Chapter Ins 3

Ins 3.46(19)(c)1. 1. After rejection of the offer required under par. (a) for individual and group policies without nonforfeiture benefits issued after the effective date of this subsection, the insurer shall provide a contingent benefit upon lapse.

Ins 3.46(19)(c)2. 2. If a group policyholder elects to make the nonforfeiture benefit an option to the certificateholder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

Ins 3.46(19)(c)3. 3. The contingent benefit on lapse shall be triggered every time an insurer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured’s initial annual premium set forth in the table in the subdivision based on the insured’s issue age, and the policy or certificate lapses within 120 days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least 60 days prior to the due date of the premium reflecting the rate increase.

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Ins 3.46(19)(c)4. 4. On or before the effective date of a substantial premium increase as described in subd. 3. the insurer shall do all of the following:

Ins 3.46(19)(c)4.a. a. Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased.

Ins 3.46(19)(c)4.b. b. Offer to convert the coverage to a paid-up status where the amount payable for each benefit is 90% of the amount payable in effect immediately prior to lapse times the ratio of the number of completed months of paid premiums divided by the number of months in the premium paying period. This option may be elected at any time during the 120-day period referenced in subd. 3.

Ins 3.46(19)(c)4.c. c. Notify the policyholder or certificateholder that a default or lapse at any time during the 120-day period referenced in subd. 3. shall be deemed to be the election of the offer to convert in subd. 4. b., if the ratio is 40% or more.

Ins 3.46(19)(d) (d) The required benefits continued as nonforfeiture benefits under par. (a), including contingent benefits upon lapse under par. (b), are computed as follows:

Ins 3.46(19)(d)1. 1. “Attained age rating” as applied in this paragraph is defined as a schedule of premiums starting from the issue date which increases with age at least 1% per year prior to age 50, and at least 3% per year for age 50 and beyond.

Ins 3.46(19)(d)2. 2. The nonforfeiture benefit shall provide paid-up long-term care, nursing home only or home care only insurance coverage after lapse. The amounts and frequency of benefits in effect at the time of lapse, but not increased thereafter, shall be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in subd. 3.

Ins 3.46(19)(d)3. 3. The standard nonforfeiture credit shall be at least 100% of the sum of all premiums paid, including the premiums paid prior to any changes in benefits. The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit may not be less than 30 times the daily nursing home benefit at the time of lapse. In either event, the calculation of the nonforfeiture credit is subject to the limitation of par. (e).

Ins 3.46(19)(d)4. 4. The nonforfeiture benefit shall begin not later than the end of the third year following the policy or certificate issue date. The contingent benefit upon lapse shall be effective during the first 3 years and subsequent years. For a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of end of the tenth year following the policy or certificate issue date or of the end of the second year following the date the policy or certificate is no longer subject to attained age rating.

Ins 3.46(19)(d)5. 5. Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

Ins 3.46(19)(e) (e) All benefits paid by the insurer while the policy or certificate is in premium–paying status and in the paid-up status may not exceed the maximum benefits which would have been payable if the policy or certificate had remained in premium-paying status.

Ins 3.46(19)(f) (f) There shall be no difference in the minimum nonforfeiture benefits as required under this subsection for group and individual policies.

Ins 3.46(19)(g) (g) Premiums charged for a policy or certificate containing nonforfeiture benefits shall be subject to the loss ratio requirements contained in s. Ins 3.455 (5) treating the policy as a whole.

Ins 3.46(19)(h) (h) This subsection shall apply as follows:

Ins 3.46(19)(h)1. 1. Except as provided in subd. 2., the provisions of this subsection apply to any long-term care, nursing home, and home health care policy issued in this state on or after January 1, 2002.

Ins 3.46(19)(h)2. 2. For group long-term care, nursing home, and home health care insurance certificates issued to employer-sponsored groups or labor organizations in this state and in force on or after January 1, 2002, which policy was in force on January 1, 2001, the provisions of this subsection shall not apply.

Ins 3.46(19)(i) (i) To determine whether contingent nonforfeiture upon lapse provisions are triggered under par. (c) 3. a replacing insurer that purchased or otherwise assumed a block or blocks of long-term care insurance policies from another insurer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original insurer.

Ins 3.46(19)(j) (j) A contingent benefit on lapse shall also be triggered for policies with a fixed or limited premium paying period every time an insurer increases the premium rates to a level that results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured’s initial annual premium set forth in par. (c) 3. based on the insured’s issue age, the policy or certificate lapses within 120 days of the due date of the premium so increased, and the ratio is 40% or more. Unless otherwise required, policyholders shall be notified at least 30 days prior to the due date of the premium reflecting the rate increase.

Ins 3.46(20) (20) Incontestability period. An insurer may rescind a long-term care insurance policy or certificate or deny an otherwise valid long-term care insurance claim only as permitted under ss. 631.11 (1) (b) and 632.76, Stats., and only if in addition to complying with ss. 631.11 (1) (b) and 632.76, Stats., any of the following apply:

Ins 3.46(20)(a) (a) For a policy or certificate that has been in force for less than 6 months, the insurer shows the misrepresentation is material to the acceptance for coverage.

Ins 3.46(20)(b) (b) For a policy or certificate that has been in force for at least 6 months but less than 2 years, the insurer shows the misrepresentation is both material to the acceptance for coverage and pertains to the condition for which benefits are sought.

Ins 3.46(20)(c) (c) For a policy or certificate that has been in force 2 years or more, the insurer shows that the insured knowingly, intentionally and fraudulently misrepresented relevant facts relating to the insured’s health.

Ins 3.46(20)(d) (d)

Ins 3.46(20)(d)1. 1. No long-term care insurance policy or certificate may be field issued based on medical or health status unless the compensation to the field issuer is not based on the number of policies or certificates issued.

Ins 3.46(20)(d)2. 2. For purposes of this paragraph, a policy or certificate that is “field issued” means the producer or third-party administrator using the insurer’s underwriting guidelines underwrites the policy not the insurer, pursuant to the authority granted to the producer or third-party administrator by an insurer.

Ins 3.46(20)(e) (e) If an insurer has paid benefits under the long-term care insurance policy or certificate, the benefit payments may not be recovered by the insurer in the event that the policy or certificate is rescinded.

Ins 3.46(20)(f) (f) In the event of the death of the insured, this subdivision may not apply to the remaining death benefit of a life insurance policy that accelerates benefits for long-term care. In this situation, the remaining death benefits under these policies shall be governed by s. 632.46, Stats. In all other situations, this subdivision shall apply to life insurance policies that accelerate benefits for long-term care.

Ins 3.46(21) (21) Reporting requirements.

Ins 3.46(21)(a) (a) Every insurer shall maintain records for each intermediary of that intermediary’s amount of replacement sales as a percent of the intermediary’s total annual sales and the amount of lapses of long-term care insurance policies sold by the intermediary as a percent of the intermediary’s total annual sales.

Ins 3.46(21)(b) (b) Every insurer shall report annually by June 30 the 10% of its intermediaries with the greatest percentages of lapses and replacements as measured by par. (a) using Appendix 10.

Ins 3.46(21)(c) (c) Reported replacement and lapse rates do not alone constitute a violation of insurance laws or necessarily imply wrongdoing. The reports are for the purpose of reviewing more closely intermediary activities regarding the sale of long-term care insurance.

Ins 3.46(21)(d) (d) Every insurer shall report annually by June 30 the number of lapsed policies as a percent of its total annual sales and as a percent of its total number of policies in force as of the end of the preceding calendar year using Appendix 10.

Ins 3.46(21)(e) (e) Every insurer shall report annually by June 30 the number of replacement policies sold as a percent of its total annual sales and as a percent of its total number of policies in force as of the preceding calendar year using Appendix 10.

Ins 3.46(21)(f) (f) Every insurer shall report annually by June 30, for qualified long-term care insurance contracts, the number of claims denied for each class of business, expressed as a percentage of claims denied using Appendix 9.

Ins 3.46(22) (22) Filing requirements for advertising. Every insurer, health care service plan or other entity providing long-term care insurance or benefits in this state shall provide a copy of any long-term care insurance advertisement whether through written, radio or television medium to the commissioner as required by s. Ins 3.27. In addition, all advertisements shall be retained by the insurer, health care service plan or other entity for at least 3 years from the date the advertisement was first used.

Ins 3.46(23) (23) Standards for marketing.

Ins 3.46(23)(a) (a) Every insurer or other entity marketing long-term care insurance coverage in this state, directly or through its intermediaries, shall do all of the following:

Ins 3.46(23)(a)1. 1. Establish marketing procedures and intermediary training requirements to assure that both of the following are met:

Ins 3.46(23)(a)1.a. a. Any marketing activities, including any comparison of policies, by its intermediaries or other producers will be fair and accurate.

Ins 3.46(23)(a)1.b. b. Excessive insurance is not sold or issued.

Ins 3.46(23)(a)2. 2. Display prominently by type, stamp or other appropriate means, on the first page of the outline of coverage and policy the following notice:

“Notice to buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations.”

Ins 3.46(23)(a)3. 3. Provide copies of the disclosure forms required in Appendices 2 and 3 to the applicant.

Ins 3.46(23)(a)4. 4. Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for long-term care insurance already has accident and sickness or long-term care insurance and the types and amounts of any such insurance, except that in the case of qualified long-term care insurance contracts as defined in s. Ins 3.465 (2) (d), an inquiry into whether a prospective applicant or enrollee for long-term care insurance has accident and sickness insurance is not required.

Ins 3.46(23)(a)5. 5. Every insurer or entity marketing long-term care insurance shall establish auditable procedures for verifying compliance with this paragraph.

Ins 3.46(23)(a)6. 6. If the state in which the policy or certificate is to be delivered or issued for delivery has a senior insurance counseling program, the insurer shall, at solicitation, provide written notice to the prospective policyholder and certificateholder that the program is available and the name, address and telephone number of the program.

Ins 3.46(23)(a)7. 7. For long-term care insurance policies and certificates, use the terms “noncancellable” or “level premium” only when the policy or certificate conforms with sub. (3) (f).

Ins 3.46(23)(a)8. 8. Provide an explanation of contingent benefit upon lapse provided for in sub. (19) (c), and, if applicable, the additional contingent benefit upon lapse provided to policies with fixed or limited premium paying periods in sub. (15) (e).

Ins 3.46(23)(b) (b) In addition to the practices prohibited in s. 628.34 (12), Stats., the following acts and practices are prohibited by insurers or other entities marketing long-term care insurance coverage in this state, directly or through its intermediaries:

Ins 3.46(23)(b)1. 1. “Twisting.” Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert any insurance policy or to take out a policy of insurance with another insurer.

Ins 3.46(23)(b)2. 2. “High pressure tactics.” Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.

Ins 3.46(23)(b)3. 3. “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.

Ins 3.46(23)(b)4. 4. “Misrepresentation.” Misrepresenting a material fact in selling or offering to sell a long-term care insurance policy.

Ins 3.46(23)(c) (c) In regards to any transaction involving a long-term care insurance product, no person subject to regulation under chs. 600 to 655, Stats., may knowingly prevent or dissuade or attempt to prevent or dissuade, any person from any of the following:

Ins 3.46(23)(c)1. 1. Filing a complaint with the office of the commissioner of insurance.

Ins 3.46(23)(c)2. 2. Cooperating with the office of the commissioner of insurance in any investigation.

Ins 3.46(23)(c)3. 3. Attending or giving testimony at any proceeding authorized by law.

Ins 3.46(23)(d) (d) If an insured exercises the right to return a policy during the free-look period, the issuer shall mail the entire premium refund directly to the person who paid the premium.

Ins 3.46(23)(e) (e)

Ins 3.46(23)(e)1. 1. With respect to the obligations set forth in this subsection, the primary responsibility of an association, as described in s. 600.01 (1) (b) 3., Stats., when endorsing or selling long-term care insurance shall be to educate its members concerning long-term care issues in general so that its members can make informed decisions. Associations shall provide objective information regarding long term care insurance policies or certificates endorsed or sold by such associations to ensure that members of such associations receive a balanced and complete explanation of the features in the policies or certificates that are being endorsed or sold.

Ins 3.46(23)(e)2. 2. The insurer shall file with the office of the commissioner of insurance all of the following material:

Ins 3.46(23)(e)2.a. a. The policy and certificate.

Ins 3.46(23)(e)2.b. b. A corresponding outline of coverage.

Ins 3.46(23)(e)2.c. c. All advertisements requested by the insurance department.

Ins 3.46(23)(e)3. 3. The association shall disclose in any long-term care insurance solicitation the following:

Ins 3.46(23)(e)3.a. a. The specific nature and amount of the compensation arrangements, including all fees, commissions, administrative fees and other forms of financial support, that the association receives from endorsement or sale of the policy or certificate to its members.

Ins 3.46(23)(e)3.b. b. A brief description of the process under which the policies and the insurer issuing the policies were selected.

Ins 3.46(23)(e)4. 4. If the association and the insurer have interlocking directorates or trustee arrangements, the association shall disclose that fact to its members.

Ins 3.46(23)(e)5. 5. The board of directors of associations selling or endorsing long-term care insurance policies or certificates shall review and approve the insurance policies as well as the compensation arrangements made with the insurer.

Ins 3.46(23)(e)6. 6. The association shall also do all of the following:

Ins 3.46(23)(e)6.a. a. Conduct an examination of its policies, including benefits, features, and rates and subsequently update the examination in the event of material change at the time of the association’s decision to endorse or engage the services of a person with expertise in long-term care insurance not affiliated with the insurer.

Ins 3.46(23)(e)6.b. b. Actively monitor the marketing efforts of the insurer and its intermediaries.

Ins 3.46(23)(e)6.c. c. Review and approve all marketing materials or other insurance communications used to promote sales or sent to members regarding the policies or certificates.

Ins 3.46(23)(e)6.d. d. Subd. 6. a. to c. may not apply to qualified long-term care insurance contracts.

Ins 3.46(23)(e)7. 7. No group long-term care insurance policy may be issued to an association unless the insurer files with the office of the commissioner of insurance the information required in this subsection.

Ins 3.46(23)(e)8. 8. An insurer may not issue a long-term care policy or certificate to an association or continue to market such a policy or certificate unless the insurer certifies annually that the association has complied with the requirements set forth in this subsection.

Ins 3.46(23)(e)9. 9. Failure to comply with the filing and certification requirements of this section constitutes an unfair trade practice in violation of s. 628.34 (11), Stats.

Ins 3.46(24) (24) Availability of new services or providers.

Ins 3.46(24)(a) (a) An insurer shall notify policyholders of the availability of a new long-term care policy series that provides coverage for new long-term care services or providers material in nature and not previously available through the insurer to the general public. The notice shall be provided within 12 months of the date the new policy series is made available for sale in this state.

Ins 3.46(24)(b) (b) Notwithstanding par. (a), notification is not required for any policy issued prior to the effective date of this section or to any policyholder or certificateholder who is eligible for benefits, is within an elimination period or is receiving benefits, or who previously received benefits under the terms of the policy, or who would not be eligible to apply for coverage due to issue age limitations under the new policy. The insurer may require that policyholders meet all eligibility requirements, including underwriting and payment of the required premium to add such new services or providers.

Ins 3.46(24)(c) (c) The insurer shall make the new coverage available in one of the following ways:

Ins 3.46(24)(c)1. 1. By adding a rider to the existing policy and charging a separate premium for the new rider based on the insured’s attained age.

Ins 3.46(24)(c)2. 2. By exchanging the existing policy or certificate for one with an issue age based on the present age of the insured and recognizing past insured status by granting premium credits toward the premiums for the new policy or certificate. The premium credits shall be based on premiums paid or reserves held for the prior policy or certificate.

Ins 3.46(24)(c)3. 3. By exchanging the existing policy or certificate for a new policy or certificate in which consideration for past insured status shall be recognized by setting the premium for the new policy or certificate at the issue age of the policy or certificate being exchanged. The cost for the new policy or certificate may recognize the difference in reserves between the new policy or certificate and the original policy or certificate.

Ins 3.46(24)(d) (d) An insurer is not required to notify policyholders of a new proprietary policy series created and filed for use in a limited distribution channel. For purposes of this paragraph, “limited distribution channel” means through a discrete entity, such as a financial institution or brokerage, for which specialized products are available that are not available for sale to the general public. Policyholders that purchased such a proprietary policy shall be notified when a new long-term care policy series that provides coverage for new long-term care services or providers material in nature is made available to that limited distribution channel.