Bulletin 2009-04 Implementation of the SC Long-Term Care Partnership Program

South Carolina of Insurance BULLETIN NU~1BER 2009-04 DATE. 30. I. BACKGROL:\IIJ A:\IIJ PURPOSE MARK SANFORD Govt>rnor A. Care on 1, Asset Protection Provided. Under the South Carolina Care Partnership Program, the asset eligibility, adjustment, and recovery provisions the South Carolina Medicaid plan are applied by '"'"''"'"· above and beyond the asset or allowance provided under the Medicaid plan, equal to the amount of insurance benefits received from a Partnership Policy. (This disregard of assets is referred to herein as the ·• Disregard.") The Disregard applies to all insurance benefits received from a Partnership Policy. Thus, for example, the Asset Disregard applies to insurance benefits paid on a reimbursement, cash benefit basis, indemnity insurance basis, or on a '·per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate" (within the meaning of section 7702B(b )(2)(A) of the Internal Revenue Code of 1986 (26 .S.C. 7702B(b )(2) (A)). Similarly, the Asset Disregard applies to all insurance benefits received from a Partnership Policy regardless of whether such insurance benefits are in respect of costs for long-term care that would not be covered by Medicaid. The Disregard equals benefits that to Policy, even if Partnership The not include return r-'>r-rnr'r'-'••n~ Policy (due to Eligibility tor benefits under Medicaid is subject to other eligibility requirements, such as applicable income limitations and home equity limitations. B. Partnership Policies. A Partnership Policy is a long-term care insurance policy (including a certificate issued under a group insurance contract) that satisfies all of the following requirements: I. Qualified under Federal tax law. The policy must be a qualitied long- term care insurance contract, as defined in section 7702B(b) of the Internal Revenue Code of 1986 (26 U.S.C. 7702B(b)). Thus, a qualified long-term care insurance contract that provides insurance benefits on a reimbursement, cash benefit basis, indemnity insurance basis, or on a •·per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate," vvithin the meaning of section 7702B(b )(2)(A) of the Internal Revenue Code of 1986 (26 U .S.C. 7702B(b)(2)(A)), will be a Partnership Policy if it ORA's other requirements applicable to Partnership Policies, as described herein. Similarly, a long-term care insurance rider or provisiOn an insurance contract (such as a rider to a insurance contract or. December 31, 2009, a rider to an contract) that qualified contract under Internal Revenue (26 U.S.C Policy other 2. be treated as 3. State of residence. The policy must cover an insured who was a of the State when coverage became effective under the policy. In the case of an exchange, this requirement shall be applied based on the coverage of the first long-term care insurance policy that was exchanged. A certificate covering an insured who is a resident of South Carolina may qualify as a Partnership Policy even if the situs of the group insurance contract under which such certificate is issued is in another State. 4. Consumer protection requirements. The Federal consumer protection requirements of section 1917(b )(1 )(C)(iii)(III) of the Social Security Act (42 U.S.C. 1396p(b)(l)(C)(iii)(III)) must be met with respect to the policy. (See also the certification process with respect to this requirement described inC below.) 5. Inflation protection. With respect to intlation protection: (a) if the policy is sold to an individual who has not attained age 61 as of the date of purchase, the policy must provide compound annual inflation protection: (b) if the policy is sold to an individual who has attained 61 but not attained 76 as of the date of purchase, the policy must provide some level of intlation and (c) · the policy sold the the • • means consumer all as f1PTI~rrn the United States Department • provide annual compounded inflation at a rate not less three percent and meet all the following (i) each benefit increase occurs automatically, unless the insured specifically rejects an increase; (ii) the increases must be provided until the insured has at least attained age 76 and each increase up to and including the increase that takes effect at age 76 must not be rejected by the insured in order to retain partnership policy status; (iii) increases may end \Vhen the insured has attained 76 or if the insured becomes eligible for benefits on or after age 76: (iv) the additional premium for each increase under this feature may be based on the premium rates that apply to the insured's attained age at the time of the increase; and (v) rejection of an increase may not operate to prevent the insured from receiving future increases. The following inflation features meet the requirements of (b) • an inflation feature that meets the requirements of • an automatic inf1ation feature that increases (not compounded) at a rate not IS predecessor and the policyholder or certificateholder under a policy are ditTerent, the insured should be the individual to whom a policy is sold for purposes the inflation protection requirements. C. Certification Process. Pursuant to section l917(b)(5)(B)(iii) the Social Security Act (42 U.S.C. 1396p(b)(5)(B)(iii)), a long-term care insurance policy shall be deemed to meet the consumer protection requirements of section 1917(b)(l)(C)(iii)(III) of the Social Security Act (42 U.S.C. 1396p(h)(l)(C)(iii)(III)) if the plan amendment provides that the South Carolina Insurance Director certifies, in a manner satisfactory to the Secretary of the U.S. Department of Health & Human Services (the ·'Secretary''), that the policy meets such requirements. In addition, the State Medicaid Director's Letter (SMDL 019) dated July 27, 2006, issued by CMS, provides that the South Carolina Insurance Director must certify that a policy meets these consumer protection requirements in order for a policy to be a Partnership Policy. In accordance with the safe harbor procedure specified in section 1917(b)(5)(B)(iii) of the Social Security Act (42 U.S.C. 1396p(b)(5)(B)(iii)) and subject to any guidance from the Secretary that may be issued providing otherwise, policies shall be considered certified pursuant to section 1917(b)(5)(B)(iii) of the Social Security Act U.S.C. l396p(b)(5)(B)(iii)) be deemed to meet if the ) An issuer and the South Director Certification Forms and State Certification identity additional policy forms on which policies are issued that consumer protection requirements of section 1917(b )( 1 )(C)(iii)(Ill) of the Social Security Act (42 U.S.C. 1396p(b)(l)(C){iii)(III)). Copies of the South Carolina Insurance Director's certifications to the Secretary shall be provided to the South Carolina Department of Health and Human Services and the issuer of the policies subject to such certification. If there is a change made by the Secretary, pursuant to section 1917(b)(5)(C) of the Social Security Act (42 U.S.C. 1396p(b)(5)(C)), in the provisions of the National Association of Insurance Commissioner's Long-Term Care Insurance Model Act or Regulation that apply to new policies covered by Partnerships, appropriate modifications will be made to the Issuer Certification Form to reflect the new requirements. D. Partnership Disclosure Requirements: • Notice of Partnership Program. An issuer or its producer. soliciting or offering to sell a policy that is intended to qualify as a Partnership Policy. shall provide to each prospective applicant a ·'Partnership Program attached as outlining the requirements and benefits a Partnership Policy. similar notice may be purpose filed and approved by the South Carolina Insurance Director. The Partnership shall provided with Outline of • E. Limitation on Partnership Policy Specific Rules. 191 l)(C)(iii)(VII) the Security Act 1396p(b)(l)(C)(iii)(VII)), apart from the described in B are by the ORA., no the terms or Partnership Policy be imposed unless such requirement is term care insurance policies without regard to the policy is a Policy. This limitation does not the State of South ability to generally regulate the terms and sale of long-term care insurance policies where South Carolina laws or regulations impose requirements without regard to whether policies are Partnership Policies. F. Interim Reporting Requirements. Pursuant to section 1917(b)(l)(C)(iii)(Vl) and (v) of the Social Security Act (42 U.S.C. 1396p(b)(l)(C)(iii)(VI) and (v), respectively), issuers of Partnership Policies must provide regular reports to the Secretary in accordance with any regulations of the Secretary. Until the etTective date of final regulations or other applicable guidance from the Secretary, issuers of policies must provide (a) notification regarding when insurance benefits provided under Partnership Policies have been paid and the amount of such benefits paid, and (b) notification regarding when such policies terminate. Such notifications must be provided within 60 days of the end of each calendar year with respect to benefits paid and terminations during such year (or, in the case of terminations resulting from death, within the later of 60 days after the end of the calendar year of death or 120 days after notification of death has been received by the issuer of the policy). Reports should be sent to the Secretary, and in particular to [insert address]. Pursuant to section 191 l)(C)(v) the Social Security Act U.S.C. 1396p(b)(I)(C)(v)), the , as appropriate, provide rPT"\fYr"tC to the State South G. Coordination Between Departments. Health Human Services must provide information and South Carolina Department of Insurance on the that any individual who sells a Partnership Policy demonstrates evidence of an understanding of such policies and how they relate to other public and private coverage of long-term care. H. Reciprocity. Pending the issuance of guidance by the Secretary pursuant to section 6021 (b) of the DRA, the South Carolina Long-Term Care Partnership Program shall provide reciprocity with respect to long-term care insurance policies covered under other state long-term care insurance partnerships (i.e., Partnerships and Medicaid plan amendments approved as of May 14, 1993, providing for a long-term care insurance partnership). I. With reciprocity, the amount of the Asset Disregard provided with respect to a policy purchased under the State long-term care insurance partnership of another State shall equal the Asset Disregard that would apply to a Partnership Policy covered directly by the South Carolina Long-Term Care Partnership Program. Such reciprocity shall be provided to all States that maintain a State long-term care insurance partnership that provides similar reciprocity for Partnership Policies issued under the South Carolina Long-Term Care Partnership Program. The provision of reciprocity under the South Carolina Long-Tenn Care Partnership Program does not affect eligibility requirements for :\1edicaid benefits that apply apart from those pertaining to permissible assets and resources. After the issuance of guidance by the Secretary pursuant to section 6021 (b) DRA, the South Carolina Department of and Human Services, if it to be exempt from standards, shall the period Office of Personnel Management has a certificate issued the meets the requirements of 191 1 Security Act .S.C. 1396p(b)(l qualify J. Producer Training. The ORA the State Medicaid Letter (Sfv1DL 19) dated July 2006, issued by Centers & Medicaid Services, require the South Carolina Director Insurance to assurance that producer who or ··a under a Partnership training and demonstrates an understanding Partnership and their relationship to public and private to long-term care." Issuers are to maintain records, subject to the state's record retention requirements, that verify its producers who sell, solicit or negotiate long-term care insurance products on their behalf have received the training required for Partnership policies and that they demonstrate an understanding of the policies and their relationship to public and private long term care coverage. For more information about producer training: For all other information in this bulletin pertaining to Medicaid: Contact Bethanie Brown at the South Carolina Department of Health and Human Services at or (803 )898-2697. Attachment A STATE CERTIFICATION FORl\'1 to State Under section 191 Insurance Director partnership ("Qualified Care Insurance the (including issued under a group insurance contract) covered under Qualified Partnership meet certain consumer protection requirements, and policies so certified are deemed to such requirements. These consumer protection requirements are set forth in section 1917(b){5)(A) of the Social Security Act U.S.C. 1396p(b)(5)(A)) and principally include certain specified provisions of the Long-Term Care Insurance Model Regulation and Long-Term Care Insurance Model Act promulgated by the National Association of Insurance Commissioners C'NAIC') (as adopted as of October 2000) (refeiTed to herein as the ·'2000 Y1odel Regulation" and "2000 Model Act" respectively). (These requirements apply to policies covered under a Qualified Pa11nership even if the State has not adopted all of such requirements \Vith respect to its regulation oflong-term care insurance.) This State Certification Form should be used by the State Insurance Director to provide the ce11ification under section 1917(b )(5)(8)( iii) of the Social Security Act. In providing this certification, the State Insurance Director may reasonably rely upon the certification of issuers of the policies that is made in accordance with the Issuer Certification Form Attachment B). The Issuer Certification Form is not intended, however. to preclude the State Insurance Director from requesting such further information from issuers of policies as the State Insurance Director determines may be needed in order to reach a determination that such policies are in compliance with the provisions of the 2000 Model Regulation and 2000 Model Act that are applicable under section 1917(b )(5)(A) of the Social Security Act. A State Insurance Director may supplement its certification from time to time to include new that are certified. I. POLICY FORMS COVERED BY CERTIFICATION policies on or to such date on will be treated as certified and \Viii be unaffected such new requirement. is covered a new Form that reflects a change in the long-term care insurance model requirements and the new State Certification Form is made as of the effective date of such then partnership policies issued under such policy after such date also \Viii be treated as certified. II. CERTIFICATION I hereby certify that, to the best of my knowledge and belief, the partnership policies issued on the policy fonns identified in to this State Certification Form comply with the requirements of section 1917(b)(5)(A) ofthe Social Security Act (42 U.S.C. 1396p(b)t5)(A)). Date Name of State Insurance Director authorized Attachment A: Exhibit I (to State Certification Form) Issuer: ------------------------------------------------------------------ Policy forms covered by certification: Issuer: Policy forms covered by certification: Issuer: Policy forms covered by certification: Issuer: Policy forms covered by certification: Issuer: Policy forms covered by certification: Issuer: Policy forms covered by certification: Issuer: Policy forms covered by certification: Attachment B ISSUER CERTIFICATION FORM State Care Under section 191 Insurance Director a State (''Qualified Partnership'') may issued a group Partnership meet certain consumer protection such requirements. These consumer of Social Security Act ( 42 U certain specified provisions of the Long-Term Care Insurance Model Regulation Care Insurance Model Act promulgated by the National Association Insurance Commissioners (as adopted as of October 2000) (referred to herein as the Model Regulation" and "2000 Model Act" respectively). In order to prm ide each State Insurance Director with information necessary to provide a certification for policies, this Issuer Certification Form requests information and a certification from issuers of long-tenn care insurance policies with respect to policy forms that may be covered under the Qualified Partnership of the State. An insurance company may request certification of policies from time to time and, accordingly, may supplement this issuer certification form, e.g., as it introduces new long-term care insurance policy forms for issuance. I. GENERAL INFORMATION A. Name, address and telephone number of issuer: B. Name, address, telephone number, and email address (if available) of an employee of issuer who will be the contact person for information relating to this form: C. Policy form number(s) (or other identifying information, such as certificate series) for policies covered by this Issuer Certification Form: Specimen each of the be provided upon request. II. QUESTIONS REGARDING APPLICABLE PROVISIONS OF THE 2000 \'10DEL REGULATION AND 2000 MODEL ACT Please answer each of the questions below with respect to the policy forms identified in section I.C above. For purposes of answering the questions belO\\', any provision the 2000 !v1odel Regulation or 2000 Model Act listed below shall be treated as including any other provision of the 2000 Model Regulation or 2000 Model Act necessary to implement the provision. Are the following requirements of the 2000 Model Regulation met with respect to all policies (including certificates issued under a group insurance contract) intended to be covered under the Qualified Partnership that are issued on each of the policy forms identified in section I.C above? Yes No A. Yes No '..JA B. Yes '.,J c. A D. A E. F. G. Section 6A (relating to guaranteed renewal or noncancellability), other than paragraph (5) thereof, and the requirements section 68 of the 2000 Model Act relating to such section 6A. Section 68 (relating to prohibitions on limitations and exclusions) other than paragraph thereof. Section 6C to extension of benefits). 60 to or conversion of of Yes Yes No Yes Yes No Yes No Yes No Yes No Yes No Yes No Yes No A NA NA NA NA N:A N/A N!A H. I. J. K. L M. N. 0. P. Q. R. S. Section 9 to disclosure to to Section 15 (relating to reporting requirements). Section 22 (relating to tiling requirements for marketing). Section 23 (relating to standards fur marketing), including inaccurate completion of medical histories, other than paragraphs (1 ), ( 6 ), and (9) of section 23C. Section 24 (relating to suitability). Section 25 (relating to prohibition against preexisting conditions and probationary periods in replacement policies or certitlcates). The provisions of section relating to contingent nonforfeiture benefits, if the policyholder declines the offer of a nonforfeiture provision described m section 7702B(g)( 4) of the Internal Revenue Code of 1986 (26 U.S.C. 7702B(g)(4)). Section 29 (relating to standard fonnat outline of coverage). Section 30 (relating to requirement to deliver shopper's of Model Act met with a group insurance are issued on the Section 6D to ' ' . Yes c. to D. E. Section 6G Yes F. 6H group Yes No NiA G. 6J to Yes No N•A H. Section 6K (relating to monthly on accelerated death benetlts). Yes No NA I. Section 7 (relating to incontestability period). In order for a policy to be covered under the Qualified Partnership of the State, the answers to all questions above should be ''yes" (or "N/A" where all requirements with respect to a provision above are not applicable). If answers differ between policy forms , a requirement would be answered ·'Yes" for one form and "N/ A" for another), you should use separate Issuer Certification Forms for such policies. Ill. CERTIFICATIONS: Date I. I hereby certify that the answers, accompanying documents. and other infonnation set forth herein are, to the best of my knowledge and belief: true, correct. and complete. Name and title of the Issuer OtTicer of the Issuer Attachment C Partnership Program Notice Important Consumer Information Regarding the South Carolina Long-Term Care Insurance Partnership Program Partnership is a partnership state insurance companies to individuals planning their Insurance companies voluntarily to in the Partnership Program offering long-term care insurance coverage that meets certain State and requirements. Long-term care insurance policies (certificates] that qualify as Partnership Policies [Certificates] may protect the policyholder's [ certificateholder's] assets through a feature known as "Asset Disregard" under South Carolina's Medicaid program. Asset Disregard means that an amount of the policyholder's [ certificateholder's] assets equal to the amount of long-term care insurance benefits received under a qualified Partnership Policy [Certificate] will be disregarded for the purpose of deterrnining the insured's eligibility for Medicaid. This generally allows a person to keep assets equal to the insurance benefits received under a qualified Partnership Policy [Certificate] without affecting the person's eligibility for Medicaid. All other Medicaid eligibility criteria will apply and special rules may apply to persons whose home equity exceeds $500.000. Asset Disregard is not available under a long-term care insurance policy [certificate] that is not a Partnership Policy [Certificate]. Therefore, you should consider if Asset Disregard is important to you, and whether a Partnership Policy meets your needs. The purchase of a Partnership Policy does not automatically qualify you for "lfedicaid. \Vhat are the Requirements for a Partnership Policy ICertificatel? In order for a policy [certificate] to qualify as a Partnership Policy [Certificate], it must, among other requirements: • be issued to an individual after 1, • • • meet • meet f ' • -no UUJ.HU''" the beneficial Medicaid contact [carrier name.] have current Medicaid eligibility, you should contact the South Department of Human Services. Attachment D Partnership Status Disclosure Notice Important Information Regarding Your (Policy's](Certificate's} Long-Term Care Insurance Partnership Status This disclosure notice is issued with your Some long-term care insurance policies [certificates] sold in South Carolina qualify the South Carolina Long-Term Insurance Partnership Program. Insurance companies voluntarily to participate in the Partnership Program by oflering term care insurance that meets certain State and Federal requirements. term care insurance policies [certificates] that qualify as Partnership Policies [Certificates] may be entitled to special treatment, and in particular an ''Asset Disregard," under South Carolina's Medicaid program. Asset Disregard means that an amount of the policyholder's [certificateholder's] assets equal to the amount of long-term care insurance benefits received under a qualified Partnership Policy [Certificates] will be disregarded for the purpose of determining the insured's eligibility for Medicaid. This generally allows a person to keep assets equal to the insurance benefits received under a qualified Partnership Policy [Certificate] without affecting the person's eligibility for Medicaid. All other Medicaid eligibility criteria \vill apply and special rules may apply to persons whose home equity exceeds $[500,000]. Asset Disregard is not available under a long-term care insurance policy [certificate] that is not a Partnership Policy [Certificate]. The purchase of a Partnership Policy does not automatically qualify you for Medicaid. Partnership Policy {Certificate[ Status. Your long-term care insurance policy (certificate) is intended to qualify as a Partnership Policy (Certificate) under the South Carolina Long-Term Care Partnership Program as of your Policy's [Certificate's) effective date. to Before you make any changes, you should consult with /insert name of carrier/ to determine the effect of a proposed change. if not or