PROPOSED RULES
INSURANCE COMMISSIONER
Original Notice.
Preproposal statement of inquiry was filed as WSR 08-12-098.
Title of Rule and Other Identifying Information: Accelerated life insurance benefits.
Hearing Location(s): Insurance Commissioner's Office, Room TR 120, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on October 1, 2008, at 9:00 a.m.
Date of Intended Adoption: October 13, 2008.
Submit Written Comments to: Kacy Scott, P.O. Box 40258, Olympia, WA 98504-0258, e-mail KacyS@oic.wa.gov, fax (360) 586-3109, by September 30, 2008.
Assistance for Persons with Disabilities: Contact Lorie Villaflores by September 30, 2008, TTY (360) 586-0241 or (360) 725-7087.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: Recently enacted SHB 2666, codified at chapter 48.83 RCW, creates conflict with existing Washington accelerated life insurance benefit rules, specifically WAC 284-23-600 through 284-23-730. Chapter 48.83 RCW which relates to long-term care insurance now includes definitions for long-term care that include definitions previously characterized as accelerated benefits under WAC 284-23-600 through 284-23-730. These proposed rules bring WAC 284-23-600 through 284-23-730 into compliance with the provisions of chapter 48.83 RCW.
Reasons Supporting Proposal: Chapter 48.83 RCW creates conflicts with existing Washington accelerated life insurance benefit rules, specifically WAC 284-23-600 through 284-23-730.
Statutory Authority for Adoption: RCW 48.02.060 (3)(a).
Statute Being Implemented: RCW 48.11.020.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Mike Kreidler, insurance commissioner, governmental.
Name of Agency Personnel Responsible for Drafting: Melodie Bankers, P.O. Box 40258, Olympia, WA 98504-0258, (360) 725-7039; Implementation: Beth Berendt, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7117; and Enforcement: Carol Sureau, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7050.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The office of the insurance commissioner (OIC) maintains a list of companies that have approved long-term care insurance coverage in Washington state. Of the seventy-five companies on the most recent (April 2008) version of this list only thirty three are currently marketing insurance coverage in this state. Of these thirty-three, only one was not either a subsidiary of a larger company or a significantly larger company than the statute's definition of a small business (fifty employees or less). The only insurer who met the definition of a small insurer did not report selling any long-term care insurance coverage in its most recent annual report (2007).
This analysis confirmed observations by OIC regulatory staff that the long-term care insurance market, due to the size and complexity of the product, does not have a functional small business component and, therefore, the proposed rules will not have a disproportionate cost impact on small businesses. As a result, no small business economic impact statement is required.
A cost-benefit analysis is not required under RCW 34.05.328. These proposed amendments to chapter 284-23 WAC are required in order to implement newly passed legislation (SHB 2666) as codified in chapter 48.83 RCW. The proposed amendments do not represent a significant change in rules but rather: (A) Change RCW citations as appropriate to refer to the new law and remove references to laws no longer in existence; (B) remove conflicts in chapter 284-23 WAC with other rules that will implement SHB 2666 and permit life insurance that accelerates benefits for long-term care coverage; and (C) repeal WAC 284-23-645 because it is no longer needed as a result of the new law.
Given that these rule changes are editing only and because the changes are the explicit result of newly passed legislation, a cost-benefit analysis is not required.
August 20, 2008
Mike Kreidler
Insurance Commissioner
OTS-1780.2
AMENDATORY SECTION(Amending Matter No. R 96-13, filed 2/6/98,
effective 3/9/98)
WAC 284-23-610
Authority, finding, purpose, and scope.
(1) The purpose of this regulation, WAC 284-23-600 through
284-23-730, is to define certain minimum standards for the
regulation of accelerated benefit provisions of individual and
group life insurance policies, a single violation of which
will be deemed to constitute an unfair claims settlement
practice. The commissioner finds and hereby defines it to be
an unfair act or practice and an unfair method of competition
for any insurer to provide accelerated benefits except as
provided in this regulation.
(2) The commissioner finds that accelerated benefits in
life insurance policies are primarily mortality risks rather
than morbidity risks. The commissioner further finds that
accelerated benefits are optional modes of settlement of
proceeds under life insurance proceeds under RCW 48.11.020. No qualifying event as defined under WAC 284-23-620(3) changes
the nature of the underlying life insurance policy. No
accelerated benefits provision shall be called or marketed as
long-term care as defined under RCW ((48.84.020(1)))
48.83.020(5).
(3) This regulation applies to all accelerated benefit provisions of individual and group life insurance policies and riders which are issued or delivered to a resident of this state, on or after the effective date of this regulation. The regulation applies to both policies and riders. It also applies to solicitations for the sale of accelerated benefits, whether in the form of policies or riders.
(4) This regulation does not require inclusion or offering of any accelerated benefit in a life insurance policy. This regulation regulates those accelerated benefits which individual and group life insurers choose to advertise, offer, or market on or after the effective date of this regulation.
[Statutory Authority: RCW 48.02.060, 48.30.010 and 48.11.020. 98-05-026 (Matter No. R 96-13), § 284-23-610, filed 2/6/98, effective 3/9/98. Statutory Authority: RCW 48.02.060 (3)(a) and 48.30.010. 94-18-029 (Order R 94-18), § 284-23-610, filed 8/29/94, effective 9/29/94.]
(1) "Accelerated benefits" means benefits payable under an individual or group life insurance policy. They are primarily mortality risks, rather than morbidity risks. Accelerated benefits may also mean optional modes of settlement of proceeds under life insurance policies. Accelerated benefits are benefits:
(a) Payable to either the policyholder of an individual life policy or to the certificate holder of a group life policy, during the lifetime of the insured, in anticipation of death, or upon the occurrence of certain specified life-threatening, terminal, or catastrophic conditions defined by the policy or rider as described in subsection (3) of this section; and
(b) Which reduce or eliminate the death benefit otherwise payable under the life insurance policy or rider; and
(c) Which are payable upon the occurrence of a single qualifying event which results in the payment of a benefit amount fixed at the time the accelerated benefit is paid.
(2) "Qualified actuary" means a person who is a qualified actuary as defined in WAC 284-05-060.
(3) "Qualifying event" means one or more of the following:
(a) A medical condition which a physician has certified is reasonably expected to result in death twenty-four months or less after the date of certification;
(b) A medical condition which has required or requires extraordinary medical intervention; for example, major organ transplants or the use of continuous life support, without which the insured would die;
(c) Any condition which usually requires continuous confinement in any eligible institution as defined in the policy or rider, if the insured is expected to remain there for the rest of his or her life;
(d) Any medical condition which, in the absence of extensive or extraordinary medical treatment, would result in a drastically limited life span of the insured. Such medical conditions may include, for example:
(i) Coronary artery disease resulting in an acute infarction or requiring surgery;
(ii) Permanent neurological deficit resulting from cerebral vascular accident;
(iii) End stage renal failure;
(iv) Acquired immune deficiency syndrome; or
(v) Other medical conditions which the insurance commissioner approves for any particular filing;
(e) Any condition which requires either community-based
care or institutional care((; or
(f) A medical condition that results in an insured being certified by a licensed health care practitioner as chronically ill by meeting either or both of the following standards within the preceding twelve-month period:
(i) The insured is expected to be unable to perform (without substantial assistance from another individual) at least two activities of daily living without a deficiency for a period of at least ninety days due to a loss of functional capacity; or
(ii) The insured requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment)).
(4) "Community based care" means services including, but not limited to: (a) Home delivered nursing services or therapy; (b) custodial or personal care; (c) day care; (d) home and chore aid services; (e) nutritional services, both in-home and in a communal dining setting; (f) respite care; (g) adult day health care services; or (h) other similar services furnished in a home-like or residential setting that does not provide overnight care. Such services shall be provided at any level of care.
(5) "Institutional care" means care provided in a hospital, nursing home, or other facility certified or licensed by the state primarily affording diagnostic, preventive, therapeutic, rehabilitative, maintenance or personal care services. Such a facility provides twenty-four-hour nursing services on its premises or in facilities available to the institution on a formal prearranged basis.
(((6) "Activities of daily living" on which an insurer
intends to rely as a measure of functional incapacity shall be
defined in the policy, and shall include all of the following:
(a) Bathing: The ability of the insured to wash himself or herself either in the tub or shower or by sponge bath, including the task of getting into or out of a tub or shower.
(b) Continence: The ability of the insured to control bowel and bladder functions; or in the event of incontinence, the ability to perform associated personal hygiene (including caring for catheter or colostomy bag).
(c) Dressing: The ability of the insured to put on and take off all items of clothing, and necessary braces, fasteners, or artificial limbs.
(d) Eating: The ability of the insured to feed himself or herself by getting food and drink from a receptacle (such as a plate, cup, or table) into the body.
(e) Toileting: The ability of the insured to get to and from the toilet, get on and off the toilet, and perform associated personal hygiene.
(f) Transferring: The ability of the insured to move in and out of a chair, bed, or wheelchair.
(7) "Licensed health care practitioner" means any physician, any registered professional nurse, or registered social worker.
(8) "Substantial assistance" means:
(a) "Hands-on assistance" - the physical assistance of another person without which the insured would be unable to perform the activity of daily living; and
(b) "Standby assistance" - the physical presence of another person within arm's reach of the insured that is necessary to prevent, by physical intervention, injury to the insured while the insured is performing the activity of daily living.
(9) "Severe cognitive impairment" means a loss or deterioration in intellectual capacity that is:
(a) Comparable to (and includes) Alzheimer's disease and similar forms of irreversible dementia; and
(b) Measured by clinical evidence and standardized tests that reliably measure impairment in the insured's (i) short-term or long-term memory, (ii) orientation as to people, places, or time, and (iii) deductive or abstract reasoning.
(10) "Substantial supervision" means continual supervision (which may include cuing by verbal prompting, gestures, or other demonstrations) by another person that is necessary to protect the insured from threats to his or her health or safety.))
[Statutory Authority: RCW 48.02.060, 48.30.010 and 48.11.020. 98-05-026 (Matter No. R 96-13), § 284-23-620, filed 2/6/98, effective 3/9/98. Statutory Authority: RCW 48.02.060 (3)(a) and 48.30.010. 94-18-029 (Order R 94-18), § 284-23-620, filed 8/29/94, effective 9/29/94.]
(2) Possible tax consequences and possible consequences on eligibility for receipt of Medicare, Medicaid, Social Security, Supplemental Security Income (SSI), or other sources of public funding shall be included in every disclosure statement.
(a) The disclosure form shall include a disclosure statement. The disclosure statement shall be prominently displayed on the first page of the policy, rider, or certificate. The disclosure statement shall contain substantially the following: "If you receive payment of accelerated benefits from a life insurance policy, you may lose your right to receive certain public funds, such as Medicare, Medicaid, Social Security, Supplemental Security, Supplemental Security Income (SSI), and possibly others. Also, receiving accelerated benefits from a life insurance policy may have tax consequences for you. We cannot give you advice about this. You may wish to obtain advice from a tax professional or an attorney before you decide to receive accelerated benefits from a life insurance policy."
(b)(((i) The disclosure statement shall state whether or
not the accelerated life is intended to qualify under section
101(g) (26 U.S.C. 101(g)) or section 7702B (26 U.S.C. 7702B)
of the Internal Revenue Code of 1986 as amended by Public Law
104-191.
(ii) If the accelerated life insurance benefit is
intended to comply with section 7702B,)) The disclosure
statement must begin with the following statement: "This
accelerated life benefit does not and is not intended to
qualify as long-term care under Washington state law. ((It
may not provide all of the benefits or meet all of the
standards required of long-term care under Washington law and
regulations.)) Washington state law prevents this accelerated
life benefit from being marketed or sold as long-term care. ((For the purposes of federal tax law only, it is intended to
be a 'qualified long-term care product.'"))
(c) The disclosure form must be provided (i) to the applicant for an individual or group life insurance policy at the time application is made for the policy or rider; and (ii)(A) to the individual insured at the time the owner of an individual life insurance policy submits a request for payment of the accelerated benefit, and before the accelerated benefit is paid, or (B) to the individual certificateholder at the time an individual certificateholder of a group life insurance policy submits a request for payment of the accelerated benefit, and before the accelerated benefit is paid. It is not sufficient to provide this required disclosure statement only to the holder of a group policy.
(3) The disclosure form shall give a brief and clear description of the accelerated benefit. It shall define all qualifying events which can trigger payment of the accelerated benefit. It shall also describe any effect of payment of accelerated benefits upon the policy's cash value, accumulation account, death benefit, premium, policy loans, and policy liens.
(a) In the case of ((agent solicited)) insurance
solicited by an insurance producer, the ((agent)) insurance
producer shall provide the disclosure form to the applicant
before or at the time the application is signed. Written
acknowledgement of receipt of the disclosure statement shall
be signed by the applicant and the ((agent)) insurance
producer.
(b) In the case of a solicitation by direct response methods, the insurer shall provide the disclosure form to the applicant at the time the policy is delivered, with a written notice that a full premium refund shall be made if the policy is returned to the insurer within the free look period.
(c) In the case of group life insurance policies, the disclosure form shall be contained in the certificate of coverage, and may be contained in any other related document furnished by the insurer to the certificateholder.
(4) If there is a premium or cost of insurance charge for the accelerated benefit, the insurer shall give the applicant a generic illustration numerically demonstrating any effect of the payment of an accelerated benefit upon the policy's cash value, accumulation account, death benefit, premium, policy loans, or policy liens.
(a) In the case of agent solicited insurance, the agent shall provide the illustration to the applicant either before or at the time the application is signed.
(b) In the case of a solicitation by direct response methods, the insurer shall provide the illustration to the applicant concurrently with delivery of the policy to the applicant.
(c) In the case of group life insurance policies, the disclosure form shall be included in the certificate of insurance or any related document furnished by the insurer to the certificateholder.
(5)(a) Insurers with financing options other than as described in WAC 284-23-690 (1)(b) and (c) of this regulation, shall disclose to the policyowner any premium or cost of insurance charge for the accelerated benefit. Insurers shall make a reasonable effort to assure that the certificateholder on a group policy is made aware of any premium or cost of insurance charge for the accelerated benefits, if he or she is required to pay all or any part of such a premium or cost of insurance charge.
(b) Insurers shall furnish an actuarial demonstration to the Insurance Commissioner when filing an individual or group life insurance policy or rider form that provides accelerated benefits, showing the method used to calculate the cost for the accelerated benefit.
(6) Insurers shall disclose to the policyholder any administrative expense charge. The insurer shall make a reasonable effort to assure that the certificateholder on a group policy is made aware of any administrative expense charge if he or she is required to pay all or any part of any such charge.
(7) When the owner of an individual policy or the certificateholder of a group policy requests payment of an accelerated benefit, within 20 days of receiving the request the insurer shall send a statement to that person, and to any irrevocable beneficiary, showing any effect that payment of an accelerated benefit will have on the policy's cash value, accumulation account, death benefit, premium, policy loans, and policy liens. This statement shall disclose that receipt of accelerated benefit payments may adversely affect the recipient's eligibility for Medicaid or other government benefits or entitlements. When the insurer pays the accelerated benefit, it shall issue an amended schedule page to the owner of an individual policy, or to the certificateholder of a group policy, showing any new, reduced in-force amount of the policy. When more than one payment of accelerated benefit is permitted under the policy or rider, the insurer shall send a revised statement to the owner of an individual policy, or to the certificateholder of a group policy, when a previous statement has become invalid due to payment of accelerated benefits.
[Statutory Authority: RCW 48.02.060, 48.30.010 and 48.11.020. 98-05-026 (Matter No. R 96-13), § 284-23-650, filed 2/6/98, effective 3/9/98. Statutory Authority: RCW 48.02.060 and 48.30.010. 94-24-072 (Order R 94-25), § 284-23-650, filed 12/6/94, effective 1/6/95. Statutory Authority: RCW 48.02.060 (3)(a) and 48.30.010. 94-18-029 (Order R 94-18), § 284-23-650, filed 8/29/94, effective 9/29/94.]
[Statutory Authority: RCW 48.02.060, 48.30.010 and 48.11.020. 98-05-026 (Matter No. R 96-13), § 284-23-730, filed 2/6/98, effective 3/9/98. Statutory Authority: RCW 48.02.060 (3)(a) and 48.30.010. 94-18-029 (Order R 94-18), § 284-23-730, filed 8/29/94, effective 9/29/94.]
The following section of the Washington Administrative Code is repealed:
| WAC 284-23-645 | Tax qualified accelerated benefit provisions. |