BEFORE THE STATE AUDITOR AND COMMISSIONER OF INSURANCE

OF THE STATE OF MONTANA

�

�

TO: All Concerned Persons

�

1. On February 14, 2008, the State Auditor and Commissioner of Insurance published MAR Notice No. 6-168 regarding the public hearing on the proposed amendment, repeal, and adoption of the above-stated rules at page 222 of the 2008 Montana Administrative Register, issue number 3.

�

2. On March 6, 2008, the State Auditor and Commissioner of Insurance held a public hearing to consider the proposed amendment, repeal, and adoption of the above-stated rules. Comments were heard at the hearing, and written comments were received before the comment deadline.

�

3. The department has amended ARM 6.6.3101, 6.6.3102, 6.6.3103, 6.6.3104, 6.6.3104A, 6.6.3105, 6.6.3106, 6.6.3107, 6.6.3108, 6.6.3109, 6.6.3109A, 6.6.3109B, 6.6.3110, 6.6.3111, 6.6.3112, 6.6.3113, 6.6.3114, 6.6.3115, 6.6.3117, 6.6.3118, and 6.6.3119 exactly as proposed.

�

4. The department has amended the following rule as proposed but with the following changes. New matter is underlined. Matter to be deleted is interlined.

�

6.6.3120 ADOPTION OF FORMS (1) through (1)(d) remain as proposed.

(e) LTC Form E Claims Denial Reporting Form

�

LTC FORM E

Claims Denial Reporting Form

Long-Term Care Insurance

�

For the State of Montana

For the Reporting Year of __________

�

Company Name: ___________________________ Due: June 30 annually

Company Address: _________________________

Company NAIC: ___________________________ Number:

Contact Person: _________________________ Phone Number: ___________

Line of Business: Individual Group

�

Instructions:

�

The purposes of this form is to report all long-term care claim denials under in-force long-term care insurance policies. "Denied" means a claim that is not paid for any reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition.

�

�

1. The nationwide data may be viewed as a more representative and credible indicator where the data for claims reported and denied for your state are small in number.

2. Example�home health care claim filed under a nursing home only policy.

3. Example�a facility that does not meet the minimum level of care requirements or the licensing requirements as outlined in the policy.

4. Examples�a benefit trigger not met, certification by a licensed health care practitioner not provided, no plan of care.

�

You are eligible for the reduced "paid-up" contingent nonforfeiture benefit when all three conditions shown below are met:

�

1. The premium you are required to pay after the increase exceeds your original premium by the same percentage or more shown in the chart below:

�

Triggers for a Substantial Premium Increase

Percent Increase

Issue Age Over Initial Premium

Under 65 50%

65-80 30%

Over 80 10%

�

2. You stop paying your premiums within 120 days of when the premium increase took effect; and

�

3. The ratio of the number of months you already paid premiums is 40% or more than the number of months you originally agreed to pay.

�

If you exercise this option your coverage will be converted to reduced "paid-up" status. That means there will be no additional premiums required. Your benefits will change in the following ways:

�

a. The total lifetime amount of benefits your reduced paid up policy will provide can be determined by multiplying 90% of the lifetime benefit amount at the time the policy becomes paid up by the ratio of the number of months you already paid premiums to the number of months you agreed to pay them.

�

b. The daily benefit amounts you purchased will also be adjusted by the same ratio.

�

If you purchased lifetime benefits, only the daily benefit amounts you purchased will

be adjusted by the applicable ratio.

�

Example:

�

▪ You bought the policy at age 65 with an annual premium payable for 10 years.

�

▪ In the sixth year, you receive a rate increase of 35% and you decide to stop paying premiums.

�

▪ Because you already paid 50% of your total premium payments and that is more than the 40% ratio, your "paid-up" policy benefits are .45 (.90 times .50) times the total benefit amount that was in effect when you stopped paying your premiums. If you purchased inflation protection, it will not continue to apply to the benefits in the reduced "paid-up" policy.

�

(f) LTC Form F Potential Rate Increase Reporting Form

LTC Form F

�

Instructions:

�

This form provides information to the applicant regarding premium rate schedules, rate schedule adjustments, potential rate revisions, and policy holder options in the event of a rate increase.

�

Insurers shall provide all of the following information to the applicant:

�

Long-Term Care Insurance

Potential Rate Increase Disclosure Form

�

[Premium Rate][Premium Rate Schedules]: [Premium rate][Premium rate schedules] that [is][are] applicable to you and that will be in effect until a request is made and [filed][approved] for an increase [is][are][on the application][$_______]

�

1. The [premium] [premium rate schedule] for this policy [will be shown on the schedule page of] [will be attached to] your policy.

�

2. Rate Schedule Adjustments:

�

The company will provide a description of when premium rate or rate schedule adjustments will be effective (e.g., next anniversary date, next billing date, etc.) (fill in the blank): ____________________________.

�

3. Potential Rate Revisions:

�

This policy is Guaranteed Renewable. This means that the rates for this product may be increased in the future. Your rates can NOT be increased due to your increasing age or declining health, but your rates may go up based on the experience of all policyholders with a policy similar to yours.

�

If you receive a premium rate or premium rate schedule increase in the future, you will be notified of the new premium amount and you will be able to exercise at least one of the following options:

�

Pay the increased premium and continue your policy in force as is.

Reduce your policy benefits to a level such that your premiums will not increase. (Subject to state law minimum standards.)

Exercise your nonforfeiture option if purchased. (This option is available for purchase for an additional premium.)

Exercise your contingent nonforfeiture rights.* (This option may be available if you do not purchase a separate nonforfeiture option.)

�

Contingent Nonforfeiture

�

If the premium rate for your policy goes up in the future and you didn't buy a nonforfeiture option, you may be eligible for contingent nonforfeiture. Here's how to tell if you are eligible:

�

You will keep some long-term care insurance coverage, if:

�

Your premium after the increase exceeds your original premium by the percentage shown (or more) in the following table; and

�

You lapse (do not pay more premiums) within 120 days of the increase.

�

The amount of coverage (i.e., new lifetime maximum benefit amount) you will keep will equal the total amount of premiums you've paid since your policy was first issued. If you have already received benefits under the policy, so that the remaining maximum benefit amount is less than the total amount of premiums you've paid, the amount of coverage will be that remaining amount.

�

Except for this reduced lifetime maximum benefit amount, all other policy benefits will remain at the levels attained at the time of the lapse and will not increase thereafter.

�

Should you choose this Contingent Nonforfeiture option, your policy, with this reduced maximum benefit amount, will be considered "paid-up" with no further premiums due.

�

Example:

�

You bought the policy at age 65 and paid the $1,000 annual premium for 10 years, so you have paid a total of $10,000 in premium.

�

In the eleventh year, you receive a rate increase of 50%, or $500 for a new annual premium of $1,500, and you decide to lapse the policy (not pay any more premiums.)

�

Your "paid-up" policy benefits are $10,000 (provided you have at least $10,000 of benefits remaining under your policy.)

�

�

[The following contingent nonforfeiture disclosure need only be included for those limited pay policies to which ARM 6.6.3119(4)(c) and (e) of the regulation are applicable].

�

In addition to the contingent nonforfeiture benefits described above, the following reduced "paid-up" contingent nonforfeiture benefit is an option in all policies that have a fixed or limited premium payment period, even if you selected a nonforfeiture benefit when you bought your policy. If both the reduced "paid-up" benefit AND the contingent benefit described above are triggered by the same rate increase, you can chose either of the two benefits.

�

You are eligible for the reduced "paid-up" contingent nonforfeiture benefit when all three conditions shown below are met:

�

1. The premium you are required to pay after the increase exceeds your original premium by the same percentage or more shown in the chart below:

�

Triggers for a Substantial Premium Increase

Percent Increase

Issue Age Over Initial Premium

Under 65 50%

65-80 30%

Over 80 10%

�

2. You stop paying your premiums within 120 days of when the premium increase took effect; and

�

3. The ratio of the number of months you already paid premiums is 40% or more than the number of months you originally agreed to pay.

�

If you exercise this option your coverage will be converted to reduced "paid-up" status. That means there will be no additional premiums required. Your benefits will change in the following ways:

�

a. The total lifetime amount of benefits your reduced paid up policy will provide can be determined by multiplying 90% of the lifetime benefit amount at the time the policy becomes paid up by the ratio of the number of months you already paid premiums to the number of months you agreed to pay them.

�

b. The daily benefit amounts you purchased will also be adjusted by the same ratio.

�

If you purchased lifetime benefits, only the daily benefit amounts you purchased will be adjusted by the applicable ratio.

�

Example:

�

▪ You bought the policy at age 65 with an annual premium payable for 10 years.

�

▪ In the sixth year, you receive a rate increase of 35% and you decide to stop paying premiums.

�

▪ Because you already paid 50% of your total premium payments and that is more than the 40% ratio, your "paid-up" policy benefits are .45 (.90 times .50) times the total benefit amount that was in effect when you stopped paying your premiums. If you purchased inflation protection, it will not continue to apply to the benefits in the reduced "paid-up" policy.

�

(g) remains as proposed.

�

AUTH: 33-1-313, 33-22-1121, MCA

IMP: 33-22-1101, 33-22-1102, 33-22-1103, 33-22-1107, 33-22-1108, 33-22-1111, 33-22-1112, 33-22-1113, 33-22-1114, 33-22-1115, 33-22-1116, 33-22-1117, 33-22-1119, 33-22-1120, 33-22-1121, MCA

�

5. The department has repealed ARM 6.6.3116 exactly as proposed.

�

6. The department has adopted New Rule IV (ARM 6.6.3126), New Rule V (ARM 6.6.3128), and New Rule VI (ARM 6.6.3129) exactly as proposed.

�

7. The department has adopted the following New Rules as proposed with the following changes. New matter is underlined. Matter to be deleted is interlined.

�

NEW RULE I (ARM 6.6.3121) REQUIRED DISCLOSURE OF RATING PRACTICES TO CONSUMERS (1) remains as proposed.

(a) except as provided in (2), this provision applies to any long-term care policy issued in Montana on or after July 1, 2008 January 1, 2009; and

(b) for certificates issued on or after the effective date of this amended rule under a group long-term care insurance policy as defined in 33-22-1107(5), MCA, which policy was in force at the time this amended rule became effective, the provisions of this rule shall apply on the policy anniversary following July 1, 2008 January 1, 2009.

(2) through (5) remain as proposed.

�

AUTH: 33-1-313, 33-22-1121, MCA

IMP: 33-22-1101, 33-22-1102, 33-22-1103, 33-22-1107, 33-22-1108, 33-22-1111, 33-22-1112, 33-22-1113, 33-22-1114, 33-22-1115, 33-22-1116, 33-22-1117, 33-22-1119, 33-22-1120, 33-22-1121, MCA

�

NEW RULE II (ARM 6.6.3122) INITIAL FILING REQUIREMENTS (1) This rule applies to any long-term care policy issued in this state on or after July 1, 2008 January 1, 2009.

(2) through (3)(b) remain as proposed.

�

AUTH: 33-1-313, 33-22-1121, MCA

IMP: 33-22-1101, 33-22-1102, 33-22-1103, 33-22-1107, 33-22-1108, 33-22-1111, 33-22-1112, 33-22-1113, 33-22-1114, 33-22-1115, 33-22-1116, 33-22-1117, 33-22-1119, 33-22-1120, 33-22-1121, MCA

�

NEW RULE III (ARM 6.6.3124) PREMIUM RATE SCHEDULE INCREASES

(1) Except as provided in (2), this rule applies to any long-term care policy issued in this state on or after July 1, 2008 January 1, 2009.

(2) through (12)(b) remain as proposed.

�

AUTH: 33-1-313, 33-22-1121, MCA

IMP: 33-22-1101, 33-22-1102, 33-22-1103, 33-22-1107, 33-22-1108, 33-22-1111, 33-22-1112, 33-22-1113, 33-22-1114, 33-22-1115, 33-22-1116, 33-22-1117, 33-22-1119, 33-22-1120, 33-22-1121, MCA

�

8. The department has thoroughly considered all commentary received. The comments received and the department's responses to each comment follow:

�

COMMENT: Several commenters, including ACLI and AHIP commented that the effective dates proposed did not give the industry enough time to prepare for the rule changes.

�

RESPONSE: Out of consideration for that concern, the department has changed the overall effective date to October 1, 2008. In New Rule I (ARM 6.6.3121), the date is changed from July 1, 2008 to January 1, 2009.

�

COMMENT: AHIP and ACLI pointed out that a significant portion of text from the model regulation was misplaced in the proposed rule. "Starting on page 252, the remaining text relating to contingent nonforfeiture for limited pay is missing. The bottom of the page goes on to show the replacement/lapse report. The missing text has been inappropriately inserted at the end of the claims denial reporting page on mid-page 248 beginning with "...You are eligible for the reduced 'paid-up'..." This text ends on page 249."

�

RESPONSE: This correction has been made to ARM 6.6.3120.

�

9. The effective date of these rules, except where otherwise stated, is October 1, 2008.

�

/s/ Christina L. Goe���������������/s/ Janice S. VanRiper

Christina L. Goe�������������������Janice S. VanRiper

Rule Reviewer����������������������Deputy Insurance Commissioner

�������������������������������������������State Auditor/Commissioner of Insurance

�

Certified to the Secretary of State March 31, 2008.