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Volume 18_ Issue 6


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									                                               FINAL REGULATIONS
                                     For information concerning Final Regulations, see Information Page.

                                                                   Symbol Key
         Roman type indicates existing text of regulations. Italic type indicates new text. Language which has been stricken indicates
                   text to be deleted. [Bracketed language] indicates a change from the proposed text of the regulation.

         STATE CORPORATION COMMISSION                                     Governing Long-Term Care Insurance

REGISTRAR'S NOTICE: The State Corporation Commission                               ORDER ADOPTING REVISIONS TO RULES
is exempt from the Administrative Process Act in accordance               WHEREAS, by order entered herein September 21, 2001, all
with § 2.2-4002 A 2 of the Code of Virginia, which exempts                interested persons were ordered to take notice that the
courts, any agency of the Supreme Court, and any agency                   Commission would consider the entry of an order subsequent
which by the Constitution is expressly granted any of the                 to October 31, 2001, adopting revisions proposed by the
powers of a court of record.                                              Bureau of Insurance to the Commission's Rules Governing
Title of Regulation: 14 VAC 5-200. Rules Governing Long-                  Long-Term Care Insurance, unless on or before October 31,
Term Care Insurance (amending 14 VAC 5-200-20 through                     2001, any person objecting to the adoption of the proposed
14 VAC 5-200-40, 14 VAC 5-200-70, 14 VAC 5-200-80,                        revisions filed a request for a hearing with the Clerk of the
14 VAC 5-200-160, and 14 VAC 5-200-175; adding 14 VAC                     Commission;
5-200-75).                                                                WHEREAS, the September 21, 2001, Order also required all
                                                                          interested persons to file their comments in support of or in
Statutory Authority: §§ 12.1-13 and 38.2-5202 of the Code of
                                                                          opposition to the proposed revisions on or before October 31,
Effective Date: February 1, 2002.
                                                                          WHEREAS, as of the date of this Order, no request for a
Summary:                                                                  hearing has been filed with the Clerk of the Commission;
  The purpose of the revisions to the rules is to carry out               WHEREAS, a comment was filed with the Clerk of the
  those provisions of Chapter 114 of the 2001 Acts of                     Commission on October 31, 2001, by AARP, expressing its
  Assembly that amended § 38.2-5202 of the Code of                        support for the proposed revisions, but noting that the
  Virginia to permit the commission to adopt standards                    renewability provisions under 14 VAC 5-200-70 A are
  regarding the rating practices of insurers to consumers. In             required, not optional as indicated in the proposed revisions;
  addition, these amendments clarify that advertisements
                                                                          WHEREAS, a comment was filed with the Clerk of the
  must be filed with the commission, clarify the disclosure
                                                                          Commission on November 1, 2001, by the Health Insurance
  that must be made in connection with the renewability of
                                                                          Association of America ("HIAA"), recommending that the
  long-term care policies, and provide that the Bureau of
  Insurance may amend the forms attached to these rules.                  Commission fully adopt the Long-Term Care Insurance Model
                                                                          Regulation endorsed by the National Association of Insurance
  Significant revisions include the following: (i) clarification of       Commissioners, including the rate stabilization provisions,
  the disclosure to be made in connection with policy                     rather than only the consumer disclosure provisions of the
  renewability in 14 VAC 5-200-70 A, (ii) provision of                    Model as proposed by the Bureau of Insurance;
  requirements for disclosure of rating practices to the
                                                                          WHEREAS, the Bureau has reviewed the comment filed by
  consumer in 14 VAC 5-200-75, and (iii) clarification that
                                                                          AARP and has recommended an amendment to 14 VAC 5-
  advertisements must be filed with the commission.
                                                                          200-70 A in response to AARP's comment;
  A significant change made to the final revisions from the
  proposed revisions is the amendment of 14 VAC 5-200-70                  WHEREAS, the Bureau has reviewed the comment filed by
                                                                          HIAA and has recommended that there be no amendment in
  A in order to clarify the situations in which disclosure of a
                                                                          response to HIAA's comment, and has further recommended
  renewability provision must be made.
                                                                          that the proposed revisions, as amended pursuant to the
Agency Contact: Bob Wright, Special Projects Coordinator,                 immediately preceding paragraph, be adopted; and
Life and Health Division, Bureau of Insurance, P.O. Box 1157,
                                                                          THE COMMISSION, having considered the proposed
Richmond, Virginia 23218, telephone (804) 371-9074 or e-
                                                                          revisions, the filed comments, and the Bureau's response and
mail rwright@scc.state.va.us.
                                                                          recommendations thereto, is of the opinion that the proposed
                         AT RICHMOND, NOVEMBER 9, 2001                    revisions as amended should be adopted;
COMMONWEALTH OF VIRGINIA                                                  THEREFORE, IT IS ORDERED THAT:
At the relation of the                                                    (1) The revisions to Chapter 200 of Title 14 of the Virginia
                                                                          Administrative Code entitled "Rules Governing Long-Term
STATE CORPORATION COMMISSION                                              Care Insurance," which amend the rules at 14 VAC 5-200-20,
                                           CASE NO. INS010248             14 VAC 5-200-30, 14 VAC 5-200-40, 14 VAC 5-200-70, 14
Ex Parte: In the matter of                                                VAC 5-200-80, 14 VAC 5-200-160, and 14 VAC 5-200-175,
Adopting Revisions to the Rules                                           add a new rule at 14 VAC 5-200-75, add new Forms A and E,

Volume 18, Issue 6                                   Virginia Register of Regulations                           Monday, December 3, 2001

Final Regulations
and designate current Forms A, B, and C to be Forms B, C,               or at reinstatement or renewal which reduce or eliminate
and D, respectively, as well as amend the newly designated              benefits or coverage in the policy shall require signed
Form B, and which are attached hereto and made a part                   acceptance by the individual insured. After the date of policy
hereof, should be, and they are hereby, ADOPTED to be                   issue, any rider or endorsement which increases benefits or
effective February 1, 2002;                                             coverage with a concomitant increase in premium during the
                                                                        policy term must be agreed to in writing signed by the insured,
(2) AN ATTESTED COPY hereof shall be sent by the Clerk of               except if the increased benefits or coverage are required by
the Commission to the Bureau of Insurance in care of Deputy             law. Where a separate additional premium is charged for
Commissioner Gerald A. Milsky, who forthwith shall give                 benefits provided in connection with riders or endorsements,
further notice of the adoption of the revisions to the rules by         such premium charge shall be set forth in the policy, rider or
mailing a copy of this Order, together with a clean copy of the         endorsement.
revised rules, to all insurers licensed by the Commission to
write long-term care insurance in the Commonwealth of                   C. Payment of benefits. A long-term care insurance policy
Virginia; and by forwarding a copy of this Order, including a           which provides for the payment of benefits based on
copy of the attached revised rules, to the Virginia Registrar of        standards described as "usual and customary," "reasonable
Regulations for appropriate publication in the Virginia Register        and customary" or words of similar import shall include a
of Regulations; and                                                     definition of such terms and an explanation of such terms in
                                                                        its accompanying outline of coverage.
(3) The Bureau of Insurance shall file with the Clerk of the
Commission an affidavit of compliance with the notice                   D. Limitations. If a long-term care insurance policy or
requirement of paragraph (2) above.                                     certificate contains any limitations with respect to preexisting
                                                                        conditions, such limitations shall appear as a separate
REGISTRAR'S NOTICE:          The proposed regulation was                paragraph of the policy or certificate and shall be labeled as
adopted as published in 18:3 VA.R. 334-348 October 22,                  "Preexisting Condition Limitations."
2001, with the additional changes shown below. Therefore,
pursuant to § 2.2-4031 A of the Code of Virginia, the text of           E. Other limitations or conditions on eligibility for benefits. A
the final regulation is not set out at length; however, the             long-term care insurance policy or certificate containing any
changes from the proposed regulation are printed below.                 limitations or conditions for eligibility other than those
                                                                        prohibited in § 38.2-5205 A of the Code of Virginia shall set
14 VAC 5-200-20. [ No change from proposed. ]                           forth a description of such limitations or conditions, including
                                                                        any required number of days of confinement prior to receipt of
14 VAC 5-200-30. [ No change from proposed. ]                           benefits, in a separate paragraph of the policy or certificate
14 VAC 5-200-40. [ No change from proposed. ]                           and shall label such paragraph "Limitations or Conditions on
                                                                        Eligibility for Benefits."
14 VAC 5-200-70. Required disclosure provisions.
                                                                        F. Disclosure of tax consequences. With regard to life
A. Renewability. [ Except as provided in subdivision 3 of this          insurance policies which provide an accelerated benefit for
subsection, ] individual long-term care insurance policies              long-term care, a disclosure statement is required at the time
[ that contain renewability provisions ] shall contain disclose         of application for the policy or rider and at the time the
the terms of renewability in a renewability provision.                  accelerated benefit payment request is submitted that receipt
  1. Such provision shall be appropriately captioned, shall             of these accelerated benefits may be taxable, and that
                                                                        assistance should be sought from a personal tax advisor. The
  appear on the first page of the policy, and shall clearly state
  the duration, where limited, of renewability and the duration         disclosure statement shall be prominently displayed on the
  of the term of coverage for which the policy is issued and            first page of the policy or rider and any other related
  for which it may be renewed that the coverage is                      documents.
  guaranteed renewable or noncancellable. [ This provision              G. Benefit triggers. Activities of daily living and cognitive
  shall not apply to policies which do not contain a                    impairment shall be used to measure an insured's need for
  renewability provision, and under which the right to                  long-term care and shall be described in the policy or
  nonrenew is reserved solely to the policyholder. ]                    certificate in a separate paragraph and shall be labeled
  2. A long-term care insurance policy or certificate, other            "Eligibility for the Payment of Benefits." Any additional benefit
  than one where the insurer does not have the right to                 triggers shall also be explained in this section. If these
  change the premium, shall include a statement that the                triggers differ for different benefits, explanation of the trigger
  premium rates may change.                                             shall accompany each benefit description. If an attending
                                                                        physician or other specified person must certify a certain level
  [ 3. This subsection shall not apply to policies that do not          of functional dependency in order to be eligible for benefits,
  contain a renewability provision and under which the right            this too shall be specified.
  to renew is reserved solely to the policyholder. ]
                                                                        14 VAC 5-200-75. Required disclosure of rating practices
B. Riders and endorsements. Except for riders or                        to consumer.
endorsements by which the insurer effectuates a request
                                                                        A. This section shall apply as follows:
made in writing by the insured under an individual long-term
care insurance policy, all riders or endorsements added to an             1. Except as provided in subdivision 2 of this subsection,
individual long-term care insurance policy after date of issue            this section applies to any long-term care policy or

Volume 18, Issue 6                                Virginia Register of Regulations                          Monday, December 3, 2001

                                                                                                           Final Regulations
  certificate issued in this Commonwealth on or after August                insurers or the long-term care policies acquired from
  1, 2002.                                                                  other nonaffiliated insurers when those increases
                                                                            occurred prior to the acquisition.
  2. For certificates issued on or after February 1, 2002,
  under a group long-term care insurance policy as defined in               d. If an acquiring insurer files for a rate increase on a
  14 VAC 5-200-40, which policy was in force on February 1,                 long-term care policy form acquired from nonaffiliated
  2002, the provisions of this section shall apply on the policy            insurers or a block of policy forms acquired from
  anniversary on or after February 1, 2003.                                 nonaffiliated insurers on or before the later of [ the
                                                                            effective date of this section (i) August 1, 2002, or
B. Other than policies for which no applicable premium rate or              February 1, 2003, as is applicable pursuant to subsection
rate schedule increases can be made, insurers shall provide                 A, ] or [ (ii) ] the end of a 24-month period following the
all of the information listed in this subsection to the applicant           acquisition of the block or policies, the acquiring insurer
at the time of application or enrollment, unless the method of              may exclude that rate increase from the disclosure.
application does not allow for delivery at that time. In such a             However, the nonaffiliated selling company shall include
case, an insurer shall provide all of the information listed in             the disclosure of that rate increase in accordance with
this section to the applicant no later than at the time of                  subdivision 5 a of this subsection.
delivery of the policy or certificate.
                                                                            e. If the acquiring insurer in subdivision 5 d of this
  1. A statement that the policy may be subject to rate                     subsection files for a subsequent rate increase, even
  increases in the future;                                                  within the 24-month period, on the same policy form
  2. An explanation of potential future premium rate revisions,             acquired from nonaffiliated insurers or block of policy
  and the policyholder’s or certificateholder’s option in the               forms acquired from nonaffiliated insurers referenced in
  event of a premium rate revision;                                         subdivision 5 d of this subsection, the acquiring insurer
                                                                            shall make all disclosures required by subdivision 5 of
  3. The premium rate or rate schedules applicable to the                   this subsection, including disclosure of the earlier rate
  applicant that will be in effect until a request is made for an           increase referenced in subdivision 5 d of this subsection.
                                                                        C. An applicant shall sign an acknowledgement at the time of
  4. A general explanation for applying premium rate or rate            application, unless the method of application does not allow
  schedule adjustments that shall include:                              for signature at that time, that the insurer made the disclosure
    a. A description of when premium rate or rate schedule              required under subdivisions B 1 and 5 of this section. If due to
    adjustments will be effective (e.g., next anniversary date,         the method of application the applicant cannot sign an
    next billing date, etc.); and                                       acknowledgement at the time of application, the applicant
                                                                        shall sign no later than at the time of delivery of the policy or
    b. The right to a revised premium rate or rate schedule as          certificate.
    provided in subdivision 2 of this subsection if the
    premium rate or rate schedule is changed.                           D. An insurer shall use Forms B and E dated February 1,
                                                                        2002, or as later modified by the Bureau of Insurance, to
  5. a. Information regarding each premium rate increase on             comply with the requirements of subsections A and B of this
    this policy form or similar policy forms over the past 10           section.
    years for this Commonwealth or any other state that, at a
    minimum, identifies:                                                E. An insurer shall provide notice of an upcoming premium
                                                                        rate     schedule     increase    to    all   policyholders   or
       (1) The policy forms for which premium rates have                certificateholders, if applicable, at least 60 days prior to the
       been increased;                                                  implementation of the premium rate schedule increase by the
                                                                        insurer. The notice shall include the information required by
       (2) The calendar years when the form was available for
                                                                        subsection B of this section when the rate increase is
       purchase; and
       (3) The amount or percentage of each increase. The
                                                                        14 VAC 5-200-80. [ No change from proposed. ]
       percentage may be expressed as a percentage of the
       premium rate prior to the increase, and may also be              14 VAC 5-200-160. [ No change from proposed. ]
       expressed as minimum and maximum percentages if
       the rate increase is variable by rating characteristics.         14 VAC 5-200-175. [ No change from proposed. ]

    b. The insurer may, in a fair manner, provide additional                                          FORMS
    explanatory information related to the rate increases.              [ No change from proposed. ]
    c. An insurer shall have the right to exclude from the                     VA.R. Doc. No. R02-31; Filed November 13, 2001, 9:55 a.m.
    disclosure premium rate increases that only apply to
    blocks of business acquired from other nonaffiliated

Volume 18, Issue 6                                Virginia Register of Regulations                             Monday, December 3, 2001


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