1999 Legislation
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HOUSE BILL NO. 14 – Long term care insurance


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H0014........................................................by MR. SPEAKER
                   Requested by Department of Insurance
INSURANCE - Repeals and adds to existing law to enact the Long-term Care
Insurance Act.

01/11    House intro - 1st rdg - to printing
01/11    Rpt prt - to Bus
02/10    Rpt out - rec d/p - to 2nd rdg
02/11    2nd rdg - to 3rd rdg
02/15    3rd rdg - PASSED - 62-0-7
      AYES -- Alltus, Barraclough, Barrett, Bell, Bieter, Black, Boe,
      Bruneel, Callister, Campbell, Clark, Crow, Cuddy, Deal, Denney,
      Ellsworth, Field(13), Field(20), Gagner, Geddes, Gould, Hammond,
      Hansen(23), Hansen(29), Henbest, Hornbeck, Jaquet, Jones, Judd,
      Kellogg, Kempton, Kunz, Lake, Limbaugh, Linford, Loertscher, McKague,
      Meyer, Montgomery, Mortensen, Moyle, Pomeroy, Reynolds, Ridinger,
      Ringo, Robison, Schaefer, Sellman, Smith, Stevenson, Stoicheff,
      Stone, (Taylor)Taylor, Tilman, Tippets, Trail, Watson, Wheeler,
      Williams, Wood, Zimmermann, Mr Speaker
      NAYS -- None
      Absent and excused -- Chase, Hadley, Kendell, Mader, Marley,
      Pischner, Sali
    Dist. 15, Seat A, Vacant
    Floor Sponsor - Watson
    Title apvd - to Senate
02/16    Senate intro - 1st rdg - to Com/HuRes
03/05    Rpt out - rec d/p - to 2nd rdg
03/08    2nd rdg - to 3rd rdg
03/10    3rd rdg - PASSED - 34-0-1
      AYES--Andreason, Boatright, Branch, Bunderson, Burtenshaw, Cameron,
      Crow, Danielson, Darrington, Davis, Deide, Dunklin, Frasure, Geddes,
      Hawkins, Ingram, Ipsen, Keough, King, Lee, McLaughlin, Noh,
      Richardson, Riggs, Risch, Sandy, Schroeder, Sorensen, Stegner,
      Stennett, Thorne, Twiggs, Wheeler, Whitworth
      Absent and excused--Parry
    Floor Sponsor - Ipsen
    Title apvd - to House
03/11    To enrol
03/12    Rpt enrol - Sp signed
03/15    Pres signed
03/16    To Governor
03/18    Governor signed
         Session Law Chapter 98
         Effective: 01/01/99

Bill Text


 ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-fifth Legislature                 First Regular Session - 1999

                             IN THE HOUSE OF REPRESENTATIVES

                                    HOUSE BILL NO. 14

                                      BY MR. SPEAKER
                          Requested by: Department of Insurance

 1                                        AN ACT

12    Be It Enacted by the Legislature of the State of Idaho:

13        SECTION  1.  That  Chapter  46,  Title 41, Idaho Code, be, and the same is
14    hereby repealed.

15        SECTION 2.  That Title 41, Idaho Code, be, and the same is hereby  amended
16    by  the addition thereto of a  NEW CHAPTER , to be known and desig-
17    nated as Chapter 46, Title 41, Idaho Code, and to read as follows:

18                                      CHAPTER 46
19                             LONG-TERM CARE INSURANCE ACT

20        41-4601.  PURPOSE. The purpose of this chapter is to  promote  the  public
21    interest, to promote the availability of long-term care insurance policies, to
22    protect  applicants  for  long-term care insurance, as defined, from unfair or
23    deceptive sales or enrollment practices, to establish standards for  long-term
24    care insurance, to facilitate public understanding and comparison of long-term
25    care  insurance  policies, and to facilitate flexibility and innovation in the
26    development of long-term care insurance coverage.

27        41-4602.  SCOPE. The requirements of this chapter shall apply to  policies
28    delivered  or issued for delivery in this state on or after the effective date
29    of this chapter.  This chapter is not intended to supersede the obligations of
30    entities subject to this chapter to comply with the substance of other  appli-
31    cable insurance laws insofar as they do not conflict with this chapter, except
32    that  laws  and regulations designed and intended to apply to medicare supple-
33    ment insurance policies shall not be applied to long-term care insurance.

34        41-4603.  DEFINITIONS. Unless the context requires otherwise, the  defini-
35    tions in this section apply throughout this chapter.
36        (1)  "Applicant" means:
37        (a)  In  the  case  of  an individual long-term care insurance policy, the
38        person who seeks to contract for benefits; and
39        (b)  In the case of a group long-term care insurance policy, the  proposed


 1        certificate holder.
 2        (2)  "Certificate"  means,  for the purposes of this chapter, any certifi-
 3    cate issued under a group long-term care insurance policy,  which  policy  has
 4    been delivered or issued for delivery in this state.
 5        (3)  "Director"  means the director of the department of insurance of this
 6    state.
 7        (4)  "Group long-term care insurance" means  a  long-term  care  insurance
 8    policy which is delivered or issued for delivery in this state and issued to:
 9        (a)  One (1) or more employers or labor organizations, or to a trust or to
10        the  trustees  of a fund established by one (1) or more employers or labor
11        organizations, or a combination thereof, for employees or former employees
12        or a combination thereof, or for members or former members or  a  combina-
13        tion thereof, of the labor organizations; or
14        (b)  Any  professional,  trade or occupational association for its members
15        or former or retired members, or combination thereof, if such association:
16             (i)   Is composed of individuals all of whom  are  or  were  actively
17             engaged in the same profession, trade or occupation; and
18             (ii)  Has  been  maintained  in  good  faith  for purposes other than
19             obtaining insurance; or
20        (c)  An association or a trust or the trustee(s) of  a  fund  established,
21        created  or maintained for the benefit of members of one (1) or more asso-
22        ciations.  Prior to advertising, marketing or offering such policy  within
23        this state, the association or associations, or the insurer of the associ-
24        ation  or  associations,  shall  file  evidence with the director that the
25        association or associations have at the outset a minimum  of  one  hundred
26        (100)  persons  and  have  been organized and maintained in good faith for
27        purposes other than that of obtaining insurance; have been in active exis-
28        tence for at least one (1) year; and have a constitution and bylaws  which
29        provide that:
30             (i)   The  association or associations hold regular meetings not less
31             than annually to further purposes of the members;
32             (ii)  Except for credit unions, the association or associations  col-
33             lect dues or solicit contributions from members; and
34             (iii) The  members  have  voting privileges and representation on the
35             governing board and committees.
36        Sixty (60) days after such filing the association or associations will  be
37        deemed  to  satisfy  such organizational requirements, unless the director
38        makes a finding that the association or associations do not satisfy  those
39        organizational requirements.
40        (d)  A  group  other  than  as described in paragraphs (a), (b) and (c) of
41        this subsection, subject to a finding by the director that:
42             (i)   The issuance of the group policy is not contrary  to  the  best
43             interest of the public;
44             (ii)  The  issuance  of the group policy would result in economies of
45             acquisition or administration; and
46             (iii) The  benefits  are  reasonable  in  relation  to  the  premiums
47             charged.
48        (5)  "Long-term care insurance" means any insurance policy or rider adver-
49    tised, marketed, offered or designed to provide coverage  for  not  less  than
50    twelve (12) consecutive months for each covered person on an expense incurred,
51    indemnity, prepaid or other basis; for one (1)  or more necessary or medically
52    necessary  diagnostic, preventive, therapeutic, rehabilitative, maintenance or
53    personal care services, provided in a setting other than an acute care unit of
54    a hospital. Such term includes group and individual annuities and life  insur-
55    ance  policies  or riders which provide directly or which supplement long-term


 1    care insurance. Such term also includes a policy or rider which  provides  for
 2    payment  of benefits based upon cognitive impairment or the loss of functional
 3    capacity. The term shall also include qualified long-term care insurance  con-
 4    tracts.  Long-term care insurance may be issued by insurers, fraternal benefit
 5    societies, managed care organizations, or  any  similar  organization  to  the
 6    extent they are otherwise authorized to issue life or health insurance.  Long-
 7    term  care  insurance  shall not include any insurance policy which is offered
 8    primarily to  provide  basic  medicare  supplement  coverage,  basic  hospital
 9    expense  coverage,  basic medical-surgical expense coverage, hospital confine-
10    ment indemnity coverage, major medical expense coverage, disability income  or
11    related  asset-protection  coverage, accident only coverage, specified disease
12    or specified accident coverage, or  limited  benefit  health  coverage.   With
13    regard  to  life insurance, this term does not include life insurance policies
14    which accelerate the death benefit specifically for one (1)  or  more  of  the
15    qualifying events of terminal illness, medical conditions requiring extraordi-
16    nary  medical  intervention, or permanent institutional confinement, and which
17    provide the option of a lump-sum payment for those benefits and in which  nei-
18    ther the benefits nor the eligibility for the benefits is conditioned upon the
19    receipt  of  long-term  care.   Notwithstanding  any other provision contained
20    herein, any product advertised, marketed or offered as long-term  care  insur-
21    ance shall be subject to the provisions of this chapter.
22        (6)  "Policy"  means,  for  the purposes of this chapter, any policy, con-
23    tract, enrolled member agreement, rider or endorsement delivered or issued for
24    delivery in this state by an insurer, fraternal benefit society, managed  care
25    organization, or any similar organization.

27    No  group  long-term  care  insurance coverage may be offered to a resident of
28    this state under a group policy issued in another state to a  group  described
29    in  section 41-4603(4)(d), Idaho Code, unless this state or another state hav-
30    ing statutory and regulatory long-term care  insurance  requirements  substan-
31    tially  similar  to  those adopted in this state has made a determination that
32    such requirements have been met.

34    ANCE.  (1)  The  director  may adopt rules that include standards for full and
35    fair disclosure setting forth the manner, content and required disclosures for
36    the sale of long-term care insurance policies, terms of renewability,  initial
37    and  subsequent  conditions  of eligibility, nonduplication of coverage provi-
38    sions, coverage of dependents, preexisting conditions, termination  of  insur-
39    ance,  continuation  or  conversion, probationary periods, limitations, excep-
40    tions, reductions, elimination periods, requirements for  replacement,  recur-
41    rent conditions and definitions of terms.
42        (2)  No long-term care insurance policy may:
43        (a)  Be  cancelled,  nonrenewed  or otherwise terminated on the grounds of
44        the age or the deterioration of the  mental  or  physical  health  of  the
45        insured individual or certificate holder; or
46        (b)  Contain  a  provision  establishing a new waiting period in the event
47        existing coverage is converted to or replaced  by  a  new  or  other  form
48        within  the  same  company, except with respect to an increase in benefits
49        voluntarily selected by the insured individual or group policyholder; or
50        (c)  Provide coverage for skilled nursing care only  or  provide  signifi-
51        cantly  more  coverage  for  skilled  care in a facility than coverage for
52        lower levels of care.
53        (3)  Preexisting condition:


 1        (a)  No long-term care insurance policy or certificate other than a policy
 2        or certificate  thereunder  issued  to  a  group  as  defined  in  section
 3        41-4603(4)(a),  Idaho  Code, shall use a definition of "preexisting condi-
 4        tion" which is more restrictive than the following: preexisting  condition
 5        means  a  condition  for which medical advice or treatment was recommended
 6        by, or received from a provider of health care services,  within  six  (6)
 7        months preceding the effective date of coverage of an insured person.
 8        (b)  No  long-term care insurance policy or certificate other than  a pol-
 9        icy or certificate thereunder issued to a  group  as  defined  in  section
10        41-4603(4)(a),  Idaho Code, may exclude coverage for a loss or confinement
11        which is the result of a preexisting condition unless such  loss  or  con-
12        finement begins within six (6) months following the effective date of cov-
13        erage of an insured person.
14        (c)  The  director  may  extend  the limitation periods set forth in para-
15        graphs (a) and (b) of this subsection as to specific age group  categories
16        in  specific  policy forms upon findings that the extension is in the best
17        interest of the public.
18        (d)  The definition  of  "preexisting  condition"  does  not  prohibit  an
19        insurer  from  using  an  application form designed to elicit the complete
20        health history of an applicant, and, on the basis of the answers  on  that
21        application,  from  underwriting  in accordance with that insurer's estab-
22        lished underwriting standards.  Unless otherwise provided in the policy or
23        certificate, a preexisting condition, regardless of  whether  it  is  dis-
24        closed    on the application, need not be covered until the waiting period
25        described in subsection (3)(b) of this section expires.  No long-term care
26        insurance policy or certificate may exclude or use waivers  or  riders  of
27        any kind to exclude, limit or reduce coverage or benefits for specifically
28        named  or described preexisting diseases or physical conditions beyond the
29        waiting period described in subsection (3)(b) of this section.
30        (4)  Prior hospitalization/institutionalization:
31        (a)  No long-term care insurance policy may be  delivered  or  issued  for
32        delivery in this state if such policy:
33             (i)   Conditions eligibility for any benefits on a prior hospitaliza-
34             tion requirement;
35             (ii)  Conditions  eligibility  for  benefits  provided in an institu-
36             tional care setting on the receipt of a higher level of institutional
37             care; or
38             (iii) Conditions eligibility for any benefits other  than  waiver  of
39             premium,  postconfinement, postacute care or recuperative benefits on
40             a prior institutionalization requirement.
41        (b)  (i)  A long-term care insurance  policy  containing  postconfinement,
42             postacute care or recuperative benefits shall clearly label in a sep-
43             arate paragraph of the policy or certificate entitled "limitations or
44             conditions  on  eligibility  for benefits" such limitations or condi-
45             tions, including any required number of days of confinement.
46             (ii)  A long-term care insurance policy  or  rider  which  conditions
47             eligibility  for  noninstitutional  benefits  on the prior receipt of
48             institutional care shall not require a prior  institutional  stay  of
49             more than thirty (30) days.
50             (iii) A long-term care insurance policy or rider containing a benefit
51             advertised,  marketed,  or offered as a home health care or home care
52             benefit may not condition receipt of benefits on a prior institution-
53             alization requirement.
54         (5)  The director may adopt rules establishing loss ratio  standards  for
55    long-term  care insurance policies provided that a specific reference to long-


 1    term care insurance policies is contained in the rule.
 2        (6)  Right to return -- Free look:  Long-term  care  insurance  applicants
 3    shall  have  the  right to return the policy or certificate within thirty (30)
 4    days of its delivery and to have the premium refunded if, after examination of
 5    the policy or certificate, the applicant is  not  satisfied  for  any  reason.
 6    Long-term  care insurance policies and certificates shall have a notice promi-
 7    nently printed on the first page or attached thereto stating in substance that
 8    the applicant shall have the right to return the policy or certificate  within
 9    thirty  (30)  days  of its delivery and to have the premium refunded if, after
10    examination of the policy or certificate, other than a certificate issued pur-
11    suant to a policy issued to a group defined in  section  41-4603(4)(a),  Idaho
12    Code, the applicant is not satisfied for any reason.
13        (7)  (a)  An  outline  of  coverage  shall  be  delivered to a prospective
14        applicant  for long-term care insurance at the time of  initial  solicita-
15        tion through means which prominently direct the attention of the recipient
16        to the document and its purpose.
17             (i)   The  director  shall  prescribe  a  standard  format, including
18             style, arrangement and overall appearance, and the content of an out-
19             line of coverage.
20             (ii)  In the case of agent solicitations, an agent must  deliver  the
21             outline  of  coverage  prior to the presentation of an application or
22             enrollment form.
23             (iii) In the case of direct response solicitations,  the  outline  of
24             coverage  must  be  presented  in conjunction with any application or
25             enrollment form.
26             (iv)  In the case of a policy issued to a group  defined  in  section
27             41-4603(4)(a),  Idaho  Code,  an  outline  of  coverage  shall not be
28             required to be delivered, provided that the information described  in
29             paragraphs  (b)(i) through (b)(vi) of this subsection is contained in
30             other materials relating to enrollment.  Upon  request,  these  other
31             materials shall be made available to the director.
32        (b)  The outline of coverage shall include:
33             (i)   A  description  of the principal benefits and coverage provided
34             in the policy;
35             (ii)  A statement of the principal exclusions, reductions and limita-
36             tions contained in the policy;
37             (iii) A statement of the terms under which the policy or certificate,
38             or both, may be continued in force  or  discontinued,  including  any
39             reservation in the policy of a right to change premium.  Continuation
40             or  conversion  provisions  of  group  coverage shall be specifically
41             described;
42             (iv)  A statement that the outline of coverage is a summary only, not
43             a contract of insurance, and that the policy or group  master  policy
44             contains governing contractual provisions;
45             (v)   A  description  of the terms under which the policy or certifi-
46             cate may be returned and premium refunded; and
47             (vi)  A brief description of the relationship of  cost  of  care  and
48             benefits.
49        (8)  A  certificate  issued  pursuant  to a group long-term care insurance
50    policy which policy is delivered or issued for delivery in  this  state  shall
51    include:
52        (a)  A  description of the principal benefits and coverage provided in the
53        policy;
54        (b)  A statement of the principal exclusions, reductions  and  limitations
55        contained in the policy; and


 1        (c)  A  statement  that  the group master policy determines governing con-
 2        tractual provisions.
 3        (9)  At the time of policy delivery, a policy summary shall  be  delivered
 4    for an individual life insurance policy which provides long-term care benefits
 5    within  the policy or by rider.  In the case of direct response solicitations,
 6    the insurer shall deliver the policy summary upon the applicant's request, but
 7    regardless of request shall make such delivery no later than at  the  time  of
 8    policy  delivery.   In addition to complying with all applicable requirements,
 9    the summary shall also include:
10        (a)  An explanation of how the long-term care benefit interacts with other
11        components of the policy, including deductions from death benefits;
12        (b)  An illustration of the amount of benefits, the  length  of  benefits,
13        and the guaranteed lifetime benefits if any, for each covered person;
14        (c)  Any  exclusions, reductions and limitations on benefits for long-term
15        care;
16        (d)  A statement that any long-term care inflation  protection  option  as
17        defined  by  the long-term care insurance rule is not available under this
18        policy.
19        (e)  If applicable to the policy type, the summary shall also include:
20             (i)   A disclosure of the effects of exercising  other  rights  under
21             the policy;
22             (ii)  A  disclosure  of guarantees related to long-term care costs of
23             insurance charges;
24             (iii) Current and projected maximum lifetime benefits.
25        (10) Any time a long-term care benefit, funded through  a  life  insurance
26    vehicle  by  the acceleration of the death benefit, is in benefit payment sta-
27    tus, a monthly report shall be provided  to  the  policyholder.   Such  report
28    shall include:
29        (a)  Any long-term care benefits paid out during the month;
30        (b)  An  explanation  of any changes in the policy, e.g. death benefits or
31        cash values, due to long-term care benefits being paid out; and
32        (c)  The amount of long-term care benefits existing or remaining.
33        (11) Any policy or rider advertised, marketed or offered as long-term care
34    or nursing home insurance shall comply with the provisions of this chapter.

35        41-4606.  INCONTESTABILITY PERIOD. (1) For a policy  or  certificate  that
36    has  been in force for less than six (6) months an insurer may rescind a long-
37    term care insurance policy or certificate or deny an otherwise valid long-term
38    care insurance claim upon a showing of misrepresentation that is  material  to
39    the acceptance for coverage.
40        (2)  For  a  policy or certificate that has been in force for at least six
41    (6) months but less than two (2) years an insurer may rescind a long-term care
42    insurance policy or certificate or deny  an  otherwise  valid  long-term  care
43    insurance  claim  upon a showing of misrepresentation that is both material to
44    the acceptance for coverage and which pertains to the condition for which ben-
45    efits are sought.
46        (3)  After a policy or certificate has been in force for two (2) years  it
47    is not contestable upon the grounds of misrepresentation alone; such policy or
48    certificate  may  be  contested only upon a showing that the insured knowingly
49    and intentionally misrepresented relevant  facts  relating  to  the  insured's
50    health.
51        (4) (a)  No  long-term  care  insurance policy or certificate may be field
52        issued based on medical or health status.
53        (b)  For purposes of this section, "field issued" means a policy  or  cer-
54        tificate issued by an agent or a third party administrator pursuant to the


 1        underwriting  authority  granted to the agent or third party administrator
 2        by an insurer.
 3        (5)  If an insurer has paid benefits under the  long-term  care  insurance
 4    policy  or  certificate,  the  benefit  payments  may  not be recovered by the
 5    insurer in the event that the policy or certificate is rescinded.
 6        (6)  In the event of the death of the  insured,  this  section  shall  not
 7    apply  to  the  remaining  death  benefit  of  a  life  insurance  policy that
 8    accelerates benefits for long-term care.  In  this  situation,  the  remaining
 9    death  benefits  under  these  policies  shall be governed by section 41-1905,
10    Idaho Code, as it pertains to incontestability. In all other situations,  this
11    section  shall  apply  to life insurance policies that accelerate benefits for
12    long-term care.

13        41-4607.  NONFORFEITURE BENEFITS. (1) Except as provided in subsection (2)
14    of this section, a long-term care insurance policy may  not  be  delivered  or
15    issued  for  delivery  in  this  state  unless the policyholder or certificate
16    holder has been offered the option  of  purchasing  a  policy  or  certificate
17    including a nonforfeiture benefit. The offer of a nonforfeiture benefit may be
18    in the form of a rider that is attached to the policy.  In the event the poli-
19    cyholder or certificate holder declines the nonforfeiture benefit, the insurer
20    shall  provide  a  contingent benefit upon lapse that shall be available for a
21    specified period of time following a substantial increase in premium rates.
22        (2)  When a group long-term care insurance policy  is  issued,  the  offer
23    required  in subsection (1) of this section shall be made to the group policy-
24    holder. However, if the policy is issued  as group long-term care insurance as
25    defined in section 41-4603(4)(d), Idaho Code, other than to a continuing  care
26    retirement  community  or  other similar entity, the offering shall be made to
27    each proposed certificate holder.
28        (3)  The director shall promulgate rules specifying the type or  types  of
29    nonforfeiture benefits to be offered as part of long-term care insurance poli-
30    cies and certificates, the standards for nonforfeiture benefits, and the rules
31    regarding  a  contingent  benefit upon lapse, including a determination of the
32    specified period of time during which a contingent benefit upon lapse will  be
33    available  and  the  substantial premium rate increase that triggers a contin-
34    gent benefit upon lapse as described in subsection (1) of this section.

35        41-4608.  AUTHORITY TO PROMULGATE RULES. The director shall issue  reason-
36    able  rules to promote premium adequacy and to protect the policyholder in the
37    event of substantial rate increases, and to establish  minimum  standards  for
38    marketing  practices, agent compensation, agent testing, penalties and report-
39    ing practices for long-term care insurance.

40        41-4609.  ADMINISTRATIVE PROCEDURES. Rules adopted for the  implementation
41    and  administration of this chapter shall be in accordance with the provisions
42    of chapter 52, title 67, Idaho Code.

43        41-4610.  SEVERABILITY. If any provision of this chapter or  the  applica-
44    tion  thereof  to  any  person  or  circumstance  is for any reason held to be
45    invalid, the remainder of the chapter and the application of such provision to
46    other persons or circumstances shall not be affected thereby.

47        41-4611.  PENALTIES. In addition to any other penalties  provided  by  the
48    laws  of  this  state,  any  insurer  and any agent found to have violated any
49    requirement of this state relating to the regulation of long-term care  insur-
50    ance  or  the  marketing of such insurance shall be subject to a fine of up to


 1    three (3) times the amount of any commissions paid for each policy involved in
 2    the violation or up to ten thousand dollars ($10,000), whichever is greater.

 3        SECTION 3.  An emergency existing  therefor,  which  emergency  is  hereby
 4    declared to exist, this act shall be in full force and effect on and after its
 5    passage and approval, and retroactively to January 1, 1999.

Statement of Purpose / Fiscal Impact

                      STATEMENT  OF  PURPOSE
This legislation repeals the existing Chapter 46, Title 41, Idaho
Code, and replaces it with a new Chapter 46, setting forth
requirements for long term care insurance issued in Idaho.  The new
act is based on model legislation developed by the National
Association of Insurance Commissioners.


Name:          Joan Krosch
Agency:   Department of Insurance
Phone:         334-4300

Statement of Purpose/Fiscal Impact                           H 1