ``(2) Home health care or community-based services.--If a 
        long-term care insurance policy provides benefits for the 
        payment of specified home health care or community-based 
        services, the policy--
                    ``(A) may not limit such benefits to services 
                provided by registered nurses or licensed practical 
                nurses;
                    ``(B) may not require benefits for such services to 
                be provided by a nurse or therapist that can be 
                provided by a home health aide or licensed or certified 
                home care worker, except that if no State licensure or 
                certification laws exists, in compliance with 
                qualifications developed by the NAIC;
                    ``(C) may not limit such benefits to services 
                provided by agencies or providers certified under title 
                XVIII of the Social Security Act; and
                    ``(D) must provide, at a minimum, benefits for 
                personal care services (including home health aide and 
                home care worker services as defined by the NAIC) home 
                health services, adult day care, and respite care in an 
                individual's home or in another setting in the 
                community, or any of these benefits on a respite care 
                basis.
            ``(3) Nursing facility services.--If a long-term care 
        insurance policy provides benefits for the payment of specified 
        nursing facility services, the policy must provide such 
        benefits with respect to all nursing facilities (as defined in 
        section 1919(a) of the Social Security Act or until such time 
        as subsequently provided for by the NAIC in establishing 
        uniform language and definitions under section 2715(a)(1)) in 
        the State.
            ``(4) Per diem policies.--
                    ``(A) Definition.--For purposes of this title, the 
                term `per diem long-term care insurance policy' means a 
                long-term care insurance policy (or certificate under a 
                group long-term care insurance policy) that provides 
                for benefit payments on a periodic basis due to 
                cognitive impairment or loss of functional capacity 
                without regard to the expenses incurred or services 
                rendered during the period to which the payments 
                relate.
                    ``(B) Limitation.--No per diem long-term care 
                insurance policy (or certificate) may condition, limit 
                or otherwise exclude benefit payments based on the 
                receipt of any type services from any type providers of 
                long-term care service providers.
    ``(d) Prohibition of Discrimination.--A long-term care insurance 
policy may not treat benefits under the policy in the case of an 
individual with Alzheimer's disease, with any related progressive 
degenerative dementia of an organic origin, with any organic or 
inorganic mental illness, or with mental retardation or any other 
cognitive or mental impairment differently from an individual having 
another medical condition for which benefits may be made available.
    ``(e) Limitation on Use of Preexisting Condition Limits.--
            ``(1) Initial issuance.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                long-term care insurance policy may not exclude or 
                condition benefits based on a medical condition for 
                which the policyholder received treatment or was 
                otherwise diagnosed before the issuance of the policy.
                    ``(B) 6-month limit.--
                            ``(i) In general.--No long-term care 
                        insurance policy or certificate issued under 
                        this title shall utilize a definition of 
                        `preexisting condition' that is more 
                        restrictive than the following: The term 
                        `preexisting condition' means a condition for 
                        which medical advice or treatment was 
                        recommended by, or received from a provider of 
                        health care services, within 6 months preceding 
                        the effective date of coverage of an insured 
                        individual.
                            ``(ii) Prohibition on exclusion of 
                        coverage.--No long-term care insurance policy 
                        or certificate may exclude coverage for a loss 
                        or confinement that is the result of a 
                        preexisting condition unless such loss or 
                        confinement begins within 6 months following 
                        the effective date of the coverage of the 
                        insured individual.
            ``(2) Replacement policies.--If a long-term care insurance 
        policy replaces another long-term care insurance policy, the 
        issuer of the replacing policy shall waive any time periods 
        applicable to preexisting conditions, waiting period, 
        elimination periods and probationary periods in the new policy 
        for similar benefits to the extent such time was spent under 
        the original policy.
    ``(f) Eligibility for Benefits.--
            ``(1) Long-term care policies.--Each long-term care 
        insurance policy shall--
                    ``(A) describe the level of benefits available 
                under the policy; and
                    ``(B) specify in clear, understandable terms, the 
                level (or levels) of physical, cognitive, or mental 
                impairment required in order to receive benefits under 
                the policy.
            ``(2) Functional assessment.--In order to submit a claim 
        under any long-term care insurance policy, each claimant shall 
        have a professional functional assessment of his or her 
        physical, cognitive, and mental abilities. Such initial 
        assessment shall be conducted by an individual or entity, 
        meeting the qualifications established by the NAIC to assure 
        the professional competence and credibility of such individual 
        or entity and that such individual meets any applicable State 
        licensure and certification requirements. The individual or 
        entity conducting such assessment may not control, or be 
        controlled by, the issuer of the policy. For purposes of this 
        paragraph and paragraph (4), the term `control' means the 
        direct or indirect possession of the power to direct the 
        management and policies of a person. Control is presumed to 
        exist, if any person directly or indirectly, owns, controls, 
        holds with the power to vote, or holds proxies representing 10 
        percent of the voting securities of another person.
            ``(3) Claims review.--Except as provided in paragraph (1), 
        each long-term care insurance policy shall be subject to final 
        claims review by the carrier pursuant to the terms of the long-
        term care insurance policy.
            ``(4) Appeals process.--
                    ``(A) In general.--Each long-term care insurance 
                policy shall provide for a timely and independent 
                appeals process, meeting standards established by the 
                NAIC, for individuals who dispute the results of the 
                claims review, conducted under paragraph (3), of the 
                policyholder's functional assessment, conducted under 
                paragraph (2).
                    ``(B) Independent assessment.--An appeals process 
                under this paragraph shall include, at the request of 
                the claimant, an independent assessment of the 
                claimant's physical, cognitive or mental abilities.
                    ``(C) Conduct.--An independent assessment under 
                subparagraph (B) shall be conducted by an individual or 
                entity meeting the qualifications established by the 
                NAIC to assure the professional competence and 
                credibility of such individual or entity and any 
                applicable State licensure and certification 
                requirements and may not be conducted--
                            ``(i) by an individual who has a direct or 
                        indirect significant or controlling interest 
                        in, or direct affiliation or relationship with, 
                        the issuer of the policy;
                            ``(ii) by an entity that provides services 
                        to the policyholder or certificateholder for 
                        which benefits are available under the long-
                        term care insurance policy; or
                            ``(iii) by an individual or entity in 
                        control of, or controlled by, the issuer of the 
                        policy.
            ``(5) Standard assessments.--Not later than 2 years after 
        the date of enactment of this title, the advisory committee 
        established under section 2701(d) shall recommend uniform needs 
        assessment mechanisms for the determination of eligibility for 
        benefits under such assessments.
    ``(g) Inflation Protection.--
            ``(1) Option to purchase.--A carrier may not offer a long-
        term care insurance policy unless the carrier also offers to 
        the proposed policyholder, including each group policyholder, 
        the option to purchase a policy that provides for increases in 
        benefit levels, with benefit maximums or reasonable durations 
        that are meaningful, to account for reasonably anticipated 
        increases in the costs of long-term care services covered by 
        the policy. A carrier may not offer to a policyholder an 
        inflation protection feature that is less favorable to the 
        policyholder than one following:
                    ``(A) With respect to policies that provide for 
                automatic periodic increases in benefits, the policy 
                provides for an annual increase in benefits in a manner 
                so that such increases are computed annually at a rate 
                of not less than 5 percent.
                    ``(B) With respect to policies that provide for 
                periodic opportunities to elect an increase in 
                benefits, the policy guarantees that the insured 
                individual will have the right to periodically increase 
                the benefit levels under the policy without providing 
                evidence of insurability or health status so long as 
                the option for the previous period was not declined. 
                The amount of any such additional benefit may not be 
                less than the difference between--
                            ``(i) the existing policy benefit; and
                            ``(ii) such existing benefit compounded 
                        annually at a rate of at least 5 percent for 
                        the period beginning on the date on which the 
                        existing benefit is purchased and extending 
                        until the year in which the offer of increase 
                        is made.
                    ``(C) With respect to service benefit policies, the 
                policy covers a specified percentage of the actual or 
                reasonable charges and does not include a maximum 
                specified indemnity amount or limit.
            ``(2) Exception.--The requirements of paragraph (1) shall 
        not apply to life insurance policies or riders containing 
        accelerated long-term care benefits.
            ``(3) Required information.--Carriers shall include the 
        following information in or together with the outline of 
        coverage provided under this title:
                    ``(A) A graphic comparison of the benefit levels of 
                a policy that increases benefits over the policy period 
                with a policy that does not increase benefits. Such 
                comparison shall show benefit levels over not less than 
                a 20-year period.
                    ``(B) Any expected premium increases or additional 
                premiums required to pay for any automatic or optional 
                benefit increases, whether the individual who purchases 
                the policy obtains the inflation protection initially 
                or whether such individual delays purchasing such 
                protection until a future time.
            ``(4) Continuation of protection.--Inflation protection 
        benefit increases under this subsection under a policy that 
        contains such protection shall continue without regard to an 
        insured's age, claim status or claim history, or the length of 
        time the individual has been insured under the policy.
            ``(5) Constant premium.--An offer of inflation protection 
        under this subsection that provides for automatic benefit 
        increases shall include an offer of a premium that the carrier 
        expects to remain constant. Such offer shall disclose in a 
        conspicuous manner that the premium may change in the future 
        unless the premium is guaranteed to remain constant.
            ``(6) Rejection.--Inflation protection under this 
        subsection shall be included in a long-term care insurance 
        policy unless a carrier obtains a written rejection of such 
        protection signed by the policyholder.

``SEC. 2716. NONFORFEITURE.

    ``(a) In General.--Each long-term care insurance policy (or 
certificate) shall provide that if the policy lapses after the policy 
has been in effect for a minimum period (specified under the standards 
under section 2701(a)), the policy will provide, without payment of any 
additional premiums, nonforfeiture benefits as determined appropriate 
by the NAIC.
    ``(b) Establishment of Standards.--The standards under section 
2701(a) shall provide that the percentage or amount of benefits under 
subsection (a) must increase based upon the policyholder's equity in 
the policy.

``SEC. 2717. LIMIT OF PERIOD OF CONTESTABILITY AND RIGHT TO RETURN.

    ``(a) Contestability.--A carrier may not cancel or renew a long-
term care insurance policy or deny a claim under the policy based on 
fraud or intentional misrepresentation relating to the issuance of the 
policy unless notice of such fraud or misrepresentation is provided 
within a time period to be determined by the NAIC.
    ``(b) Right to Return.--Each applicant for a long-term care 
insurance policy shall have the right to return the policy (or 
certificates) within 30 days of the date of its delivery (and to have 
the premium refunded) if, after examination of the policy or 
certificate, the applicant is not satisfied for any reason.

``SEC. 2718. CIVIL MONEY PENALTY.

    ``(a) Carrier.--Any carrier, association or its subsidiary that 
sells or offers for sale a long-term care insurance policy and that--
            ``(1) fails to make a refund in accordance with section 
        2713(a);
            ``(2) fails to transmit a policy in accordance with section 
        2713(b);
            ``(3) fails to provide, make available, or report 
        information in accordance with subsections (c) or (d) of 
        section 2713;
            ``(4) provides a commission or compensation in violation of 
        section 2713(e);
            ``(5) fails to provide an outline of coverage in violation 
        of section 2715(b)(1); or
            ``(6) issues a policy without obtaining certain information 
        in violation of section 2715(f);
is subject to a civil money penalty of not to exceed $25,000 for each 
such violation.
    ``(b) Agents.--Any agent that sells or offers for sale a long-term 
care insurance policy and that--
            ``(1) fails to make a refund in accordance with section 
        2713(a);
            ``(2) fails to transmit a policy in accordance with section 
        2713(b);
            ``(3) fails to provide, make available, or report 
        information in accordance with subsections (c) or (d) of 
        section 2713;
            ``(4) fails to provide an outline of coverage in violation 
        of section 2715(b)(1); or
            ``(5) issues a policy without obtaining certain information 
        in violation of section 2715(f);
is subject to a civil money penalty of not to exceed $15,000 for each 
such violation.

      ``Part C--Long-Term Care Insurance Policies, Definition and 
                              Endorsements

``SEC. 2721. LONG-TERM CARE INSURANCE POLICY DEFINED.

    ``(a) In General.--As used in this section, the term `long-term 
care insurance policy' means any insurance policy, rider or certificate 
advertised, marketed, offered or designed to provide coverage for not 
less than 12 consecutive months for each covered person on an expense 
incurred, indemnity prepaid or other basis, for one or more necessary 
diagnostic, preventive, therapeutic, rehabilitative, maintenance or 
personal care services, provided in a setting other than an acute care 
unit of a hospital. Such term includes--
            ``(1) group and individual annuities and life insurance 
        policies, riders or certificates that provide directly, or that 
        supplement long-term care insurance; and
            ``(2) a policy, rider or certificates that provides for 
        payment of benefits based on cognitive impairment or the loss 
        of functional capacity.
    ``(b) Issuance.--Long-term care insurance policies may be issued 
by--
            ``(1) carriers;
            ``(2) fraternal benefit societies;
            ``(3) nonprofit health, hospital, and medical service 
        corporations;
            ``(4) prepaid health plans;
            ``(5) health maintenance organizations; or
            ``(6) any similar organization to the extent they are 
        otherwise authorized to issue life or health insurance.
    ``(c) Policies Excluded.--The term `long-term care insurance 
policy' shall not include any insurance policy, rider or certificate 
that is offered primarily to provide basic Medicare supplement 
coverage, basic hospital expense coverage, basic medical-surgical 
expense coverage, hospital confinement indemnity coverage, major 
medical expense coverage, disability income or related asset-protection 
coverage, accident only coverage, specified disease or specified 
accident coverage, or limited benefit health coverage. With respect to 
life insurance, such term shall not include life insurance policies, 
riders or certificates that accelerate the death benefit specifically 
for one or more of the qualifying events of terminal illness, medical 
conditions requiring extraordinary medical intervention, or permanent 
institutional confinement, and that provide the option of a lump-sum 
payment for those benefits and in which neither the benefits nor the 
eligibility for the benefits is conditioned upon the receipt of long-
term care.
    ``(d) Applications.--Notwithstanding any other provision of this 
title, this title shall apply to any product advertised, marketed or 
offered as a long-term insurance policy, rider or certificate.

``SEC. 2722. CODE OF CONDUCT WITH RESPECT TO ENDORSEMENTS.

    ``Not later than 1 year after the date of enactment of this title 
the NAIC shall issue guidelines that shall apply to organizations and 
associations, other than employers and labor organizations that do not 
accept compensation, and their subsidiaries that provide endorsements 
of long-term care insurance policies, or that permit such policies to 
be offered for sale through the organization or association. Such 
guidelines shall include at minimum the following:
            ``(1) In endorsing or selling long-term care insurance 
        policies, the primary responsibility of an organization or 
        association shall be to educate their members concerning such 
        policies and assist such members in making informed decisions. 
        Such organizations and associations may not function primarily 
        as sales agents for insurance companies.
            ``(2) Organizations and associations shall provide 
        objective information regarding long-term care insurance 
        policies sold or endorsed by such organizations and 
        associations to ensure that members of such organizations and 
        associations have a balanced and complete understanding of both 
        the strengths and weaknesses of the policies that are being 
        endorsed or sold.
            ``(3) Organizations and associations selling or endorsing 
        long-term care insurance policies shall disclose in marketing 
        literature provided to their members concerning such policies 
        the manner in which such policies and the insurance company 
        issuing such policies were selected. If the organization or 
        association and the insurance company have interlocking 
        directorates, the organization or association shall disclose 
        such fact to their members.
            ``(4) Organizations and associations selling or endorsing 
        long-term care insurance policies shall disclose in marketing 
        literature provided to their members concerning such policies 
        the nature and amount of the compensation arrangements 
        (including all fees, commissions, administrative fees and other 
        forms of financial support that the organization or association 
        receives) from the endorsement or sale of the policy to its 
        members.
            ``(5) The Boards of Directors of organizations and 
        associations selling or endorsing long-term care insurance 
        policies, if such organizations and associations have a Board 
        of Directors, shall review and approve such insurance policies, 
        the compensation arrangements and the marketing materials used 
        to promote sales of such policies.

                   ``Part D--Miscellaneous Provisions

``SEC. 2731. FUNDING FOR LONG-TERM CARE INSURANCE INFORMATION, 
              COUNSELING, AND ASSISTANCE.

    ``(a) In General.--The Secretary, acting through the Public Health 
Service, may award grants to States, and national organizations with 
demonstrated experience in long-term care insurance, for the 
establishment of programs to provide information, counseling, and 
assistance relating to the procurement of adequate and appropriate 
long-term care insurance.
    ``(b) Application.--To be eligible to receive a grant under 
subsection (a), a State or national organization shall prepare and 
submit to the Secretary an application at such time, in such manner, 
and containing such information as the Secretary may require, including 
a description of the program for which the State or organization 
intends to use the amounts provided under the grant.
    ``(c) Authorization of Appropriations.--
            ``(1) In general.--There are authorized to be appropriate 
        for grants to States under subsection (a), $10,000,000 for each 
        of the fiscal years 1994 through 1996.
            ``(2) National organizations.--There are authorized to be 
        appropriate for grants to national organizations under 
        subsection (a), $1,000,000 for each of the fiscal years 1994 
        through 1996.

``SEC. 2732. DEFINITIONS.

    ``As used in this title:
            ``(1) Agent.--The term `agent' means--
                    ``(A) prior to 2 years after the date of enactment 
                of this Act, an individual who sells or offers for sale 
                a long-term care insurance policy subject to the 
                requirements of this title and is licensed or required 
                to be licensed under State law for such purpose; and
                    ``(B) after the date referred to in subparagraph 
                (A), an individual who meets the training and 
                certification requirements established under section 
                2712(f).
            ``(2) Association.--The term `association' includes the 
        association and its subsidiaries.
            ``(3) Carrier.--The term `carrier' means any person that 
        offers a health benefit plan, whether through insurance or 
        otherwise, including a licensed insurance company, a prepaid 
        hospital or medical service plan, a health maintenance 
        organization, a self-insured carrier, a reinsurance carrier, 
        and a multiple employer welfare arrangement (a combination of 
        employers associated for the purpose of providing health 
        benefit plan coverage for their employees).''.
    (b) Conforming Amendments.--
            (1) Sections 2701 through 2714 of the Public Health Service 
        Act (42 U.S.C. 300cc through 300cc-15) are redesignated as 
        sections 2801 through 2814, respectively.
            (2)(A) Sections 465(f) and 497 of such Act (42 U.S.C. 
        286(f) and 289(f)) are amended by striking out ``2701'' each 
        place that such appears and inserting in lieu thereof ``2801''.

                                 <all>

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S 203 IS----3
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```