Date:November 19, 2008
To:Health and Life Insurance Writers Marketing Long-Term Care Insurance
From:Sean Dilweg, Commissioner of Insurance
Subject:Amendments to Wisconsin's Long-Term Care Insurance Regulation, Agent Training Requirements and Long-Term Care Partnership Program

This bulletin applies to all health and life insurers that plan to issue or market long-term care (LTC) Insurance policies and riders or LTC insurance partnership program policies after January 1, 2009.

Background

The Deficit Reduction Act of 2005 (DRA) provided that states could participate in the LTC partnership program by filing amendments to their State Medicaid Program (SMP). The Wisconsin legislature adopted legislation that required the state of Wisconsin Department of Health Services (DHS) to file with the U.S. Department of Health and Human Services (DHSS) an amended SMP. It also required that DHS and the Office of the Commissioner of Insurance (OCI) work together to approve LTC training programs for agents.

The DRA required that state departments of insurance certify that partnership policies provide the specified consumer protection requirements of the NAIC model LTC insurance act and regulation. This required that Wisconsin amend ss. Ins 3.455 and 3.46, Wis. Adm. Code, regarding long-term care, nursing home and home health care policies.

The intent of this bulletin is to provide basic information to insurers offering LTC coverage regarding changes to Wisconsin's LTC regulations, including amendments and new provisions that:

  • Meet the requirements of the 2000 NAIC LTC model act and regulation
  • Create LTC partnership program policies
  • Create LTC agent training requirements
  • Create LTC filing requirements for advertisements
  • Amend LTC marketing standards
  • Expand LTC reporting requirements
  • Require notification of the availability of new coverage for LTC services and providers
  • Require the right to reduce coverage and lower premiums

Applicability

The amendments apply to individual and group LTC insurance policies, certificates and riders, and to LTC care insurance policies certified as qualified LTC insurance partnership program policies. The amendments first apply to policies or certificates offered or issued on or after January 1, 2009, or on the first renewal date on or after January 1, 2009, but no later than January 1, 2010, for collectively bargained policies or certificates.

Explanation of the Amendments

The following identifies changes to ss. Ins 3.455 and 3.46, Wis. Adm. Code, that meet the requirements in the 2000 NAIC LTC model act and regulation and those identified in the DRA.

Section Ins 3.455 (3), Wis. Adm. Code, regarding definitions, adds definitions for the terms "Basis for continuation of coverage," "Basis for conversion of coverage," "Converted policy" and "Managed-care plan" and renumbered existing definitions.

Section Ins 3.455 (7), Wis. Adm. Code, regarding continuation and conversion requirements, adds provisions regarding converted policies.

Section Ins 3.46 (3), Wis. Adm. Code, regarding definitions, renumbers existing definitions and adds new definitions for "Assisting living facility," "Department," "Group long-term care insurance," "Guaranteed renewable for life," "Home health care services," "Long-term care insurance," "Long-term care insurance policy qualifying for the Wisconsin Long-Term Care Insurance Partnership Program," "Medicaid," "Mental or nervous disorder," "Personal care," "Qualified long-term care services," and "Wisconsin Long-Term Care Insurance Partnership Program."

Section Ins 3.46 (4) (c), Wis. Adm. Code, regarding general form requirements, specifies fixed daily benefit limits regarding home health or community care services.

Section Ins 3.46 (4) (j) and (k), Wis. Adm. Code, regarding general form requirements, specifies terms that if used in the policy shall be defined.

Section Ins 3.46 (4) (m), Wis. Adm. Code, regarding general form requirements, specifies the exclusions and limitations that may be included in a policy.

Section Ins 3.46 (4) (n) and (r ), Wis. Adm. Code, regarding general form requirements, prohibits certain limitations or exclusions if the policy provides benefits for home health care or community care services.

Section Ins 3.46 (5) (a) and (b) 9, Wis. Adm. Code, regarding form requirements, specifies that the notice and caption regarding the right to return in s. Ins 3.13 (2) (j), Wis. Adm. Code, does not apply to life insurance LTC coverage. The rule also provides that a LTC policy that is an individual policy shall include a provision that the policy is guaranteed renewable for life or noncancellable. The provision shall be appropriately captioned and shall appear on the first page of the policy and shall include any reservation by the insurer of the right to change premiums and any automatic renewal premium increase based on the policyholder's age.

Section Ins 3.46 (8) (c) and (d), Wis. Adm. Code, regarding the outline of coverage, specifies disclosures required on the first page of the outline. The outline disclosures do not apply to group coverage offered as a result of collective bargaining and is guaranteed issue.

Section Ins 3.46 (9) (k), Wis. Adm. Code, regarding disclosure when soliciting, requires that an insured provide copies of the disclosure forms required in amended Appendices 2 and 5 to the applicant.

Section Ins 3.46 (9) (L), Wis. Adm. Code, regarding disclosure when soliciting, provides that for a group insurance policy signature requirements may be obtained by telephonic or electronic enrollment.

Section Ins 3.46 (9) (m), Wis. Adm. Code, regarding disclosure when soliciting, provides that specific disclosure for life insurance policies that provide an accelerated benefit for LTC be provided. With regard to life insurance policies that provide an accelerated benefit for LTC, a disclosure statement is required at the time of application for the policy or rider and at the time the accelerated benefit payment request is submitted that receipt of these accelerated benefits may be taxable and that assistance should be sought from a personal tax advisor. The disclosure statement shall be prominently displayed on the first page of the policy or rider and any other related documents. This paragraph may not apply to qualified LTC insurance contracts.

Section Ins 3.46 (10) (f), Wis. Adm. Code, regarding underwriting, provides that if the application contains a question regarding prescription medication the application shall ask the applicant to list the medications and provides that, when medications are listed and related to a medical condition for which coverage would otherwise be denied, the insurance may not rescind the coverage for that condition.

Section Ins 3.46 (10) (g), (h), (i) and (j), Wis. Adm. Code, regarding underwriting, specifies disclosures in the application, delivery of the application and maintaining a record of rescissions.

Section Ins 3.46 (11) (a) 4, Wis. Adm. Code, provides that activities of daily living and cognitive impairment triggers shall be described in the policy in a separate paragraph and shall be labeled "Eligibility for the Payment of Benefits."

Section Ins 3.46 (11) (h), Wis. Adm. Code, regarding the offer of coverage with inflation protection, specifies when insurers offering group LTC policies are exempt.

Section Ins 3.46 (14) (a), (c) to (g), Wis. Adm. Code, regarding replacement, requires that an insurer furnish an applicant with notice regarding replacement in compliance with either Appendix 6 or 7, depending on whether the insurer uses agents or direct response solicitation.

Section Ins 3.46 (19) (c) 4, Wis. Adm. Code, regarding nonforfeiture benefit requirements, specifies notification and offer of nonforfeiture benefits.

Section Ins 3.46 (19) (d), Wis. Adm. Code, regarding nonforfeiture benefit requirements, specifies computation of required benefits continued as nonforfeiture benefits, including contingent benefits upon lapse.

Section Ins 3.46 (19) (j), Wis. Adm. Code, regarding nonforfeiture benefit requirements, specifies the triggers for a contingent benefit on lapse.

Section Ins 3.46 (20) (a) to (c), Wis. Adm. Code, regarding incontestability period, provides that an insurer may rescind a LTC insurance policy or certificate or deny an otherwise valid LTC insurance claim only as permitted under ss. 631.11 (1) (b) and 632.76, Wis. Stat., and in addition comply with the following:

  • 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
  • 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
  • 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

Section Ins 3.46 (20) (d), Wis. Adm. Code, regarding incontestability period, provides that no LTC 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. The rule also defines the term "field issued."

Section Ins 3.46 (20) (e), Wis. Adm. Code, regarding incontestability period, provides that, if an insurer has paid benefits under the LTC insurance policy or certificate, the benefit payments may not be recovered by the insurer in the event that the policy or certificate is rescinded.

Section Ins 3.46 (20) (f), Wis. Adm. Code, regarding incontestability period, provides that in the event of the death of the insured the incontestability provision in s. Ins 3.46 (20), Wis. Adm. Code, may not apply to the remaining death benefit of a life insurance policy that accelerates benefits for LTC. The remaining death benefits shall be governed by s. 632.46, Wis. Stat.

Section Ins 3.46 (21), Wis. Adm. Code, regarding reporting requirements, provides that insurers maintain records for each agent regarding replacement sales as a percent of the agents total annual sales.

Section Ins 3.46 (22), Wis. Adm. Code, regarding filing requirements for advertising, requires that an insurer, health care service plan or other entity providing LTC insurance or benefits provide a copy of any LTC insurance advertisement to the commissioner as required by s. Ins 3.27, Wis. Adm. Code. 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.

Section Ins 3.46 (23) (a) and (b), Wis. Adm. Code, regarding standards for marketing, specifies that an insurer establish marketing procedures and intermediary training requirements, provide disclosures, and identify prohibited acts and practices. The rule also requires that an insurer shall at solicitation provide written notice to the prospective policyholder and certificateholder that a senior counseling program is available in Wisconsin and the name, address and telephone number of the program.

Section Ins 3.46 (23) (c), Wis. Adm. Code, regarding standards for marketing, provides in regards to any transaction involving a LTC insurance product that no person may knowingly prevent or dissuade or attempt to prevent or dissuade any person from filing a complaint with the commissioner, cooperating with the commissioner in any investigation, or attending or giving testimony at any proceeding authorized by law.

Section Ins 3.46 (23) (d), Wis. Adm. Code, regarding standards for marketing, provides that, 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.

Section Ins 3.46 (23) (e), Wis. Adm. Code, regarding standards for marketing, specifies the responsibilities of an association when endorsing or selling LTC insurance.

Section Ins 3.46 (24), Wis. Adm. Code, regarding availability of new services or providers, requires that a LTC insurer notify policyholders of the availability of a new LTC policy series that provides coverage for new LTC 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 Wisconsin.

Section Ins 3.46 (25), Wis. Adm. Code, regarding the right to reduce coverage and lower premiums, provides that LTC policies and certificates include a provision that allows the policyholder or certificateholder to reduce coverage and lower premiums by either reducing the maximum benefit or reducing the benefit amount.

Agent LTC Training Requirements

Section Ins 3.46 (26) (a), Wis. Adm. Code, regarding insurance intermediary training requirements, provides that no agent may sell, solicit or negotiate any LTC insurance unless the agent is duly licensed and appointed and has completed the initial training and ongoing training every 24 months. Initial training is defined as no less than 8 hours, of which 2 hours shall contain Wisconsin-specific Medicaid and LTC information. Ongoing training is defined as one 4-hour training course specific to LTC insurance and shall incorporate updates to the state partnership program. The training may not include training that is insurer or company product specific or that includes any sales or marketing information, materials, or training, other than those required by state or federal law.

The Wisconsin-specific Medicaid and LTC training developed by the Wisconsin Department of Health Services (DHS) can be viewed at http://www.uwosh.edu/ccdet/DHFS/lc/default.htm under the "Instructional Resources" heading.

Section Ins 3.46 (26) (a) 4, Wis. Adm. Code, regarding insurance intermediary training requirements, specifies the topics that shall be included in the required training.

Section Ins 3.46 (26) (b) 1, Wis. Adm. Code, regarding insurance intermediary training requirements, provides that agents licensed prior to January 1, 2009, shall complete the initial training prior to selling LTC products on or after January 1, 2009. Completion of initial training courses on or after October 27, 2007, that meets the requirements under the rule may be counted towards completion of the initial 8-hour training requirement.

Section Ins 3.46 (26) (b) 2, Wis. Adm. Code, regarding insurance intermediary training requirements, provides that agents who complete initial training by January 1, 2009, are required to complete the required 4 hours of ongoing training by the first complete license renewal cycle. Agents completing initial training after January 1, 2009, shall complete the required 4 hours of ongoing training by the date of their next complete license renewal cycle. An agent's license renewal date is biennial and based on the last day of the agent's birth month as identified on the agent's license.

Section Ins 3.46 (26) (c), Wis. Adm. Code, regarding insurance intermediary training requirements, provides that insurers shall obtain and maintain verification that the agents appointed with the insurer received the required training and shall make such information available to the commissioner upon request.

Section Ins 3.46 (26) (d), Wis. Adm. Code, regarding insurance intermediary training requirements, provides that insurers offering LTC insurance intended as a qualifying partnership policy shall maintain records that its agents have demonstrated an understanding of the state partnership program and the relationship of the state partnership program to public and private coverage of LTC including Wisconsin Medicaid LTC programs. Information maintained shall be in a form that allows the commissioner to provide assurance to the DHS that the insurer's agents have received the LTC insurance training.

Amendments to Reporting Requirements

Section Ins 3.46 (16) (b), Wis. Adm. Code, regarding suitability, requires annual reporting to the commissioner of information regarding suitability.

Section Ins 3.46 (21), Wis. Adm. Code, regarding annual reporting, requires annual reporting to the commissioner regarding data on lapses and replacements and data on denied claims using Appendices 9 and 10.

Amendments to Appendices

The following Appendices were repealed and recreated:

  • Ins 3.46 APPENDIX 1, Outline of Coverage
  • Ins 3.46 APPENDIX 2, Long-Term Care Insurance Personal Worksheet
  • Ins 3.46 APPENDIX 3, Things you Should know Before you Buy Long-Term Care Insurance
  • Ins 3.46 APPENDIX 4, Long-Term Insurance Suitability Letter
  • Ins 3.46 APPENDIX 5, Long-Term Care Insurance Potential Rate Increase Disclosure Form

The following Appendices were created:

  • Ins 3.46 APPENDIX 6, Notice to Applicant regarding Replacement of Individual Accident and Sickness or Long-Term Care Insurance
  • Ins 3.46 APPENDIX 7, Notice to Applicant regarding Replacement of Individual Accident and Sickness or Long-Term Care Insurance [for direct response solicitation]
  • Ins 3.46 APPENDIX 8, Rescission Reporting Form for Long-Term Care Policies
  • Ins 3.46 APPENDIX 9, Claims Denial Reporting Form Long-Term Care Insurance
  • Ins 3.46 APPENDIX 10, Long-Term Care Insurance Replacement and Lapse Reporting Form

LTC Partnership Program

Section Ins 3.465, Wis. Adm. Code, regarding Wisconsin Long-Term Care Partnership Program, applies to an insurer offering a LTC policy that is intended to qualify under the state's partnership program and that is in compliance with the requirements of 42 U.S.C 1396p (b).

Section Ins 3.465 (2), Wis. Adm. Code, regarding definitions includes definitions of "Automatic exchange," "Consumer price index," "Qualified long-term care insurance contract," "Qualifying partnership policy exchange," and "Secretary."

Section Ins 3.465 (3), Wis. Adm. Code, regarding qualifying partnership policies, provides that a qualifying partnership policy shall be filed with and approved by the commissioner prior to use and contain the qualifying partnership policy certification form (OCI 26-113). The rule also provides that a qualifying partnership policy shall:

  • Meet the requirements of a tax-qualified LTC insurance contract as defined in Section 7702B(b) of the Internal Revenue Code of 1986, as amended,
  • Meet all applicable requirements of ss. Ins 3.455, 3.46, and 3.465, Wis. Adm. Code,
  • Be accompanied by a clear disclosure that the policy is intended to be a qualifying partnership policy, in the format contained in Ins 3.465 Appendix 1,
  • Provide inflation protection provisions applicable based on a person's age as of the date of purchase of the policy,
  • Not base underwriting criteria upon whether or not the policy is a qualifying partnership policy.

Section Ins 3.465 (4) (a), Wis. Adm. Code, regarding form requirements for qualifying partnership policies, provides that an insurer file the policy, outline of coverage, premium rates, and actuarial memorandum with the commissioner and include the qualifying partnership certification form. The qualifying partnership policy certification form (OCI 26-113) is available from the OCI Web site oci.wi.gov or by writing to the commissioner.

Section Ins 3.465 (4) (b) to (d), Wis. Adm. Code, regarding form requirements for qualifying partnership policies, provides that, if an insurer intends to use a previously approved policy to qualify as a qualifying partnership policy, the insurer submit prior to use the certification form (OCI 26-113), and file an endorsement or rider if the insurer intends to amend a previously approved policy to qualify as a qualifying partnership policy.

Section Ins 3.465 (5), Wis. Adm. Code, regarding inflation protection requirements, provides for the following inflation protection based on a person's age on the date of purchase:

  • Less than age 61
Automatic annual compounded inflation protection
   At a rate of at least 3%, or
   At a rate based on changes in the consumer price index or
   At a rate of at least 3% and
      Increases automatically unless insured rejects an
      increase until insured attains age 76
  • At least age 61
    but less than 76
Automatic annual compounded inflation protection described above, or
   At least 3% annual simple inflation protection
  • At least age 76
No less restrictive than in all of the above, but
   Inflation protection is not required

Section Ins 3.465 (6) (a), Wis. Adm. Code, regarding disclosure when soliciting, provides that in addition to the requirements of s. Ins 3.46, Wis. Adm. Code, an insurer issuing or marketing a policy that is intended to qualify for the state's partnership program shall explain at the time of solicitation the benefits associated with a qualifying partnership policy and provide notice in the format contained in Appendix 1 and 2, the Guide to Long-term Care booklet, and The Wisconsin Long-term Care Programs guide.

Section Ins 3.465 (6) (b), Wis. Adm. Code, regarding disclosure when soliciting, provides that for a qualifying partnership policy issued to a group when an outline of coverage is not delivered the insurer or agent shall deliver copies of the qualifying partnership policy disclosure notice, the Guide to Long-term Care booklet, and The Wisconsin Long-term Care Programs guide.

Section Ins 3.465 (6) (c), Wis. Adm. Code, regarding disclosure when soliciting, provides that, for a life insurance policy that offers LTC insurance as a provision in the policy or in a rider that is intended to qualify under the state's partnership program, the insurer or agent at the time of solicitation shall deliver the disclosure notice (Appendix 1), the Guide to Long-term Care booklet, and The Wisconsin Long-term Care Programs guide.

Section Ins 3.465 (7) (a) and (b), Wis. Adm. Code, regarding other disclosures, provides that, when an insurer is made aware that the insured or certificateholder initiated a policy change request or declined a benefit increase that will result in the loss of the status as a qualifying partnership policy, the insurer shall provide, in writing, an explanation of how such action impacts the insured and the reason for the loss in status. The insurer shall also advise the insured or certificateholder of how to retain the policy as a qualified partnership policy if requested.

Section Ins 3.465 (7) (c), Wis. Adm. Code, regarding other disclosures, provides that an insurer shall provide a completed qualifying partnership policy summary document in the format of OCI 26-114, when requested by the insured or the insured's authorized representative.

Section Ins 3.465 (8) (a), Wis. Adm. Code, regarding restrictions on exchange, provides that LTC policies offered in exchange are subject to the premium rate schedule increases provision in s. Ins 3.455 (9m), Wis. Adm. Code, and distinguishes between an exchange and an automatic exchange.

Section Ins 3.465 (8) (a) 2, Wis. Adm. Code, regarding restrictions on exchange, provides that an insurer issuing an automatic exchange shall utilize only a policy that requires no modifications or additions and may not underwrite. An insurer shall use original issue age and risk class of the insured in determining the premium charged for the new policy.

Section Ins 3.465 (8) (a) 3, Wis. Adm. Code, regarding restrictions on exchange, provides that an insurer offering an exchange with an actuarial value of benefits exceeding that of the existing LTC policy shall treat the exchange as replacement and be suitable and shall apply its new business LTC underwriting guidelines to the increased benefits. The premium for the additional benefits shall be determined using the then current age and risk class of the insured for the additional benefits only.

Section Ins 3.465 (8) (b), Wis. Adm. Code, regarding the offer of exchange, provides that an insurer may offer the option to exchange existing LTC policies for qualifying partnership policies on a one-time basis if within one year from the date the insurer begins to advertise, market, offer, sell, or issues policies it makes the offer to all existing LTC policyholders or certificateholders. The insurers must submit and receive approval to offer a LTC policy that is intended to be a qualifying policy. The offer shall be made on a nondiscriminatory basis without regard to the age or health status of the insured. The offer shall remain open for a minimum of 120 days from the date of the mailing by the insurer. In the event of an exchange, the insured may not lose any rights that have accrued under the original policy including, but not limited to, rights established because of the lapse of time related to preexisting condition exclusions, elimination periods, or incontestability clauses.

Section Ins 3.465 (8) (c), Wis. Adm. Code, regarding exchanged policy requirements, provides that the new policy offered in an exchange or automatic exchange shall be in a form that is offered for sale by the insurer in the general market at the time of exchange. A policy received in an exchange on or after January 1, 2009, is treated as newly issued and thus is eligible for partnership program status.

Section Ins 3.465 (8) (d) 1, Wis. Adm. Code, regarding exceptions and exemptions, provides that insurers offering group LTC policies are exempt from specific provisions of the rule if the group policy or coverage meet specified requirements. Four of these requirements are that the policy is issued to a local, municipal, county, or state public employee group, that the group coverage was negotiated as part of a collective bargaining agreement, that the group coverage is provided to all eligible employees on a guaranteed issue basis, and that the policy provides insureds with at least 5% compound annualized inflation protection.

Section Ins 3.465 (8) (d) 2, Wis. Adm. Code, regarding exceptions and exemptions, provides that an insurer is not required to offer an exchange to an individual who is eligible for benefits or within an elimination period, or who is or who has been in claim status on or after January 1, 2009, or who would not be eligible to apply for coverage due to issue age limitations under the new policy.

Sections Ins 3.465, Wis. Adm. Code, creates Appendix 1, Partnership Policy Status Disclosure Notice, and s. Ins 3.465, Appendix 2, Partnership Program Notice.

Instructions for LTC Insurance Policy and Rider Submission and Approval

In order for a LTC policy to qualify as a qualifying partnership policy, the policy must be filed with and approved by the commissioner prior to use. Also, a qualifying partnership policy filing must include the qualifying partnership policy certification form (OCI 26-113).

Insurers that plan to issue or market existing or newly approved LTC policy forms or riders in Wisconsin after January 1, 2009, are required to file with the OCI prior to use all advertising materials.

Form filing transmittal forms and instructions are available on the OCI's Web site at: http://oci.wi.gov/oci_home.htm. Each product category must be filed separately.

Effective Date:
This bulletin takes effect immediately. The requirements explained in this bulletin apply to all LTC policies, certificates and riders marketed or issued beginning January 1, 2009. A copy of the rule may be obtained from the OCI internet Web site at http://oci.wi.gov/rules/0346fn08.pdf or by contacting Inger Williams at (608) 264-8110.

Contact Information:
Questions regarding form filing transmittals and advertisement transmittals should be directed to Linda Low at: linda.low@wisconsin.gov. Questions regarding rate filings should be directed to Stephanie Cook at: stephanie.cook@wisconsin.gov. Questions regarding other information contained in this bulletin should be directed to contact Diane Dambach at: diane.dambach@wisconsin.gov.