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.

Effective Date: January 1, 2015.

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 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 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 the insurance carrier to retain evidence of mailing the notice for at least three years from the date of the notice.

AT RICHMOND, JUNE 4, 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 ADOPTING RULES

By Order to Take Notice ("Order") entered February 11, 2014, all interested persons were ordered to take notice that subsequent to March 31, 2014, the State Corporation Commission ("Commission") would consider the entry of an order to adopt amendments to 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 ("Rules"). These amendments were proposed by the Bureau of Insurance ("Bureau").

The amendments to 14 VAC 5-200-65 were proposed to enhance the mailing of notice of lapse or termination provisions to long-term care insurance policyholders and/or designees in order to protect such policyholders and/or designees from unintentionally lapsing their long-term care policies due to nonpayment of premium. The current rules require that notice of lapse or termination only be mailed by first class United States mail. The proposed amendments 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. They also specify that notice of lapse or termination 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 of lapse or termination was properly sent.

The Order required that on or before March 31, 2014, any person requesting a hearing on the amendments to 14 VAC 5-200-65 shall have filed such request for hearing with the Clerk of the Commission ("Clerk"). No request for a hearing was filed with the Clerk.

The Order also required all interested persons to file their comments in support of or in opposition to the amendments to 14 VAC 5-200-65 on or before March 31, 2014. Eleven residents of the Commonwealth of Virginia, as well as AARP Virginia, the Alzheimer's Association, the American Council of Life Insurers, and the Virginia Poverty Law Center filed timely comments with the Clerk. The Bureau provided a response to these comments, which it filed with the Clerk on May 12, 2014 ("Response").

As a result of these comments received, the Bureau recommended in its Response that the proposed amendments to 14 VAC 5-200-65 be further revised as follows: amend 14 VAC 5-200-65 A 3 b and 14 VAC 5-200-65 A 3 c to provide for proof of mailing to specifically identified recipients obtained from the commercial delivery service or United States Postal Service, respectively. This amendment will assist in determining whether a notice of lapse or termination was properly sent to specified recipients.

The Bureau recommends that 14 VAC 5-200-65 be adopted as revised.

NOW THE COMMISSION, having considered this matter, the filed comments, the Bureau's response to the comments, and the Bureau's recommendation to amend and revise 14 VAC 5-200-65, is of the opinion that 14 VAC 5-200-65 should be adopted as amended and revised.

Accordingly, IT IS ORDERED THAT:

(1) The amendments and revisions to 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, which Rules are attached hereto and made a part hereof, are hereby ADOPTED to be effective January 1, 2015.

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

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

(4) The Commission's Division of Information Resources shall make available this Order and the attached adopted, amended and revised 14 VAC 5-200-65, on the Commission's website: http://www.scc.virginia.gov/case.

(5) The Bureau shall file with the Clerk an affidavit of compliance with the notice requirements of Ordering Paragraph (2) 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 obtains ] 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 notice was ] 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 obtains ] 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 notice was ] 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 of mailing, as evidenced in the written receipt obtained by the insurer pursuant to subdivision 3 a, b, or c of this subsection ]. The insurer shall retain [ any and all ] evidence of mailing the notice, including the [ street address list ] of [ the ] recipients, as applicable, and [ the content of the notification a copy of the notice ], 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.