760 IAC 2-16.1-1 Nonforfeiture

Sec. 1. (a) This section does not apply to life insurance policies or riders containing accelerated long term care benefits. (b) A long term care insurance policy may not be delivered or issued for delivery in Indiana unless the policyholder or certificate holder has been offered the option of purchasing a policy or certificate including a nonforfeiture benefit. A policy or certificate offered with nonforfeiture benefits shall have coverage elements, eligibility, benefit triggers, and benefit length that are the same as coverage to be issued without nonforfeiture benefits. The nonforfeiture benefit included in the offer shall be the benefit described in subsection (e). The offer shall be in writing if the nonforfeiture benefit is not otherwise described in the outline of coverage or other materials given to the prospective policyholder. (c) If the offer is rejected, the insurer shall provide the contingent benefit upon lapse described in this section. (d) After rejection of the offer, for individual and group policies without nonforfeiture benefits issued after the effective date of this section, the insurer shall provide a contingent benefit upon lapse. In the event a group policyholder elects to make the nonforfeiture benefit an option to the certificate holder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse. The contingent benefit on lapse shall be triggered 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 the following table based on the insured's issue age, and the policy or certificate lapses within one hundred twenty (120) days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least thirty (30) days prior to the due date of the premium reflecting the rate increase. Triggers for a Substantial Premium Increase Issue Age Percent Increase Over Initial Premium 29 and under 200% 30-34 190% 35-39 170% 40-44 150% 45-49 130% 50-54 110% 55-59 90% 60 70% 61 66% 62 62% 63 58% 64 54% 65 50% 66 48% 67 46% 68 44% 69 42% 70 40% 71 38% 72 36% 73 34% 74 32% 75 30% 76 28% 77 26% 78 24% 79 22% 80 20% 81 19% 82 18% 83 17% 84 16% 85 15% 86 14% 87 13% 88 12% 89 11% 90 and over 10% On or before the effective date of a substantial premium increase, the insurer shall do the following: (1) Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased. (2) Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of subsection (e). This option may be elected at any time during the one hundred twenty (120) day period referenced in subdivision (3). (3) Notify the policyholder or certificate holder that a default or lapse at any time during the one hundred twenty (120) day period referenced in this subdivision shall be deemed to be the election of the offer to convert in subsection (b). (e) Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse, are as follows: (1) For purposes of this subsection, "attained age rating" means a schedule of premiums starting from the issue date that increases at least one percent (1%) per year prior to fifty (50) years of age, and at least three percent (3%) per year beyond fifty (50) years of age. (2) For purposes of this subsection, the nonforfeiture benefit shall be of a shortened benefit period providing paid-up long term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) will be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in subdivision (3). (3) The standard nonforfeiture credit will be equal to one hundred percent (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 shall be not less than thirty (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 subsection (f). (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 three (3) years as well as thereafter. For a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of the end of: (A) the tenth year following the policy or certificate issue date; or (B) the second year following the date the policy or certificate is no longer subject to attained age rating. (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. (f) All benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid-up status will not exceed the maximum benefits that would be payable if the policy or certificate had remained in premium paying status. (g) There shall be no difference in the minimum nonforfeiture benefits as required under this section for group and individual policies. (h) The requirements set forth in this section shall become effective twelve (12) months after adoption of this rule and shall apply as follows: (1) Except as provided in subdivision (2), this section applies to any long term care policy issued in this state on or after the effective date of this section. (2) For certificates issued on or after the effective date of this section, under a group long term care insurance policy, which policy was in force at the time this section became effective, this section shall not apply. (i) Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse shall be subject to the loss ratio requirements of 760 IAC 2-13 treating the policy as a whole. (j) To determine whether contingent nonforfeiture upon lapse provisions are triggered under subsection (d), 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. (k) A nonforfeiture benefit for federally tax-qualified long term care insurance contracts that are level premium contracts shall be offered that meets the following requirements: (1) The nonforfeiture provision shall be appropriately captioned. (2) The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums and shall state that the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency, and interest as reflected in changes in rates for premium paying contracts approved by the commissioner for the same contract form. (3) The nonforfeiture provision shall provide at least one (1) of the following: (A) Reduced paid-up insurance. (B) Extended term insurance. (C) Shortened benefit period. (D) Other similar offerings approved by the commissioner.