[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1013 Introduced in House (IH)]

  1st Session
                                H. R. 1013

   To amend the Social Security Act to protect consumers through the 
   establishment of standards for long-term care insurance policies.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 22, 1995

   Mrs. Collins of Illinois introduced the following bill; which was 
                 referred to the Committee on Commerce

_______________________________________________________________________

                                 A BILL


 
   To amend the Social Security Act to protect consumers through the 
   establishment of 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Long-Term Care 
Insurance Standards and Consumer Protection Act of 1995''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Establishment of national standards for long-term care 
                            insurance.
            ``TITLE XXI--LONG-TERM CARE INSURANCE STANDARDS

       ``Part A--General Requirement; Establishment of Standards

        ``Subpart 1--Establishment and Application of Standards

        ``Sec. 2101. General requirement.
        ``Sec. 2102. Establishment of standards.
        ``Sec. 2103. Deadline for application of standards in States.
        ``Sec. 2104. Relation to State law.
        ``Sec. 2105. Steering committee on long-term care insurance 
                            standards.
   ``Subpart 2--Code of Conduct for Endorsements; Agent Training and 
                         Certification Programs

        ``Sec. 2111. Guidelines for code of conduct with respect to 
                            endorsements.
        ``Sec. 2112. Requirements for agent training and certification 
                            programs.
                        ``Subpart 3--Definitions

        ``Sec. 2116. Long-term care insurance policy.
        ``Sec. 2117. Other terms.
                          ``Part B--Standards

                     ``Subpart 1--Policy Standards

        ``Sec. 2121. Use of standard definitions and terminology and 
                            uniform format.
        ``Sec. 2122. Minimum benefits; limiting conditions on benefits.
        ``Sec. 2123. Prohibition of discrimination against individuals 
                            with Alzheimer's and related diseases.
        ``Sec. 2124. Limitation on use of preexisting condition limits.
        ``Sec. 2125. Use of functional assessment.
        ``Sec. 2126. Requirements for premiums and premium increases.
        ``Sec. 2127. Inflation protection.
        ``Sec. 2128. Nonforfeiture benefits.
        ``Sec. 2129. Designation of representatives.
        ``Sec. 2130. Renewal and policy upgrades.
                      ``Subpart 2--Sales Practices

        ``Sec. 2131. Certification of training of sales agents.
        ``Sec. 2132. Duty of good faith and fair dealing.
        ``Sec. 2133. Financial guidelines.
        ``Sec. 2134. Prohibition of sale or issuance to medicaid 
                            beneficiaries.
        ``Sec. 2135. Prohibition of sale or issuance of duplicate 
                            policies.
        ``Sec. 2136. Provision of outline of coverage and other 
                            information.
        ``Sec. 2137. Information on financial arrangements with groups.
                     ``Subpart 3--Carrier Standards

        ``Sec. 2141. Refund of premiums (free look).
        ``Sec. 2142. Mailing of policy.
        ``Sec. 2143. Prompt payment.
        ``Sec. 2144. Information on claims denials.
        ``Sec. 2145. Limitation on rescission, cancellation, or 
                            nonrenewal or denial of claims.
        ``Sec. 2146. Reporting of information; access to information.
        ``Sec. 2147. Provision of outline of coverage for renewals.
                   ``Part C--Enforcement of Standards

                    ``Subpart 1--General Provisions

        ``Sec. 2151. Secretarial enforcement authority.
        ``Sec. 2152. Complaints and investigations.
        ``Sec. 2153. Hearings.
        ``Sec. 2154. Cease and desist order with civil money penalty.
        ``Sec. 2155. Establishment of toll-free telephone hotline.
   ``Subpart 2--Conditions for Approval of State Regulatory Programs

        ``Sec. 2161. General requirement.
        ``Sec. 2162. Enforcement.
        ``Sec. 2163. Toll-free telephone system.
        ``Sec. 2164. Publication of information.
        ``Sec. 2165. Process for approval of premiums.
        ``Sec. 2166. Annual reports.
        ``Sec. 2167. Increase in funding for long-term care insurance, 
                            information, counseling, and assistance 
                            through State regulatory programs.''.
Sec. 3. Study of standard measure of value for long-term care insurance 
                            policies.
Sec. 4. Waiver of paperwork requirements.

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

    The Social Security Act is amended by adding at the end the 
following new title:

            ``TITLE XXI--LONG-TERM CARE INSURANCE STANDARDS

       ``Part A--General Requirement; Establishment of Standards

        ``Subpart 1--Establishment and Application of Standards

                         ``general requirement

    ``Sec. 2101. (a) Approved Regulatory States.--No long-term care 
insurance policy (as defined in section 2116) may be issued, sold, or 
offered for sale in a State which has a regulatory program that the 
Secretary has approved consistent with the requirements of subpart 2 of 
part C, on or after the date specified in section 2103, unless the 
policy has been certified by the State commissioner of insurance under 
such program as meeting the standards established under such program in 
the State.
    ``(b) Other States.--No long-term care insurance policy may be 
issued, sold, or offered for sale in a State that does not have such an 
approved regulatory program, on or after the date specified in section 
2103, unless the policy has been certified by the Secretary (in 
accordance with such procedures as the Secretary may establish by 
regulation) as meeting the standards established under section 2102.
    ``(c) Treatment of Advertising and Soliciting.--For purposes of 
this section, the advertising or soliciting with respect to a policy, 
directly or indirectly, shall be deemed the offering for sale of the 
policy.

                      ``establishment of standards

    ``Sec. 2102. (a) Application of Standards.--
            ``(1) NAIC.--If, within 12 months after the date of the 
        enactment of this title, the National Association of Insurance 
        Commissioners promulgates model standards that incorporate the 
        requirements of part B and subpart 2 of part C, such standards 
        shall apply under section 2101, effective on the date specified 
        in section 2103(a).
            ``(2) Subsequent standards.--If the NAIC modifies the model 
        standards previously established under this subsection in a 
        manner consistent with the requirements of part B and subpart 2 
        of part C, such modified standards shall apply under section 
        2101, effective as of the date specified in section 2103(a).
            ``(3) Use of term `standards'.--In this title, the term 
        `Standards' means all standards established under this section 
        that apply in a State under section 2101 and includes, with 
        respect to subpart 2 of part C, standards to carry out the 
        requirements for State regulatory programs under such subpart.
    ``(b) Default.--If the NAIC does not promulgate the model standards 
under subsection (a) by the deadline established in that subsection, 
the Secretary shall promulgate, within 12 months after such deadline, a 
regulation that provides standards that incorporate the requirements of 
part B and subpart 2 of part C and such standards shall apply under 
section 2101.
    ``(c) Balance in Standards.--The standards for long-term care 
insurance established under this title shall reflect a balance 
between--
            ``(1) the goal of protecting consumers through assuring 
        they are appropriately informed and receive adequate value for 
        their purchase, and
            ``(2) the goal of allowing the appropriate development of 
        long-term care insurance products and the market for such 
        products.

           ``deadline for application of standards in states

    ``Sec. 2103. (a) In General.--For purposes of this part, with 
respect to initial standards or subsequent standards established under 
section 2102, the date specified in this section for a State is 
whichever of the following is earlier:
            ``(1) The date the State adopts such initial or subsequent 
        standards.
            ``(2) 1 year after the first day of the first legislative 
        session of the State legislature that begins after the date 
        such initial or subsequent standards are established.
    ``(b) Treatment of States With 2-Year Legislative Sessions.--In 
applying subsection (a)(2) 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 session of the State legislature.

                        ``relation to state law

    ``Sec. 2104. (a) Preemption.--Except as provided in subsection (b), 
the Standards established under section 2102 preempt provisions of 
State law which conflict with such Standards.
    ``(b) Stricter Standards Permitted.--A State may apply standards 
that provide greater protection to policyholders of long-term care 
insurance policies than the Standards so long as such standards are not 
inconsistent or in conflict with any of the requirements of this title.

       ``steering committee on long-term care insurance standards

    ``Sec. 2105. (a) Establishment.--
            ``(1) In general.--The NAIC shall establish a Steering 
        Committee on Long-Term Care Insurance Standards (in this 
        section referred to as the `Committee').
            ``(2) Secretarial establishment.--In case the Secretary is 
        required to promulgate standards under section 2102(b)--
                    ``(A) the Secretary shall establish a Steering 
                Committee on Long-Term Care Insurance Standards (in 
                this section referred to as the `Committee'), and
                    ``(B) any subsequent reference in this section to 
                the NAIC is deemed a reference to the Secretary.
    ``(b) Composition.--
            ``(1) In general.--The Committee shall be composed of 11 
        individuals to be appointed by the NAIC as follows:
                    ``(A) 3 individuals who are representative of 
                consumer groups and who have substantial knowledge and 
                expertise on the issue of long-term care insurance.
                    ``(B) 3 individuals who are representative of the 
                long-term care insurance carriers.
                    ``(C) 1 individual who is representative of agents 
                who sell long-term care insurance.
                    ``(D) 1 individual who is representative of 
                providers of long-term care services.
                    ``(E) 1 individual who is a counselor or consultant 
                to purchasers of long-term care insurance.
                    ``(F) 2 individuals who are experts in long-term 
                care insurance who are from universities or independent 
                institutions and are not representative of consumer 
                groups, carriers, agents, or providers.
            ``(2) Terms.--Members of the Committee shall be appointed 
        for terms of 3 years, except that the initial members shall be 
        appointed for staggered terms as determined appropriate by the 
        NAIC.
    ``(c) Functions.--
            ``(1) In general.--The Committee shall make detailed 
        recommendations to (and otherwise advise) the NAIC concerning--
                    ``(A) the minimum standards for long-term care 
                insurance consistent with the provisions of this title; 
                and
                    ``(B) the modification of such standards consistent 
                with future laws to expand existing Federal or State 
                long-term care benefits or enhance protection of 
                consumers.
            ``(2) General consultation requirement.--NAIC shall carry 
        out its activities under this title in consultation with the 
        Committee.
    ``(d) Support.--The NAIC shall provide such assistance as may be 
necessary for the operation of the Committee, which assistance may 
include per diem compensation and travel expenses for members of the 
Committee while serving on the business of the Committee.
    ``(e) Committee Authority.--The Committee may--
            ``(1) seek such assistance and support as may be required 
        in the performance of its duties from appropriate Federal 
        departments and agencies, and
            ``(2) prescribe such rules and regulations as it deems 
        necessary with respect to the internal organization and 
        operation of the Committee.
    ``(f) Annual Report.--Not later than March 31 of each year, the 
NAIC is requested to prepare and submit to the Congress a report 
concerning the activities of the NAIC and of the Committee under this 
title during the previous year.

   ``Subpart 2--Code of Conduct for Endorsements; Agent Training and 
                         Certification Programs

     ``guidelines for code of conduct with respect to endorsements

    ``Sec. 2111. Not later than 1 year after the date of enactment of 
this title, the NAIC shall issue guidelines that shall apply to 
organizations and associations and their subsidiaries that provide 
endorsements of long-term care insurance policies, or that permit such 
policies to be offered for sale through the organization or association 
or subsidiary. Such guidelines shall include, at a minimum, the 
following:
            ``(1) In endorsing or selling long-term care insurance 
        policies, the primary responsibility of an organization or 
        association or its subsidiary shall be to educate their members 
        concerning such policies and assist such members in making 
        informed decisions. Such organizations and associations and 
        their subsidiaries may not function primarily as sales agents 
        for insurance companies.
            ``(2) Organizations and associations and their subsidiaries 
        shall provide objective information regarding long-term care 
        insurance policies sold or endorsed by such organizations, 
        associations, and subsidiaries to ensure that members of such 
        organizations, associations, and subsidiaries have a balanced 
        and complete understanding of both the strengths and weaknesses 
        of the policies that are being endorsed or sold.
            ``(3) Organizations and associations and their subsidiaries 
        selling or endorsing long-term care insurance policies shall 
        disclose, in marketing literature concerning such policies that 
        is provided to their members, the manner in which such policies 
        and the insurance company issuing such policies were selected. 
        If the organization, association, or subsidiary and the 
        insurance company have interlocking directorates, the 
        organization, association, or subsidiary shall disclose such 
        fact to their members.
            ``(4) Organizations and associations and their subsidiaries 
        selling or endorsing long-term care insurance policies shall 
        disclose, in marketing literature concerning such policies that 
        is provided to their members, the precise nature and amount of 
        the compensation arrangements (including all fees, commissions, 
        administrative fees and other forms of financial support) that 
        the organization, association, or subsidiary receives from the 
        endorsement or sale of the policies to its members. The Boards 
        of Directors of organizations and associations and their 
        subsidiaries selling or endorsing long-term care insurance 
        policies shall review and approve the compensation arrangements 
        relating to such policies.
            ``(5) Organizations and associations and their subsidiaries 
        selling or endorsing long-term care insurance policies to their 
        members also--
                    ``(A) shall disclose, in summary form, the most 
                recent information available pertaining to the 
                financial status (including solvency) of the carrier;
                    ``(B) shall make periodic actuarial or independent 
                examinations of the policies, including their benefits, 
                features, and rates;
                    ``(C) shall actively monitor the marketing efforts, 
                with respect to its members, of the carrier and its 
                agents;
                    ``(D) shall review and approve all marketing 
                materials or other insurance communications used to 
                promote sales among, or sent to, members regarding such 
                policies; and
                    ``(E) shall file with the State insurance 
                commissioner of the State in which they are based--
                            ``(i) a copy of the policies,
                            ``(ii) a copy of the outline of coverage 
                        which accompanies such policies,
                            ``(iii) a copy of each advertising and 
                        other marketing materials utilized in 
                        connection with the sale or endorsement of such 
                        policies, and
                            ``(iv) a statement of compliance with all 
                        the requirements of this section.

      ``requirements for agent training and certification programs

    ``Sec. 2112. (a) Establishment.--The NAIC shall establish 
requirements for long-term care insurance agent training and 
certification that--
            ``(1) specify requirements for a training program, either 
        as part of a life-health insurance training program or as a 
        separate long-term care insurance training program, to train 
        insurance agents who desire to sell or offer for sale long-term 
        care insurance policies;
            ``(2) specify that the agent must pass either--
                    ``(A) a comprehensive examination on long-term care 
                insurance coverage and appropriate sales techniques, or
                    ``(B) an equally comprehensive long-term care 
                insurance portion of another examination required by a 
                State in order for the agent to sell another insurance 
                product in the State;
            ``(3) specify procedures for certifying agents who have 
        completed such program as qualified to sell or offer for sale 
        long-term care insurance policies; and
            ``(4) specify, on or after 18 months after the date of 
        establishment of such requirements, that no one without a 
        certification may sell or offer for sale a long-term care 
        insurance policy.
    ``(b) Administration.--The program established under subsection (a) 
shall be administered in each State through the State insurance 
commissioner.
    ``(c) Continuing Education Requirements.--
            ``(1) Establishment.--The NAIC shall consider the 
        appropriateness of establishing, and may establish, continuing 
        education requirements for agents who continue to sell long-
        term care insurance policies.
            ``(2) Application of requirements.--For purposes of this 
        title, if the NAIC has established a continuing education 
        requirement under paragraph (1), an individual shall not be 
        considered to be certified under a training and certification 
        program established under this section unless the individual 
        meets such continuing education requirement.

                        ``Subpart 3--Definitions

                   ``long-term care insurance policy

    ``Sec. 2116. (a) In General.--In this title, except as otherwise 
provided in this section, 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 individual on 
an expense incurred, indemnity, prepaid, service-benefit, 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 
described in the previous sentence.
    ``(b) Policies Excluded.--Except as provided in subsections (c) and 
(d), in this title 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--
            ``(1) basic hospital expense coverage, basic medical-
        surgical expense coverage, hospital confinement indemnity 
        coverage, or major medical expense coverage,
            ``(2) disability income or related asset-protection 
        coverage,
            ``(3) accident only coverage,
            ``(4) specified disease or specified accident coverage, or
            ``(5) limited benefit health coverage.
    ``(c) Inclusion of Policies Marketed as Long-term Care Insurance.--
In this title, the term `long-term care insurance policy' also includes 
any product which is advertised, marketed, or offered as long-term care 
insurance.
    ``(d) Disclosure Requirements for Certain Disability Income 
Policies and Life Insurance Policies.--
            ``(1) In general.--In this title, the term `long-term care 
        insurance policy' includes--
                    ``(A) a policy described in subsection (b)(2) under 
                which the eligibility or amount of benefits are based 
                on an assessment of functional ability (based on 
                activities of daily living or otherwise), or
                    ``(B) a life insurance policy described in 
                paragraph (3),
        if the disclosure requirements of paragraph (2) are not met.
            ``(2) Disclosure requirements.--The disclosure requirements 
        of this paragraph for a policy are that--
                    ``(A) the policy discloses (in a form and manner 
                specified in the Standards) the fact that the policy is 
                not a long-term care insurance policy;
                    ``(B) the policy outlines how the benefits in the 
                policy differ from the benefits required to be provided 
                under the Standards of a long-term care insurance 
                policy; and
                    ``(C) in the case of a life-insurance policy 
                described in subsection (c), at the time of policy 
                delivery there is provided to the purchaser and the 
                beneficiary 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) a description of the amount and 
                        length of benefits and the guaranteed lifetime 
                        benefits (if any) for each covered individual; 
                        and
                            ``(iii) any exclusions, reductions, and 
                        limitations on benefits of long-term care.
            ``(3) Certain life insurance policies.--A life insurance 
        policy described in this paragraph is one--
                    ``(A) which accelerates 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 provides the option of a lump-sum 
                payment for those benefits; or
                    ``(C) which provides benefits based on the use of 
                nursing facility care.

                             ``other terms

    ``Sec. 2117. In this title:
            ``(1) Agent.--The term `agent' means--
                    ``(A) prior to 1 year after the date of the 
                establishment of the agent training and certification 
                requirements of section 2112, an individual who sells 
                or offers for sale a long-term care insurance policy 
                subject to the requirements of section 2101; and
                    ``(B) after the date referred to in subparagraph 
                (A), an individual certified under a training and 
                certification program established under section 2112.
            ``(2) Approved regulatory program.--The term `approved 
        regulatory program' means a regulatory program in a State that 
        the Secretary has approved consistent with the requirements of 
        subpart 2 of part C.
            ``(3) Approved regulatory state; nonregulatory state.--The 
        term `approved regulatory State' means a State with an approved 
        regulatory program (as defined in paragraph (2)) and the term 
        `nonregulatory State' means a State other than an approved 
        regulatory State.
            ``(4) Carrier.--The term `carrier' means any person that 
        issues a long-term care insurance policy, including a licensed 
        insurance company, a prepaid hospital or medical service plan, 
        a health maintenance organization, and a multiple small 
        employer welfare arrangement.
            ``(5) State commissioner of insurance.--The term `State 
        commissioner of insurance' includes a State superintendent of 
        insurance.
            ``(6) Steering committee.--The term `steering committee' 
        means the Steering Committee on Long-Term Care Insurance 
        Standards established under section 2104(a).
            ``(7) NAIC.--The term `NAIC' means the National Association 
        of Insurance Commissioners.

                          ``Part B--Standards

                     ``Subpart 1--Policy Standards

    ``use of standard definitions and terminology and uniform format

    ``Sec. 2121. Each long-term care insurance policy shall, pursuant 
to the Standards--
            ``(1) use uniform language and definitions for description 
        of benefits, coverage, providers of covered services, 
        facilities at which covered services are rendered, and 
        eligibility for benefits, including definitions of `home and 
        community care services' and of `nursing facility services', 
        and
            ``(2) use a uniform format and simple, easily understood 
        English for presenting the marketing material and outline of 
        coverage under such a policy.
In establishing the Standards that specify the language and definitions 
under paragraph (1), such language and definitions shall take into 
account the definitions and terminology used by States in relation to 
long-term care services and providers.

          ``minimum benefits; limiting conditions on benefits

    ``Sec. 2122. (a) Minimum Benefits.--In general.--A long-term care 
insurance policy shall provide benefits either--
            ``(1) for nursing facility services, but not for home and 
        community care services, and be labeled prominently as a 
        `nursing home care' policy;
            ``(2) for home and community care services, but not for 
        nursing facility services, and be labeled prominently as a 
        `home and community care' policy; or
            ``(3) for both nursing facility services and home and 
        community care services, and be labeled prominently as a 
        `comprehensive long-term care' policy.
    ``(b) Restrictions on Conditions.--A long-term care insurance 
policy may not condition or limit eligibility--
            ``(1) for benefits for a type of services to the need for 
        or receipt of any other services, including prior 
        hospitalization;
            ``(2) for any benefit solely on the medical necessity for 
        such benefit;
            ``(3) for benefits furnished by licensed or certified 
        providers on compliance with conditions which are in addition 
        to those required for licensure or certification under State 
        law;
            ``(4) for nursing facility services (if covered under the 
        policy) only--
                    ``(A) to care provided in facilities which provide 
                a specified level of care; or
                    ``(B) to care provided in facilities which provide 
                for 24-hour or other nursing care not required in order 
                to be licensed by the State; or
            ``(5) for benefits on the continued payment of premiums 
        during periods when the policyholder or certificate holder is 
        eligible for benefits under the long-term care insurance 
        policy.
    ``(c) Home and Community Care Services.--
            ``(1) Services included.--Home and community care services 
        under a long-term care insurance policy shall include--
                    ``(A) home-based services (described in paragraph 
                (2)) which are provided in a place of residence used as 
                the individual's home (or, in the case of services 
                described in subparagraphs (C), (F), and (G) of that 
                paragraph, which may be provided outside the 
                individual's residence), and
                    ``(B) community-based services (described in 
                paragraph (3)).
            ``(2) Home-based services.--The home-based services 
        described in this paragraph are as follows:
                    ``(A) Nursing care provided by or under the 
                supervision of a registered professional nurse.
                    ``(B) Services which--
                            ``(i) are furnished by a homemaker/home 
                        health aide who has successfully completed a 
                        training and competency evaluation program that 
                        meets minimum standards established by the 
                        Secretary under section 1891(a)(3)(D), and
                            ``(ii)(I) are related to the inability of 
                        the policyholder or certificate holder to 
                        perform activities of daily living or 
                        instrumental activities of daily living, or 
                        (II) in the case of an individual described in 
                        section 2123, consist of providing supervision.
                    ``(C) Personal assistance services furnished by an 
                individual who has successfully completed a training 
                and competency evaluation program that meets minimum 
                standards established by the Secretary.
                    ``(D) Medical social services.
                    ``(E) Physical, occupational, or respiratory 
                therapy or speech-language pathology.
                    ``(F) Provision of, or assistance with, medical 
                supplies (other than drugs and biologicals), assistive 
                technologies, and equipment that assist in the 
                performance of activities of daily living.
                    ``(G) Patient and caregiver (including family 
                caregiver) education and training to develop skills 
                necessary to permit the individual to remain in the 
                home setting.
                    ``(H) Respite care.
                    ``(I) Such other home-based items and services as 
                the Secretary may approve.
            ``(3) Community-based services.--The community-based 
        services described in this paragraph are as follows:
                    ``(A) Adult day care services provided by an adult 
                day care program that meets such standards (including 
                the provision of at least 1 meal a day and the 
                provision of necessary transportation) established by 
                the Secretary.
                    ``(B) In the case of individuals with chronic 
                mental illness, day treatment or other partial 
                hospitalization services, psychosocial rehabilitation 
                services, and clinic services (whether or not furnished 
                in a facility), but not including individual therapy.
                    ``(C) Such other community-based items and services 
                as the Secretary may approve.
            ``(4) Limitations on conditions.--If a long-term care 
        insurance policy provides benefits for home and community care 
        services, the policy--
                    ``(A) may not limit such benefits to services 
                provided by registered nurses, licensed practical 
                nurses, occupational, physical, or speech therapists, 
                or social workers;
                    ``(B) 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 licensed or certified 
                home care worker acting within the scope of the 
                worker's licensure or certification;
                    ``(C) may not limit such benefits to services 
                provided by agencies or providers certified under title 
                XVIII;
                    ``(D) may not limit or exclude benefits for such 
                services by requiring that the policyholder have an 
                acute condition before home and community care services 
                are covered; and
                    ``(E) shall provide at least 365 days of benefits 
                for such services.
    ``(d) Nursing Facility Services.--
            ``(1) Types of services.--Nursing facility services under a 
        long-term care insurance policy shall include the following:
                    ``(A) Nursing care provided by or under the 
                supervision of a registered professional nurse.
                    ``(B) Bed and board in connection with the 
                furnishing of such nursing care.
                    ``(C) Physical, occupational, or respiratory 
                therapy, or speech-language pathology, furnished by the 
                facility or by others under arrangements with them made 
                by the facility.
                    ``(D) Medical social services.
                    ``(E) Such drugs, biologicals, supplies, 
                appliances, and equipment, furnished for use in the 
                facility as are ordinarily furnished by such facility 
                for the care and treatment of residents.
                    ``(F) Medical services provided by an intern or 
                resident-in-training of a hospital with which the 
                facility has in effect a transfer agreement (meeting 
                the requirements of section 1861(l)), under a teaching 
                program of such hospital approved as provided in the 
                last sentence of section 1861(b), and other diagnostic 
                or therapeutic services provided by a hospital with 
                which the facility has such an agreement in effect.
                    ``(G) Such other services necessary to the health 
                of the residents as are generally provided by nursing 
                facilities.
            ``(2) Minimum duration.--If a long-term care insurance 
        policy provides benefits for nursing facility services--
                    ``(A) the policy shall provide such benefits with 
                respect to all nursing facilities (as defined in 
                section 1919(a) or as subsequently provided for by the 
                NAIC in establishing uniform language and definitions 
                under section 2121(1)) in the State, and
                    ``(B) the policy shall provide not less than 365 
                days of such benefits with respect to all such nursing 
                facilities.

 ``prohibition of discrimination against individuals with alzheimer's 
                          and related diseases

    ``Sec. 2123. A long-term care insurance policy may not provide 
benefits under the policy for an individual with Alzheimer's disease, 
with any related progressive degenerative dementia of an organic 
origin, or with any mental disorder of a demonstrable organic origin, 
that are any less advantageous than the benefits for an individual 
having another medical condition for which benefits may be made 
available.

          ``limitation on use of preexisting condition limits

    ``Sec. 2124. (a) Initial Issuance.--
            ``(1) In general.--Subject to paragraph (2), 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 date 
        of issuance of the policy.
            ``(2) 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 replacing policy 
shall waive any time periods (including waiting periods, elimination 
periods, and probationary periods) applicable to preexisting conditions 
in the new policy for similar benefits to the extent such time was 
spent under the original policy.

                     ``use of functional assessment

    ``Sec. 2125. (a) In General.--If a long-term care insurance policy 
limits the eligibility for, or level of, benefits, the policy--
            ``(1) shall specify that eligibility for, and the level of, 
        benefits available under the policy are to be based on a 
        functional assessment (described in subsection (c)); and
            ``(2) shall specify the level (or levels) of physical, 
        cognitive, or mental impairment required under such an 
        assessment to obtain benefits under the policy.
    ``(b) Conduct of Assessment.--Such assessment may not be conducted 
by a person who has a direct or indirect ownership or control relation 
with the carrier issuing the policy.
    ``(c) Uniform Assessment Instrument and Uniform Formulas.--
            ``(1) Uniform assessment.--The functional assessment 
        referred to in subsection (a) must--
                    ``(A) be based on a professional assessment of the 
                policyholder's physical, cognitive, and mental 
                abilities, and
                    ``(B) be conducted in accordance with a standard, 
                reproducible, uniform assessment instrument and 
                methodology designated under the Standards.
            ``(2) Uniform formulas.--Benefits shall be determined in 
        accordance with an eligibility formula specified in the 
        Standards and based on the assessment described in paragraph 
        (1).
    ``(d) Appeals Process.--Each long-term care insurance policy shall 
provide for an appeals process, meeting the Standards, for individuals 
who dispute the results of an assessment conducted under this section, 
including any determination of eligibility, level of functional 
impairment, or level of benefits.

           ``requirements for premiums and premium increases

    ``Sec. 2126. (a) Initial Issuance.--The premiums charged for the 
initial issuance of a long-term care insurance policy shall be 
established in accordance with a system that ensures that premiums--
            ``(1) accurately reflect the true lifetime cost of such a 
        policy (in order to minimize premium rate increases),
            ``(2) are fully supported by an actuarial memorandum, and
            ``(3) utilize lapse rates and other assumptions in 
        accordance with guidelines as specified in the Standards,
and that discloses the specifics of the assumptions utilized.
    ``(b) Additional System Requirements.--The standards established to 
carry out subsection (a) may include--
            ``(1) requirements and restrictions on the original pricing 
        structure and methodology;
            ``(2) a requirement that policies (particularly indemnity 
        policies) be non-cancellable and have premiums that are fixed 
        and level, except in the specific cases of--
                    ``(A) verified, substantial changes in mortality 
                and morbidity rates,
                    ``(B) changes in medical technology which have a 
                major actuarial impact, and
                    ``(C) changes in government specified eligibility 
                requirements, covered services, and definitions which 
                have a major actuarial impact; and
            ``(3) a requirement that policies (particularly service-
        benefit policies) have guaranteed annual and lifetime limits on 
        premium rate increases, to be set forth in such Standards.
    ``(c) Renewals.--Except as provided in subsection (d)--
            ``(1) Prohibition on increases in first 3 years.--No 
        increase in premiums shall be allowable during the first 3 
        years of a policy's duration.
            ``(2) Requirements for certain premium increases for 
        individuals under age 70.--In the case of a policyholder or 
        certificateholder who is under the age of 70, a proposed 
        premium increase for renewal of the policy that would result 
        either--
                    ``(A) in the premium exceeding twice the original 
                premium amount, or
                    ``(B) in a premium increase, over any 3-year 
                period, exceeding 30 percent of the premium in effect 
                at the beginning of such period,
        shall not be granted unless the requirements of section 
        2165(a)(3) are met.
            ``(3) Requirements for premium increases for individuals 
        between 70 and 80 years of age.--In the case of a policyholder 
        or certificateholder who is at least 70 years of age but under 
        the age of 80, no proposed premium increase for renewal of the 
        policy shall be granted if the proposed premium increase would 
        result either--
                    ``(A) in a premium increase, over any 3-year 
                period, exceeding 15 percent of the premium in effect 
                at the beginning of the period, or
                    ``(B) in a premium increase, over the 10-year 
                period ending upon attaining age 80, exceeding 50 
                percent of the premium in effect at the earliest time 
                covered during such period.
            ``(4) Prohibition on premium increases for individuals 80 
        years of age or older.--In the case of a policyholder or 
        certificate holder of a long-term care insurance policy who is 
        80 years of age or older, the premiums for such policy may not 
        be increased.
    ``(d) Special Rules in Case of Inflation Protection.--In the case 
of a policy that includes inflation protection benefits, the 
requirements of subsection (c) shall not apply to any proposed or 
expected premium increases if the increases are consistent with the 
increases attributable to such inflation protection as scheduled within 
the policy and were illustrated in a conspicuous manner in the outline 
of coverage provided at the time of purchase.

                         ``inflation protection

    ``Sec. 2127. (a) Optional Rider at Time of Initial Issuance.--
            ``(1) In general.--Subject to paragraph (2), each long-term 
        care insurance policy shall provide for inflation protection in 
        accordance with paragraph (3).
            ``(2) Option.--Paragraph (1) shall not apply if, at the 
        time of initial sale, the policy purchaser, after being 
        provided the information described in section 2136(b)(9), 
        executes a written waiver of such inflation protection.
            ``(3) Choice among types of inflation protection.--
                    ``(A) In general.--In satisfying the requirement of 
                paragraph (1), each policy shall provide the 
                policyholder with a choice of the inflation protection 
                described in subparagraph (B) and the choice of any 
                other inflation protection structure which the NAIC 
                finds to be appropriate and acceptable.
                    ``(B) Specified inflation protection.--The 
                inflation protection described in this subparagraph is 
                protection that provides, at the time of each annual 
                renewal of a policy, 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 subparagraph, 
                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).
    ``(b) NAIC Determination.--The NAIC shall study the issue of 
inflation protection to determine which types of protection are 
appropriate and acceptable, and whether it is appropriate to require 
that all long-term care insurance policies must include provisions for 
protection against inflation. If the NAIC determines that protection 
against inflation should be a required feature of every long-term care 
insurance policy, the NAIC shall determine the characteristics and 
structure of not more than 3 types of inflation protection, at least 
one of which must be included in every such policy sold, effective 6 
months after the date of designation of such types of protection.

                        ``nonforfeiture benefits

    ``Sec. 2128. (a) In General.--Each long-term care insurance policy 
or certificate shall provide that if the policy lapses after the policy 
has been in effect for at least a minimum period of time (specified in 
the Standards), the policy will provide, without payment of any 
additional premiums, benefits of a type and amount (specified in the 
Standards) to the policyholder or certificate holder of the lapsed 
policy.
    ``(b) Standards.--The Standards shall provide that the benefits 
under subsection (a) must increase based upon the period of time in 
which premiums were being received under the policy.

                    ``designation of representatives

    ``Sec. 2129. (a) In General.--The carrier issuing a long-term care 
insurance policy--
            ``(1) at the time of issuance of the policy shall require 
        the applicant or policyholder either--
                    ``(A) to designate 1 or more representatives whom 
                the carrier shall notify in the event that the 
                policyholder fails to pay premiums, or
                    ``(B) to provide a written waiver (signed and dated 
                by the applicant or policyholder) of the right to make 
                such designation; and
            ``(2) shall permit the policyholder to make or alter such a 
        designation not less frequently than annually at the time of 
        renewal.
    ``(b) No Legal Obligation To Pay Premiums.--An individual 
designated as a representative under subsection (a) is not under any 
legal obligation to pay for premiums or to otherwise act in the event 
of a notification under this section.

                     ``renewal and policy upgrades

    ``Sec. 2130. (a) In General.--No long-term care insurance policy 
may be rescinded, canceled, or nonrenewed for any reason other than 
nonpayment of premium (subject to subsection (d) and any nonforfeiture 
rights under section 2128) or fraud or material misrepresentation 
(subject to subsections (c), (d), and (e) of section 2145).
    ``(b) Continuation and Conversion Rights for Group Policies.--
            ``(1) In general.--Each group long-term care insurance 
        policy shall provide covered individuals with a basis for 
        continuation or conversion in accordance with this subsection.
            ``(2) Basis for continuation.--For purposes of paragraph 
        (1), 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 
        facilities, may provide continuation benefits which are 
        substantially equivalent to the benefits of the existing group 
        policy.
            ``(3) Basis for conversion.--For purposes of paragraph (1), 
        a policy provides a basis for conversion of coverage if the 
        policy entitles each individual--
                    ``(A) whose coverage under the group policy would 
                otherwise be terminated for any reason; and
                    ``(B) 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.
            ``(4) Treatment of substantial equivalence.--In determining 
        under this subsection whether benefits are substantially 
        equivalent, consideration should be given to the difference 
        between managed care and non-managed care plans.
            ``(5) 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 carrier 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.
            ``(6) Premiums for replacement or conversion.--In the case 
        of a converted policy or a replacement policy issued by the 
        same carrier that had issued a previous policy and issued to 
        the same group or its successor, or issued to any individual 
        covered by the previous group policy, the premium shall be 
        calculated on the basis of the insured's age at the inception 
        of coverage under the earliest previous policy which became the 
        basis for the converted or replaced policy in the case of 
        benefits which are the same as benefits that were provided 
        under any earlier policy.
    ``(c) Guaranteed Issuance.--
            ``(1) In general.--A carrier that sells or issues long-term 
        care insurance policies shall guarantee that such policies 
        shall be sold or issued to an individual if such individual 
        meets the minimum medical underwriting requirements of such 
        policy.
            ``(2) Policy upgrades.--
                    ``(A) Right to purchase policy that conforms to 
                standards.--Each long-term care insurance policy in 
                effect as of the effective date of the Standards 
                established under section 2102 shall permit the 
                policyholder to purchase a policy that meets all such 
                standards and the carrier shall directly inform each 
                such policyholder of the right to purchase an upgraded 
                policy under this paragraph.
                    ``(B) Right to purchase supplemental upgrades.--
                            ``(i) In general.--If a carrier of a long-
                        term care insurance policy provides for the 
                        issuance of policies with benefits that are 
                        greater than the benefits previously provided 
                        under such policies, subject to clause (ii), 
                        the policyholder of a long-term care insurance 
                        policy previously issued by that carrier and 
                        still in force has the right to purchase a 
                        policy that provides for such upgraded benefits 
                        and the carrier shall directly inform each such 
                        policyholder of the existence of such an 
                        upgraded policy and the right to purchase an 
                        upgraded policy under this paragraph.
                            ``(ii) Limitation.--Clause (i) shall not 
                        apply to a policyholder who is eligible (or was 
                        eligible at any time within the previous 3 
                        months) for benefits under the long-term care 
                        insurance policy.
                    ``(C) Limitation on medical underwriting of 
                upgraded policies required under federal or state 
                law.--With respect to a policy that offers upgraded 
                benefits in accordance with a new Federal or State 
                requirement, the carrier issuing the policy may not 
                impose additional medical underwriting criteria, except 
                that--
                            ``(i) the carrier may establish a premium 
                        that is higher than the premium for the 
                        previously issued policy only for the benefits 
                        in the upgraded policy that exceed the benefits 
                        in the previously issued policy, to the extent 
                        consistent with a methodology developed by the 
                        NAIC, and
                            ``(ii) the carrier may impose additional 
                        medical underwriting criteria that are not more 
                        stringent than that used for new prospective 
                        purchasers--
                                    ``(I) in relation to benefits to 
                                the extent they were not included in 
                                the previously issued policy, and
                                    ``(II) in cases where the State 
                                insurance commissioner determines that 
                                the absence of such underwriting would 
                                result in adverse selection of insured 
                                risks.
                    ``(D) Limitation on medical underwriting on 
                supplemental upgrades.--With respect to an upgraded 
                long-term care insurance policy that offers benefits 
                that are greater than the benefits required under 
                Federal or State requirements, the carrier issuing the 
                policy--
                            ``(i) except as provided in clause (ii), 
                        may not impose additional medical underwriting 
                        criteria in relation to benefits that are the 
                        same as the benefits under the previously 
                        issued policy and the premiums charged with 
                        respect to such benefits may not be greater 
                        than the premiums charged with respect to such 
                        benefits under the previously issued policy, 
                        but
                            ``(ii) may impose additional medical 
                        underwriting criteria in cases where the State 
                        insurance commissioner determines that the 
                        absence of such underwriting would result in 
                        adverse selection of insured risks.
                    ``(E) Approval of higher premiums required.--In the 
                case of a carrier that intends to offer upgraded 
                policies at premiums that are higher than the premiums 
                charged for their existing policies, such carrier must 
                have such higher premiums approved through the process 
                specified in section 2165.
                    ``(F) Credit toward nonforfeiture benefit.--In the 
                case that a policy is replaced with an upgraded policy, 
                the upgraded policy shall provide for credit designed 
                to assure retention of a policyholder's equity, 
                according to a formula specified by the NAIC, toward 
                the nonforfeiture benefit for periods of coverage under 
                the previous long-term care insurance policy issued by 
                the same carrier.
    ``(d) Effect of Incapacitation.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        long-term care insurance policy in effect as of the effective 
        date of the Standards established under section 2102 may not be 
        canceled for nonpayment if the policy holder is determined by a 
        long-term care provider, physician or other health care 
        provider, in accordance with a uniform assessment under section 
        2125, to be cognitively, mentally, or physically incapacitated.
            ``(2) Permitted cancellation.--A long-term care insurance 
        policy may be canceled under paragraph (1) for nonpayment if--
                    ``(A) the period of such nonpayment is in excess of 
                30 days; and
                    ``(B) notice of intent to cancel (and right of 
                reinstatement under paragraph (3)) is received by all 
                representatives designated by the policyholder or 
                certificate holder (in accordance with section 2129) 
                after the expiration of the period specified in 
                subparagraph (A) and not less than 30 days prior to 
                such cancellation.
            ``(3) Reinstatement.--If a long-term care insurance policy 
        lapses or is canceled for nonpayment under this subsection, the 
        policy may be reinstated without any loss in the policyholder's 
        equity (for purposes of a nonforfeiture benefit) if the 
        policyholder pays all premiums owing within a period (specified 
        in the standards and of not less than 6 months) after the date 
        of the lapse or cancellation.

                      ``Subpart 2--Sales Practices

              ``certification of training of sales agents

    ``Sec. 2131. A person may not sell or offer for sale a long-term 
care insurance policy unless the person has been certified under the 
State regulatory program (or, in nonregulatory States, by the 
Secretary) as having received training (in accordance with section 
2112) with respect to such policies in accordance with the Standards.

                 ``duty of good faith and fair dealing

    ``Sec. 2132. (a) In General.--Each person 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.--A person is considered to have 
violated subsection (a) if the person engages in any of the following 
practices:
            ``(1) Twisting.--
                    ``(A) In general.--Knowingly making any misleading 
                representation or incomplete or fraudulent comparison 
                of any long-term care insurance policy or carrier 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.
                    ``(B) Policy replacement form.--With respect to any 
                person who elects to replace or effect a change in a 
                long-term care insurance policy, the individual that is 
                selling such policy shall ensure that such person 
                completes a policy replacement form developed by the 
                NAIC. A copy of such form shall be retained by the 
                selling individual and additional copies shall be 
                delivered by the selling individual to the old policy 
                carrier, the new carrier, and the State insurance 
                commissioner.
            ``(2) 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.
            ``(3) 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.
            ``(4) Additional practices.--Such sales practices as the 
        Secretary may specify in regulations.
    ``(c) Periodic Reports and Additional Unfair Sales Practices.--The 
NAIC shall periodically report to the Secretary on improper sales 
practices that should be treated (under subsection (b)(4)) as 
violations of subsection (a). Any additional unfair sales practices 
specified in regulations referred to in subsection (b)(4) shall only 
apply to activities occurring after the date of promulgation of the 
regulations.
    ``(d) Prohibition of Completion of Medical Histories.--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 for any 
other individual (other than a relative of the person). Except as 
provided in the previous sentence, the medical history portion of such 
application may be completed by any individual (including the 
applicant, an immediate relative of the applicant, or the applicant's 
physician).

                         ``financial guidelines

    ``Sec. 2133. The NAIC, simultaneously with the establishment of the 
Standards, shall develop recommended minimum financial guidelines 
(including income, assets, and other criteria) that an individual 
should meet before purchasing a long-term care insurance policy. Such 
guidelines also shall include a requirement that every prospective 
purchaser is provided, before a purchase of a long-term care policy, a 
written statement, in prominent typeface, that long-term care insurance 
is not an appropriate product for every consumer to purchase and that a 
prospective purchaser should consider whether the purchaser's financial 
situation necessitates such a purchase.

      ``prohibition of sale or issuance to medicaid beneficiaries

    ``Sec. 2134. 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 
title XIX.

        ``prohibition of sale or issuance of duplicate policies

    ``Sec. 2135. (a) In General.--A person may not sell or issue a 
long-term care insurance policy--
            ``(1) knowing that the policy provides for coverage that, 
        when combined with coverage provided in a service-benefit long-
        term care insurance policy (as defined in subsection (b)) in 
        effect for the benefit of the same individual, would result in 
        greater than 100 percent reimbursement for covered services 
        (unless the policy is intended to replace such other policy), 
        or
            ``(2) 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--
                    ``(A) does not duplicate other coverage in effect 
                under a service-benefit long-term care insurance 
                policy, or
                    ``(B) will replace another service-benefit long-
                term care insurance policy.
    ``(b) Service-Benefit Long-Term Care Insurance Policy Defined.--In 
subsection (a), the term `service-benefit long-term care insurance 
policy' means a long-term care insurance policy which provides benefits 
which are a percentage of the actual or reasonable cost of the services 
furnished.

        ``provision of outline of coverage and other information

    ``Sec. 2136. (a) Outline of Coverage.--A person may not sell or 
offer for a sale a long-term care insurance policy for the benefit of 
an individual without providing to the purchaser or potential purchaser 
(or representative), before such purchase, with--
            ``(1) a copy of the guidelines developed under section 2133 
        and an explanation of such guidelines;
            ``(2) the consumer guide on the purchase of long-term care 
        insurance policies (written by the NAIC), which shall include a 
        personal assessment form to assist in determining the 
        purchaser's financial and other need for long-term care 
        insurance; and
            ``(3) an outline of coverage that includes the information 
        required under subsection (b).
In applying this subsection in the case of a group long-term care 
insurance policy, the carrier issuing the policy is responsible for the 
provision of the outline and information to each certificate holder 
before the policy takes effect with respect to that certificate holder.
    ``(b) Contents of Outline of Coverage.--The outline of coverage for 
each long-term care insurance policy shall be in a uniform format, 
utilizing simple, easily understood English, as prescribed in 
guidelines issued by the NAIC. Each outline shall include (in 
accordance with the Standards) at least the following:
            ``(1) A description of the principal benefits and coverage 
        (including any inflation protection) under the policy, how such 
        benefits and coverage compare to the range of potential 
        benefits and coverage available under such policies, and the 
        eligibility criteria (if any) for such benefits.
            ``(2) A statement of the principal exclusions, reductions, 
        and limitations contained in the policy.
            ``(3) A statement of the terms under which the policy (or 
        certificate in the case of a group policy) may be continued in 
        force or discontinued and the terms for continuation or 
        conversion.
            ``(4) A statement that the outline of coverage is a summary 
        only, not a contract of insurance, and that the policy (or, in 
        the case of a certificate, the group policy under which the 
        certificate is issued) contains the contractual provisions that 
        govern.
            ``(5) A description of the terms, specified in section 
        2141, under which a policy may be returned and the premium 
        refunded.
            ``(6) Information (supplied either by the NAIC or by the 
        Secretary) on national average nursing home lengths of stay and 
        percentage of the population that requires nursing facility or 
        home care services, broken down by age groups.
            ``(7) A statement of whether the carrier has a right to 
        increase premiums and, if such right exists, the extent to 
        which such premiums may be increased and the circumstances 
        under which such an increase may occur.
            ``(8) Information (supplied either by the State 
        commissioner of insurance or the Secretary) on the average 
        costs and range of costs for home care and nursing facility 
        care in the State of residence and information (in graphic 
        form) on the relationship of the benefits provided under the 
        policy to such State average costs.
            ``(9) 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, except that such 
        information need not cover a period beyond the age of 85.
    ``(c) Certificates.--A certificate issued pursuant to a group long-
term care insurance policy shall include--
            ``(1) a description of the principal benefits and coverage 
        provided in the policy;
            ``(2) a statement of the principal exclusions, reductions, 
        and limitations contained in the policy; and
            ``(3) a statement that the group master policy determines 
        governing contractual provisions.
    ``(d) 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--
            ``(1) an explanation of how the long-term care benefits 
        interact with other components of the policy (including 
        deductions from death benefits);
            ``(2) an illustration of the amount of benefits, the length 
        of benefit, and the guaranteed lifetime benefits (if any) for 
        each covered person;
            ``(3) principal exclusions, reductions, and limitations on 
        benefits of long-term care; and
            ``(4) a description of the tax consequences of redeeming 
        the life insurance policy to pay for long-term care.
    ``(e) Enforcement of Representations of Additional Benefits.--If a 
purchaser of a long-term care insurance policy establishes, by a 
preponderance of the evidence, that--
            ``(1) an agent sold, offered for sale, or issued a long-
        term care insurance policy,
            ``(2) the agent represented that the policy contained 
        benefits which are in addition to the benefits otherwise 
        provided under the policy, and
            ``(3) the purchaser of the policy reasonably relied upon 
        such misrepresentations in purchasing the policy,
then the carrier issuing the policy is liable to the purchaser either 
for the cost of purchasing the services that would have been covered if 
the benefits had been included in the policy or for the provision of 
the additional benefits so represented. The carrier may recover the 
costs incurred under this subsection from the agent whose actions gave 
rise to such expenses.

          ``information on financial arrangements with groups

    ``Sec. 2137. A person may not sell or offer for sale a long-term 
care insurance policy to a member of an organization with which the 
person (or the carrier issuing the policy) has a financial arrangement 
of any type unless the person discloses (in accordance with the 
Standards) the nature of the financial arrangement.

                     ``Subpart 3--Carrier Standards

                    ``refund of premiums (free look)

    ``Sec. 2141. 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, the carrier shall refund 
directly 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.

                          ``mailing of policy

    ``Sec. 2142. 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 carrier shall transmit to the applicant the 
policy of insurance not later than 30 days after the date of the 
approval.

                            ``prompt payment

    ``Sec. 2143. A carrier issuing a long-term care insurance policy 
shall make payment promptly to satisfy claims filed under such policy.

                    ``information on claims denials

    ``Sec. 2144. If a claim under a long-term care insurance policy is 
denied or results in less than full payment, the carrier shall, within 
30 days of the date of the denial or partial payment--
            ``(1) provide to the policyholder and to the person 
        submitting the claim a written explanation of the reasons for 
        the denial or partial payment;
            ``(2) make available to such person all information 
        directly relating to such denial or partial payment; and
            ``(3) inform the individual of the process established 
        under section 2145(f) for the appeal of the claim denial.

 ``limitation on rescission, cancellation, or nonrenewal or denial of 
                                 claims

    ``Sec. 2145. (a) Limitation.--
            ``(1) In general.--A carrier may rescind, cancel, or 
        nonrenew a long-term care insurance policy or certificate, or 
        deny an otherwise valid claim under such policy, only in 
        accordance with this section.
            ``(2) Timely resolution of insurability questions.--Before 
        issuing a long-term care insurance policy or certificate with 
        respect to coverage of an individual, the carrier shall resolve 
        all reasonable questions relating to the insurability of the 
        individual (including, if the carrier underwrites such 
        coverage, the completion of such underwriting). No claim under 
        a long-term care insurance policy may be denied on the basis of 
        a failure to disclose information at the time of delivery (and 
        issuance for delivery) of the policy if the application for the 
        policy failed to request such information.
    ``(b) Nonpayment of Premiums.--A carrier may cancel or nonrenew a 
long-term care insurance policy or certificate for nonpayment of 
premiums, except as provided in section 2130(d).
    ``(c) Misrepresentation Relating to Insurability.--A carrier may 
cancel or nonrenew a long-term care insurance policy or certificate, or 
deny an otherwise valid claim under such policy or certificate based 
upon misrepresentation of facts relating to the insurability of the 
individual, only--
            ``(1) based upon clear and convincing evidence--
                    ``(A) of misrepresentation of information material 
                to the acceptance for coverage, and
                    ``(B) which involves a chronic condition or dates 
                of treatment before the date of the policy application; 
                and
            ``(2) if the carrier notifies the policyholder of the 
        carrier's intention to cancel or nonrenew the policy or 
        certificate or deny the claim not later than--
                    ``(A) 60 days after the date the carrier discovers 
                the misrepresentation, or
                    ``(B) 6 months (or 2 years in the case of clear and 
                convincing evidence that the misrepresentation pertains 
                to the condition for which benefits are sought) after 
                the date of issuance of the policy or certificate,
        whichever is earlier.
    ``(d) Fraud Relating to Insurability.--A carrier may rescind, 
cancel, or nonrenew a long-term care insurance policy or certificate, 
or deny an otherwise valid claim under such policy or certificate based 
upon fraud relating to the insurability of the individual, only--
            ``(1) based upon clear and convincing evidence--
                    ``(A) of fraud consisting of the knowing and 
                intentional misstatement of information material to the 
                acceptance for coverage, and
                    ``(B) which involves a chronic condition or dates 
                of treatment before the date of the policy application; 
                and
            ``(2) if the carrier notifies the policyholder of the 
        carrier's intention to rescind, cancel, or nonrenew the policy 
        or certificate or deny the claim not later than 60 days after 
        the date the carrier discovers the fraud.
    ``(e) Fraud or Misrepresentation Relating to a Group Policy.--In 
the case of a policyholder or certificate holder who is insured as part 
of a group, within 2 years after the date of issuance of the policy or 
certificate, a carrier may rescind, cancel, or nonrenew the policy or 
certificate, or deny an otherwise valid claim under such policy, based 
upon fraud or misrepresentation of facts relating to that individual's 
status as a member of the group or other relationship to that group at 
the time of initial coverage of that individual under the policy or 
certificate.
    ``(f) Appeals Process.--A policyholder or certificate holder whose 
policy or certificate has been rescinded, canceled, or nonrenewed, or 
whose claim has been fully or partly denied, or whose claim has not 
been acted upon with reasonable promptness shall have the right to a 
review of such rescission, cancellation, nonrenewal, or denial under a 
process specified in the Standards and shall be granted an opportunity 
for a fair hearing by the carrier in any case where the amount in 
controversy is at least $500. The Standards may provide for an appeal 
to the State commissioner of insurance in an appropriate State.

           ``reporting of information; access to information

    ``Sec. 2146. (a) Reporting of Information.--Each carrier issuing 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 the following:
            ``(1) The long-term care insurance policies of the carrier 
        that are in force.
            ``(2) Utilization of benefits and payment of claims under 
        the policy.
            ``(3) The ages of individuals purchasing the policy.
            ``(4) Advertising and other marketing material utilized in 
        connection with the sale of such policies, including a copy of 
        each such item.
            ``(5) Total premiums written and premiums earned in the 
        previous year.
            ``(6) The most recent premiums for such policies and the 
        premiums imposed for such policies during the previous 5-year 
        period.
            ``(7) The absolute numbers and rates of lapse, replacement, 
        and rescission for each of its various types of policies (and 
        by agent for those agents who sold at least 10 such policies 
        and are in the highest 20th percentile of agents for that 
        carrier with respect to each such rate). For purposes of this 
        paragraph, there shall be a separate category for a lapse due 
        to the death of the policyholder.
            ``(8) The number of claims denied for such policies and the 
        ratio of claims denied to claims submitted for such policies. 
        For purposes of this paragraph, there shall not be included as 
        a claim submitted or denied any claim that is denied solely 
        because of the failure to meet a deductible, waiting period, or 
        exclusionary period.
            ``(9) Complaints received with respect to such policies, 
        and the resolution of such complaints.
            ``(10) The number of claims under such policies being 
        appealed to the commissioner of insurance of the State and 
        cases being litigated in response to denials of claims or other 
        policy disputes.
            ``(11) The number of denied claims that are reversed on 
        appeal to the commissioner of insurance or through litigation 
        (as a percentage of claim denials so appealed or being 
        litigated) for such policies.
            ``(12) Such other information as is specified in the 
        Standards.
Information under this subsection shall be reported in a format 
specified in the Standards.
    ``(b) Access to Information.--Each such carrier shall make 
available to the Secretary and the Commissioner or superintendent of 
insurance of each State in which the policy is sold such additional 
information as the Secretary, Commissioner, or superintendent, may 
request.
    ``(c) Availability of Information.--The State commissioner of 
insurance of each State shall make information under this section 
available, upon request, to the NAIC and, to the extent consistent with 
other laws, to other interested parties.

            ``provision of outline of coverage for renewals

    ``Sec. 2147. Each carrier issuing a long-term care insurance policy 
shall provide, at the time of renewal of such a policy or, in the case 
of a policy issued through a group, the anniversary date of purchase of 
the policy an outline of coverage described in section 2136 to each 
policyholder.

                   ``Part C--Enforcement of Standards

                    ``Subpart 1--General Provisions

                  ``secretarial enforcement authority

    ``Sec. 2151. (a) In General.--The Secretary shall exercise 
authority under this section in the case of a nonregulatory State.
    ``(b) Loss of Status.--If an association or its subsidiary or a 
carrier is determined under this section not to be in compliance with 
applicable Standards in a nonregulatory State and is not determined to 
have come into compliance with such applicable Standards at the end of 
the 6-month period beginning on the date of the initial determination 
of such noncompliance, any long-term care insurance policy issued, 
sold, or offered for sale by such association or its subsidiary or 
carrier in such State shall be considered to be issued, sold, or 
offered for sale in violation of section 2101(a).

                    ``complaints and investigations

    ``Sec. 2152. (a) In General.--The Secretary shall establish 
procedures--
            ``(1) for individuals and entities to file written, signed 
        complaints respecting alleged violations of the requirements of 
        part B,
            ``(2) for responding on a timely basis to such complaints, 
        and
            ``(3) for the investigation of--
                    ``(A) those complaints which, on their face, have a 
                substantial probability of validity, and
                    ``(B) such other alleged violations of the 
                requirements of part B as the Secretary determines to 
                be appropriate.
    ``(b) Conduct of Investigations.--In conducting investigations 
under this section, the Secretary shall have reasonable access to 
examine evidence of any person or entity being investigated.
    ``(c) Treatment of Carrier Violations.--For purposes of this 
subpart, a carrier whose policy was sold, offered for sale, or issued 
by an agent in violation of subpart 2 of part B and who had any reason 
to know of such violation but did not act immediately to correct such 
violation in good faith, shall be deemed to have violated the 
provisions of such subpart.

                               ``hearings

    ``Sec. 2153. (a) In General.--Before imposing an order described in 
section 2154 against a person or entity under this section for a 
violation of the requirements of part B, the Secretary shall provide 
the person or entity with notice and, upon request made within a 
reasonable time (of not less than 30 days, as established by the 
Secretary by regulation) of the date of the notice, a hearing 
respecting the violation. If no hearing is so requested, the Secretary 
shall impose a final and unappealable order.
    ``(b) Conduct of Hearing.--Any hearing so requested shall be 
conducted before an administrative law judge under section 201. If no 
hearing is so requested, the Secretary's imposition of the order shall 
constitute a final and unappealable order.
    ``(c) Authority in Hearings.--
            ``(1) In general.--In conducting hearings under this 
        section--
                    ``(A) the Secretary and administrative law judges 
                shall have reasonable access to examine evidence of any 
                person or entity being investigated, and
                    ``(B) administrative law judges, may, if necessary, 
                compel by subpoena the attendance of witnesses and the 
                production of evidence at any designated place or 
                hearing.
            ``(2) Enforcement of subpoenas.--In case of contumacy or 
        refusal to obey a subpoena lawfully issued under this 
        subsection and upon application of the Secretary, an 
        appropriate district court of the United States may issue an 
        order requiring compliance with such subpoena and any failure 
        to obey such order may be punished by such court as a contempt 
        thereof.
    ``(d) Issuance of Orders.--If the administrative law judge 
determines, upon the preponderance of the evidence received, that a 
person or entity named in the complaint has violated the requirements 
of part B, the administrative law judge shall state the findings of 
fact and issue and cause to be served on such person or entity an order 
described in section 2154 which includes the findings and the basis of 
the order.

           ``cease and desist order with civil money penalty

    ``Sec. 2154. (a) Cease and Desist Order.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this section, the order under this section--
                    ``(A) shall require the person or entity--
                            ``(i) to cease and desist from such 
                        violations, and
                            ``(ii) to pay a civil penalty in an amount 
                        not to exceed $25,000 (or $15,000 in the case 
                        of a violation by an agent) for each such 
                        violation; and
                    ``(B) may require the person or entity to take such 
                other remedial action as is appropriate.
            ``(2) Amount of civil penalty.--The amount of a civil 
        penalty under paragraph (1)(A)(ii) may take into account the 
        penalties imposed by a State with respect to the same such 
        violation.
            ``(3) Procedures for civil penalty.--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 subsection in the same manner as such 
        provisions apply to a penalty or proceeding under section 
        1128A(a).
    ``(b) Criminal Penalty for Multiple Agent Violations.--In the case 
of an agent who has committed multiple violations of the requirements 
of subpart 2 of part B, such agent also may be imprisoned not more than 
5 years, or fined in accordance with title 18, United States Code, or 
both.
    ``(c) Corrections Within 30 Days.--No order shall be imposed under 
this section by reason of any violation if the person or entity 
establishes to the satisfaction of the Secretary by clear and 
convincing evidence that--
            ``(1) such violation was due to reasonable cause and was 
        not intentional and was not due to willful neglect, and
            ``(2) such violation is corrected within the 30-day period 
        beginning on the earliest date the person or entity knew, or 
        exercising reasonable diligence should have known, that such a 
        violation was occurring.
    ``(d) Waiver by Secretary.--In the case of a violation which is due 
to reasonable cause and is not intentional or due to willful neglect, 
the Secretary may waive part or all of the civil money penalty imposed 
by subsection (a)(1)(A)(ii) to the extent that payment of such penalty 
would be grossly excessive relative to the violation involved and to 
the need for deterrence of violations.
    ``(e) Review by the Secretary.--The decision and order of an 
administrative law judge under this section shall become the final 
agency decision and order of the Secretary unless, within 30 days, the 
Secretary modifies or vacates the decision and order, in which case the 
decision and order of the Secretary shall become a final order under 
this section.
    ``(f) Judicial Review.--A person or entity adversely affected by a 
final order issued under this section may, within 45 days after the 
date the final order is issued, file a petition in the Court of Appeals 
for the appropriate circuit for review of the order.
    ``(g) Enforcement of Orders.--If a person or entity fails to comply 
with a final order issued under this section against the person or 
entity after opportunity for judicial review under subsection (f), the 
Secretary shall file a suit to seek compliance with the order in any 
appropriate district court of the United States. In any such suit, the 
validity and appropriateness of the final order shall not be subject to 
review.

             ``establishment of toll-free telephone hotline

    ``Sec. 2155. In the case of a nonregulatory State, the Secretary 
shall provide for the establishment of the toll-free telephone 
information and complaint system described in section 2163 in carrying 
out this subpart in the State.

   ``Subpart 2--Conditions for Approval of State Regulatory Programs

                         ``general requirement

    ``Sec. 2161. (a) In General.--The Secretary may not approve a State 
regulatory program for purposes of this title, unless the Secretary 
determines that the program--
            ``(1) provides for the application and enforcement of the 
        Standards under part B; and
            ``(2) complies with the requirements of this subpart.
    ``(b) Periodic Review of State Regulatory Programs.--The Secretary 
periodically shall review State regulatory programs to determine if 
they continue to meet the requirements for approval under subsection 
(a) and may determine whether a long-term care insurance policy meets 
the applicable requirements of part B. If the Secretary determines that 
a State regulatory program no longer meets such requirements or is no 
longer in compliance, before making a final determination that a State 
regulatory program no longer meets such requirements, the Secretary 
shall provide the State a hearing and an opportunity of 6 months (or, 
in the case in which State legislation is required in order for the 
State to be in compliance with such requirements, such longer period as 
is necessary to enact such legislation) to adopt such a plan of 
correction as would permit the program to continue to meet such 
requirements. If the Secretary makes a final determination that the 
State regulatory program, after such a hearing and opportunity, fails 
to meet such requirements, the Secretary shall assume responsibility 
under section 2101(b) with respect to certifying policies in the State 
and shall exercise full authority under subpart 1 of this part for 
persons and entities in the State.

                             ``enforcement

    ``Sec. 2162. (a) In General.--The enforcement process under each 
State regulatory program shall be designed in a manner so as to secure 
compliance with the Standards within 30 days after the date of a 
finding of noncompliance with such Standards.
    ``(b) Process.--The enforcement process under each State regulatory 
program shall provide for--
            ``(1) procedures for individuals and entities to file 
        written, signed complaints respecting alleged violations of the 
        Standards;
            ``(2) responding on a timely basis to such complaints;
            ``(3) the investigation of--
                    ``(A) those complaints which, on their face, have a 
                substantial probability of validity, and
                    ``(B) such other alleged violations of the 
                Standards as the program finds appropriate;
            ``(4) notice and opportunity for a hearing before executing 
        sanctions;
            ``(5) the imposition of appropriate sanctions (which 
        include, in appropriate cases, the imposition of a civil money 
        penalty) in the case of a person or entity determined to have 
        violated the Standards; and
            ``(6) an annual report to the Secretary on details 
        concerning complaints filed under the process, including the 
        disposition of, and actions resulting from, such complaints and 
        cases where compliance was not secured under subsection (a).
    ``(c) Uniform Methodology for Recording Complaints.--The process 
under subsection (b) shall provide for the recording of consumer 
complaints filed under subsection (b)(1) in accordance with a uniform 
methodology developed by the NAIC or the Secretary.

                      ``toll-free telephone system

    ``Sec. 2163. (a) In General.--Each State regulatory program shall 
provide a toll-free telephone system which provides--
            ``(1) for a system for the provision of information 
        concerning (A) how to file a complaint under the process 
        described in section 2162, (B) on complaints received under 
        such process respecting particular long-term care insurance 
        policies or carriers, and (C) the compliance of particular 
        long-term care insurance policies or carriers with the 
        requirements of this title;
            ``(2) information to employers and consumers about carriers 
        that offer long-term care insurance policies in the area 
        covered by the regulatory authority; and
            ``(3) information on how to obtain counseling to evaluate 
        the benefits, coverage, conditions, exclusions, and cost of 
        such policies.
    ``(b) Access to Information on Complaints.--
            ``(1) In general.--Each State regulatory program shall 
        provide, through the toll-free telephone system under 
        subsection (a), for consumer access to complaints filed with 
        the State commissioner or superintendent of insurance with 
        respect to long-term care insurance policies. Any such 
        disclosure of complaint information shall be accompanied by a 
        general disclaimer stating that no representations are being 
        made as to the merits of such a complaint. Any complaint that 
        has resulted in a final order in favor of an agent or issuer of 
        a policy shall be removed from the records of complaints to 
        which consumers have access.
            ``(2) Confidentiality.--The access provided under paragraph 
        (1) shall be limited to the extent required to protect the 
        confidentiality of the identity of individual policyholders 
        consistent with State law.

                      ``publication of information

    ``Sec. 2164. Each State regulatory program shall publish annually a 
summary--
            ``(1) by carrier, of (A) the types of long-term health care 
        policies issued and (B) the types of complaints filed 
        concerning such policies, and
            ``(2) of the information reported by policy under section 
        2146.

                   ``process for approval of premiums

    ``Sec. 2165. (a) In General.--Each State regulatory program shall--
            ``(1) provide for a process for approving or disapproving 
        proposed premium increases with respect to long-term care 
        insurance policies;
            ``(2) provide for the receipt and consideration of public 
        comments before approving or disapproving such a premium 
        increase;
            ``(3) provide, in the case of a proposed premium increase 
        described in section 2126(c)(2) or 2130(c)(2)(E), for--
                    ``(A) a public hearing at least 30 days before the 
                date of approval or disapproval of any such increase; 
                and
                    ``(B) for notice to be sent to each policyholder 
                who would be affected by such proposed increase at 
                least 30 days before the date of the public hearing 
                under subparagraph (A).
    ``(b) Conditions for Approval.--No such premium increase shall be 
approved (or deemed approved) unless the proposed increase is 
accompanied by an actuarial memorandum which--
            ``(1) includes a description of the assumptions which 
        justify the increase,
            ``(2) fully supports the increase,
            ``(3) contains such information as may be required under 
        the Standards,
            ``(4) is made available to the public, and
            ``(5) is certified by an actuary who has no financial 
        relationship with the carrier applying for the increase.
    ``(c) Secretarial Authority.--In the case of a State without an 
approved regulatory program, the Secretary shall provide for the 
activities described in subsections (a) and (b).

                            ``annual reports

    ``Sec. 2166. Each State regulatory program shall provide for annual 
reports to the Secretary on the implementation and enforcement of the 
Standards in the State.

   ``increase in funding for long-term care insurance, information, 
      counseling, and assistance through state regulatory programs

    ``Sec. 2167. In addition to amounts otherwise authorized to be 
appropriated, there are authorized to be appropriated, under section 
4360(g) of the Omnibus Budget Reconciliation Act of 1990, $10,000,000 
for each of fiscal years 1996, 1997, and 1998, to fund grant programs 
under such section for the purpose of providing information, 
counseling, and assistance relating to the procurement of adequate and 
appropriate long-term care insurance.''.

SEC. 3. STUDY OF STANDARD MEASURE OF VALUE FOR LONG-TERM CARE INSURANCE 
              POLICIES.

    The Secretary of Health and Human Services shall provide for the 
conduct of a study to develop a standard measure of value for long-term 
care insurance policies. Not later than 2 years after the date of the 
enactment of this title, the Secretary shall prepare and submit to the 
appropriate committees of Congress a report concerning such study.

SEC. 4. WAIVER OF PAPERWORK REQUIREMENTS.

    Chapter 35 of title 44, United States Code, and Executive Order 
12291 shall not apply to information and regulations required for 
purposes of carrying out this Act and the amendments made by this Act.
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