REPORT TITLE:
Long-Term Care Insurance


DESCRIPTION:
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.  (SB131 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        131
THE SENATE                              S.B. NO.           S.D. 3
TWENTIETH LEGISLATURE, 1999                                H.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO LONG-TERM CARE.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 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 workplace and that the State should
 
15 encourage the offering of long-term care insurance to provide a
 
16 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
 

 
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 1 employers to offer long-term care coverage, and to increase state
 
 2 regulation of long-term care insurance.
 
 3                              PART II
 
 4                           STATE POLICY
 
 5      SECTION 2.  Chapter 431:10A, Hawaii Revised Statutes, is
 
 6 amended by adding a new section to part V to be appropriately
 
 7 designated and to read as follows:
 
 8      431:10A-      Employers and others to offer long-term care
 
 9 insurance policies; employer contributions.  (a)  No later than
 
10 January 1, 2000, every employer, labor organization, or other
 
11 entity specified under the definition of "group long-term care
 
12 insurance", shall offer long-term care insurance policies
 
13 approved by the insurance commissioner under section 431:10A-526
 
14 to its employees or members; provided that employees or members
 
15 shall not be required to purchase a long-term care insurance
 
16 policy.
 
17      (b)  For purposes of subsection (a), all insurers subject to
 
18 this part shall make available a group long-term care insurance
 
19 policy to every employer, labor organization, or other entity
 
20 specified under the definition of "group long-term care
 
21 insurance", if a policy is available.  
 

 
 
 
 
 
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 1      (c)  In the absence of an agreement between an employer and
 
 2 an employee or member, an employer, labor organization, or other
 
 3 entity specified in subsection (a) shall not be required to
 
 4 contribute to the payment of premiums for a policy purchased
 
 5 under subsection (a).  Every agreement shall specify the
 
 6 percentage of the premium to be contributed.
 
 7      (d)  If an employee purchases a policy under subsection (a),
 
 8 the employer shall not be required to withhold the employee's
 
 9 premium from wages, unless the employer agrees to contribute to
 
10 paying the premium under subsection (c).
 
11      (e)  An employee's or member's spouse or reciprocal
 
12 beneficiary, as well as their parents and grandparents, including
 
13 in-laws.
 
14      SECTION 3.  Section 87-23.5, Hawaii Revised Statutes, is
 
15 amended by amending subsections (a) and (b) to read as follows:
 
16      "(a)  The board [of trustees] shall determine the benefits
 
17 of a long-term care benefits plan for employee-beneficiaries,
 
18 their spouses or reciprocal beneficiaries, their parents and
 
19 grandparents, including in-laws, and qualified-beneficiaries.
 
20 The plan shall comply with [the provisions of article 10A, part
 
21 V, of chapter 431, upon initial plan implementation only.] part V
 
22 of chapter 431:10A.
 

 
 
 
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 1      (b)  Notwithstanding any other law to the contrary, [such]
 
 2 benefits shall be available only to employee-beneficiaries, their
 
 3 spouses or reciprocal beneficiaries, as well as their parents and
 
 4 grandparents, including in-laws, and qualified-beneficiaries who
 
 5 enroll between the ages of twenty and eighty-five.  Eligible
 
 6 persons must comply with the plan's age, enrollment, medical
 
 7 underwriting, and contribution requirements."
 
 8                             PART III
 
 9                     HIPAA CONSUMER PROTECTION
 
10      SECTION 4.  Chapter 431:10A, Hawaii Revised Statutes, is
 
11 amended by adding sixteen new sections to part V to be
 
12 appropriately designated and to read as follows:
 
13      "431:10A-A  Policy practices and provision; renewability-
 
14 individual policies.  (a)  The terms guaranteed renewable and
 
15 noncancellable shall not be used in any individual long-term care
 
16 insurance policy without further explanatory language in
 
17 accordance with section        .
 
18      (b)  A policy issued to an individual shall not contain
 
19 renewal provisions other than guaranteed renewable or
 
20 noncancellable.
 
21      (c)  As used in this section, the term "guaranteed
 
22 renewable" means the insured has a right to continue the long-
 

 
 
 
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 1 term care insurance in force by the timely payment of premiums
 
 2 and the insurer has no unilateral right to make any change in any
 
 3 provision of the policy or rider while the insurance is in force,
 
 4 and cannot decline to renew, except that rates may be revised by
 
 5 the insurer on a class basis.
 
 6      (d)  As used in this section, the term "noncancellable"
 
 7 means the insured has the right to continue the long-term care
 
 8 insurance in force by the timely payment of premiums during which
 
 9 period the insurer has no right to unilaterally make any change
 
10 in any provision of the insurance or premium rate.
 
11      431:10A-B  Policy practices and provision; limitations and
 
12 exclusions-group and individual policies.  (a)  A policy may not
 
13 be delivered or issued for delivery in this State as long-term
 
14 care insurance if the policy limits or excludes coverage by type
 
15 of illness, treatment, medical condition or accident, except as
 
16 follows:
 
17      (1)  Preexisting conditions;
 
18      (2)  Mental or nervous disorders; provided that coverage for
 
19           Alzheimer's disease shall not be limited or excluded;
 
20      (3)  Alcoholism or drug addiction;
 
21      (4)  Illness, treatment, or medical condition arising out
 
22           of:
 

 
 
 
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 1           (A)  War or act of war, whether declared or undeclared;
 
 2           (B)  Participation in a felony, riot, or insurrection;
 
 3           (C)  Service in the armed forces or units auxiliary
 
 4                thereto;
 
 5           (D)  Suicide, whether sane or insane, attempted
 
 6                suicide, or intentionally self-inflicted injury;
 
 7           or
 
 8      (5)  Treatment provided in a government facility, unless
 
 9           required by law, services for which benefits are
 
10           available under medicare or other governmental program,
 
11           except medicaid, any state or federal workers'
 
12           compensation, employer's liability or occupational
 
13           disease law, or any motor vehicle insurance law,
 
14           services provided by a member of the covered person's
 
15           immediate family, and services for which no charge is
 
16           normally made in the absence of insurance.
 
17      (b)  This section is not intended to prohibit exclusions and
 
18 limitations by type of provider or territorial limitations.
 
19      431:10A-C  Policy practices and provision; extension of
 
20 benefits-group and individual policies.  Termination of long-term
 
21 care insurance shall be without prejudice to any benefits payable
 
22 for institutionalization if the institutionalization began while
 

 
 
 
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 1 the long-term care insurance was in force and continues without
 
 2 interruption after termination.  The extension of benefits beyond
 
 3 the period the long-term care insurance was in force may be
 
 4 limited to the duration of the benefit period, if any, or to
 
 5 payment of the maximum benefits and may be subject to any policy
 
 6 waiting period, and all other applicable provisions of the
 
 7 policy.
 
 8      431:10A-D  Policy practices and provision; continuation or
 
 9 conversion-group policies.  (a)  All group long-term care
 
10 insurance issued in this State shall provide covered individuals
 
11 with a basis for continuation or conversion of coverage.
 
12      (b)  A policy provision that provides a basis for
 
13 continuation of coverage is one that maintains coverage under the
 
14 existing group policy when the coverage would otherwise terminate
 
15 and that is subject only to continued timely payment when due.
 
16 Group policies that restrict provision of benefits and services
 
17 to, or contain incentives to use certain providers or facilities
 
18 may provide continuation of benefits that are substantially
 
19 equivalent to the benefits of the existing group policy.  The
 
20 commissioner shall make a determination as to the substantial
 
21 equivalency of benefits and, in doing so, shall take into
 
22 consideration the differences between managed care and non-
 

 
 
 
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 1 managed care plans, including provider system arrangements or
 
 2 networks, service availability, benefit levels, and
 
 3 administrative complexity.
 
 4      (c)  A policy provision that provides a basis for conversion
 
 5 of coverage is one in which an individual, whose coverage under
 
 6 the group policy would otherwise terminate, or has been
 
 7 terminated for any reason, including discontinuance of the group
 
 8 policy in its entirety or with respect to an insured class, is
 
 9 entitled to the issuance of a converted policy by the insurer
 
10 under whose group policy the individual is covered, without
 
11 evidence of insurability; provided that the individual has been
 
12 continuously insured under the group policy or any group policy
 
13 that it replaced for at least six months prior to termination.
 
14      (d)  As used in this section, a "converted policy" means an
 
15 individual policy of long-term care insurance providing benefits
 
16 identical to or benefits determined by the commissioner to be
 
17 substantially equivalent to or in excess of those provided under
 
18 the group policy from which conversion is made.  If the group
 
19 policy from which conversion is made restricts provision of
 
20 benefits and services to, or contains incentives to use certain
 
21 providers or facilities, the commissioner, in making a
 
22 determination as to substantial equivalency of benefits, shall
 

 
 
 
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 1 take into consideration the differences between managed care and
 
 2 nonmanaged care plans, including provider system arrangements or
 
 3 networks, service availability, benefit levels, and
 
 4 administrative complexity.
 
 5      (e)  The insured shall make written application for the
 
 6 converted policy.  The first premium, if any, shall be due and
 
 7 paid as directed by the insurer no later that thirty-one days
 
 8 after termination of coverage under the group policy.  The
 
 9 converted policy shall be issued effective on the day following
 
10 the termination of coverage under the group policy, and shall be
 
11 renewable annually.
 
12      (f)  The premium for the converted policy shall be
 
13 calculated on the basis of the insured's age at inception of
 
14 coverage under the group policy from which conversion is made;
 
15 provided that where the group policy from which conversion is
 
16 made is a replacement to a previous group policy, the premium
 
17 shall be calculated on the basis of the insured's age at
 
18 inception of the replacement group policy.
 
19      (g)  Continuation of coverage or issuance of a converted
 
20 policy shall be mandatory except in the following circumstances:
 
21      (1)  Termination of group coverage results from an
 
22           individual's failure to make any required payment of
 
23           premium or contribution when due; or
 

 
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 1      (2)  The termination of group coverage is replaced by
 
 2           another group coverage effective on the day following
 
 3           the termination of coverage and all the following
 
 4           requirements are met:
 
 5           (A)  Replacement occurs no later than thirty-one days
 
 6                after termination;
 
 7           (B)  The replacement group coverage provides benefits
 
 8                that are identical or substantially equivalent to,
 
 9                or in excess of those provided by the previous
 
10                group coverage; and
 
11           (C)  The premium for the new group coverage is
 
12                calculated in a manner consistent with subsection
 
13                (f).
 
14      (h)  Notwithstanding any other provision of this section, a
 
15 converted policy issued to an individual who at the time of
 
16 conversion is covered by another long-term care insurance policy
 
17 that provides benefits on the basis of incurred expenses, may
 
18 contain a provision that results in a reduction of benefits
 
19 payable if the benefits provided under the additional coverage,
 
20 together with the full benefits provided by the converted policy,
 
21 would result in payment of more than one hundred per cent of
 
22 incurred expenses.  The provision shall only be included in the
 

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

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

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

 
 
 
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 1 the notice requirement shall be extended to sixty days after the
 
 2 insured is no longer on a payroll or pension deduction plan.  The
 
 3 insurer shall clearly indicate whether payment is being made
 
 4 through a payroll or pension deduction plan.
 
 5      431:10A-G  Lapse or termination for nonpayment of premium-
 
 6 group and individual policies.  No policy or certificate shall
 
 7 lapse or terminate for nonpayment of premiums unless the insurer,
 
 8 at least thirty days before the effective date of the lapse or
 
 9 termination, has given notice to the insured and to those persons
 
10 designated by the insured to receive notice at the address
 
11 provided by the insured for purposes of receiving notice of lapse
 
12 or termination.  Notice shall be given by first class United
 
13 States mail, postage prepaid; provided that the notice shall not
 
14 be given until the thirty or sixty day requirements under section
 
15        .  Notice shall be deemed to have been given as of five
 
16 days after the date of mailing.
 
17      431:10A-H  Reinstatement-group and individual policies.
 
18 (a)  A long-term care insurance policy or certificate shall
 
19 include a provision that provides for reinstatement of coverage,
 
20 in the event of lapse if the insurer is provided proof that the
 
21 insured was cognitively impaired or had a loss of functional
 
22 capacity before the grace period contained in the expired policy.
 

 
 
 
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 1 The option of reinstatement shall be available to the insured if
 
 2 requested within five months after termination and shall allow
 
 3 for the collection of past due premiums, where appropriate.  The
 
 4 standard of proof of cognitive impairment or loss of functional
 
 5 capacity shall not be more stringent than the benefit eligibility
 
 6 criteria for cognitive impairment or the loss of functional
 
 7 capacity contained in the policy or certificate.
 
 8      (b)  This section shall be in conformance with P.L. 104-191
 
 9 or any regulations relating thereto.
 
10      431:10A-I  Disclosure standards; renewability-individual
 
11 policies.  All individual long-term care insurance policies shall
 
12 contain a renewability provision.  The provision shall be
 
13 appropriately captioned, shall appear on the first page of the
 
14 policy, and shall clearly state the duration of renewability and
 
15 the duration of the term of coverage for which the policy is
 
16 issued and for which it may be renewed; provided that this
 
17 section shall not apply to policies that are part of or combined
 
18 with a life insurance policy and do not contain a nonrenewability
 
19 provision, and under which the right to nonrenew is reserved
 
20 solely to the policyholder.
 
21      431:10A-J Disclosure standards; riders and endorsements-
 
22 individual policies.  (a)  All riders or endorsements added to an
 

 
 
 
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 1 individual long-term care insurance policy after the date of
 
 2 issue or upon reinstatement or renewal, that reduce or eliminate
 
 3 benefits or coverage in the policy shall require the insured to
 
 4 sign a written acceptance.  This subsection shall not apply if
 
 5 the insured makes a written request to the insurer for a rider or
 
 6 endorsement.
 
 7      (b)  After the date of issuance, any rider or endorsement
 
 8 that increases benefits or coverage with a concomitant increase
 
 9 in premium during the policy term shall be agreed to in writing
 
10 by the insured, unless the increase in benefits or coverage is
 
11 required by law.
 
12      (c)  If a separate additional premium is charged for
 
13 benefits or coverage provided in connection with a rider or
 
14 endorsement, the premium charge shall be set forth in the policy,
 
15 rider, or endorsement.
 
16      431:10A-K  Disclosure standards; payment of benefits-group
 
17 and individual policies.  A long-term care insurance policy that
 
18 provide for payment of benefits based on standards described as
 
19 "usual and customary", "reasonable and customary", or similar
 
20 words or phrases, shall include a definition of these terms and
 
21 an explanation of the terms in its accompanying outline of
 
22 coverage.
 

 
 
 
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 1      431:10A-L  Disclosure standards; preexisting conditions
 
 2 limitation-group and individual policies.  If a long-term care
 
 3 insurance policy or certificate contains any limitations with
 
 4 respect to preexisting conditions, the limitations shall appear
 
 5 as a separate paragraph of the policy or certificate and shall be
 
 6 labeled as "Preexisting Condition Limitations."
 
 7      431:10A-M  Disclosure standards; other limitations and
 
 8 conditions on eligibility for benefits-group and individual
 
 9 policies.  A long-term care insurance policy or certificate
 
10 containing any limitations or conditions for eligibility other
 
11 than those allowed in sections     and      shall set forth a
 
12 description of the limitations or conditions, including any
 
13 required number of days of confinement, in a separate paragraph
 
14 of the policy or certificate and shall be labeled as "Limitations
 
15 or Conditions on Eligibility of Benefits."
 
16      431:10A-N  Prohibition against post claims underwriting-
 
17 group and individual policies.  (a)  All applications for long-
 
18 term care insurance policies or certificates, except a policy or
 
19 certificate which is guaranteed issue, shall contain clear and
 
20 unambiguous questions designed to ascertain the health condition
 
21 of the applicant.
 

 
 
 
 
 
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 1      (b)  If an application for long-term care insurance contains
 
 2 a question that asks whether the applicant has had medication
 
 3 prescribed by a physician, the question shall also ask the
 
 4 applicant to list the medication that has been prescribed.
 
 5      (c)  If the medications listed in the application were known
 
 6 by the insurer, or should have been known at the time of
 
 7 application, to be directly related to a medical condition for
 
 8 which coverage would otherwise be denied, then the policy or
 
 9 certificate issued based on the application shall not be
 
10 rescinded for that condition.
 
11      (d)  A copy of the completed application or enrollment form
 
12 shall be delivered to the insured no later than at the time of
 
13 delivery of the policy or certificate unless it was retained by
 
14 the applicant at the time of application.
 
15      (e)  Every insurer or other entity selling or issuing long-
 
16 term care insurance benefits shall maintain a record of all
 
17 policy or certificate rescissions, both state and countrywide,
 
18 except those that the insured voluntarily rescinded.  Every
 
19 insurer shall annually furnish this information to the insurance
 
20 commissioner in the format prescribed by the National Association
 
21 of Insurance Commissioners in Appendix A.
 

 
 
 
 
 
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 1      431:10A-O  Minimum standards for home health and community
 
 2 care benefits-group and individual policies.  (a)  A long-term
 
 3 care insurance policy or certificate that provides benefits for
 
 4 home health care of community care services shall not limit or
 
 5 exclude benefits by:
 
 6      (1)  Requiring that the insured would otherwise need care in
 
 7           a skilled nursing facility if home health care services
 
 8           were not provided;
 
 9      (2)  Requiring that the insured first or simultaneously
 
10           receive nursing or therapeutic services, or both, in a
 
11           home, community, or institutional setting before home
 
12           health care services are covered;
 
13      (3)  Limiting eligible services provided by registered
 
14           nurses or licensed practical nurses;
 
15      (4)  Requiring that a nurse or therapist provide services
 
16           covered by the policy or certificate that can be
 
17           provided by a home health aide, or other licensed or
 
18           certified home care worker acting within the scope of
 
19           his or her licensure or certification;
 
20      (5)  Excluding coverage for personal care services provided
 
21           by a home health aide;
 

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

 
 
 
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 1      431:10A-P  Requirement to offer inflation protection-group
 
 2 and individual policies.  (a)  No insurer may offer a long-term
 
 3 care insurance policy unless the insurer also offers to the
 
 4 policyholder, in addition to any other inflation protection, the
 
 5 option to purchase a policy that provides for benefit levels to
 
 6 increase with benefit maximums or after reasonable time periods
 
 7 that are meaningful to account for reasonably anticipated
 
 8 increases in the costs of long-term care services covered by the
 
 9 policy.  The insurer shall offer to each policyholder, at the
 
10 time of purchase, the option to purchase a policy with an
 
11 inflation protection feature no less favorable than one of the
 
12 following:
 
13      (1)  Benefit levels are increased annually and increases
 
14           compound annually at a rate not less that five per
 
15           cent;
 
16      (2)  Insured individuals are granted 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
 

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

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

 
 
 
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                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1 inflation protection.  Specifically, I have reviewed Plans
 
 2 , and I REJECT INFLATION PROTECTION."
 
 3                              PART IV
 
 4                   NON-HIPAA CONSUMER PROTECTION
 
 5      SECTION 5.  Chapter 431:10A, Hawaii Revised Statutes, is
 
 6 amended by adding seven new sections to part V to be
 
 7 appropriately designated and to read as follows:
 
 8      "431:10A-Q  Policy practices and provision; premiums
 
 9 charged-group and individual policies.  (a)  The premium charged
 
10 to an insured shall not increase due to either:
 
11      (1)  Increasing age of the insured to ages beyond sixty-
 
12           five; or
 
13      (2)  The duration the insured has been covered under the
 
14           policy.
 
15      (b)  The purchase of additional coverage shall not be
 
16 considered a premium rate increase, except for purposes under
 
17 section      .
 
18      431:10A-R  Disclosure standards; disclosure of tax
 
19 consequences-individual policies.  If a life insurance policy
 
20 provides for an accelerated benefit for long-term care, the
 
21 insured shall make a written disclosure at the time of
 
22 application for the policy or rider and at the time the
 

 
 
 
Page 25                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1 accelerated benefit payment request is submitted that receiving
 
 2 accelerated benefits may have taxable consequences and that
 
 3 assistance should be sought from a personal tax advisor.  The
 
 4 disclosure statement shall be prominently displayed on the first
 
 5 page of the policy or rider and any other related documents.
 
 6      431:10A-S  Disclosure standards; disclosure of tax
 
 7 qualified policy-group and individual policies.  Any long-term
 
 8 care insurance policy or certificate that is intended to be a tax
 
 9 qualified long-term care insurance policy shall contain a written
 
10 disclosure by the insured that the policy is intended to meet the
 
11 tax qualifications for a long-term care insurance policy under
 
12 the tax provisions of the Health Insurance Portability and
 
13 Accountability Act of 1996, P.L. 104-191.  The disclosure shall
 
14 inform the applicant that the policy is intended to be a tax
 
15 qualified policy and that the applicant should consult a personal
 
16 tax advisor before purchasing a tax qualified policy to determine
 
17 the tax consequences to the applicant.
 
18      431:10A-T  Disclosure standards; benefit trigger-group and
 
19 individual policies.  Activities of daily living and cognitive
 
20 impairment shall be used to measure an insured's long-term care
 
21 and shall be described in the policy or certificate in a separate
 
22 paragraph.  The paragraph shall be labeled "Eligibility for the
 

 
 
 
Page 26                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1 Payment of Benefits."  Any additional benefit triggers shall also
 
 2 be explained in this section.  If these benefit triggers differ
 
 3 for different benefits, an explanation of the trigger shall
 
 4 accompany each benefit description.  If an attending physician or
 
 5 other specified person must certify a certain level of functional
 
 6 dependency to be eligible for benefits, this requirement shall
 
 7 also be specified.
 
 8      431:10A-U  Standards for benefit triggers-group and
 
 9 individual policies.  (a)  A long-term care insurance policy
 
10 shall condition the payment of benefits on a determination of the
 
11 insured's ability to perform activities of daily living and on
 
12 cognitive impairment.  Eligibility for the payment of benefits
 
13 shall not be more restrictive than requiring either:
 
14      (1)  A presence of cognitive impairment; or
 
15      (2)  A deficiency in the ability to perform not more than:
 
16           (A)  Two activities of daily living for a period of
 
17                ninety days for tax qualified policies; or
 
18           (B)  Three activities of daily living for nontax
 
19                qualified policies.
 
20      (b)  Activities of daily living shall include at least:
 
21 bathing, continence, dressing, eating, toileting, and
 
22 transferring.  Other activities of daily living may be used to
 

 
 
 
Page 27                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1 trigger covered benefits in addition to those contained in this
 
 2 subsection as long as the additional activities of daily living
 
 3 are described in the policy.
 
 4      (c)  An insurer may use additional provisions for the
 
 5 determination of when benefits are payable under a policy or
 
 6 certificate; provided that these additional provisions do not
 
 7 restrict or replace the requirements under subsections (a) and
 
 8 (b).
 
 9      (d)  For purposes of this section, the determination of a
 
10 deficiency shall not be more restrictive than:
 
11      (1)  Requiring hands-on assistance of another person to
 
12           perform the prescribed activities of daily living; or
 
13      (2)  If the deficiency is due to the presence of a cognitive
 
14           impairment, supervision or verbal cueing by another
 
15           person is needed to protect the insured or others.
 
16      (e)  Assessments of activities of daily living and cognitive
 
17 impairment shall be performed by licensed or certified
 
18 professionals, such as physicians, nurses, or social workers.
 
19      (f)  Every long-term care insurance policy shall include a
 
20 clear description of the process for appealing and resolving
 
21 benefit determinations.
 

 
 
 
 
 
Page 28                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      (g)  This section shall not apply to certificates issued on
 
 2 or after the effective date of this Act if the group long-term
 
 3 care insurance policy was in force on the effective date of this
 
 4 Act.
 
 5      431:10A-V  Prohibition against preexisting conditions and
 
 6 probationary periods in replacement policies and certificates-
 
 7 group and individual policies.  If a long-term care insurance
 
 8 policy or certificate replaces another long-term care insurance
 
 9 policy or certificate, the replacing issuer shall waive any time
 
10 periods applicable to preexisting conditions and probationary
 
11 periods in the new long-term care policy for similar benefits to
 
12 the extent that similar exclusions have been satisfied under the
 
13 original policy.
 
14      431:10A-W  Nonforeiture benefit requirement; group and
 
15 invididual policies.  (a)  No long-term care insurance policy or
 
16 certificate shall delivered or issued in this State unless the
 
17 policyholder or certificateholder has been offered the option of
 
18 purchasing a policy or certificate that include a nonforfeiture
 
19 benefit.  A policy or certificate that includes a nonforfeiture
 
20 benefit shall have coverage elements, eligibility, benefit
 
21 triggers, and benefit length that are the same as a policy or
 
22 certificate issued or delivered without nonforfeiture benefits.
 

 
 
 
Page 29                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      (b)  The offer shall be in writing if the nonforfeiture
 
 2 benefit is not described in the outline of coverage or other
 
 3 materials provided to a prospective applicant.
 
 4      (c)  If the offer is rejected, the insurer shall provide the 
 
 5 contingent benefit upon lapse.  The contingent benefit upon lapse
 
 6 shall be triggered every time an insurer increases the premium
 
 7 rates to a level that results in a cumulative increase of the
 
 8 annual premium equal to or exceeding the percentage of the
 
 9 insured's initial annual premium set forth below based on the
 
10 insured's issue age, and the policy or certificate lapses within
 
11 one hundred twenty days of the due date of the premium so
 
12 increased.  Unless otherwise required, policyholders and
 
13 certificateholders shall be notified at least thirty days prior
 
14 to the due date of the premium reflecting the rate increase as
 
15 established by rules.
 
16      (d)  If a group policyholder elects to make the
 
17 nonforfeiture benefit an option of the certificateholder, a
 
18 certificate shall provide either the nonforfeiture benefit or the
 
19 contingent benefit upon lapse.
 
20      (e)  On or before the effective date of a substantial
 
21 premium increase as defined in subsection (c), the insurer shall:
 

 
 
 
 
 
Page 30                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      (1)  Offer to reduce policy benefits provided by the current
 
 2           coverage without the requirement of additional
 
 3           underwriting so that required premium payments are not
 
 4           increased;
 
 5      (2)  Offer to convert the coverage to a paid-up status with
 
 6           a shortened benefit period in accordance with the terms
 
 7           of subsection (f); provided that this option may be
 
 8           elected at any time during the one hundred twenty day
 
 9           period under subsection (c); and
 
10      (3)  Notify the policyholder and certificateholder that a
 
11           default or lapse at any time during the one hundred
 
12           twenty day period under subsection (c) shall be deemed
 
13           to be the election offer to convert in paragraph (2).
 
14      (f)  Benefits continued as nonforfeiture benefits, including
 
15 contingent benefits upon lapse, shall be as follows:
 
16      (1)  Attained age rating is defined as a schedule of
 
17           premiums starting from the issue date which increases
 
18           with age at least one per cent per year prior to age
 
19           fifty, and at least three per cent per year beyond age
 
20           fifty;
 
21      (2)  Nonforfeiture benefit shall be a shortened benefit
 
22           providing paid-up long-term care insurance coverage
 

 
 
 
Page 31                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

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

 
 
 
 
 
Page 32                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

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

 
Page 33                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1                              PART V
 
 2             HIPAA LONG-TERM CARE INSURER REQUIREMENTS
 
 3      SECTION 6.  Chapter 431:10A, Hawaii Revised Statutes, is
 
 4 amended by adding eight new sections to part V to be
 
 5 appropriately designated and to read as follows:
 
 6      "431:10A-AA  Requirements for application forms and
 
 7 replacement coverage-group and individual policies.
 
 8      (a)  Application forms shall include questions designed to
 
 9 elicit information as to whether, as of the date of application,
 
10 the applicant has another long-term care insurance policy or
 
11 certificate in force or whether a long-term care policy or
 
12 certificate is intended to replace any other accident and
 
13 sickness or long-term care policy or certificate presently in
 
14 force.  A supplementary application or other form to be signed by
 
15 the applicant and agent, except where the coverage is sold
 
16 without an agent, containing the questions may be used.
 
17      (b)  The following questions shall be used to satisfy
 
18 subsection (a):
 
19      (1)  Do you have another long-term care insurance policy or
 
20           certificate in force, including a health care service
 
21           contract or health maintenance organization contract?
 

 
 
 
 
 
Page 34                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      (2)  Did you have another long-term care insurance policy or
 
 2           certificate in force during the last twelve months?
 
 3           (A)  If so, with which company?
 
 4           (B)  If that policy lapsed, when did it lapse?
 
 5      (3)  Are you covered by Medicaid?
 
 6      (4)  Do you intend to replace any of your medical or health
 
 7           insurance coverage with this policy or certificate?
 
 8      (c)  An agent shall list any other health insurance policies
 
 9 that the agent has sold to the applicant and the agent shall list
 
10 the policies sold that are still in force and list policies sold
 
11 in the past five years that are no longer in force.
 
12      (d)  A replacement policy application shall include
 
13 questions as set forth in subsection (b); provided that the
 
14 questions in the replacement policy application may be modified
 
15 only to the extent necessary to elicit information about health
 
16 or long-term care insurance policies other than the group policy
 
17 being replaced; provided that the certificateholder has been
 
18 notified of the replacement.
 
19      (e)  Upon determining that a sale will involve replacement,
 
20 an insurer who does not use direct response solicitation methods
 
21 or its agent shall furnish the applicant, prior to issuance or
 
22 delivery of the individual long-term care insurance policy, a
 

 
 
 
Page 35                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1 notice regarding the replacement of accident and sickness or
 
 2 long-term care insurance coverage.  One copy of the notice shall
 
 3 be retained by the applicant and an additional copy that is
 
 4 signed by the applicant shall be retained by the insurer.
 
 5      (f)  Upon determining that a sale will involve replacement,
 
 6 an insurer who uses direct response solicitation methods or its
 
 7 agent shall deliver a notice regarding replacement of accident
 
 8 and sickness or long-term care insurance coverage upon issuance
 
 9 of the policy.
 
10      (g)  Where replacement is intended, the replacing insurer
 
11 shall notify, in writing, the existing insurer of the proposed
 
12 replacement.  The existing policy shall be identified by the
 
13 insurer, name of the insured, and policy number or address
 
14 including zip code.  Notice shall be made within five working
 
15 days from the date the application is received by the insurer or
 
16 the date the policy is issued, whichever is sooner.
 
17      (h)  Life insurance policies that accelerate benefits for
 
18 long-term care shall comply with this section if the policy being
 
19 replaced is a long-term care insurance policy.  If the policy
 
20 being replaced is a life insurance policy, the insurer shall
 
21 comply with the replacement requirement of NAIC Replacement Life
 
22 and Annuities Model Reg.  If a life insurance policy that
 

 
 
 
Page 36                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1 accelerates benefits for long-term care is replaced by another
 
 2 policy, the replacing insurer shall comply with both the long-
 
 3 term care and the life insurance replacement requirements.
 
 4      (i)  The notice forms required by subsections (e) and (f)
 
 5 shall substantially comply with the forms contained in section 12
 
 6 of the NAIC Long-Term Care Model Regulations July 1998 until the
 
 7 commissioner has adopted forms by rules pursuant to chapter 91.
 
 8      431:10A-BB  Reporting requirements-group and individual
 
 9 policies.  (a)  Every insurer shall maintain records for each
 
10 agent of the agent's amount of replacement sales as a per cent of
 
11 the agent's total annual sales and the amount of lapses of long-
 
12 term care insurance policies sold by the agent as a per cent of
 
13 the agent's total annual sales.
 
14      (b)  Every insurer shall report annually by June 30th of
 
15 each year all of the following:
 
16      (1)  The ten per cent of its agents with the greatest
 
17           percentages of lapses and replacements as measured in
 
18           subsection (a);
 
19      (2)  The number of lapsed policies as a per cent of its
 
20           total annual sales and as a per cent of its total
 
21           number of policies in force as of the end of the
 
22           preceding calendar year;
 

 
 
 
Page 37                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      (3)  The number of replacement policies sold as a per cent
 
 2           of its total annual sales and as a per cent of its
 
 3           total number of policies in force as of the end of the
 
 4           preceding calendar year; and
 
 5      (4)  The number of claims denied during the previous
 
 6           calendar year for each class of business, expressed as
 
 7           a percentage of claims denied; provided that the claims
 
 8           denied shall not include claims denied for failure to
 
 9           meeting the waiting period or because of any applicable
 
10           preexisting condition.
 
11      (c)  For purposes of this section, "report" means on a
 
12 statewide basis.
 
13      431:10A-CC  Filing requirements; advertising-group and
 
14 individual policies.  (a)  Any entity providing long-term care
 
15 insurance or benefits shall provide a copy of any long-term care
 
16 insurance advertisement intended for use in this state whether
 
17 through written or electronic medium to the commissioner.
 
18      (b)  Any advertisement used in this state shall be retained
 
19 by the entity for at least three years from the date the
 
20 advertisement was first used.
 
21      (c)  The commissioner may exempt from the requirements of
 
22 this section any advertising when, in the commissioner's opinion,
 
23 this requirement may not reasonably be applied.
 

 
Page 38                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      431:10A-DD  Standards for marketing-group and individual
 
 2 policies.  (a)  Any entity offering long-term care insurance
 
 3 coverage in this state, directly or through producers, shall:
 
 4      (1)  Establish marketing procedures to assure that any
 
 5           comparison of policies by its agents or other producers
 
 6           will be fair and accurate;
 
 7      (2)  Establish marketing procedures to assure excessive
 
 8           insurance is not sold or issued;
 
 9      (3)  Display prominently by type, stamp, or other
 
10           appropriate means, on the first page of the outline of
 
11           coverage and policy:
 
12           "Notice to buyer: This policy may not cover all of the
 
13           costs associated with long-term care incurred by the
 
14           buyer during the period of coverage.  The buyer is
 
15           advised to review carefully all policy limitations.";
 
16      (4)  Inquire and otherwise make every reasonable effort to
 
17           identify whether a prospective applicant or enrollee
 
18           for long-term care insurance currently has accident and
 
19           sickness or long-term care insurance and the types and
 
20           amounts of any such insurance;
 
21      (5)  Establish auditable procedures for verifying compliance
 
22           with this subsection;
 

 
 
 
Page 39                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      (6)  Provide written notice to the prospective policyholder
 
 2           or certificateholder of a state senior insurance
 
 3           counseling program including the name, address, and
 
 4           telephone number of the program; provided that the
 
 5           program has been approved by the commissioner; and
 
 6      (7)  Use the terms "noncancellable" or "level premium" only
 
 7           when the policy or certificate conforms to section.
 
 8      (b)  In addition to the acts or practices prohibited in
 
 9 article 13 of chapter 431, all of the following are prohibited:
 
10      (1)  Twisting.  Knowingly making any misleading
 
11           representation or incomplete or fraudulent comparison
 
12           of any insurance policies or insurers for the purpose
 
13           of inducing, or tending to induce, any person to lapse,
 
14           forfeit, surrender, terminate, retain, pledge, assign,
 
15           borrow on, or convert any insurance policy or to take
 
16           out a policy of insurance with another insurer;
 
17      (2)  High pressure tactics.  Employing any method of
 
18           marketing having the effect of or tending to induce the
 
19           purchase of insurance through force, fright, threat,
 
20           whether explicit or implied, or undue pressure to
 
21           purchase or recommend purchase of insurance; and
 

 
 
 
 
 
Page 40                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

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

 
 
 
Page 41                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

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

 
 
 
Page 42                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      (1)  At the time of the association's or trust's decision to
 
 2           endorse, engage the services of a person with a
 
 3           expertise in long-term care insurance not affiliated
 
 4           with the insurer to conduct an examination of the
 
 5           policies, including its benefits, features, and rates,
 
 6           and update the examination thereafter in the event of
 
 7           material change;
 
 8      (2)  Actively monitor the marketing efforts of the insurer
 
 9           and its agents; and
 
10      (3)  Review and approve all marketing materials or other
 
11           insurance communications used to promote sales or sent
 
12           to members regarding the policies or certificates.
 
13      (g)  No group long-term care insurance policy or certificate
 
14 may be issued to an association unless the insurer files with the
 
15 commissioner the information required in this section.
 
16      (h)  The insurer shall not issue a long-term care policy or
 
17 certificate to an association or trust, or continue to market the
 
18 policy or certificate unless the insurer certifies annually that
 
19 the association has complied with the requirements of this
 
20 section.
 
21      (i)  Failure to comply with the filing and certification
 
22 requirements of this section constitutes an unfair trade practice
 
23 under article 13 of chapter 431.
 

 
Page 43                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

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

 
Page 44                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 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;
 

 
Page 45                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

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

 
 
 
Page 46                                                    131
                                     S.B. NO.           S.D. 3
                                                        H.D. 1
                                                        

 
 1      (d)  Any information contained in the personal worksheet
 
 2 shall not be sold or disseminated outside of the issuer's company
 
 3 or agency.
 
 4      (e)  The issuer shall use the suitability standards it has
 
 5 developed pursuant to this section in determining the
 
 6 appropriateness of long-term care insurance coverage for a
 
 7 particular applicant.  The agent of the issuer shall use the
 
 8 suitability standards developed by the issuer.
 
 9      (f)  If the issuer determines that the applicant does not
 
10 meet its financial suitability standards, or if the applicant has
 
11 declined to provide the information, the issuer may reject the
 
12 application.  In the alternative, the issuer shall send the
 
13 applicant a letter similar to the NAIC Long-Term Care Insurance
 
14 Model Regulations July 1998, Appendix D.  If the applicant has
 
15 declined to provide financial information, the issuer may use
 
16 some other method to verify the applicant's intent.  Either the
 
17 applicant's returned letter or a record of the alternate method
 
18 of verification shall be made part of the applicant's file.
 
19      (g)  The issuer shall report annually to the commissioner
 
20 the total number of applications received from residents of this
 
21 State, the number of those who declined to provide information on
 
22 a personal worksheet, the number of applicants who did not meet
 

 
 
 
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 1 the suitability standards, and the number of those who chose to
 
 2 confirm after receiving the suitability letter."
 
 3                              PART VI
 
 4           NON-HIPAA LONG-TERM CARE INSURER REQUIREMENTS
 
 5      SECTION 7.  Chapter 431:10A, Hawaii Revised Statutes, is
 
 6 amended by adding three new sections to part V to be
 
 7 appropriately designated and to read as follows:
 
 8      431:10A-II  Filing requirements-group policies.  An insurer
 
 9 offering long-term care insurance destined for use or application
 
10 in this State shall file with the commissioner evidence that the
 
11 group policy or certificate thereunder has been approved by a
 
12 state having statutory or regulatory long-term care insurance
 
13 requirements substantially similar to this chapter.
 
14      431:10A-JJ  Reserve standards; life insurance policies or
 
15 riders-group and individual policies.  (a)  If long-term care
 
16 benefits are provided through the acceleration of benefits under
 
17 a group or individual life policy or rider, the policy reserves
 
18 for the benefits shall be determined in accordance with section
 
19 431:5-307.  Claim reserves shall also be established in the case
 
20 where the policy or rider is in claim status.
 
21      (b)  Reserves for policies or riders subject to this section
 
22 shall be based on the multiple decrement model utilizing all
 

 
 
 
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 1 relevant decrements except for voluntary termination rates.
 
 2 Single decrement approximations are acceptable if the calculation
 
 3 produces essentially similar reserves, if the reserve is clearly
 
 4 more conservative, or if the reserve is immaterial.  The
 
 5 calculations may take into account the reduction in life
 
 6 insurance benefits due to the payment of long-term care benefits;
 
 7 provided that the reserves for the long-term care benefit and the
 
 8 life insurance benefit shall not be less than the reserves for
 
 9 the life insurance benefit assuming no long-term care benefit.
 
10      (c)  In the development and calculation of reserves for
 
11 policies and riders subject to this subsection, due regard shall
 
12 be given to applicable policy provisions, marketing methods,
 
13 administrative procedures, and all other considerations which
 
14 have an impact on projected claim costs, including:
 
15      (1)  Definition of insured events;
 
16      (2)  Covered long-term care facilities;
 
17      (3)  Existence of home convalescence care coverage;
 
18      (4)  Definition of facilities;
 
19      (5)  Existence or absence of barriers to eligibility;
 
20      (6)  Premium waiver provision;
 
21      (7)  Renewability;
 
22      (8)  Ability to raise premiums;
 

 
 
 
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 1      (9)  Marketing method;
 
 2     (10)  Underwriting procedures;
 
 3     (11)  Claims adjustment procedures;
 
 4     (12)  Waiting period;
 
 5     (13)  Maximum benefit;
 
 6     (14)  Availability of eligible facilities;
 
 7     (15)  Margins in claim costs;
 
 8     (16)  Optional nature of benefit;
 
 9     (17)  Delay in eligibility requirements;
 
10     (18)  Inflation protection; and
 
11     (19)  Guaranteed insurability option.
 
12      (c)  Any applicable valuation morbidity table shall be
 
13 certified as appropriate as a statutory valuation table by a
 
14 member of the American Academy of Actuaries.
 
15      431:10A-KK  Reserve standards; insurance other than life-
 
16 group and individual policies.  When long-term care benefits are
 
17 provided through insurance other than life insurance, the
 
18 reserves shall be determined by a table certified as appropriate
 
19 as a statutory valuation table by a member of the American
 
20 Academy of Actuaries and approved by the commissioner."
 
21      SECTION 8.  Section 431:10A-521 is amended by adding the
 
22 following definitions to be appropriately inserted and to read as
 
23 follows:
 

 
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 1      ""Activities of daily living" means at least bathing,
 
 2 continence, dressing, eating, toileting and transferring.
 
 3      "Acute condition" means that the individual is medically
 
 4 unstable.  This individual requires frequent monitoring by
 
 5 medical professionals to maintain the individual's health.
 
 6      "Adult day care" means a program for six or more
 
 7 individuals, of social and health-related services provided
 
 8 during the day in a community group setting for the purpose of
 
 9 supporting frail, impaired elderly or other disabled adults who
 
10 can benefit from care in a group setting outside the home.
 
11      "Bathing" means washing oneself by sponge bath, in a tub or
 
12 shower, and includes getting in or out of the tub or shower.
 
13      "Cognitive impairment" means a deficiency in a person's
 
14 short or long-term memory, orientation as to person, place, and
 
15 time, deductive or abstract reasoning, or judgment as it relates
 
16 to safety awareness.
 
17      "Continence" means the ability to maintain control of bowel
 
18 and bladder function, or when unable to maintain control of bowel
 
19 or bladder function, the ability to perform associated personal
 
20 hygiene, including caring for catheter or colostomy bag.
 
21      "Dressing" means putting on and taking off all items of
 
22 clothing and any necessary braces, fasteners, or artificial
 
23 limbs.
 

 
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 1      "Eating" means feeding oneself by getting food into the body
 
 2 from a receptacle including a plate, cup, or table, or by a
 
 3 feeding tube or intravenously.
 
 4      "Hands-on assistance" means physical assistance, whether
 
 5 minimal, moderate, or maximal, without which the individual would
 
 6 not be able to perform the activity of daily living.
 
 7      "HIPAA" means the Health Insurance Portability and
 
 8 Accountability Act of 1996, P.L. 104-96.
 
 9      "Home health care services" means medical and nonmedical
 
10 services, provided to ill, disabled, or infirm persons in their
 
11 residences.  These services may include homemaker services,
 
12 assistance with activities of daily living, and respite care
 
13 services.
 
14      "Mental or nervous disorder" means neurosis, psychoneurosis,
 
15 psychopathy, psychosis, or mental or emotional disease or
 
16 disorder, and shall not be defined beyond these terms.
 
17      "NAIC" means the National Association of Insurance
 
18 Commissioners.
 
19      "Personal care" means the provision of hands-on services to
 
20 assist an individual with activities of daily living.
 
21      "Skilled nursing care," "intermediate care," "personal
 
22 care," "home care," and other services shall be defined in
 

 
 
 
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 1 relation to the level of skill required, the nature of the care,
 
 2 and the setting in which care must be delivered.
 
 3      "Toileting" means getting to and from the toilet, getting on
 
 4 and off the toilet, and performing associated personal hygiene.
 
 5      "Transferring" means moving into or out of a bed, chair, or
 
 6 wheelchair."
 
 7      SECTION 9.  Section 431-10A-523, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "[[]431:10A-523[]]  Disclosure standards[.] ; rules.  The
 
10 commissioner may adopt rules under chapter 91 that include
 
11 standards for full and fair disclosure setting forth the manner,
 
12 content, and required disclosures for the sale of long-term care
 
13 insurance policies, terms of renewability, initial and subsequent
 
14 conditions of eligibility, nonduplication of coverage provisions,
 
15 coverage of dependents, preexisting conditions, termination of
 
16 insurance, probationary periods, limitations, exceptions,
 
17 reductions, elimination periods, requirements for replacement,
 
18 recurrent conditions, and definitions of terms[.]; provided that
 
19 the rules are not inconsistent with the provisions of sections
 
20          ."
 
21      SECTION 10.  Section 431:10A-526, Hawaii Revised Statutes,
 
22 is amended to read as follows:
 

 
 
 
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 1      "[[]431:10A-526[]]  Loss ratio standards[.]; factors;
 
 2 commissioner approval.  (a)  The commissioner may adopt rules
 
 3 [establishing] to further clarify loss ratio standards for long-
 
 4 term care insurance policies [provided that a specific reference
 
 5 to long-term care insurance policies is contained in the rules].
 
 6 For all policies, the loss ratio standards shall provide for
 
 7 reasonable benefits in relation to premiums.  Benefits shall be
 
 8 deemed reasonable in relation to premiums if the expected loss
 
 9 ratio is at least sixty per cent, calculated in a manner that
 
10 provides for adequate reserving of the long-term care insurance
 
11 risk.  In establishing loss ratio standards, the commissioner
 
12 shall consider all relevant factors, including but not limited
 
13 to:
 
14      (1)  Statistical credibility of incurred claims experience
 
15           and earned premiums;
 
16      (2)  The period for which rates are computed to provide
 
17           coverage;
 
18      (3)  Experienced and projected trends;
 
19      (4)  Concentration of experience within early policy
 
20           duration;
 
21      (5)  Expected claim fluctuation;
 

 
 
 
 
 
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 1      (6)  Experience regarding refunds, adjustments, or
 
 2           dividends;
 
 3      (7)  Renewability features;
 
 4      (8)  All appropriate expense factors;
 
 5      (9)  Interest;
 
 6     (10)  Experimental nature of the coverage, if applicable;
 
 7     (11)  Policy reserves;
 
 8     (12)  Mix of business by risk classification, if applicable;
 
 9           and
 
10     (13)  Product features, including elimination periods, co-
 
11           payments, high deductibles, and high maximum limits.
 
12      (b)  Subsection (a) shall not apply to life insurance
 
13 policies that accelerate benefits for long-term care.  A life
 
14 insurance policy that funds long-term care benefits entirely by
 
15 accelerating the death benefit shall be considered to provide
 
16 reasonable benefits in relation to premiums paid, if the policy
 
17 complies with all of the following provisions:
 
18      (1)  The interest credited internally to determine cash
 
19           value accumulations, including long-term care, if any,
 
20           are guaranteed not to be less than the minimum
 
21           guaranteed interest rate for cash value accumulations
 
22           without long-term care set forth in the policy;
 

 
 
 
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 1      (2)  The portion of the policy that provides life insurance
 
 2           benefits meets the nonforfeiture requirements for life
 
 3           insurance;
 
 4      (3)  The policy meets the disclosure requirements of
 
 5           sections   ,    , and   ;
 
 6      (4)  Any policy illustration that meets the applicable
 
 7           requirements of [policy illustration];
 
 8      (5)  An actuarial memorandum is filed with the insurance
 
 9           division that includes:
 
10           (A)  A description of the basis on which the long-term
 
11                care rates were determined;
 
12           (B)  A description of the basis for the reserves;
 
13           (C)  A summary of the type of policy, benefits,
 
14                renewability, general marketing method, and limits
 
15                on ages of issuance;
 
16           (D)  A description and a table of each actuarial
 
17                assumption used.  For expenses, an insurer shall
 
18                include per cent of premium dollars per policy and
 
19                dollars per unit of benefits, if any;
 
20           (E)  A description and a table of the anticipated
 
21                policy reserves and additional reserves to be held
 
22                in each future year for active lives;
 

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

 
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 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 13 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
 

 
 
 
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 1 appropriate, adequate, and affordable universal long-term care
 
 2 financing program, including but not limited to:
 
 3      (1)  Reliance upon private insurance, creation of a public
 
 4           trust fund, or creation of a quasi-public state entity,
 
 5           or a combination of these; and
 
 6      (2)  Funding mechanisms, such as tax or insurance premiums,
 
 7           and the amounts thereof.
 
 8      The legislature believes that a comprehensive actuarial
 
 9 study and analysis should include marketing data and mechanisms
 
10 of the entire population of the State, including private sector
 
11 employees, government employees, all age groups, and the
 
12 disabled, for purposes of making recommendations to structure
 
13 such a program.  The actuarial study and analysis also should
 
14 consider the report of the joint legislative committee on long-
 
15 term care, dated December 1, 1998, and the report "Financing Long
 
16 Term Care, A Report to the Hawaii State Legislature" of the
 
17 executive office on aging dated January 1991, and its related
 
18 actuarial report, in making the actuaries' findings and
 
19 recommendations.
 
20      The legislature further believes that the governor shall
 
21 expend $150,000 to commission the actuarial study from funds
 
22 appropriated to the Hawaii public employees health fund for
 

 
 
 
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 1 fiscal year 1998-1999 (Act 116, Session Laws of Hawaii 1998,
 
 2 BUF 142) and other available funds under the jurisdiction of the
 
 3 insurance division.  If the governor does not expend those funds
 
 4 or does not initiate the actuarial study, the legislature
 
 5 recommends that the actuarial study be commissioned by the joint
 
 6 legislative committee on long-term care.
 
 7      SECTION 16.  The actuarial report under section 10 shall be
 
 8 submitted not later than November 1, 1999, to the office of the
 
 9 governor, the senate, and the house of representatives.  The
 
10 joint legislative committee on long-term care, established by Act
 
11 339, Session Laws of Hawaii 1997, shall conduct hearings on the
 
12 actuarial report in time for a legislative package of proposals
 
13 to be submitted in the 2000 session.
 
14      SECTION 17.  There is appropriated out of the general
 
15 revenues of the State of Hawaii the sum of $300,000 or so much
 
16 there of as may be necessary for fiscal year 1999-2000 to hire or
 
17 contract with a qualified long-term care actuarial firm for the
 
18 purposes of commissioning a comprehensive actuarial study and
 
19 analysis.
 
20      SECTION 18.  The sum appropriated under section 17 shall be
 
21 expended by the joint legislative committee on long-term care,
 
22 established by Act 339, Session Laws of Hawaii 1997, if the
 

 
 
 
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 1 office of the governor does not expend those funds described
 
 2 under section 10, or so much thereof as necessary, or otherwise
 
 3 does not initiate a comprehensive actuarial study and analysis on
 
 4 long-term care, by June 30, 1999.
 
 5                              PART IX
 
 6                    JOINT LEGISLATIVE COMMITTEE
 
 7      SECTION 19.  There is appropriated out of the general
 
 8 revenues of the State of Hawaii the following sums or so much
 
 9 thereof as may be necessary for fiscal year 1999-2000 for
 
10 expenses related to the joint legislative committee on long-term
 
11 care:
 
12      House of Representatives          $30,000
 
13      Senate                            $30,000
 
14      The sums appropriated shall be expended by the house of
 
15 representatives and the senate respectively, for the purposes of
 
16 conducting statewide public briefings on the findings and
 
17 recommendations of the comprehensive actuarial study undertaken
 
18 pursuant to this Act.
 
19      SECTION 20.  The revisor of statutes is authorized by this
 
20 Act to designate numerical section references in lieu of
 
21 alphabetical references as contained in this Act and shall
 
22 accordingly designate the internal section references contained
 
23 in this Act. 
 

 
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 1      SECTION 21.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 22.  This Act shall take effect upon its approval;
 
 4 provided that sections  ,   , and   shall take effect on July 1,
 
 5 1999.