[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 538 Introduced in Senate (IS)]
103d CONGRESS
1st Session
S. 538
To amend title XIX of the Social Security Act to establish Federal
standards for long-term care insurance policies, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 9 (legislative day, March 3), 1993
Mr. Pryor introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend title XIX of the Social Security Act to establish Federal
standards for long-term care insurance policies, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Long-Term Care Insurance Consumer
Protection Act of 1993''.
SEC. 2. ESTABLISHMENT OF FEDERAL STANDARDS FOR LONG-TERM CARE INSURANCE
POLICIES.
(a) In General.--Title XIX of the Social Security Act is amended by
adding at the end the following new section:
``long-term care insurance standards
``Sec. 1931. (a) Implementation of Policy Standards.--
``(1) In general.--
``(A) New issues.--No long-term care insurance
policy (as defined in subsection (i)) may be issued,
sold, or offered for sale in a State on or after the
date specified in paragraph (4) unless--
``(i) the Secretary determines that the
State has established a regulatory program
that--
``(I) provides for the application
and enforcement of the standards
established under paragraph (3), and
``(II) complies with the
requirements of paragraph (5),
by the date specified in paragraph (4), and the
policy has been approved by the State
commissioner or superintendent of insurance
under such program; or
``(ii) if the State has not established
such a program, the policy has been certified
by the Secretary (in accordance with such
procedures as the Secretary establishes) as
meeting the standards established under
paragraph (3).
For purposes of this paragraph, the advertising or
soliciting with respect to a policy, directly or
indirectly, shall be deemed the offering for sale of
the policy.
``(B) Review of state regulatory programs.--The
Secretary periodically shall review regulatory programs
described in subparagraph (A)(i) to determine if they
continue to provide for the application and enforcement
of the standards established under paragraph (3).
``(2) Sanctions.--Any person who issues or renews a policy,
on or after the date specified in paragraph (4), in violation
of paragraph (1), is subject to a civil money penalty of not to
exceed $25,000 for each such violation. The provisions of
section 1128A (other than the first sentence of subsection (a)
and other than subsection (b)) shall apply to a civil money
penalty under this paragraph in the same manner as such
provisions apply to a penalty or proceeding under section
1128A(a).
``(3) Promulgation of standards.--
``(A) In general.--If, within 12 months after the
date of the enactment of this section, the National
Association of Insurance Commissioners (in this section
referred to as the `NAIC') promulgates model standards
that incorporate the requirements of subsections (d)
through (h), such standards shall apply under paragraph
(1).
``(B) Default.--If the NAIC does not promulgate the
model standards under subparagraph (A) by the deadline
established in that paragraph, the Secretary shall
promulgate, within 12 months after such deadline, a
regulation that provides standards that incorporate the
requirements of subsections (d) through (h) and such
standards shall be applied under paragraph (1).
``(C) Consultation.--In establishing standards
under this paragraph, the NAIC or Secretary shall
consult with a working group composed of
representatives of issuers of long-term care insurance
policies, consumer groups, and other qualified
individuals. Such representatives shall be selected in
a manner so as to assure balanced representation among
the interested groups.
``(D) Limited preemption.--The standards
established under this paragraph preempt provisions of
State law which conflict with such standards, but
nothing in this section shall be construed as
preventing a State from applying standards that provide
greater protection to policyholders of long-term care
insurance policies.
``(4) Deadline for application of standards.--
``(A) In general.--Subject to subparagraph (B), the
date specified in this paragraph for a State is--
``(i) the date the State adopts the
standards established under paragraph (3), or
``(ii) 1 year after the date such standards
are first established,
whichever is earlier.
``(B) State requiring legislation.--In the case of
a State which the Secretary identifies, in consultation
with the NAIC, as--
``(i) requiring State legislation (other
than legislation appropriating funds) in order
for the standards established under paragraph
(3) to be applied, but
``(ii) having a legislature which is not
scheduled to meet in 1994 in a legislative
session in which such legislation may be
considered,
the date specified in this paragraph is the first day
of the first calendar quarter beginning after the close
of the first legislative session of the State
legislature that begins on or after January 1, 1994.
For purposes of the previous sentence, in the case of a
State that has a 2-year legislative session, each year
of such session shall be deemed to be a separate
regular session of the State legislature.
``(5) Additional requirements for approval of state
regulatory programs.--For purposes of paragraph (1)(A)(i)(II),
the requirements of this paragraph for a State regulatory
program are as follows:
``(A) Consumer access to compliance information.--
``(i) In general.--The program must provide
for consumer access to complaints filed with
the State commissioner or superintendent of
insurance with respect to long-term care
insurance policies.
``(ii) Confidentiality.--The access
provided under clause (i) shall be limited to
the extent required to protect the
confidentiality of the identity of individual
policyholders.
``(B) Access to other information.--The program
must provide for consumer access to information
reported under subsection (c)(4).
``(C) Process for approval of premiums.--The
program must provide for a process for approving or
disapproving proposed premium increases with respect to
long-term care insurance policies and must establish a
policy for the holding of public hearings prior to
approval of such a premium increase. No such premium
increase shall be approved (or deemed approved) unless
the proposed increase is accompanied by an actuarial
memorandum which supports the increase and which
contains such information as may be required under the
standards under paragraph (3).
``(b) Regulation of Sales Practices.--
``(1) Duty of good faith and fair dealing.--
``(A) In general.--Each individual who is selling
or offering for sale a long-term care insurance policy
has the duty of good faith and fair dealing to the
purchaser or potential purchaser of such a policy.
``(B) Prohibited practices.--An individual is
considered to have violated subparagraph (A) if the
individual engages in any of the following practices:
``(i) Twisting.--Knowingly making any
misleading representation or incomplete or
fraudulent comparison of any health care
insurance policy or insurers for the purpose of
inducing, or tending to induce, any person to
retain or effect a change with respect to a
long-term care insurance policy.
``(ii) High pressure tactics.--Employing
any method of marketing having the effect of,
or intending to, induce the purchase of long-
term care insurance policy through undue
pressure.
``(iii) Cold lead advertising.--Making use
directly or indirectly of any method of
marketing which fails to disclose in a
conspicuous manner that a purpose of the method
of marketing is solicitation of insurance and
that contact will be made by an insurance agent
or insurance company.
``(2) Completion of medical histories prohibited.--A person
who is selling or offering for sale a long-term care insurance
policy may not complete the medical history portion of an
application.
``(3) Prohibition of sale or issuance to medicaid
beneficiaries.--A person may not knowingly sell or issue a
long-term care insurance policy to an individual who is
eligible for medical assistance (other than only as a qualified
medicare beneficiary) under this title.
``(4) Prohibition of sale or issuance of duplicate service
benefit policies.--A person may not sell or issue a service-
benefit long-term care insurance policy--
``(A) knowing that the policy provides for coverage
that duplicates coverage already provided in another
service-benefit long-term care insurance policy (unless
the policy is intended to replace such other policy),
or
``(B) for the benefit of an individual unless the
individual (or a representative of the individual)
provides a written statement to the effect that the
coverage (i) does not duplicate other coverage in
effect under a service-benefit long-term care insurance
policy or (ii) will replace another service-benefit
long-term care insurance policy.
In this paragraph, the term `service-benefit long-term care
insurance policy' means a long-term care insurance policy which
provides for benefits based on the amount and type of services
furnished, rather than on the amount of expenses incurred.
``(5) Provision of outline of coverage.--No person may sell
or offer for sale a long-term care insurance policy without
providing to the purchaser or potential purchaser (or
representative) an outline of coverage that complies with the
standards established under subsection (a)(3).
``(6) Civil money penalty.--Any person who sells, offers
for sale, or issues a long-term care insurance policy in
violation of this subsection is subject to a civil money
penalty of not to exceed $25,000 for each such violation. The
provisions of section 1128A (other than the first sentence of
subsection (a) and other than subsection (b)) shall apply to a
civil money penalty under this paragraph in the same manner as
such provisions apply to a penalty or proceeding under section
1128A(a).
``(c) Additional Responsibilities of Issuers.--
``(1) Refund of premiums.--If an application for a long-
term care insurance policy (or for a certificate under a group
long-term care insurance policy) is denied or an applicant
returns a policy or certificate within 30 days of the date of
its issuance pursuant to subsection (h), the issuer shall
refund to the applicant, not later than 30 days after the date
of the denial or return, any premiums paid with respect to such
a policy.
``(2) Mailing of policy.--If an application for a long-term
care insurance policy (or for a certificate under a group long-
term care insurance policy) is approved, the issuer shall
transmit to the applicant the policy (or certificate) of
insurance not later than 30 days after the date of the
approval.
``(3) Information on denials of claims.--If a claim under a
long-term care insurance policy is denied, the issuer shall,
within 60 days of the date of a written request by the
policyholder or certificate-holder (or representative)--
``(A) provide a written explanation of the reasons
for the denial, and
``(B) make available all information directly
relating to such denial.
``(4) Reporting of information.--The issuer of a long-term
care insurance policy shall periodically (not less often than
annually) report to the Commissioner or superintendent of
insurance of each State in which the policy is sold, and shall
make available to the Secretary, upon request, information
respecting--
``(A) the long-term care insurance policies of the
issuer that are in force,
``(B) the most recent premiums for such policies
and the premiums imposed for such policies during the
previous 5-year period,
``(C) the lapse rates, replacement rates, and
rescission rates for policies (by agent), and
``(D) the claims denied (as a percentage of claims
submitted) for such policies.
Information under this paragraph shall be reported in a format
specified in the standards established under subsection (a)(3)
to carry out this subsection. For purposes of subparagraph (C),
there shall not be included as a lapse of policy such a lapse
due to the death of the policyholder. For purposes of
subparagraph (D), there shall not be included as a denied claim
a claim that is denied solely because of the failure to meet a
deductible, waiting period, or exclusionary period.
``(5) Access to information.--Each such issuer shall
provide the Secretary and the Commissioner or superintendent of
insurance of each State in which the policy is sold such
information as the Secretary, Commissioner, or superintendent,
may request.
``(6) Provision of outline of coverage for renewals.--Each
issuer of a long-term care insurance policy shall provide, at
the time of renewal of such a policy, an outline of coverage
that meets the applicable standards established pursuant to
this section.
``(7) Medical assessments for the elderly.--Before issuing
a long-term care insurance policy to an applicant who is 75
years of age or older, if the policy is not guaranteed issue
the issuer shall obtain one of the following:
``(A) A report of a physical examination.
``(B) An assessment of functional capacity.
``(C) Copies of medical records.
``(8) Civil money penalty.--Any issuer of a long-term care
insurance policy who--
``(A) fails to make a refund in accordance with
paragraph (1),
``(B) fails to transmit a policy in accordance with
paragraph (2),
``(C) fails to provide, make available, or report
information in accordance with paragraph (3), (4), or
(5),
``(D) fails to provide an outline of coverage in
violation of paragraph (6), or
``(E) issues a policy without obtaining certain
information in violation of paragraph (7),
is subject to a civil money penalty of not to exceed $25,000
for each such violation. The provisions of section 1128A (other
than the first sentence of subsection (a) and other than
subsection (b)) shall apply to a civil money penalty under this
paragraph in the same manner as such provisions apply to a
penalty or proceeding under section 1128A(a).
``(d) Requirements Relating to Renewability.--
``(1) In general.--No long-term care insurance policy may
be canceled or nonrenewed for any reason other than nonpayment
of premium or material misrepresentation.
``(2) Continuation and conversion rights for group
policies.--
``(A) In general.--Each group long-term care
insurance policy shall provide covered individuals with
a basis for continuation or conversion in accordance
with this paragraph.
``(B) Basis for continuation.--For purposes of
subparagraph (A), a policy provides a basis for
continuation of coverage if the policy maintains
coverage under the existing group policy when such
coverage would otherwise terminate and which is subject
only to the continued timely payment of premium when
due. A group policy which restricts provision of
benefits and services to or contains incentives to use
certain providers or facility, may provide continuation
benefits which are substantially equivalent to the
benefits of the existing group policy.
``(C) Basis for conversion.--For purposes of
subparagraph (A), a policy provides a basis for
conversion of coverage if the policy entitles each
individual--
``(i) whose coverage under the group policy
would otherwise be terminated for any reason,
and
``(ii) who has been continuously insured
under the policy (or group policy which was
replaced) for at least 6 months before the date
of the termination,
to issuance of a policy providing benefits identical
to, substantially equivalent to, or in excess of, those
of the policy being terminated, without evidence of
insurability.
``(D) Treatment of substantial equivalence.--In
determining under this paragraph whether benefits are
substantially equivalent, there shall be taken into
consideration the differences between managed care and
non-managed care plans.
``(E) Group replacement of policies.--If a group
long-term care insurance policy is replaced by another
long-term care insurance policy purchased by the same
policyholder, the succeeding issuer shall offer
coverage to all persons covered under the old group
policy on its date of termination. Coverage under the
new group policy shall not result in any exclusion for
preexisting conditions that would have been covered
under the group policy being replaced.
``(e) Benefit Standards.--
``(1) Use of standard definitions and terminology and
uniform format.--
``(A) In general.--Each long-term care insurance
policy shall, pursuant to standards established under
subsection (a)(3)--
``(i) use uniform language and definitions,
and
``(ii) use a uniform format for presenting
the outline of coverage under such a policy.
``(B) Certain variation in language permitted.--
Such standards may permit the use of non-uniform
language, but only to the extent required to take into
account differences among States in the licensing of
nursing facilities and other providers of long-term
care.
``(2) Disclosure.--
``(A) Outline of coverage.--The outline of coverage
for each long-term care insurance policy shall include
at least the following:
``(i) A description of the principal
benefits and coverage under the policy.
``(ii) A statement of the principal
exclusions, reductions, and limitations
contained in the policy.
``(iii) A statement of the terms under
which the policy (or certificate) may be
continued in force or discontinued, the terms
for continuation or conversion, and any
reservation in the policy of a right to change
premiums.
``(iv) A statement that the outline of
coverage is a summary only, not a contract of
insurance, and that the policy (or master
policy) contains the contractual provisions
that govern.
``(v) A statement of the value of the
policy (determined in accordance with standard
established to carry out this subparagraph).
``(vii) A description of the terms,
specified in subsection (h), under which a
policy or certificate may be returned and
premium refunded.
``(viii) Information on national average
costs for nursing facility and home health care
and information (in graphic form) on the
relationship of the benefits provided under the
policy to such national average costs.
``(ix) A statement of the percentage limit
on annual premium increases that is provided
under the policy pursuant to paragraph (8).
``(x) Information (in graphic form) on the
projected effect of inflation on the value of
benefits provided under the policy during a
period of at least 20 years.
``(B) Certificates.--A certificate issued pursuant
to a group long-term care insurance policy shall
include--
``(i) a description of the principal
benefits and coverage provided in the policy;
``(ii) a statement of the principal
exclusions, reductions, and limitations
contained in the policy; and
``(iii) a statement that the group master
policy determines governing contractual
provisions.
``(C) Long-term care as part of life insurance.--In
the case of a long-term care insurance policy issued as
a part of or a rider on a life insurance policy, at the
time of policy delivery there shall be provided a
policy summary that includes--
``(i) an explanation of how the long-term
care benefits interact with other components of
the policy (including deductions from death
benefits);
``(ii) an illustration of the amount of
benefits, the length of benefit, and the
guaranteed lifetime benefits (if any) for each
covered person; and
``(iii) any exclusions, reductions, and
limitations on benefits of long-term care.
``(3) Limiting conditions on benefits; minimum benefits.--
``(A) In general.--A long-term care insurance
policy may not condition or limit eligibility--
``(i) for benefits for a type of services
to the need for or receipt of any other
services,
``(ii) for any noninstitutional benefit on
the medical necessity for such benefit,
``(iii) for benefits furnished by licensed
providers on compliance with conditions which
are in addition to those required for licensure
under State law, or
``(iv) for custodial care (if covered under
the policy) only (I) to care provided in
facilities which provide a higher level of care
or (II) to care provided in facilities which
provide for 24-hour or other nursing care not
required in order to be licensed by the State.
``(B) Home health care services.--If a long-term
care insurance policy provides benefits for home health
care services, the policy--
``(i) may not limit such benefits to
services provided by registered nurses or
licensed practical nurses;
``(ii) may not require benefits for such
services to be provided by a nurse or therapist
that can be provided by a home health aide or
other licensed or certified home care worker
acting within the scope of the worker's
licensure or certification;
``(iii) may not limit such benefits to
services provided by agencies or providers
certified under title XVIII; and
``(iv) must provide benefits for personal
care services (including home health aide and
homemaker services), home health services, and
respite care in an individual's home.
``(C) Nursing facility services.--If a long-term
care insurance policy provides benefits for nursing
facility services, the policy must provide such
benefits with respect to all nursing facilities that
are licensed in the State.
``(D) Minimum period of coverage.--Each long-term
care insurance policy shall provide benefits over a
period of at least 12 consecutive months.
``(4) Prohibition of discrimination.--A long-term care
insurance policy may not treat benefits under the policy in the
case of an individual with Alzheimer's disease, with any
related progressive degenerative dementia of an organic origin,
or with any organic or inorganic mental illness differently
from an individual having another medical condition for which
benefits may be made available.
``(5) Limitation on use of preexisting condition limits.--
``(A) Initial issuance.--
``(i) In general.--Subject to clause (ii),
a long-term care insurance policy may not
exclude or condition benefits based on a
medical condition for which the policyholder
received treatment or was otherwise diagnosed
before the issuance of the policy.
``(ii) 6-month limit.--A long-term care
insurance policy may exclude benefits under a
policy, during its first 6 months, based on a
condition for which the policyholder received
treatment or was otherwise diagnosed during the
6 months before the policy became effective.
``(B) Replacement policies.--If a long-term care
insurance policy replaces another long-term care
insurance policy, the issuer of the replacing policy
shall waive any time periods applicable to preexisting
conditions, waiting period, elimination periods and
probationary periods in the new policy for similar
benefits to the extent such time was spent under the
original policy.
``(6) Use of functional assessment.--
``(A) In general.--Each long-term care insurance
policy--
``(i) shall determine eligibility for, and
level of, benefits (other than for nursing
facility services) available under the policy
based on a professional assessment of the
policyholder's functional ability, and
``(ii) shall specify the level (or levels)
of functional impairment required under such an
assessment to obtain benefits other than for
nursing facility services) under the policy.
``(B) Appeals process.--Each long-term care
insurance policy shall provide for an appeals process,
meeting standards established under this subsection,
for individuals who dispute the results of an
assessment conducted under this paragraph.
``(7) Inflation protection.--
``(A) Optional rider at time of initial issuance.--
Each long-term care insurance policy shall permit the
policyholder, at the time of initial sale, an option of
providing for inflation protection described in
subparagraph (B).
``(B) Inflation protection described.--The
inflation protection described in this subparagraph
provides, at the time of each annual renewal of a
policy, for an increase of a specified percentage (but
not less than 5 percent) in the dollar payment levels
and the maximum payment limit on benefit coverage above
the levels or limit in effect during the previous
policy year. In applying this subparagraph, the
increases shall be compounded annually and the policy
may provide for rounding such an increase to the
nearest multiple of $1 (in the case of dollar payment
levels) or $100 (in the case of the maximum payment
limit).
``(8) Specification of limits on premium increases.--Each
long-term care insurance policy shall specify a limit on the
percentage increase in premiums for a policy that may be made
in any between one policy year and the subsequent policy year.
``(f) Nonforfeiture.--
``(1) In general.--Each long-term care insurance policy
shall provide that if the policy lapses after the policy has
been in effect for a minimum period (specified under the
standards under subsection (a)(3)), the policy will provide
without payment of any additional premiums benefits equal to--
``(A) a percentage (specified under such standards)
of the benefits otherwise available at term, or
``(B) such other type of benefits as such standards
may provide.
``(2) Establishment of standards.--The standards under
subsection (a)(3)--
``(A) may not provide more than 2 additional types
of benefits under paragraph (1)(B), and
``(B) may provide that the percentage or amount of
benefits under paragraph (1) must increase based upon
the period of time in which the policy was in effect.
``(g) Limit of Period of Contestability.--The issuer of a long-term
care insurance policy may not cancel such a policy or deny a claim
under the policy based on fraud or misrepresentation relating to the
issuance of the policy unless notice of such fraud or misrepresentation
is provided within 6 months after the date of the issuance of the
policy.
``(h) Right to return (free look).--Each applicant for a long-term
care insurance policy shall have the right to return the policy (or
certificate) within 30 days of the date of its delivery (and to have
the premium refunded) if, after examination of the policy or
certificate, the applicant is not satisfied for any reason.
``(i) Long-Term Care Insurance Policy Defined.--
``(1) In general.--In this section, except as otherwise
provided in this subsection, the term `long-term care insurance
policy' means any insurance policy, certificate, or rider
advertised, marketed, offered, or designed to provide coverage
for each covered person on an expense incurred, indemnity,
prepaid, or other basis, for one or more diagnostic,
preventive, therapeutic, rehabilitative, maintenance or
personal care services, provided in a setting other than an
acute care unit of a hospital. Such term includes a group or
individual annuity or life insurance policy or rider which
provides directly (or which supplements) long-term care
insurance.
``(2) Policies excluded.--Except as provided in paragraph
(4), the term `long-term care insurance policy' does not
include any medicare supplemental policy (as defined in section
1882(g)) and any insurance which is offered primarily to
provide--
``(A) basic hospital expense coverage, basic
medical-surgical expense coverage, hospital confinement
indemnity coverage, or major medical expense coverage,
``(B) disability income or related asset-protection
coverage,
``(C) accident only coverage,
``(D) specified disease or specified accident
coverage, or
``(E) limited benefit health coverage.
``(3) Treatment of certain life insurance policies.--Except
as provided in paragraph (4), the term `long-term care
insurance policy' does not include life insurance policies--
``(A) which accelerate the death benefit
specifically for--
``(i) one or more of the qualifying events
of terminal illness,
``(ii) medical conditions requiring
extraordinary medical intervention, or
``(iii) permanent institutional
confinement;
``(B) which provide the option of a lump-sum
payment for those benefits; and
``(C) in which neither the benefits nor the
eligibility for the benefits is conditioned upon the
receipt of long-term care.
``(4) Inclusion of policies marketed as long-term care
insurance.--The term `long-term care insurance policy' also
means any product which is advertised, marketed, or offered as
long-term care insurance.''.
(b) Report on Assessment Methods for Functional Ability.--Within 2
years after the date of the enactment of this Act, the Secretary of
Health and Human Services shall submit to the Congress a report on the
different methods that may be used to conduct assessments of functional
ability described in section 1931(e)(6)(A) of the Social Security Act
and the relative effectiveness of each of such methods.
(c) Report on Solvency Protection.--Within 2 years after the date
of the enactment of this Act, the Secretary of Health and Human
Services shall submit to the Congress a report on standards that may be
applied to assure the solvency of insurers with respect to long-term
care insurance policies.
(d) Study of Standard Measure of Value for Long-Term Care Insurance
Policies.--The Secretary of Health and Human Services shall provide for
a study to develop a standard measure of value for long-term care
insurance policies. Within 2 years after the date of the enactment of
this Act, the Secretary shall submit to the Congress a report on such
study.
SEC. 3. INCREASE IN FUNDING FOR LONG-TERM CARE INSURANCE INFORMATION,
COUNSELING, AND ASSISTANCE.
The subsection (f) of section 4360 of the Omnibus Budget
Reconciliation Act of 1990 relating to authorization of appropriations
for grants is amended by inserting before the period at the end the
following: ``and an additional $20,000,000 for each of fiscal years
1994, 1995, and 1996, to fund such grant programs for the purpose of
providing information, counseling, and assistance relating to the
procurement of adequate and appropriate long-term care insurance''.
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