I
104TH CONGRESS
2D SESSION
H. R. 3381
To amend the Internal Revenue Code of 1986 and the Social Security Act
to provide tax incentives for the purchase of long-term care insurance
and to establish consumer protection standards for such insurance.
IN THE HOUSE OF REPRESENTATIVES
MAY 1, 1996
Mr. DURBIN introduced the following bill; which was referred to the Commit-
tee on Ways and Means, and in addition to the Committee on Commerce,
for a period to be subsequently determined by the Speaker, in each case
for consideration of such provisions as fall within the jurisdiction of the
committee concerned
A BILL
To amend the Internal Revenue Code of 1986 and the Social
Security Act to provide tax incentives for the purchase
of long-term care insurance and to establish consumer
protection standards for such insurance.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Long-Term Care In-
surance Incentives and Consumer Protection Act of
1996’’.
TITLE I—TAX-RELATED
PROVISIONS
SEC. 100. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this title an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
SEC. 101. TREATMENT OF LONG-TERM CARE INSURANCE.
(a) GENERAL RULE.—Chapter 79 (relating to defini-
tions) is amended by inserting after section 7702A the fol-
lowing new section:
‘‘SEC. 7702B. TREATMENT OF QUALIFIED LONG-TERM CARE
INSURANCE.
‘‘(a) IN GENERAL.—For purposes of this title—
‘‘(1) a qualified long-term care insurance con-
tract shall be treated as an accident and health in-
surance contract,
‘‘(2) amounts (other than policyholder divi-
dends, as defined in section 808, or premium re-
funds) received under a qualified long-term care in-
surance contract shall be treated as amounts re-
ceived for personal injuries and sickness and shall be
treated as reimbursement for expenses actually in-
‘‘(A) PER
DIEM, ETC. PAYMENTS
PER-
MITTED.—A contract shall not fail to be de-
scribed in subparagraph (A) or (B) of para-
graph (1) by reason of payments being made on
a per diem or other periodic basis without re-
gard to the expenses incurred during the period
to which the payments relate.
‘‘(B) SPECIAL RULES RELATING TO MEDI-
CARE.—
‘‘(i) Paragraph (1)(B) shall not apply
to expenses which are reimbursable under
title XVIII of the Social Security Act only
as a secondary payor.
‘‘(ii) No provision of law shall be con-
strued or applied so as to prohibit the of-
fering of a qualified long-term care insur-
ance contract on the basis that the con-
tract coordinates its benefits with those
provided under such title.
‘‘(C) REFUNDS OF PREMIUMS.—Paragraph
(1)(E) shall not apply to any refund on the
death of the insured, or on a complete surren-
der or cancellation of the contract, which can-
not exceed the aggregate premiums paid under
the contract. Any refund on a complete surren-
der or cancellation of the contract shall be in-
cludible in gross income to the extent that any
deduction or exclusion was allowable with re-
spect to the premiums.
‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified long-
term care services’ means necessary diagnostic, pre-
ventive, therapeutic, curing, treating, mitigating, and
rehabilitative services, and maintenance or personal
care services, which—
‘‘(A) are required by a chronically ill indi-
vidual, and
‘‘(B) are provided pursuant to a plan of
care prescribed by a licensed health care practi-
tioner.
‘‘(2) CHRONICALLY ILL INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘chronically
ill individual’ means any individual who has
been certified by a licensed health care practi-
tioner as—
‘‘(i) being unable to perform (without
substantial assistance from another indi-
vidual) at least 2 activities of daily living
for a period of at least 90 days due to a
loss of functional capacity,
‘‘(ii) having a level of disability simi-
lar (as determined by the Secretary in con-
sultation with the Secretary of Health and
Human Services) to the level of disability
described in clause (i), or
‘‘(iii) requiring substantial supervision
to protect such individual from threats to
health and safety due to severe cognitive
impairment.
Such term shall not include any individual oth-
erwise meeting the requirements of the preced-
ing sentence unless within the preceding 12-
month period a licensed health care practitioner
has certified that such individual meets such re-
quirements.
‘‘(B) ACTIVITIES OF DAILY LIVING.—For
purposes of subparagraph (A), each of the fol-
lowing is an activity of daily living:
‘‘(i) Eating.
‘‘(ii) Toileting.
‘‘(iii) Transferring.
‘‘(iv) Bathing.
‘‘(v) Dressing.
‘‘(vi) Continence.
Nothing in this section shall be construed to re-
quire a contract to take into account all of the
preceding activities of daily living.
‘‘(3) MAINTENANCE OR PERSONAL CARE SERV-
ICES.—The term ‘maintenance or personal care serv-
ices’ means any care the primary purpose of which
is the provision of needed assistance with any of the
disabilities as a result of which the individual is a
chronically ill individual (including the protection
from threats to health and safety due to severe cog-
nitive impairment).
‘‘(4) 
LICENSED
HEALTH
CARE
PRACTI-
TIONER.—The term ‘licensed health care practi-
tioner’ means any physician (as defined in section
1861(r)(1) of the Social Security Act) and any reg-
istered professional nurse, licensed social worker, or
other individual who meets such requirements as
may be prescribed by the Secretary.
‘‘(d) AGGREGATE PAYMENTS IN EXCESS OF LIM-
ITS.—
‘‘(1) IN GENERAL.—If the aggregate amount of
periodic payments under all qualified long-term care
insurance contracts with respect to an insured for
any period exceeds the dollar amount in effect for
such period under paragraph (3), such excess pay-
ments shall be treated as made for qualified long-
term care services only to the extent of the costs in-
curred by the payee (not otherwise compensated for
by insurance or otherwise) for qualified long-term
care services provided during such period for such
insured.
‘‘(2) PERIODIC
PAYMENTS.—For purposes of
paragraph (1), the term ‘periodic payment’ means
any payment (whether on a periodic basis or other-
wise) made without regard to the extent of the costs
incurred by the payee for qualified long-term care
services.
‘‘(3) DOLLAR AMOUNT.—The dollar amount in
effect under this subsection shall be $175 per day
(or the equivalent amount in the case of payments
on another periodic basis).
‘‘(4) INFLATION ADJUSTMENT.—In the case of
a calendar year after 1997, the dollar amount con-
tained in paragraph (3) shall be increased at the
same time and in the same manner as amounts are
increased pursuant to section 213(d)(10).
‘‘(e) TREATMENT OF COVERAGE PROVIDED AS PART
OF A LIFE INSURANCE CONTRACT.—Except as otherwise
provided in regulations prescribed by the Secretary, in the
case of any long-term care insurance coverage (whether
or not qualified) provided by a rider on a life insurance
contract—
‘‘(1) IN GENERAL.—This section shall apply as
if the portion of the contract providing such cov-
erage is a separate contract.
‘‘(2) APPLICATION OF SECTION 7702.—Section
7702(c)(2) (relating to the guideline premium limi-
tation) shall be applied by increasing the guideline
premium limitation with respect to a life insurance
contract, as of any date—
‘‘(A) by the sum of any charges (but not
premium payments) against the life insurance
contract’s cash surrender value (within the
meaning of section 7702(f)(2)(A)) for such cov-
erage made to that date under the contract, less
‘‘(B) any such charges the imposition of
which reduces the premiums paid for the con-
tract 
(within 
the 
meaning 
of 
section
7702(f)(1)).
‘‘(3) APPLICATION OF SECTION 213.—No deduc-
tion shall be allowed under section 213(a) for
charges against the life insurance contract’s cash
surrender value described in paragraph (2), unless
such charges are includible in income as a result of
the application of section 72(e)(10) and the rider is
a qualified long-term care insurance contract under
subsection (b).
‘‘(4) PORTION DEFINED.—For purposes of this
subsection, the term ‘portion’ means only the terms
and benefits under a life insurance contract that are
in addition to the terms and benefits under the con-
tract without regard to the coverage under a quali-
fied long-term care insurance contract.’’
(b) LONG-TERM CARE INSURANCE NOT PERMITTED
UNDER CAFETERIA PLANS OR FLEXIBLE SPENDING AR-
RANGEMENTS.—
(1) CAFETERIA
PLANS.—Section 125(f) is
amended by adding at the end the following new
sentence: ‘‘Such term shall not include any product
which is advertised, marketed, or offered as long-
term care insurance.’’
(2) FLEXIBLE
SPENDING
ARRANGEMENTS.—
The text of section 106 (relating to contributions by
employer to accident and health plans) is amended
to read as follows:
‘‘(a) GENERAL RULE.—Except as provided in sub-
section (b), gross income of an employee does not include
employer-provided coverage under an accident or health
plan.
‘‘(b) INCLUSION OF LONG-TERM CARE BENEFITS
PROVIDED THROUGH FLEXIBLE SPENDING ARRANGE-
MENTS.—
‘‘(1) IN GENERAL.—Effective on and after Jan-
uary 1, 1997, gross income of an employee shall in-
clude employer-provided coverage for qualified long-
term care services (as defined in section 7702B(c))
to the extent that such coverage is provided through
a flexible spending or similar arrangement.
‘‘(2) FLEXIBLE
SPENDING
ARRANGEMENT.—
For purposes of this subsection, a flexible spending
arrangement is a benefit program which provides
employees with coverage under which—
‘‘(A) specified incurred expenses may be
reimbursed (subject to reimbursement maxi-
mums and other reasonable conditions), and
‘‘(B) the maximum amount of reimburse-
ment which is reasonably available to a partici-
pant for such coverage is less than 500 percent
of the value of such coverage.
In the case of an insured plan, the maximum
amount reasonably available shall be determined on
the basis of the underlying coverage.’’
(c) CONTINUATION COVERAGE EXCISE TAX NOT TO
APPLY.—Subsection (f) of section 4980B is amended by
adding at the end the following new paragraph:
‘‘(9) CONTINUATION OF LONG-TERM CARE COV-
ERAGE NOT REQUIRED.—A group health plan shall
not be treated as failing to meet the requirements of
this subsection solely by reason of failing to provide
coverage under any qualified long-term care insur-
ance contract (as defined in section 7702B(b)).’’
(d) CLERICAL AMENDMENT.—The table of sections
for chapter 79 is amended by inserting after the item re-
lating to section 7702A the following new item:
‘‘Sec. 7702B. Treatment of qualified long-term care insurance.’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to contracts issued after De-
cember 31, 1996.
(2) CONTINUATION OF EXISTING POLICIES.—In
the case of any contract issued before January 1,
1997, which met the long-term care insurance re-
quirements of the State in which the contract was
sitused at the time the contract was issued—
(A) such contract shall be treated for pur-
poses of the Internal Revenue Code of 1986 as
a qualified long-term care insurance contract
(as defined in section 7702B(b) of such Code),
and
(B) services provided under, or reimbursed
by, such contract shall be treated for such pur-
poses as qualified long-term care services (as
defined in section 7702B(c) of such Code).
(3) EXCHANGES
OF
EXISTING
POLICIES.—If,
after the date of enactment of this Act and before
January 1, 1998, a contract providing for long-term
care insurance coverage is exchanged solely for a
qualified long-term care insurance contract (as de-
fined in section 7702B(b) of such Code), no gain or
loss shall be recognized on the exchange. If, in addi-
tion to a qualified long-term care insurance contract,
money or other property is received in the exchange,
then any gain shall be recognized to the extent of
the sum of the money and the fair market value of
the other property received. For purposes of this
paragraph, the cancellation of a contract providing
for long-term care insurance coverage and reinvest-
ment of the cancellation proceeds in a qualified long-
term care insurance contract within 60 days there-
after shall be treated as an exchange.
(4) ISSUANCE
OF
CERTAIN
RIDERS
PER-
MITTED.—For purposes of applying sections 101(f),
7702, and 7702A of the Internal Revenue Code of
1986 to any contract—
(A) the issuance of a rider which is treated
as a qualified long-term care insurance contract
under section 7702B, and
(B) the addition of any provision required
to conform any other long-term care rider to be
so treated,
shall not be treated as a modification or material
change of such contract.
SEC. 102. QUALIFIED LONG-TERM CARE SERVICES TREAT-
ED AS MEDICAL CARE.
(a) GENERAL RULE.—Paragraph (1) of section
213(d) (defining medical care) is amended by striking
‘‘or’’ at the end of subparagraph (B), by redesignating
subparagraph (C) as subparagraph (D), and by inserting
after subparagraph (B) the following new subparagraph:
‘‘(C) for qualified long-term care services
(as defined in section 7702B(c)), or’’.
(b) DEDUCTION FOR PREMIUMS ALLOWED WITHOUT
REGARD TO ADJUSTED GROSS INCOME THRESHOLD.—
Subsection (a) of section 213 is amended to read as fol-
lows:
‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be
allowed as a deduction the following amounts not com-
pensated for by insurance or otherwise—
‘‘(1) the amount by which the expenses paid
during the taxable year (reduced by the amount de-
ductible under paragraph (2)) for medical care of
the taxpayer, his spouse, and dependents (as defined
in section 152) exceeds 7.5 percent of adjusted gross
income, and
‘‘(2) the amount of the eligible long-term care
premiums paid during the taxable year.’’
(c) TECHNICAL AMENDMENTS.—
(1) Subparagraph (D) of section 213(d)(1) (as
redesignated by subsection (a)) is amended by in-
serting before the period ‘‘or for any qualified long-
term care insurance contract (as defined in section
7702B(b))’’.
(2)(A) Paragraph (1) of section 213(d) is
amended by adding at the end the following new
flush sentence:
‘‘In the case of a qualified long-term care insurance
contract (as defined in section 7702B(b)), only eligi-
ble long-term care premiums (as defined in para-
graph (10)) shall be taken into account under sub-
paragraph (D).’’
(B) Subsection (d) of section 213 is amended
by adding at the end the following new paragraphs:
‘‘(10) 
ELIGIBLE
LONG-TERM
CARE
PRE-
MIUMS.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘eligible long-term care pre-
miums’ means the amount paid during a tax-
able year for any qualified long-term care insur-
ance contract (as defined in section 7702B(b))
covering an individual, to the extent such
amount does not exceed the limitation deter-
mined under the following table:
‘‘In the case of an individual
with an attained age before the
The limitation
close of the taxable year of:
is:
40 or less ...................................................
$
200
More than 40 but not more than 50 .........
375
More than 50 but not more than 60 .........
750
More than 60 but not more than 70 .........
2,000
More than 70 .............................................
2,500.
‘‘(B) INDEXING.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 1997, each dollar amount contained
in subparagraph (A) shall be increased by
the medical care cost adjustment of such
amount for such calendar year. If any in-
crease determined under the preceding sen-
tence is not a multiple of $10, such in-
crease shall be rounded to the nearest mul-
tiple of $10.
‘‘(ii) MEDICAL
CARE
COST
ADJUST-
MENT.—For purposes of clause (i), the
medical care cost adjustment for any cal-
endar year is the percentage (if any) by
which—
‘‘(I) the medical care component
of the Consumer Price Index (as de-
fined in section 1(f)(5)) for August of
the preceding calendar year, exceeds
‘‘(II) such component for August
of 1996.
The Secretary shall, in consultation with
the Secretary of Health and Human Serv-
ices, prescribe an adjustment which the
Secretary determines is more appropriate
for purposes of this paragraph than the
adjustment described in the preceding sen-
tence, and the adjustment so prescribed
shall apply in lieu of the adjustment de-
scribed in the preceding sentence.
‘‘(11) CERTAIN
PAYMENTS
TO
RELATIVES
TREATED AS NOT PAID FOR MEDICAL CARE.—An
amount paid for a qualified long-term care service
(as defined in section 7702B(c)) provided to an indi-
vidual shall be treated as not paid for medical care
if such service is provided—
‘‘(A) by the spouse of the individual or by
a relative (directly or through a partnership,
corporation, or other entity) unless the service
is provided by a licensed professional with re-
spect to such service, or
‘‘(B) by a corporation or partnership which
is related (within the meaning of section 267(b)
or 707(b)) to the individual.
For purposes of this paragraph, the term ‘relative’
means an individual bearing a relationship to the in-
dividual which is described in any of paragraphs (1)
through (8) of section 152(a). This paragraph shall
not apply for purposes of section 105(b) with respect
to reimbursements through insurance.’’
(3) Paragraph (6) of section 213(d) is
amended—
(A) by striking ‘‘subparagraphs (A) and
(B)’’ and inserting ‘‘subparagraphs (A), (B),
and (C)’’, and
(B) by striking ‘‘paragraph (1)(C)’’ in sub-
paragraph 
(A) 
and 
inserting 
‘‘paragraph
(1)(D)’’.
(4) Paragraph (7) of section 213(d) is amended
by striking ‘‘subparagraphs (A) and (B)’’ and insert-
ing ‘‘subparagraphs (A), (B), and (C)’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 1996.
(2) DEDUCTION FOR LONG-TERM CARE SERV-
ICES.—Amounts paid for qualified long-term care
services (as defined in section 7702B(c) of the Inter-
nal Revenue Code of 1986, as added by this Act)
furnished in any taxable year beginning before Janu-
ary 1, 1997, shall not be taken into account under
section 213 of the Internal Revenue Code of 1986.
SEC. 103. CERTAIN EXCHANGES OF LIFE INSURANCE CON-
TRACTS FOR QUALIFIED LONG-TERM CARE
INSURANCE CONTRACTS NOT TAXABLE.
(a) IN GENERAL.—Subsection (a) of section 1035
(relating to certain exchanges of insurance contracts) is
amended by striking the period at the end of paragraph
(3) and inserting ‘‘; or’’, and by adding at the end the
following new paragraph:
‘‘(4) a contract of life insurance or an endow-
ment or annuity contract for a qualified long-term
care insurance contract (as defined in section
7702B(b)).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 104. EXCEPTION FROM PENALTY TAX FOR AMOUNTS
WITHDRAWN FROM CERTAIN RETIREMENT
PLANS FOR QUALIFIED LONG-TERM CARE IN-
SURANCE.
(a) IN GENERAL.—Paragraph (2) of section 72(t) is
amended by adding at the end the following new subpara-
graph:
‘‘(F) PREMIUMS
FOR
QUALIFIED
LONG-
TERM CARE INSURANCE CONTRACTS.—Distribu-
tions to an individual from an individual retire-
ment plan, or from amounts attributable to em-
ployer contributions made pursuant to elective
deferrals described in subparagraph (A) or (C)
of section 402(g)(3), to the extent such dis-
tributions do not exceed the premiums for a
qualified long-term care insurance contract (as
defined in section 7702B(b)) for such individual
or the spouse of such individual. In applying
subparagraph (B), such premiums shall be
treated as amounts not paid for medical care.’’
(b) DISTRIBUTIONS PERMITTED FROM CERTAIN
PLANS TO PAY LONG-TERM CARE PREMIUMS.—
(1) Section 401(k)(2)(B)(i) is amended by
striking ‘‘or’’ at the end of subclause (III), by strik-
ing ‘‘and’’ at the end of subclause (IV) and inserting
‘‘or’’, and by inserting after subclause (IV) the fol-
lowing new subclause:
‘‘(V) the date distributions for
premiums for a long-term care insur-
ance contract (as defined in section
7702B(b)) for coverage of such indi-
vidual or the spouse of such individual
are made, and’’.
(2) Section 403(b)(11) is amended by striking
‘‘or’’ at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting
‘‘, or’’, and by inserting after subparagraph (B) the
following new subparagraph:
‘‘(C) for the payment of premiums for a
long-term care insurance contract (as defined in
section 7702B(b)) for coverage of the employee
or the spouse of the employee.’’
(3) Subparagraph (A) of section 457(d)(1) is
amended by striking ‘‘or’’ at the end of clause (ii),
by striking ‘‘and’’ at the end of clause (iii) and in-
serting ‘‘or’’, and by inserting after clause (iii) the
following new clause:
‘‘(iv) the date distributions for pre-
miums for a long-term care insurance con-
tract (as defined in section 7702B(b)) for
coverage of such individual or the spouse
of such individual are made, and’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
December 31, 1996.
SEC. 105. REPORTING REQUIREMENTS.
(a) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 is amended by adding at the end
the following new section:
‘‘SEC. 6050Q. CERTAIN LONG-TERM CARE BENEFITS.
‘‘(a) REQUIREMENT
OF REPORTING.—Any person
who pays long-term care benefits shall make a return, ac-
cording to the forms or regulations prescribed by the Sec-
retary, setting forth—
‘‘(1) the aggregate amount of such benefits
paid by such person to any individual during any
calendar year, and
‘‘(2) the name, address, and TIN of such indi-
vidual.
‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS
WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—
Every person required to make a return under subsection
(a) shall furnish to each individual whose name is required
to be set forth in such return a written statement show-
ing—
‘‘(1) the name of the person making the pay-
ments, and
‘‘(2) the aggregate amount of long-term care
benefits paid to the individual which are required to
be shown on such return.
The written statement required under the preceding sen-
tence shall be furnished to the individual on or before Jan-
uary 31 of the year following the calendar year for which
the return under subsection (a) was required to be made.
‘‘(c) LONG-TERM CARE BENEFITS.—For purposes of
this section, the term ‘long-term care benefit’ means—
‘‘(1) any amount paid under any product which
is advertised, marketed, or offered as long-term care
insurance, and
‘‘(2) payments which are excludable from gross
income by reason of section 101(g).’’.
(b) PENALTIES.—
(1) Subparagraph (B) of section 6724(d)(1) is
amended by redesignating clauses (ix) through (xiv)
as clauses (x) through (xv), respectively, and by in-
serting after clause (viii) the following new clause:
‘‘(ix) section 6050Q (relating to cer-
tain long-term care benefits),’’.
(2) Paragraph (2) of section 6724(d) is amend-
ed by redesignating subparagraphs (Q) through (T)
as subparagraphs (R) through (U), respectively, and
by inserting after subparagraph (P) the following
new subparagraph:
‘‘(Q) section 6050Q(b) (relating to certain
long-term care benefits),’’.
(c) CLERICAL AMENDMENT.—The table of sections
for subpart B of part III of subchapter A of chapter 61
is amended by adding at the end the following new item:
‘‘Sec. 6050Q. Certain long-term care benefits.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to benefits paid after December
31, 1996.
TITLE II—FEDERAL STANDARDS
FOR 
PRIVATE 
LONG-TERM
CARE 
INSURANCE 
CON-
TRACTS
SEC. 201. FEDERAL STANDARDS FOR PRIVATE LONG-TERM
CARE INSURANCE CONTRACTS.
(a) IN GENERAL.—The Social Security Act is amend-
ed by adding at the end the following:
‘‘TITLE XXI—FEDERAL STANDARDS FOR PRI-
VATE LONG-TERM CARE INSURANCE CON-
TRACTS
‘‘SEC. 2101. REQUIREMENTS FOR STATE ENFORCEMENT
PROGRAMS.
‘‘(a) IN GENERAL.—The Secretary shall review, ap-
prove, and periodically reapprove State programs that cer-
tify long-term care insurance contracts as meeting the
Federal standards established under this title. The Sec-
retary may not approve or reapprove such a program un-
less it meets the requirements of this section.
‘‘(b) GENERAL REQUIREMENT.—In order to be ap-
proved, a State program must include such laws and pro-
cedures as may be necessary to ensure the compliance of
long-term care insurance contracts certified by the State,
and insurers issuing such contracts and their agents, with
the Federal requirements established under this title.
‘‘(c) SPECIFIC
ACTIVITIES
UNDER STATE PRO-
GRAM.—In order to be approved, a State program shall
provide for the following procedures and activities:
‘‘(1) MONITORING
OF
INSURERS
AND
CON-
TRACTS.—Procedures for ongoing monitoring of the
compliance of insurers doing business in the State,
and of long-term care insurance contracts issued in
the State, with requirements under this title.
‘‘(2) 
CONTRACT
REVIEW
AND
CERTIFI-
CATION.—Procedures for review and certification
(and annual recertification) of each such contract
sold in the State.
‘‘(3) CONSUMER
COMPLAINTS
AND
DISPUTE
RESOLUTION.—Administrative procedures for the in-
vestigation and resolution of complaints by consum-
ers, and disputes between consumers and insurers,
with respect to long-term care insurance, including
procedures for the filing, investigation, and adjudica-
tion of consumer complaints with respect to the com-
pliance of insurers and contracts with requirements
under this title, or other requirements under State
law.
‘‘SEC. 2102. REQUIREMENTS TO FACILITATE UNDERSTAND-
ING AND COMPARISON OF BENEFITS.
‘‘(a) IN GENERAL.—The Secretary, in consultation
with the National Association of Insurance Commissioners
(in this title referred to as the ‘NAIC’), shall promulgate
regulations designed to standardize formats and terminol-
ogy used in long-term care insurance contracts, to require
insurers to provide to customers and beneficiaries infor-
mation on the range of public and private long-term care
coverage available, and to establish such other require-
ments as may be appropriate to promote consumer under-
standing and facilitate comparison of benefits, which shall
include at a minimum the requirements specified in this
section.
‘‘(b) UNIFORM TERMS, DEFINITIONS, AND FOR-
MATS.—Insurers shall be required to use, in long-term
care insurance contracts, uniform terminology, definitions
of terms, and formats, in accordance with regulations pro-
mulgated by the Secretary.
‘‘(c) STANDARD OUTLINE OF COVERAGE.—
‘‘(1) IN GENERAL.—Insurers shall be required
to develop for each long-term care insurance con-
tract offered or sold, to include as a part of each
such contract, and to make available to each poten-
tial purchaser and furnish to each insured individual
and contractholder, an outline of coverage under
such contract that—
‘‘(A) includes the elements specified in
paragraph (2),
‘‘(B) is in a uniform format,
‘‘(C) accurately and clearly reflects the
contents of the contract, and
‘‘(D) is updated periodically on such time-
table as may be required by the Secretary (or
more frequently as necessary to reflect signifi-
cant changes in outlined information).
‘‘(2) CONTENTS OF OUTLINE.—The outline of
coverage for each long-term care insurance contract
shall include at least the following:
‘‘(A) BENEFITS.—A description of—
‘‘(i) the principal benefits covered, in-
cluding the extent of—
‘‘(I) benefits for services fur-
nished in residential care facilities,
and
‘‘(II) other benefits,
‘‘(ii) the principal exclusions from and
limitations on coverage,
‘‘(iii) the terms and conditions, if any,
upon which the insured individual may ob-
tain upgraded benefits, and
‘‘(iv) the threshold conditions for enti-
tlement to receive benefits.
‘‘(B) CANCELLATION.—A statement of the
circumstances in which a contract may be ter-
minated, and the refund or nonforfeitures bene-
fits (if any) applicable in each such cir-
cumstance, including—
‘‘(i) death of the insured individual,
‘‘(ii) nonpayment of premiums,
‘‘(iii) election by the insured individ-
ual not to renew,
‘‘(iv) any other circumstance.
‘‘(C) PREMIUM.—A statement of—
‘‘(i) the total annual premium, and
the portion of such premium attributable
to each covered benefit,
‘‘(ii) any reservation by the insurer of
a right to change premiums,
‘‘(iii) any limit on annual premium in-
creases,
‘‘(iv) any expected premium increases
associated with automatic or optional bene-
fit increases (including inflation protec-
tion), and
‘‘(v) any circumstances under which
payment of premium is waived.
‘‘(D) COST/VALUE COMPARISON.—
‘‘(i) Information on average costs
(and variation in such costs) for nursing
facility care (and such other care as the
Secretary may specify) in the United
States, information on the value of benefits
relative to such costs, and a statement that
this national average varies by geographic
region.
‘‘(ii) A comparison of benefits, over a
period of at least 20 years, for contracts
with and without inflation protection.
‘‘(iii) A declaration as to whether the
amount of benefits will increase over time,
and, if so, a statement of the type and
amount of, any limitations on, and any
premium increases for, such benefit in-
creases.
‘‘SEC. 2103. LIMITING CONDITIONS ON BENEFITS.
‘‘(a) IN GENERAL.—A long-term care insurance con-
tract may not—
‘‘(1) condition eligibility for benefits for a type
of service on the need for or receipt of any other
type of service (such as prior hospitalization or insti-
tutionalization, or a higher level of care than the
care for which benefits are covered);
‘‘(2) condition eligibility for any benefit (where
the need for such benefit has been established by an
independent assessment of impairment) on any par-
ticular medical diagnosis (including any acute condi-
tion) or on one of a group of diagnoses;
‘‘(3) condition eligibility for benefits furnished
by licensed or certified providers on compliance by
such providers with conditions not required under
Federal or State law; or
‘‘(4) condition coverage of any service on provi-
sion of such service by a provider, or in a setting,
providing a higher level of care than that required
by an insured individual.
‘‘(b) HOME CARE
OR COMMUNITY-BASED SERV-
ICES.—A long-term care insurance contract that provides
benefits for any home care or community-based services
provided in a setting other than a residential care facil-
ity—
‘‘(1) may not limit such benefits to services pro-
vided by registered nurses or licensed practical
nurses;
‘‘(2) may not limit such benefits to services fur-
nished by persons or entities participating in pro-
grams under titles XVIII and XIX of this Act; and
‘‘(3) must provide, at a minimum, benefits for
personal assistance with activities of daily living,
home health care, adult day care, and respite care.
‘‘(c) NURSING FACILITY SERVICES.—A long-term
care insurance contract that provides benefits for any
nursing facility services—
‘‘(1) must provide benefits for such services
provided by all types of nursing facilities licensed by
the State, and
‘‘(2) may provide benefits for care in other resi-
dential facilities.
‘‘(d) PROHIBITION ON DISCRIMINATION BY DIAG-
NOSIS.—A long-term care insurance contract may not pro-
vide for treatment of—
‘‘(1) Alzheimer’s disease or any other progres-
sive degenerative dementia of an organic origin,
‘‘(2) any organic or inorganic mental illness,
‘‘(3) mental retardation or any other cognitive
or mental impairment, or
‘‘(4) HIV infection or AIDS,
different from the treatment of any other medical
condition for purposes of determining whether
threshold conditions for the receipt of benefits have
been met, or the amount of benefits under the con-
tract.
‘‘SEC. 2104. INFLATION PROTECTION.
‘‘(a) IN GENERAL.—The Secretary, after consulta-
tion with NAIC, shall promulgate regulations establishing
requirements with respect to inflation protection, which
shall include at a minimum the requirements specified in
this section.
‘‘(b) REQUIREMENT TO OFFER.—An insurer offering
for sale any long-term care insurance contract shall be re-
quired to afford the purchaser the option to obtain cov-
erage under such contract (upon payment of increased
premiums) of annual increases in benefits at rates in ac-
cordance with subsection (c).
‘‘(c) RATE INCREASE IN BENEFITS.—For purposes
of subsection (b), the benefits under a contract for each
year shall be increased by a percentage of the full value
of benefits under the contract for the previous year, which
shall be not less than 5 percent of such value (or such
other rate of increase as may be determined by the Sec-
retary to be adequate to offset increases in the costs of
long-term care services for which coverage is provided
under the contract).
‘‘(d) REQUIREMENT OF WRITTEN REJECTION.—In-
flation protection in accordance with subsection (b) may
be excluded from the coverage under a contract only if
the insured individual (or, if different, the person respon-
sible for payment of premiums) has rejected in writing the
option to obtain such coverage.
‘‘SEC. 2105. NONFORFEITURE BENEFITS.
‘‘(a) IN GENERAL.—The Secretary, after consulta-
tion with NAIC, shall promulgate regulations establishing
requirements with respect to nonforfeiture benefits, which
shall include at a minimum the requirements specified in
this section.
‘‘(b) REQUIREMENT.—Each long-term care insurance
contract that lapses for any reason (including nonpayment
of premiums, cancellation, or failure to renew, but exclud-
ing lapses due to death) after remaining in effect beyond
a specified minimum period shall provide for appropriate
nonforfeiture benefits.
‘‘(c) NONFORFEITURE BENEFITS.—The standards
established under this section shall require that the
amount or percentage of nonforfeiture benefits shall in-
crease proportionally with the amount of premiums paid
by a contractholder.
‘‘SEC. 2106. CONTINUATION, RENEWAL, REPLACEMENT,
CONVERSION, AND CANCELLATION OF CON-
TRACTS.
‘‘(a) IN GENERAL.—The Secretary, in consultation
with NAIC, shall promulgate regulations establishing re-
quirements applicable to the renewal, replacement, conver-
sion, and cancellation of long-term care insurance con-
tracts, which shall include at a minimum the requirements
specified in this section.
‘‘(b) INSURED’S RIGHT TO CANCEL DURING EXAM-
INATION PERIOD.—Each individual insured (or, if dif-
ferent, each individual liable for payment of premiums)
under a long-term care insurance contract shall have the
unconditional right to return the contract within 30 days
after the date of its issuance and delivery, and to obtain
a full refund of any premium paid.
‘‘(c) CONTINUATION, RENEWAL, REPLACEMENT, AND
CONVERSION OF CONTRACTS.—
‘‘(1) IN GENERAL.—Insurers shall not be per-
mitted to cancel, or refuse to renew (or replace with
a substantial equivalent), any long-term care insur-
ance contract for any reason other than for fraud or
material misrepresentation or for nonpayment of
premium.
‘‘(2) CONTINUATION AND CONVERSION RIGHTS
WITH RESPECT TO GROUP CONTRACTS.—
‘‘(A) IN GENERAL.—Insurers shall be re-
quired to include in each group long-term care
insurance contract, a provision affording to
each insured individual, when such contract
would otherwise terminate, the opportunity (at
the insurer’s option, subject to approval of the
State insurance commissioner) either to con-
tinue or to convert coverage under such con-
tract in accordance with this paragraph.
‘‘(B) RIGHTS OF RELATED INDIVIDUALS.—
In the case of any insured individual whose eli-
gibility for coverage under a group contract is
based on relationship to another individual, the
insurer shall be required to continue such cov-
erage upon termination of the relationship due
to divorce or death.
‘‘(C) CONTINUATION
OF
COVERAGE.—A
group contract shall be considered to meet the
requirements of this paragraph with respect to
rights of an insured individual to continuation
of coverage if coverage of the same (or substan-
tially equivalent) benefits for such individual
under such contract is maintained, subject only
to timely payment of premiums.
‘‘(D) 
CONVERSION
OF
COVERAGE.—A
group contract shall be considered to meet the
requirements of this paragraph with respect to
conversion if it entitles each individual who has
been continuously covered under the contract
for at least 6 months before the date of the ter-
mination to issuance of a replacement contract
providing benefits identical to, substantially
equivalent to, or in excess of, the benefits under
such terminated group contract—
‘‘(i) without requiring evidence of in-
surability with respect to benefits covered
under such previous contract, and
‘‘(ii) at premium rates no higher than
would apply if the insured individual had
initially obtained coverage under such re-
placement contract on the date such in-
sured individual initially obtained coverage
under such group contract.
‘‘SEC. 2107. DEFINITIONS.
‘‘For purposes of this title:
‘‘(1) ACTIVITY
OF
DAILY
LIVING.—The term
‘activity of daily living’ means any of the following:
eating, toileting, dressing, bathing, transferring, and
continence.
‘‘(2) ADULT DAY CARE.—The term ‘adult day
care’ means a program providing social and health-
related services during the day to six or more adults
with disabilities (or such smaller number as the Sec-
retary may specify in regulations) in a community
group setting outside the home.
‘‘(3) CONTRACTHOLDER.—The term ‘contract-
holder’ means the entity which is the holder of
record of a group long-term care insurance contract.
‘‘(4) HOME HEALTH CARE.—The term ‘home
health care’ means medical and nonmedical services
including such services as homemaker services, as-
sistance with activities of daily living, and respite
care provided to individuals in their residences.
‘‘(5) INSURED INDIVIDUAL.—The term ‘insured
individual’ means, with respect to a long-term care
insurance contract, any individual who has coverage
of benefits under such contract.
‘‘(6) INSURER.—The term ‘insurer’ means any
person that offers or sells an individual or group
long-term care insurance contract under which such
person is at risk for all or part of the cost of bene-
fits under the contract, and includes any agent of
such person.
‘‘(7) 
LONG-TERM
CARE
INSURANCE
CON-
TRACT.—The term ‘long-term care insurance con-
tract’ has the meaning given such term in section
7702B(b) of the Internal Revenue Code of 1986
(without regard to paragraph (1)(F) of such sec-
tion).
‘‘(8) NURSING
FACILITY.—The term ‘nursing
facility’ means a facility licensed by the State to pro-
vide to residents—
‘‘(A) skilled nursing care and related serv-
ices for residents who require medical or nurs-
ing care;
‘‘(B) rehabilitation services for the reha-
bilitation of injured, disabled, or sick individ-
uals, or
‘‘(C) on a regular basis, health-related care
and services to individuals who because of their
mental or physical condition require care and
services (above the level of room and board)
which can be made available to them only
through institutional facilities.
‘‘(9) RESIDENTIAL CARE FACILITY.—The term
‘residential care facility’ means a facility (including
a nursing facility) that—
‘‘(A) provides to residents medical or per-
sonal care services (including at a minimum as-
sistance with activities of daily living) in a set-
ting other than an individual or single-family
home, and
‘‘(B) does not provide services of a higher
level than can be provided by a nursing facility.
‘‘(10) RESPITE CARE.—The term ‘respite care’
means the temporary provision of care (including as-
sistance with activities of daily living) to an individ-
ual, in the individual’s home or another setting in
the community, for the purpose of affording such in-
dividual’s unpaid caregiver a respite from the re-
sponsibilities of such care.
‘‘(11) STATE INSURANCE COMMISSIONER.—The
term ‘State insurance commissioner’ means the
State official bearing such title, or, in the case of a
jurisdiction where such title is not used, the State
official with primary responsibility for the regulation
of insurance.’’.
(b) DEFINITION OF STATE.—Section 1101(a)(1) of
the Social Security Act (42 U.S.C. 1301(a)(1)) is amend-
ed by adding at the end ‘‘Such term when used in title
XXI includes only the several States and the District of
Columbia.’’.
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