LONG‐TERM CARE INSURANCE STUDY A Report to the Governor and Lt. Governor UPDATE, SEPTEMBER 2008 Prepared By: The Iowa Insurance Division Susan E. Voss, Commissioner 1
On June 19, 2007, Governor Culver directed the Iowa Insurance Division to conduct a study on issues relating to long‐term care insurance. Further, he instructed the Division to provide the Culver‐Judge Administration with a report and recommendations to address any concerns raised throughout the study. Following a three‐month review process, the Division issued a report on September 17, 2007, including a series of Findings and Recommendations. In the past year, the Division acted upon many of the 27 Recommendations listed in the Report. This Update will outline each recommendation and the current status of implementation. We are pleased to report that most of the Recommendations have been implemented or are in the process of being implemented. Commencement of several of the recommendations took place prior to the 2008 legislative session. Other recommendations have been implemented or are in the course of being implemented due to passage of House File 2694 and House File 2555 in 2008. The Division makes the following Report on the status of the Recommendations. 1. Standardize long‐term care insurance policy terminology and definitions. This recommendation was implemented pursuant to House File 2694. Changes were made to definitions. 2. Institute an additional premium rate review mechanism including consumer‐initiated rate hearings. Since the issuance of the Report in September 2007, the Division has been employing outside actuarial firms to review long‐term care insurance rate filings. The costs for this additional rate review are paid by the carrier. This was codified in House File 2555. 3. Implement the amendments to the 2006 NAIC Long‐Term Care Insurance Model Act. Some portions of the Model Act were implemented immediately following release of the Report. However, House File 2694 addressed additional Model Act changes including definitions and coverage content. These changes have an effective date of January 1, 2009. 4. Implement a prompt pay law for long‐term care insurance claims. House 2694 provided a new section 514G.108 for prompt payment of claims. 5. Facilitate a meeting of insurance industry and the long‐term care industry to discuss insurance claim issues. The Commissioner met with representatives of the long‐term care industry in May 2008 to seek input on claims concerns. These concerns have been reviewed and the Division is addressing them with the industry. The Commissioner has been invited to meet with the long‐ term care insurance industry. A joint meeting has not been scheduled at this time. 6. Create an independent review system for claim denial. House File 2694 provided for an independent review system to address long‐term care insurance claim issues. The Division is in the process of promulgating rules to implement the review system. The procedure goes into effect January 1, 2009. Currently, the National Association of Insurance Commissioners is reviewing the new Iowa law for use as a national model for other states. 7. Require insurance carriers to make a one‐time offer of other types of long‐term care benefits to policyholders who have only nursing home coverage. A proposal has been formulated to require that policies issued prior to February 1, 2003 will receive benefit from rate stabilization rules adopted and effective on policies issued February 1, 2003 or later. This rule requires 2
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newer policies to include certain protections and some of those protections will now be extended t older policies. First, when a premium rate increase is requested on an “old” policy, the insurer must include an option for a policyholder to continue to pay the prior premium rate and reduce the policy benefits. In addition, if the amount of the proposed premium increase exceeds a percentage specified in an Insurance Division administrative rule, the insurer must offer an option for a policyholder to cease paying all premiums. Under this option, the policy will lapse and the insurer will maintain a balance in an account equal to all premiums paid. When a claim is filed and the benefit triggers are met, benefits will be paid according to the policy up to the amount of total premiums paid. The policy owner thus still gets the benefit of the total amount of premiums paid. This will require rulemaking. A draft rule has been filed for notice on September 5, 2008. Initiate a market conduct review of long‐term care insurance carriers to determine the rate of compliance with Iowa’s suitability and disclosure standards. We completed a review in the fall of 2007. Several carriers were identified for further review of standards and advertising. A new position has been created at the Division to provide this oversight and review. The position is currently in the process of being filled. Ongoing review of advertising and specific carrier issues will be part of this staff member’s duties. Encourage innovative long‐term care products. We have encouraged the industry to consider products that provide greater benefit flexibility to consumers, i.e., long‐term care insurance products with a life insurance component. We are seeing some products with these types of features being filed with the Division for sale in Iowa. Create a separate Enforcement Bureau within the Iowa insurance Division. The Bureau has been created and a Bureau Chief was recently hired. Establish a statutory consumer protection requirement and create a separate consumer protection unit. House File 2555 created a Consumer Advocate Bureau within the Division. While no funding for this Bureau was provided in legislation, the Division created the Bureau and is currently interviewing perspective candidates for the position of Consumer Advocate. We hope to have the person on staff in early October. Require long‐term care insurance carriers to provide policyholders with a clear and concise policy summary. House File 2694 provides for a specific outline of coverage and a policy summary. A newly created position in the Division will review long‐term care insurance policies to ensure these requirements are met. Improve the consumer protection procedures of the Division to provide more thorough responses to consumers in explaining insurance issues and complaints. The Division has conducted an in‐house review of consumer complaint procedures and changes have been made including additional interaction with consumers following the conclusion of the Division’s assistance. However, the Commissioner will also recommend a review of procedures be commenced by the new Consumer Advocate.
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14. Create a senior health insurance specialist to review health issues and trends of concern to Iowa’s older population and make recommendations to the Commissioner. The Division has recently hired a new staff person to handle these issues. 15. Implement continuing education training for insurance agents selling long‐term care insurance. This requirement was implemented through administrative rule earlier in 2007/2008. 16. Review the use of designations and titles by insurance agents especially in the area of sales to older Iowans and provide guidelines for their use. This recommendation was implemented on September 7, 2007 through Iowa Insurance Division Bulletin, 07‐05. 17. Coordinate efforts with other state agencies to educate consumers about financial and long‐ term care issues concerning older Iowans. An educational outreach in Carroll, Iowa was held in the spring of 2008. Staff from the Department of Elder Affairs and the Attorney General’s office also presented. A forum with all three agencies is being planned in Mason City for later this year. 18. Adopt the “Own Your Future” Campaign for Iowa. Iowa applied for grant funds from CMS for this program. The application was denied. 19. Adopt an in‐house review system of complaints for a more thorough analysis of issues of issues including review of ongoing complaint files closed and completed complaints and enforcement actions. The Market Regulation Bureau conducted a review of complaints. A new position has been created to focus specifically on senior health insurance issues. In addition, a new position has been created in the Senior Health Insurance Information Program (SHIIP) to provide educational outreach and assistance to seniors and their families with long‐term care insurance issues. A separate Enforcement Bureau has been created to better focus on enforcement actions. We hope to have the new Consumer Advocate conduct a separate review of consumer complaint handling procedures within the Division. 20. Revise the method used to determine the conclusion of a complaint file and the documentation of funds retrieved or saved for the consumer. A review was conducted late last year regarding complaint files and the finalization of actions by the Division. As a result of the review, additional documentation is now required and follow‐up with complainants occurs to determine the final outcome and to accurately analyze the effectiveness of the Division’s assistance to the consumer. 21. Hire an additional SHIIP staff member to assist with outreach and education. An additional staff position along with funding was provided to the Division in House File 2694. A new staff person has been hired to handle these duties. 22. Establish regular meetings at least yearly with older Iowans and their families to seek input on insurance issues. Meetings are being planned throughout the state. A forum was held earlier in 2008 in Carroll for seniors. Another meeting is planned for October in another area of the state. New staff was hired to assist in the area of long‐term care insurance will also conduct listening posts and forums. It is expected that the new Consumer Advocate may hold meetings as well. 4
23. Create a quarterly newsletter for consumers, agents, carriers and other interested parties. The recommendation has not been implemented. We are currently reviewing staff availability and costs. 24. Create a consumer webpage dedicated to older Iowans. We are planning to have a separate webpage for the Consumer Advocate and will work with the Advocate to determine what type of webpage may be effective. A prototype has been created in preparation of the new Consumer Advocate. We currently have a SHIIP webpage that provides educational information on long‐term care insurance as well as Medicare and Medicare‐related products. 25. Review all marketing materials on long‐term care insurance products prior to use by carriers and agents. The Division is currently reviewing marketing materials for long‐term care insurance products. 26. Establish regular meetings with other state agencies to share information concerning older Iowans. We have commenced an interagency group to conduct seminars across the state to educate seniors and their families on a wide range of financial issues. This group includes the Division, the Department of Elder Affairs and the Attorney General. 27. Commence a state‐wide discussion on long‐term care and its impact on Iowa’s future. This recommendation has not been implemented. However, we anticipate that the new consumer advocate along with new Division staff will commence work on this recommendation. The Division will continue to monitor and review those recommendations currently implemented and address the recommendations that have not been implemented. We will update officials and the public as we move forward in these areas of long‐term care insurance regulation and oversight. The Division appreciates the support of the Governor, Lt. Governor and their staffs, the Iowa Legislature, the insurance industry, other Iowa state agencies and departments, consumer‐based interest groups, long‐term care associations and the many, many Iowa consumers who assisted in the 2007 study, the 2008 long‐term care insurance legislation, and the implementation of many of these recommendations. 5