which are a percentage of the actual or reasonable cost
of the services furnished.
‘‘PROVISION OF OUTLINE OF COVERAGE AND OTHER
INFORMATION
‘‘SEC. 2136. (a) OUTLINE OF COVERAGE.—A person
may not sell or offer for a sale a long-term care insurance
policy for the benefit of an individual without providing
to the purchaser or potential purchaser (or representa-
tive), before such purchase, with—
‘‘(1) a copy of the guidelines developed under
section 2133 and an explanation of such guidelines;
‘‘(2) the consumer guide on the purchase of
long-term care insurance policies (written by the
NAIC), which shall include a personal assessment
form to assist in determining the purchaser’s finan-
cial and other need for long-term care insurance;
and
‘‘(3) an outline of coverage that includes the in-
formation required under subsection (b).
In applying this subsection in the case of a group long-
term care insurance policy, the carrier issuing the policy
is responsible for the provision of the outline and informa-
tion to each certificate holder before the policy takes effect
with respect to that certificate holder.
‘‘(b) CONTENTS OF OUTLINE OF COVERAGE.—The
outline of coverage for each long-term care insurance pol-
icy shall be in a uniform format, utilizing simple, easily
understood English, as prescribed in guidelines issued by
the NAIC. Each outline shall include (in accordance with
the Standards) at least the following:
‘‘(1) A description of the principal benefits and
coverage (including any inflation protection) under
the policy, how such benefits and coverage compare
to the range of potential benefits and coverage avail-
able under such policies, and the eligibility criteria
(if any) for such benefits.
‘‘(2) A statement of the principal exclusions, re-
ductions, and limitations contained in the policy.
‘‘(3) A statement of the terms under which the
policy (or certificate in the case of a group policy)
may be continued in force or discontinued and the
terms for continuation or conversion.
‘‘(4) A statement that the outline of coverage is
a summary only, not a contract of insurance, and
that the policy (or, in the case of a certificate, the
group policy under which the certificate is issued)
contains the contractual provisions that govern.
‘‘(5) A description of the terms, specified in
section 2141, under which a policy may be returned
and the premium refunded.
‘‘(6) Information (supplied either by the NAIC
or by the Secretary) on national average nursing
home lengths of stay and percentage of the popu-
lation that requires nursing facility or home care
services, broken down by age groups.
‘‘(7) A statement of whether the carrier has a
right to increase premiums and, if such right exists,
the extent to which such premiums may be increased
and the circumstances under which such an increase
may occur.
‘‘(8) Information (supplied either by the State
commissioner of insurance or the Secretary) on the
average costs and range of costs for home care and
nursing facility care in the State of residence and in-
formation (in graphic form) on the relationship of
the benefits provided under the policy to such State
average costs.
‘‘(9) Information (in graphic form) on the pro-
jected effect of inflation on the value of benefits pro-
vided under the policy during a period of at least 20
years, except that such information need not cover
a period beyond the age of 85.
‘‘(c) CERTIFICATES.—A certificate issued pursuant
to a group long-term care insurance policy shall include—
‘‘(1) a description of the principal benefits and
coverage provided in the policy;
‘‘(2) a statement of the principal exclusions, re-
ductions, and limitations contained in the policy; and
‘‘(3) a statement that the group master policy
determines governing contractual provisions.
‘‘(d) LONG-TERM CARE AS PART OF LIFE INSUR-
ANCE.—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 pol-
icy summary that includes—
‘‘(1) an explanation of how the long-term care
benefits interact with other components of the policy
(including deductions from death benefits);
‘‘(2) an illustration of the amount of benefits,
the length of benefit, and the guaranteed lifetime
benefits (if any) for each covered person;
‘‘(3) principal exclusions, reductions, and limi-
tations on benefits of long-term care; and
‘‘(4) a description of the tax consequences of
redeeming the life insurance policy to pay for long-
term care.
‘‘(e) ENFORCEMENT OF REPRESENTATIONS OF AD-
DITIONAL BENEFITS.—If a purchaser of a long-term care
insurance policy establishes, by a preponderance of the evi-
dence, that—
‘‘(1) an agent sold, offered for sale, or issued
a long-term care insurance policy,
‘‘(2) the agent represented that the policy con-
tained benefits which are in addition to the benefits
otherwise provided under the policy, and
‘‘(3) the purchaser of the policy reasonably re-
lied upon such misrepresentations in purchasing the
policy,
then the carrier issuing the policy is liable to the purchaser
either for the cost of purchasing the services that would
have been covered if the benefits had been included in the
policy or for the provision of the additional benefits so rep-
resented. The carrier may recover the costs incurred under
this subsection from the agent whose actions gave rise to
such expenses.
‘‘INFORMATION ON FINANCIAL ARRANGEMENTS WITH
GROUPS
‘‘SEC. 2137. A person may not sell or offer for sale
a long-term care insurance policy to a member of an orga-
nization with which the person (or the carrier issuing the
policy) has a financial arrangement of any type unless the
person discloses (in accordance with the Standards) the
nature of the financial arrangement.
‘‘Subpart 3—Carrier Standards
‘‘REFUND OF PREMIUMS (FREE LOOK)
‘‘SEC. 2141. 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 re-
turns a policy or certificate within 30 days of the date
of its issuance, the carrier shall refund directly to the ap-
plicant, not later than 30 days after the date of the denial
or return, any premiums paid with respect to such a pol-
icy.
‘‘MAILING OF POLICY
‘‘SEC. 2142. 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
transmit to the applicant the policy of insurance not later
than 30 days after the date of the approval.
‘‘PROMPT PAYMENT
‘‘SEC. 2143. A carrier issuing a long-term care insur-
ance policy shall make payment promptly to satisfy claims
filed under such policy.
‘‘INFORMATION ON CLAIMS DENIALS
‘‘SEC. 2144. If a claim under a long-term care insur-
ance policy is denied or results in less than full payment,
the carrier shall, within 30 days of the date of the denial
or partial payment—
‘‘(1) provide to the policyholder and to the per-
son submitting the claim a written explanation of
the reasons for the denial or partial payment;
‘‘(2) make available to such person all informa-
tion directly relating to such denial or partial pay-
ment; and
‘‘(3) inform the individual of the process estab-
lished under section 2145(f) for the appeal of the
claim denial.
‘‘LIMITATION ON RESCISSION, CANCELLATION, OR
NONRENEWAL OR DENIAL OF CLAIMS
‘‘SEC. 2145. (a) LIMITATION.—
‘‘(1) IN GENERAL.—A carrier may rescind, can-
cel, or nonrenew a long-term care insurance policy or
certificate, or deny an otherwise valid claim under
such policy, only in accordance with this section.
‘‘(2) TIMELY
RESOLUTION
OF
INSURABILITY
QUESTIONS.—Before issuing a long-term care insur-
ance policy or certificate with respect to coverage of
an individual, the carrier shall resolve all reasonable
questions relating to the insurability of the individ-
ual (including, if the carrier underwrites such cov-
erage, the completion of such underwriting). No
claim under a long-term care insurance policy may
be denied on the basis of a failure to disclose infor-
mation at the time of delivery (and issuance for de-
livery) of the policy if the application for the policy
failed to request such information.
‘‘(b) NONPAYMENT OF PREMIUMS.—A carrier may
cancel or nonrenew a long-term care insurance policy or
certificate for nonpayment of premiums, except as pro-
vided in section 2130(d).
‘‘(c) MISREPRESENTATION RELATING TO INSURABIL-
ITY.—A carrier may cancel or nonrenew a long-term care
insurance policy or certificate, or deny an otherwise valid
claim under such policy or certificate based upon mis-
representation of facts relating to the insurability of the
individual, only—
‘‘(1) based upon clear and convincing evi-
dence—
‘‘(A) of misrepresentation of information
material to the acceptance for coverage, and
‘‘(B) which involves a chronic condition or
dates of treatment before the date of the policy
application; and
‘‘(2) if the carrier notifies the policyholder of
the carrier’s intention to cancel or nonrenew the pol-
icy or certificate or deny the claim not later than—
‘‘(A) 60 days after the date the carrier dis-
covers the misrepresentation, or
‘‘(e) FRAUD OR MISREPRESENTATION RELATING TO
A GROUP POLICY.—In the case of a policyholder or certifi-
cate holder who is insured as part of a group, within 2
years after the date of issuance of the policy or certificate,
a carrier may rescind, cancel, or nonrenew the policy or
certificate, or deny an otherwise valid claim under such
policy, based upon fraud or misrepresentation of facts re-
lating to that individual’s status as a member of the group
or other relationship to that group at the time of initial
coverage of that individual under the policy or certificate.
‘‘(f) APPEALS PROCESS.—A policyholder or certifi-
cate holder whose policy or certificate has been rescinded,
canceled, or nonrenewed, or whose claim has been fully
or partly denied, or whose claim has not been acted upon
with reasonable promptness shall have the right to a re-
view of such rescission, cancellation, nonrenewal, or denial
under a process specified in the Standards and shall be
granted an opportunity for a fair hearing by the carrier
in any case where the amount in controversy is at least
$500. The Standards may provide for an appeal to the
State commissioner of insurance in an appropriate State.
‘‘REPORTING OF INFORMATION; ACCESS TO INFORMATION
‘‘SEC. 2146. (a) REPORTING OF INFORMATION.—
Each carrier issuing a long-term care insurance policy
shall periodically (not less often than annually) report to
the Commissioner or superintendent of insurance of each
State in which the policy is sold, and shall make available
to the Secretary, upon request, information respecting the
following:
‘‘(1) The long-term care insurance policies of
the carrier that are in force.
‘‘(2) Utilization of benefits and payment of
claims under the policy.
‘‘(3) The ages of individuals purchasing the pol-
icy.
‘‘(4) Advertising and other marketing material
utilized in connection with the sale of such policies,
including a copy of each such item.
‘‘(5) Total premiums written and premiums
earned in the previous year.
‘‘(6) The most recent premiums for such poli-
cies and the premiums imposed for such policies
during the previous 5-year period.
‘‘(7) The absolute numbers and rates of lapse,
replacement, and rescission for each of its various
types of policies (and by agent for those agents who
sold at least 10 such policies and are in the highest
20th percentile of agents for that carrier with re-
spect to each such rate). For purposes of this para-
graph, there shall be a separate category for a lapse
due to the death of the policyholder.
‘‘(8) The number of claims denied for such poli-
cies and the ratio of claims denied to claims submit-
ted for such policies. For purposes of this para-
graph, there shall not be included as a claim submit-
ted or denied any claim that is denied solely because
of the failure to meet a deductible, waiting period,
or exclusionary period.
‘‘(9) Complaints received with respect to such
policies, and the resolution of such complaints.
‘‘(10) The number of claims under such policies
being appealed to the commissioner of insurance of
the State and cases being litigated in response to de-
nials of claims or other policy disputes.
‘‘(11) The number of denied claims that are re-
versed on appeal to the commissioner of insurance or
through litigation (as a percentage of claim denials
so appealed or being litigated) for such policies.
‘‘(12) Such other information as is specified in
the Standards.
Information under this subsection shall be reported in a
format specified in the Standards.
‘‘(b) ACCESS TO INFORMATION.—Each such carrier
shall make available to the Secretary and the Commis-
sioner or superintendent of insurance of each State in
which the policy is sold such additional information as the
Secretary, Commissioner, or superintendent, may request.
‘‘(c) AVAILABILITY
OF INFORMATION.—The State
commissioner of insurance of each State shall make infor-
mation under this section available, upon request, to the
NAIC and, to the extent consistent with other laws, to
other interested parties.
‘‘PROVISION OF OUTLINE OF COVERAGE FOR RENEWALS
‘‘SEC. 2147. Each carrier issuing a long-term care
insurance policy shall provide, at the time of renewal of
such a policy or, in the case of a policy issued through
a group, the anniversary date of purchase of the policy
an outline of coverage described in section 2136 to each
policyholder.
‘‘PART C—ENFORCEMENT OF STANDARDS
‘‘Subpart 1—General Provisions
‘‘SECRETARIAL ENFORCEMENT AUTHORITY
‘‘SEC. 2151. (a) IN GENERAL.—The Secretary shall
exercise authority under this section in the case of a non-
regulatory State.
‘‘(b) LOSS OF STATUS.—If an association or its sub-
sidiary or a carrier is determined under this section not
to be in compliance with applicable Standards in a non-
regulatory State and is not determined to have come into
compliance with such applicable Standards at the end of
the 6-month period beginning on the date of the initial
determination of such noncompliance, any long-term care
insurance policy issued, sold, or offered for sale by such
association or its subsidiary or carrier in such State shall
be considered to be issued, sold, or offered for sale in viola-
tion of section 2101(a).
‘‘COMPLAINTS AND INVESTIGATIONS
‘‘SEC. 2152. (a) IN GENERAL.—The Secretary shall
establish procedures—
‘‘(1) for individuals and entities to file written,
signed complaints respecting alleged violations of the
requirements of part B,
‘‘(2) for responding on a timely basis to such
complaints, and
‘‘(3) for the investigation of—
‘‘(A) those complaints which, on their face,
have a substantial probability of validity, and
‘‘(B) such other alleged violations of the
requirements of part B as the Secretary deter-
mines to be appropriate.
‘‘(b) CONDUCT OF INVESTIGATIONS.—In conducting
investigations under this section, the Secretary shall have
reasonable access to examine evidence of any person or
entity being investigated.
‘‘(c) TREATMENT
OF CARRIER VIOLATIONS.—For
purposes of this subpart, a carrier whose policy was sold,
offered for sale, or issued by an agent in violation of sub-
part 2 of part B and who had any reason to know of such
violation but did not act immediately to correct such viola-
tion in good faith, shall be deemed to have violated the
provisions of such subpart.
‘‘HEARINGS
‘‘SEC. 2153. (a) IN GENERAL.—Before imposing an
order described in section 2154 against a person or entity
under this section for a violation of the requirements of
part B, the Secretary shall provide the person or entity
with notice and, upon request made within a reasonable
time (of not less than 30 days, as established by the Sec-
retary by regulation) of the date of the notice, a hearing
respecting the violation. If no hearing is so requested, the
Secretary shall impose a final and unappealable order.
‘‘(b) CONDUCT OF HEARING.—Any hearing so re-
quested shall be conducted before an administrative law
judge under section 201. If no hearing is so requested,
the Secretary’s imposition of the order shall constitute a
final and unappealable order.
‘‘(c) AUTHORITY IN HEARINGS.—
‘‘(1) IN
GENERAL.—In conducting hearings
under this section—
‘‘(A) the Secretary and administrative law
judges shall have reasonable access to examine
evidence of any person or entity being inves-
tigated, and