Title of Regulation: 14VAC5-200. Rules Governing Long-Term Care Insurance (amending 14VAC5-200-65).

Statutory Authority: §§ 12.1-13 and 38.2-223 of the Code of Virginia.

Public Hearing Information: A public hearing will be scheduled upon request.

Public Comment Deadline: March 31, 2014.

Agency Contact: Robert Grissom, Chief Insurance Market Examiner, Life and Health Division, Bureau of Insurance, State Corporation Commission, P.O. Box 1157, Richmond, VA 23218, telephone (804) 371-9152, FAX (804) 371-9944, or email bob.grissom@scc.virginia.gov.

Summary:

The proposed amendments enhance the mailing notice provisions to long-term care insurance policyholders or designees. The current rules require that notice only be mailed by first class United States mail. The proposed amendments (i) require that long-term care insurance carriers provide the policyholder or certificateholder, as well as a person designated by the policyholder or certificateholder, notice of lapse or termination of the policy or certificate for nonpayment of premium at least 30 days prior to the effective date of such lapse or termination; (ii) expand the notice mailing provisions to allow mailing by one of several means; and (iii) require that carriers must retain evidence of mailing the required notices because these proof-of-mailing provisions will assist with determining whether a notice was properly sent.

AT RICHMOND, FEBRUARY 11, 2014

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. INS-2014-00019

Ex Parte: In the matter of
Amending the Rules Governing
Long-Term Care Insurance

ORDER TO TAKE NOTICE

Section 12.1-13 of the Code of Virginia ("Code") provides that the State Corporation Commission ("Commission") shall have the power to promulgate rules and regulations in the enforcement and administration of all laws within its jurisdiction, and § 38.2-223 of the Code provides that the Commission may issue any rules and regulations necessary or appropriate for the administration and enforcement of Title 38.2 of the Code.

The rules and regulations issued by the Commission pursuant to § 38.2-223 of the Code are set forth in Title 14 of the Virginia Administrative Code. Copies of these rules and regulations may also be accessed via the Commission's website: http://www.scc.virginia.gov/boi/laws.aspx.

The Bureau of Insurance ("Bureau") has submitted to the Commission a proposal to amend the Rules Governing Long-Term Care Insurance at Chapter 200 of Title 14 of the Virginia Administrative Code, specifically set forth at 14 VAC 5-200-65, Unintentional lapse.

The purpose of the amendments to 14 VAC 5-200-65 is to enhance the mailing of notice provisions to long-term care insurance policyholders and/or designees. The current rules require that notice only be mailed by first class United States mail. The proposed amendment requires that long-term care insurance carriers provide the policyholder or certificateholder, as well as a person designated by the policyholder or certificateholder, notice of lapse or termination of the policy or certificate for nonpayment of premium at least 30 days prior to the effective date of such lapse or termination. It also specifies that notice may be mailed by one of several means and that carriers must retain evidence of mailing the required notices. These proof-of-mailing provisions will assist with determining whether a notice was properly sent.

NOW THE COMMISSION is of the opinion that the proposed amendment submitted by the Bureau to amend 14 VAC 5-200-65 should be considered for adoption.

Accordingly, IT IS ORDERED THAT:

(1) The proposal to amend Chapter 200 of Title 14 of the Virginia Administrative Code, specifically 14 VAC 5-200-65, Unintentional lapse, is attached hereto and made a part hereof.

(2) All interested persons who desire to comment in support of or in opposition to, or request a hearing to consider the amendments to 14 VAC 5-200-65, shall file such comments or hearing request on or before March 31, 2014, with Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218. Interested persons desiring to submit comments electronically may do so by following the instructions at the Commission's website: http://www.scc.virginia.gov/case. All comments shall refer to Case No. INS-2014-00019.

(3) If no written request for a hearing on the proposal to amend 14 VAC 5-200-65 is received on or before March 31, 2014, the Commission, upon consideration of any comments submitted in support of or in opposition to the proposal, may amend 14 VAC 5-200-65.

(4) AN ATTESTED COPY hereof, together with a copy of the proposal to amend 14 VAC 5-200-65, shall be sent by the Clerk of the Commission to the Bureau in care of Deputy Commissioner Althelia P. Battle, who forthwith shall give further notice of the proposal to amend 14 VAC 5-200-65 by mailing a copy of this Order, together with the proposal, to all companies licensed by the Commission to write long-term care insurance in the Commonwealth of Virginia, as well as all interested persons.

(5) The Commission's Division of Information Resources forthwith shall cause a copy of this Order, together with the proposal to amend 14 VAC 5-200-65, to be forwarded to the Virginia Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.

(6) The Commission's Division of Information Resources shall make available this Order and the attached proposed amendment to 14 VAC 5-200-65 on the Commission's website: http://www.scc.virginia.gov/case.

(7) The Bureau shall file with the Clerk of the Commission an affidavit of compliance with the notice requirements of Ordering Paragraph (4) above.

14VAC5-200-65. Unintentional lapse.

A. Each insurer offering long-term care insurance shall, as a protection against unintentional lapse, comply with the following:

1. Notice before lapse or termination. No individual long-term care policy or certificate shall be issued until the insurer has received from the applicant either a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. The applicant has the right to designate at least one person who is to receive the notice of termination, in addition to the insured. Designation shall not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one person. The designation shall include each person's full name and home address. In the case of an applicant who elects not to designate an additional person, the waiver shall state: "Protection against unintended lapse. I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this long-term care insurance policy for nonpayment of premium. I understand that notice will not be given until 30 days after a premium is due and unpaid. I elect NOT to designate a person to receive this notice."

The insurer shall notify the insured in writing of the right to change this written designation, no less often than once every two years.

2. When the policyholder or certificateholder pays premium for a long-term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in subdivision 1 of this subsection need not be met until 60 days after the policyholder or certificateholder is no longer on such a payment plan. The application or enrollment form for such policies or certificates shall clearly indicate the payment plan selected by the applicant.

3. Lapse or termination for nonpayment of premium. No individual long-term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least 30 days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to subdivision 1 of this subsection, at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first class United States mail, postage prepaid; and notice No notice shall be effective unless it has been mailed in accordance with one of the following:

a. The notice is sent by certified mail, or the insurer obtains a certificate of mailing by the United States Postal Service;

b. The notice is sent by a commercial delivery service, and the insurer shall (i) obtain at the time of mailing a written receipt from the service showing the date of mailing and the number of items mailed and (ii) retain a mailing list showing the name and address of the insured and of those persons designated pursuant to subdivision 1 of this subsection to whom the notices were mailed, together with a signed statement by the insurer that the written receipt from the service corresponds to the mailing list retained by the insurer; or

c. The notice is sent by first-class United States mail, and the insurer shall (i) obtain at the time of mailing a written receipt from the United States Postal Service showing the date of mailing and the number of items mailed and (ii) retain a mailing list showing the name and address of the insured and of those persons designated pursuant to subdivision 1 of this subsection to whom the notices were mailed.

Notification shall also be provided to the agent of record of the insured, if any, within 72 hours after the notice has been mailed to the insured and those persons designated pursuant to subdivision 1 of this subsection.

There is a presumption that notice is delivered five days after the date that certified mail, commercial delivery service mail, or first-class United States mail is sent, the date of a certificate of mailing, or the date that notice was returned as undeliverable. The insurer shall retain evidence of mailing the notice, including the street address of the recipients, as applicable, and the content of the notification, for at least three years following the date of notice. Notice may not be given until 30 days after a premium is due and unpaid. Notice shall be deemed to have been given as of five days after the date of mailing.

B. Reinstatement. In addition to the requirement in subsection A of this section, a long-term care insurance policy or certificate shall include a provision that provides for reinstatement of coverage in the event of lapse if the insurer is provided proof that the policyholder or certificateholder was cognitively impaired or had a loss of functional capacity before the grace period contained in the policy expired. This option shall be available to the insured if requested within five months after termination and shall allow for the collection of past due premium, where appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy and certificate.