Long-Term Care

Requires long-term care insurance policies to meet specified
standards; requires employers to offer long-term care (LTC)
policies to employees; makes appropriation for LTC actuarial
study; makes appropriation to insurance division to hire LTC
actuary; extends sunset date and makes appropriation for Joint
Legislative Committee. (HB169 HD2)

HOUSE OF REPRESENTATIVES                H.B. NO.           169
TWENTIETH LEGISLATURE, 1999                                H.D. 2
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1                              PART I.
 2                              PURPOSE
 3      SECTION 1.  This Act is a recommendation of the joint
 4 legislative committee on long-term care, as contained in its
 5 report to the legislature dated December 1, 1998.  This Act is a
 6 companion to a separate bill that amends the income tax law to
 7 allow an income tax deduction for individuals who purchase long-
 8 term care insurance policies.
 9      Long-term care is an issue of immense importance.  Providing
10 adequate care for the aged and disabled is an economic burden for
11 many people.  The legislature finds that long-term care insurance
12 policies offer a means of alleviating that burden.  The
13 legislature believes that the ideal setting to provide long-term
14 care insurance is through the employment workplace and that the
15 State should encourage the offering of long-term care insurance
16 in order to provide a modicum of financial security.  
17      The purpose of this Act is to increase the number of long-
18 term care insurance policies in effect in Hawaii by requiring
19 employers to offer long-term care coverage, and to increase state
20 regulation over long-term care insurance.

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 1                             PART II.
 2                           STATE POLICY
 3      SECTION 2.  Chapter 431:10A, Hawaii Revised Statutes, is
 4 amended by adding a new section to Part V to be appropriately
 5 designated and to read as follows:
 6      431:10A-     Employers and others to offer long-term care
 7 insurance policies; employer contributions.  (a)  No later than
 8 January 1, 2000, every employer, labor organization, or other
 9 entity specified under the definition of "group long-term care
10 insurance", shall offer long-term care insurance policies issued
11 that have been approved by the insurance commissioner under
12 section 431:10A-526, to its employees or members; provided that
13 employees or members shall not be required to purchase a policy.
14      (b)  For purposes of subsection (a), all insurers that are
15 subject to this part shall make available a group long-term care
16 insurance policy to every employer, labor organization, or other
17 entity specified under the definition of "group long-term care
18 insurance", if a policy is available.  
19      (c)  In the absence of an agreement between an employer and
20 an employee or member, an employer, labor organization, or other
21 entity described in subsection (a) shall not be required to
22 contribute to the payment of premiums for a policy purchased
23 under subsection (a).  Any agreement shall specify a percentage
24 of the premium to be contributed.

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 1      (d)  If an employee purchases a policy under subsection (a),
 2 the employer shall not be required to withhold the employee's
 3 premium from wages, unless the employer agrees to contribute to
 4 paying the premiums under subsection (c).
 5      (e)  An employee's or member's spouse or reciprocal
 6 beneficiary, as well as their parents and grandparents, including
 7 in-laws.
 8      SECTION 3.  Section 87-23.5, Hawaii Revised Statutes, is
 9 amended by amending subsections (a) and (b) to read as follows:
10      "(a)  The board [of trustees] shall determine the benefits
11 of a long-term care benefits plan for employee-beneficiaries,
12 their spouses or reciprocal beneficiaries, as well as their
13 parents and grandparents, including in-laws, and qualified-
14 beneficiaries.  The plan shall comply with [the provisions of
15 article 10A, part V, of chapter 431, upon initial plan
16 implementation only.] part V of chapter 431:10A.
17      (b)  Notwithstanding any other law to the contrary, [such]
18 the benefits shall be available only to employee-beneficiaries,
19 their spouses or reciprocal beneficiaries, as well as their
20 parents and grandparents, including in-laws, and qualified-
21 beneficiaries who enroll between the ages of twenty and eighty-
22 five.  Eligible persons must comply with the plan's age,
23 enrollment, medical underwriting, and contribution requirements."
24                             PART III.

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 1                     HIPAA CONSUMER PROTECTION
 2      SECTION 4.  Chapter 431:10A, Hawaii Revised Statutes, is
 3 amended by adding sixteen new sections to Part V to be
 4 appropriately designated and to read as follows:
 5      "431:10A-A   Policy practices and provision; renewability-
 6 individual policies.  (a)  The terms guaranteed renewable and
 7 noncancellable shall not be used in any individual long-term care
 8 insurance policy without further explanatory language in
 9 accordance with section        .
10      (b)  A policy issued to an individual shall not contain
11 renewal provisions other than guaranteed renewable or
12 noncancellable.
13      (c)  As used in this section, the term "guaranteed
14 renewable" means the insured has a right to continue the long-
15 term care insurance in force by the timely payment of premiums
16 and when the insurer has no unilateral right to make any change
17 in any provision of the policy or rider while the insurance is in
18 force, and cannot decline to renew, except that rates may be
19 revised by the insurer on a class basis.
20      (d)  As used in this section, the term "noncancellable"
21 means the insured has the right to continue the long-term care
22 insurance in force by the timely payment of premiums during which
23 period the insurer has no right to unilaterally make any change
24 in any provision of the insurance or premium rate.

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 1      431:10A-B   Policy practices and provision; limitations and
 2 exclusions-group and individual policies.  (a)  A policy may not
 3 be delivered or issued for delivery in this State as long-term
 4 care insurance if the policy limits or excludes coverage by type
 5 of illness, treatment, medical condition or accident, except as
 6 follows:
 7      (1)  Preexisting conditions;
 8      (2)  Mental or nervous disorders; provided that coverage for
 9           Alzheimer's Disease shall not be limited or excluded;
10      (3)  Alcoholism or drug addiction;
11      (4)  Illness, treatment, or medical condition arising out
12           of:
13           (A)  War or act of war, whether declared or undeclared;
14           (B)  Participation in a felony, riot, or insurrection;
15           (C)  Service in the armed forces or units auxiliary
16                thereto;
17           (D)  Suicide, whether sane or insane, attempted
18                suicide, or intentionally self-inflicted injury;
19                or
20      (5)  Treatment provided in a government facility, unless
21           required by law, services for which benefits are
22           available under Medicare or other governmental program,
23           except Medicaid, any state or federal workers'
24           compensation, employer's liability or occupational

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 1           disease law, or any motor vehicle insurance law,
 2           services provided by a member of the covered person's
 3           immediate family and services for which no charge is
 4           normally made in the absence of insurance.
 5      (b)  This section is not intended to prohibit exclusions and
 6 limitations by type of provider or territorial limitations.
 7      431:10A-C   Policy practices and provision; extension of
 8 benefits-group and individual policies.  Termination of long-term
 9 care insurance shall be without prejudice to any benefits payable
10 for institutionalization if the institutionalization began while
11 the long-term care insurance was in force and continues without
12 interruption after termination.  The extension of benefits beyond
13 the period the long-term care insurance was in force may be
14 limited to the duration of the benefit period, if any, or to
15 payment of the maximum benefits and may be subject to any policy
16 waiting period, and all other applicable provisions of the
17 policy.  
18      431:10A-D   Policy practices and provision; continuation or
19 conversion-group policies.  (a)  All group long-term care
20 insurance issued in this State shall provide covered individuals
21 with a basis for continuation or conversion of coverage.
22      (b)  A policy provision that provides for a basis for
23 continuation of coverage is one that maintains coverage under the
24 existing group policy when the coverage would otherwise terminate

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 1 and which is subject only to the continued timely payment when
 2 due.  Group policies that restrict provision of benefits and
 3 services to, or contain incentives to use certain providers or
 4 facilities may provide continuation of benefits that are
 5 substantially equivalent to the benefits of the existing group
 6 policy.  The commissioner shall make a determination as to the
 7 substantial equivalency of benefits, and in doing so, shall take
 8 into consideration the differences between managed care and non-
 9 managed care plans, including but not limited to, provider system
10 arrangements or networks, service availability, benefit levels
11 and administrative complexity.
12      (c)  A policy provision that provides for a basis for
13 conversion of coverage is one that entitles an individual whose
14 coverage under the group policy would otherwise terminate or has
15 been terminated for any reason, including discontinuance of the
16 group policy in its entirety or with respect to an insured class
17 to the issuance of a converted policy by the insurer under whose
18 group policy the individual is covered, without evidence of
19 insurability; provided that the individual has been continuously
20 insured under the group policy or any group policy that it
21 replaced for at least six months prior to termination.  
22      (d)  As used in this section, a "converted policy" means an
23 individual policy of long-term care insurance providing benefits
24 identical to or benefits determined by the commissioner to be

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 1 substantially equivalent to or in excess of those provided under
 2 the group policy from which conversion is made.  If the group
 3 policy from which conversion is made restricts provision of
 4 benefits and services to, or contains incentives to use certain
 5 providers or facilities, the commissioner, in making a
 6 determination as to substantial equivalency of benefits, shall
 7 take into consideration the differences between managed care and
 8 non-managed care plans, including but not limited to, provider
 9 system arrangements or networks, service availability, benefit
10 levels and administrative complexity.
11      (e)  The insured shall make written application for the
12 converted policy.  The first premium, if any, shall be due and
13 paid as directed by the insurer no later that thirty-one days
14 after termination of coverage under the group policy.  The
15 converted policy shall be issued effective on the day following
16 the termination of coverage under the group policy, and shall be
17 [5~renewable annually.
18      (f)  The premium for the converted policy shall be
19 calculated on the basis of the insured's age at inception of
20 coverage under the group policy from which conversion is made;
21 provided that where the group policy from which conversion is
22 made is a replacement to a previous group policy, the premium
23 shall be calculated on the basis of the insured's age at
24 inception of the replacement group policy.

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 1      (g)  Continuation of coverage or issuance of a converted
 2 policy shall be mandatory except in the following circumstances:
 3      (1)  Termination of group coverage resulted from an
 4           individual's failure to make any required payment of
 5           premium or contribution when due; or
 6      (2)  The termination of group coverage is replaced by
 7           another group coverage effective on the day following
 8           the termination of coverage and all the following
 9           requirements are met:
10           (A)  Replacement occurs no later than thirty-one days
11                after termination;
12           (B   The replacement group coverage provides benefits
13                that are identical or substantially equivalent to
14                or in excess of those provided by the previous
15                group coverage; and
16           (C)  The premium for the new group coverage is
17                calculated in a manner consistent with subsection
18                (f).
19      (h)  Notwithstanding any other provision of this section, a
20 converted policy issued to an individual who at the time of
21 conversion is covered by another long-term care insurance policy
22 that provides benefits on the basis of incurred expenses, may
23 contain a provision that results in a reduction of benefits
24 payable if the benefits provided under the additionally coverage,

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 1 together with the full benefits provided by the converted policy,
 2 would result in payment of more that one hundred per cent of
 3 incurred expenses.  The provision shall only be included in the
 4 converted policy if the converted policy also provides for a
 5 premium decrease or refund which reflects the reduction in
 6 benefits payable. 
 7      (i)  The converted policy may provide that the benefits
 8 payable under the converted policy, together with the benefits
 9 payable under the group policy from which conversion is made,
10 shall not exceed those that would have been payable had the
11 individual's coverage under the group policy remained in force
12 and effect. 
13      (j)  Notwithstanding any other provision of this section, an
14 insured individual whose eligibility for group long-term care
15 coverage is based upon the individual's relationship to another
16 person shall be entitled to continuation of coverage under the
17 group policy upon termination of the qualifying relationship by
18 death or dissolution of marriage.
19      (k)  As used in this section "managed care plan" means a
20 health care or assisted living arrangement designed to coordinate
21 patient care or control costs through utilization review, case
22 management, or use of specific provider networks.
23      431:10A-E   Policy practices and provision; discontinuance
24 and replacement-group policies.   If a group long-term care

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 1 insurance policy is replaced by another group long-term care
 2 insurance policy issued to the same policyholder, the succeeding
 3 insurer shall offer coverage to all persons covered under the
 4 previous group policy on its date of termination.  Coverage
 5 provided or offered to individuals by the insurer and premiums
 6 charged to person under the new group policy shall not:
 7      (1)  Result in an exclusion for preexisting conditions that
 8           would have been covered under the group policy being
 9           replaced; and 
10      (2)  Vary or otherwise depend on the individual's health or
11           disability status, claim experience, or use of long-
12           term care services.
13      431:10A-F    Unintentional lapse; prevention-group and
14 individual policies.  (a) Every insurer offering long-term care
15 insurance shall comply with this section to prevent an
16 unintentional lapse.
17      (b)  No long-term care policy or certificate shall be issued
18 until the insurer has received from the applicant with a written
19 designation of at least one person, in addition to the applicant,
20 who is to receive notice of lapse or termination of the policy or
21 certificate for nonpayment of premium, or a written waiver dated
22 and signed by the applicant electing not to designate an at least
23 one person who is to receive the notice of termination, in
24 addition to the insured.  Designation shall not constitute
25 acceptance of any liability on the third party for services

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 1 provided to the insured.  The form used for the written
 2 designation shall provide space clearly designated for listing at
 3 least one person.  The designation shall include the person's
 4 full name and home address.
 5      (c)  When an applicant decides to waive the applicant's
 6 right to designate another person, the waiver shall state:
 7      "Protection Against Unintended Lapse.  I understand that I
 8 have the right to designate at least one person other than myself
 9 to receive notice of lapse or termination of this long-term care
10 insurance policy for nonpayment of premium.  I understand that
11 notice will not be given until thirty (30) days after a premium
12 is due and unpaid.  I elect NOT to designate a person to receive
13 this notice"
14      (d)  The insurer shall notify the insured of the right to
15 change this written designation, no less often that every two
16 years.
17      (e)  The thirty day requirement in subsection (b) shall not
18 be applicable if payment for a long-term care insurance policy or
19 certificate is made through a payroll or pension deduction plan.
20 If payment is made through a payroll or pension deduction plan,
21 the notice requirement shall be extended to sixty (60) days after
22 the insured is no longer on a payroll or pension deduction plan.
23 The insurer shall clearly indicate whether payment is being made
24 through a plan.

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 1      431:10A-G    Lapse or termination for nonpayment of
 2 premium-group and individual policies.   No policy or certificate
 3 shall lapse or terminate for nonpayment of premiums unless the
 4 insurer, at least thirty (30) days before the effective date of
 5 the lapse or termination, has given notice to the insured and to
 6 those persons designated in section     at the address provided
 7 by the insured for purposes of receiving notice of lapse or
 8 termination.  Notice shall be given by first class United States
 9 mail, postage prepaid; provided that the notice shall not be
10 given until the thirty or sixty day requirements under section
11 .  Notice shall be deemed to have been given as of five days
12 after the date of mailing.
13      431:10A-H    Reinstatement-group and individual policies.
14 (a)  A long-term care insurance policy or certificate shall
15 include a provision that provides for reinstatement of coverage,
16 in the event of lapse if the insurer is provided proof that the
17 insured was cognitively impaired or had a loss of functional
18 capacity before the grace period contained in the policy expired.
19 This option shall be available to the insured if requested within
20 five months after termination and shall allow for the collection
21 of past due premium, where appropriate.  The standard of proof of
22 cognitive impairment of loss of functional capacity shall not be
23 more stringent than the benefit eligibility criteria on cognitive
24 impairment or the loss of functional capacity contained in the

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 1 policy or certificate.
 2      (b)  This section shall be in conformance with P.L. 104-191
 3 or any regulations relating thereto. (NAIC still drafting)
 4      431:10A-I   Disclosure standards; renewability-individual
 5 policies.  All individual long-term care insurance policies shall
 6 contain a renewability provision.  The provision shall be
 7 appropriately captioned, shall appear on the first page of the
 8 policy, and shall clearly state the duration of renewability and
 9 the duration of the term of coverage for which the policy is
10 issued and for which it may be renewed; provided that this
11 section shall not apply to policies that are part of or combined
12 with a life insurance policy and do not contain a nonrenewability
13 provision, and under which the right to nonrenew is reserved
14 solely to the policyholder.
15      431:10A-J   Disclosure standards; riders and endorsements-
16 individual policies.  (a)  All riders or endorsements added to an
17 individual long-term care insurance policy after the date or
18 issue, upon reinstatement, or renewal that reduce or eliminate
19 benefits or coverage in the policy shall require the insured to
20 sign a written acceptance.  This subsection shall not apply if
21 the insured makes a written request to the insurer for a rider or
22 endorsement.
23      (b)  After the date of issuance, any rider or endorsement
24 that increases benefits or coverage with a concomitant increase

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 1 in premium during the policy term shall be agreed to in writing
 2 by the insured, unless the increase in benefits or coverage is
 3 required by law. 
 4      (c)  If a separate additional premium is charged for
 5 benefits or coverage provided in connection with a rider or
 6 endorsement, the premium charge shall be set forth in the policy,
 7 rider, or endorsement. 
 8      431:10A-K   Disclosure standards; payment of benefits-group
 9 and individual policies.  A long-term care insurance policy that
10 provide for payment of benefits based on standards described as
11 "usual and customary," "reasonable and customary," or similar
12 words or phrases shall include a definition of these terms and an
13 explanation of the terms in its accompanying outline of coverage.
14      431:10A-L   Disclosure standards; preexisting conditions
15 limitation-group and individual policies. If a long-term care
16 insurance policy or certificate contains any limitations with
17 respect to preexisting conditions, the limitations shall appear
18 as a separate paragraph of the policy or certificate and shall be
19 labeled as "Preexisting Condition Limitations."
20      431:10A-M   Disclosure standards; other limitations and
21 conditions on eligibility for benefits-group and individual
22 policies.  A long-term care insurance policy or certificate
23 containing any limitations or conditions for eligibility other
24 than those prohibited in sections     and      shall set forth a

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 1 description of the limitations or conditions, including any
 2 required number of days of confinement, in a separate paragraph
 3 of the policy or certificate and shall be labeled as "Limitations
 4 or Conditions on Eligibility of Benefits."
 5      431:10A-N   Prohibition against post claims underwriting-
 6 group and individual policies.  (a)  All applications for long-
 7 term care insurance policies or certificates, except a policy or
 8 certificate which is guaranteed issue, shall contain clear and
 9 unambiguous questions designed to ascertain the health condition
10 of the applicant.
11      (b)  If an application for long-term care insurance contains
12 a question that asks whether the applicant has had medication
13 prescribed by a physician, shall also ask the applicant to list
14 the medication that has been prescribed.
15      (c)  If the medications listed in the application were known
16 by the insurer, or should have been known at the time of
17 application, to be directly related to a medical condition for
18 which coverage would otherwise be denied, then the policy or
19 certificate shall not be rescinded for that condition.
20      (d)  A copy of the completed application or enrollment form
21 shall be delivered to the insured no later than at the time of
22 delivery of the policy or certificate unless it was retained by
23 the applicant at the time of application.
24      (e)  Every insurer or other entity selling or issuing long-

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 1 term care insurance benefits shall maintain a record of all
 2 policy or certificate rescissions, both state and countrywide,
 3 except those that the insured voluntarily effectuated.  Every
 4 insurer shall annually furnish this information to the insurance
 5 commissioner in the format prescribed by the National Association
 6 of Insurance Commissioners in Appendix A.
 7      431:10A-O    Minimum standards for home health and
 8 community care benefits-group and individual policies.  (a)  A
 9 long-term care insurance policy or certificate that provides
10 benefits for home health care of community care services shall
11 not limit or exclude benefits by:
12      (1)  Requiring that the insured would need care in a skilled
13           nursing facility if home health care services were not
14           provided;
15      (2)  Requiring that the insured first or simultaneously
16           receive nursing or therapeutic services, or both, in a
17           home, community or institutional setting before home
18           health care services are covered;
19      (3)  Limiting eligible services provided by registered
20           nurses or licensed practical nurses;
21      (4)  Requiring that a nurse or therapist provide services
22           covered by the policy or certificate that can be
23           provided by a home health aide, or other licensed or
24           certified home care worker acting within the scope of

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 1           his or her licensure or certification;
 2      (5)  Excluding coverage for personal care services provided
 3           by a home health aide;
 4      (6)  Requiring that the provision of home health care
 5           services be at a level of certification or licensure
 6           greater that that required by the eligible service;
 7      (7)  Requiring that the insured  or claimant have an acute
 8           condition before home health care services are covered;
 9      (8)  Limiting benefits to services provided by Medicare-
10           certified agencies or providers; 
11      (9)  Excluding coverage for adult day care service.
12      (b)  A long-term care insurance policy or certificate, if it
13 provides for home health or community care services, shall
14 provide total home health or community care coverage that is a
15 dollar amount equivalent to at least one-half of one year's
16 coverage available for nursing home benefits under the policy or
17 certificate, at the time covered home health or community care
18 serves are being received.  This subsection shall not apply to
19 policies or certificates issued to residents of continuing care
20 retirement communities.
21      (c)  Home health care coverage may be applied to  non-home
22 health care benefits provided in the policy or certificate when
23 determining maximum coverage under the terms of the policy or
24 certificate; provided that this subsection shall not imply that

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 1 home health care may be restricted to a period of time.
 2      431:10A-P   Requirement to offer inflation protection-group
 3 and individual policies.  (a)  No insurer may offer a long-term
 4 care insurance policy unless the insurer also offers to the
 5 policyholder, in addition to any other inflation protection, the
 6 option to purchase a policy that provides for benefit levels to
 7 increase with benefit maximums or reasonable duration which are
 8 meaningful to account for reasonably anticipated increases in the
 9 costs of long-term care services covered by the policy.  The
10 insurer shall offer to each policyholder, at the time of
11 purchase, the option to purchase a policy with an inflation
12 protection feature no less favorable than one of the following:
13      (1)  Increases benefit levels annually in a manner so that
14           the increases are compounded annually at a rate not
15           less that five per cent;
16      (2)  Guarantees the insured individual the right to
17           periodically increase benefit levels without providing
18           evidence of insurability or health status so long as
19           the option for the previous period has not been
20           declined.  The amount of the additional benefit shall
21           be no less than the difference between the existing
22           policy benefit and that benefit compounded annually at
23           a rate of at least five per cent for the period
24           beginning with the purchase of the existing benefit and

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 1           extending until the year in which the offer is made; or
 2      (3)  Covers a specified percentage of actual or reasonable
 3           charges and does not include a maximum specified
 4           indemnity amount or limit.
 5      (b)  Where the policy is issued to a group, the required
 6 offer in subsection (a) shall be made to the group policyholder;
 7 provided that if the policy is issued to a group defined in
 8 paragraph (4) in the definition of "group long-term care
 9 insurance" in section 431:10A-521 other than to a continuing care
10 retirement community, the offering shall be made to each
11 certificate holder. 
12      (c)  This section shall not apply to life insurance policies
13 or riders containing accelerated long-term care benefits.  
14      (d)  Every insurer shall include the following information
15           in the outline of coverage or with the outline of
16           coverage:
17           (1)  A graphic comparison of the benefit levels of a
18                policy that increases benefits over the policy
19                period with a policy that does not increase
20                benefits for one of the following duration
21                periods:
22                (A)  At least a twenty year period;
23                (B)  Until attained age; or
24                (C   Throughout period of coverage; and

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 1           (2)  Any expected premium increases or additional
 2                premiums to pay for automatic or optional benefit
 3                increases.
 4      (e)  Inflation protection benefit increases under a policy
 5 which contains these benefits shall continue without regard to an
 6 insured's age, claim status or claim history, or the length of
 7 time the person has been insured under the policy
 8      (f)  An offer of inflation protection that provides for
 9 automatic benefit increases shall include an offer of a premium
10 which the insurer expects to remain constant.  The offer shall
11 disclose in a conspicuous manner that the premium may change in
12 the future unless the premium is guaranteed to remain constant.
13      (g)  Inflation protection shall be included in a long-term
14 care insurance policy unless the insurer obtains a rejection of
15 inflation protection signed by the policyholder as required in
16 subsection (h).
17      (h)  The rejection shall be considered part of the
18 application and shall state:
19      "I have reviewed the outline of coverage and the graphs that
20 compare the benefits and premiums of this policy with and without
21 inflation protection.  Specifically, I have reviewed Plans
23                             PART IV.
25      SECTION 5.  Chapter 431:10A, Hawaii Revised Statutes, is

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 1 amended by adding seven new sections to Part V to be
 2 appropriately designated and to read as follows:
 3      "431:10A-Q   Policy practices and provision; premiums
 4 charged-group and individual policies.  (a)  The premium charged
 5 to an insured shall not increase due to either:
 6      (1)  Increasing age of the insured to ages beyond sixty-
 7           five; or
 8      (2)  The duration the insured has been covered under the
 9           policy.
10      (b)  The purchase of additional coverage shall not be
11 considered a premium rate increase, except for purposes under
12 section      .
13      431:10A-R   Disclosure standards; disclosure of tax
14 consequences-individual policies.  If a life insurance policy
15 provides for an accelerated benefit for long-term care, the
16 insured shall make a written disclosure at the time of
17 application for the policy or rider and at the time the
18 accelerated benefit payment request is submitted that receiving
19 accelerated benefits may have taxable consequences and that
20 assistance should be sought from a personal tax advisor.  The
21 disclosure statement shall be prominently displayed on the first
22 page of the policy or rider and any other related documents.
23      431:10A-S   Disclosure standards; disclosure of tax
24 qualified policy-group and individual policies.  Any long-term

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                                     H.B. NO.           169
                                                        H.D. 2

 1 care insurance policy or certificate that is intended to be a tax
 2 qualified long-term care insurance policy shall contain a written
 3 disclosure by the insured that the policy is intended to meet the
 4 tax qualifications for a long-term care insurance policy under
 5 the tax provisions of the Health Insurance Portability and
 6 Accountability Act of 1996, P.L. 104-191.  The disclosure shall
 7 Inform the applicant the the policy is intended to be a tax
 8 qualified policy and that the applicant should consult a personal
 9 tax advisor before purchasing a tax qualified policy to determine
10 the tax consequences to the applicant.
11      431:10A-T   Disclosure standards; benefit trigger-group and
12 individual policies.   Activities of daily living and cognitive
13 impairment shall be used to measure an insured's long-term care
14 and shall be described in the policy or certificate in a separate
15 paragraph.  The paragraph shall be labeled "Eligibility for the
16 Payment of Benefits."  Any additional benefit triggers shall also
17 be explained in this section.  If these benefit triggers differ
18 for different benefits, an explanation of the trigger shall
19 accompany each benefit description.  If an attending physician or
20 other specified person must certify a certain level of functional
21 dependency in order to be eligible for benefits, this requirement
22 shall also be specified.
23      431:10A-U    Standards for benefit triggers-group and
24 individual policies.  (a)  A long-term care insurance policy

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                                     H.B. NO.           169
                                                        H.D. 2

 1 shall condition the payment of benefits on a determination of the
 2 insured's ability to perform activities of daily living and on
 3 cognitive impairment.  Eligibility for the payment of benefits
 4 shall not be more restrictive than requiring either:
 5      (1)  A presence of cognitive impairment; or
 6      (2)  A deficiency in the ability to perform not more than:
 7           (A)  Two activities of daily living for a period of
 8                ninety days for tax qualified policies; or
 9           (B)  Three activities of daily living for nontax
10                qualified policies.
11      (b)  Activities of daily living shall include at least:
12 bathing, continence, dressing, eating, toileting, and
13 transferring.  Other activities of daily living may be used to
14 trigger covered benefits in addition to those contained in this
15 subsection as long as the additional activities of daily living
16 are described in the policy.
17      (c)  An insurer may use additional provisions for the
18 determination of when benefits are payable under a policy or
19 certificate; provided that these additional provisions do not
20 restrict or replace the requirements under subsections (a) and
21 (b).
22      (d)  For purposes of this section, the determination of a
23 deficiency shall not be more restrictive than:
24      (1)  Requiring hands-on assistance of another person to

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                                     H.B. NO.           169
                                                        H.D. 2

 1           perform the prescribed activities of daily living; or
 2      (2)  If the deficiency is due to the presence of a cognitive
 3           impairment, supervision or verbal cueing by another
 4           person is needed in order to protect the insured or
 5           others.  
 6      (e)  Assessments of activities of daily living and cognitive
 7 impairment shall be performed by licensed or certified
 8 professionals, such as physicians, nurses, or social workers.
 9      (f)  Every long-term care insurance policy shall include a
10 clear description of the process for appealing and resolving
11 benefit determinations.
12      (g)  This section shall not apply to certificates issued on
13 or after the effective date of this Act if the group long-term
14 care insurance policy was in force on the effective date of this
15 Act.
16      431:10A-V    Prohibition against preexisting conditions and
17 probationary periods in replacement policies and certificates-
18 group and individual policies.  If a long-term care insurance
19 policy or certificate replaces another long-term care insurance
20 policy or certificate, the replacing issuer shall waive any time
21 periods applicable to preexisting conditions and probationary
22 periods in the new long-term care policy for similar benefits to
23 the extent that similar exclusions have been satisfied under the
24 original policy.

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                                     H.B. NO.           169
                                                        H.D. 2

 1      431:10A-W     Nonforeiture Benefit Requirement-group and
 2 invididual policies.  (a)  No long-term care insurance policy or
 3 certificate shall delivered or issued in this State unless the
 4 policyholder or certificateholder has been offered the option of
 5 purchasing a policy or certificate that include a nonforfeiture
 6 benefit.  A policy or certificate that includes a nonforfeiture
 7 benefit shall have coverage elements, eligibility, benefit
 8 triggers, and benefit length that are the same as a policy or
 9 certificate issued or delivered without nonforfeiture benefits.  
10      (b)  The offer shall be in writing if the nonforfeiture
11 benefit is not described in the outline of coverage or other
12 materials provided to a prospective applicant. 
13      (c)  If the offer is rejected, the insurer shall provide the 
14 contingent benefit upon lapse.  The contingent benefit upon lapse
15 shall be triggered every time an insurer increases the premium
16 rates to a level which results in a cumulative increase of the
17 annual premium equal to or exceeding the percentage of the
18 insured's initial annual premium set forth below based on the
19 insured's issue age, and the policy or certificate lapses within
20 one hundred twenty days of the due date of the premium so
21 increased.  Unless otherwise required, policyholders and
22 certificateholders shall be notified at least thirty days prior
23 to the due date of the premium reflecting the rate increase as
24 established by rules.

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                                     H.B. NO.           169
                                                        H.D. 2

 1      (d)  If a group policyholder elects to make the
 2 nonforfeiture benefit an option of the certificateholder, a
 3 certificate shall provide either the nonforfeiture benefit or the
 4 contingent benefit upon lapse.
 5      (e)  On or before the effective date of a substantial
 6 premium increase as defined in subsection (c), the insurer shall:
 7      (1)  Offer to reduce policy benefits provided by the current
 8           coverage without the requirement of additional
 9           underwriting so that required premium payments are not
10           increased;
11      (2)  Offer to convert the coverage to a paid-up status with
12           a shortened benefit period in accordance with the terms
13           of subsection (f); provided that this option may be
14           elected at any time during the 120 day period under
15           subsection (c); and
16      (3)  Notify the policyholder and certificateholder that a
17           default or lapse at any time during the 120 day period
18           under subsection (c) shall be deemed to be the election
19           offer to convert in paragraph (2).
20      (f)  Benefits continued as nonforfeiture benefits, including
21 contingent benefits upon lapse, are:
22      (1)  Attained age rating is defined as a schedule of
23           premiums starting from the issue date which increases
24           age at least one per cent per year prior to age fifty,

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                                     H.B. NO.           169
                                                        H.D. 2

 1           and at least three per cent per year beyond age fifty;
 2      (2)  Nonforfeiture benefit shall be a shortened benefit
 3           providing paid-up long-term care insurance coverage
 4           after lapse.  The same benefits will be payable for a
 5           qualifying claim, but the lifetime maximum dollars or
 6           days of benefits shall be determined as provided in
 7           paragraph (3);
 8      (3)  The standard nonforfeiture credit will be equal to on
 9           hundred per cent of the sum of all premiums paid,
10           including premiums paid prior to any changes in
11           benefits.
12      (4)  The nonforeiture benefit and contingent benefit upon
13           lapse shall begin no later than the end of the third
14           year following the policy or certificate issue date;
15           provided that for a policy or certificate with a
16           contingent benefit upon lapse or a policy or
17           certificate with attained age rating, the nonforfeiture
18           benefit shall begin the earlier of:
19           (A)  The end of the tenth year following the policy or
20                certificate issue date; or
21           (B)  The end of the second year following the date the
22                policy or certificate is no longer subject to
23                attained age rating; and
24      (5)  Nonforfeiture credits may be used for all care and

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                                     H.B. NO.           169
                                                        H.D. 2

 1           services qualifying for benefits under the terms of the
 2           policy or certificate, up to the limits specified in
 3           the policy or certificate.
 4      (g)  All benefits paid by the insurer while the policy or
 5 certificate is in premium paying status and in paid up status
 6 shall not exceed the maximum benefits which would be payable if
 7 the policy or certificate had remained in premium paying status.
 8      (h)  There shall be no difference in the minimum
 9 nonforfeiture benefits as required under this section for group
10 and individual policies.
11      (i)  The provisions of this section shall apply to any long-
12 term care policy issued or delivered in this State after the
13 effective date of this Act.
14      (j)  Premiums charged for a policy or certificate containing
15 nonforfeiture benefits or contingent benefit on lapse shall be
16 subject to the loss ratio requirements under section 431:10A-
17      (k)  A replacing insurer that purchases or assumes a block
18 or blocks of long-term care insurance policies from another
19 insurer shall calculate the percentage increase based on the
20 initial annual premium paid by the insured when the policy was
21 first purchase from the original insurer.
22                              PART V.
24      SECTION 6.  Chapter 431:10A, Hawaii Revised Statutes, is

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                                     H.B. NO.           169
                                                        H.D. 2

 1 amended by adding eight new sections to Part V to be
 2 appropriately designated and to read as follows:
 3      "431:10A-AA    Requirements for application forms and
 4 replacement coverage-group and individual policies.
 5      (a)  Application forms shall include questions designed to
 6 elicit information as to whether, as of the date of application,
 7 the applicant has another long-term care insurance policy or
 8 certificate in force or whether a long-term care policy or
 9 certificate is intended to replace any other accident and
10 sickness or long-term care policy or certificate presently in
11 force.  A supplementary application or other form to be signed by
12 the applicant and agent, except where the coverage is sold
13 without an agent, containing the questions may be used.  
14      (b)  The following questions shall be used to satisfy
15 subsection (a):
16      (1)  Do you have another long-term care insurance policy or
17           certificate in force, including a health care service
18           contract or health maintenance organization contract?
19      (2)  Did you have another long-term care insurance policy or
20           certificate in force during the last twelve months?
21           (A)  If so, with which company?
22           (B)  If that policy lapsed, when did it lapse?
23      (3)  Are you covered by Medicaid?
24      (4)  Do you intend to replace any of your medical or health

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                                     H.B. NO.           169
                                                        H.D. 2

 1           insurance coverage with this policy or certificate?
 2      (c)  An agent shall list any other health insurance policies
 3 that the agent has sold to the applicant and the agent shall list
 4 the policies sold that are still in force and list policies sold
 5 in the past five years that are no longer in force.
 6      (d)  A replacement policy shall include questions as set
 7 forth in subsection (b); provided that the questions in this
 8 subsection may be modified only to the extent necessary to elicit
 9 information about health or long-term care insurance policies
10 other than the group policy being replaced; provided that the
11 certificateholder has been notified of the replacement.
12      (e)  Upon determining that a sale will involve replacement,
13 an insurer who does not use direct response solicitation methods
14 or its agent shall furnish the applicant, prior to issuance or
15 delivery of the individual long-term care insurance policy, a
16 notice regarding the replacement of accident and sickness or
17 long-term care insurance coverage.  One copy of the notice shall
18 be retained by the applicant and an additional copy that is
19 signed by the applicant shall be retained by the insurer.
20      (f)  Upon determining that a sale will involve replacement,
21 an insurer who uses direct response solicitation methods or its
22 agent shall deliver a notice regarding replacement of accident
23 and sickness or long-term care insurance coverage upon issuance
24 of the policy.
25      (g)  Where replacement is intended, the replacing insurer

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                                     H.B. NO.           169
                                                        H.D. 2

 1 shall notify, in writing, the existing insurer of the proposed
 2 replacement.  The existing policy shall be identified by the
 3 insurer, name of the insured, and policy number or address
 4 including zip code.  Notice shall be made within five working
 5 days from the date the application is received by the insurer or
 6 the date the policy is issued, whichever is sooner.
 7      (h)  Life insurance policies that accelerate benefits for
 8 long-term care shall comply with this section if the policy being
 9 replaced is a long-term care insurance policy.  If the policy
10 being replace is a life insurance policy, the insurer shall
11 comply with the replacement requirement of {NAIC Replacement Life
12 and Annuities Model Reg}.  If a life insurance policy that
13 accelerates benefits for long-term care is replace by another
14 policy, the replacing insurer shall comply with both the long-
15 term care and the life insurance replacement requirements.  
16      (i)  The notice forms required by subsections (e) and (f)
17 shall substantially comply with the forms contained in section 12
18 of the NAIC Long-Term Care Model Regulations July 1998 until the
19 commissioner has adopted forms by rules pursuant to chapter 91.
20      431:10A-BB     Reporting requirements-group and individual
21 policies.  (a)  Every insurer shall maintain records for each
22 agent of the agent's amount of replacement sales as a per cent of
23 the agent's total annual sales and the amount of lapses of long-
24 term care insurance policies sold by the agent as a per cent of

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                                     H.B. NO.           169
                                                        H.D. 2

 1 the agent's total annual sales.
 2      (b)  Every insurer shall report annually by June 30th of
 3 each year all of the following:
 4      (1)  The ten per cent of its agents with the greatest
 5           percentages of lapses and replacements as measured in
 6           subsection (a);
 7      (2)  The number of lapsed policies as a per cent of its
 8           total annual sales and as a per cent of its total
 9           number of policies in force as of the end of the
10           preceding calendar year;
11      (3)  The number of replacement policies sold as a per cent
12           of its total annual sales and as a per cent of its
13           total number of policies in force as of the end of the
14           preceding calendar year;
15      (4)  The number of claims denied during the previous
16           calendar year for each class of business, expressed as
17           a percentage of claims denied; provided that the claims
18           denied shall not include claims denied for failure to
19           meeting the waiting period or because of any applicable
20           preexisting condition.
21      (c)  For purposes of this section, "report" means on a
22 statewide basis.
23      431:10A-CC    Filing requirements; advertising-group and
24 individual policies.  (a)  Any entity providing long-term care

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                                     H.B. NO.           169
                                                        H.D. 2

 1 insurance or benefits shall provide a copy of any long-term care
 2 insurance advertisement intended for use in this State whether
 3 through written or electronic medium to the commissioner.  
 4      (b)  Any advertisement used in this State shall be retained
 5 by the entity for at least three years from the date the
 6 advertisement was first used.
 7      (c)  The commissioner may exempt from the requirements of
 8 this section any advertising when, in the commissioner's opinion,
 9 this requirement may not reasonably be applied.   
10      431:10A-DD    Standards for marketing-group and individual
11 policies.  (a)  Any entity offering long-term care insurance
12 coverage in this State, directly or through producers, shall:
13      (1)  Establish marketing procedures to assure that any
14           comparison of policies by its agents or other producers
15           will be fair and accurate;
16      (2)  Establish marketing procedures to assure excessive
17           insurance is not sold or issued;
18      (3)  Display prominently by type, stamp, or other
19           appropriate means, on the first page of the outline of
20           coverage and policy:
21           "Notice to buyer: This policy may not cover all of the
22           costs associated with long-term care incurred by the
23           buyer during the period of coverage.  The buyer is
24           advised to review carefully all policy limitations."

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                                     H.B. NO.           169
                                                        H.D. 2

 1      (4)  Inquire and otherwise make every reasonable effort to
 2           identify whether a prospective applicant or enrollee
 3           for long-term care insurance currently has accident and
 4           sickness or long-term care insurance and the types and
 5           amounts of any such insurance;
 6      (5)  Every entity marketing long-term care insurance shall
 7           establish auditable procedures for verifying compliance
 8           with this subsection;
 9      (6)  Provide written notice to the prospective policyholder
10           or certificateholder of a state senior insurance
11           counseling program including the name, address, and
12           telephone number of the program; provided that the
13           program has been approved by the commissioner; and
14      (7)  Use the terms "noncancellable" or "level premium" only
15           when the policy or certificate conforms to section
16           .
17      (b)  In addition to the acts or practices prohibited in
18 chapter 431:13, all of the following are prohibited:
19      (1)  Twisting.  Knowingly making any misleading
20           representation or incomplete or fraudulent comparison
21           of any insurance policies or insurers for the purpose
22           of inducing, or tending to induce, any person to lapse,
23           forfeit, surrender, terminate, retain, pledge, assign,
24           borrow on, or convert any insurance policy or to take

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                                     H.B. NO.           169
                                                        H.D. 2

 1           out a policy of insurance with another insurer.
 2      (2)  High pressure tactics.  Employing any method of
 3           marketing having the effect of or tending to induce the
 4           purchase of insurance through force, fright, threat,
 5           whether explicit or implied, or undue pressure to
 6           purchase or recommend purchase of insurance.
 7      (3)  Cold lead advertising.  Making use directly or
 8           indirectly of any method of marketing which fails to
 9           disclose in a conspicuous manner that a purpose of the
10           method of marketing is solicitation of insurance and
11           that contact will be made by an insurance agent or
12           insurance company.
13      431:10A-EE    Standards of marketing-certain group
14 policies.  (a)  Every association or trust defined in paragraph
15 (3) in the definition of "group long-term care insurance" under
16 section 431:10A-521, when endorsing or selling long-term care
17 insurance, shall educate its members concerning long-term care
18 issues in general so that its members can make informed
19 decisions.  The association or trust shall provide objective
20 information regarding long-term care insurance policies or
21 certificates endorsed or sold through the association or trust to
22 ensure that members of the association or trust receive a
23 balanced and complete explanation of the features in the policies
24 or certificates being endorsed or sold.

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                                     H.B. NO.           169
                                                        H.D. 2

 1      (b)  Where an association or trust is endorsing or selling a
 2 long-term care insurance policy or certificate, the insurer shall
 3 file the following information with the commissioner:
 4      (1)  The policy or certificate;
 5      (2)  A corresponding outline of coverage; and
 6      (3)  Any advertisements requested by the commissioner.
 7      (c)  The association or trust shall disclose in any long-
 8 term care insurance solicitation:
 9      (1)  The specific nature and amount of the comparison
10           arrangements (including all fees, commissions,
11           administrative fees, and other forms of financial
12           support) that the association or trust receives from
13           endorsement or sale of the policy or certificate of its
14           members; and
15      (2)  A brief description of the process under which the
16           policies and the insurer issuing the policies were
17           selected.
18      (d)  If the association or trust and insurer have
19 interlocking directorates or trustees arrangements, the
20 association or trust shall disclose this fact to its members.
21      (e)  The board of directors of an association or the
22 trustees of a trust endorsing or selling long-term care insurance
23 policies or certificates shall review and approve the insurance
24 policies as well as the compensation arrangements with the

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                                     H.B. NO.           169
                                                        H.D. 2

 1 insurer.
 2      (f)  The association or trust shall also:
 3      (1)  At the time of the association's or trust's decision to
 4           endorse, engage the services of a person with a
 5           expertise in long-term care insurance not affiliated
 6           with the insurer to conduct an examination of the
 7           policies, including its benefits, features, and rates,
 8           and update the examination thereafter in the event of
 9           material change;
10      (2)  Actively monitor the marketing efforts of the insurer
11           and its agents; and
12      (3)  Review and approve all marketing materials or other
13           insurance communications used to promote sales or sent
14           to members regarding the policies or certificates.
15      (g)  No group long-term care insurance policy or certificate
16 may be issued to an association unless the insurer files with the
17 commissioner the information required in this section.
18      (h)  The insurer shall not issue a long-term care policy or
19 certificate to an association or trust, or continue to market the
20 policy or certificate unless the insurer certifies annually that
21 the association has complied with the requirements of this
22 section.
23      (i)  Failure to comply with the filing and certification
24 requirements of this section constitutes an unfair trade practice

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                                     H.B. NO.           169
                                                        H.D. 2

 1 under chapter 431:13.
 2      431:10A-FF    Delivery of Shopper's Guide-group and
 3 individual policies.  (a)  Each prospective applicant of a long-
 4 term care insurance policy or certificate shall be provided with
 5 a copy of a long-term care shopper's guide in a format developed
 6 by the NAIC or approved by the commissioner.  
 7      (b)  If solicitation is done through an agent, the agent
 8 shall deliver a shopper's guide prior to presentation of the
 9 application or enrollment form.
10      (c)  If solicitation is done through a direct response
11 solicitation, the shopper's guide shall be presented in
12 conjunction with any application or enrollment form.  
13      (d)  Life insurance policies or riders containing
14 accelerated long-term care benefits are not required to furnish a
15 shopper's guide but shall furnish a policy summary as required by
16 this chapter.
17      431:10A-GG    Standards format outline of coverage-group
18 and individual policies.  (a)  The outline of coverage shall:
19      (1)  Be a free-standing document, using at least ten-point
20           type;
21      (2)  Not contain material that is advertising in nature; and
22      (3)  Emphasized material shall be done through underscoring,
23           capitalization, or other means that provides prominence
24           equivalent to underscoring or capitalization.

Page 40                                                    
                                     H.B. NO.           169
                                                        H.D. 2

 1      (b)  Every outline of coverage shall be substantially
 2 similar to the Outline of Coverage in the NAIC Long-Term Care
 3 Insurance Model Regulations July 1998 or as approved by the
 4 commissioner.
 5      431:10A-HH   Suitability-group and individual policies.
 6 (a)  This section shall not apply to life insurance policies that
 7 accelerate benefits for long-term care.
 8      (b)  Every issuer marketing long-term care insurance shall:
 9      (1)  Develop and use suitability standards to determine
10           whether the purchase or replacement of long-term care
11           insurance is appropriate for the needs of the
12           applicant;
13      (2)  Train its agents in the use of its suitability
14           standards; and
15      (3)  Maintain a copy of its suitability standards and make
16           them available for inspection upon request by the
17           commissioner.
18      (c)  The issuer and agent shall develop procedures that are
19 designed to determine whether the applicant meet the standards
20 developed by the issuer and shall consider the following:
21      (1)  The ability to pay for the proposed coverage and other
22           pertinent financial information related to the purchase
23           of the coverage;
24      (2)  The applicant's goals or needs with respect to long-

Page 41                                                    
                                     H.B. NO.           169
                                                        H.D. 2

 1           term care and the advantages or disadvantages of
 2           insurance to meet these goals or needs; and
 3      (3)  The values, benefits, and costs of the applicant's
 4           existing insurance, if any, when compared to the
 5           values, benefits, and costs of the recommended purchase
 6           or replacement.
 7 The issuer or agent shall make reasonable efforts to obtain the
 8 information.  The efforts shall include presentation to the
 9 applicant, at or prior to application, the "Long-Term Care
10 Insurance Personal Worksheet."  The worksheet shall contain at a
11 minimum information contained in Appendix B and C of the NAIC
12 Long-Term Care Insurance Model Regulations July 1998, and shall
13 be set out in at least twelve point type.  A copy of the issuer's
14 personal worksheet shall be filed with the commissioner.
15      (b)  Nothing in this section shall restrict an issuer from
16 request more information to comply with this section.
17      (c)  A completed worksheet shall be returned to the issuer
18 prior to the issuer's consideration of the applicant for
19 coverage, except the personal worksheet need not be returned for
20 sales of employer group long-term care insurance to employees and
21 their dependents.
22      (d)  Any information contained in the personal worksheet
23 shall not be sold or disseminated outside of the issuer's company
24 or agency.
25      (e)  The issuer shall use the suitability standards it has

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                                     H.B. NO.           169
                                                        H.D. 2

 1 developed pursuant to this section in determining the
 2 appropriateness of long-term care insurance coverage for a
 3 particular applicant.  The agent of the issuer shall use the
 4 suitability standards developed by the issuer.
 5      (f)  If the issuer determines that the applicant does not
 6 meet its financial suitability standards, or if the applicant has
 7 declined to provide the information, the issuer may reject the
 8 application.  In the alternative, the issuer shall send the
 9 applicant a letter similar to the NAIC Long-Term Care Insurance
10 Model Regulations July 1998, Appendix D.  If the applicant has
11 declined to provide financial information, the issuer may use
12 some other method to verify the applicant's intent.  Either the
13 applicant's returned letter or a record of the alternate method
14 of verification shall be made part of the applicant's file.
15      (g)  The issue shall report annually to the commissioner the
16 total number of applications received from residents of this
17 State, the number of those who declined to provide information on
18 a personal worksheet, the number of applicants who did not meet
19 the suitability standards, and the number of those who chose to
20 confirm after receiving the suitability letter."
21                             PART VI.
23      SECTION 7.  Chapter 431:10A, Hawaii Revised Statutes, is
24 amended by adding three new sections to Part V to be

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                                     H.B. NO.           169
                                                        H.D. 2

 1 appropriately designated and to read as follows:
 2      431:10A-II    Filing requirements-group policies.  An
 3 insurer offering long-term care insurance destined for use or
 4 application in this State shall file with the commissioner
 5 evidence that the group policy or certificate thereunder has been
 6 approved by a state having statutory or regulatory long-term care
 7 insurance requirements substantially similar to this chapter.
 8      431:10A-JJ    Reserve standards; life insurance policies or
 9 riders-group and individual policies .  (a)  If long-term care
10 benefits are provided through the acceleration of benefits under
11 a group or individual life policy or rider, the policy reserves
12 for the benefits shall be determined in accordance with section
13 431:5-307.  Claim reserves shall also be established in the case
14 where the policy or rider is in claim status.
15      (b)  Reserves for policies or riders subject to this section
16 shall be based on the multiple decrement model utilizing all
17 relevant decrements except for voluntary termination rates.
18 Single decrement approximations are acceptable if the calculation
19 produces essentially similar reserves, if the reserve is clearly
20 more conservative, or if the reserve is immaterial.  The
21 calculations may take into account the reduction in life
22 insurance benefits due to the payment of long-term care benefits;
23 provided that the reserves for the long-term care benefit and the
24 life insurance benefit shall not be less than the reserves for

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                                     H.B. NO.           169
                                                        H.D. 2

 1 the life insurance benefit assuming no long-term care benefit.
 2      (c)  In the development and calculation of reserves for
 3 policies and riders subject to this subsection, due regard shall
 4 be given to applicable policy provisions, marketing methods,
 5 administrative procedures, and all other considerations which
 6 have an impact on projected claim costs, including but not
 7 limited to the following:
 8      (1)  Definition of insured events;
 9      (2)  Covered long-term care facilities;
10      (3)  Existence of home convalescence care coverage;
11      (4)  Definition of facilities;
12      (5)  Existence or absence of barriers to eligibility;
13      (6)  Premium waiver provision;
14      (7)  Renewability;
15      (8)  Ability to raise premiums;
16      (9)  Marketing method;
17     (10)  Underwriting procedures;
18     (11)  Claims adjustment procedures;
19     (12)  Waiting period;
20     (13)  Maximum benefit;
21     (14)  Availability of eligible facilities;
22     (15)  Margins in claim costs;
23     (16)  Optional nature of benefit;
24     (17)  Delay in eligibility requirements;

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                                     H.B. NO.           169
                                                        H.D. 2

 1     (18)  Inflation protection; and
 2     (19)  Guaranteed insurability option.
 3      (c)  Any applicable valuation morbidity table shall be
 4 certified as appropriate as a statutory valuation table by a
 5 member of the American Academy of Actuaries.
 6      431:10A-KK    Reserve standards; insurance other than life-
 7 group and individual policies.  When long-term care benefits are
 8 provided through insurance other than life insurance, the
 9 reserves shall be determined by a table certified as appropriate
10 as a statutory valuation table by a member of the American
11 Academy of Actuaries and approved by the commissioner."
12      SECTION 8.  Section 431:10A-521 is amended by adding the
13 following definitions to read as follows:
14      ""Activities of daily living" means at least bathing,
15 continence, dressing, eating, toileting and transferring.
16      "Acute condition" means that the individual is medically
17 unstable.  This individual requires frequent monitoring by
18 medical professionals in order to maintain the individual's
19 health.
20      "Adult day care" means a program for six or more
21 individuals, of social and health-related services provided
22 during the day in a community group setting for the purpose of
23 supporting frail, impaired elderly or other disabled adults who
24 can benefit from care in a group setting outside the home.

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                                     H.B. NO.           169
                                                        H.D. 2

 1      "Bathing" means washing oneself by sponge bath, in a tub or
 2 shower, and includes getting in or out of the tub or shower.
 3      "Cognitive impairment" means a deficiency in a person's
 4 short or long-term memory, orientation as to person, place and
 5 time, deductive or abstract reasoning, or judgment as it relates
 6 to safety awareness.
 7      "Continence" means the ability to maintain control of bowel
 8 and bladder function, or when unable to maintain control of bowel
 9 or bladder function, the ability to perform associated personal
10 hygiene, including caring for catheter or colostomy bag.
11      "Dressing" means putting on and taking of all items of
12 clothing and any necessary braces, fasteners, or artificial
13 limbs.
14      "Eating" means feeding oneself by getting food into the body
15 from a receptacle including a plate, cup, or table. or by a
16 feeding tube or intravenously.
17      "Hands-on assistance" means physical assistance, whether
18 minimal, moderate, or maximal, without which the individual would
19 not be able to perform the activity of daily living.
20      "HIPAA" means the Health Insurance Portability and
21 Accountability Act of 1996, P.L. 104-96.
22      "Home health care services" means medical and nonmedical
23 services, provided to ill, disabled, or infirm persons in their
24 residences.  These services may include homemaker services,

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                                                        H.D. 2

 1 assistance with activities of daily living, and respite care
 2 services.
 3      "Mental or nervous disorder" means neurosis, psychoneurosis,
 4 psychopathy, psychosis, or mental or emotional disease or
 5 disorder, and shall not be defined beyond these terms.
 6      "NAIC" means the National Association of Insurance
 7 Commissioners.
 8      "Personal care" means the provision of hands-on services to
 9 assist an individual with activities of daily living.
10      "Skilled nursing care," "intermediate care," "personal
11 care," "home care," and other services shall be defined in
12 relation to the level of skill required, the nature of the care
13 and the setting in which care must be delivered.
14      "Toileting" means getting to and from the toilet, getting on
15 and off the toilet, and performing associated personal hygiene.
16      "Transferring" means moving into or out of a bed, chair or
17 wheelchair."
18      SECTION 9.  Section 431-10A-523, Hawaii Revised Statutes, is
19 amended to read as follows:
20      "[[]431:10A-523[]]  Disclosure standards[.] ; rules.  The
21 commissioner may adopt rules under chapter 91 that include
22 standards for full and fair disclosure setting forth the manner,
23 content, and required disclosures for the sale of long-term care
24 insurance policies, terms of renewability, initial and subsequent

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                                     H.B. NO.           169
                                                        H.D. 2

 1 conditions of eligibility, nonduplication of coverage provisions,
 2 coverage of dependents, preexisting conditions, termination of
 3 insurance, probationary periods, limitations, exceptions,
 4 reductions, elimination periods, requirements for replacement,
 5 recurrent conditions, and definitions of terms[.] ; provided that
 6 the rules are not inconsistent with the provisions of sections
 7 -      ."
 8      SECTION 10.  Section 431:10A-526, Hawaii Revised Statutes,
 9 is amended to read as follows:
10      "[[]431:10A-526[]]  Loss ratio standards[.]; factors;
11 commissioner approval.  (a)  The commissioner may adopt rules
12 [establishing]  to further clarify loss ratio standards for long-
13 term care insurance policies [provided that a specific reference
14 to long-term care insurance policies is contained in the rules].
15 For all policies, the loss ratio standards shall provide for
16 reasonable benefits in relation to premiums.  Benefits shall be
17 deemed reasonable in relation to premiums if the expected loss
18 ratio is at least sixty per cent, calculated in a manner that
19 provides for adequate reserving of the long-term care insurance
20 risk.  In establishing loss ratio standards, the commissioner
21 shall consider all relevant factors, including but not limited
22 to:
23      (1)  Statistical credibility of incurred claims experience
24           and earned premiums;

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                                                        H.D. 2

 1      (2)  The period for which rates are computed to provide
 2           coverage;
 3      (3)  Experienced and projected trends;
 4      (4)  Concentration of experience within early policy
 5           duration;
 6      (5)  Expected claim fluctuation;
 7      (6)  Experience regarding refunds, adjustments, or
 8           dividends;
 9      (7)  Renewability features;
10      (8)  All appropriate expense factors;
11      (9)  Interest;
12     (10)  Experimental nature of the coverage, if applicable;
13     (11)  Policy reserves; and
14     (12)  Mix of business by risk classification, if applicable;
15     (13)  Product features, including but not limited to,
16           elimination periods, co-payments, high deductibles, and
17           high maximum limits.
18      (b)  Subsection (a) shall not apply to life insurance
19 policies that accelerate benefits for long-term care.  A life
20 insurance policy that funds long-term care benefits entirely by
21 accelerating the death benefit shall be considered to provide
22 reasonable benefits in relation to premiums paid, if the policy
23 complies with all of the following provisions:
24      (1)  The interest credited internally to determine cash

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                                     H.B. NO.           169
                                                        H.D. 2

 1           value accumulations, including long-term care, if any,
 2           are guaranteed not to be less than the minimum
 3           guaranteed interest rate for cash value accumulations
 4           without long-term care set forth in the policy;
 5      (2)  The portion of the policy that provides life insurance
 6           benefits meets the nonforfeiture requirements for life
 7           insurance;
 8      (3)  The policy meets the disclosure requirements meets the
 9           requirements of sections   ,    , and   ;
10      (4)  Any policy illustration that meets the applicable
11           requirements of [policy illustration];
12      (5)  An actuarial memorandum is filed with the insurance
13           division that includes:
14           (A)  A description of the basis on which the long-term
15                care rates were determined;
16           (B)  A description of the basis for the reserves;
17           (C)  A summary of the type of policy, benefits,
18                renewability, general marketing method, and limits
19                on ages of issuance;
20           (D)  A description and a table of each actuarial
21                assumption used.  For expenses, an insurer shall
22                include per cent of premium dollars per policy and
23                dollars per unit of benefits, if any;
24           (E)  A description and a table of the anticipated

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                                     H.B. NO.           169
                                                        H.D. 2

 1                policy reserves and additional reserves to be held
 2                in each future year for active lives;
 3           (F)  The estimated average annual premium per policy
 4                and the average issue age;
 5           (G)  A statement as to whether underwriting is
 6                performed at the time of application and shall
 7                indicate whether underwriting is used, and if
 8                used, shall include a description of the type or
 9                types of underwriting used; provided that in cases
10                involving a group policy, the statement shall
11                indicate whether the enrollee or dependent will be
12                underwritten and when underwriting occurs; and
13           (H)  A description of the effect of long-term care
14                policy provision on the required premiums,
15                nonforfeiture values and reserves on the
16                underlying life insurance policy, both for active
17                lives and those in long-term care claim status."
18      SECTION 11.  Section 432:1-102, Hawaii Revised Statutes, is
19 amended by amending subsection (a) to read as follows:
20      "(a)  Part III and part V of article 10A of chapter 431
21 shall apply to nonprofit medical indemnity or hospital service
22 associations.  Such associations shall be exempt from the
23 provisions of part I of article 10A; provided that such exemption
24 is in compliance with applicable federal statutes and
25 regulations."

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                                     H.B. NO.           169
                                                        H.D. 2

 1      SECTION 12.  Act 339, Session Laws of Hawaii 1997, is
 2 amended by amending section 4, is amended to read as follows:
 3      "SECTION 4.  The joint legislative committee shall submit
 4 [a] an interim report of its findings and recommendations to the
 5 legislature by December 1, 1998[.], and a final report by
 6 December 30, 1999.  The joint legislative committee shall cease
 7 to exist on June 30, [1999.] 2000."
 8                             PART VII.
 9                        REGULATORY FUNDING
10      SECTION 13.  There is appropriated out of the general
11 revenues of the State of Hawaii the sum of $         , or so much
12 thereof as may be necessary for fiscal year 1999-2000, for the
13 insurance division to hire a qualified long-term care insurance
14 actuary and to increase its staff to enable it to adequately
15 review long-term care insurance filings.
16      SECTION 14.  The sum appropriated under section 8 shall be
17 expended by the department of commerce and consumer affairs for
18 the purposes of this Part.
19                            PART VIII.
20                          ACTUARIAL STUDY
21      SECTION 15.  The legislature finds that comprehensive
22 information and analysis is needed by the State to determine an
23 appropriate, adequate, and affordable universal long-term care
24 financing program, including but not limited to:

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                                     H.B. NO.           169
                                                        H.D. 2

 1      (1)  Reliance upon private insurance, creation of a public
 2           trust fund, or creation of a quasi-public state entity,
 3           or a combination of these; and
 4      (2)  Funding mechanisms, such as tax or insurance premiums,
 5           and the amounts thereof.
 6      The legislature believes that a comprehensive actuarial
 7 study and analysis should, include marketing data and mechanisms,
 8 of the entire population of the State, including private sector
 9 employees, government employees, all age groups, and the
10 disabled, for purposes of making recommendations to structure
11 such a program.  The actuarial study and analysis also should
12 consider the report of the joint legislative committee on long-
13 term care, dated December 1, 1998, and the report "Financing Long
14 Term Care, A Report to the Hawaii State Legislature" of the
15 Executive Office on Aging dated January 1991, and its related
16 actuarial report, in making the actuaries' findings and
17 recommendations.
18      The legislature further believes that the governor shall
19 expend $150,000 to commission the actuarial study from funds
20 appropriated to the Hawaii Public Employees Health Fund for
21 fiscal year 1998-1999 (Act 116, Session Laws of Hawaii 1998,
22 BUF 142) and other available funds under the jurisdiction of the
23 insurance division.  If the governor does not expend those funds
24 or does not initiate the actuarial study, the legislature

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                                     H.B. NO.           169
                                                        H.D. 2

 1 recommends that the actuarial study be commissioned by the joint
 2 legislative committee on long-term care.
 3      SECTION 16.  The actuarial report under section 10 shall be
 4 submitted not later than November 1, 1999, to the office of the
 5 governor, the senate, and the house of representatives.  The
 6 joint legislative committee on long-term care, established by Act
 7 339, Session Laws of Hawaii 1997, shall conduct hearings on the
 8 actuarial report in time for a legislative package of proposals
 9 to be submitted in the 2000 session.
10      SECTION 17.  There is appropriated out of the general
11 revenues of the State of Hawaii the sum of $300,000, or so much
12 there of as may be necessary for fiscal year 1999-2000, to hire
13 or contract with a qualified long-term care actuarial firm for
14 the purposes of commissioning a comprehensive actuarial study and
15 analysis.
16      SECTION 18.  The sum appropriated under section 12 shall be
17 expended by the joint legislative committee on long-term care,
18 established by Act 339, Session Laws of Hawaii 1997, if the
19 office of the governor does not expend those funds described
20 under section 10, or so much thereof as necessary, or otherwise
21 does not initiate a comprehensive actuarial study and analysis on
22 long-term care, by June 30, 1999.
23                             PART IX.

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                                     H.B. NO.           169
                                                        H.D. 2

 1      SECTION 19.  There is appropriated out of the general
 2 revenues of the State of Hawaii the following sums, or so much
 3 thereof as may be necessary, for fiscal year 1999-2000, for
 4 expenses related to the joint legislative committee on long-term
 5 care:
 6      House of Representatives          $30,000
 7      Senate                            $30,000
 8      The sums appropriated shall be expended by the house of
 9 representatives and the senate respectively, for the purposes of
10 conducting statewide public briefings on the findings and
11 recommendations of the comprehensive actuarial study undertaken
12 pursuant to this Act.
13      SECTION 20.  Statutory material to be repealed is bracketed.
14 New statutory material is underscored.
15      SECTION 21.  The revisor of statutes is authorized by this
16 Act to designate numerical section references in lieu of
17 alphabetical references as contained in this Act and shall
18 accordingly designate the internal section references contained
19 in this Act. 
20      SECTION 21.  This Act shall take effect upon its approval;
21 provided that sections  ,   , and   shall take effect on July 1,
22 1999.