HB1632 95TH GENERAL ASSEMBLY

LRB095 10154 KBJ 30368 b

95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
HB1632

Introduced 2/22/2007, by Rep. Michael Tryon

SYNOPSIS AS INTRODUCED:

See Index

Creates the Long-Term Care Program Article of the Illinois Insurance Code. Provides that the Illinois long-term care program is established to: (1) provide incentives for individuals to insure against the costs of providing for their long-term care needs; (2) provide a mechanism for individuals to qualify for coverage of the costs of their long-term care needs under the Medicaid program without first being required to substantially exhaust all their resources; (3) assist in developing methods for increasing access to and the affordability of a long-term care policy; (4) provide counseling services to individuals in planning for their long-term care needs; and (5) alleviate the financial burden on the State's medical assistance program by encouraging the pursuit of private initiatives. Provides for the implementation and administration of the Article by the Division of Insurance and the Department of Healthcare and Family Services. Sets forth the formula for an asset disregard adjustment under the Illinois long-term care program. Sets forth requirements and prohibitions concerning qualified long-term care policies and insurers. Provides for policy disclosure and other standards. Contains provisions concerning long-term care benefits, group policy certificates, and compensation of insurance producers. Provides that the Director of the Division may impose a civil penalty against an insurer who has violated the Article or rules adopted under the Article. Repeals the Long-Term Care Insurance Article of the Illinois Insurance Code.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning insurance.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Insurance Code is amended by adding Article XLV as follows:

(215 ILCS 5/Art. XLV heading new)

ARTICLE XLV. LONG-TERM CARE PROGRAM

(215 ILCS 5/1500 new)

Sec. 1500. Definitions. In this Article:

"Applicant" means an individual who applies for long-term care insurance through an individual insurance policy or a prospective holder of a certificate issued under a group long-term care insurance policy.

"Certificate" means a document issued to a member of the group covered under a group insurance policy, which policy has been delivered or issued for delivery in this State, to signify that the individual named in the certificate is covered under the policy.

"Certificate holder" means an individual to whom a certificate is issued.

"Department" means the Department of Healthcare and Family Services.

"Division" means the Division of Insurance of the Department of Financial and Professional Regulation.

"Health maintenance organization" has the same meaning ascribed to the term in the Health Maintenance Organization Act.

"Insurance policy" means any policy, contract, subscriber agreement, rider, or endorsement delivered or issued for delivery in this State by an insurer, a fraternal benefit society, a nonprofit corporation, a health maintenance organization, a limited service health maintenance organization, a preferred provider arrangement, or any other organization.

"Long-term care" means the provision of the following services in a setting, other than an acute care wing of a hospital, to enable individuals whose functional capacities are chronically impaired to be maintained at their maximum level of health and well-being:

(1) physician's services;

(2) nursing services;

(3) diagnostic services;

(4) therapeutic services, including physical therapy, speech therapy, and occupational therapy;

(5) rehabilitative services;

(6) maintenance services;

(7) personal care services, including companion services and assistance in bathing, dressing, and other skills of daily living;

(8) transportation services;

(9) day care services;

(10) home health care services;

(11) respite care services; and

(12) services provided by chiropractors, podiatrists, and optometrists.

"Long-term care insurance" means insurance coverage for at least 12 consecutive months for each covered person on an expense incurred, indemnity, or prepaid basis for one or more necessary long-term care services provided in a setting other than an acute care wing of a hospital. "Long-term care insurance" does not include payment:

(1) of coinsurance, deductibles, or premiums for other insurance policies;

(2) for services covered by other insurance policies; or

(3) for services covered by Parts A and B of the Medicare program (42 U.S.C. 1395).

"Long-term care facility" has the same meaning ascribed to that term in the Nursing Home Care Act.

"Long-term care policy" means an insurance policy that provides coverage for at least 12 consecutive months for each covered person on an expense incurred, indemnity, prepaid, or other basis for one or more necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care wing of a hospital. "Long-term care policy" includes the following:

(1) A policy advertised, marketed, or offered as long-term care insurance.

(2) A group or individual annuity, a life insurance policy, or riders that provide directly or supplement long-term care insurance.

(3) A policy or rider that provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. "Long-term care policy" does not include the following:

(1) An insurance policy that is offered primarily to provide basic hospital expense coverage, basic medical and surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income protection coverage, accident only coverage, specified disease or specified accident coverage, comprehensive coverage, catastrophic coverage, or limited benefit health coverage.

(2) A life insurance policy that accelerates the death benefit specifically for terminal illness, a medical condition requiring extraordinary medical intervention, or a permanent institutional confinement and that provides the option of a lump sum payment for those benefits and in which neither the benefits nor the eligibility for the benefits is conditioned upon the receipt of long-term care.

(3) An insurance policy that is offered primarily to provide basic Medicare supplemental coverage.

(215 ILCS 5/1505 new)

Sec. 1505. Illinois long-term care program.

(a) The Illinois long-term care program is established to do the following:

(1) provide incentives for individuals to insure against the costs of providing for their long-term care needs;

(2) provide a mechanism for individuals to qualify for coverage of the costs of their long-term care needs under the Medicaid program without first being required to substantially exhaust all their resources;

(3) assist in developing methods for increasing access to and the affordability of a long-term care policy;

(4) provide counseling services to individuals in planning for their long-term care needs; and

(5) alleviate the financial burden on the State's medical assistance program by encouraging the pursuit of private initiatives.

(b) The Department and the Division shall administer the program. The Division shall develop and coordinate a plan to provide counseling services under the program.

(215 ILCS 5/1510 new)

Sec. 1510. Information on program.

(a) The Division or the agency with which the Division has contracted shall make available to any individual interested in participating in the Illinois long-term care program information concerning the following:

(1) The Illinois long-term care program.

(2) Long-term care insurance policies.

(3) Medicare supplement insurance policies.

(4) Parts A and B of the Medicare program (42 U.S.C. 1395).

(5) Health maintenance organizations that have contracted with the Medicare program.

(6) The Medicaid program.

(b) If an individual elects to pursue any of the options under subsection (a) of this Section, the Division shall assist the individual in doing so.

(215 ILCS 5/1515 new)

Sec. 1515. Eligibility. An individual who is either: (1) the beneficiary of a qualified long-term care policy approved by the Division; or (2) enrolled in a health maintenance organization that both provides long-term care services and meets the requirements of this Article is eligible for assistance under the Medicaid program using the asset disregard under Section 1525 of this Code.

(215 ILCS 5/1520 new)

Sec. 1520. Policy provisions.

(a) An insurer or other person who issues a qualified long-term care policy under this Article must at a minimum offer to each policyholder or prospective policyholder a policy that provides both:

(1) long-term care facility coverage; and

(2) home and community care coverage.

(b) An insurer or other person who complies with subsection (a) of this Section may also elect to offer a qualified long-term care policy that provides only long-term care facility coverage.

(215 ILCS 5/1525 new)

Sec. 1525. Asset disregard adjustment. (a) As used in this Section, "asset disregard" means one of the following:

(1) A one dollar increase in the amount of assets an individual who: (A) purchases a qualified long-term care policy; and (B) meets the requirements under Section 1515 of this Code may retain under the Medicaid program for each one dollar of benefit paid out under the individual's long-term care policy for long-term care services.

(2) The total assets an individual owns and may retain under the Medicaid program and still qualify for benefits at the time the individual applies for benefits if the individual:

(A) is the beneficiary of a qualified long-term care policy that provides maximum benefits at the time of purchase of at least $140,000 and includes a provision under which the daily benefit increases by at least 5% per year, compounded at least annually;

(B) meets the requirements under Section 1515 of this Article; and

(C) has exhausted the benefits of the qualified long-term care policy.

(b) When the Department determines whether an individual is eligible for Medicaid, the Department shall make an asset disregard adjustment for any individual who purchases a qualified long-term care policy. The asset disregard must be available after benefits of the long-term care policy have been applied to the cost of long-term care as required under this Article.

(c) The qualified long-term care policy an individual must purchase to be eligible for the asset disregard under subsection (a)(2) of this Section must have maximum benefits at the time of purchase equal to at least $140,000 plus 5% interest compounded annually beginning January 1, 2008.

(215 ILCS 5/1530 new)

Sec. 1530. Public programs; asset disregard. A public program administered by the State that (i) provides long-term care services and (ii) bases eligibility upon the amount of the individual's assets must apply the asset disregard under Section 1525 of this Code in determining the amount of the individual's assets.

(215 ILCS 5/1535 new)

Sec. 1535. Discontinuation of program. If the Illinois long-term care program is discontinued, an individual who purchased a qualified long-term care policy prior to the date the program is discontinued is eligible to receive an asset disregard as defined under Section 1525 of this Code.

(215 ILCS 5/1540 new)

Sec. 1540. Reciprocal agreements to extend asset disregard. The Department may enter into reciprocal agreements with other states to extend the asset disregard under Section 1525 of this Article to residents who had purchased qualified long-term care policies in other states.

(215 ILCS 5/1545 new)

Sec. 1545. Rules. The Director of Healthcare and Family Services may adopt rules necessary to implement this Act.

(215 ILCS 5/1550 new)

Sec. 1550. Compliance with statutory requirements. An insurance policy may be marketed, advertised, offered, or sold in this State as long-term care insurance only if that policy complies with the requirements of this Article.

(215 ILCS 5/1555 new)

Sec. 1555. Standards for policy disclosure, marketing practices, continuing education, penalties, and reporting practices.

(a) The Director of the Division shall adopt rules establishing standards of full and fair disclosure concerning long-term care insurance policies. The standards must require disclosure of information concerning the following:

(1) the sale of the policies;

(2) terms of renewability;

(3) initial and subsequent terms of eligibility;

(4) nonduplication of coverage provisions;

(5) coverage of dependents;

(6) preexisting conditions;

(7) termination of insurance coverage;

(8) probationary periods;

(9) limitations on coverage;

(10) exceptions to coverage;

(11) reductions from coverage;

(12) elimination periods;

(13) requirements for replacement;

(14) recurrent conditions;

(15) definitions of terms; and

(16) continuation or conversion of coverage.

(b) The Director of the Division may establish minimum standards concerning:

(1) marketing practices;

(2) insurance producer continuing education;

(3) penalties; and

(4) reporting practices for long-term care insurance.

(c) Rules adopted by the Director of the Division under this Section must:

(1) recognize the unique, developing, and experimental nature of long-term care insurance; and

(2) where necessary or appropriate, recognize the distinctions between group insurance policies and individual insurance policies.

(215 ILCS 5/1560 new)

Sec. 1560. Qualification of long-term care policies; rules. The Division shall adopt rules that establish standards for the qualification of a long-term care policy. The rules must include the following:

(1) The standards adopted under Section 1555 of this Code.

(2) The requirement that an insurer or other person who issues a qualified long-term care policy must at a minimum offer to each policyholder or prospective policyholder a policy that provides both:

(A) long-term care facility coverage; and

(B) home and community care coverage.

(3) A provision that an insurer or other person who complies with subdivision (2) of this Section may elect to also offer a qualified long-term care policy that provides only long-term care facility coverage.

(4) The submission of data by insurers that will allow the Division and the Department to administer the Illinois long-term care program.

(5) Other standards needed to administer the Illinois long-term care program.

(215 ILCS 5/1565 new)

Sec. 1565. Loss ratio standards rule. The Director of the Division may not adopt a rule establishing loss ratio standards that apply to long-term care insurance policies unless the rule exclusively concerns long-term care insurance.

(215 ILCS 5/1570 new)

Sec. 1570. Termination of policy on grounds of age or deteriorated health. An insurer that issues a long-term care insurance policy may not cancel, decline to renew, or otherwise terminate the policy solely on the grounds of the age or deterioration in mental or physical health of the insured individual or certificate holder.

(215 ILCS 5/1575 new)

Sec. 1575. Exclusion of coverage; limitations.

(a) As used in this Section, "preexisting condition" means the existence of either symptoms that would cause an ordinarily prudent person to seek diagnosis, care, or treatment or a condition for which medical advice or treatment was recommended by or received from a provider of health care services within a period not to exceed either:

(1) 12 months preceding the effective date of coverage of an insured person who is 65 years of age or older on the effective date of coverage; or

(2) 24 months preceding the effective date of coverage of an insured person who is less than 65 years of age on the effective date of coverage.

(b) A long-term care insurance policy may exclude coverage for a loss or confinement that is the result of a preexisting condition only if that loss or confinement begins within:

(1) 12 months following the effective date of coverage of an insured person who is 65 years of age or older on the effective date of coverage; or

(2) 24 months following the effective date of coverage of an insured person who is under 65 years of age on the effective date of coverage.

(c) The Director of the Division may extend the limitation periods set forth in this Section concerning specific age group categories in specific policies upon a finding that the extension is in the best interests of the public.

(215 ILCS 5/1580 new)

Sec. 1580. Loss or confinement resulting from a preexisting condition.

(a) As used in this Section, "preexisting condition" means a condition for which medical advice or treatment was recommended by or received from a provider of health care services within 6 months preceding the effective date of coverage of an insured individual.

(b) A long-term care insurance policy may not use a definition of preexisting condition that is more restrictive than the definition contained in subsection (a) of this Section.

(c) A long-term care insurance policy may not exclude coverage for a loss or confinement that is the result of a preexisting condition unless the loss or confinement begins within 6 months following the effective date of coverage of an insured individual.

(d) The Director of the Division may extend the limitation period under subsections (a) and (c) of this Section concerning a specific age group category in a specific policy form upon a finding by the Director that the extension is in the best interest of the public.

(e) This Section does not prohibit an insurer from doing any of the following:

(1) Using an application form designed to elicit the complete health history of an applicant.

(2) Based on an application, underwriting in accordance with the insurer's established underwriting standards.

(f) Unless otherwise provided in the policy or certificate, a preexisting condition, regardless of whether the condition is disclosed on the application, need not be covered until after the waiting period described in subsection (c) of this Section.

(g) A long-term care insurance policy may not exclude or use a waiver or rider to exclude, limit, or reduce coverage or benefits for a specifically named or described preexisting disease or physical condition beyond the waiting period described in subsection (c) of this Section.

(215 ILCS 5/1585 new)

Sec. 1585. Conditions on eligibility for benefits; restrictions.

(a) A long-term care insurance policy may not be delivered or issued for delivery in this State if the policy:

(1) conditions eligibility for any benefits on a prior hospitalization requirement;

(2) conditions eligibility for benefits provided in an institutional care setting on the receipt of a higher level of institutional care; or

(3) conditions eligibility for a benefit other than:

(A) a waiver of premium;

(B) postconfinement;

(C) postacute care; or

(D) recuperative benefits on a prior institutionalization requirement.

(b) A long-term care insurance policy containing a postconfinement, postacute, or recuperative benefit must clearly label in a separate paragraph of the policy a statement entitled "limitations or conditions on eligibility for benefits". Under the statement, the policy must outline any limitations or conditions for benefits.

(c) A long-term care insurance policy or rider that conditions eligibility of noninstitutional benefits on the prior receipt of institutional care must not require a prior institutional stay of more than 30 days.

(d) A long-term care insurance policy or rider that provides benefits only following institutionalization may not condition such benefits upon admission to a facility for the same or related conditions within a period of less than 30 days after discharge from the institution.

(215 ILCS 5/1590 new)

Sec. 1590. Establishment of new waiting period. A long-term care insurance policy may not:

(1) contain a provision establishing a new waiting period if an existing policy is converted to or replaced by a new form issued by the same insurer, except in the case of an increase in benefits voluntarily selected by the insured individual or group policyholder;

(2) be canceled, nonrenewed, or otherwise terminated on the grounds of age or the deterioration of the mental or physical health of the insured individual or certificate holder;

(3) provide coverage for skilled nursing care only; or

(4) provide significantly more coverage for skilled care than coverage for a lower level of care. This Section does not prohibit an insurer from voluntarily waiving any authorized waiting period.

(215 ILCS 5/1595 new)

Sec. 1595. No obligation return period; notice.

(a) An individual long-term care insurance policyholder may return the policy within 30 days after its delivery and have the premium refunded if, after examination of the policy, the policyholder is not satisfied for any reason.

(b) Each individual long-term care insurance policy must have prominently printed on or attached to its first page a notice setting forth in substance the provisions of subsection (a) of this Section.

(215 ILCS 5/1600 new)

Sec. 1600. Direct response solicitation issued policies.

(a) A person insured under a long-term care insurance policy or certificate issued under a direct response solicitation may return the policy or certificate within 30 days after its delivery and have the premium refunded if the insured person is not satisfied for any reason.

(b) Each long-term care insurance policy or certificate issued under a direct response solicitation must have printed on or attached to its first page a notice setting forth in substance the provisions of subsection (a) of this Section.

(215 ILCS 5/1605 new)

Sec. 1605. Outline of coverage; contents.

(a) The insurer shall deliver an outline of the coverage provided by an individual long-term care insurance policy to the prospective applicant at the time of initial solicitation through means that prominently direct the attention of the recipient to the document and the document's purpose.

(b) The Director of the Division shall prescribe a standard format regarding: (1) style; (2) arrangement; (3) overall appearance; and (4) content for an outline of coverage.

(c) An insurance producer who solicits a long-term care insurance policy shall deliver the outline of coverage before the presentation of an application or enrollment form.

(d) The outline of coverage must be presented in conjunction with any application or enrollment form when there is a direct response solicitation of long-term care insurance.

(e) An outline of coverage required under this Section must include the following:

(1) A description of the principal benefits and coverage provided in the policy.

(2) A statement of the principal exclusions, reductions, and limitations set forth in the policy.

(3) A statement of the policy's renewal provisions, including any reservation by the insurer of a right to change premiums.

(4) A statement that the outline of coverage is a summary of the policy issued or applied for and that the policy should be consulted to determine the exact terms of the coverage provided by the policy.

(5) A description of the terms under which the policy may be returned and the premium refunded.

(6) A brief description of the relationship of the cost of care and benefits.

(7) A statement of the terms under which the policy or certificate may continue or be discontinued, including any reservation in the policy of the right to change the premium.

(215 ILCS 5/1610 new)

Sec. 1610. Policy summary; requirements.

(a) A policy summary must be delivered, at the time of policy delivery, for an individual life insurance policy that provides long-term care benefits within the policy or by a rider.

(b) The insurer shall deliver the policy summary upon the applicant's request when there is a direct response solicitation. If there is no request, the insurer shall deliver the policy summary not later than when the policy is delivered.

(c) The policy summary must include the following:

(1) An explanation of how long a long-term care benefit interacts with other components of the policy, including deductions from a death benefit.

(2) An illustration of the amount of a benefit, the length of a benefit, and the guaranteed lifetime benefits for each covered person.

(3) Any exclusion, reduction, or limitation on benefits of long-term care.

(d) A policy summary required under this Section must also include the following information, if applicable:

(1) A disclosure of any effect of exercising rights under the policy other than rights referred to in subsection (c) of this Section.

(2) A disclosure of any guarantee related to long-term care costs of insurance charges.

(3) Current and projected maximum lifetime benefits.

(215 ILCS 5/1615 new)

Sec. 1615. Benefits funded through life insurance by acceleration of death benefits. If a long-term care benefit, funded through a life insurance vehicle by the acceleration of the death benefit, is in benefit payment status, a monthly report containing the following must be provided to the policyholder:

(1) Any long-term care benefit paid out during the month.

(2) An explanation of any change in the policy, including a change in death benefit or cash value due to long-term care benefits being paid.

(3) The amount of long-term care benefits remaining under the policy.

(215 ILCS 5/1620 new)

Sec. 1620. Group policy certificate; contents. A certificate issued under a group long-term care insurance policy that is delivered or issued for delivery in this State must include the following:

(1) a description of the principal benefits and coverage provided in the policy;

(2) a statement of the principal exclusions, reductions, and limitations set forth in the policy; and

(3) a statement that the group master policy should be consulted to determine the exact terms of the coverage provided by the policy.

(215 ILCS 5/1625 new)

Sec. 1625. Application of general insurance law. All other applicable provisions of this Code not in conflict with the provisions of this Article shall apply to insurance policies issued under this Article.

(215 ILCS 5/1630 new)

Sec. 1630. Group policies issued in another state; requirements. Group long-term care insurance may not be offered to a resident of this State under a group policy issued in another state unless the Director of the Division determines that the group long-term care insurance policy substantially complies with insurance requirements similar to those established under this Article.

(215 ILCS 5/1635 new)

Sec. 1635. Compensation of insurance producers; restrictions.

(a) As used in this Section, "compensation" includes pecuniary and nonpecuniary remuneration of any kind relating to the sale or renewal of the policy or certificate including, but not limited to, the following:

(1) bonuses;

(2) gifts;

(3) prizes;

(4) awards; and

(5) finders fees.

(b) An insurer or other entity that provides a commission or other compensation to an insurance producer or other representative for the sale of a long-term care insurance policy may not violate the following conditions:

(1) The amount of the first year commission or first year compensation for selling or servicing the policy may not exceed 200% of the amount of the commission or other compensation paid in the second year.

(2) The amount of commission or other compensation provided in years after the second year must be equal to the amount provided in the second year.

(3) A commission or other compensation must be provided each year for at least 5 years after the first year.

(c) If an existing long-term care policy or certificate is replaced, the insurer or other entity that issues the replacement policy may not provide, and its insurance producer may not accept, compensation in an amount greater than the renewal compensation payable by the replacing insurer on renewal policies, unless the benefits of the replacement policy or certificate are clearly and substantially greater than the benefits under the replaced policy or certificate.

(d) This Section does not apply to the following:

(1) Life insurance policies and certificates.

(2) A policy or certificate that is sponsored by an employer for the benefit of:

(A) the employer's employees; or

(B) the employer's employees and their dependents.

(215 ILCS 5/1640 new)

Sec. 1640. Violations; civil penalty; amount.

(a) In addition to any other sanction provided under this Article, the Director of the Division may impose a civil penalty against an insurer who has violated this Article or rules adopted under this Article. A penalty imposed under this Article must be the greater of:

(1) 3 times the amount of the commissions paid for each policy involved in the violation; or

(2) $10,000.

(b) In addition to any other sanction provided under this Article, the Director of the Division may impose a penalty against an insurance producer who has violated this Article or rules adopted under this Article. The penalty must be the greater of:

(1) up to 3 times the amount of the commissions paid to that insurance producer for each policy involved in the violation; or

(2)$2,500.

(215 ILCS 5/Art. XIXA rep.)

Section 10. The Illinois Insurance Code is amended by repealing Article XIXA.