2009 California Insurance Code - Section 10237-10237.6 :: Article 5. Inflation Escalator And Benefit Increases

10237.  This article applies to all long-term care insurance
policies delivered or issued for delivery in this state on or after
January 1, 1991.

10237.1.  No insurer may deliver or issue for delivery a long-term
care insurance policy or certificate in this state unless the insurer
offers to each policyholder and certificate holder, in addition to
any other inflation protection, the option to purchase a long-term
care insurance policy or certificate that provides for benefit levels
and benefit maximums to increase to account for reasonably
anticipated increases in the costs of long-term care services covered
by the policy. Insurers shall offer to each policyholder and
certificate holder, at the time of purchase, the option to purchase a
long-term care insurance policy or certificate containing an
inflation protection feature which is no less favorable than one that
does one or more of the following:
   (a) Increases benefit levels annually in a manner so that the
increases are compounded annually at a rate of not less than 5
percent.
   (b) Guarantees the insured individual the right to periodically
increase benefit levels without providing evidence of insurability or
health status and without regard to claim status or history so long
as the option for the previous period has not been declined. The
amount of the additional benefit shall be no less than the difference
between the existing policy benefit and that benefit compounded
annually at a rate of at least 5 percent for the period beginning
with the purchase of the existing benefit and extending until the
year in which the offer is made.
   (c) Covers a specified percentage of actual or reasonable charges
and does not include a maximum specified indemnity amount limit.
   (d) The insurer of a group long-term care insurance policy as
defined in subdivision (a), (b), or (c) of Section 10231.6, shall
offer the holder of the group policy the opportunity to have the
inflation protection pursuant to this section 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 insurer's offer.

10237.2.  If the policy is issued to a group, the required offering
in Section 10237.1 shall be made to the group policyholder; except
that if the policy is issued to a group as defined in subdivision (d)
of Section 10231.6, other than to a continuing care retirement
community, the offering shall be made to each proposed certificate
holder.

10237.3.  The offer in Section 10237.1 shall not be required of any
of the following:
   (a) Life insurance policies or riders containing accelerated
long-term care benefits.
   (b) Expense incurred long-term care insurance policies. For
purposes of this subdivision, "expense incurred" does not include
policies paying a certain percentage of reasonable and customary
charges up to a specified, indemnity-type maximum amount.

10237.4.  (a) Inflation protection benefit increases under a policy
that contains these benefits shall continue without regard to an
insured's age, claim status or claim history, or the length of time
the person has been insured under the policy.
   (b) An offer of inflation protection that provides for automatic
benefit increases shall include an offer of a premium which the
insurer expects to remain constant. The offer shall disclose in a
conspicuous manner that the premium may change in the future unless
the premium is guaranteed to remain constant.
   (c) The inflation protection benefit increases under a policy or
certificate that contains an inflation protection feature shall not
be reduced due to the payment of claims.

10237.5.  (a) An inflation protection provision that increases
benefit levels annually in a manner so that the increases are
compounded annually at a rate not less than 5 percent shall be
included in a long-term care insurance policy unless an insurer
obtains a rejection of inflation protection signed by the
policyholder.
   (b) The rejection, to be included in the application or on a
separate form, shall state:
"I have reviewed the outline of coverage and the graphs that compare
the benefits and premiums of this policy with and without inflation
protection. Specifically, I have reviewed the plan, and I reject 5
percent annual compound inflation protection.

  _______________________________ __________________
       Signature of Applicant            Date"

10237.6.  (a) An insurer shall include the following information in
or with the outline of coverage:
   (1) A graphic comparison of the benefit levels of a policy that
increases benefits at a compounded annual rate of not less than 5
percent over the policy period with a policy that does not increase
benefits. The graphic comparison shall show benefit levels over at
least a 20-year period.
   (2) Any expected premium increases or additional premiums to pay
for automatic or optional benefit increases.
   (b) An insurer may use a reasonable hypothetical or graphic
demonstration for purposes of this disclosure.