Date:June 6, 1996
To:All Insurers Authorized to Write Life and Accident and Health Insurance in Wisconsin
From:Josephine W. Musser, Commissioner of Insurance
Subject:Section Ins 3.455, Wis. Adm. Code, et. al., Concerning Long-Term Care, Nursing Home, and Home Health Care Insurance Coverages Sold in the State of Wisconsin

On September 1, 1996, amendments to ss. Ins 3.455 and 3.46, Wis. Adm. Code, regarding standards for long-term care, nursing home and home health care insurance, and life insurance long-term care coverage will go into effect. The revisions to the long-term care rule are mainly based on the new standards set in the National Association of Insurance Commissioners (NAIC) model rule for long-term care.

ALL LONG-TERM CARE POLICIES MARKETED, ADVERTISED, AND ISSUED ON OR AFTER SEPTEMBER 1, 1996, MUST CONFORM TO THESE CHANGES. INSURERS MAY USE BOTH NEWLY APPROVED POLICY FORMS AND PREVIOUSLY APPROVED FORMS UNTIL SEPTEMBER 1, 1996.

The major changes involve daily minimum coverage, reinstatement, benefit triggers, nonforfeiture benefits, suitability standards, rate stabilization, and formats for the disclosures required.

Rate Increase Standards--s. Ins 3.455 (9), Wis. Adm. Code

The rate stabilization requirements for policies providing long-term care, nursing home, or home health care coverage prohibit increases in the premium rate schedule during the initial 3 years a policy is in force. After the initial 3-year period, increases in the premium rate schedule must meet the following minimum requirements:

  1. Any rate increase is guaranteed for at least 2 years after its effective date;
  2. No rate increase may exceed 10% for insureds age 75 or above and whose coverage has been in force for at least 10 years;
  3. If rates for any policy increase more than 50% in any 3-year period, the insurer must discontinue issuing policies for 2 years from the effective date of the rate increase;
  4. Premiums may not increase due to the increasing age of the insured at ages beyond 65 or the duration the insured has been covered under the policy.

The rate requirements also apply to any replacing insurer which assumes a block of business from a prior insurer.

All rate filings must include a past history of previous rate increases and a certification of the maximum rate increase over the last 35 months.

Policy Forms--s. Ins 3.46 (4), Wis. Adm. Code

The rule amends the standards for policy forms by increasing the daily benefit limit to a minimum of $60 per day. The fixed daily benefit applies to the total long-term care insurance in force for any one insured. The amendment to the rule deletes the requirement that the attending physician certification is conclusive for plan of care, activities of daily living, and level of care. It replaces this requirement with benefit triggers based on activities of daily living.

The amendments further require reinstatement of coverage if the insurer is provided proof of cognitive impairment or the loss of functional capacity and if the reinstatement of coverage is requested within 5 months after termination and provision is made for the collection of past due premiums.

Disclosure When Soliciting--s. Ins 3.46 (9), Wis. Adm. Code

The appropriate disclosure statement from Appendix 8 of s. Ins 3.39, Wis. Adm. Code, must be used on or with an application for long-term care, nursing home, and home health care coverage. The disclosure statement must be in the same text and format as in the appendix, and be in at least 12-point type.

Nonforfeiture Benefits--s. Ins 3.46 (11m), Wis. Adm. Code

The rule requires the insurer to offer at the time of sale a shortened benefit period nonforfeiture benefit with the following standards:

  1. Attained age rating is defined as a schedule of premiums starting from the issue date that increases with age at least 1% per year prior to age 50, and at least 3% per year beyond age 50.
  2. The nonforfeiture benefit provides paid-up coverage after lapse.
  3. The standard nonforfeiture credit must be at least 100% of the sum of all premiums paid. The minimum nonforfeiture credit cannot be less than 30 times the daily nursing home benefit at the time of lapse.
  4. The nonforfeiture benefit must begin no later than the end of the third year following issue date except for policies with attained age rating.
  5. For policies with attained age rating, the nonforfeiture benefit must begin on the earlier of:
    • The end of the 10th year following issue date; or
    • The end of the second year following the date the policy is no longer subject to attained age rating.
  6. Premium charges for nonforfeiture benefits are subject to the loss ratio requirements of s. Ins 3.455 (5), Wis. Adm. Code, treating the policy as a whole.

Unintentional Lapse--s. Ins 3.46 (15), Wis. Adm. Code

The rule requires the insurer to obtain a designation of at least one person who is to receive a notice of lapse or termination of the policy for nonpayment of premium or a written waiver by the applicant electing not to designate additional persons to receive notice. The insurer must send a letter to the designee indicating that the insured has designated the person to receive notice of lapse or termination. A policy may not be terminated for nonpayment of premium unless the insurer at least 30 days before the effective date of the lapse or termination has given notice to the insured and to the designated person. The insurer must notify a policyholder at least once every two years of the right to designate a person to receive the notice, or to change or add to designations already made. The format of the designation is described in the rule.

Suitability--s. Ins 3.46 (16), Wis. Adm. Code

The rule requires the insurer to develop and use suitability standards to determine whether the purchase or replacement of long-term care insurance is appropriate, to train its agents in the use of its suitability standards, and to maintain a copy of its standards for inspection by the commissioner. The rule outlines the items that must be considered by the insurer when developing its suitability standards. The agent, at or prior to the completion of the application, must present to the applicant the "Long-Term Care Insurance Personal Worksheet," and the disclosure form entitled "Things You Should Know Before You Buy Long-Term Care Insurance." The formats for the worksheet and the disclosure form are contained in the Appendices to the rule.

Standards for Benefit Triggers--s. Ins 3.46 (17), Wis. Adm. Code

The rule defines six activities of daily living (ADLs): bathing, continence, dressing, eating, toileting, and transferring. It requires payment of benefits when there is either a deficiency in the ability to perform not more than 3 of the ADLs or the presence of cognitive impairment. It also requires that the assessments of ADLs and cognitive impairment be performed by licensed or certified professionals, such as physicians, nurses, or social workers. Determination of a deficiency may not be more restrictive than requiring the insured to have hands-on assistance to perform ADLs or, if the deficiency is due to cognitive impairment, supervision or verbal cueing to protect the insured and others.

Applicability

The rules do not apply to policies issued prior to the rules' effective date or to the renewal of those policies. After the effective date but before September 1, 1996, insurers may market policies under either the current rule or this rule, if a policy form conforming to this rule has been approved.

The above presents a brief summary of the amendments to the regulations applying to long-term care, nursing home, and home health care insurance products. For a copy of the rule, send a written request, along with a large self-addressed, stamped envelope, to Meg Gunderson in our Central Files Section. If you have questions, you may contact Diane Dambach at (608) 266-0106. Questions regarding rate stabilization may be directed to David Heineck at (608) 266-0095.

Thank you for your cooperation.