Or. Admin. Code § 836-052-0746

Current through Register Vol. 63, No. 12, December 1, 2024

Section 836-052-0746 - Nonforfeiture Benefit Requirement

(1) This rule does not apply to life insurance policies or riders containing accelerated long-term care benefits.

(2) To comply with the requirement to offer a nonforfeiture benefit pursuant to the provisions of ORS 743.664:

(a) A long-term care policy, certificate or rider offered with nonforfeiture benefits must have coverage elements, eligibility, benefit triggers and benefit length that are the same as coverage to be issued without nonforfeiture benefits. The nonforfeiture benefit included in the offer must be the benefit described in section (6) of this rule.

(b) The offer must be in writing if the nonforfeiture benefit is not otherwise described in the Outline of Coverage or other materials given to the prospective policyholder.

(3) If the offer required to be made under ORS 743.664 is rejected, the insurer shall provide the contingent benefit upon lapse described in this rule. Even if this offer is accepted for a policy with a fixed or limited premium paying period, the contingent benefit on lapse in section (4)(d) of this rule shall still apply.

(4)

(a) After rejection of an offer required under section ORS 743.664, for an individual or group policy without nonforfeiture benefits issued after the effective date of this section, the insurer shall provide a contingent benefit upon lapse.

(b) In the event a group policyholder elects to make the nonforfeiture benefit an option to the certificate holder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

(c) The contingent benefit on lapse shall be triggered every time an insurer increases the premium rates to a level that results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth in this subsection based on the insured's issue age, and the policy or certificate lapses within 120 days of the due date of the premium so increased. Unless otherwise required, a policyholder shall be notified at least 30 days prior to the due date of the premium reflecting the rate increase. [Table not included. See ED. NOTE.]

(d) A contingent benefit on lapse shall also be triggered for policies with a fixed or limited premium paying period every time an insurer increases the premium rates to a level that results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured's initial annual premium set forth in this paragraph based on the insured's issue age, the policy or certificate lapses within 120 days of the due date of the premium so increased, and the ratio in subsection (e)(B) of this section is 40 percent or more. Unless otherwise required, policyholders shall be notified at least 30 days prior to the due date of the premium reflecting the rate increase. This provision is in addition to the contingent benefit provided by subsection (c) of this section, and when both are triggered, the benefit provider shall be at the option of the insured. [Table not included. See ED. NOTE.]

(e) On or before the effective date of a substantial premium increase as defined in subsection (c) of this section, the insurer shall:

(A) Offer to reduce policy benefits provided by the current coverage consistent with the requirements of OAR 836-052-0740 so that the required premium payments are not increased.

(B) Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the provisions of section (6) of this rule. This option may be elected at any time during the 120-day period referenced in subsection (c) of this section; and

(C) Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period referenced in subsection (c) of this section shall be deemed to be the election of the offer to convert in paragraph (B) of this subsection unless the automatic option in subsection (f)(C) applies.

(f) On or before the effective date of a substantial premium increase as defined in subsection (d) of this section, the insurer shall:

(A) Offer to reduce policy benefits provided by the current coverage consistent with the requirements of OAR 836-052-0740 so that required premium payments are not increased;

(B) Offer to convert the coverage to a paid up status when the amount payable for each benefit is 90 percent of the amount payable in effect immediately prior to lapse times the ratio of the number of completed months of paid premiums divided by the number of months in the premium paying period. This option may be elected at any time during the 120-day period referenced in subsection (d) of this section; and

(C) Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period referenced in subsection (d) of this section shall be deemed to be the election of the offer to convert in paragraph (B) of this subsection if the ration is 40 percent or more.

(5) For any long-term care policy issued in this state on or after January 1, 2016:

(a) In the event the policy or certificate was issued at least 20 years prior to the effective date of the increase, a value of zero percent shall be used in place of all values in the table referenced in OAR 836-052-0746(4)(d).

(b) Values above 100 percent in the table referenced in OAR 836-052-0746(4)(d) shall be reduced to 100 percent.

(6) Benefits that must be continued as nonforfeiture benefits, including contingent benefits upon lapse in accordance with section (4)(c) of this rule but not section (4)(d) of this rule, are described in this section as follows:

(a) For purposes of this section, attained age rating is defined as a schedule of premiums starting from the issue date that increases age at least one percent per year prior to age 50, and at least three percent per year beyond age 50.

(b) For purposes of this section, the nonforfeiture benefit shall be of a shortened benefit period providing paid-up long-term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) must be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in subsection (c) of this section.

(c) The standard nonforfeiture credit must be equal to 100% of the sum of all premiums paid, including the premiums paid prior to any changes in benefits. The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall not be less than 30 times the daily nursing home benefit at the time of lapse. In either event, the calculation of the nonforfeiture credit is subject to the limitation of section (7) of this rule.

(d)

(A) The nonforfeiture benefit shall begin not later than the end of the third year following the policy or certificate issue date. The contingent benefit upon lapse shall be effective during the first three years as well as thereafter.

(B) Notwithstanding paragraph (a) of this subsection, for a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:

(i) The end of the tenth year following the policy or certificate issue date; or

(ii) The end of the second year following the date the policy or certificate is no longer subject to attained age rating.

(e) Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

(7) All benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid up status may not exceed the maximum benefits that would be payable if the policy or certificate had remained in premium paying status.

(8) There shall be no difference in the minimum nonforfeiture benefits as required under this rule for group and individual long term care insurance policies.

(9) The requirements set forth in this rule become effective March 1, 2006, after adoption of this provision and shall apply as follows:

(a) Except as provided in paragraphs (b) and (c) of this subsection, the provisions of this rule apply to any long-term care policy issued in this state on or after March 1, 2005.

(b) For certificates issued on or after March 1, 2006 under a group long-term care insurance policy as defined in ORS 743.652(3)(a), which policy was in force March 1, 2005, the provisions of this rule do not apply.

(c) The last sentence in section (3) and section (4)(d) and (f) of this rule apply to any long term care insurance policy or certificate issued in this state after May 31, 2008, except new certificates on a group policy as defined in ORS 743.652(3)(a) after December 1, 2008.

(10) Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse shall be subject to the loss ratio requirements of OAR 836-052-0666, 836-052-0676, or 836-052-0680, whichever is applicable, treating the policy as a whole.

(11) To determine whether contingent nonforfeiture upon lapse provisions are triggered under section (4)(c) or (d) of this rule, a replacing insurer that purchased or otherwise assumed a block or blocks of long-term care insurance policies from another insurer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original insurer.

(12) A nonforfeiture benefit for qualified long-term care insurance contracts that are level premium contracts shall be offered that meets the following requirements:

(a) The nonforfeiture provision shall be appropriately captioned;

(b) The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums and shall state that the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency and interest as reflected in changes in rates for premium paying contracts approved by the Director for the same contract form; and

(c) The nonforfeiture provision shall provide at least one of the following:

(A) Reduced paid-up insurance;

(B) Extended term insurance;

(C) Shortened benefit period; or

(D) Other similar offerings approved by the Director.

Or. Admin. Code § 836-052-0746

ID 3-2005, f. & cert. ef. 3-1-05; ID 10-2007, f. 12-3-07, cert. ef. 1-1-08; ID 5-2015, f. 6-10-15, cert. ef. 1/1/2016

Tables referenced are available from the agency.

Stat. Auth.: ORS 731.244, 742.023, 743.013, 743.655, 743.656 & 746.240

Stats. Implemented: ORS 731.244, 742.003, 742.005, 742.009, 743.010(3), 743.013(3), 743.650, 743.653, 743.655, 743.656 & 746.240