REPORT TITLE:
Long-Term Care Insurance


DESCRIPTION:
Enacts LTC insurance Model Act and model regulations; requires
employers to offer LTC policies to employees; enacts
recommendations of JLC; appropriates funds for Insurance
Division.  (SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        131
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                
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      SECTION 1.  Long-term care is an issue of immense
 
 3 importance.  Providing adequate care for the aged and disabled is
 
 4 an economic burden for many people.  The legislature finds that
 
 5 long-term care insurance policies offer a means of alleviating
 
 6 that burden.  The legislature believes that the ideal setting to
 
 7 provide long-term care insurance is through the employment
 
 8 workplace and that the State should encourage the offering of
 
 9 long-term care insurance in order to provide a modicum of
 
10 financial security.
 
11      The purpose of this Act is to increase the number of long-
 
12 term care insurance policies in effect in Hawaii and to conform
 
13 Hawaii's long-term care insurance statutes to the Model Long Term
 
14 Care Act of 1998.
 
15      This Act also enacts the Long-Term Care Insurance Model Act
 
16 of 1998, of the National Association of Insurance Commissioners.
 
17                              PART II
 
18      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
19 a new part to chapter 431:10A, to be designated as part V, and to
 
20 read as follows:
 

 
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                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1                "PART V.  LONG-TERM CARE INSURANCE
 
 2      SUBPART A.  MODEL LONG-TERM CARE INSURANCE ACT OF 1998
 
 3      431:10A-501  Definitions.  As used in this part, unless the
 
 4 context requires otherwise:
 
 5      "Applicant" means:
 
 6      (1)  In the case of an individual long-term care insurance
 
 7           policy, the person who seeks to contract for benefits;
 
 8           and
 
 9      (2)  In the case of a group long-term care insurance policy,
 
10           the proposed certificate holder.
 
11      "Certificate" means any certificate issued under a group
 
12 long-term care insurance policy, which policy has been delivered
 
13 or issued for delivery in this State.
 
14      "Commissioner" means the insurance commissioner.
 
15      "Group long-term care insurance" means a long-term care
 
16 insurance policy delivered or issued for delivery in this State
 
17 and issued to:
 
18      (1)  One or more employers or labor organizations, or a
 
19           trust or the trustees of a fund established by one or
 
20           more employers or labor organizations, or a combination
 
21           thereof, for employees or former employees or a
 
22           combination thereof or for members or former members or
 
23           a combination thereof, of the labor organizations; or
 

 
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 1      (2)  Any professional, trade, or occupational association
 
 2           for its members or former or retired members, or
 
 3           combination thereof, if the association:
 
 4           (A)  Is composed of individuals all of whom are or were
 
 5                actively engaged in the same profession, trade, or
 
 6                occupation; and
 
 7           (B)  Has been maintained in good faith for purposes
 
 8                other than obtaining insurance; or
 
 9      (3)  An association or a trust or the trustees of a fund
 
10           established, created, or maintained for the benefit of
 
11           members of one or more associations.  Prior to
 
12           advertising, marketing, or offering the policy within
 
13           this State, the association or the insurer of the
 
14           association shall file evidence with the commissioner
 
15           that the association has at the outset a minimum of one
 
16           hundred persons; has been organized and maintained in
 
17           good faith for purposes other than that of obtaining
 
18           insurance; has been in active existence for at least
 
19           one year; and has a constitution and bylaws which
 
20           provide that:
 
21           (A)  The association holds regular meetings at least
 
22                annually to further purposes of the members;
 
23           (B)  Except for credit unions, the association collects
 
24                dues or solicits contributions from members; and
 

 
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 1           (C)  The members have voting privileges and
 
 2                representation on the governing board and
 
 3                committees.
 
 4           Thirty days after the filing the association will be
 
 5           deemed to satisfy the organizational requirements
 
 6           unless the commissioner makes a finding that the
 
 7           association does not satisfy those organizational
 
 8           requirements;
 
 9      (4)  An organization of retirees that is organized and
 
10           maintained for the purpose of obtaining benefits for
 
11           its members;
 
12      (5)  A group other than as described in paragraphs (1), (2),
 
13           and (3), subject to a finding by the commissioner that:
 
14           (A)  The issuance of the group policy is not contrary
 
15                to the best interest of the public;
 
16           (B)  The issuance of the group policy would result in
 
17                economies of acquisition or administration; and
 
18           (C)  The benefits are reasonable in relation to the
 
19                premiums charged.
 
20      "Long-term care insurance" means any insurance policy or
 
21 rider advertised, marketed, offered, or designed to provide
 
22 coverage for not less than twelve consecutive months for each
 
23 covered person on an expense incurred, indemnity, prepaid, or
 

 
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                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 other basis, for one or more necessary or medically necessary
 
 2 diagnostic, preventive, therapeutic, rehabilitative, maintenance,
 
 3 or personal care services, provided in a setting other than an
 
 4 acute care unit of a hospital.  The term includes group and
 
 5 individual annuities and life insurance policies or riders that
 
 6 provide directly or that supplement long-term care insurance.
 
 7 The term also includes a policy or rider that provides for
 
 8 payment of benefits based upon cognitive impairment or loss of
 
 9 functional capacity.  Long-term care insurance may be issued by
 
10 insurers, fraternal benefit societies, nonprofit health,
 
11 hospital, and medical service corporations, prepaid health plans,
 
12 health maintenance organizations, or any similar organization to
 
13 the extent that they are authorized under this part to issue
 
14 long-term care insurance.  Long-term care insurance shall not
 
15 include any insurance policy offered primarily to provide basic
 
16 medicare supplement coverage, basic hospital expense coverage,
 
17 basic medical-surgical expense coverage, hospital confinement
 
18 indemnity coverage, major medical expense coverage, disability
 
19 income or related asset-protection coverage, accident only
 
20 coverage, specified disease or specified accident coverage, or
 
21 limited benefit health coverage.  With regard to life insurance,
 
22 the term does not include life insurance policies that accelerate
 
23 the death benefit specifically for one or more of the qualifying
 

 
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 1 events of terminal illness, medical conditions requiring
 
 2 extraordinary medical intervention, or permanent institutional
 
 3 confinement, and which provide the option of a lump-sum payment
 
 4 for those benefits and in which neither the benefits nor the
 
 5 eligibility for the benefits is conditioned upon the receipt of
 
 6 long-term care.  Notwithstanding any other provision in this
 
 7 part, any product advertised, marketed, or offered as long-term
 
 8 care insurance, including nursing home insurance, shall be
 
 9 subject to this part.
 
10      "Policy" means any policy, contract, subscriber agreement,
 
11 rider, or endorsement delivered or issued for delivery in this
 
12 State by an insurer, fraternal benefit society, nonprofit health,
 
13 hospital, or medical service corporation, prepaid health plan,
 
14 health maintenance organization, or any similar organization.
 
15      431:10A-502  Prohibitions.(a)  No insurance policy may be
 
16 advertised, marketed, or offered as long-term care or nursing
 
17 home insurance unless it complies with this part.
 
18      (b)  No group long-term care insurance may be offered to a
 
19 resident of this State under a group policy issued in another
 
20 state to a group described in paragraph (4) of the definition of
 
21 "group long-term care insurance" unless this State, or another
 
22 state having statutory and regulatory long-term care insurance
 
23 requirements substantially similar to those adopted in this
 

 
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 1 State, has made a determination that the requirements have been
 
 2 met. 
 
 3      431:10A-503  Disclosure and performance standards; rules.
 
 4 The commissioner may adopt rules under chapter 91 that include
 
 5 standards for full and fair disclosure setting forth the manner,
 
 6 content, and required disclosures for the sale of long-term care
 
 7 insurance policies, terms of renewability, initial and subsequent
 
 8 conditions of eligibility, nonduplication of coverage provisions,
 
 9 coverage of dependents, preexisting conditions, termination of
 
10 insurance, continuation or conversion, probationary periods,
 
11 limitations, exceptions, reductions, elimination periods,
 
12 requirements for replacement, recurrent conditions, and
 
13 definitions of terms.
 
14      431:10A-504  Policy standards.(a)  No long-term care
 
15 insurance policy may:
 
16      (1)  Be canceled, nonrenewed, or otherwise terminated on the
 
17           grounds of the age or the deterioration of the mental
 
18           or physical health of the insured individual or
 
19           certificate holder;
 
20      (2)  Contain a provision establishing a new waiting period
 
21           if existing coverage is converted to or replaced by a
 
22           new or other form within the same company, except with
 
23           respect to an increase in benefits voluntarily selected
 

 
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 1           by the insured individual or group policyholder; or
 
 2      (3)  Provide coverage for skilled nursing care only or
 
 3           provide significantly more coverage for skilled nursing
 
 4           care in a facility than coverage for lower levels of
 
 5           care.
 
 6      (b)  No long-term care insurance policy or certificate other
 
 7 than a policy or certificate thereunder issued to a group meeting
 
 8 the requirements of paragraph (1) of the definition of "group
 
 9 long-term care insurance" shall use a definition of preexisting
 
10 condition which is more restrictive than the following:
 
11 "preexisting condition" means a condition for which medical
 
12 advice or treatment was recommended by or received from a
 
13 provider of health care services within six months preceding the
 
14 effective date of coverage of an insured person.
 
15      (c)  No long-term care insurance policy or certificate other
 
16 than a policy or certificate thereunder issued to a group meeting
 
17 the requirements of paragraph (1) of the definition of "group
 
18 long-term care insurance" may exclude coverage for a loss or
 
19 confinement which is the result of a preexisting condition unless
 
20 the loss or confinement begins within six months following the
 
21 effective date of coverage of an insured person.
 
22      (d)  The commissioner may extend the limitation periods in
 
23 subsections (b) and (c) as to specific age group categories in
 

 
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 1 specific policy forms upon findings that the extension is in the
 
 2 best interest of the public.
 
 3      (e)  The definition of "preexisting condition" does not
 
 4 prohibit an insurer from using an application form designed to
 
 5 elicit the complete health history of an applicant, and, on the
 
 6 basis of the answers on that application, from underwriting in
 
 7 accordance with that insurer's established underwriting
 
 8 standards.  Unless otherwise provided in the policy or
 
 9 certificate, a preexisting condition, regardless of whether it is
 
10 disclosed on the application or not, need not be covered until
 
11 the waiting period described in subsection (c) expires.  No long-
 
12 term care insurance policy or certificate may exclude or use
 
13 waivers or riders of any kind to exclude, limit, or reduce
 
14 coverage or benefits for specifically named or described
 
15 preexisting diseases or physical conditions beyond the waiting
 
16 period described in subsection (c).
 
17      431:10A-505  Prior hospitalization; prior
 
18 institutionalization.(a)  No long-term care insurance policy
 
19 may be delivered or issued for delivery in this State if the
 
20 policy:
 
21      (1)  Conditions eligibility for any benefits on a prior
 
22           hospitalization requirement;
 
23      (2)  Conditions eligibility for benefits provided in an
 

 
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                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1           institutional care setting on the receipt of a higher
 
 2           level of institutional care; or
 
 3      (3)  Conditions eligibility for any benefits other than
 
 4           waiver of premium, post-confinement, post-acute care,
 
 5           or recuperative benefits on a prior
 
 6           institutionalization requirement.
 
 7      (b)  A long-term care insurance policy containing post-
 
 8 confinement, post-acute care, or recuperative benefits shall
 
 9 contain a clear label, in a separate paragraph of the policy or
 
10 certificate, entitled "limitations or conditions on eligibility
 
11 for benefits," setting forth the limitations or conditions as set
 
12 forth in subsection (a), including any required number of days of
 
13 confinement.
 
14      (c)  A long-term care insurance policy or rider that
 
15 conditions eligibility of noninstitutional benefits on the prior
 
16 receipt of institutional care shall not require a prior
 
17 institutional stay of more than thirty days.
 
18      431:10A-506  Loss ratio standards; factors; commissioner
 
19 approval.(a)  The commissioner shall adopt rules establishing
 
20 loss ratio standards after sufficient actuarial experience has
 
21 accumulated for long-term care insurance policies.  For all
 
22 policies, the loss ratio standards shall provide for reasonable
 
23 benefits in relation to premiums.  Benefits shall be deemed
 

 
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 1 reasonable in relation to premiums if the expected loss ratio is
 
 2 at least sixty per cent, calculated in a manner that provides for
 
 3 adequate reserving of the long-term care insurance risk.  In
 
 4 establishing loss ratio standards, the commissioner shall
 
 5 consider all relevant factors, including but not limited to:
 
 6      (1)  Statistical credibility of incurred claims experience
 
 7           and earned premiums;
 
 8      (2)  The period for which rates are computed to provide
 
 9           coverage;
 
10      (3)  Experienced and projected trends;
 
11      (4)  Concentration of experience within early policy
 
12           duration;
 
13      (5)  Expected claim fluctuation;
 
14      (6)  Experience regarding refunds, adjustments, or
 
15           dividends;
 
16      (7)  Renewability features;
 
17      (8)  All appropriate expense factors;
 
18      (9)  Interest;
 
19     (10)  Experimental nature of the coverage, if applicable;
 
20     (11)  Policy reserves; 
 
21     (12)  Mix of business by risk classification, if applicable;
 
22           and
 
23     (13)  Product features, including but not limited to,
 

 
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                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1           elimination periods, co-payments, high deductibles, and
 
 2           high maximum limits.
 
 3      (b)  For purposes of subsection (a), no long-term care
 
 4 insurance policy shall be sold without the prior approval of the
 
 5 commissioner.  An insurer issuing a long-term care insurance
 
 6 policy shall file with the commissioner for approval a sample
 
 7 policy, proposed premium rates, actuarial analyses, expected loss
 
 8 ratios, and other information relevant to items enumerated under
 
 9 subsection (a) or as requested by the commissioner, to justify
 
10 those premium rates and to determine compliance with this part.
 
11 Prior to the adoption of rules, the commissioner shall decide
 
12 whether or not to approve the filings based on information
 
13 contained in the filings, notwithstanding the absence of
 
14 sufficient actuarial experience; provided that the commissioner
 
15 may approve the filings if the estimates and data are actuarially
 
16 credible without necessarily relying on actuarial experience.
 
17 For purposes of this subsection, the commissioner may assess a
 
18 reasonable fee for the filing.
 
19      (c)  Subsection (a) shall not apply to life insurance
 
20 policies that accelerate benefits for long-term care.  A life
 
21 insurance policy that funds long-term care benefits entirely by
 
22 accelerating the death benefit shall be considered to provide
 
23 reasonable benefits in relation to premiums paid, if the policy
 
24 complies with all of the following provisions:
 

 
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 1      (1)  The interest credited internally to determine cash
 
 2           value accumulations, including long-term care, if any,
 
 3           are guaranteed not to be less than the minimum
 
 4           guaranteed interest rate for cash value accumulations
 
 5           without long-term care set forth in the policy;
 
 6      (2)  The portion of the policy that provides life insurance
 
 7           benefits meets the nonforfeiture requirements for life
 
 8           insurance;
 
 9      (3)  The policy meets the disclosure requirements of section
 
10           431:10D-102, 431:10D-201, or 431:10D-305, as
 
11           applicable; 
 
12      (4)  Any policy illustration that meets the applicable
 
13           requirements for policy illustration;
 
14      (5)  An actuarial memorandum is filed with the insurance
 
15           division that includes:
 
16           (A)  A description of the basis on which the long-term
 
17                care rates were determined;
 
18           (B)  A description of the basis for the reserves;
 
19           (C)  A summary of the type of policy, benefits,
 
20                renewability, general marketing method, and limits
 
21                on ages of issuance;
 
22           (D)  A description and a table of each actuarial
 
23                assumption used.  For expenses, an insurer shall
 

 
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 1                include per cent of premium dollars per policy and
 
 2                dollars per unit of benefits, if any;
 
 3           (E)  A description and a table of the anticipated
 
 4                policy reserves and additional reserves to be held
 
 5                in each future year for active lives;
 
 6           (F)  The estimated average annual premium per policy
 
 7                and the average issue age;
 
 8           (G)  A statement as to whether underwriting is
 
 9                performed at the time of application and shall
 
10                indicate whether underwriting is used, and if
 
11                used, shall include a description of the type or
 
12                types of underwriting used; provided that in cases
 
13                involving a group policy, the statement shall
 
14                indicate whether the enrollee or dependent will be
 
15                underwritten and when underwriting occurs; and
 
16           (H)  A description of the effect of long-term care
 
17                policy provision on the required premiums,
 
18                nonforfeiture values and reserves on the
 
19                underlying life insurance policy, both for active
 
20                lives and those in long-term care claim status.
 
21      431:10A-507  Right to return; free look provision.  Long-
 
22 term care applicants shall have the right to return the policy or
 
23 certificate within thirty days of its delivery and to have the
 

 
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 1 premium refunded if, after examination of the policy or
 
 2 certificate, the applicant is not satisfied for any reason.
 
 3 Long-term care insurance policies and certificates shall have a
 
 4 notice prominently printed on the first page or attached thereto
 
 5 stating in substance that the applicant shall have the right to
 
 6 return the policy or certificate within thirty days of its
 
 7 delivery and to have the premium refunded if, after examination
 
 8 of the policy or certificate, other than a certificate issued
 
 9 pursuant to a policy issued to a group defined in paragraph (1)
 
10 of the definition of "group long-term care insurance", the
 
11 applicant is not satisfied for any reason.
 
12      431:10A-508  Outline of coverage required.(a)  An outline
 
13 of coverage shall be delivered to a prospective applicant for
 
14 long-term care insurance at the time of initial solicitation
 
15 through means that prominently direct the attention of the
 
16 recipient to the document and its purpose.  In the case of agent
 
17 solicitations, an agent shall deliver the outline of coverage
 
18 before the presentation of an application or enrollment form.  In
 
19 the case of direct response solicitation, the outline of coverage
 
20 shall be presented with any application or enrollment form.
 
21      (b)  For a group long-term care insurance policy under
 
22 paragraph (1) of the definition of "group long-term care
 
23 insurance", an outline of coverage under subsection (c) shall not
 

 
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 1 be required to be delivered; provided that the information
 
 2 enumerated under subsection (c) is contained in other materials
 
 3 relating to enrollment, which shall be made available upon
 
 4 request to the commissioner.
 
 5      (c)  The outline of coverage shall include:
 
 6      (1)  A description of the principal benefits and coverage
 
 7           provided in the policy;
 
 8      (2)  A statement of the principal exclusions, reductions,
 
 9           and limitations contained in the policy;
 
10      (3)  A statement of the terms under which the policy or
 
11           certificate, or both, may be continued in force or
 
12           discontinued, including any reservation in the policy
 
13           of a right to change premiums.  Continuation or
 
14           conversion provisions of group coverage shall be
 
15           specifically described;
 
16      (4)  A statement that the outline of coverage is a summary
 
17           only, not a contract of insurance, and that the policy
 
18           or group master policy contains governing contractual
 
19           provisions;
 
20      (5)  A description of the terms under which the policy or
 
21           certificate may be returned and premium refunded; and
 
22      (6)  A brief description of the relationship of costs of
 
23           care and benefits.
 

 
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 1      (d)  The commissioner may prescribe a standard format,
 
 2 including style, arrangement, and overall appearance, and the
 
 3 content of an outline of coverage.
 
 4      431:10A-509  Group policy certificate requirements. A
 
 5 certificate issued for a group long-term care insurance policy
 
 6 shall include:
 
 7      (1)  A description of the principal benefits and coverages
 
 8           in the policy;
 
 9      (2)  A statement of the principal exclusions, reductions,
 
10           and limitations contained in the policy; and
 
11      (3)  A statement that the group master policy determines
 
12           governing contractural provisions.
 
13      431:10A-510  Life insurance policies offering long-term
 
14 care benefits.(a)  At the time of policy delivery, a policy
 
15 summary shall be delivered for an individual life insurance
 
16 policy that provides long-term care benefits within the policy or
 
17 by rider.  In the case of direct response solicitations, the
 
18 insurer shall deliver the policy summary at the time of the
 
19 applicant's request, but regardless of request shall deliver the
 
20 policy summary no later than at the time of policy delivery.  The
 
21 policy summary shall comply with the requirements of section
 
22 431:10A-508 and shall also include:
 
23      (1)  An explanation of how the long-term care benefit
 
24           interacts with other components of the policy,
 

 
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                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1           including deductions from death benefits;
 
 2      (2)  An illustration of the amount of benefits, the length
 
 3           of benefits, and the guaranteed lifetime benefits if
 
 4           any, for each covered person;
 
 5      (3)  Any exclusions, reductions, and limitations on benefits
 
 6           of long-term care; and
 
 7      (4)  If applicable to the policy type, a disclosure of the
 
 8           effects of exercising other rights under the policy, a
 
 9           disclosure of guarantees related to long-term care
 
10           costs of insurance charges, and current and projected
 
11           maximum lifetime benefits.
 
12      (b)  If a long-term care benefit funded through a life
 
13 insurance vehicle by the acceleration of the death benefit is in
 
14 benefit payment status, a monthly report shall be provided to the
 
15 policyholder.  The report shall include:
 
16      (1)  A description of and the amount of any long-term care
 
17           benefits paid out during the month;
 
18      (2)  An explanation of any changes in the policy due to
 
19           long-term care benefits being paid out; and
 
20      (3)  The amount of long-term care benefits existing or
 
21           remaining. 
 
22      431:10A-511  Incontestability period.(a)  For a policy or
 
23 certificate that has been in effect for less than six months, an
 

 
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 1 insurer may rescind a long-term care insurance policy or
 
 2 certificate or deny a valid long-term care insurance claim upon
 
 3 showing by the insurer of a misrepresentation that material to
 
 4 the acceptance of coverage.
 
 5      (b)  For a policy that has been in effect for six months or
 
 6 more, but less than two years, an insurer may rescind a long-term
 
 7 care insurance policy or certificate or deny an otherwise valid
 
 8 long-term care insurance claim upon a showing misrepresentation
 
 9 that:
 
10      (1)  Is material to the acceptance for coverage; and
 
11      (2)  Pertains to the condition for which benefits are
 
12           sought.
 
13      (c)  For a policy that has been in effect for two years or
 
14 more, an insurer shall not contest the policy on the grounds of
 
15 misrepresentation alone; provided that the policy may be
 
16 contested only upon a showing by the insurer that the insured
 
17 knowingly and intentionally misrepresented relevant facts
 
18 relating to the insured's health.
 
19      (d)  No long-term care insurance policy may be field issued
 
20 based on medical or health status.  For purposes of this
 
21 subsection, "field issued" means a policy or certificate issued
 
22 by an agent or a third-party administrator pursuant to
 
23 underwriting authority granted to the agent or third party
 
24 administrator by an insurer.
 

 
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 1      (e)  If an insurer has paid benefits under the long-term
 
 2 care insurance policy certificate, the benefit payments shall not
 
 3 be recovered by the insurer if the policy or certificate is
 
 4 rescinded.
 
 5      (f)  This section shall apply to life insurance policies
 
 6 that accelerate death benefits for long-term care; provided that
 
 7 in the case of death of an insured who received accelerated death
 
 8 benefits, this section shall not apply to the remaining death
 
 9 benefit, except that the remaining death benefit shall be subject
 
10 to sections 431:10D-109 and 431:10D-110.
 
11      431:10A-512  Nonforfeiture benefits.(a)  Except as
 
12 provided in subsection (b), a long-term care insurance policy may
 
13 not be delivered or issued for delivery unless the policyholder
 
14 or certificate holder has been offered an option to purchase a
 
15 policy or certificate that includes a nonforfeiture benefit.  The
 
16 offer of a nonforfeiture benefit may be in the form of a rider
 
17 that is attached to the policy.  If the policyholder or
 
18 certificate holder declines the nonforfeiture benefit, the
 
19 insurer shall provide a contingent benefit upon lapse that shall
 
20 be available for a specified period of time following a
 
21 substantial increase in premium rates.
 
22      (b)  For a group long-term care insurance policy, the offer
 
23 of a nonforfeiture benefit under subsection (a) shall be made to
 

 
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 1 the group policyholder if the group is a continuing care
 
 2 retirement community or similar entity; provided that the offer
 
 3 of a nonforfeiture benefit for a group long-term care insurance
 
 4 policy shall be made to each proposed certificate holder in all
 
 5 other cases.
 
 6      (c)  The commissioner shall adopt rules to specify the type
 
 7 of nonforfeiture benefits to be offered as part of long-term care
 
 8 insurance policies or certificates, the standards for
 
 9 nonforfeiture benefits, and the rules for contingent benefit upon
 
10 lapse, including a determination of the specified period of time
 
11 during which a contingent benefit upon lapse shall be available
 
12 and the substantial premium rate increase that triggers a
 
13 contingent benefit upon lapse as provided in subsection (a).
 
14      431:10A-513  Rules.  The commissioner shall adopt necessary
 
15 rules under chapter 91 to implement this part, to promote premium
 
16 adequacy, and to establish minimum standards for marketing
 
17 practices, compensation arrangements, and reporting practices for
 
18 long-term care insurance.
 
19      431:10A-514  Exceptions.  Nothing in this part shall limit
 
20 or restrict the sale or offering for sale in this State of
 
21 insurance which provides long-term care benefits in
 
22 noninstitutional settings, including a private residence.
 
23      431:10A-515  Penalties.  In addition to any other penalties
 
24 provided by law, any insurer or agent found in violation of this
 

 
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                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 part or the marketing of long-term care insurance policies shall
 
 2 be subject to an administrative fine to be levied by the
 
 3 commissioner in an amount of three times the amount of any
 
 4 commission paid for each policy involved, up to $10,000,
 
 5 whichever is greater.
 
 6              SUBPART B.  UNIVERSAL AVAILABILITY OF 
 
 7                     LONG-TERM CARE INSURANCE
 
 8      431:10A-601  Definitions.  As used in this part:
 
 9      "Activities of daily living" means at least bathing,
 
10 continence, dressing, eating, toileting, and transferring.
 
11      "Acute condition" means that the individual is medically
 
12 unstable.  This individual requires frequent monitoring by
 
13 medical professionals in order to maintain the individual's
 
14 health.
 
15      "Adult day care" means a program for six or more
 
16 individuals, of social and health-related services provided
 
17 during the day in a community group setting for the purpose of
 
18 supporting frail, impaired elderly or other disabled adults who
 
19 can benefit from care in a group setting outside the home.
 
20      "Bathing" means washing oneself by sponge bath, in a tub or
 
21 shower, and includes getting in or out of the tub or shower.
 
22      "Cognitive impairment" means a deficiency in a person's
 
23 short or long-term memory, orientation as to person, place, and
 

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

 
Page 24                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 psychopathy, psychosis, or mental or emotional disease or
 
 2 disorder, and shall not be defined beyond these terms.
 
 3      "NAIC" refers to the National Association of Insurance
 
 4 Commissioners.
 
 5      "Personal care" means the provision of hands-on services to
 
 6 assist an individual with activities of daily living.
 
 7      "Skilled nursing care," "intermediate care," "personal
 
 8 care," "home care," and other services shall be defined in
 
 9 relation to the level of skill required, the nature of the care,
 
10 and the setting in which care must be delivered.
 
11      "Toileting" means getting to and from the toilet, getting on
 
12 and off the toilet, and performing associated personal hygiene.
 
13      "Transferring" means moving into or out of a bed, chair, or
 
14 wheelchair.
 
15      431:10A-602  Group long-term care insurance policies to
 
16 conform to HIPAA and Internal Revenue Service.(a) Every group
 
17 long-term care insurance policy sold beginning July 15, 1999,
 
18 shall conform to subtitle C of the Health Insurance Portability
 
19 and Accountability Act of 1996, P.L. No. 104-191, as amended, and
 
20 to section 7702B of the Internal Revenue Code of 1986, as
 
21 amended.
 
22      (b)  A group long-term care insurance policy shall provide
 
23 coverage, at a minimum, for "qualified long-term care services",
 

 
Page 25                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 as defined in subtitle C of the Health Insurance Portability and
 
 2 Accountability Act of 1996, P.L. No. 104-191, as amended, and in
 
 3 section 7702B of the Internal Revenue Code of 1986, as amended.
 
 4      (c)  For purpose of subsection (b) and for purpose of
 
 5 describing examples of services typically found in this State,
 
 6 coverage includes the following services or any combination of
 
 7 services:
 
 8      (1)  Home health care services, as defined in section
 
 9           431:10A-601;
 
10      (2)  Adult day care, as defined in section 431:10A-601;
 
11      (3)  Adult residential care home, as defined in section
 
12           321-15.1;
 
13      (4)  Extended care adult residential care home, as defined
 
14           in section 323D-2;
 
15      (5)  Nursing home, as defined in section 457B-2;
 
16      (6)  Skilled nursing facilities and intermediate care
 
17           facilities, as referenced in section 321-11(10);
 
18      (7)  Hospices, as referenced in section 321-11;
 
19      (8)  Assisted living facility, as defined in section 323D-2;
 
20      (9)  Personal care, as defined in section 431:10A-601;
 
21     (10)  Respite care, as defined in section 333F-1; and
 
22     (11)  Any other care as provided by rule of the commissioner.
 
23      (d)  A group long-term care insurance policy may be sold
 

 
Page 26                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 prior to July 15, 1999; provided that the coverages shall be
 
 2 amended in accordance with this part, if necessary.  All policies
 
 3 shall be issued with a written explanation that the coverage may
 
 4 be subject to modification as a result of this part.
 
 5      431:10A-603  Individual long-term care insurance policy
 
 6 coverages.(a)  Every individual long-term care insurance policy
 
 7 sold beginning July 15, 1999, shall provide coverage for one or
 
 8 more of the types of care enumerated under section
 
 9 431:10A-602(c).
 
10      (b)  An individual long-term care insurance policy sold
 
11 beginning July 15, 1999, shall not be required to conform to
 
12 section 431:10A-602(a) and (b); provided that if it does not
 
13 conform, then it shall not qualify for federal or state income
 
14 tax benefits.
 
15      (d)  An individual long-term care insurance policy may be
 
16 sold prior to July 15, 1999; provided that the coverages shall be
 
17 amended in accordance with this part, if necessary.  All policies
 
18 shall be issued with a written explanation that the coverage may
 
19 be subject to modification as a result of this part.
 
20      431:10A-604  Employers and others to offer long-term care
 
21 insurance policies; no employer contributions.(a)  No later
 
22 than January 1, 2000, every employer, labor organization, retiree
 
23 organization, or other entity specified under the definition of
 

 
Page 27                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 "group long-term care insurance", shall offer a group long-term
 
 2 care insurance policy that complies with section 431:10A-602 to
 
 3 its employees or members, as appropriate; provided that employees
 
 4 or members shall not be required to purchase a policy.
 
 5      (b)  In the absence of an agreement between an employer and
 
 6 employee, or organization and member, or other entity and member,
 
 7 as appropriate, contributions to the payment of premiums for a
 
 8 policy purchased by an employee or member under subsection (a)
 
 9 shall not be required of the employer, organization, or entity,
 
10 as appropriate.
 
11      (c)  An agreement under subsection (b) shall specify a
 
12 percentage of the premium to be contributed, and the method of
 
13 payment of the premium by the employee or member, and by the
 
14 employer, organization, or entity that is acceptable to the
 
15 insurer providing the policy; provided if the insurer requires
 
16 withholding of premiums from wages, any expense incurred by the
 
17 employer, organization, or entity for the withholding shall be
 
18 reimbursed by the insurer without added cost to the premium.
 
19      431:10A-605  Availability of policies. For purposes of
 
20 section 431:10A-604, all insurers that are subject to this part
 
21 shall make available upon request a group long-term care
 
22 insurance policy to every employer, labor organization, retiree
 
23 organization, or other entity specified under the definition of
 

 
Page 28                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 "group long-term care insurance"; provided that an individual
 
 2 long-term care insurance policy under section 431A10A-603 may be
 
 3 substituted for a group long-term care insurance policy if a
 
 4 group policy is not available to the particular group by a
 
 5 particular insurer solely for the reason of the number of
 
 6 employees or members in that particular group.
 
 7      431:10A-606  Purchase of policy and payment of premiums on
 
 8 an individual's behalf.  An individual or group long-term care
 
 9 insurance policy shall allow a person to purchase a policy and
 
10 pay the premiums for an individual or group long-term care
 
11 insurance policy that covers the person, the person's spouse, or
 
12 reciprocal beneficiary, as well as their parents and
 
13 grandparents, including in-laws.
 
14      431:10A-607  Age-graded premiums.(a)  Premiums for an
 
15 individual or group long-term care insurance policy shall be
 
16 graded by age, along with other underwriting criteria as
 
17 determined by the insurance commissioner, of the applicant at the
 
18 time of purchase of the policy.  Premiums shall be fixed over the
 
19 life of the policy; provided that the commissioner may allow an
 
20 adjustment in premiums if the commissioner finds that an
 
21 adjustment is necessary for the addition of benefits, solvency of
 
22 the insurer in the line of long-term care insurance, or loss
 
23 ratio purposes.
 

 
Page 29                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      (b)  Reasonable underwriting criteria other than age may be
 
 2 utilized with the approval of the insurance commissioner;
 
 3 provided that the criteria shall not result to average risks as a
 
 4 whole in denying long-term care insurance or in assessing
 
 5 unreasonable premiums.
 
 6      431:10A-608  Conflict with HIPA.  If a conflict occurs
 
 7 between a provision of part V of chapter 431:10A, as amended, and
 
 8 the federal Health Insurance Portability and Accountability Act
 
 9 of 1996, P.L. 104-191, as amended, the provision shall be deemed
 
10 amended to comply with that federal law and any related
 
11 regulations, to the extent that a particular policy is intended
 
12 to qualify for federal income tax benefits.
 
13      431:10A-609  Terminology interchangeable.  For purposes of
 
14 this part, the term "group long-term care insurance" refers to a
 
15 means of marketing or method of issuance of a long-term care
 
16 insurance policy, without regard to substantive differences in
 
17 the policy.
 
18               SUBPART C.  HIPAA CONSUMER PROTECTION
 
19      431:10A-701  Policy practices and provision; renewability;
 
20 individual policies.(a)  The terms guaranteed renewable and
 
21 noncancellable shall not be used in any individual long-term care
 
22 insurance policy without further explanatory language in
 
23 accordance with section        .
 

 
Page 30                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      (b)  A policy issued to an individual shall not contain
 
 2 renewal provisions other than guaranteed renewable or
 
 3 noncancellable.
 
 4      (c)  As used in this section, the term "guaranteed
 
 5 renewable" means the insured has a right to continue the long-
 
 6 term care insurance in force by the timely payment of premiums
 
 7 and when the insurer has no unilateral right to make any change
 
 8 in any provision of the policy or rider while the insurance is in
 
 9 force, and cannot decline to renew, except that rates may be
 
10 revised by the insurer on a class basis.
 
11      (d)  As used in this section, the term "noncancellable"
 
12 means the insured has the right to continue the long-term care
 
13 insurance in force by the timely payment of premiums during which
 
14 period the insurer has no right to unilaterally make any change
 
15 in any provision of the insurance or premium rate.
 
16      431:10A-702  Policy practices and provision; limitations
 
17 and exclusions; group and individual policies.(a)  A policy may
 
18 not be delivered or issued for delivery in this State as long-
 
19 term care insurance if the policy limits or excludes coverage by
 
20 type of illness, treatment, medical condition, or accident,
 
21 except as follows:
 
22      (1)  Preexisting conditions;
 
23      (2)  Mental or nervous disorders; provided that coverage for
 

 
Page 31                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1           Alzheimer's Disease shall not be limited or excluded;
 
 2      (3)  Alcoholism or drug addiction;
 
 3      (4)  Illness, treatment, or medical condition arising out
 
 4           of:
 
 5           (A)  War or act of war, whether declared or undeclared;
 
 6           (B)  Participation in a felony, riot, or insurrection;
 
 7           (C)  Service in the armed forces or units auxiliary
 
 8                thereto;
 
 9           (D)  Suicide, whether sane or insane, attempted
 
10                suicide, or intentionally self-inflicted injury;
 
11                or
 
12      (5)  Treatment provided in a government facility, unless
 
13           required by law, services for which benefits are
 
14           available under Medicare or other governmental program,
 
15           except Medicaid, any state or federal workers'
 
16           compensation, employer's liability or occupational
 
17           disease law, or any motor vehicle insurance law,
 
18           services provided by a member of the covered person's
 
19           immediate family and services for which no charge is
 
20           normally made in the absence of insurance.
 
21      (b)  This section is not intended to prohibit exclusions and
 
22 limitations by type of provider or territorial limitations.
 
23      431:10A-703  Policy practices and provision; extension of
 

 


 

Page 32                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 benefits; group and individual policies.  Termination of
 
 2 long-term care insurance shall be without prejudice to any
 
 3 benefits payable for institutionalization if the
 
 4 institutionalization began while the long-term care insurance was
 
 5 in force and continues without interruption after termination.
 
 6 The extension of benefits beyond the period the long-term care
 
 7 insurance was in force may be limited to the duration of the
 
 8 benefit period, if any, or to payment of the maximum benefits and
 
 9 may be subject to any policy waiting period, and all other
 
10 applicable provisions of the policy.  
 
11      431:10A-704  Policy practices and provision; continuation
 
12 or conversion; group policies.(a)  All group long-term care
 
13 insurance issued in this State shall provide covered individuals
 
14 with a basis for continuation or conversion of coverage.
 
15      (b)  A policy provision that provides for a basis for
 
16 continuation of coverage is one that maintains coverage under the
 
17 existing group policy when the coverage would otherwise terminate
 
18 and which is subject only to the continued timely payment when
 
19 due.  Group policies that restrict provision of benefits and
 
20 services to, or contain incentives to use certain providers or
 
21 facilities may provide continuation of benefits that are
 
22 substantially equivalent to the benefits of the existing group
 
23 policy.  The commissioner shall make a determination as to the
 

 
Page 33                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

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

 
Page 34                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 determination as to substantial equivalency of benefits, shall
 
 2 take into consideration the differences between managed care and
 
 3 non-managed care plans, including but not limited to, provider
 
 4 system arrangements or networks, service availability, benefit
 
 5 levels, and administrative complexity.
 
 6      (e)  The insured shall make written application for the
 
 7 converted policy.  The first premium, if any, shall be due and
 
 8 paid as directed by the insurer no later that thirty-one days
 
 9 after termination of coverage under the group policy.  The
 
10 converted policy shall be issued effective on the day following
 
11 the termination of coverage under the group policy, and shall be
 
12 renewable annually.
 
13      (f)  The premium for the converted policy shall be
 
14 calculated on the basis of the insured's age at inception of
 
15 coverage under the group policy from which conversion is made;
 
16 provided that where the group policy from which conversion is
 
17 made is a replacement to a previous group policy, the premium
 
18 shall be calculated on the basis of the insured's age at
 
19 inception of the previous group policy.
 
20      (g)  Continuation of coverage or issuance of a converted
 
21 policy shall be mandatory except in the following circumstances:
 
22      (1)  Termination of group coverage resulted from an
 
23           individual's failure to make any required payment of
 
24           premium or contribution when due; or
 

 
Page 35                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 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 additionally coverage,
 
20 together with the full benefits provided by the converted policy,
 
21 would result in payment of more that one hundred per cent of
 
22 incurred expenses.  The provision shall only be included in the
 
23 converted policy if the converted policy also provides for a
 

 
Page 36                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 premium decrease or refund which reflects the reduction in
 
 2 benefits payable. 
 
 3      (i)  The converted policy may provide that the benefits
 
 4 payable under the converted policy, together with the benefits
 
 5 payable under the group policy from which conversion is made,
 
 6 shall not exceed those that would have been payable had the
 
 7 individual's coverage under the group policy remained in force
 
 8 and effect. 
 
 9      (j)  Notwithstanding any other provision of this section, an
 
10 insured individual whose eligibility for group long-term care
 
11 coverage is based upon the individual's relationship to another
 
12 person shall be entitled to continuation of coverage under the
 
13 group policy upon termination of the qualifying relationship by
 
14 death or dissolution of marriage.
 
15      (k)  As used in this section "managed care plan" means a
 
16 health care or assisted living arrangement designed to coordinate
 
17 patient care or control costs through utilization review, case
 
18 management, or use of specific provider networks.
 
19      431:10A-705  Policy practices and provision; discontinuance
 
20 and replacement; group policies. If a group long-term care
 
21 insurance policy is replaced by another group long-term care
 
22 insurance policy issued to the same policyholder, the succeeding
 
23 insurer shall offer coverage to all persons covered under the
 

 
Page 37                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 previous group policy on its date of termination.  Coverage
 
 2 provided or offered to individuals by the insurer and premiums
 
 3 charged to a person under the new group policy shall not:
 
 4      (1)  Result in an exclusion for preexisting conditions that
 
 5           would have been covered under the group policy being
 
 6           replaced; and 
 
 7      (2)  Vary or otherwise depend on the individual's health or
 
 8           disability status, claim experience, or use of long-
 
 9           term care services.
 
10      431:10A-706  Unintentional lapse; prevention; group and
 
11 individual policies.(a) Every insurer offering long-term care
 
12 insurance shall comply with this section to prevent an
 
13 unintentional lapse.
 
14      (b)  No long-term care policy or certificate shall be issued
 
15 until the insurer has received from the applicant with a written
 
16 designation of at least one person, in addition to the applicant,
 
17 who is to receive notice of lapse or termination of the policy or
 
18 certificate for nonpayment of premium, or a written waiver dated
 
19 and signed by the applicant electing not to designate at least
 
20 one person who is to receive the notice of termination, in
 
21 addition to the insured.  Designation shall not constitute
 
22 acceptance of any liability on the third party for services
 
23 provided to the insured.  The form used for the written
 

 
Page 38                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 designation shall provide space clearly designated for listing at
 
 2 least one person.  The designation shall include the person's
 
 3 full name and home address.
 
 4      (c)  When an applicant decides to waive the applicant's
 
 5 right to designate another person, the waiver shall state:
 
 6      "Protection Against Unintended Lapse.  I understand that I
 
 7 have the right to designate at least one person other than myself
 
 8 to receive notice of lapse or termination of this long-term care
 
 9 insurance policy for nonpayment of premium.  I understand that
 
10 notice will not be given until thirty (30) days after a premium
 
11 is due and unpaid.  I elect NOT to designate a person to receive
 
12 this notice"
 
13      (d)  The insurer shall notify the insured of the right to
 
14 change this written designation, no less often that every two
 
15 years.
 
16      (e)  The thirty day requirement in section 431:10A-707 shall
 
17 not be applicable if payment for a long-term care insurance
 
18 policy or certificate is made through a payroll or pension
 
19 deduction plan.  If payment is made through a payroll or pension
 
20 deduction plan, the notice requirement shall be extended to sixty
 
21 days after the insured is no longer on a payroll or pension
 
22 deduction plan.  The insurer shall clearly indicate whether
 
23 payment is being made through a plan.
 

 
Page 39                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      431:10A-707  Lapse or termination for nonpayment of
 
 2 premium; group and individual policies. No policy or
 
 3 certificate shall lapse or terminate for nonpayment of premiums
 
 4 unless the insurer, at least thirty days before the effective
 
 5 date of the lapse or termination, has given notice to the insured
 
 6 and to those persons designated in section 431:10A-706(b) at the
 
 7 address provided by the insured for purposes of receiving notice
 
 8 of lapse or termination.  Notice shall be given by first class
 
 9 United States mail, postage prepaid; provided that the notice
 
10 shall not be given until the thirty or sixty day requirements
 
11 under section 431:10A-706(e).  Notice shall be deemed to have
 
12 been given as of five days after the date of mailing.
 
13      431:10A-708  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
 

 
Page 40                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 impairment or the loss of functional capacity contained in the
 
 2 policy or certificate.
 
 3      (b)  This section shall be in conformance with HIPAA or any
 
 4 related regulations.
 
 5      431:10A-709  Disclosure standards; renewability; individual
 
 6 policies.  All individual long-term care insurance policies shall
 
 7 contain a renewability provision.  The provision shall be
 
 8 appropriately captioned, shall appear on the first page of the
 
 9 policy, and shall clearly state the duration of renewability and
 
10 the duration of the term of coverage for which the policy is
 
11 issued and for which it may be renewed; provided that this
 
12 section shall not apply to policies that are part of or combined
 
13 with a life insurance policy and do not contain a nonrenewability
 
14 provision, and under which the right to nonrenew is reserved
 
15 solely to the policyholder.
 
16      431:10A-710  Disclosure standards; riders and endorsements;
 
17 individual policies.(a)  All riders or endorsements added to an
 
18 individual long-term care insurance policy after the date or
 
19 issue, upon reinstatement, or renewal that reduce or eliminate
 
20 benefits or coverage in the policy shall require the insured to
 
21 sign a written acceptance.  This subsection shall not apply if
 
22 the insured makes a written request to the insurer for a rider or
 
23 endorsement.
 

 
Page 41                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      (b)  After the date of issuance, any rider or endorsement
 
 2 that increases benefits or coverage with a concomitant increase
 
 3 in premium during the policy term shall be agreed to in writing
 
 4 by the insured, unless the increase in benefits or coverage is
 
 5 required by law. 
 
 6      (c)  If a separate additional premium is charged for
 
 7 benefits or coverage provided in connection with a rider or
 
 8 endorsement, the premium charge shall be set forth in the policy,
 
 9 rider, or endorsement. 
 
10      431:10A-711  Disclosure standards; payment of benefits;
 
11 group and individual policies.  A long-term care insurance policy
 
12 that provides for payment of benefits based on standards
 
13 described as "usual and customary," "reasonable and customary,"
 
14 or similar words or phrases shall include a definition of these
 
15 terms and an explanation of the terms in its accompanying outline
 
16 of coverage.
 
17      431:10A-712  Disclosure standards; preexisting conditions
 
18 limitation; group and individual policies.  If a long-term care
 
19 insurance policy or certificate contains any limitations with
 
20 respect to preexisting conditions, the limitations shall appear
 
21 as a separate paragraph of the policy or certificate and shall be
 
22 labeled as "Preexisting Condition Limitations."
 
23      431:10A-713  Disclosure standards; other limitations and
 

 


 

Page 42                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 conditions on eligibility for benefits; group and individual
 
 2 policies.  A long-term care insurance policy or certificate
 
 3 containing any limitations or conditions for eligibility other
 
 4 than those prohibited in sections 431:10A-702 and 431:10A-712
 
 5 shall set forth a description of the limitations or conditions,
 
 6 including any required number of days of confinement, in a
 
 7 separate paragraph of the policy or certificate and shall be
 
 8 labeled as "Limitations or Conditions on Eligibility of
 
 9 Benefits."
 
10      431:10A-714  Prohibition against post claims underwriting;
 
11 group and individual policies.(a)  All applications for long-
 
12 term care insurance policies or certificates, except a policy or
 
13 certificate which is guaranteed issue, shall contain clear and
 
14 unambiguous questions designed to ascertain the health condition
 
15 of the applicant.
 
16      (b)  If an application for long-term care insurance contains
 
17 a question that asks whether the applicant has had medication
 
18 prescribed by a physician, it shall also ask the applicant to
 
19 list the medication that has been prescribed.
 
20      (c)  If the medications listed in the application were known
 
21 by the insurer, or should have been known at the time of
 
22 application, to be directly related to a medical condition for
 
23 which coverage would otherwise be denied, then the policy or
 

 
Page 43                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 certificate shall not be rescinded for that condition.
 
 2      (d)  A copy of the completed application or enrollment form
 
 3 shall be delivered to the insured no later than at the time of
 
 4 delivery of the policy or certificate unless it was retained by
 
 5 the applicant at the time of application.
 
 6      (e)  Every insurer or other entity selling or issuing long-
 
 7 term care insurance benefits shall maintain a record of all
 
 8 policy or certificate rescissions, both state and countrywide,
 
 9 except those that the insured voluntarily effectuated.  Every
 
10 insurer shall annually furnish this information to the insurance
 
11 commissioner in the format prescribed by the National Association
 
12 of Insurance Commissioners.
 
13      431:10A-715  Minimum standards for home health and
 
14 community care benefits; group and individual policies.  (a)  A
 
15 long-term care insurance policy or certificate that provides
 
16 benefits for home health care of community care services shall
 
17 not limit or exclude benefits by:
 
18      (1)  Requiring that the insured would need care in a skilled
 
19           nursing facility if home health care services were not
 
20           provided;
 
21      (2)  Requiring that the insured first or simultaneously
 
22           receive nursing or therapeutic services, or both, in a
 
23           home, community, or institutional setting before home
 

 
Page 44                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1           health care services are covered;
 
 2      (3)  Limiting eligible services provided by registered
 
 3           nurses or licensed practical nurses;
 
 4      (4)  Requiring that a nurse or therapist provide services
 
 5           covered by the policy or certificate that can be
 
 6           provided by a home health aide, or other licensed or
 
 7           certified home care worker acting within the scope of
 
 8           licensure or certification;
 
 9      (5)  Excluding coverage for personal care services provided
 
10           by a home health aide;
 
11      (6)  Requiring that the provision of home health care
 
12           services be at a level of certification or licensure
 
13           greater that that required by the eligible service;
 
14      (7)  Requiring that the insured or claimant have an acute
 
15           condition before home health care services are covered;
 
16      (8)  Limiting benefits to services provided by Medicare-
 
17           certified agencies or providers; or 
 
18      (9)  Excluding coverage for adult day care service.
 
19      (b)  A long-term care insurance policy or certificate, if it
 
20 provides for home health or community care services, shall
 
21 provide total home health or community care coverage that is a
 
22 dollar amount equivalent to at least one-half of one year's
 
23 coverage available for nursing home benefits under the policy or
 

 
Page 45                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 certificate, at the time covered home health or community care
 
 2 services are being received.  This subsection shall not apply to
 
 3 policies or certificates issued to residents of continuing care
 
 4 retirement communities.
 
 5      (c)  Home health care coverage may be applied to non-home
 
 6 health care benefits provided in the policy or certificate when
 
 7 determining maximum coverage under the terms of the policy or
 
 8 certificate; provided that this subsection shall not imply that
 
 9 home health care may be restricted to a period of time.
 
10      431:10A-716  Requirement to offer inflation protection;
 
11 group and individual policies.(a)  No insurer may offer a long-
 
12 term care insurance policy unless the insurer also offers to the
 
13 policyholder, in addition to any other inflation protection, the
 
14 option to purchase a policy that provides for benefit levels to
 
15 increase with benefit maximums or reasonable duration which are
 
16 meaningful to account for reasonably anticipated increases in the
 
17 costs of long-term care services covered by the policy.  The
 
18 insurer shall offer to each policyholder, at the time of
 
19 purchase, the option to purchase a policy with an inflation
 
20 protection feature no less favorable than one of the following:
 
21      (1)  Increases benefit levels annually in a manner so that
 
22           the increases are compounded annually at a rate not
 
23           less that five per cent;
 

 
Page 46                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      (2)  Guarantees the insured individual the right to
 
 2           periodically increase benefit levels without providing
 
 3           evidence of insurability or health status so long as
 
 4           the option for the previous period has not been
 
 5           declined.  The amount of the additional benefit shall
 
 6           be no less than the difference between the existing
 
 7           policy benefit and that benefit compounded annually at
 
 8           a rate of at least five per cent for the period
 
 9           beginning with the purchase of the existing benefit and
 
10           extending until the year in which the offer is made; or
 
11      (3)  Covers a specified percentage of actual or reasonable
 
12           charges and does not include a maximum specified
 
13           indemnity amount or limit.
 
14      (b)  Where the policy is issued to a group, the required
 
15 offer in subsection (a) shall be made to the group policyholder;
 
16 provided that if the policy is issued to a group described in the
 
17 definition of "group long-term care insurance", other than to a
 
18 continuing care retirement community, the offering shall be made
 
19 to each certificate holder. 
 
20      (c)  This section shall not apply to life insurance policies
 
21 or riders containing accelerated long-term care benefits.  
 
22      (d)  Every insurer shall include the following information
 
23           in the outline of coverage or with the outline of
 

 
Page 47                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1           coverage:
 
 2           (1)  A graphic comparison of the benefit levels of a
 
 3                policy that increases benefits over the policy
 
 4                period with a policy that does not increase
 
 5                benefits for one of the following duration
 
 6                periods:
 
 7                (A)  At least a twenty year period;
 
 8                (B)  Until attained age; or
 
 9                (C)  Throughout period of coverage; and
 
10           (2)  Any expected premium increases or additional
 
11                premiums to pay for automatic or optional benefit
 
12                increases.
 
13      (e)  Inflation protection benefit increases under a policy
 
14 which contains these benefits shall continue without regard to an
 
15 insured's age, claim status or claim history, or the length of
 
16 time the person has been insured under the policy
 
17      (f)  An offer of inflation protection that provides for
 
18 automatic benefit increases shall include an offer of a premium
 
19 which the insurer expects to remain constant.  The offer shall
 
20 disclose in a conspicuous manner that the premium may change in
 
21 the future unless the premium is guaranteed to remain constant.
 
22      (g)  Inflation protection shall be included in a long-term
 
23 care insurance policy unless the insurer obtains a rejection of
 

 
Page 48                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 inflation protection signed by the policyholder as required in
 
 2 subsection (h).
 
 3      (h)  The rejection shall be considered part of the
 
 4 application and shall state:
 
 5      "I have reviewed the outline of coverage and the graphs that
 
 6 compare the benefits and premiums of this policy with and without
 
 7 inflation protection.  Specifically, I have reviewed Plans    ,
 
 8 and I REJECT INFLATION PROTECTION.
 
 9             SUBPART D.  NON-HIPAA CONSUMER PROTECTION
 
10      431:10A-801  Disclosure standards; disclosure of tax
 
11 consequences; individual policies.  If a life insurance policy
 
12 provides for an accelerated benefit for long-term care, the
 
13 insurer shall make a written disclosure at the time of
 
14 application for the policy or rider and at the time the
 
15 accelerated benefit payment request is submitted that receiving
 
16 accelerated benefits may have taxable consequences and that
 
17 assistance should be sought from a personal tax advisor.  The
 
18 disclosure statement shall be prominently displayed on the first
 
19 page of the policy or rider and any other related documents.
 
20      431:10A-802  Disclosure standards; disclosure of tax
 
21 qualified policy; group and individual policies.  Any long-term
 
22 care insurance policy or certificate that is intended to be a tax
 
23 qualified long-term care insurance policy shall contain a written
 

 
Page 49                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 disclosure by the insurer that the policy is intended to meet the
 
 2 tax qualifications for a long-term care insurance policy under
 
 3 the tax provisions of the HIPAA.  The disclosure shall inform the
 
 4 applicant the policy is intended to be a tax qualified policy and
 
 5 that the applicant should consult a personal tax advisor before
 
 6 purchasing a tax qualified policy to determine the tax
 
 7 consequences to the applicant.
 
 8      431:10A-803  Disclosure standards; benefit trigger; group
 
 9 and individual policies. Activities of daily living and
 
10 cognitive impairment shall be used to measure an insured's long-
 
11 term care and shall be described in the policy or certificate in
 
12 a separate paragraph.  The paragraph shall be labeled
 
13 "Eligibility for the Payment of Benefits."  Any additional
 
14 benefit triggers shall also be explained in this section.  If
 
15 these benefit triggers differ for different benefits, an
 
16 explanation of the trigger shall accompany each benefit
 
17 description.  If an attending physician or other specified person
 
18 must certify a certain level of functional dependency in order to
 
19 be eligible for benefits, this requirement shall also be
 
20 specified.
 
21      431:10A-804  Standards for benefit triggers; group and
 
22 individual policies.(a)  A long-term care insurance policy
 
23 shall condition the payment of benefits on a determination of the
 

 
Page 50                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

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

 
Page 51                                                    131
                                     S.B. NO.           S.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 a physician, nurse, or social worker.
 
 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 July 15, 1999, if a group long-term care insurance
 
14 policy was in force on that date.
 
15      431:10A-805  Prohibition against preexisting conditions and
 
16 probationary periods in replacement policies and certificates;
 
17 group and individual policies.  If a long-term care insurance
 
18 policy or certificate replaces another long-term care insurance
 
19 policy or certificate, the replacing issuer shall waive any time
 
20 periods applicable to preexisting conditions and probationary
 
21 periods in the new long-term care policy for similar benefits to
 
22 the extent that similar exclusions have been satisfied under the
 
23 original policy.
 

 
Page 52                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      431:10A-806  Nonforfeiture benefit requirement; group and
 
 2 individual policies.(a)  No long-term care insurance policy or
 
 3 certificate shall be 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 includes 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
 

 
Page 53                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

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

 
Page 54                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

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

 
Page 55                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1                policy or certificate is no longer subject to
 
 2                attained age rating; and
 
 3      (5)  Nonforfeiture credits may be used for all care and
 
 4           services qualifying for benefits under the terms of the
 
 5           policy or certificate, up to the limits specified in
 
 6           the policy or certificate.
 
 7      (g)  All benefits paid by the insurer while the policy or
 
 8 certificate is in premium paying status and in paid up status
 
 9 shall not exceed the maximum benefits which would be payable if
 
10 the policy or certificate had remained in premium paying status.
 
11      (h)  There shall be no difference in the minimum
 
12 nonforfeiture benefits as required under this section for group
 
13 and individual policies.
 
14      (i)  The provisions of this section shall apply to any long-
 
15 term care policy issued or delivered in this State after the
 
16 effective date of this Act.
 
17      (j)  Premiums charged for a policy or certificate containing
 
18 nonforfeiture benefits or contingent benefit on lapse shall be
 
19 subject to the loss ratio requirements under section 431:10A-506
 
20      (k)  A replacing insurer that purchases or assumes a block
 
21 or blocks of long-term care insurance policies from another
 
22 insurer shall calculate the percentage increase based on the
 
23 initial annual premium paid by the insured when the policy was
 

 
Page 56                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 first purchased from the original insurer.
 
 2       SUBPART E.  HIPAA LONG-TERM CARE INSURER REQUIREMENTS
 
 3      431:10A-901  Requirements for application forms and
 
 4 replacement coverage; group and individual policies.(a)
 
 5 Application forms shall include questions designed to elicit
 
 6 information as to whether, as of the date of application, the
 
 7 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?
 

 
Page 57                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

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

 
Page 58                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 and sickness or long-term care insurance coverage upon issuance
 
 2 of the policy.
 
 3      (g)  Where replacement is intended, the replacing insurer
 
 4 shall notify, in writing, the existing insurer of the proposed
 
 5 replacement.  The existing policy shall be identified by the
 
 6 insurer, name of the insured, and policy number or address
 
 7 including zip code.  Notice shall be made within five working
 
 8 days from the date the application is received by the insurer or
 
 9 the date the policy is issued, whichever occurs first.
 
10      (h)  Life insurance policies that accelerate benefits for
 
11 long-term care shall comply with this section if the policy being
 
12 replaced is a long-term care insurance policy.  If the policy
 
13 being replaced is a life insurance policy, the insurer shall
 
14 comply with the replacement requirement of the NAIC Replacement
 
15 Life and Annuities Model Regulations.  If a life insurance policy
 
16 that accelerates benefits for long-term care is replaced by
 
17 another policy, the replacing insurer shall comply with both the
 
18 long-term care and the life insurance replacement requirements.  
 
19      (i)  The notice forms required by subsections (e) and (f)
 
20 shall substantially comply with the form requirements of this
 
21 section.
 
22      431:10A-902  Reporting requirements; group and individual
 
23 policies.(a)  Every insurer shall maintain records for each
 

 
Page 59                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

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

 
Page 60                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      (c)  For purposes of this section, "report" means on a
 
 2 statewide basis.
 
 3      431:10A-903  Filing requirements; advertising; group and
 
 4 individual policies.  (a)  Any entity providing long-term care
 
 5 insurance or benefits shall provide a copy of any long-term care
 
 6 insurance advertisement intended for use in this State whether
 
 7 through written or electronic medium to the commissioner.  
 
 8      (b)  Any advertisement used in this State shall be retained
 
 9 by the entity for at least three years from the date the
 
10 advertisement was first used.
 
11      (c)  The commissioner may exempt from the requirements of
 
12 this section any advertising when, in the commissioner's opinion,
 
13 this requirement may not reasonably be applied.   
 
14      431:10A-904  Standards for marketing; group and individual
 
15 policies.(a)  Any entity offering long-term care insurance
 
16 coverage in this State, directly or through producers, shall:
 
17      (1)  Establish marketing procedures to assure that any
 
18           comparison of policies by its agents or other producers
 
19           will be fair and accurate;
 
20      (2)  Establish marketing procedures to assure excessive
 
21           insurance is not sold or issued;
 
22      (3)  Display prominently by type, stamp, or other
 
23           appropriate means, on the first page of the outline of
 

 
Page 61                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1           coverage and policy:
 
 2           "Notice to buyer: This policy may not cover all of the
 
 3           costs associated with long-term care incurred by the
 
 4           buyer during the period of coverage.  The buyer is
 
 5           advised to review carefully all policy limitations."
 
 6      (4)  Inquire and otherwise make every reasonable effort to
 
 7           identify whether a prospective applicant or enrollee
 
 8           for long-term care insurance currently has accident and
 
 9           sickness or long-term care insurance and the types and
 
10           amounts of any such insurance;
 
11      (5)  Every entity marketing long-term care insurance shall
 
12           establish procedures for audits to verify compliance
 
13           with this subsection;
 
14      (6)  Provide written notice to the prospective policyholder
 
15           or certificateholder of a state senior insurance
 
16           counseling program including the name, address, and
 
17           telephone number of the program; provided that the
 
18           program has been approved by the commissioner; and
 
19      (7)  Use the terms "noncancellable" or "level premium" only
 
20           when the policy or certificate conforms to section
 
21           431:10A-504.
 
22      (b)  In addition to the acts or practices prohibited in
 
23 chapter 431, article 13, all of the following are prohibited:
 

 
Page 62                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      (1)  Twisting.  Knowingly making any misleading
 
 2           representation or incomplete or fraudulent comparison
 
 3           of any insurance policies or insurers for the purpose
 
 4           of inducing, or tending to induce, any person to lapse,
 
 5           forfeit, surrender, terminate, retain, pledge, assign,
 
 6           borrow on, or convert any insurance policy or to take
 
 7           out a policy of insurance with another insurer.
 
 8      (2)  High pressure tactics.  Employing any method of
 
 9           marketing having the effect of or tending to induce the
 
10           purchase of insurance through force, fright, threat,
 
11           whether explicit or implied, or undue pressure to
 
12           purchase or recommend purchase of insurance.
 
13      (3)  Cold lead advertising.  Making use directly or
 
14           indirectly of any method of marketing which fails to
 
15           disclose in a conspicuous manner that a purpose of the
 
16           method of marketing is solicitation of insurance and
 
17           that contact will be made by an insurance agent or
 
18           insurance company.
 
19      431:10A-905  Standards of marketing; certain group
 
20 policies.(a)  Every association or trust defined in paragraph
 
21 (3) in the definition of "group long-term care insurance", when
 
22 endorsing or selling long-term care insurance, shall educate its
 
23 members concerning long-term care issues in general so that its
 

 
Page 63                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 members can make informed decisions.  The association or trust
 
 2 shall provide objective information regarding long-term care
 
 3 insurance policies or certificates endorsed or sold through the
 
 4 association or trust to ensure that members of the association or
 
 5 trust receive a balanced and complete explanation of the features
 
 6 in the policies or certificates being endorsed or sold.
 
 7      (b)  Where an association or trust is endorsing or selling a
 
 8 long-term care insurance policy or certificate, the insurer shall
 
 9 file the following information with the commissioner:
 
10      (1)  The policy or certificate;
 
11      (2)  A corresponding outline of coverage; and
 
12      (3)  Any advertisements requested by the commissioner.
 
13      (c)  The association or trust shall disclose in any long-
 
14 term care insurance solicitation:
 
15      (1)  The specific nature and amount of the comparison
 
16           arrangements (including all fees, commissions,
 
17           administrative fees, and other forms of financial
 
18           support) that the association or trust receives from
 
19           endorsement or sale of the policy or certificate of its
 
20           members; and
 
21      (2)  A brief description of the process under which the
 
22           policies and the insurer issuing the policies were
 
23           selected.
 

 
Page 64                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      (d)  If the association or trust and insurer have
 
 2 interlocking directorates or trustees arrangements, the
 
 3 association or trust shall disclose this fact to its members.
 
 4      (e)  The board of directors of an association or the
 
 5 trustees of a trust endorsing or selling long-term care insurance
 
 6 policies or certificates shall review and approve the insurance
 
 7 policies as well as the compensation arrangements with the
 
 8 insurer.
 
 9      (f)  The association or trust shall also:
 
10      (1)  At the time of the association's or trust's decision to
 
11           endorse, engage the services of a person with a
 
12           expertise in long-term care insurance not affiliated
 
13           with the insurer to conduct an examination of the
 
14           policies, including its benefits, features, and rates,
 
15           and update the examination thereafter in the event of
 
16           material change;
 
17      (2)  Actively monitor the marketing efforts of the insurer
 
18           and its agents; and
 
19      (3)  Review and approve all marketing materials or other
 
20           insurance communications used to promote sales or sent
 
21           to members regarding the policies or certificates.
 
22      (g)  No group long-term care insurance policy or certificate
 
23 may be issued to an association unless the insurer files with the
 

 
Page 65                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 commissioner the information required in this section.
 
 2      (h)  The insurer shall not issue a long-term care policy or
 
 3 certificate to an association or trust, or continue to market the
 
 4 policy or certificate unless the insurer certifies annually that
 
 5 the association has complied with the requirements of this
 
 6 section.
 
 7      (i)  Failure to comply with the filing and certification
 
 8 requirements of this section constitutes an unfair trade practice
 
 9 under chapter 431, article 13.
 
10      431:10A-906  Delivery of shopper's guide; group and
 
11 individual policies.(a)  Each prospective applicant of a long-
 
12 term care insurance policy or certificate shall be provided with
 
13 a copy of a long-term care shopper's guide in a format developed
 
14 by the NAIC or approved by the commissioner.  
 
15      (b)  If solicitation is done through an agent, the agent
 
16 shall deliver a shopper's guide prior to presentation of the
 
17 application or enrollment form.
 
18      (c)  If solicitation is done through a direct response
 
19 solicitation, the shopper's guide shall be presented in
 
20 conjunction with any application or enrollment form.  
 
21      (d)  Life insurance policies or riders containing
 
22 accelerated long-term care benefits are not required to furnish a
 
23 shopper's guide but shall furnish a policy summary as required by
 

 
Page 66                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1 this part.
 
 2      431:10A-907  Standards format outline of coverage; group
 
 3 and individual policies.(a)  The outline of coverage shall:
 
 4      (1)  Be a free-standing document, using at least ten-point
 
 5           type;
 
 6      (2)  Not contain material that is advertising in nature; and
 
 7      (3)  Emphasize material through underscoring,
 
 8           capitalization, or other means that provides prominence
 
 9           equivalent to underscoring or capitalization.
 
10      (b)  Every outline of coverage shall be substantially
 
11 similar to the outline of coverage in section 431:10A-905, or as
 
12 approved by the commissioner.
 
13      431:10A-908  Suitability; group and individual policies.
 
14 (a)  This section shall not apply to life insurance policies that
 
15 accelerate benefits for long-term care.
 
16      (b)  Every issuer marketing long-term care insurance shall:
 
17      (1)  Develop and use suitability standards to determine
 
18           whether the purchase or replacement of long-term care
 
19           insurance is appropriate for the needs of the
 
20           applicant;
 
21      (2)  Train its agents in the use of its suitability
 
22           standards; and
 
23      (3)  Maintain a copy of its suitability standards and make
 

 
Page 67                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1           them available for inspection upon request by the
 
 2           commissioner.
 
 3      (c)  The issuer and agent shall develop procedures that are
 
 4 designed to determine whether the applicant meet the standards
 
 5 developed by the issuer and shall consider the following:
 
 6      (1)  The ability to pay for the proposed coverage and other
 
 7           pertinent financial information related to the purchase
 
 8           of the coverage;
 
 9      (2)  The applicant's goals or needs with respect to long-
 
10           term care and the advantages or disadvantages of
 
11           insurance to meet these goals or needs; and
 
12      (3)  The values, benefits, and costs of the applicant's
 
13           existing insurance, if any, when compared to the
 
14           values, benefits, and costs of the recommended purchase
 
15           or replacement.
 
16 The issuer or agent shall make reasonable efforts to obtain the
 
17 information.  The efforts shall include presentation to the
 
18 applicant, at or prior to application, of the "Long-Term Care
 
19 Insurance Personal Worksheet."  The worksheet shall contain at a
 
20 minimum information contained in Appendix B and C of the NAIC
 
21 Long-Term Care Insurance Model Regulations, July 1998, and shall
 
22 be set out in at least twelve point type.  A copy of the issuer's
 
23 personal worksheet shall be filed with the commissioner.
 

 
Page 68                                                    131
                                     S.B. NO.           S.D. 2
                                                        
                                                        

 
 1      (d)  Nothing in this section shall restrict an issuer from
 
 2 requesting more information to comply with this section.
 
 3      (e)  A completed worksheet shall be returned to the issuer
 
 4 prior to the issuer's consideration of the applicant for
 
 5 coverage, except the personal worksheet need not be returned for
 
 6 sales of employer group long-term care insurance to employees and
 
 7 their dependents.
 
 8      (f)  Any information contained in the personal worksheet
 
 9 shall not be sold or disseminated outside of the issuer's company
 
10 or agency.
 
11      (g)  The issuer shall use the suitability standards it has
 
12 developed pursuant to this section in determining the
 
13 appropriateness of long-term care insurance coverage for a
 
14 particular applicant.  The agent of the issuer shall use the
 
15 suitability standards developed by the issuer.
 
16      (h)  If the issuer determines that the applicant does not
 
17 meet its financial suitability standards, or if the applicant has
 
18 declined to provide the information, the issuer may reject the
 
19 application.  In the alternative, the issuer shall send the
 
20 applicant a letter similar to the NAIC Long-Term Care Insurance
 
21 Model Regulations July 1998, Appendix D.  If the applicant has
 
22 declined to provide financial information, the issuer may use
 
23 some other method to verify the applicant's intent.  Either the
 

 
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 1 applicant's returned letter or a record of the alternate method
 
 2 of verification shall be made part of the applicant's file.
 
 3      (i)  The issuer shall report annually to the commissioner
 
 4 the total number of applications received from residents of this
 
 5 State, the number of those who declined to provide information on
 
 6 a personal worksheet, the number of applicants who did not meet
 
 7 the suitability standards, and the number of those who chose to
 
 8 confirm after receiving the suitability letter.
 
 9               SUBPART F.  NON-HIPAA LONG-TERM CARE 
 
10                       INSURER REQUIREMENTS
 
11      431:10A-1001  Filing requirements; group policies.  An
 
12 insurer offering long-term care insurance destined for use or
 
13 application in this State shall file with the commissioner
 
14 evidence that the group policy or certificate thereunder has been
 
15 approved by a state having statutory or regulatory long-term care
 
16 insurance requirements substantially similar to this part.
 
17      431:10A-1002  Reserve standards; life insurance policies or
 
18 riders; group and individual policies.(a)  If long-term care
 
19 benefits are provided through the acceleration of benefits under
 
20 a group or individual life policy or rider, the policy reserves
 
21 for the benefits shall be determined in accordance with section
 
22 431:5-307.  Claim reserves shall also be established in the case
 
23 where the policy or rider is in claim status.
 

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

 
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 1      (7)  Renewability;
 
 2      (8)  Ability to raise premiums;
 
 3      (9)  Marketing method;
 
 4     (10)  Underwriting procedures;
 
 5     (11)  Claims adjustment procedures;
 
 6     (12)  Waiting period;
 
 7     (13)  Maximum benefit;
 
 8     (14)  Availability of eligible facilities;
 
 9     (15)  Margins in claim costs;
 
10     (16)  Optional nature of benefit;
 
11     (17)  Delay in eligibility requirements;
 
12     (18)  Inflation protection; and
 
13     (19)  Guaranteed insurability option.
 
14      (c)  Any applicable valuation morbidity table shall be
 
15 certified as appropriate as a statutory valuation table by a
 
16 member of the American Academy of Actuaries.
 
17      431:10A-1003  Reserve standards; insurance other than life;
 
18 group and individual policies.  When long-term care benefits are
 
19 provided through insurance other than life insurance, the
 
20 reserves shall be determined by a table certified as appropriate
 
21 as a statutory valuation table by a member of the American
 
22 Academy of Actuaries and approved by the commissioner."
 
23                             PART III
 

 
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 1      SECTION 3.  Section 87-23.5, Hawaii Revised Statutes, is
 
 2 amended by amending subsections (a) and (b) to read as follows:
 
 3      "(a)  The board [of trustees] shall determine the benefits
 
 4 of a long-term care benefits plan for employee-beneficiaries,
 
 5 their spouses or reciprocal beneficiaries, as well as their
 
 6 parents and grandparents, including in-laws, and qualified-
 
 7 beneficiaries.  The plan shall comply with [the provisions of]
 
 8 article 10A, part V, of chapter 431[, upon initial plan
 
 9 implementation only].
 
10      (b)  Notwithstanding any other law to the contrary, [such]
 
11 the benefits shall be available only to employee-beneficiaries,
 
12 their spouses or reciprocal beneficiaries, as well as their
 
13 parents and grandparents, including in-laws, and qualified-
 
14 beneficiaries who enroll between the ages of twenty and eighty-
 
15 five.  Eligible persons must comply with the plan's age,
 
16 enrollment, medical underwriting, and contribution requirements."
 
17      SECTION 4.  Section 432:1-102, Hawaii Revised Statutes, is
 
18 amended by amending subsection (a) to read as follows:
 
19      "(a)  Part III and part V of article 10A of chapter 431
 
20 shall apply to nonprofit medical indemnity or hospital service
 
21 associations.  Such associations shall be exempt from the
 
22 provisions of part I of article 10A; provided that such exemption
 
23 is in compliance with applicable federal statutes and
 

 
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 1 regulations."
 
 2      SECTION 5.  Section 431:2-201.5, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "[[]431:2-201.5[]]  Conformity to federal law.(a)  The
 
 5 provisions of the Health Insurance Portability and Accountability
 
 6 Act of 1996, P.L. 104-191, as it relates to group and individual
 
 7 health insurance, and as to long-term care insurance to the
 
 8 extent provided in part V of article 10A, chapter 431, shall
 
 9 apply to title 24, except:
 
10      (1)  Where state law provides greater health benefits or
 
11           coverage than the Health Insurance Portability and
 
12           Accountability Act of 1996, P.L. 104-191 then the state
 
13           law shall be applicable;
 
14      (2)  This section shall not be applicable or affect life
 
15           insurance, endowment, or annuity contracts, or any
 
16           supplemental contract thereto, described in
 
17           section 431:10A-101(4);
 
18      (3)  The following definitions shall be used when applying
 
19           the Health Insurance Portability and Accountability Act
 
20           of 1996, P.L. 104-191:
 
21           (A)  "Employee" means an employee who works on a full-
 
22                time basis with a normal workweek of twenty hours
 
23                or more;
 
24           (B)  "Group health issuer" means all persons offering
 
25                benefits under group health plans, but shall not
 
26                include those persons offering benefits exempted
 
27                from title I of the Health Insurance Portability
 
28                and Accountability Act of 1996, P.L. 104-191 under
 
29                section 706(c) of the Employee Retirement Income
 
30                Security Act of 1974 and sections 2747 and 2791(c)
 
31                of the Public Health Service Act; and
 
32           (C)  "Small employer" means an employer who employs
 
33                between one and no more than fifty employees;
 
34      (4)  All group health issuers shall offer group health plans
 
35           to small employers whose employees live, work, or
 
36           reside in the group health issuer's service areas;
 
37           provided that the commissioner may exempt a group
 
38           health issuer if the commissioner determines that the
 
39           group health issuer does not have the capacity to
 
40           deliver services adequately to enrollees of additional
 
41           groups given its obligation to existing employer
 
42           groups; and
 
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 1      (5)  A group health issuer shall be prohibited from imposing
 
 2           any preexisting condition exclusion.
 
 3      (b)  The insurance commissioner may adopt rules to
 
 4 implement, clarify, or conform title 24 to the Health Insurance
 
 5 Portability and Accountability Act of 1996, P.L. 104-191.
 
 6      (c)  The adoption of the Health Insurance Portability and
 
 7 Accountability Act of 1996, P.L. 104-191 for the purposes of
 
 8 title 24 is not an adoption for any purposes for income taxes
 
 9 under chapter 235[.]; except as specifically provided in part V
 
10 of article 10A, chapter 431."
 
11      SECTION 6.  Section 431:16-205, Hawaii Revised Statutes, is
 
12 amended by amending subsection (g) to read as follows:
 
13      "(g)  Member insurer means any insurer licensed or who holds
 
14 a certificate of authority to transact in this State any kind of
 
15 insurance for which coverage is provided under section
 
16 431:16-203, and includes any insurer whose license or certificate
 
17 of authority in this State may have been suspended, revoked, not
 
18 renewed, or voluntarily withdrawn, but does not include:
 
19      (1)  A nonprofit hospital or medical service organization;
 
20           provided that the organization is not offering long-
 
21           term care insurance;
 
22      (2)  A health maintenance organization;
 
23      (3)  A fraternal benefit society;
 

 
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 1      (4)  A mandatory state pooling plan;
 
 2      (5)  A mutual assessment company or any entity that operates
 
 3           on an assessment basis;
 
 4      (6)  An insurance exchange; or
 
 5      (7)  Any entity similar to any of the above."
 
 6      SECTION 7.  The insurance commissioner shall request the
 
 7 Internal Revenue Service for a ruling on whether this Act
 
 8 conforms to the Health Insurance Portability and Accountability
 
 9 Act of 1996, P.L. No. 104-191, as amended.
 
10                             PART VII.
 
11      SECTION 8.  There is appropriated out of the general
 
12 revenues of the State of Hawaii the sum of $         , or so much
 
13 thereof as may be necessary for fiscal year 1999-2000, for the
 
14 insurance division to hire a qualified long-term care insurance
 
15 actuary and to increase its staff to enable it to adequately
 
16 review long-term care insurance filings.
 
17      SECTION 9.  The sum appropriated under section 8 shall be
 
18 expended by the department of commerce and consumer affairs for
 
19 the purposes of this Part.
 
20      SECTION 10.  Chapter 431:10A, Part V, Hawaii Revised
 
21 Statutes, is repealed.
 
22      SECTION 11.  If the provision of this Act, or the
 
23 application thereof to any person or circumstance is held
 
24 invalid, the invalidity does not affect other provisions or
 

 
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 1 applications of the Act which can be given effect without the
 
 2 invalid provision or application, and to this end the provisions
 
 3 of this Act are severable.
 
 4      SECTION 12.  Statutory material to be repealed is bracketed.
 
 5 New statutory material is underscored.
 
 6      SECTION 13.  This Act shall take effect upon its approval.