[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1221 Introduced in House (IH)]

  1st Session
                                H. R. 1221

 To amend the Public Health Service Act to establish Federal standards 
     for long-term care insurance policies, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 14, 1995

Mr. Wyden (for himself, Mrs. Morella, Mr. Kennedy of Massachusetts, and 
 Mr. Regula) introduced the following bill; which was referred to the 
                         Committee on Commerce

_______________________________________________________________________

                                 A BILL


 
 To amend the Public Health Service Act to establish Federal standards 
     for long-term care insurance policies, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Long-Term Care Insurance Consumer 
Protection Act of 1995''.

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

    The Public Health Service Act (42 U.S.C. 201 et seq.) is amended by 
adding at the end the following:

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

``SEC. 2701. IMPLEMENTATION OF POLICY STANDARDS.

    ``(a) In General.--
            ``(1) New issues.--No long-term care insurance policy (as 
        defined in section 2709) may be issued, sold, or offered for 
        sale in a State on or after the date specified in subsection 
        (d) unless--
                    ``(A) the Secretary determines that the State has 
                established a regulatory program that--
                            ``(i) provides for the application and 
                        enforcement of the standards established under 
                        subsection (c); and
                            ``(ii) complies with the requirements of 
                        subsection (e);
                by the date specified in subsection (d), and the policy 
                has been approved by the State commissioner or 
                superintendent of insurance under such program; or
                    ``(B) if the State has not established such a 
                program, the policy has been certified by the Secretary 
                (in accordance with such procedures as the Secretary 
                establishes) as meeting the standards established under 
                subsection (c).
        For purposes of this subsection, the advertising or soliciting 
        with respect to a policy, directly or indirectly, shall be 
        deemed the offering for sale of the policy.
            ``(2) Review of state regulatory programs.--The Secretary 
        periodically shall review regulatory programs described in 
        paragraph (1)(A) to determine if they continue to provide for 
        the application and enforcement of the standards established 
        under subsection (c).
    ``(b) Sanctions.--Any person who issues or renews a policy, on or 
after the date specified in subsection (d), in violation of subsection 
(a), is subject to a civil money penalty of not to exceed $25,000 for 
each such violation. The provisions of section 1128A of the Social 
Security Act (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 such section 1128A(a).
    ``(c) Promulgation of Standards.--
            ``(1) In general.--If, within 12 months after the date of 
        the enactment of this title, the National Association of 
        Insurance Commissioners (in this title referred to as the 
        `NAIC') promulgates model standards that incorporate the 
        requirements of sections 2704 through 2708, such standards 
        shall apply under subsection (a).
            ``(2) Default.--If the NAIC does not promulgate the model 
        standards under paragraph (1) 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 sections 2704 
        through 2708 and such standards shall be applied under 
        subsection (a).
            ``(3) Consultation.--In establishing standards under this 
        subsection, the NAIC or Secretary shall consult with a working 
        group composed of representatives of issuers of long-term care 
        insurance policies, consumer groups, and other qualified 
        individuals. Such representatives shall be selected in a manner 
        so as to assure balanced representation among the interested 
        groups.
            ``(4) Relation to state law.--Nothing in this title shall 
        be construed as preventing a State from applying standards that 
        provide greater protection to policyholders of long-term care 
        insurance policies.
    ``(d) Deadline for Application of Standards.--
            ``(1) In general.--Subject to paragraph (2), the date 
        specified in this subsection for a State is--
                    ``(A) the date the State adopts the standards 
                established under subsection (c); or
                    ``(B) 1 year after the date such standards are 
                first established;
        whichever is earlier.
            ``(2) State requiring legislation.--In the case of a State 
        which the Secretary identifies, in consultation with the NAIC, 
        as--
                    ``(A) requiring State legislation (other than 
                legislation appropriating funds) in order for the 
                standards established under subsection (c) to be 
                applied; but
                    ``(B) having a legislature which is not scheduled 
                to meet in 1997 in a legislative session in which such 
                legislation may be considered;
        the date specified in this subsection is the first day of the 
        first calendar quarter beginning after the close of the first 
        legislative session of the State legislature that begins on or 
        after January 1, 1997. For purposes of the previous sentence, 
        in the case of a State that has a 2-year legislative session, 
        each year of such session shall be deemed to be a separate 
        regular session of the State legislature.
    ``(e) Additional Requirements for Approval of State Regulatory 
Programs.--For purposes of subsection (a)(1)(A)(ii), the requirements 
of this subsection for a State regulatory program are as follows:
            ``(1) Consumer access to compliance information.--
                    ``(A) In general.--The program must provide for 
                consumer access to complaints filed with the State 
                commissioner or superintendent of insurance with 
                respect to long-term care insurance policies.
                    ``(B) Confidentiality.--The access provided under 
                subparagraph (A) shall be limited to the extent 
                required to protect the confidentiality of the identity 
                of individual policyholders.
            ``(2) Access to other information.--The program must 
        provide for consumer access to information reported under 
        section 2703(d).
            ``(3) Process for approval of premiums.--The program must 
        provide for a process for approving or disapproving proposed 
        premium increases with respect to long-term care insurance 
        policies and must establish a policy for the holding of public 
        hearings prior to approval of such a premium increase. No such 
        premium increase shall be approved (or deemed approved) unless 
        the proposed increase is accompanied by an actuarial memorandum 
        which supports the increase and which contains such information 
        as may be required under the standards under section 2701(c).

``SEC. 2702. REGULATION OF SALES PRACTICES.

    ``(a) Duty of Good Faith and Fair Dealing.--
            ``(1) In general.--Each individual who is selling or 
        offering for sale a long-term care insurance policy has the 
        duty of good faith and fair dealing to the purchaser or 
        potential purchaser of such a policy.
            ``(2) Prohibited practices.--An individual is considered to 
        have violated paragraph (1) if the individual engages in any of 
        the following practices:
                    ``(A) Twisting.--Knowingly making any misleading 
                representation or incomplete or fraudulent comparison 
                of any health care insurance policy or insurers for the 
                purpose of inducing, or tending to induce, any person 
                to retain or effect a change with respect to a long-
                term care insurance policy.
                    ``(B) 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.
                    ``(C) 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.
    ``(b) Completion of Medical Histories Prohibited.--A person who is 
selling or offering for sale a long-term care insurance policy may not 
complete the medical history portion of an application.
    ``(c) Prohibition of Sale or Issuance to Medicaid Beneficiaries.--A 
person may not knowingly sell or issue a long-term care insurance 
policy to an individual who is eligible for medical assistance (other 
than only as a qualified medicare beneficiary) under title XIX of the 
Social Security Act.
    ``(d) Prohibition of Sale or Issuance of Duplicate Service Benefit 
Policies.--A person may not sell or issue a service-benefit long-term 
care insurance policy--
            ``(1) knowing that the policy provides for coverage that 
        duplicates coverage already provided in another service-benefit 
        long-term care insurance policy (unless the policy is intended 
        to replace such other policy); or
            ``(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.
In this subsection, the term `service-benefit long-term care insurance 
policy' means a long-term care insurance policy which provides for 
benefits based on the amount of expenses incurred, rather than on an 
indemnity basis.
    ``(e) Provision of Outline of Coverage.--No person may sell or 
offer for a sale a long-term care insurance policy without providing to 
the purchaser or potential purchaser (or representative) an outline of 
coverage that complies with the standards established under section 
2701(c).
    ``(f) Information on Financial Arrangements with Groups.--No person 
may sell or offer for sale a long-term care insurance policy with 
respect to a member of an organization with which the person (or the 
issuer of the policy) has a financial arrangement of any type unless 
the person discloses (in accordance with standards established under 
section 2701(c)) the nature of the financial arrangement.
    ``(g) Penalties.--Any person who sells, offers for sale, or issues 
a long-term care insurance policy in violation of this section may be 
imprisoned not more than 5 years, or fined in accordance with title 18, 
United States Code, and, in addition, is subject to a civil money 
penalty of not to exceed $25,000 for each such violation. The 
provisions of section 1128A of the Social Security Act (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 such section 
1128A(a).

``SEC. 2703. ADDITIONAL RESPONSIBILITIES OF ISSUERS.

    ``(a) Refund of Premiums.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is denied or an applicant returns a policy or 
certificate within 30 days of the date of its issuance pursuant to 
section 2708, the issuer shall refund to the applicant, not later than 
30 days after the date of the denial or return, any premiums paid with 
respect to such a policy.
    ``(b) Mailing of Policy.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is approved, the issuer shall transmit to the 
applicant the policy (or certificate) of insurance not later than 30 
days after the date of the approval.
    ``(c) Information on Denials of Claims.--If a claim under a long-
term care insurance policy is denied, the issuer shall, within 60 days 
of the date of a written request by the policyholder or 
certificateholder (or representative)--
            ``(1) provide a written explanation of the reasons for the 
        denial; and
            ``(2) make available all information directly relating to 
        such denial.
No claim under such a policy may be denied on the basis of a failure to 
disclose a condition at the time of issuance of the policy if the 
application for the policy failed to request information respecting the 
condition.
    ``(d) Reporting of Information.--The issuer of a long-term care 
insurance policy shall periodically (not less often than annually) 
report to the Commissioner or superintendent of insurance of each State 
in which the policy is sold, and shall make available to the Secretary, 
upon request, information respecting--
            ``(1) the long-term care insurance policies of the issuer 
        that are in force;
            ``(2) the most recent premiums for such policies and the 
        premiums imposed for such policies during the previous 5-year 
        period;
            ``(3) the lapse rates, replacement rates, and rescission 
        rates for policies (by agent); and
            ``(4) the claims denied (as a percentage of claims 
        submitted) for such policies.
Information under this subsection shall be reported in a format 
specified in the standards established under section 2701(c) to carry 
out this section. For purposes of paragraph (3), there shall not be 
included as a lapse of policy such a lapse due to the death of the 
policyholder. For purposes of paragraph (4), there shall not be 
included as a denied claim that is denied solely because of the failure 
to meet a deductible, waiting period, or exclusionary period.
    ``(e) Access to Information.--Each such issuer shall provide the 
Secretary and the Commissioner or superintendent of insurance of each 
State in which the policy is sold such information as the Secretary, 
Commissioner, or superintendent, may request.
    ``(f) Provision of Outline of Coverage for Renewals.--Each issuer 
of a long-term care insurance policy shall provide, at the time of 
renewal of such a policy, an outline of coverage that meets the 
applicable standards established pursuant to this title.
    ``(g) Medical Assessments for the Elderly.--Before issuing a long-
term care insurance policy to an applicant who is 75 years of age or 
older, if the policy is not guaranteed issue the issuer shall obtain 
one of the following:
            ``(1) A report of a physical examination.
            ``(2) An assessment of functional capacity.
            ``(3) Copies of medical records.
    ``(h) Limits on Compensation for Sale of Policies.--
            ``(1) In general.--The issuer of a long-term care insurance 
        policy may not provide a commission or other compensation to an 
        agent or other representative for the sale of such a policy in 
        an amount that exceeds 200 percent of the commission or other 
        compensation paid for selling or servicing such a policy in the 
        second or subsequent year.
            ``(2) Compensation defined.--In paragraph (1), the term 
        `compensation' includes pecuniary or nonpecuniary remuneration 
        of any kind relating to the sale or renewal of the policy or 
        certification, including deferred compensation, bonuses, gifts, 
        prizes, awards, and finders fees.
    ``(i) Civil Money Penalty.--Any issuer of a long-term care 
insurance policy who--
            ``(1) fails to make a refund in accordance with subsection 
        (a);
            ``(2) fails to transmit a policy in accordance with 
        subsection (b);
            ``(3) fails to provide, make available, or report 
        information in accordance with subsection (c), (d), or (e);
            ``(4) fails to provide an outline of coverage in violation 
        of subsection (f);
            ``(5) issues a policy without obtaining certain information 
        in violation of subsection (g); or
            ``(6) provides a commission or compensation in violation of 
        subsection (h),
is subject to a civil money penalty of not to exceed $25,000 for each 
such violation. The provisions of section 1128A of the Social Security 
Act (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 such section 1128A(a).

``SEC. 2704. REQUIREMENTS RELATING TO RENEWABILITY.

    ``(a) In General.--No long-term care insurance policy may be 
canceled or nonrenewed for any reason other than nonpayment of premium 
or material misrepresentation.
    ``(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 
        facility, 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, there shall be taken into consideration 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 issuer shall offer coverage to all persons covered 
        under the old group policy on its date of termination. Coverage 
        under the new group policy shall not result in any exclusion 
        for preexisting conditions that would have been covered under 
        the group policy being replaced.
    ``(c) Upgrade for Current Policies.--Each long-term care insurance 
policy in effect as of the effective date of the standards established 
under section 2701(c) shall permit the policyholder to purchase a 
policy that meets all such standards. In offering such a policy, the 
issuer may impose additional underwriting restrictions only for 
benefits not held under the previously issued policy.

``SEC. 2705. BENEFIT STANDARDS.

    ``(a) Use of Standard Definitions and Terminology and Uniform 
Format.--Each long-term care insurance policy shall, pursuant to 
standards established under section 2701(c)--
            ``(1) use uniform language and definitions; and
            ``(2) use a uniform format for presenting the outline of 
        coverage under such a policy.
    ``(b) Disclosure.--
            ``(1) Outline of coverage.--The outline of coverage for 
        each long-term care insurance policy shall include at least the 
        following:
                    ``(A) A description of the principal benefits and 
                coverage under the policy.
                    ``(B) A statement of the principal exclusions, 
                reductions, and limitations contained in the policy.
                    ``(C) A statement of the terms under which the 
                policy (or certificate) may be continued in force or 
                discontinued, the terms for continuation or conversion, 
                and any reservation in the policy of a right to change 
                premiums.
                    ``(D) A statement that the outline of coverage is a 
                summary only, not a contract of insurance, and that the 
                policy (or master policy) contains the contractual 
                provisions that govern.
                    ``(E) A statement of the value of the policy 
                (determined in accordance with standard established to 
                carry out this paragraph).
                    ``(F) A description of the terms, specified in 
                section 2708, under which a policy or certificate may 
                be returned and premium refunded.
                    ``(G) Information on national average costs for 
                nursing facility and home health care and information 
                (in graphic form) on the relationship of the value of 
                the benefits provided under the policy to such national 
                average costs.
                    ``(H) A statement of the percentage limit on annual 
                premium increases that is provided under the policy 
                pursuant to subsection (h).
                    ``(I) 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.
            ``(2) Certificates.--A certificate issued pursuant to a 
        group long-term care insurance policy shall include--
                    ``(A) a description of the principal benefits and 
                coverage provided in the policy;
                    ``(B) a statement of the principal exclusions, 
                reductions, and limitations contained in the policy; 
                and
                    ``(C) a statement that the group master policy 
                determines governing contractual provisions.
            ``(3) 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--
                    ``(A) an explanation of how the long-term care 
                benefits interact with other components of the policy 
                (including deductions from death benefits);
                    ``(B) an illustration of the amount of benefits, 
                the length of benefit, and the guaranteed lifetime 
                benefits (if any) for each covered person; and
                    ``(C) any exclusions, reductions, and limitations 
                on benefits of long-term care.
    ``(c) Limiting Conditions on Benefits; Minimum Benefits.--
            ``(1) In general.--A long-term care insurance policy may 
        not condition or limit eligibility--
                    ``(A) for benefits for a type of services to the 
                need for or receipt of any other services;
                    ``(B) for any noninstitutional benefit on the 
                medical necessity for such benefit;
                    ``(C) for benefits furnished by licensed providers 
                on compliance with conditions which are in addition to 
                those required for licensure under State law; or
                    ``(D) for custodial care (if covered under the 
                policy) only (i) to care provided in facilities which 
                provide a higher level of care or (ii) to care provided 
                in facilities which provide for 24-hour or other 
                nursing care not required in order to be licensed by 
                the State.
            ``(2) Home health care services.--If a long-term care 
        insurance policy provides benefits for home health care 
        services, the policy--
                    ``(A) may not limit such benefits to services 
                provided by registered nurses or licensed practical 
                nurses;
                    ``(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 other 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 of the Social Security Act; and
                    ``(D) must provide benefits for custodial care, 
                personal care services (including home health aide and 
                homemaker services), home health services, and respite 
                care in an individual's home.
            ``(3) Nursing facility services.--If a long-term care 
        insurance policy provides benefits for nursing facility 
        services, the policy must provide such benefits with respect to 
        all nursing facilities (as defined in section 1919(a) of the 
        Social Security Act) in the State.
            ``(4) Minimum period of coverage.--Each long-term care 
        insurance policy shall provide benefits over a period of at 
        least 12 consecutive months.
            ``(5) Prohibition of discrimination.--A long-term care 
        insurance policy may not treat benefits under the policy in the 
        case of an individual with Alzheimer's disease, with any 
        related progressive degenerative dementia of an organic origin, 
        or with any organic or inorganic mental illness differently 
        from an individual having another medical condition for which 
        benefits may be made available.
    ``(e) Limitation on Use of Preexisting Condition Limits.--
            ``(1) Initial issuance.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                long-term care insurance policy may not exclude or 
                condition benefits based on a medical condition for 
                which the policyholder received treatment or was 
                otherwise diagnosed before the issuance of the policy.
                    ``(B) 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.
            ``(2) Replacement policies.--If a long-term care insurance 
        policy replaces another long-term care insurance policy, the 
        issuer of the replacing policy shall waive any time periods 
        applicable to preexisting conditions, waiting period, 
        elimination periods and probationary periods in the new policy 
        for similar benefits to the extent such time was spent under 
        the original policy.
    ``(f) Use of Functional Assessment.--
            ``(1) In general.--Each long-term care insurance policy--
                    ``(A) shall determine eligibility for, and level 
                of, benefits (other than for nursing facility services) 
                available under the policy based on a professional 
                assessment of the policyholder's functional ability; 
                and
                    ``(B) shall specify the level (or levels) of 
                functional impairment required under such an assessment 
                to obtain benefits other than for nursing facility 
                services) under the policy.
        Such assessment may not be conducted by an individual who has a 
        direct or indirect ownership or control interest, or direct or 
        indirect affiliation or relationship with, the issuer of the 
        policy or an entity that provides services for which benefits 
        are available under the long-term care insurance policy.
            ``(2) Appeals process.--Each long-term care insurance 
        policy shall provide for an appeals process, meeting standards 
        established under this section, for individuals who dispute the 
        results of an assessment conducted under this subsection.
    ``(g) Inflation Protection.--Each long-term care insurance policy 
shall provide, at the time of each annual renewal, for an increase of a 
specified percentage (but not less than 5 percent) in the dollar 
payment levels and the maximum payment limit on benefit coverage above 
the levels or limit in effect during the previous policy year. In 
applying this subsection, 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).
    ``(h) Specification of Limits on Premium Increases.--Each long-term 
care insurance policy shall specify a limit on the percentage increase 
in premiums for a policy that may be made in any between one policy 
year and the subsequent policy year.

``SEC. 2706. NONFORFEITURE.

    ``(a) In General.--Each long-term care insurance policy shall 
provide that if the policy lapses after the policy has been in effect 
for a minimum period (specified under the standards under section 
2701(c)), the policy will provide without payment of any additional 
premiums benefits equal to--
            ``(1) a percentage (specified under such standards) of the 
        benefits otherwise available at term; or
            ``(2) such other type of benefits as such standards may 
        provide.
    ``(b) Establishment of Standards.--The standards under section 
2701(c)--
            ``(1) may not provide more than 2 additional types of 
        benefits under subsection (a)(2); and
            ``(2) may provide that the percentage or amount of benefits 
        under subsection (a) must increase based upon the period of 
        time in which the policy was in effect.

``SEC. 2707. LIMIT OF PERIOD OF CONTESTABILITY.

    ``The issuer of a long-term care insurance policy may not cancel 
such a policy or deny a claim under the policy based on fraud or 
misrepresentation relating to the issuance of the policy unless notice 
of such fraud or misrepresentation is provided within 6 months after 
the date of the issuance of the policy.

``SEC. 2708. RIGHT TO RETURN (FREE LOOK).

    ``Each applicant for a long-term care insurance policy shall have 
the right to return the policy (or certificate) within 30 days of the 
date of its delivery (and to have the premium refunded) if, after 
examination of the policy or certificate, the applicant is not 
satisfied for any reason.

``SEC. 2709. LONG-TERM CARE INSURANCE POLICY DEFINED.

    ``(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 person on an expense 
incurred, indemnity, prepaid, or other basis, for one or more 
diagnostic, preventive, therapeutic, rehabilitative, maintenance or 
personal care services, provided in a setting other than an acute care 
unit of a hospital. Such term includes a group or individual annuity or 
life insurance policy or rider which provides directly (or which 
supplements) long-term care insurance.
    ``(b) Policies Excluded.--Except as provided in subsection (d), the 
term `long-term care insurance policy' does not include any medicare 
supplemental policy (as defined in section 1882(g) of the Social 
Security Act) 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) Treatment of Certain Life Insurance Policies.--Except as 
provided in subsection (d), the term `long-term care insurance policy' 
does not include life insurance policies--
            ``(1) which accelerate the death benefit specifically for--
                    ``(A) one or more of the qualifying events of 
                terminal illness;
                    ``(B) medical conditions requiring extraordinary 
                medical intervention; or
                    ``(C) permanent institutional confinement;
            ``(2) which provide the option of a lump-sum payment for 
        those benefits; and
            ``(3) in which neither the benefits nor the eligibility for 
        the benefits is conditioned upon the receipt of long-term care.
    ``(d) Inclusion of Policies Marketed as Long-Term Care Insurance.--
The term `long-term care insurance policy' also means any product which 
is advertised, marketed, or offered as long-term care insurance.''.

SEC. 3. AMENDMENTS TO THE MEDICAID PROGRAM.

    (a) State Medicaid Requirement for Regulatory Program.--Section 
1902(a) of the Social Security Act (42 U.S.C. 1396(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (61);
            (2) by striking the period at the end of paragraph (62) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (62) the following new 
        paragraph:
            ``(63) establish, by the date specified in section 2701(d) 
        of the Public Health Service Act, a State regulatory program, 
        that meets the requirements of section 2701(a)(1)(A) of such 
        Act.''.
    (b) Denial of Medicaid Funds for Failure to Establish Regulatory 
Program.--Section 1903(i) of the Social Security Act (42 U.S.C. 
1396b(i)) is amended--
            (1) by striking ``or'' at the end of paragraph (14);
            (2) by striking the period at the end of paragraph (15) and 
        inserting ``; or''; and
            (3) by inserting after paragraph (15) the following new 
        paragraph.
            ``(16) with respect to any amount expended for medical 
        assistance for nursing facility services (furnished on and 
        after the date specified in section 2701(d) of the Public 
        Health Service Act) during such period as the state has failed 
        to establish and maintain a regulatory program that meets the 
        requirements of section 2701(a)(1)(A) of such Act.''.

SEC. 4. REPORTS AND STUDY.

    (a) Report on Assessment Methods for Functional Ability.--Within 2 
years after the date of the enactment of this Act, the Secretary of 
Health and Human Services shall submit to Congress a report on the 
different methods that may be used to conduct assessments of functional 
ability described in section 2705(f)(1) of the Public Health Service 
Act (including the methods used under section 1929(c) of the Social 
Security Act) and the relative effectiveness of each of such methods.
    (b) Report on Solvency Protection.--Within 2 years after the date 
of the enactment of this Act, the Secretary of Health and Human 
Services shall submit to Congress a report on standards that may be 
applied to assure the solvency of insurers with respect to long-term 
care insurance policies.
    (c) Study of Standard Measure of Value for Long-Term Care Insurance 
Policies.--The Secretary of Health and Human Services shall provide for 
a study to develop a standard measure of value for long-term care 
insurance policies. Within 2 years after the date of the enactment of 
this Act, the Secretary shall submit to Congress a report on such 
study.

SEC. 5. FUNDING FOR LONG-TERM CARE INSURANCE INFORMATION, COUNSELING, 
              AND ASSISTANCE.

    There are authorized to be appropriated to provide information, 
counseling, and assistance relating to the procurement of adequate and 
appropriate long-term care insurance, $20,000,000 for each of fiscal 
years 1997, 1998, and 1999.
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