[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 438 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 438

  To amend title XIX of the Social Security Act to establish Federal 
            standards for long-term care insurance policies.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 5, 1993

  Mr. Wyden introduced the following bill; which was referred to the 
                    Committee on Energy and Commerce

                              May 3, 1993

                   Additional sponsor: Ms. Slaughter

_______________________________________________________________________

                                 A BILL


 
  To amend title XIX of the Social Security Act to establish Federal 
            standards for long-term care insurance policies.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Long-Term Care Insurance Consumer 
Protection Act of 1993''.

SEC. 2. ESTABLISHMENT OF FEDERAL STANDARDS FOR LONG-TERM CARE INSURANCE 
              POLICIES.

    (a) In General.--Title XIX of the Social Security Act is amended by 
adding at the end the following new section:

                  ``long-term care insurance standards

    ``Sec. 1931. (a) Implementation of Policy Standards.--
            ``(1) In general.--
                    ``(A) New issues.--No long-term care insurance 
                policy (as defined in subsection (i)) may be issued, 
                sold, or offered for sale in a State on or after the 
                date specified in paragraph (4) unless--
                            ``(i) the Secretary determines that the 
                        State has established a regulatory program 
                        that--
                                    ``(I) provides for the application 
                                and enforcement of the standards 
                                established under paragraph (3), and
                                    ``(II) complies with the 
                                requirements of paragraph (5),
                        by the date specified in paragraph (4), and the 
                        policy has been approved by the State 
                        commissioner or superintendent of insurance 
                        under such program; or
                            ``(ii) if the State has not established 
                        such a program, the policy has been certified 
                        by the Secretary (in accordance with such 
                        procedures as the Secretary establishes) as 
                        meeting the standards established under 
                        paragraph (3).
                For purposes of this paragraph, the advertising or 
                soliciting with respect to a policy, directly or 
                indirectly, shall be deemed the offering for sale of 
                the policy.
                    ``(B) Review of state regulatory programs.--The 
                Secretary periodically shall review regulatory programs 
                described in subparagraph (A)(i) to determine if they 
                continue to provide for the application and enforcement 
                of the standards established under paragraph (3).
            ``(2) Sanctions.--Any person who issues or renews a policy, 
        on or after the date specified in paragraph (4), in violation 
        of paragraph (1), is subject to a civil money penalty of not to 
        exceed $25,000 for each such violation. The provisions of 
        section 1128A (other than the first sentence of subsection (a) 
        and other than subsection (b)) shall apply to a civil money 
        penalty under this paragraph in the same manner as such 
        provisions apply to a penalty or proceeding under section 
        1128A(a).
            ``(3) Promulgation of standards.--
                    ``(A) In general.--If, within 12 months after the 
                date of the enactment of this section, the National 
                Association of Insurance Commissioners (in this section 
                referred to as the `NAIC') promulgates model standards 
                that incorporate the requirements of subsections (d) 
                through (h), such standards shall apply under paragraph 
                (1).
                    ``(B) Default.--If the NAIC does not promulgate the 
                model standards under subparagraph (A) by the deadline 
                established in that paragraph, the Secretary shall 
                promulgate, within 12 months after such deadline, a 
                regulation that provides standards that incorporate the 
                requirements of subsections (d) through (h) and such 
                standards shall be applied under paragraph (1).
                    ``(C) Consultation.--In establishing standards 
                under this paragraph, the NAIC or Secretary shall 
                consult with a working group composed of 
                representatives of issuers of long-term care insurance 
                policies, consumer groups, and other qualified 
                individuals. Such representatives shall be selected in 
                a manner so as to assure balanced representation among 
                the interested groups.
                    ``(D) Relation to state law.--Nothing in this 
                section shall be construed as preventing a State from 
                applying standards that provide greater protection to 
                policyholders of long-term care insurance policies.
            ``(4) Deadline for application of standards.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                date specified in this paragraph for a State is--
                            ``(i) the date the State adopts the 
                        standards established under paragraph (3), or
                            ``(ii) 1 year after the date such standards 
                        are first established,
                whichever is earlier.
                    ``(B) State requiring legislation.--In the case of 
                a State which the Secretary identifies, in consultation 
                with the NAIC, as--
                            ``(i) requiring State legislation (other 
                        than legislation appropriating funds) in order 
                        for the standards established under paragraph 
                        (3) to be applied, but
                            ``(ii) having a legislature which is not 
                        scheduled to meet in 1995 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1995. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.
            ``(5) Additional requirements for approval of state 
        regulatory programs.--For purposes of paragraph (1)(A)(i)(II), 
        the requirements of this paragraph for a State regulatory 
        program are as follows:
                    ``(A) Consumer access to compliance information.--
                            ``(i) In general.--The program must provide 
                        for consumer access to complaints filed with 
                        the State commissioner or superintendent of 
                        insurance with respect to long-term care 
                        insurance policies.
                            ``(ii) Confidentiality.--The access 
                        provided under clause (i) shall be limited to 
                        the extent required to protect the 
                        confidentiality of the identity of individual 
                        policyholders.
                    ``(B) Access to other information.--The program 
                must provide for consumer access to information 
                reported under subsection (c)(4).
                    ``(C) Process for approval of premiums.--The 
                program must provide for a process for approving or 
                disapproving proposed premium increases with respect to 
                long-term care insurance policies and must establish a 
                policy for the holding of public hearings prior to 
                approval of such a premium increase. No such premium 
                increase shall be approved (or deemed approved) unless 
                the proposed increase is accompanied by an actuarial 
                memorandum which supports the increase and which 
                contains such information as may be required under the 
                standards under subsection (a)(3).
    ``(b) Regulation of Sales Practices.--
            ``(1) Duty of good faith and fair dealing.--
                    ``(A) In general.--Each individual who is selling 
                or offering for sale a long-term care insurance policy 
                has the duty of good faith and fair dealing to the 
                purchaser or potential purchaser of such a policy.
                    ``(B) Prohibited practices.--An individual is 
                considered to have violated subparagraph (A) if the 
                individual engages in any of the following practices:
                            ``(i) Twisting.--Knowingly making any 
                        misleading representation or incomplete or 
                        fraudulent comparison of any health care 
                        insurance policy or insurers for the purpose of 
                        inducing, or tending to induce, any person to 
                        retain or effect a change with respect to a 
                        long-term care insurance policy.
                            ``(ii) High pressure tactics.--Employing 
                        any method of marketing having the effect of, 
                        or intending to, induce the purchase of long-
                        term care insurance policy through undue 
                        pressure.
                            ``(iii) Cold lead advertising.--Making use 
                        directly or indirectly of any method of 
                        marketing which fails to disclose in a 
                        conspicuous manner that a purpose of the method 
                        of marketing is solicitation of insurance and 
                        that contact will be made by an insurance agent 
                        or insurance company.
            ``(2) Completion of medical histories prohibited.--A person 
        who is selling or offering for sale a long-term care insurance 
        policy may not complete the medical history portion of an 
        application.
            ``(3) Prohibition of sale or issuance to medicaid 
        beneficiaries.--A person may not knowingly sell or issue a 
        long-term care insurance policy to an individual who is 
        eligible for medical assistance (other than only as a qualified 
        medicare beneficiary) under this title.
            ``(4) Prohibition of sale or issuance of duplicate service 
        benefit policies.--A person may not sell or issue a service-
        benefit long-term care insurance policy--
                    ``(A) knowing that the policy provides for coverage 
                that duplicates coverage already provided in another 
                service-benefit long-term care insurance policy (unless 
                the policy is intended to replace such other policy), 
                or
                    ``(B) for the benefit of an individual unless the 
                individual (or a representative of the individual) 
                provides a written statement to the effect that the 
                coverage (i) does not duplicate other coverage in 
                effect under a service-benefit long-term care insurance 
                policy or (ii) will replace another service-benefit 
                long-term care insurance policy.
        In this paragraph, the term `service-benefit long-term care 
        insurance policy' means a long-term care insurance policy which 
        provides for benefits based on the amount of expenses incurred, 
        rather than on an indemnity basis.
            ``(5) Provision of outline of coverage.--No person may sell 
        or offer for a sale a long-term care insurance policy without 
        providing to the purchaser or potential purchaser (or 
        representative) an outline of coverage that complies with the 
        standards established under subsection (a)(3).
            ``(6) Information on financial arrangements with groups.--
        No person may sell or offer for sale a long-term care insurance 
        policy with respect to a member of an organization with which 
        the person (or the issuer of the policy) has a financial 
        arrangement of any type unless the person discloses (in 
        accordance with standards established under subsection (a)(3)) 
        the nature of the financial arrangement.
            ``(7) Penalties.--Any person who sells, offers for sale, or 
        issues a long-term care insurance policy in violation of this 
        subsection may be imprisoned not more than 5 years, or fined in 
        accordance with title 18, United States Code, and, in addition, 
        is subject to a civil money penalty of not to exceed $25,000 
        for each such violation. The provisions of section 1128A (other 
        than the first sentence of subsection (a) and other than 
        subsection (b)) shall apply to a civil money penalty under this 
        paragraph in the same manner as such provisions apply to a 
        penalty or proceeding under section 1128A(a).
    ``(c) Additional Responsibilities of Issuers.--
            ``(1) Refund of premiums.--If an application for a long-
        term care insurance policy (or for a certificate under a group 
        long-term care insurance policy) is denied or an applicant 
        returns a policy or certificate within 30 days of the date of 
        its issuance pursuant to subsection (h), the issuer shall 
        refund to the applicant, not later than 30 days after the date 
        of the denial or return, any premiums paid with respect to such 
        a policy.
            ``(2) Mailing of policy.--If an application for a long-term 
        care insurance policy (or for a certificate under a group long-
        term care insurance policy) is approved, the issuer shall 
        transmit to the applicant the policy (or certificate) of 
        insurance not later than 30 days after the date of the 
        approval.
            ``(3) Information on denials of claims.--If a claim under a 
        long-term care insurance policy is denied, the issuer shall, 
        within 60 days of the date of a written request by the 
        policyholder or certificateholder (or representative)--
                    ``(A) provide a written explanation of the reasons 
                for the denial, and
                    ``(B) make available all information directly 
                relating to such denial.
        No claim under such a policy may be denied on the basis of a 
        failure to disclose a condition at the time of issuance of the 
        policy if the application for the policy failed to request 
        information respecting the condition.
            ``(4) Reporting of information.--The issuer of a long-term 
        care insurance policy shall periodically (not less often than 
        annually) report to the Commissioner or superintendent of 
        insurance of each State in which the policy is sold, and shall 
        make available to the Secretary, upon request, information 
        respecting--
                    ``(A) the long-term care insurance policies of the 
                issuer that are in force,
                    ``(B) the most recent premiums for such policies 
                and the premiums imposed for such policies during the 
                previous 5-year period,
                    ``(C) the lapse rates, replacement rates, and 
                rescission rates for policies (by agent), and
                    ``(D) the claims denied (as a percentage of claims 
                submitted) for such policies.
        Information under this paragraph shall be reported in a format 
        specified in the standards established under subsection (a)(3) 
        to carry out this subsection. For purposes of subparagraph (C), 
        there shall not be included as a lapse of policy such a lapse 
        due to the death of the policyholder. For purposes of 
        subparagraph (D), there shall not be included as a denied claim 
        that is denied solely because of the failure to meet a 
        deductible, waiting period, or exclusionary period.
            ``(5) Access to information.--Each such issuer shall 
        provide the Secretary and the Commissioner or superintendent of 
        insurance of each State in which the policy is sold such 
        information as the Secretary, Commissioner, or superintendent, 
        may request.
            ``(6) Provision of outline of coverage for renewals.--Each 
        issuer of a long-term care insurance policy shall provide, at 
        the time of renewal of such a policy, an outline of coverage 
        that meets the applicable standards established pursuant to 
        this section.
            ``(7) Medical assessments for the elderly.--Before issuing 
        a long-term care insurance policy to an applicant who is 75 
        years of age or older, if the policy is not guaranteed issue 
        the issuer shall obtain one of the following:
                    ``(A) A report of a physical examination.
                    ``(B) An assessment of functional capacity.
                    ``(C) Copies of medical records.
            ``(8) Limits on compensation for sale of policies.--
                    ``(A) In general.--The issuer of a long-term care 
                insurance policy may not provide a commission or other 
                compensation to an agent or other representative for 
                the sale of such a policy in an amount that exceeds 200 
                percent of the commission or other compensation paid 
                for selling or servicing such a policy in the second or 
                subsequent year.
                    ``(B) Compensation defined.--In subparagraph (A), 
                the term `compensation' includes pecuniary or 
                nonpecuniary remuneration of any kind relating to the 
                sale or renewal of the policy or certification, 
                including deferred compensation, bonuses, gifts, 
                prizes, awards, and finders fees.
            ``(9) Civil money penalty.--Any issuer of a long-term care 
        insurance policy who--
                    ``(A) fails to make a refund in accordance with 
                paragraph (1),
                    ``(B) fails to transmit a policy in accordance with 
                paragraph (2),
                    ``(C) fails to provide, make available, or report 
                information in accordance with paragraph (3), (4), or 
                (5),
                    ``(D) fails to provide an outline of coverage in 
                violation of paragraph (6), or
                    ``(E) issues a policy without obtaining certain 
                information in violation of paragraph (7), or
                    ``(F) provides a commission or compensation in 
                violation of paragraph (8),
        is subject to a civil money penalty of not to exceed $25,000 
        for each such violation. The provisions of section 1128A (other 
        than the first sentence of subsection (a) and other than 
        subsection (b)) shall apply to a civil money penalty under this 
        paragraph in the same manner as such provisions apply to a 
        penalty or proceeding under section 1128A(a).
    ``(d) Requirements Relating to Renewability.--
            ``(1) In general.--No long-term care insurance policy may 
        be canceled or nonrenewed for any reason other than nonpayment 
        of premium or material misrepresentation.
            ``(2) Continuation and conversion rights for group 
        policies.--
                    ``(A) In general.--Each group long-term care 
                insurance policy shall provide covered individuals with 
                a basis for continuation or conversion in accordance 
                with this paragraph.
                    ``(B) Basis for continuation.--For purposes of 
                subparagraph (A), a policy provides a basis for 
                continuation of coverage if the policy maintains 
                coverage under the existing group policy when such 
                coverage would otherwise terminate and which is subject 
                only to the continued timely payment of premium when 
                due. A group policy which restricts provision of 
                benefits and services to or contains incentives to use 
                certain providers or facility, may provide continuation 
                benefits which are substantially equivalent to the 
                benefits of the existing group policy.
                    ``(C) Basis for conversion.--For purposes of 
                subparagraph (A), a policy provides a basis for 
                conversion of coverage if the policy entitles each 
                individual--
                            ``(i) whose coverage under the group policy 
                        would otherwise be terminated for any reason, 
                        and
                            ``(ii) who has been continuously insured 
                        under the policy (or group policy which was 
                        replaced) for at least 6 months before the date 
                        of the termination,
                to issuance of a policy providing benefits identical 
                to, substantially equivalent to, or in excess of, those 
                of the policy being terminated, without evidence of 
                insurability.
                    ``(D) Treatment of substantial equivalence.--In 
                determining under this paragraph whether benefits are 
                substantially equivalent, there shall be taken into 
                consideration the difference between managed care and 
                non-managed care plans.
                    ``(E) Group replacement of policies.--If a group 
                long-term care insurance policy is replaced by another 
                long-term care insurance policy purchased by the same 
                policyholder, the succeeding issuer shall offer 
                coverage to all persons covered under the old group 
                policy on its date of termination. Coverage under the 
                new group policy shall not result in any exclusion for 
                preexisting conditions that would have been covered 
                under the group policy being replaced.
            ``(3) Upgrade for current policies.--Each long-term care 
        insurance policy in effect as of the effective date of the 
        standards established under subsection (a)(3) shall permit the 
        policyholder to purchase a policy that meets all such 
        standards. In offering such a policy, the issuer may impose 
        additional underwriting restrictions only for benefits not held 
        under the previously issued policy.
    ``(e) Benefit Standards.--
            ``(1) Use of standard definitions and terminology and 
        uniform format.--Each long-term care insurance policy shall, 
        pursuant to standards established under subsection (a)(3)--
                    ``(A) use uniform language and definitions, and
                    ``(B) use a uniform format for presenting the 
                outline of coverage under such a policy.
            ``(2) Disclosure.--
                    ``(A) Outline of coverage.--The outline of coverage 
                for each long-term care insurance policy shall include 
                at least the following:
                            ``(i) A description of the principal 
                        benefits and coverage under the policy.
                            ``(ii) A statement of the principal 
                        exclusions, reductions, and limitations 
                        contained in the policy.
                            ``(iii) A statement of the terms under 
                        which the policy (or certificate) may be 
                        continued in force or discontinued, the terms 
                        for continuation or conversion, and any 
                        reservation in the policy of a right to change 
                        premiums.
                            ``(iv) A statement that the outline of 
                        coverage is a summary only, not a contract of 
                        insurance, and that the policy (or master 
                        policy) contains the contractual provisions 
                        that govern.
                            ``(v) A statement of the value of the 
                        policy (determined in accordance with standard 
                        established to carry out this subparagraph).
                            ``(vi) A description of the terms, 
                        specified in subsection (h), under which a 
                        policy or certificate may be returned and 
                        premium refunded.
                            ``(vii) Information on national average 
                        costs for nursing facility and home health care 
                        and information (in graphic form) on the 
                        relationship of the value of the benefits 
                        provided under the policy to such national 
                        average costs.
                            ``(viii) A statement of the percentage 
                        limit on annual premium increases that is 
                        provided under the policy pursuant to paragraph 
                        (8).
                            ``(ix) Information (in graphic form) on the 
                        projected effect of inflation on the value of 
                        benefits provided under the policy during a 
                        period of at least 20 years.
                    ``(B) Certificates.--A certificate issued pursuant 
                to a group long-term care insurance policy shall 
                include--
                            ``(i) a description of the principal 
                        benefits and coverage provided in the policy;
                            ``(ii) a statement of the principal 
                        exclusions, reductions, and limitations 
                        contained in the policy; and
                            ``(iii) A statement that the group master 
                        policy determines governing contractual 
                        provisions.
                    ``(C) Long-term care as part of life insurance.--In 
                the case of a long-term care insurance policy issued as 
                a part of or a rider on a life insurance policy, at the 
                time of policy delivery there shall be provided a 
                policy summary that includes--
                            ``(i) an explanation of how the long-term 
                        care benefits interact with other components of 
                        the policy (including deductions from death 
                        benefits);
                            ``(ii) an illustration of the amount of 
                        benefits, the length of benefit, and the 
                        guaranteed lifetime benefits (if any) for each 
                        covered person; and
                            ``(iii) any exclusions, reductions, and 
                        limitations on benefits of long-term care.
            ``(3) Limiting conditions on benefits; minimum benefits.--
                    ``(A) In general.--A long-term care insurance 
                policy may not condition or limit eligibility--
                            ``(i) for benefits for a type of services 
                        to the need for or receipt of any other 
                        services,
                            ``(ii) for any noninstitutional benefit on 
                        the medical necessity for such benefit,
                            ``(iii) for benefits furnished by licensed 
                        providers on compliance with conditions which 
                        are in addition to those required for licensure 
                        under State law, or
                            ``(iv) for custodial care (if covered under 
                        the policy) only (I) to care provided in 
                        facilities which provide a higher level of care 
                        or (II) to care provided in facilities which 
                        provide for 24-hour or other nursing care not 
                        required in order to be licensed by the State.
                    ``(B) Home health care services.--If a long-term 
                care insurance policy provides benefits for home health 
                care services, the policy--
                            ``(i) may not limit such benefits to 
                        services provided by registered nurses or 
                        licensed practical nurses;
                            ``(ii) may not require benefits for such 
                        services to be provided by a nurse or therapist 
                        that can be provided by a home health aide or 
                        other licensed or certified home care worker 
                        acting within the scope of the worker's 
                        licensure or certification;
                            ``(iii) may not limit such benefits to 
                        services provided by agencies or providers 
                        certified under title XVIII; and
                            ``(iv) must provide benefits for custodial 
                        care, personal care services (including home 
                        health aide and homemaker services), home 
                        health services, and respite care in an 
                        individual's home.
                    ``(C) Nursing facility services.--If a long-term 
                care insurance policy provides benefits for nursing 
                facility services, the policy must provide such 
                benefits with respect to all nursing facilities (as 
                defined in section 1919(a)) in the State.
                    ``(D) Minimum period of coverage.--Each long-term 
                care insurance policy shall provide benefits over a 
                period of at least 12 consecutive months.
            ``(4) Prohibition of discrimination.--A long-term care 
        insurance policy may not treat benefits under the policy in the 
        case of an individual with Alzheimer's disease, with any 
        related progressive degenerative dementia of an organic origin, 
        or with any organic or inorganic mental illness differently 
        from an individual having another medical condition for which 
        benefits may be made available.
            ``(5) Limitation on use of preexisting condition limits.--
                    ``(A) Initial issuance.--
                            ``(i) In general.--Subject to clause (ii), 
                        a long-term care insurance policy may not 
                        exclude or condition benefits based on a 
                        medical condition for which the policyholder 
                        received treatment or was otherwise diagnosed 
                        before the issuance of the policy.
                            ``(ii) 6-month limit.--A long-term care 
                        insurance policy may exclude benefits under a 
                        policy, during its first 6 months, based on a 
                        condition for which the policyholder received 
                        treatment or was otherwise diagnosed during the 
                        6 months before the policy became effective.
                    ``(B) Replacement policies.--If a long-term care 
                insurance policy replaces another long-term care 
                insurance policy, the issuer of the replacing policy 
                shall waive any time periods applicable to preexisting 
                conditions, waiting period, elimination periods and 
                probationary periods in the new policy for similar 
                benefits to the extent such time was spent under the 
                original policy.
            ``(6) Use of functional assessment.--
                    ``(A) In general.--Each long-term care insurance 
                policy--
                            ``(i) shall determine eligibility for, and 
                        level of, benefits (other than for nursing 
                        facility services) available under the policy 
                        based on a professional assessment of the 
                        policyholder's functional ability, and
                            ``(ii) shall specify the level (or levels) 
                        of functional impairment required under such an 
                        assessment to obtain benefits other than for 
                        nursing facility services) under the policy.
                Such assessment may not be conducted by an individual 
                who has a direct or indirect ownership or control 
                interest, or direct or indirect affiliation or 
                relationship with, the issuer of the policy or an 
                entity that provides services for which benefits are 
                available under the long-term care insurance policy.
                    ``(B) Appeals process.--Each long-term care 
                insurance policy shall provide for an appeals process, 
                meeting standards established under this subsection, 
                for individuals who dispute the results of an 
                assessment conducted under this paragraph.
            ``(7) Inflation protection.--Each long-term care insurance 
        policy shall provide, at the time of each annual renewal, for 
        an increase of a specified percentage (but not less than 5 
        percent) in the dollar payment levels and the maximum payment 
        limit on benefit coverage above the levels or limit in effect 
        during the previous policy year. In applying this paragraph, 
        the increases shall be compounded annually and the policy may 
        provide for rounding such an increase to the nearest multiple 
        of $1 (in the case of dollar payment levels) or $100 (in the 
        case of the maximum payment limit).
            ``(8) Specification of limits on premium increases.--Each 
        long-term care insurance policy shall specify a limit on the 
        percentage increase in premiums for a policy that may be made 
        in any between one policy year and the subsequent policy year.
    ``(f) Nonforfeiture.--
            ``(1) In general.--Each long-term care insurance policy 
        shall provide that if the policy lapses after the policy has 
        been in effect for a minimum period (specified under the 
        standards under subsection (a)(3)), the policy will provide 
        without payment of any additional premiums benefits equal to--
                    ``(A) a percentage (specified under such standards) 
                of the benefits otherwise available at term, or
                    ``(B) such other type of benefits as such standards 
                may provide.
            ``(2) Establishment of standards.--The standards under 
        subsection (a)(3)--
                    ``(A) may not provide more than 2 additional types 
                of benefits under paragraph (1)(B), and
                    ``(B) may provide that the percentage or amount of 
                benefits under paragraph (1) must increase based upon 
                the period of time in which the policy was in effect.
    ``(g) Limit of Period of Contestability.--The issuer of a long-term 
care insurance policy may not cancel such a policy or deny a claim 
under the policy based on fraud or misrepresentation relating to the 
issuance of the policy unless notice of such fraud or misrepresentation 
is provided within 6 months after the date of the issuance of the 
policy.
    ``(h) Right To Return (free look).--Each applicant for a long-term 
care insurance policy shall have the right to return the policy (or 
certificate) within 30 days of the date of its delivery (and to have 
the premium refunded) if, after examination of the policy or 
certificate, the applicant is not satisfied for any reason.
    ``(i) Long-Term Care Insurance Policy Defined.--
            ``(1) In general.--In this section, except as otherwise 
        provided in this subsection, the term `long-term care insurance 
        policy' means any insurance policy, certificate, or rider 
        advertised, marketed, offered, or designed to provide coverage 
        for each covered person on an expense incurred, indemnity, 
        prepaid, or other basis, for one or more diagnostic, 
        preventive, therapeutic, rehabilitative, maintenance or 
        personal care services, provided in a setting other than an 
        acute care unit of a hospital. Such term includes a group or 
        individual annuity or life insurance policy or rider which 
        provides directly (or which supplements) long-term care 
        insurance.
            ``(2) Policies excluded.--Except as provided in paragraph 
        (4), the term `long-term care insurance policy' does not 
        include any medicare supplemental policy (as defined in section 
        1882(g)) and any insurance which is offered primarily to 
        provide--
                    ``(A) basic hospital expense coverage, basic 
                medical-surgical expense coverage, hospital confinement 
                indemnity coverage, or major medical expense coverage,
                    ``(B) disability income or related asset-protection 
                coverage,
                    ``(C) accident only coverage,
                    ``(D) specified disease or specified accident 
                coverage, or
                    ``(E) limited benefit health coverage.
            ``(3) Treatment of certain life insurance policies.--Except 
        as provided in paragraph (4), the term `long-term care 
        insurance policy' does not include life insurance policies--
                    ``(A) which accelerate the death benefit 
                specifically for--
                            ``(i) one or more of the qualifying events 
                        of terminal illness,
                            ``(ii) medical conditions requiring 
                        extraordinary medical intervention, or
                            ``(iii) permanent institutional 
                        confinement;
                    ``(B) which provide the option of a lump-sum 
                payment for those benefits; and
                    ``(C) in which neither the benefits nor the 
                eligibility for the benefits is conditioned upon the 
                receipt of long-term care.
            ``(4) Inclusion of policies marketed as long-term care 
        insurance.--The term `long-term care insurance policy' also 
        means any product which is advertised, marketed, or offered as 
        long-term care insurance.''.
    (b) State Medicaid Requirement for Regulatory Program.--Section 
1902(a) of the Social Security Act (42 U.S.C. 1396(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (54);
            (2) in the paragraph (55) inserted by section 4602(a)(3) of 
        the Omnibus Budget Reconciliation Act of 1990, by striking the 
        period at the end and inserting a semicolon;
            (3) by redesignating the paragraph (55) inserted by section 
        4604(b)(3) of the Omnibus Budget Reconciliation Act of 1990 as 
        paragraph (56), by transferring and inserting it after the 
        paragraph (55) inserted by section 4602(a)(3) of such Act, and 
        by striking the period at the end and inserting a semicolon;
            (4) by placing paragraphs (57) and (58), inserted by 
        section 4751(a)(1)(C) of the Omnibus Budget Reconciliation Act 
        of 1990, immediately after paragraph (56), as redesignated by 
        paragraph (3);
            (5) in the paragraph (58) inserted by section 4751(a)(1)(C) 
        of the Omnibus Budget Reconciliation Act of 1990, by striking 
        the period at the end and inserting a semicolon;
            (6) by redesignating the paragraph (58) inserted by section 
        4752(c)(1)(C) of the Omnibus Budget Reconciliation Act of 1990 
        as paragraph (59), by transferring and inserting it after the 
        paragraph (58) inserted by section 4751(a)(1)(C) of such Act, 
        and by striking the period at the end and inserting ``; and''; 
        and
            (7) by inserting after paragraph (59), as so redesignated, 
        the following new paragraph:
            ``(60) establish, by the date specified in section 
        1931(a)(4), a State regulatory program, that meets the 
        requirements of section 1931(a)(1)(A)(i).''.
    (c) Denial of Medicaid Funds for Failure to Establish Regulatory 
Program.--Section 1903(i) of the Social Security Act (42 U.S.C. 
1396b(i)) is amended--
            (1) in paragraph (10), by striking all that follows 
        ``1927(g)'' and inserting a semicolon;
            (2) in paragraph (12) by striking the period at the end and 
        inserting a semicolon;
            (3) by redesignating the paragraph (14) inserted by section 
        4752(e) of the Omnibus Budget Reconciliation Act of 1990 as 
        paragraph (13), and by striking the period at the end and 
        inserting ``; or''; and
            (4) by inserting after paragraph (13), as so redesignated, 
        the following new paragraph.
            ``(14) with respect to any amount expended for medical 
        assistance for nursing facility services (furnished on and 
        after the date specified in section 1931(a)(4)) during such 
        period as the state has failed to establish and maintain a 
        regulatory program that meets the requirements of section 
        1931(a)(1)(A)(i).''.
    (d) Report on Assessment Methods for Functional Ability.--Within 2 
years after the date of the enactment of this Act, the Secretary of 
Health and Human Services shall submit to Congress a report on the 
different methods that may be used to conduct assessments of functional 
ability described in section 1931(e)(6)(A) of the Social Security Act 
(including the methods used under section 1929(c) of such Act) and the 
relative effectiveness of each of such methods.
    (e) Report on Solvency Protection.--Within 2 years after the date 
of the enactment of this Act, the Secretary of Health and Human 
Services shall submit to Congress a report on standards that may be 
applied to assure the solvency of insurers with respect to long-term 
care insurance policies.
    (f) Study of Standard Measure of Value for Long-Term Care Insurance 
Policies.--The Secretary of Health and Human Services shall provide for 
a study to develop a standard measure of value for long-term care 
insurance policies. Within 2 years after the date of the enactment of 
this Act, the Secretary shall submit to Congress a report on such 
study.

SEC. 3. FUNDING FOR LONG-TERM CARE INSURANCE INFORMATION, COUNSELING, 
              AND ASSISTANCE.

    There are authorized to be appropriated to provide information, 
counseling, and assistance relating to the procurement of adequate and 
appropriate long-term care insurance, $20,000,000 for each of fiscal 
years 1995, 1996, and 1997.

                                 <all>

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