Statutory Authority: 18 Delaware Code, Section 314 (18 Del.C. 314)
Long-term Care, Regulation No. 63
Adopted: July 30, 1990
Amended: December 23, 1996
Amended: [March 22, 1999]
Table of Contents:
1. Purpose
2. Authority
3. Applicability and scope
4. Definitions
5. Policy definitions
6. Policy practices and provisions
7. Required disclosure provisions
8. Unintentional Lapse
89. Prohibition against post-claims underwriting
910. Minimum standards for home health and community care benefits in long-term care insurance policies
1011. Requirement to offer inflation protection
1112. Requirements for replacement
1213. Reporting requirements and report of lapsed policies
1314. Licensing
1415. Discretionary powers of Commissioner
1516. Reserve standards
1617. Loss ratio standards
1718. Filing requirement
1819. Standard format outline of coverage
1920. Filing requirements for advertising
2021. Standards for marketing
2122. Suitability
23 Standards for benefit triggers
24. Prohibition against pre-existing conditions and probationary waiting periods in replacement policies or certificates
2225. Requirement to deliver shopper's guide
2326. Requirement to offer nonforfeiture benefit
2427. Permitted compensation arrangements
2528. Penalties
2629. Separability
2730. Effective Date
Appendix A. Rescission reporting form
Appendix B. Long-Term Care Insurance Personal Worksheet
Appendix C. “Things You Should Know Before You Buy Long-Term Care Insurance”
Appendix D. Long-Term Care Insurance Suitability Letter
Section 1. Purpose
The purpose of this regulation is to implement 18 Del. C., Chapter 71, to promote the public interest, to promote the availability of long-term care insurance coverage, to protect applicants for long-term care insurance, from unfair or deceptive sales or enrollment practices, to facilitate public understanding and comparison of long-term care insurance coverages, and to facilitate flexibility and innovation in the development of long-term care insurance.
Section 2. Authority
This regulation is issued pursuant to the authority vested in the Commissioner under 18 Del. C. Sec. 314.
Section 3. Applicability and [Scope][scope]
Except as otherwise specifically provided, this regulation applies to all long-term care insurance policies and certificates delivered or issued for delivery in this state on or after the effective date hereof, by insurers; fraternal benefit societies; nonprofit health, hospital and medical service corporations; prepaid health plans; health maintenance organizations and all similar organizations.
Section 4. Definitions
For the purpose of this regulation, the terms "Department," "long-term care insurance," "Commissioner," "applicant," "policy" and "certificate" shall have the meanings set forth in 18 Del. C. Sections 102 and 7103.
Section 5. Policy [Definitions][definitions]
No long-term care insurance policy delivered or issued for delivery in this state shall use the terms set forth below, or terms of like or similar meaning, unless the terms are defined in the policy and the definitions satisfy the following requirements:
[A(1)] “Activities of daily living” means at least bathing, continence, dressing, eating, toileting and transferring.
A[B.(2)] "Acute Condition" means that the individual is medically unstable. Such an individual requires frequent monitoring by medical professionals, such as physicians and registered nurses, in order to maintain their health status.
B[C.(3)] "Adult day care" means a program for six (6) or more individuals, of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly or other disabled adults who can benefit from care in a group setting outside the home.
[D(4)] “Chronically ill” means any individual who has been certified by a Licensed Health Care Practitioner as being unable to perform, without substantial assistance from another individual, at least two activities of daily living for a period of at least ninety (90) days; or who requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment.
[(5)E.] “Cognitive impairment” means a deficiency in a person’s short-term or long-term memory, orientation as to person, place, and time, deductive [or abstract] reasoning, or judgment [as it relates to safety awareness.]
C[F.(6)] "Home health care services" means medical and nonmedical services provided to ill, disabled or infirm persons in their residences. Such services may include homemaker services, assistance with activities of daily living and respite care services.
D[G.(7)] "Medicare" [means shall be defined as] "The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended," or "Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof," or words of similar import.
E[H.(8)] "Mental or nervous disorder" shall not be defined to include more than neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder.
F[I.(9)] "Personal care" means the provision of hands-on services to assist an individual with activities of daily living (such as bathing, eating, dressing, transferring and toileting).
G[J.(10)] "Preexisting Conditions" shall be defined in accordance with 18 Del. C. Sec. 7105 (C).
[K.(11)] “Qualified Long-Term Care Insurance Policy” means a policy that provides coverage for qualified long-term care services that is intended to meet the requirements of § 7702B(b) of the Internal Revenue Code of 1986, as amended.
[L.(12)] “Qualified Long-Term Care Services” means necessary diagnostic, preventive therapeutic, curing, treating, mitigating and rehabilitative services and Maintenance or Personal Care Services which are required by a Chronically Ill Individual and are provided pursuant to a Plan of Care prescribed by a Licensed Health Care Practitioner.
H[M.(13)] "Skilled nursing care," "intermediate care," "personal care," "home care," and other services shall be defined in relation to the level of skill required, nature of the care and the setting in which care must be delivered.
I[N.(14)] All providers of services, including but not limited to "skilled nursing facility," "extended care facility," "intermediate care facility," "convalescent nursing home," "personal care facility," and "home care agency" shall be defined in relation to the services and facilities required to be available and the licensure or degree status of those providing or supervising the services. The definition may require that the provider be appropriately licensed or certified.
Section 6. Policy Practices and Provisions
A. Renewability. The terms "guaranteed renewable" and "noncancellable" shall not be used in any individual long-term care insurance policy without providing further explanatory language in accordance with the disclosure requirements of Section 7 of this regulation.
(1) No such policy issued to an individual shall contain renewal provisions less favorable to the insured than "guaranteed renewable." However, the Commissioner may authorize nonrenewal on a statewide basis, on terms and conditions deemed necessary by the Commissioner, to best protect the interests of the insureds, if the insurer demonstrates: That renewal will jeopardize the insurer's solvency.
(2) The term "guaranteed renewable" may be used only when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums, during which period the insurer has no unilateral right to make any change in any provision of the policy or rider, and cannot decline to renew and cannot revise rates except on a class basis in accordance with subsection 4 below. This cost disclosure must be approved by the Commissioner and included in any solicitation and also prominently displayed on the initial policy.
(3) Every long-term care insurance policy or certificate issued or delivered in this State must be "guaranteed renewable" as defined in subsection 2 above, and contain a cost disclosure section as defined subsection 4 below.
(4) (a) The following cost disclosure information shall appear in bold print on the
cover page of every individual policy and Outline of Coverage issued or delivered in this state: "This policy provides only the following price protection, and no more. Your premiums may not increase by more than X% during any given calendar year and your benefits may not decrease. Any representations that these increases will not take place are unauthorized and shall not be relied upon."
(b) The following cost disclosure information shall appear in bold print on the cover page of every certificate and Outline of Coverage issued or delivered in this state: "This policy provides only the following price protection, and no more. Your premiums are guaranteed to remain the same for the first three (3) years this policy is in force. Your premiums may not increase by more than X% during any three year rating period. Insurers will be allowed a carry forward of the initially disclosed maximum premium increase, but said carry forward is lost within twenty-four (24) months if not utilized." Any additional language that appears under the cost disclosure section must be approved in advance by the Delaware Insurance Department. The purpose of this cost disclosure section is twofold: first, to make crystal clear to the purchaser what the maximum cost will be from year to year, and second, to prohibit the practice of low pricing during the early years of a policy followed by dramatic increases designed to produce a high ratio of cancellations when the group insured reaches that age at which its members are more likely to file claims. Therefore, this section does not permit annual increases to be accumulated and applied all at once. For example, if the price is $100 in the initial year of the policy and 10% is the represented annual maximum increase, then during the second year of the policy, the maximum allowable price is $110, the third year of the policy the maximum allowable price is not more than 110% of the price actually charges during year two of the policy. It is not permissible to charge $121 during the third year of the policy unless $110 had actually been charged during year two of the policy. In other words, any permitted annual price increase not implemented during a calendar year is thereafter waived and may not be considered in calculating future prices.
[(5) In addition to other requirements of this subsection, a qualified long-term care insurance contract shall be guaranteed renewable.]
B. Limitations and Exclusions. No policy may be delivered or issued for delivery in this state as long-term care insurance if such policy limits or excludes coverage by type of illness, treatment, medical condition or accident, except as follows:
(1) Preexisting conditions;
(2) Mental or nervous disorders; however, this shall not permit exclusion or limitation of benefits on the basis of Alzheimer's Disease;
(3) Alcoholism and drug addiction;
(4) Illness, treatment or medical condition arising out of:
(a) War or act of war (whether declared or undeclared);
(b) Participation in a felony, riot or insurrection;
(c) Service in the armed forces or units auxiliary thereto;
(d) Suicide (sane or insane), attempted suicide or intentionally self-inflicted injury; or
(e) Aviation (this exclusion applies only to non-fare-paying passengers).
(5) Treatment provided in a government facility (unless otherwise required by law), services for which benefits are available under Medicare or other governmental program (except Medicaid), any state or federal workers' compensation, employer's liability or occupational disease law, or any motor vehicle no-fault law, services provided by a member of the covered person's immediate family and services for which no charge is normally made in the absence of insurance.
(6) No territorial limitations [will be permitted are permissible,] except that nothing herein shall preclude limiting benefits for specific services to a specific dollar amount, or to that dollar amount which is reasonable and prevailing in a particular geographic area which is defined and clearly delineated in the original offering or solicitation and the initial policy or certificate, or to specific providers within a particular geographic area. Moreover, nothing herein shall prohibit the limitation of services to a particular geographic area when the insured elects to receive services within that specific geographical area. For purposes of this clause, the location of receipt of services must be within 50 miles of the domicile of the insured at the time of entry therein or that area, including the nearest three nursing homes, whichever distance is greater.
[7. Expenses for services or items available or paid under another long-term care insurance or health insurance policy.
8. In the case of a qualified long-term care insurance contract expenses for services or items to the extent that the expenses are reimbursable under Title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount.
9. This Subsection B is not intended to prohibit exclusions and limitations by type of provider.]
C. Extension of Benefits. Termination of long-term care insurance shall be without prejudice to any benefits payable for institutionalization which began while the long-term care insurance was in force and continues without interruption after termination. Such extension of benefits beyond the period the long-term care insurance was in force may be limited to the duration of the benefit period, if any, or to payment of the maximum benefits and may be subject to any policy waiting period, and all other applicable provisions of the policy.
D. Continuation or Conversion.
(1) Group long-term care insurance issued in this state on or after the effective date of this section shall provide covered individuals with a basis for continuation or conversion of coverage.
(2) For the purposes of this section, "a basis for continuation of coverage" means a policy provision which 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. Group policies which restrict provision of benefits and services to, or contain incentives to use certain providers and/or facilities may provide continuation benefits which are substantially equivalent to the benefits under the existing policy. The Commissioner shall make a determination as to the substantial equivalency of benefits, and in doing so, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels and administrative complexity.
(3) For the purposes of this section, "a basis for conversion of coverage" means a policy provision that an individual whose coverage under the group policy would otherwise terminate or has been terminated for any reason, including discontinuance of the group policy in its entirety or with respect to an insured class, and who has been continuously insured under the group policy (and any group policy which it replaced), for at least six months immediately prior to termination, shall be entitled to the issuance of a converted policy by the insurer under whose group policy he or she is covered, without evidence of insurability.
(4) For the purposes of this section, "converted policy" means an individual policy of long-term care insurance providing benefits identical to or determined by the Commissioner to be substantially equivalent to or in excess of those provided under the group policy from which conversion is made.
Where the group policy from which conversion is made restricts provision of benefits and services to, or contains incentives to use certain providers and/or facilities, the Commissioner, in making a determination as to the substantial equivalency of benefits, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels and administrative complexity. When the policyholder or certificate holder is no longer in the geographical area of the provider system or available services, the insurer must calculate the financial worth of the group policy and make a cash contribution toward the purchase of any health insurance policy the policyholder may select.
(5) Written application for the converted policy shall be made and the first premium due, if any, shall be paid as directed by the insurer no later than thirty-one (31) days after termination of coverage under the group policy. The converted policy shall be issued effective on the day following the termination of coverage under the group policy, and shall be renewable annually.
(6) Unless 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 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.
(7) Continuation of coverage or issuance of a converted policy shall be mandatory, except where:
(a) Termination of group coverage resulted from an individual's failure to make any required payment of premium or contribution when due; or
(b) The terminating coverage is replaced no later than thirty-one (31) days after termination, by group coverage effective on the day following the termination of coverage:
(i) Providing benefits identical to or benefits determined by the Commissioner to be substantially equivalent to or in excess of those provided by the terminating coverage; and
(ii) The premium for which is calculated in a manner consistent with the requirements of Paragraph (6) of this section.
(8) Notwithstanding any other provision of this section, a converted policy issued to an individual who at the time of conversion is covered by another long-term care insurance policy which provides benefits on the basis of incurred expenses, may contain a provision which results in a reduction of benefits payable if the benefits provided under the additional coverage, together with the full benefits provided by the converted policy, would result in payment of more than 100 percent of incurred expenses. Such provision shall only be included in the converted policy if the converted policy also provides for a premium decrease or refund which reflects the reduction in benefits payable.
(9) The converted policy may provide that the benefits payable under the converted policy, together with the benefits payable under the group policy from which conversion is made, shall not exceed those that would have been payable had the individual's coverage under the group policy remained in force and effect.
(10) Notwithstanding any other provision of this section, any insured individual whose eligibility for group long-term care coverage is based upon his or her relationship to another person, shall be entitled to continuation of coverage under the group policy upon termination of the qualifying relationship by death or dissolution of marriage.
(11) For the purposes of this section: a "Managed-Care Plan" is a health care or assisted living arrangement designed to coordinate patient care or control costs through utilization review, case management or use of specific provider networks.
E. Discontinuance and Replacement.
If a group long-term care insurance policy is replaced by another group long-term care policy issued to the same policyholder, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination. Coverage provided or offered to individuals by the insurer and the premiums charged under the new group policy:
(1) Shall not result in any exclusion for pre-existing conditions that would have been covered under the group policy being replaced; and
(2) Shall not vary or otherwise depend on the individual's health or disability status, claim experience or use of long-term care services.
F. The premiums charged to an insured for long-term care insurance shall not increase due to either:(1) The increasing age of the insured at ages beyond sixty-five (65); or(2) The duration the insured has been covered under the policy.
G. Electronic Enrollment for Group Policies
(1) In the case of a group defined in 18 Del. C. § 7103(4) a. any requirement that a signature of an insured be obtained by an agent or insurer shall be deemed satisfied if:
(a) The consent is obtained by telephonic or electronic enrollment by the group policyholder or insurer. A verification of enrollment information shall be provided to the enrollee;
(b) The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure the accuracy, retention and prompt retrieval of records; and
(c) The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure that the confidentiality of individually identifiable information is maintained.
(2) The insurer shall make available, upon request of the Commissioner, records that will demonstrate the insurer’s ability to confirm enrollment and coverage amounts.
Section 7. Required Disclosure Provisions
A. Renewability. Individual long-term care insurance policies shall contain a renewability provision consistent herewith. Such provision shall be appropriately captioned, shall appear on the first page of the policy, and shall clearly state the duration, where limited, of renewability and the duration of the term of coverage for which the policy is issued and for which it may be renewed, subject to Section 6., paragraph A.(1) hereof. This provision shall not apply to policies which do not contain a renewability provision, and under which the right to nonrenew is reserved solely to the policyholder.
B. Riders and Endorsements. Except for riders or endorsements by which the insurer effectuates a request made in writing by the insured under an individual long-term care insurance policy, all riders or endorsements added to an individual long-term care insurance policy after date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage in the policy shall require signed acceptance by the individual insured. After the date of policy issue, any rider or endorsement which increases benefits or cover-age with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, except if the increased benefits or coverage are required by law. Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, such premium charge shall be set forth in the policy, rider or endorsement.
C. Payment of Benefits. A long-term care insurance policy which provides for the payment of benefits based on standards described as "usual and customary", "reasonable and customary", "reasonable and prevailing", or words of similar import shall include a definition of such terms and an explanation of such terms in its outline of coverage.
D. Limitations. If a long-term care insurance policy or certificate contains any limitations with respect to preexisting conditions, such limitations shall appear as a separate paragraph of the policy or certificate and shall be labeled as "Preexisting Condition Limitations."
E. Other Limitations or Conditions on Eligibility for Benefits. A long-term care insurance policy or certificate containing any limitations or conditions for eligibility, except in accordance with 18 Del. C. Section 7105, shall set forth a description of such limitations or conditions, including any required number of days or confinement, in a separate paragraph of the policy or certificate and shall label such paragraph "Limitations or Conditions of Eligibility for Benefits."
F. Disclosure of Tax Consequences.
(1) With regard to life insurance policies which provide an accelerated benefit for long-term care, a disclosure statement is required at the time of application for the policy or rider and at the time the accelerated benefit payment request is submitted that receipt of these accelerated benefits may be taxable, and that assistance should be sought from a personal tax advisor. The disclosure statement shall be prominently displayed on the first page of the policy or rider and any other related documents. [This subsection shall not apply to qualified long-term care insurance contracts.]
(2) With regard to qualified long-term care insurance policies a disclosure statement shall appear in bold print on the face of the policy and outline of coverage indicating the policy is intended to be a qualified long-term care policy under Section 7702B(b) of the Internal Revenue Code of 1996.
G. Benefit Triggers. Activities of daily living and cognitive impairment shall be used to measure an insured’s need for long term care and shall be described in the policy or certificate in a separate paragraph and shall be labeled “Eligibility for the Payment of Benefits.” Any additional benefit triggers shall also be explained in this section. If these triggers differ for different benefits, explanation of the trigger shall accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too shall be specified.
Section 8. Unintentional Lapse
Each insurer offering long-term care insurance shall, as a protection against unintentional lapse, comply with the following:
(1) (a) Notice before lapse or termination. No individual long-term care policy or
certificate shall be issued until the insurer has received from the applicant either a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured. Designation shall not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one person. The designation shall include each person’s full name and home address. In the case of an applicant who elects not to designate an additional person, the waiver shall state: “Protection against unintended lapse. I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this long-term care insurance policy for nonpayment of premium. I understand that notice will not be given until thirty (30) days after a premium is due and unpaid. I elect NOT to designate a person to receive this notice.”
The insurer shall notify the insured of the right to change this written designation, no less often than once every two (2) years.
(b) When the policyholder or certificateholder pays premium for a long-term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in Subsection (1)a. need not be met until sixty (60) days after the policyholder or certificateholder is no longer on such a payment plan. The application or enrollment form for such policies or certificates shall clearly indicate the payment plan selected by the applicant.
(c) Lapse or termination for nonpayment of premium. No individual long-term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least thirty (30) days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to Subsection (1)a. , at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first class United States mail, postage prepaid; and notice may not be given until thirty (30) days after a premium is due and unpaid. Notice shall be deemed to have been given as of five (5) days after the date of mailing.
(2) Reinstatement. In addition to the requirement in Subsection (1), a long-term care insurance policy or certificate shall include a provision that provides for reinstatement of coverage, in the event of lapse if the insurer is provided proof that the policyholder or certificateholder was cognitively impaired or had a loss of functional capacity before the grace period contained in the policy expired. This option shall be available to the insured if requested within five (5) months after termination and shall allow for the collection of past due premium, where appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy and certificate.
Section 89. Prohibition Against Post-Claims Underwriting
A. All applications for long-term care insurance policies or certificates except those which are guaranteed issue shall contain clear and unambiguous questions designed to ascertain the health condition of the applicant.
B. (1) If an application for long-term care insurance contains a question which asks whether
the applicant has had medication prescribed by a physician, it must also ask the applicant to list the medication that has been prescribed.
(2) If the medications listed in such application were known by the insurer, or should have been known at the time of application, to be directly related to a medical condition for which coverage would otherwise be denied, then the policy or certificate shall not be rescinded for that condition.
C. Except for policies or certificates which are guaranteed issue:
(1) The following language shall be set out conspicuously and in close conjunction with the applicant's signature block on an application for a long-term care insurance policy or certificate: Caution: If your answers on this application are incorrect or untrue [company] has the right to deny benefits or rescind your policy.
(2) The following language, or language substantially similar to the following, shall be set out conspicuously on the long-term care insurance policy or certificate at the time of delivery: Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address].
(3) Prior to issuance of a long-term care insurance policy or certificate to an applicant age eighty (80) or older, the insurer shall obtain one of the following:
(a) A report of a physical examination,
(b) An assessment of functional capacity,
(c) An attending physician's statement, or
(d) Copies of medical records.
D. A copy of the completed application or enrollment form (whichever is applicable) shall be delivered to the insured no later than at the time of delivery of the policy or certificate unless it was retained by the applicant at the time of application.
E. Every insurer or other entity selling or issuing long-term care insurance benefits shall maintain a record of all policy or certificate rescissions, both state and countrywide, except those which the insured voluntarily effectuated and shall annually furnish this information to the Insurance Commissioner in the form prescribed by the National Association of Insurance Commissioners.
Section 910 . Minimum Standards for Home Health and Community Care Benefits in Long-Term Care Insurance Policies
A. A long-term care insurance policy or certificate shall not, if it provides benefits for home health or community care services, limit or exclude benefits;
(1) By requiring that the insured/claimant would need skilled care in a skilled nursing facility if home health care services were not provided.
(2) By requiring that the insured/claimant first or simultaneously receive nursing and/or therapeutic services in a home, community or institutional setting before home health care services are covered.
(3) By limiting eligible services to services provided by registered nurses or licensed practical nurses.
(4) By requiring that a nurse or therapist provide services covered by the policy that can be provided by a home health aide, or other licensed or certified home care worker acting within the scope of his or her licensure or certification.
(5) By excluding coverage for personal care services provided by a home health aide;
(6) By requiring that the provision of home health care services be at a level of certification or licensure greater than that required by the eligible service;
(7) By requiring that the insured/claimant have an acute condition before home health care services are covered.
(8) By limiting benefits to services provided by Medicare-certified agencies or providers;
(9) By excluding coverage for adult day care services.
B. A long-term care insurance policy or certificate, if it provides for home health or community care services, shall provide total home health or community care coverage that is a dollar amount equivalent to at least one-half of one year's coverage available for nursing home benefits under the policy or certificate. This requirement shall not apply to policies or certificates issued to residents of continuing care retirement communities.
C. Home health care coverage may be applied to non-home health care benefits provided in the policy or certificate when determining the maximum coverage under the terms of the policy or certificate.
Section 1011. Requirement to Offer Inflation Protection
A. No insurer may offer a long-term care insurance policy unless the insurer also offers to the policyholder the option to purchase a policy that provides for benefit levels to increase with benefit maximums or reasonable durations which are meaningful to account for reasonably anticipated increases in the costs of long-term services covered by the policy. Insurers must offer to each policyholder, at the time of purchase, the option to purchase a policy with an inflation protection feature no less favorable than one of the following:
(1) Increases benefit levels annually in a manner so that the increases are compounded annually at a rate not less than five percent (5%);
(2) Guarantees the insured individual the right to periodically increase benefit levels without providing evidence of insurability or health status so long as the option for the previous period has not been declined. The amount of additional benefit shall be no less than the difference between the existing policy benefit and that benefit compounded annually at a rate of at least five percent (5%) for the period beginning with the purchase of the existing benefit and extended until the year in which the offer is made; or
(3) Covers a specific percentage of actual or reasonable charges and does not include a maximum specified indemnity amount of limit.
B. Where the policy is issued to a group, the required offer in Subsection A above shall be made to the group policyholder; except, if the policy is issued to a group defined in 18 Del. C., Section 7103.(4), other than to a continuing care retirement community, the offering shall be made to each proposed certificate holder.
C. The offer in Subsection A above shall not be required of life insurance policies or riders containing accelerated long-term care benefits.
D. Insurers shall include the following information in or with the outline of coverage:
(1) 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. The graphic comparison shall show benefit levels over at least a twenty (20) year period.
(2) Any expected premium increases or additional premiums to pay for automatic or optional benefit increases. An insurer may use a reasonable hypothetical, or a graphic demonstration, for the purposes of this disclosure.
E. Inflation protection benefit increases under a policy which contains such benefits shall continue without regard to an insured's age, claim status or claim history, or the length of time the person has been insured under the policy.
F. An offer of inflation protection which provides for automatic benefit increases shall include an offer of a premium which the insurer 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.
G. (1) Inflation protection as provided in subsection A(1) of this section shall be included in a
long-term care insurance policy unless an insurer obtains a rejection of inflation protection signed by the policyholder as required in this subsection.
(2) The rejection shall be considered part of the application and shall state:
I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy with and without inflation protection. Specifically, I have reviewed Plans -------- and I reject inflation protection.
Section 1112. Requirements for Replacement
A. Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another long-term care insurance policy or certificate in force or whether a long-term care policy or certificate is intended to replace any accident and sickness or long-term care policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and the agent, except where the coverage is sold without an agent, containing such questions may be used. With regard to a replacement policy issued to a group defined in 18 Del. C., 7103 (4), the following questions may be modified only to the extent necessary to elicit information about health or long-term care insurance policies other than the group policy being replaced; provided, however, that the certificate holder has been notified of the replacement.
(1) Do you have another long-term care insurance policy or certificate in force (including health care services contract, health maintenance organization contract)?
(2) Did you have another long-term care insurance policy or certificate in force during the last twelve (12) months?
(a) If so, with which company?
(b) If that policy lapsed, when did it lapse?
(3) Are you covered by Medicaid?
(4) Do you intend to replace any of your medical or health insurance with this policy {certificate}?
B. Agents shall list any other health insurance policies they have sold to the applicant.
(1) List policies sold which are still in force.
(2) List policies sold in the last five (5) years which are no longer in force.
C. Solicitations Other than Direct Response. Upon determining that a sale will involve replacement, an insurer; other than an insurer using direct response solicitation methods, or its agent; shall furnish the applicant, prior to issuance or delivery of the individual long-term care insurance policy, a notice regarding replacement of accident and sickness or long-term care coverage. One copy of such notice shall be retained by the applicant and an additional copy signed by the applicant shall be retained by the insurer. The required notice shall be provided in the following manner:
NOTICE TO APPLICANT REGARDING REPLACEMENT OF INDIVIDUAL ACCIDENT AND SICKNESS OR LONG-TERM CARE INSURANCE
According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness or long-term care insurance and replace it with an individual long term care insurance policy to be issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.
You should review this new coverage carefully, comparing it with all accident and sickness or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care insurance is a wise decision.
STATEMENT TO APPLICANT BY AGENT [BROKER OR OTHER REPRESENTATIVE]:
(Use additional sheets, as necessary).
I have reviewed your current medical or health insurance coverage. I believe the replacement of insurance involved in this transaction materially improves your position. My conclusion has taken into account the following considerations, which I call to your attention:
1. Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.
2. State law provides that your replacement policy or certificate may not contain new pre-existing conditions or probationary periods.
3. If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.
4. If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical health history. Failure to include all material medical information on an application may provide a basis for the company to deny and future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, reread it carefully to be certain that all information has been properly recorded.
_______________________________
(Date)
_______________________________
(Agent's Signature)
The above "Notice to the Applicant" was delivered to me on:
________________________________
(Date)
_________________________
(Applicant's Signature)
D. Direct Response Solicitations. Insurers using direct response solicitation methods shall deliver a notice regarding replacement of accident and sickness or long-term care coverage to the applicant upon issuance of the policy. The required notice shall be provided in the following manner:
NOTICE TO APPLICANT REGARDING REPLACEMENT OF INDIVIDUAL ACCIDENT AND SICKNESS OR LONG-TERM CARE INSURANCE
According to [your application] [information you have furnished], you intend to lapse or otherwise terminate existing accident and sickness or long-term care insurance and replace it with the long-term care insurance policy delivered herewith issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy.
You should review this new coverage carefully, comparing it with all accident and sickness or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision.
1. Health conditions which you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy.
2. State law provides that your replacement policy or certificate may not contain new pre-existing conditions or probationary periods.
3. If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.
4. [To be included only if the application is attached to the policy.] If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. Carefully check the application and write to [company name and address] within (30) thirty days if any information is not correct and complete, or if any past medical history has been left out of the application.
__________________________
(Company Name)
E. Where replacement is intended, the replacing insurer shall notify, in writing, the existing insurer of the proposed replacement. The existing policy shall be identified by the name of the insurer, name of the insured and policy number or address including zip code. Such notice shall be made within five (5) working days from the date the application is received by the insurer or the date the policy is issued, whichever is sooner.
Section 1213. Replacement Requirements
A. Every insurer shall maintain records for each Delaware-licensed agent of that agent's amount of replacement sales as a percentage of the agent's total annual sales and the amount of lapses of long-term care insurance policies sold by the agent as a percent of the agent's total annual sales.
B. Each insurer shall report annually by June 30 the ten precedent (10%) of its Delaware-licensed agents with the greatest percentages of lapses and replacements as measured by subsection A. above.
C. Reported replacement and lapse rates do not alone constitute a violation of insurance laws or necessarily imply wrongdoing. The reports are for the purpose of reviewing more closely agent activities regarding the sale of long-term care insurance.
D. Every entity providing long-term care insurance in this state shall file annually as an attachment to its annual statement an exhibit that discloses the total number of long-term care insurance policies, by form number, in force in this state and the total number of policies, by form number, that have lapsed over the previous five years. Companies must provide in-force policy and lapsed policy information in the following manner:
POLICY FORM # ______
SOLD LAPSED LAPSED LAPSED LAPSED LAPSED TOTAL
1985 1985 1986 1987 1988 1989
100 6 21 11 32 14 84
1986 1986 1987 1988 1989
100 6 11 21 32 70
1987 1987 1988 1989
100 6 21 28 50
1988 1988 1989
100 6 14 20
1989 1989
100 6 6
E. Every insurer shall report, annually by June 30 the number of replacement policies sold as a percentage of its total annual sales and as a percentage of its total number of policies in force as of the preceding calendar year.
F. For purposes of this section, "policy" shall mean only long-term care insurance and "report" shall mean on a statewide basis.
Section 1314. Licensing
No agent is authorized to market, sell, solicit or otherwise contact any person for the purpose of marketing long-term care insurance unless the agent has demonstrated his or her knowledge of long-term care insurance and the appropriateness of such insurance by passing a test required by this state and maintaining appropriate licenses. For purposes of this section:
A. The examination for licensure as a health insurance agent or broker shall be expanded to include a minimum of at least ten (10) questions in the area of long-term care insurance.
[(1)] Agents shall comply with the licensing provisions contained in 18 Del. C. §§ 1716(a)(4) and 1725(a) relating to lines of authority and examinations, respectively.
B. To continue to sell long-term care insurance policies or certificates, agents and broker shall be required - in addition to current annual Continuing Education Unit requirements - to successfully complete an additional three (3) hours of long-term care insurance-specific Continuing Education coursework, to be administered by the Delaware Insurance Department.
C [(2)] Insurers shall submit to the Delaware Insurance Department, no later than May 1 of each year, a complete list of every Delaware-licensed agent or broker who sold a long-term care insurance policy or certificate during the previous calendar year.
Section 1415. Discretionary Powers of Commissioner
The Commissioner may, upon written request and after an administrative hearing, issue an order to modify or suspend a specific provision or provisions of this regulation with respect to a specific long-term care insurance policy or certificate upon a written finding that:
A. The modification or suspension would be in the best interest of the insureds; and
B. The purposes to be achieved could not be effectively or efficiently achieved without the modification or suspension; and
C. (1) The modification or suspension is necessary to the development of an innovative and
reasonable approach for insuring long-term care; or
(2) The policy or certificate is to be issued to residents of a life care or continuing care retirement community or some other residential community for the elderly and the modification or suspension is reasonable related to the special needs or nature of such a community; or
(3) The modification or suspension is necessary to permit long-term care insurance to be sold as part of, or in conjunction with, another insurance product.
Section 1516. Reserve Standards
A. When long-term care benefits are provided through the acceleration of benefits under group or individual life policies or riders to such policies, policy reserves for such benefits shall be determined in accordance with 18 Del. C. Sec. 1113. Claim reserves must also be established in the case when such policy or rider is in claim status. Reserves for policies and riders subject to this subsection should be based on the multiple decrement model utilizing all relevant decrements except for voluntary termination rates. Single decrement approximations are acceptable if the calculation produces essentially similar reserves, if the reserve is clearly more conservative, or if the reserve is immaterial. The calculations may take into account the reduction in life insurance benefits due to the payment of long-term care benefits. However, in no event shall the reserves for the long-term care benefit and the life insurance benefit be less than the reserves for the life insurance benefit assuming no long-term benefit. In the development and calculation of reserves for policies and riders subject to this subsection, due regard shall be given to the applicable policy provisions, marketing methods, administrative procedures and all other considerations which have an impact on projected claim costs, including, but not limited to, the following:
(1) Definition of insured events;
(2) Covered long-term care facilities;
(3) Existence of home convalescence coverage;
(4) Definition of facilities;
(5) Existence or absence of barriers to eligibility;
(6) Premium waiver provision;
(7) Renewability;
(8) Ability to raise premiums;
(9) Marketing method;
(10) Underwriting procedures;
(11) Claims adjustment procedures;
(12) Waiting period;
(13) Maximum benefit;
(14) Availability of eligible facilities;
(15) Margins in claim costs;
(16) Optional nature of benefit;
(17) Delay in eligibility for benefit;
(18) Inflation protection provisions; and
(19) Guaranteed insurability options.
Any applicable valuation morbidity table shall be certified as appropriate as a statutory valuation table by a member of the American Academy of Actuaries.
B. When long-term care benefits are provided other than as in Subsection A above, reserves shall be determined in accordance with 18 Del. C. Sec. 1108.
Section 1617. Loss Ratio
A. Benefits under individual long-term care insurance policies and group policies with fewer than 250 insureds shall be deemed reasonable in relation to premiums provided the expected loss ratio is at least sixty percent, calculated in a manner which provides for adequate reserving of the long-term care insurance risk. Long-term care benefits provided through the acceleration of the death benefit under a life insurance policy or annuity, where the charge or the premium for the acceleration benefit is identifiable and where the payment of such long-term care benefits cannot result in the decrease of the total amount of benefits payable under the policy (i.e., long-term care benefits plus balance payable upon death), shall be exempt from this section. In evaluating the expected loss ratio, due consideration shall be given to all relevant factors, including:
[(1)A.] Statistical credibility of incurred claims experience and earned premiums;
[(2)B.] The period for which rates are computed to provide coverage;
[(3)C.] Experienced and projected trends;
[(4)D.] Concentration of experience within early policy duration;
[(5)E.] Expected claim fluctuation;
[(6)F.] Experience refunds, adjustments or dividends;
[(7)G.] Renewability features;
[(8)H.] All appropriate expense factors;
[(9)I.] Interest;
[(10)J.] Experimental nature of this coverage;
[(11)K.] Policy reserves;
[(12)L.] Mix of business by risk classification; and
[(13)M.] Product features such as long elimination periods, high deductibles and high maximum limits.
B. Every entity providing long-term care insurance in this State shall file annually its rates, rating schedule and supporting documentation including ratios of incurred losses to earned premiums by number of years of policy duration demonstrating that it is in compliance with the foregoing applicable loss ratio standards and that the period for which the policy is rated is reasonable in accordance with accepted actuarial principles and experience.
For purposes of this section, policy forms shall be deemed to comply the loss ratio standards if:
[(1i)] for the most recent year, the ratio of the incurred losses to earned premiums for policies or certificates which have been in force for three years or more is greater that or equal to the applicable percentages contained in this section; and
[(2ii)] the expected losses in relation to premiums over the entire period for which the policy is rated comply with the requirements of this section. An expected third-year loss ratio which is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than three years.
Section 1718. Filing Requirement
Prior to an insurer or similar organization offering group long-term care insurance to a resident of this state pursuant to 18 Del. C. Section 7104 it shall file with the Commissioner evidence that the group policy or certificate thereunder has been approved by a state having statutory or regulatory long-term care insurance requirements substantially similar to those adopted in this state.
Section 1819. Standard Format Outline of Coverage
This section of the regulation implements, interprets and makes specific, the provisions of 18 Del. C. Section 7105, in prescribing a standard format and the content of an outline of coverage.
A.(1) The outline of coverage shall be a free-standing document, using no smaller than ten point type.
B.(2) The outline of coverage shall contain no material of an advertising nature.
C.(3) Text which is capitalized or underscored in the standard format outline of coverage may be emphasized by other means which provide prominence equivalent to such capitalization or underscoring.
D.(4) Use of the text and sequence of text of the standard format outline of coverage is mandatory, unless otherwise specifically indicated.
E.(5) Format for outline of coverage;
[COMPANY NAME]
[ADDRESS - CITY & STATE]
[TELEPHONE NUMBER]
LONG-TERM CARE INSURANCE
OUTLINE OF COVERAGE
[Policy Number or Group Master Policy and Certificate Number]
[Except for polices or certificates which are guaranteed issue, the following cautionary statement, or language substantially similar, must appear on the outline of coverage.]
Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when your applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address].
1. This policy is [an individual policy of insurance] ([a group policy] which was issued in the [indicate jurisdiction in which group policy was issued]).
2. PURPOSE OF OUTLINE OF COVERAGE. This outline of coverage provides a very brief description of the important features of the policy. You should compare this outline of coverage to outlines of coverage for other policies available to you.
This is not an insurance contract, but only a summary of coverage. Only the individual or group policy contains governing contractual provisions. This means that the policy or group policy sets forth in detail the rights and obligations of both you and the insurance company. Therefore, if you purchase this coverage, or any other coverage, it is important that you READ YOUR POLICY (OR CERTIFICATE) CAREFULLY!
3. TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE RETURNED AND PREMIUM REFUNDED.
(a) [Provide a brief description of the right to return--"free look" provision of the policy.]
(b) [Include a statement that the policy either does or does not contain provisions providing for a refund or partial refund of premium upon the death of an insured or surrender of the policy or certificate. If the policy contains such provisions, include a description of them.]
4. THIS IS NOT MEDICARE SUPPLEMENT COVERAGE. If you are eligible for Medicare, review the Medicare Supplement Buyer's Guide provided by the insurance company.
(a) [For agents] Neither [insert company name] nor its agents represent Medicare, the federal government or any state government.
(b) [For direct response] [insert company name] is not representing Medicare, the federal government or any state government.
5. LONG-TERM CARE COVERAGE. Policies of this category are designed to provide coverage for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital, such as in a nursing home, in the community or in the home.
This policy provides coverage in the form of a fixed dollar indemnity benefit for covered long-term care expenses, subject to policy [limitations] [waiting periods] and [coinsurance] requirements. [Modify this paragraph if the policy is not an indemnity policy.]
6. BENEFITS PROVIDED BY THIS POLICY.
(a) [Covered services, related deductible(s), waiting periods, elimination periods and benefit maximums.]
(b) [Institutional benefits, by skill level.]
(c) [Non-institutional benefits, by skill level.]
[Any benefit screens triggers must be explained in this section. If these screenstriggers differ for different benefits, explanation of the screen trigger should accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too must be specified. If activities of daily living (ADLs) are used to measure an insured's need for long-term care, then these qualifying criteria or screens triggers must be explained.]
(d) Activities of daily living and cognitive impairment shall be used to measure an insured’s need for long-term care and must be defined and described as part of the outline of coverage.
7. LIMITATIONS AND EXCLUSIONS.
[Describe:
(a) Preexisting conditions;
(b) Non-eligible facilities/provider;
(c) Non-eligible levels of care (e.g., unlicensed providers, care of treatment provided by a family member, etc.);
(d) Exclusions/exceptions;
(e) Limitations.]
[This section should provide a brief specific description of any policy provisions which limit, exclude, restrict, reduce, delay, or in any other manner operate to qualify payment of the benefits described in (6) above.]
THIS POLICY MAY NOT COVER ALL THE EXPENSES ASSOCIATED WITH YOUR
LONG-TERM CARE NEEDS.
8. RELATIONSHIP OF COST OF CARE AND BENEFITS. Because the costs of long-term care services will likely increase over time, you should consider whether and how the benefits of this plan may be adjusted. [As applicable, indicate the following:
(a) That the benefit level will not increase over time;
(b) Any automatic benefit adjustment provisions;
(c) Whether the insured will be guaranteed the option to buy additional benefits and the basis upon which benefits will be increased over time if not only by a specified amount or percentage;
(d) If there is such a guarantee, include whether additional underwriting or health screening will be required, the frequency and amounts of the upgrade options, and any significant restrictions or limitations;
(e) And finally, describe whether there will be any additional premium charge imposed, and how that is to be calculated.]
9. TERMS UNDER WHICH THE POLICY (OR CERTIFICATE) MAY BE CONTINUED IN FORCE OR DISCONTINUED.
(a) Describe the policy renewability provisions;
(b) For group coverage, specifically describe continuation/conversion provisions applicable to the certificate and group policy;
(c) Describe waiver of premium provisions or state that there are not such provisions;
(d) State whether or not the company has a right to change premium, and if such a right exists, describe clearly and concisely each circumstance under which premium may change.
10. ALZHEIMER'S DISEASE AND OTHER ORGANIC BRAIN DISORDERS.
[State that the policy provides coverage for insureds clinically diagnosed as having Alzheimer's disease or related degenerative and dementing illnesses. Specifically describe each benefit screen or other policy provision which provides preconditions to the availability of policy benefits for such an insured.]
11. PREMIUM.
[(a) State the total annual premium for the policy;
(b) If the premium varies with an applicant's choice among benefit options, indicate the portion of annual premium which corresponds to each benefit option.]
12. ADDITIONAL FEATURES.
[(a) Indicate if medical underwriting is used;
(b) Describe other important features.]
Section 1920. Filing Requirements for Advertising
Prior to use, every insurer, health care service plan or other entity providing long-term care insurance in this State shall provide a copy of any long-term care insurance advertisement intended for use in this State whether through written, radio or television medium to the Insurance Commissioner of the State Delaware for review and approval by the Commissioner.
Section 2021. Standards for Marketing
A. Every insurer, health care service plan or other entity marketing long-term care insurance coverage in this state, directly or through its producers, shall:
(1) Establish marketing procedures to assure that any comparison of policies by its agents or other producers will be fair and accurate.
(2) Establish marketing procedures to assure excessive insurance is not sold or issued.
(3) Display prominently by type, stamp or other appropriate means, on the first page of the outline of coverage and policy, the following: "Notice to Buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations."
(4) Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for long-term care insurance already has accident and sickness or long-term care insurance and the types and amounts of any such insurance.
(5) Every insurer or entity marketing long-term care insurance shall establish auditable procedures for verifying compliance with this subsection~A.
(6) If the state of Delaware is the state in which the policy or certificate is delivered or issued for delivery, the insurer shall, at solicitation, provide written notice to the prospective policyholder or certificate holder that the Senior Outreach Advisory Resource Program (SOAR) Elderinfo Program, a senior counseling program approved by the Commissioner, is available and the name, address and telephone number of the SOAR Elderinfo Program.
B. In addition to the practices prohibited in 18 Del. C., Chapter 23, Unfair Trade Practices, the following acts and practices are prohibited:
(1) Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert any insurance policy or to take out a policy of insurance with another insurer.
(2) High Pressure Tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.
(3) 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.
Section 22. Suitability
A. This section shall not apply to life insurance policies that accelerate benefits for long-term care.
B. Every insurer, health care service plan or other entity marketing long-term care insurance (“insurer”) shall:
(1) Develop and use suitability standards to determine whether the purchase or replacement of long-term care insurance is appropriate for the needs of the applicant;
(2) Train its agents in the use of its suitability standards; and
(3) Maintain a copy of its suitability standards and make them available for inspection upon request by the Commissioner.
C. (1) To determine whether the applicant meets the standards developed by the insurer, the
agent and insurer shall develop procedures that take the following into consideration:
(a) The ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage;
(b) The applicant’s goals or needs with respect to long-term care and the advantages and disadvantages of insurance to meet these goals or needs; and
(c) The values, benefits and costs of the applicant’s existing insurance, if any, when compared to the values, benefits and costs of the recommended purchase or replacement.
(2) The insurer, and where an agent is involved, the agent shall make reasonable efforts to obtain the information set out in Paragraph (1) above. The efforts shall include presentation to the applicant, at or prior to application, the “Long-Term Care Insurance Personal Worksheet.” The personal worksheet used by the issuer shall contain, at a minimum, the information in the format contained in Appendix B, in not less than twelve (12) point type. The insurer may request the applicant to provide additional information to comply with its suitability standards. A copy of the insurer’s personal worksheet shall be filed with the Commissioner.
(3) A completed personal worksheet shall be returned to the insurer prior to the insurer’s consideration of the applicant for coverage, except the personal worksheet need not be returned for sales of employer group long-term care insurance to employees and their spouses.
(4) The sale or dissemination outside the company or agency by the issuer or agent of information obtained through the personal worksheet in Appendix B is prohibited.
D. The insurer shall use the suitability standards it has developed pursuant to this section in determining whether issuing long-term care insurance coverage to an applicant is appropriate.
E. Agents shall use the suitability standards developed by the insurer in marketing long-term care insurance.
F. At the same time as the personal worksheet is provided to the applicant, the disclosure form entitled “Things You Should Know Before You Buy Long-Term Care Insurance” shall be provided. The form shall be in the format contained in Appendix C, in not less than twelve (12) point type.
G. If the issuer determines that the applicant does not meet its financial suitability standards, or if the applicant has declined to provide the information, the issuer may reject the application. In the alternative, the issuer shall send the applicant a letter similar to Appendix D. However, if the applicant has declined to provide financial information, the issuer may use some other method to verify the applicant’s intent. Either the applicant’s returned letter or a record of the alternative method of verification shall be made part of the applicant’s file.
H. The insurer shall report annually to the Commissioner the total number of applications received from residents of this state, the number of those who declined to provide information on the personal worksheet, the number of applicants who did not meet the suitability standards, and the number of those who chose to confirm after receiving a suitability letter.
Section 23. Standards for Benefit Triggers
A. A long-term care insurance policy shall condition the payment of benefits on a determination of the insured’s ability to perform activities of daily living and on cognitive impairment. Eligibility for the payment of benefits shall not be more restrictive than requiring either a deficiency in the ability to perform not more than three (3) of the activities of daily living or the presence of cognitive impairment.
B. (1) Activities of daily living shall include at least the following as defined in Section 5 and in the policy:
(a) Bathing;
(b) Continence;
(c) Dressing;
(d) Eating;
(e) Toileting; and
(f) Transferring;
(2) Insurers may use activities of daily living to trigger covered benefits in addition to those contained in Paragraph (1) as long as they are defined in the policy.
C. An insurer may use additional provisions for the determination of when benefits are payable under a policy or certificate; however the provisions shall not restrict, and are not in lieu of, the requirements contained in Subsections A and B.
D. For purposes of this section the determination of a deficiency shall not be more restrictive than:
(1) Requiring the hands-on assistance of another person to perform the prescribed activities of daily living; or
(2) If the deficiency is due to the presence of a cognitive impairment, supervision or verbal cueing by another person is needed in order to protect the insured or others.
E. Assessments of activities of daily living and cognitive impairment shall be performed by licensed or certified professionals, such as physicians, nurses or social workers.
F. Long term care insurance policies shall include a clear description of the process for appealing and resolving benefit determinations.
G. The requirements set forth in this section shall be effective (12 months after adoption of this provision) and shall apply as follows:
(1) Except as provided in Paragraph (2), the provisions of this section apply to a long-term care policy issued in this state on or after the effective date of the amended regulation.
(2) For certificates issued on or after the effective date of this section, under a group long-term care insurance policy as defined in 18 Del. C. § 7103(4)a. [effective, the provisions of this section shall not apply.
Section 21 24. Prohibition Against Pre-Existing Conditions and Probationary Periods in Replacement Policies or Certificates
If a long-term care insurance policy or certificate replaces another long-term care insurance policy or certificate, the replacing insurer shall waive any time periods applicable to pre-existing conditions and probationary periods in the new long-term care insurance policy or certificate to the extent that similar exclusions have been satisfied under the original policy.
Section 2225. Requirement to Deliver Shopper's Guide
A. A long-term care insurance shopper's guide in the format developed by the National Association of Insurance Commissioners, or one developed or approved by the Commissioner, shall be provided to all prospective applicants of a long-term care insurance policy or certificate.
(1) In the case of agent solicitations, an agent must deliver the shopper's guide prior to the presentation of an application or enrollment form.
(2) In the case of direct response solicitations, the shopper's guide must be presented in conjunction with any application or enrollment form.
B. Life insurance policies or riders containing accelerated long-term care benefits are not required to furnish the above-referenced guide, but shall furnish the policy summary required under 18 Del. C., Section 7105 (j).
Section 2326. Requirement to Offer Nonforfeiture Benefit
A. No policy or certificate may be delivered or issued for delivery in this state unless the insurer also offers to the policyholder or certificateholder the option to purchase a policy that provides for nonforfeiture benefits to the defaulting or lapsing policyholder or certificateholder.
This section does not apply to life insurance policies or riders containing accelerated long-term care benefits.
(1) For purpose of this section, attained age rating is defined as a schedule of premiums starting from the issue date which increases with increasing age at least one percent per year to age fifty (50), and at least three percent (3%) per year beyond age fifty (50).
(2) For purposes of this section, the nonforfeiture benefit shall be a shortened benefit period providing paid-up long-term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) will be payable for a qualifying claim, but the lifetime maximum dollars or days of benefit shall be determined as specified in Paragraph (3).
(3) The standard nonforfeiture credit will be equal to 100 percent of the sum of all premiums paid, including the premiums paid prior to any changes in benefits. The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall not be less than thirty (30) times the daily nursing home benefit at the time of lapse. In either event, the calculation of the nonforfeiture credit is subject to the limitation of Subsection B.
(4) No policy or certificate shall begin a nonforfeiture benefit later than the end of the third year following the policy or certificate issue date except that for a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:
(a) The end of the tenth year following the policy or certificate issue date; or
(b) The end of the second year following the date the policy or certificate is no longer subject to attained age rating.
(5) Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.
B. All benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid up status will not exceed the maximum benefits which would have been payable if the policy or certificate had remained in premium paying status.
C. There shall be no difference in the minimum nonforfeiture benefit as required under this section for group and individual policies.
D. The requirements set forth in this section shall become effective on May 1, 1997, except for certificates issued on or after the effective date of this section under a group long-term care insurance policy as defined in 18 Del. C., Section 7103, which policy was in force at the time this amended regulation became effective.
E. Premiums charged for a policy or certificate containing nonforfeiture benefits shall be subject to the loss ratio requirements of Section 16 treating the policy as a whole.
F. (1) A nonforfeiture benefit as provided in subsection A.(2) and (3) of this section shall be included in a long-term care insurance policy or certificate unless an insurer obtains a rejection of a nonforfeiture benefit signed by the policyholder or certificateholder as required in this section.
(2) The rejection shall be considered part of the application and shall state: I have reviewed the outline of coverage and the nonforfeiture benefit as described therein. Specifically, I have reviewed Plan __________________ and I reject the nonforfeiture benefit.
G. Nonforfeiture benefits for qualified long-term care policies shall meet the following requirements:
(1) The nonforfeiture provision shall be appropriately captioned:
(2) The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums and shall state that the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency and interest as reflected in changes in rates for premium paying contracts approved by the Secretary of the Treasury for the same contract form; and
(3) The nonforfeiture provision shall provide at least one of the following:
(a) Reduced paid-up insurance;
(b) Extended term insurance;
(c) Shortened benefit insurance; or
(d) Other similar offerings approved by the Commissioner.
H. If the required offer of a nonforfeiture benefit is rejected, the insurer shall provide the contingent benefit upon lapse described below. In the event that a group policyholder elects to make the nonforfeiture benefit an option to the certificateholder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.
(1) The contingent benefit on lapse shall be triggered every time an insurer increases the premium rates to a level which results in a cumulative increase of the annual premium set forth below based on the insured’s issue age, and the policy or certificate lapses within 120 days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least thirty (30) days prior to the due date of the premium reflecting the rate increase.
Triggers for a Substantial Premium Increase
Percent Increase Over
Issue Age Initial Premium
29 and under 200%
30-34 190%
35-39 170%
40-44 150%
45-49 130%
50-54 110%
55-59 90%
60 70%
61 66%
62 62%
63 58%
64 54%
65 50%
66 48%
67 46%
68 44%
69 42%
70 40%
71 38%
72 36%
73 34%
74 32%
75 30%
76 28%
77 26%
78 24%
79 22%
80 20%
81 19%
82 18%
83 17%
84 16%
85 15%
86 14%
87 13%
88 12%
89 11%
90 and over 10%
(2) On or before the effective date of a substantial premium increase as defined in Paragraph (1) above, the insurer shall:
(a) Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased;
(b) Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of Subsection E. This option may be elected at any time during the 120-day period referenced in Subsection D(1); and
(c) Notify the policyholder or certificateholder that a default or lapse at any time during the 120-day period referenced in Subsection D(1) shall be deemed to be the election of the offer to convert in Subparagraph (b) above.
(3) The contingent benefit upon lapse shall begin not later than the end of the third year following the policy or certificate issue date.
Section 2427. Permitted Compensation Arrangements
A. An insurer or other entity may provide commission or other compensation to an agent or other representative for the sale of a long-term care insurance policy or certificate which shall not exceed twentythirty-five percent (3525%) of the total premium paid for that policy year.
B. No entity shall provide compensation to its agents or other producers and no agent or producer shall receive compensation greater than twenty-five percent (25%) of the total premium paid for that policy year for the sale of a replacement long-term care insurance policy or certificate.
C. For purposes of this section, "compensation" includes pecuniary or non-pecuniary remuneration or any kind relating to the sale or renewal of the policy or certificate including but not limited to bonuses, gifts, prizes, awards and finders fees.
Section 2528. Penalties
In addition to any other penalties provided by the laws of this state, any insurer and any agent found to violate any requirement of this state relating to the regulation of long-term care insurance or the marketing of such insurance shall be subject to a fine of up to three (3) times the amount of any commissions paid for each policy involved in the violation or up to $10,000, whichever is greater.
Section 2629. Separability
If any provision of this regulation or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the regulation and the application of such provision to other persons or circumstances shall not be affected thereby.
Section 2730. Effective Date
This regulation became effective July 30, 1990, except Section 13 became effective July 1, 1993. Amendment #1 adopted nonforfeiture benefits (Section~23) on December 23, 1996, to become effective on May 1, 1997. Subsequent amended provisions of this Regulation shall become effective 120 days from the Commissioner’s order amending this regulation.
Donna Lee H. Williams
Insurance Commissioner
Appendix B
Long Term Care Insurance
Personal Worksheet
People buy long-term care insurance for a variety of reasons. These reasons include to avoid spending assets for long-term care, to make sure there are choices regarding the type of care received, to protect family members from having to pay for care, or to decrease the chances of going on Medicaid. However, long term care insurance can be expensive, and is not appropriate for everyone. State law requires the insurance company to ask you to complete this worksheet to help you and the insurance company determine whether you should buy this policy.
Premium
The premium for the coverage you are considering will be [$_________ per month, or $_______ per year,] [a one-time single premium of $____________.]
[The company cannot raise your rates on this policy.] [The company has a right to increase premiums in the future.] The company has sold long-term care insurance since [year] and has sold this policy since [year]. [The last rate increase for this policy in this state was in [year], when premiums went up by an average of ______%]. [The company has not raised its rates for this policy.]
Drafting Note: The issuer shall use the bracketed sentence or sentences applicable to the product offered. If a company includes a statement regarding not having raised rates, it must disclose the company’s rate increases under prior policies providing essentially similar coverage.
[® Have you considered whether you could afford to keep this policy if the premiums were raised, for example, by 20%?]
Drafting Note: The issuer shall use the bracketed sentence unless the policy is fully paid up or is a noncancellable policy.
Income
Where will you get the money to pay each year’s premiums?
®Income ®Savings ®Family members
What is your annual income? (check one)
®Under $10,000 ®$[10-20,000] ®$[20-30,000]
®$[30-50,000] ®Over $50,000
Drafting Note: The issuer may choose the numbers to put in the brackets to fit its suitability standards.
How do you expect your income to change over the next 10 years? (check one)
®No change ®Increase ®Decrease
If you will be paying premiums with money received only from your own income, a rule of thumb is that you may not be able to afford this policy if the premiums will be more than 7% of your income.
Savings and Investments
Not counting your home, what is the approximate value of all of your assets (savings and investments)? (check one)
®Under $20,000 ®$20,000-$30,000 ®$30,000-$50,000
®Over $50,000
How do you expect your assets to change over the next ten years? (check one)
® Stay about the same ® Increase ® Decrease
If you are buying this policy to protect your assets and your assets are less than $30,000, you may wish to consider other options for financing your long-term care.
Disclosure Statement
® The information provided above accurately describes my financial situation.
® I choose not to complete this information.
Signed:
(Applicant) (Date)
[® I explained to the applicant the importance of completing this information.
Signed:
(Agent) (Date)
Agent’s Printed Name: ]
[Note: In order for us to process your application, please return this signed statement to [name of company], along with your application.]
[My agent has advised me that this policy does not appear to be suitable for me. However, I still want the company to consider my application.
Signed: ]
(Applicant) (Date)
Drafting Note: Choose the appropriate sentences depending on whether this is a direct mail or agent sale.
The company may contact you to verify your answers.
Drafting Note: When the Long-Term Care Insurance Personal Worksheet is furnished to employees and their spouses under employer group policies, the text from the heading “Disclosure Statement” to the end of the page may be removed.
Appendix C
Things You Should Know Before You Buy
Long-Term Care Insurance
Long-Term Care Insurance |
•A long-term care insurance policy may pay most of the costs for your care in a nursing home. Many policies also pay for care at home or other community settings. Since policies can vary in coverage, you should read this policy and make sure you understand what it covers before you buy it. |
•[You should not buy this insurance policy unless you can afford to pay the premiums every year.] [Remember that the company can increase premiums in the future.] |
Drafting Note: For single premium policies, delete this bullet; for noncancellable policies, delete the second sentence only.
•The personal worksheet includes questions designed to help you and the company determine whether this policy is suitable for your needs. | |
Medicare |
•Medicare does not pay for most long-term care. |
Medicaid |
•Medicaid will generally pay for long-term care if you have very little income and few assets. You probably should not buy this policy if you are now eligible for Medicaid. |
•Many people become eligible for Medicaid after they have used up their own financial resources by paying for long-term care services. | |
•When Medicaid pays your spouse’s nursing home bills, you are allowed to keep your house and furniture, a living allowance, and some of your joint assets. | |
•Your choice of long-term care services may be limited if you are receiving Medicaid. To learn more about Medicaid, contact your local or state Medicaid agency. | |
Shopper’s Guide |
•Make sure the insurance company or agent gives you a copy of a book called the National Association of Insurance Commissioners’ “Shopper’s Guide to Long-Term Care Insurance.” Read it carefully. If you have decided to apply for long-term care insurance, you have the right to return the policy within 30 days and get back any premium you have paid if you are dissatisfied for any reason or choose not to purchase the policy. |
Counseling |
•Free counseling and additional information about long-term care insurance are available through your state’s insurance counseling program. Contact your state insurance department or department on aging for more information about the senior health insurance counseling program in your state. |
Appendix D
Long-Term Care Insurance Suitability Letter
Dear [Applicant]:
Your recent application for long-term care insurance included a “personal worksheet,” which asked questions about your finances and your reasons for buying long-term care insurance. For your protection, state law requires us to consider this information when we review your application, to avoid selling a policy to those who may not need coverage.
[Your answers indicate that long-term care insurance may not meet your financial needs. We suggest that you review the information provided along with your application, including the booklet “Shopper’s Guide to Long-Term Care Insurance” and the page titled “Things You Should Know Before Buying Long-Term Care Insurance.” Your state insurance department also has information about long-term care insurance and may be able to refer you to a counselor free of charge who can help you decide whether to buy this policy.]
[You chose not to provide any financial information for us to review.]
Drafting Note: Choose the paragraph that applies.
We have suspended our final review of your application. If, after careful consideration, you still believe this policy is what you want, check the appropriate box below and return this letter to us within the next 60 days. We will then continue reviewing your application and issue a policy if you meet our medical standards.
If we do not hear from you within the next 60 days, we will close your file and not issue you a policy. You should understand that you will not have any coverage until we hear back from you, approve your application and issue you a policy.
Please check one box and return in the enclosed envelope.
® Yes, [although my worksheet indicates that long-term care insurance may not be a suitable purchase,] I wish to purchase this coverage. Please resume review of my application.
Drafting Note: Delete the phrase in brackets if the applicant did not answer the questions about income.
® No. I have decided not to buy a policy at this time.
APPLICANT’S SIGNATURE DATE
Please return to [issuer] at [address] by [date].