NO. 20. AN ACT RELATING TO LONG-TERM CARE INSURANCE.
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. 8 V.S.A. §§ 8084a and 8084b are added to read:
§ 8084a. REQUIRED DISCLOSURE OF RATING PRACTICES TO
(a) Other than policies for which no applicable premium rate or rate schedule increases can be made, insurers shall provide all of the information listed in this subsection to the applicant at the time of application or enrollment, unless the method of application does not allow for delivery at that time. In such a case, an insurer shall provide all of the information listed in this subsection to the applicant no later than at the time of delivery of the policy or certificate.
(1) A statement that the policy may be subject to rate increases in the future;
(2) An explanation of potential future premium rate revisions and the policyholder’s or certificate holder’s option in the event of a premium rate revision;
(3) The premium rate or rate schedules applicable to the applicant that will be in effect until a request is made for an increase;
(4) A general explanation for applying premium rate or rate schedule adjustments that shall include:
(A) A description of when premium rate or rate schedule adjustments will be effective; and
(B) The right to a revised premium rate or rate schedule as provided in subdivision (2) of this subsection if the premium rate or rate schedule is changed;
(5) Information regarding each premium rate increase on this policy form or similar policy forms over the past ten years for this state or any other state that, at a minimum, identifies:
(A) The policy forms for which premium rates have been increased;
(B) The calendar years during which the form was available for purchase; and
(C) The amount or percent of each increase. The percentage may be expressed as a percentage of the premium rate prior to the increase, and may also be expressed as minimum and maximum percentages if the rate increase is variable by rating characteristics.
(b) In certain circumstances, the commissioner may waive the disclosures required to be made by an insurer under subdivision (a)(5) of this section where such disclosures relate to blocks of business acquired by such an insurer from nonaffiliated insurers or the long-term care policies acquired from nonaffiliated insurers, and when the increases which would otherwise be required to be disclosed occurred prior to the acquisition of such block or policies. Similarly, the commissioner may waive the premium disclosures required by subdivision (a)(5), as relates to a rate increase on a long-term care policy form acquired from nonaffiliated insurers or a block of policy forms acquired from nonaffiliated insurers on or before the end of a 24-month period following the acquisition of the block of policies, and where disclosure of the rate increase had been made by the selling insurer prior to the acquisition. When making a decision to waive the disclosures required under
subdivision (a)(5) of this section, the commissioner shall consider such factors as whether making the disclosures would be unfair or punitive to the acquiring insurer and whether nondisclosure would harm Vermont consumers.
(c) The insurer may, in a fair manner, provide explanatory information related to the rate increases.
(d) An applicant shall, at the time of application, unless the method of application does not allow for acknowledgment at that time, in such a case, no later than at the time of delivery of the policy or certificate, sign an acknowledgment that the insurer made the disclosure required under subdivisions (a)(1) and (5) of this section.
(e) An insurer shall provide notice of an upcoming premium rate schedule increase to all policyholders or certificate holders, if applicable, at least 45 days prior to the implementation of the premium rate schedule increase by the insurer. The notice shall include the information required by subsection (a) of this section when the rate increase is implemented.
§ 8084b. SUITABILITY
(a) This section shall not apply to life insurance policies that accelerate benefits for long-term care.
(b) The “issuer,” meaning every insurer, health care service plan, or other entity marketing long‑term care insurance, shall:
(1) Develop and use suitability standards to determine whether the purchase or replacement of long-term care insurance is appropriate for the needs of the applicant;
(2) Train its agents in the use of its suitability standards;
(3) Maintain a copy of its suitability standards and make them available for inspection upon request by the commissioner; and
(4) File with the commissioner a copy of the issuer’s personal worksheet form.
(c)(1) To determine whether the applicant meets the standards developed by the issuer, the agent and issuer shall develop procedures that take the following into consideration:
(A) The ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage;
(B) The applicant’s goals or needs with respect to long-term care and the advantages and disadvantages of insurance to meet these goals or needs; and
(C) The values, benefits, and costs of the applicant’s existing insurance, if any, when compared to the values, benefits, and costs of the recommended purchase or replacement.
(2) The issuer and, where an agent is involved, the agent shall make reasonable efforts to obtain the information set out in subsection (c) of this section. The efforts shall include presentation to the applicant, at or prior to application, of the personal worksheet used by the issuer. The issuer may request the applicant to provide information to comply with its suitability standards.
(3) A completed personal worksheet shall be returned to the issuer prior to the issuer’s consideration of the applicant for coverage, except the personal worksheet need not be returned for sales of employer group coverage to employees and their spouses.
(4) The sale or dissemination outside the company or agency by the issuer or agent of information obtained through the personal worksheet is prohibited.
(d) The issuer shall use the suitability standards it has developed pursuant to this section in determining whether issuing long-term care insurance coverage to an applicant is appropriate.
(e) Agents shall use the suitability standards developed by the issuer in marketing long-term care insurance.
(f) If the issuer determines that the applicant does not meet its financial suitability standards, or if the applicant has declined to provide the information, the issuer may reject the application. In the alternative, the issuer shall send the applicant a letter by which the applicant may choose to purchase the policy knowing that the issuer had determined that the applicant did not meet the financial suitability standards. However, if the applicant has declined to provide financial information, the issuer may use some other method to verify the applicant’s intent. Either the applicant’s returned letter or a record of the alternative method of verification shall be made part of the applicant’s file.
(g) The issuer shall report annually to the commissioner the total number of applications received from residents of this state, the number of those who declined to provide information on the personal worksheet, the number of applicants who did not meet the suitability standards, and the number of those who chose to confirm after receiving a suitability letter.
Sec. 2. EFFECTIVE DATE
This act shall take effect on passage and shall apply as follows:
(1) Except as provided in subdivision (2) of this section, this act applies to any long‑term care policy or certificate issued in this state on or after January 1, 2006.
(2) For certificates issued on or after the effective date of this act under a group long-term care insurance policy as defined in 8 V.S.A. § 8082(4)(A), which policy was in force at the time this act became effective, the provisions of this act shall apply on the policy anniversary following January 1, 2006.
Approved: May 11, 2005
The Vermont General Assembly
115 State Street