INSURANCE DEPARTMENT Long Term Care Partnership Program Revised Guidance; Request for Comment; Notice 2016-09 [46 Pa.B. 4307]
[Saturday, July 30, 2016]Long term care insurance (LTCI) is a product that many consumers may use to plan for the future. Yet, it is too often unaffordable for those who might wish to purchase it, and may become unaffordable when a rate increase is implemented for those who have policies. The Insurance Department (Department) is working on ways to make LTCI more affordable and provide additional asset protection options for middle-income Americans.
One of the types of LTCI available for consumers is a long term care partnership (LTCP) policy. With an LTCP policy, a consumer gets long term care (LTC) coverage with the added benefit of being able to preserve assets while still having the safety net of Medical Assistance if they should use all of their LTCP benefits.
In 2008, when Pennsylvania's Qualified Partnership Program (Partnership Program) was established, the Department identified levels of inflation protection for LTCP policies that it would certify as satisfying Federal requirements. To make this product more accessible and provide more affordable options for consumers, the Department proposes to amend its April 2008 guidance to insurers by allowing them to offer LTCP policies with lower inflation protection levels. In 2008, after consultation with the LTCI industry, the Department allowed inflation protection options equal to the Consumer Price Index or a fixed rate of not less than 3% to demonstrate compliance with Federal law for purposes of the Partnership Program. The Department proposes lowering the fixed rate option for purposes of the Partnership Program from 3% to 1%, which would still be in compliance with Federal law. (State law will still require insurers to offer a 5% inflation protection option for all LTCI policies; insurers may also continue to offer other inflation protection levels as an option.)
This policy change would give consumers more affordable LTCP product options while retaining product choices with additional inflation protection available today. While a lower level of inflation protection would reduce an individual's benefit, particularly over time, it would allow an individual to maintain meaningful coverage while still having the protection of an LTCP policy. The Department expects that giving consumers more choice in the level of inflation protection they may purchase will significantly increase the competitiveness of LTCP policies by making them more accessible, affordable and analogous to the choices consumers have with traditional LTCI. Consumers are not required to purchase a specific LTC daily benefit amount or length of coverage with LTCP policies, so making this change will give them an additional choice when weighing different financial planning options.
Further, the Department proposes to clarify that as a policyholder ages, the policyholder may reduce his inflation protection level and still avail himself of the benefits of an LTCP policy, so long as the policy has the requisite age-triggered level of inflation protection when they apply for Medicaid coverage.
This proposed adjustment to the LTCP inflation protection level is one tool to address the affordability of LTCI. Insurance Commissioner Teresa D. Miller, chairing the LTC Innovation Subgroup of the National Association of Insurance Commissioners, is pursuing this goal Nationally as well as within this Commonwealth, and looks forward to taking additional steps and exploring options to make affordable ownership of one's financial future in the face of potential long term care needs a realistic goal for many residents of this Commonwealth.
Accordingly, the Department invites comments on its proposed revision to its 2008 guidance on inflation protection levels for LTCP policies, as specified in Exhibit 1, including the proposed revised Attachment C.
Interested parties are invited to submit written comments, suggestions or objections to the Bureau of Life, Accident and Health, Office of Insurance Product Regulation, 1326 Strawberry Square, Harrisburg, PA 17120, ra-rateform@pa.gov, within 30 days after publication of this notice in the Pennsylvania Bulletin.
Exhibit 1 Insurance Department
Long Term Care Partnership Program
Revised Guidance Announcement;
Notice 2016-__This notice provides guidance that supersedes paragraph ''C'' of Notice 2008-05, published at 38 Pa.B. 1907 (April 19, 2008) regarding inflation protection for Qualified Partnership Policies, and shall remain in effect until a subsequent notice is published in the Pennsylvania Bulletin.
As explained in Notice 2008-05, as of July 1, 2007, Pennsylvania has had a qualified long term care insurance partnership (''Qualified Partnership'') in accord with the Deficit Reduction Act of 2005, Pub.L. No. 109-171 (the DRA). As explained in that Notice, Qualified Partnership Policies (''Qualified Partnership Policy'') may provide valuable protections to purchasers of Qualified State Long Term Care Insurance policies. Qualified Partnership Policies permit individuals to protect certain resources if eligibility under the Medical Assistance Program is ever needed. The protection of resources when determining an individual's eligibility for Pennsylvania's Medical Assistance-Long Term Care Program permits the disregard of specific resources equal to the amount of insurance benefits that were paid from a Qualified Partnership Policy. If those specific resources are still in existence at the time of the individual's death and become part of the decedent's probate estate, they will not be recoverable under Pennsylvania's Medical Assistance Estate Recovery program.
Since the Qualified Partnership has been in place, it has become clear that additional flexibility in the levels of inflation protection necessary under the DRA would benefit consumers by allowing more affordable coverage options while still providing meaningful inflation protection to consumers. Therefore, the Department hereby revises its guidance to insurers and insurance producers in paragraph ''C'' of Notice 2008-05 concerning inflation protection for Qualified Partnership policies:
C. Inflation Protection. The DRA, at 42 U.S.C. § 1396p(b)(1)(A)(iii)(IV), requires that Qualified Partnership Policies provide certain levels of inflation protection based on the age of the individual as of the date of policy purchase. Pennsylvania will certify inflation protection options as meeting the DRA requirements subject to the following:
1) ''Compound annual inflation protection'' means compound coverage that automatically increases annually at a rate equal to the Consumer Price Index (CPI) or at a fixed rate of not less than 1%. Note that 31 Pa. Code § 89a.112 requires an offer of 5% compound annual inflation protection be made on all long term care policies offered in Pennsylvania.
2) ''Some level of inflation protection'' means either compound or simple inflation protection at a rate equal to the CPI or at a fixed rate of not less than 1%.
3) A future or guaranteed purchase option for inflation protection does not meet the requirements of the DRA.
4) Inflation protection options with a limited term (i.e. 10 years or 20 years) do not meet the requirements of the DRA.
5) Inflation protection options that reduce the level of inflation protection as the individual ages are permitted only insofar as they are consistent with the age-specific inflation protection levels outlined in the DRA.
6) The inflation protection level of an individual's policy that is in effect as of the month of application for Medical Assistance is determinative of whether the policy is consistent with the inflation protection levels outlined in the DRA.
Finally, the Department has modified Attachment C, the Policyholder Notification of Policy Status, to reflect the fact that the level of inflation protection on a policy may change from the level at the time of issuance to a lower level that still is consistent with the inflation protection levels outlined in the DRA. The Insurance Department requests that issuers provide a notification regarding the status of any Qualified Partnership Policy against which claims have been made, upon request of the policyholder, policyholder representative, or the Department of Human Services.
The remainder of Notice 2008-05 remains as published therein.
Revised Attachment C Policyholder Long Term Care Partnership (LTCP) Program Status Form
[ Issuer Letterhead ]
LONG TERM CARE PARTNERSHIP PROGRAM POLICY SUMMARY 1. Name of insured _____
2. Policy/certificate number _____
3. Effective date of coverage _____
4. The policy/certificate was issued in the state of __________
5. Issue age of the insured at the time the coverage was issued _____
6. The policy/certificate was issued [ ] With [ ] Without inflation coverage
7. The inflation coverage at the time of issuance was [ ] Simple Inflation [ ] Compound Inflation [ ] None
8. The inflation coverage currently in effect on the coverage is [ ] Simple Inflation [ ] Compound Inflation [ ] None
9. The policy meets the standards of a tax qualified long term care policy [ ] Yes [ ] No
10. The cumulative dollar amount of insurance benefits paid $ _____
(Note: The indicated amount does not include any payments for cash surrender, return of premium death benefits, or waiver of premium, and if joint coverage, the amount is for the indicated insured only)
11. The total dollar amount of insurance benefits remaining available under the policy $ _____
12. Date this form was completed _____
13. The name, phone number and email address of the person completing this form
Name and Title
Phone Number
Email AddressI hereby certify that the above information is true and accurate to the best of my knowledge at the time of this certification.
_________________ Date: ______
SignatureTERESA D. MILLER,
Insurance Commissioner[Pa.B. Doc. No. 16-1331. Filed for public inspection July 29, 2016, 9:00 a.m.]
