2007 California Insurance Code Article 4. Implementation

CA Codes (ins:10235-10236.8)

10235.  This article applies to all long-term care insurance
policies delivered or issued for delivery in this state on or after
January 1, 1990.


10235.2.  No long-term care insurance policy delivered or issued for
delivery in this state shall use the terms set forth below, unless
the terms are defined in the policy and the definitions satisfy the
following requirements:
   (a) "Medicare" shall be defined as the "Health Insurance for the
Aged Act," Title XVIII of the Social Security Amendments of 1965 as
then constituted or later amended, or Title I, Part I of Public Law
89-97, as enacted by the 89th Congress of the United States of
America and popularly known as the Health Insurance for the Aged Act,
as then constituted and any later amendments or substitutes thereof,
or words of similar import.
   (b) "Skilled nursing care," "intermediate care," "home health
care," and other services shall be defined in relation to the level
of skill required, the nature of the care and the setting in which
care is required to be delivered.
   (c) All providers of services, including, but not limited to,
skilled nursing facilities, intermediate care facilities, and home
health agencies shall be defined in relation to the services and
facilities required to be available and the licensure or degree
status of those providing or supervising the services.  The
definition may require that the provider be appropriately licensed or
certified.



10235.8.  No policy may be delivered or issued for delivery in this
state as long-term care insurance if the policy limits or excludes
coverage by type of illness, treatment, medical condition, or
accident, except as to the following:
   (a) Preexisting conditions or diseases.
   (b) Alcoholism and drug addiction.
   (c) Illness, treatment, or a medical condition arising out of any
of the following:
   (1) War or act of war, whether declared or undeclared.
   (2) Participation in a felony, riot, or insurrection.
   (3) Service in the armed forces or units auxiliary thereto.
   (4) Suicide, whether sane or insane, attempted suicide, or
intentionally self-inflicted injury.
   (5) Aviation in the capacity of a non-fare-paying passenger.
   (d) Treatment provided in a government facility, unless otherwise
required by law, services for which benefits are available under
Medicare or other governmental programs (except Medi-Cal or
medicaid), any state or federal workers' compensation, employer's
liability or occupational disease law, or any motor vehicle no fault
law, services provided by a member of the covered person's immediate
family, and services for which no charge is normally made in the
absence of insurance.
   This section does not prohibit exclusions and limitations by type
of provider or territorial limitations.


10235.9.  (a) Every insurer shall report annually by June 30 the
total number of claims denied by each class of business in the state
and the number of these claims denied for failure to meet the waiting
period or because of a preexisting condition as of the end of the
preceding calendar year.
   (b) The insurer shall provide every policyholder or certificate
holder whose claim is denied a written notice within 40 days of the
date of denial of the reasons for the denial and all information
directly related to the denial.  Insurers shall annually report to
the department the number of denied claims.
   (c) The department shall make available to the public, upon
request, the denial rate of claims by insurer.




10235.10.  Termination of long-term care insurance shall be without
prejudice to any benefits payable for institutionalization if that
institutionalization began while the long-term care insurance was in
force and continues without interruption after termination.  This
extension of benefits beyond the period the long-term care insurance
was in force may be limited to the duration of the benefit period, if
any, or to payment of the maximum benefits and may be subject to any
policy waiting period, and all other applicable provisions of the
policy.


10235.14.  (a) Individual long-term care insurance policies shall
contain a renewability provision.  This provision shall be
appropriately captioned, shall appear on the first page of the
policy, and shall clearly disclose the term of coverage for which the
policy is initially issued, the terms and conditions under which the
policy may be renewed, and whether or not the issuer has the right
to change the premium.  If this right exists, the policy provisions
shall clearly and concisely describe each circumstance under which
the premium may change.
   (b) Except for riders or endorsements by which the insurer
effectuates a request made in writing by the insured under an
individual long-term care insurance policy, all riders or
endorsements added to an individual long-term care insurance policy
after date of issue or at reinstatement or renewal which reduce or
eliminate benefits or coverage in the policy shall require signed
acceptance by the individual insured.  After the date of policy
issue, any rider or endorsement which increases benefits or coverage
with a concomitant increase in premium during the policy term shall
be agreed to in writing signed by the insured, unless the increased
benefits or coverage are required by law.  If a separate additional
premium is charged for benefits provided in connection with riders or
endorsements, that premium charge shall be set forth in the policy,
rider, or endorsement.
   (c) If a long-term care insurance policy or certificate contains
any limitations with respect to preexisting conditions, those
limitations shall appear as a separate paragraph of the policy or
certificate and shall be labeled as "preexisting condition
limitations."
   (d) A long-term care insurance policy or certificate containing
any limitations or conditions for eligibility shall set forth in a
separate paragraph of the policy or certificate a description of
those limitations or conditions, including any required number of
days of confinement, and shall label that paragraph "Limitations or
Conditions on Eligibility for Benefits."




10235.16.  (a) Long-term care insurance application forms shall
include a question designed to elicit information as to whether the
proposed insurance is intended to replace any other accident and
sickness or long-term care insurance presently in force.  A
supplementary application or other form to be signed by the applicant
containing such a question may be used.
   (b) Upon determining that a sale will involve replacement, an
insurer, other than an insurer using direct response solicitation
methods, or its agent shall furnish the applicant, prior to issuance
or delivery of a policy or certificate, a notice regarding
replacement of accident and sickness or long-term care coverage.  One
copy of this notice shall be retained by the applicant and an
additional copy signed by the applicant shall be retained by the
insurer.  The required notice shall be provided in the following
form:

      "NOTICE TO APPLICANT REGARDING REPLACEMENT OF ACCIDENT AND
SICKNESS OR LONG-TERM CARE INSURANCE

   According to (your application) (information you have furnished),
you intend to lapse or otherwise terminate existing accident and
sickness or long-term care insurance and replace it with long-term
care insurance coverage to be issued by (company name) Insurance
Company.  Your new coverage provides thirty (30) days within which
you may decide, without cost, whether you desire to keep the
coverage.  For your own information and protection, you should be
aware of and seriously consider certain factors which may affect the
insurance protection available to you under the new coverage.
   (1) Health conditions which you may presently have (preexisting
conditions), may not be immediately or fully covered under the new
coverage.  This could result in denial or delay in payment of
benefits under the new coverage, whereas a similar claim might have
been payable under your present coverage.
   (2) You may wish to secure the advice of your present insurer or
its agent regarding the proposed replacement of your present
coverage.  This is not only your right, but it is also in your best
interest to make sure you understand all the relevant factors
involved in replacing your present coverage.
   (3) If, after due consideration, you still wish to terminate your
present coverage and replace it with new coverage, be certain to
truthfully and completely answer all questions on the application
concerning your medical health history.  Failure to include all
material medical information on an application may provide a basis
for the company to deny any future claims and to refund your premium
as though your coverage had never been in force.  After the
application has been completed and before you sign it, reread it
carefully to be certain that all the information has been properly
recorded.

   The above "Notice to Applicant" was delivered to me on:



____________________________________
                                  (Date)

____________________________________
                                  (Applicant's Signature)"

   (c) For group coverage not subject to the 30-day return provision
of Section 10232.7, the notice shall be modified to reflect the
appropriate time period in which the policy may be returned and
premium refunded.
   (d) The replacement notice shall include the following statement
except when the replacement coverage is group insurance as described
in subdivision (a) of Section 10231.6:

   COMPARISON TO YOUR CURRENT COVERAGE:  I have reviewed your current
long-term care coverage.  To the best of my knowledge, the
replacement of insurance involved in this transaction materially
improves your position for the following reasons:  ____ Additional or
different benefits      (please specify) ______.  ____ No change in
benefits, but lower premiums.  ____ Fewer benefits and lower
premiums.  ____ Other (please specify) ______.




____________________________________________
(Signature of Agent and Name of Insurer)
____________________________________________
(Signature of Applicant)
____________________________________________
(Date)



10235.17.  For purposes of this chapter, the commissioner shall
define inappropriate replacement of long-term care insurance in
consultation with other interested parties.



10235.18.  (a) Insurers using direct response solicitation methods
shall deliver a notice regarding replacement of accident and sickness
or long-term care coverage to the applicant upon issuance of the
policy or certificate.  The required notice shall be provided in the
following form:

      "NOTICE TO APPLICANT REGARDING REPLACEMENT OF ACCIDENT AND
SICKNESS OR LONG-TERM CARE INSURANCE

   According to (your application) (information you have furnished),
you intend to lapse or otherwise terminate existing accident and
sickness or long-term care insurance and replace it with the
long-term care insurance coverage delivered herewith issued by
(company name) Insurance Company.  Your new coverage provides thirty
(30) days within which you may decide, without cost, whether you
desire to keep the policy or certificate.  For your own information
and protection, you should be aware of and seriously consider certain
factors which may affect the insurance protection available to you
under the new coverage.
   (1) Health conditions which you may presently have (preexisting
conditions), may not be immediately or fully covered under the new
coverage.  This could result in denial or delay in payment of
benefits under the new coverage, whereas a similar claim might have
been payable under your present coverage.
   (2) You may wish to secure the advice of your present insurer or
its agent regarding the proposed replacement of your present policy
coverage.  This is not only your right, but it is also in your best
interest to make sure you understand all the relevant factors
involved in replacing your present coverage.
   (3) (To be included only if the application is attached to the
policy or certificate).  If, after due consideration, you still wish
to terminate your present coverage and replace it with new coverage,
read the copy of the application attached to your new coverage and be
sure that all questions are answered fully and correctly.  Omissions
or misstatements in the application could cause an otherwise valid
claim to be denied.  Carefully check the application and write to
(company name and address) within thirty (30) days if any information
is not correct and complete, or if any past medical history has been
left out of the application.


                             ______________________________
                                    (Company Name)"

   (b) For group coverage not subject to the 30-day return provision
of Section 10232.7, the notice shall be modified to reflect the
appropriate time period in which the policy may be returned and
premium refunded.


10235.20.  The commissioner may waive a specific provision or
provisions of this article with respect to a specific long-term care
insurance policy or certificate upon making written findings
specified in subdivisions (a), (b), and (c), as follows:
   (a) The waiver would be in the best interest of the insureds.
   (b) The underlying purposes of this article could not be
effectively or efficiently achieved without the waiver.
   (c) Any of the following:
   (1) The waiver is necessary to the development of an innovative
and reasonable approach for insuring long-term care.
   (2) The policy or certificate is to be issued to residents of a
life care or continuing care retirement community or some other
residential community for the elderly and the waiver is reasonably
related to the special needs or nature of such a community.
   (3) The waiver is necessary to permit long-term care insurance to
be sold as part of, or in conjunction with, another insurance
product.
   The commissioner may condition any waiver upon compliance with
alternative requirements to achieve the purposes of this article.




10235.30.  (a) No insurer may deliver or issue for delivery a
long-term care policy in this state unless the insurer offers at the
time of application an option to purchase a shortened benefit period
nonforfeiture benefit with the following features:
   (1) Eligibility begins no later than after 10 years of premium
payments.
   (2) The lifetime maximum benefit is no less than the dollar
equivalent of three months of care at the nursing facility per diem
benefit contained in the policy or the amount of the premiums paid,
whichever is greater.
   (3) The same benefits covered in the policy and any riders at the
time eligibility begins are payable for a qualifying claim.
   (4) The lifetime maximum benefit may be reduced by the amount of
any claims already paid.
   (5) Cash back, extended term, and reduced paid-up forms of
nonforfeiture benefits shall not be allowed.
   (6) The lifetime maximum benefit amount increases proportionally
with the number of years of premium payment.
   (b) This section shall not apply to life insurance policies that
accelerate benefits for long-term care.


10235.35.  (a) Notwithstanding any other provision of law, the
commissioner may require the administration by an insurer of the
contingent benefit upon lapse, as described in Section 26 (A), (D)
(3), (E), (F), (G), and (J) of the Long-Term Care Insurance Model
Regulation promulgated by the National Association of Insurance
Commissioners, as adopted in October 2000, as a condition of approval
or acknowledgment of a rate adjustment for a block of business for
which the contingent benefit upon lapse is not otherwise available.
   (b) The insurer shall notify policyholders and certificate holders
of the contingent benefit upon lapse when required by the
commissioner in conjunction with the implementation of a rate
adjustment. The commissioner may require an insurer who files for
such a rate adjustment to allow policyholders and certificate holders
to reduce coverage pursuant to Section 10235.50 to avoid an increase
in the policy's premium amount.
   (c) The commissioner may also approve any other alternative
mechanism filed by the insurer in lieu of the contingent benefit upon
lapse.


10235.40.  (a) No individual long-term care policy or certificate
shall be issued until the applicant has been given the right to
designate at least one individual, in addition to the applicant, to
receive notice of lapse or termination of a policy or certificate for
nonpayment of premium.  The insurer shall receive from each
applicant one of the following:
   (1) A written designation listing the name, address, and telephone
number of at least one individual, in addition to the applicant, who
is to receive notice of lapse or termination of the policy or
certificate for nonpayment of premium.
   (2) A waiver signed and dated by the applicant electing not to
designate additional persons to receive notice.  The required waiver
shall read as follows:
"Protection Against Unintended Lapse.
I understand that I have the right to designate at least one person
other than myself to receive notice of lapse or termination of this
long-term care insurance policy for nonpayment of premium.  I
understand that notice will not be given until 30 days after a
premium is due and unpaid.  I elect not to designate any person to
receive the notice.


  ________________________________________    ______________
          Signature of Applicant                  Date"

   (b) The insurer shall notify the insured of the right to change
the written designation, no less often than once every two years.
   (c) When the policyholder or certificate holder pays the premium
for a long-term care insurance policy or certificate through a
payroll or pension deduction plan, the requirements contained in
subdivision (a) need not be met until 60 days after the policyholder
or certificate holder is no longer on that deduction payment plan.
The application or enrollment form for a certified long-term care
insurance policy or certificate shall clearly indicate the deduction
payment plan selected by the applicant.
   (d) No individual long-term care policy or certificate shall lapse
or be terminated for nonpayment of premium unless the insurer, at
least 30 days prior to the effective date of the lapse or
termination, gives notice to the insured and to the individual or
individuals designated pursuant to subdivision (a), at the address
provided by the insured for purposes of receiving notice of lapse or
termination.  Notice shall be given by first-class United States
mail, postage prepaid, not less than 30 days after a premium is due
and unpaid.
   (e) Each long-term care insurance policy or certificate shall
include a provision which, in the event of lapse, provides for
reinstatement of coverage, if the insurer is provided with proof of
the insured's cognitive impairment or the loss of functional
capacity.  This option shall be available to the insured if requested
within five months after termination and shall allow for the
collection of a past due premium, where appropriate.  The standard of
proof of cognitive impairment or loss of functional capacity shall
not be more stringent than the benefit eligibility criteria on
cognitive impairment or the loss of functional capacity contained in
the policy certificate.



10235.50.  Every policy or certificate shall include a provision
that gives the policyholder or certificate holder the following
rights to reduce coverage and lower premiums:
   (a) A right, exercisable any time after the first year, to retain
a policy or certificate while lowering the premium in no fewer than
the following three ways:
   (1) Reducing the lifetime maximum benefit.
   (2) Reducing the nursing facility per diem and reducing the home-
and community-based service benefits of a home care only policy and
of a comprehensive long-term care policy.
   (3) Converting a "comprehensive long-term care" policy or
certificate to a "Nursing Facility Only" or a "Home Care Only" policy
or certificate, if the insurer issues those policies or certificates
for sale in the state.
   (b) The premium for the policy or certificate that is reduced in
coverage will be based on the age of the insured at issue age and the
premium rate applicable to the amount of reduced coverage at the
original issue date.
   (c) If the contract in force at the time a reduction in coverage
is made provides for benefit adjustments for anticipated increases in
the costs of long-term care services, then the reduced nursing
facility per diem, lifetime maximum benefit, and daily, weekly, or
monthly home care benefits shall be adjusted in the same manner and
in the same amount as the contract in force prior to the reduction in
coverage.
   (d) In the event a policy or certificate is about to lapse, the
insurer shall provide written notice to the insured of the options in
subdivision (a) to lower the premium by reducing coverage and of the
premiums applicable to the reduced coverage options.  The insurer
may include in the notice additional options to those required in
subdivision (a).  The notice shall provide the insured at least 30
days in which to elect to reduce coverage and the policy shall be
reinstated without underwriting if the insured elects the reduced
coverage.
   (e) In the event of a premium increase, the insured shall be
offered the option to lower premiums and reduce coverage.



10235.51.  (a) Every policy or certificate shall include a provision
that gives the insured the option to elect, no less frequently than
on each anniversary date after the policy or certificate is issued,
to pay an extra premium for one or more riders that increase coverage
in any of the following ways:
   (1) Increase the amount of the per diem benefits.
   (2) Increase the lifetime maximum benefit.
   (3) Increase the amount of both the nursing facility per diem
benefit and the home- and community-based care benefits of a
comprehensive long-term care insurance policy or certificate.
   (b) The premiums for the riders to increase coverage may be based
on the attained age of the insured.  The premium for the original
policy or certificate will not be changed and will continue to be
based on the insured's age when the original policy or certificate
was issued.
   (c) The insurer may require the insured to undergo new
underwriting, in addition to the payment of an additional premium, to
qualify for the additional coverage.  The insurer may restrict the
age for issuance of additional coverage and restrict the aggregate
amount of additional coverage an insured may acquire to the maximum
age and coverage the insurer allows when issuing a new policy or
certificate.



10235.52.  (a) Every policy shall contain a provision that, in the
event the insurer develops new benefits or benefit eligibility or new
policies with new benefits or benefit eligibility not included in
the previously issued policy, the insurer will grant current holders
of its policies who are not in benefit or within the elimination
period the following rights:
   (1) The policyholder will be notified of the availability of the
new benefits or benefit eligibility or new policy within 12 months.
The insurer's notice shall be filed with the department at the same
time as the new policy or rider.
   (2) The insurer shall offer the policyholder new benefits or
benefit eligibility in one of the following ways:
   (A) By adding a rider to the existing policy and paying a separate
premium for the new benefits or benefit eligibility based on the
insured's attained age.  The premium for the existing policy will
remain unchanged based on the insured's age at issuance.
   (B) By replacing the existing policy or certificate in accordance
with Section 10234.87.
   (C) By replacing the existing policy or certificate with a new
policy or certificate in which case consideration for past insured
status shall be recognized by setting the premium for the replacement
policy or certificate at the issue age of the policy or certificate
being replaced.
   (b) The insured may be required to undergo new underwriting, but
the underwriting can be no more restrictive than if the policyholder
or certificate holder were applying for a new policy or certificate.

   (c) The insurer of a group policy as defined under subdivisions
(a) to (c), inclusive, of Section 10231.6 must offer the group
policyholder the opportunity to have the new benefits and provisions
extended to existing certificate holders, but the insurer is relieved
of the obligations imposed by this section if the holder of the
group policy declines the issuer's offer.
   (d) This section shall become operative on June 30, 2003.




10235.91.  In the event a non-medicaid national or state long-term
care program is created through public funding that substantially
duplicates benefits covered by the policy or certificate, the
policyholder or certificate holder will be entitled to select either
a reduction in future premiums or an increase in future benefits.  An
actuarial method for determining the premium reductions and
increases in future benefits will be mutually agreed upon by the
department and insurers.  The amount of the premium reductions and
future benefit increases to be made by each insurer will be based on
the extent of the duplication of covered benefits, the amount of past
premium payments, and claims experience.  Each insurer's premium
reduction and benefit increase plans shall be filed and approved by
the department.



10235.94.  Every policy or certificate shall include a provision
giving the policyholder or certificate holder the right to appeal
decisions regarding benefit eligibility, care plans, services and
providers, and reimbursement payments.


10236.  Every individual and group long-term care policy and
certificate under a group long-term care policy shall be either
guaranteed renewable or noncancelable.
   (a) "Guaranteed renewable" means that the insured has the right to
continue coverage in force if premiums are timely paid during which
period the insurer may not unilaterally change the terms of coverage
or decline to renew, except that the insurer may, in accordance with
provisions in the policy, and in accordance with Section 10236.1,
change the premium rates to all insureds in the same class.  The
"class" is determined by the insurer for the purpose of setting rates
at the time the policy is issued.
   (b) "Noncancelable" means the insured has the right to continue
the coverage in force if premiums are timely paid during which period
the insurer may not unilaterally change the terms of coverage,
decline to renew, or change the premium rate.
   (c) Every long-term care policy and certificate shall contain an
appropriately captioned renewability provision on page one, which
shall clearly describe the initial term of coverage, the conditions
for renewal, and, if guaranteed renewable, a description of the class
and of each circumstance under which the insurer may change the
premium amount.


10236.1.  Benefits under individual long-term care insurance
policies issued before new premium rate schedules are approved under
Section 10236.11 shall be deemed reasonable in relation to premiums
if the expected loss ratio is at least 60 percent, calculated in a
manner that provides for adequate reserving of the long-term care
insurance risk.  In evaluating the expected loss ratio, due
consideration shall be given to all relevant factors, including the
following:
   (a) Statistical credibility of incurred claims experience and
earned premiums.
   (b) The period for which rates are computed to provide coverage.
   (c) Experienced and projected trends.
   (d) Concentration of experience within early policy duration.
   (e) Expected claim fluctuation.
   (f) Experience refunds, adjustments, or dividends.
   (g) Renewability features.
   (h) All appropriate expense factors.
   (i) Interest.
   (j) Experimental nature of the coverage.
   (k) Policy reserves.
   (l) Mix of business by risk classification.
   (m) Product features, such as long elimination periods, high
deductibles, and high maximum limits.



10236.11.  The premium rate schedules for all individual and group
long-term care insurance policies issued in this state shall be filed
with and receive the prior approval of the commissioner before the
policy may be offered, sold, issued, or delivered to a resident of
this state.
   All initial rate filings shall be subject to the following:
   (a) No approval for an initial premium schedule shall be granted
unless the actuary performing the review for the commissioner
certifies that the initial premium rate schedule is sufficient to
cover anticipated costs under moderately adverse experience and that
the premium rate schedule is reasonably expected to be sustainable
over the life of the form with no future premium increases
anticipated.  The certification may rely on supporting data in the
filing.  The actuary performing the review may request an actuarial
demonstration that the assumptions the insurer has used are
reasonable.  The actuarial demonstration shall include either premium
and claim experience on similar policy forms, adjusted for any
premium or benefit differences, relevant and creditable data from
other studies, or both.
   (b) The insurer shall submit to the commissioner for approval a
rate filing for each policy form that includes at least all of the
following information:
   (1) An actuarial memorandum that describes the assumptions the
insurer used to develop the premium rate schedule.  The actuarial
assumptions shall include, but not be limited to, a sufficiently
detailed description of morbidity assumptions, voluntary lapse rates,
mortality assumptions, asset investment yield rates, a description
of all expense components, and plan and option mix assumptions.  The
memorandum shall also include the expected lifetime loss ratio and
projections of yearly earned premiums, incurred claims, incurred
claim loss ratios, and changes in contract reserves.
   (2) An actuarial certification consisting of at least all of the
following:
   (A) A statement that the initial premium rate schedule is
sufficient to cover anticipated costs under moderately adverse
experience and that the premium rate schedule is reasonably expected
to be sustainable over the life of the form with no future premium
increases anticipated.
   (B) A statement that the policy design and coverage provided have
been reviewed and taken into consideration.
   (C) A statement that the underwriting and claims adjudication
processes have been reviewed and taken into consideration.
   (D) A complete description of the basis for contract reserves that
are anticipated to be held under the form, to include all of the
following:
   (i) Sufficient detail or sample calculations provided so as to
have a complete depiction of the reserve amounts to be held.
   (ii) A statement that the assumptions used for reserves contain
reasonable margins for adverse experience.
   (iii) A statement that the net valuation premium for renewal years
does not increase (except for attained-age rating where permitted).

   (iv) A statement that the difference between the gross premium and
the net valuation premium for renewal years is sufficient to cover
expected renewal expenses, or if that statement cannot be made, a
complete description of the situations in which this does not occur
and the type and level of change in the reserve assumptions that
would be necessary for the difference to be sufficient.  An aggregate
distribution of anticipated issues may be used as long as the
underlying gross premiums maintain a reasonably consistent
relationship.  If the gross premiums for certain age groups appear to
be inconsistent with this requirement, the commissioner may request
a demonstration under subdivision (a) based on a standard age
distribution.
   (E) A statement that the premium rate schedule is not less than
the premium rate schedule for existing similar policy forms also
available from the insurer except for reasonable differences
attributable to benefits or a comparison of the premium schedules for
similar policy forms that are currently available from the insurer
with an explanation of the differences.
   (c) Premium rate schedules and new policy forms shall be filed by
January 1, 2002, for all group long-term care insurance policies that
an insurer will offer, sell, issue, or deliver on or after January
1, 2003, and for all previously approved individual long-term care
insurance policies that an insurer will offer, sell, issue, or
deliver on or after January 1, 2003, unless the January 1, 2002,
deadline is extended by the commissioner.  Insurers may continue to
offer and market long-term care insurance policies approved prior to
January 1, 2002, until the earlier of (1) 90 days after approval of
both the premium rate schedules and new policy forms filed pursuant
to this section or (2) January 1, 2003.  Insurers that have filed
premium rate schedules and new policy forms by March 1, 2002, may
continue to offer and market long-term care insurance policies
approved prior to January 1, 2002, until the earlier of (1) 90 days
after approval of both the premium rate schedules and new policy
forms filed pursuant to this section or (2) June 30, 2003.
   (d) Nothing in this section shall be construed as prohibiting an
insurer from filing new group and individual policy forms, or from
relieving an insurer of the obligation to file these forms, with the
commissioner after January 1, 2003, if the policy form meets all the
requirements of this chapter.



10236.12.  All actuaries used by the commissioner to review rate
applications submitted by insurers pursuant to this chapter, whether
employed by the department or secured by contract, shall be members
of the American Academy of Actuaries with at least five years'
relevant experience in long-term care insurance industry pricing.  If
the department does not have actuaries with the experience required
by this section, the commissioner shall contract with actuaries to
review all rate applications submitted by insurers pursuant to this
chapter.  If the department has actuaries that have experience
required by this section, but not enough of those experienced
actuaries to perform the volume of work required by this chapter, the
commissioner may contract with independent actuaries, as necessary.

    If the commissioner contracts with independent actuaries, the
commissioner shall promulgate regulations no later than January 1,
2002, to maintain the confidentiality of rate filings and proprietary
insurer information and to avoid conflicts of interest.



10236.13.  No insurer may increase the premium for an individual or
group long-term care insurance policy or certificate approved for
sale under this chapter unless the insurer has received prior
approval for the increase from the commissioner.
   The insurer shall submit to the commissioner for approval all
proposed premium rate schedule increases, including at least all of
the following information:
   (a) Certification by an actuary, who is a member of the American
Society of Actuaries and who is in good standing with that society,
that:
   (1) If the requested premium rate schedule increase is implemented
and the underlying assumptions, which reflect moderately adverse
conditions, are realized, no further premium rate schedule increases
are anticipated.
   (2) The premium rate filing is in compliance with the provisions
of this section.
   (b) An actuarial memorandum justifying the rate schedule change
request that includes all of the following:
   (1) Lifetime projections of earned premiums and incurred claims
based on the filed premium rate schedule increase, and the method and
assumptions used in determining the projected values, including
reflection of any assumptions that deviate from those used for
pricing other forms currently available for sale.
   (A) Annual values for the five years preceding and the three years
following the valuation date shall be provided separately.
   (B) The projections shall include the development of the lifetime
loss ratio.
   (C) For policies issued with premium rate schedules approved under
Section 10236.11, the projections shall demonstrate compliance with
subdivision (a) of Section 10236.14.  For all other policies, the
projections shall demonstrate compliance with Section 10236.1.
   (D) In the event the commissioner determines that a premium rate
increase is justified due to changes in laws or regulations that are
retroactively applicable to long-term care insurance previously sold
in this state, then:
   (i) The projected experience should be limited to the increases in
claims expenses attributable to the changes in law or regulations.
   (ii) In the event the commissioner determines that potential
offsets to higher claims costs may exist, the insurer shall be
required to use appropriate net projected experience.
   (2) Disclosure of how reserves have been incorporated in this rate
increase.
   (3) Disclosure of the analysis performed to determine why a rate
adjustment is necessary, which pricing assumptions were not realized
and why, and what other actions taken by the company have been relied
on by the actuary.
   (4) A statement that policy design, underwriting, and claims
adjudication practices have been taken into consideration.
   (5) In the event that it is necessary to maintain consistent
premium rates for new certificates and certificates receiving a rate
increase, the insurer shall file composite rates reflecting
projections of new certificates.
   (c) A statement that renewal premium rate schedules are not
greater than new business premium rate schedules except for
differences attributable to benefits, unless sufficient justification
is provided to the commissioner.
   (d) Sufficient information for approval of the premium rate
schedule increase by the commissioner.
   (e) The provisions of this section are applicable to all
individual and group policies issued in this state on or after July
1, 2002.



10236.14.  Approval of all premium rate schedule increases shall be
subject to the following requirements:
   (a) Premium rate schedule increases shall demonstrate that the sum
of the accumulated value of incurred claims, without the inclusion
of active life reserves, and the present value of future projected
incurred claims, without the inclusion of active life reserves, will
not be less than the sum of the following:
   (1) The accumulated value of the initial earned premium times 58
percent.
   (2) Eighty-five percent of the accumulated value of prior premium
rate schedule increases on an earned basis.
   (3) The present value of future projected initial earned premiums
times 58 percent.
   (4) Eighty-five percent of the present value of future projected
premiums not in paragraph (3) on an earned basis.
   (b) In the event the commissioner determines that a premium rate
increase is justified due to changes in laws or regulations that are
retroactively applicable to long-term care insurance previously sold
in this state, a premium rate schedule increase may be approved if
the increase provides that 70 percent of the present value of
projected additional premiums shall be returned to policyholders in
benefits and the other requirements applicable to other premium rate
schedule increases are met.
   (c) All present and accumulated values used to determine rate
increases should use the maximum valuation interest rate for contract
reserves. The actuary shall disclose as part of the actuarial
memorandum the use of any appropriate averages.
   (d) If the requested premium rate schedule increase on any new
policy form approved under Section 10236.11 exceeds 15 percent or if
the requested premium rate schedule increase on any policy form
approved under Section 10236.11 plus all increases occurring after
July 1, 2002, in the premium rate schedule for the same policy form
exceed 15 percent, no request for a rate increase on any policy form
shall be approved by the commissioner except as follows:  all the
insurer's individual experience on long-term care policy forms issued
in this state that have been approved pursuant to Section 10236.11
are pooled together to project future claims experience and the
combined experience satisfies the requirements in subdivision (a). An
insurer is not precluded from filing requests for premium rate
schedule increases on all of its policy forms if the combined
experiences after pooling all applicable policy forms satisfies the
requirements of subdivision (a).
   (e) No approval for an increase in the premium schedule shall be
granted unless the actuary performing the review for the commissioner
certifies that if the requested premium rate schedule increase is
implemented and the underlying assumptions, which reflect moderately
adverse conditions, are realized, no further premium rate schedule
increases are anticipated. The certification may rely on supporting
data in the filing.
   (f) The provisions of this section are applicable to all
individual and group policies issued in this state on or after July
1, 2002.


10236.15.  Premium rate schedule increases that have been approved
shall be subject to the following:
   (a) For each rate increase that is implemented, the insurer shall
file for approval by the commissioner updated projections, as defined
in paragraph (1) of subdivision (b) of Section 10236.13, annually
for the next three years and include a comparison of actual results
to projected values.  The commissioner may extend the period to
greater than three years.
   (b) (1) If the commissioner has determined that the actual
experience following a rate increase does not adequately match the
projected experience and that the current projections under
moderately adverse conditions demonstrate that incurred claims will
not exceed proportions of premiums specified in subdivision (a), the
commissioner may require the insurer to implement any of the
following:
   (A) Premium rate schedule adjustments.
   (B) Other measures to reduce the difference between the projected
and actual experience.
   (2) In determining whether the actual experience adequately
matches the projected experience, consideration should be given to
paragraph (5) of subdivision (b) of Section 10236.13, if applicable.

   (c) If the commissioner demonstrates, based upon credible
evidence, that an insurer has engaged in a persistent practice of
filing inadequate premium schedules, the commissioner may, in
addition to any other authority of the commissioner under this
chapter, and after the insurer is afforded proper notice and due
process, prohibit the insurer from filing and marketing comparable
coverage for a period of up to five years or from offering all other
similar coverages, and may limit marketing of new applications to the
products subject to recent premium rate schedule increases.
   (d) This section shall not apply to life insurance policies and
certificates that accelerate benefits for long-term care.
   (e) The provisions of this section are applicable to all
individual and group policies issued in this state on or after July
1, 2002.


10236.5.  (a) Every certificate of group insurance issued or
delivered in California shall provide for continuation or conversion
coverage for the certificate holder if the group coverage terminates
for any reason except the following reasons:
   (1) The termination of group coverage resulted from the insured's
failure to make any required payment of premium or contribution when
due.
   (2) The terminating coverage is replaced not later than 31 days
after termination by new group coverage effective on the day
following the termination and the replacement coverage meets both of
the following criteria:
   (A) The replacement coverage provides benefits identical to, or
benefits determined by the commissioner to be substantially
equivalent to or in excess of, those provided by the terminating
coverage.
   (B) The premium for the replacement coverage is calculated on the
insured's age at the time of issue of the group certificate for the
coverage which is being replaced.  If the coverage being replaced has
itself replaced previous group coverage, the premium for the newest
replacement coverage is calculated on the insured's age at the time
the previous group certificate was issued.
   (b) "Continuation coverage" means the maintenance of coverage
under an existing group policy when that coverage would be or has
been terminated and which is subject only to continued timely payment
of the premium.
   Any insured individual whose eligibility for group coverage is
based on his or her relationship to another person, shall be entitled
to continuation coverage under the group policy if the qualifying
relationship terminates by dissolution of marriage or death.
   (c) "Conversion coverage" means an individual policy of long-term
care insurance, issued by the insurer of the terminating group
coverage, without considering insurability, containing benefits which
are identical, or which have been determined by the commissioner to
be at least substantially equivalent, to the group coverage which
would be or has been terminated for any reason.
   In determining whether benefits are substantially equivalent, the
commissioner shall consider, if applicable, the relative advantages
of managed care plans which use restricted provider networks,
considering items such as service availability, benefit levels, and
administrative complexity.
   The premium for the converted policy shall be calculated on the
insured's age at the time the group certificate was issued.  If the
terminating group coverage replaced previous group coverage, the
premium for the converted policy shall be calculated on the insured's
age at the time the previous group certificate was issued.
   Before issuing conversion coverage, the insurer may require, if
adequate notice is provided to certificate holders in the
certificate, that:
   (1) The individual must have been continuously insured under the
group policy, or any group policy which it replaced, for at least six
months immediately prior to termination in order to be entitled to
conversion coverage.
   (2) The insured must submit written application for a conversion
policy within a reasonable period after termination of the group
coverage, and the premium paid as directed by the insurer, in order
that the conversion policy be issued effective on the day following
termination of group coverage.
   (3) The conversion policy contains a provision for a reduction of
benefits if the insured has existing long-term care insurance,
payable on an expense-incurred basis, which, together with the
conversion policy, would result in payment of more than 100 percent
of incurred expenses.  This provision shall not be included in the
conversion policy unless the reduction in benefits is reflected in a
premium decrease or refund.
   (4) The conversion policy contains a provision limiting the
payment for a single claim, spell of illness, or benefit period
occurring at the time of conversion, to the amount that would have
been payable had the group coverage remained in effect.



10236.8.  If a group long-term care policy is replaced by another
policy to the same master policyholder issued, the replacing insurer
shall do all of the following:
   (a) Provide benefits identical to the terminating coverage or
benefits determined by the commissioner to be at least substantially
equivalent to the terminating coverage.  Lesser or greater benefits
may be provided if the commissioner determines the replacement
coverage is the most advantageous choice for the beneficiaries.
   (b) Calculate the premium on the insured's age at the time of
issue of the group certificate for the coverage which is being
replaced.  If the coverage being replaced has itself replaced
previous group coverage, the premium for the newest replacement
coverage shall be calculated on the insured's age at the time the
previous group certificate was issued.  If the replacement coverage
adds new or increased benefits, the premium for the new or increased
benefits may be calculated on the insured's age at the time of
replacement.
   (c) Offer coverage to all persons covered under the replaced group
policy on its date of termination.
   (d) Not exclude coverage for preexisting conditions if the
terminating group coverage would provide benefits for those
preexisting conditions.
   (e) Not require new waiting periods, elimination periods,
probationary periods, or similar preconditions related to preexisting
conditions.  The insurer shall waive any such time periods
applicable to preexisting conditions to the extent that similar
preconditions have been satisfied under the terminating group
coverage.
   (f) Not vary the benefits or the premium based on the insured's
health, disability status, claims experience, or use of long-term
care services.