S0548B0292A02955 DMS:SRA 07/10/07 #90 A02955 AMENDMENTS TO SENATE BILL NO. 548 Sponsor: REPRESENTATIVE R. TAYLOR Printer's No. 292 1 Amend Title, page 1, lines 1 through 3, by striking out all 2 of said lines and inserting 3 Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An 4 act relating to insurance; amending, revising, and 5 consolidating the law providing for the incorporation of 6 insurance companies, and the regulation, supervision, and 7 protection of home and foreign insurance companies, Lloyds 8 associations, reciprocal and inter-insurance exchanges, and 9 fire insurance rating bureaus, and the regulation and 10 supervision of insurance carried by such companies, 11 associations, and exchanges, including insurance carried by 12 the State Workmen's Insurance Fund; providing penalties; and 13 repealing existing laws," providing for scope of article, for 14 the definition of "long-term care insurance," for the Long- 15 Term Care Partnership Program, for authority to promulgate 16 regulations, for marketing and advertising prohibited and for 17 penalties; and further providing for coverage and 18 limitations. 19 Amend Bill, page 1, lines 6 through 18; page 2, lines 1 20 through 12, by striking out all of said lines on said pages and 21 inserting 22 Section 1. Section 1102 of the act of May 17, 1921 (P.L.682, 23 No.284), known as The Insurance Company Law of 1921, added 24 December 15, 1992 (P.L.1129, No.148), is amended to read: 25 Section 1102. Scope of Article.--This article is not 26 intended to supersede the obligations of entities subject to 27 this article to comply with the substance of other applicable 28 insurance laws insofar as they do not conflict with this 29 article, except that laws and regulations designed and intended 30 to apply to Medicare supplement insurance policies shall not be 31 applied to long-term care insurance. A policy which is not 32 advertised, marketed or offered as long-term care insurance [or 33 nursing home insurance] need not meet the requirements of this 34 article. 35 Section 2. The definition of "long-term care insurance" in 36 section 1103 of the act, amended November 30, 2004 (P.L.1690, 37 No.216), is amended to read: 38 Section 1103. Definitions.--As used in this article, the
1 following words and phrases shall have the meanings given to 2 them in this section: 3 * * * 4 "Long-term care insurance." Any insurance policy or rider 5 advertised, marketed, offered or designed to provide 6 comprehensive coverage for each covered person on an expense- 7 incurred, indemnity, prepaid or other basis for functionally 8 necessary or medically necessary diagnostic, preventive, 9 therapeutic, rehabilitative, maintenance or personal care 10 services provided in a setting other than an acute care unit of 11 a hospital. The term includes a policy, rider or prepaid home 12 health or personal care service policy which provides for 13 payment of benefits based upon cognitive impairment or the loss 14 of functional capacity. The term includes group and individual 15 policies or riders issued by insurers, fraternal benefit 16 societies, nonprofit health, hospital and medical service 17 corporations, health maintenance organizations or similar 18 organizations. The term does not include any insurance policy 19 which is offered primarily to provide basic Medicare supplement 20 coverage, basic hospital expense coverage, basic medical- 21 surgical expense coverage, hospital confinement indemnity 22 coverage, major medical expense coverage, disability income 23 protection coverage, accident-only coverage, specified disease 24 or specified accident coverage or limited benefit health 25 coverage. 26 * * * 27 Section 3. The act is amended by adding a section to read: 28 Section 1110.1. Long-Term Care Partnership Program.--(a) 29 There is hereby established the Long-Term Care Partnership 30 Program, to be administered by the Department of Public Welfare 31 in accordance with the requirements for qualified State long- 32 term care insurance partnerships. The purpose of this program is 33 to reduce future Medicaid costs for long-term care by delaying 34 or eliminating dependence on Medicaid by providing incentives 35 for individuals to ensure against the potentially substantial 36 costs that arise upon the need for long-term care. 37 (b) In order to implement the program, the Department of 38 Public Welfare shall file a State plan amendment with Centers 39 for Medicare and Medicaid Services of the United States 40 Department of Health and Human Services pursuant to Title XIX of 41 the Social Security Act (49 Stat. 620, 42 U.S.C. § 1396 et seq.) 42 within 30 days of the effective date of this section. The 43 program, including the treatment of assets for Medicaid 44 eligibility and estate recovery, shall be structured and 45 administered by the Department of Public Welfare in accordance 46 with Federal law and applicable Federal guidelines for qualified 47 State long-term care partnerships. 48 (c) The department shall require all insurers offering a 49 qualified Long-Term Care Partnership Program policy to offer to 50 exchange any policy or certificate issued between February 8, 51 2006, and the date the State plan amendment takes effect, with a 52 qualified Long-Term Care Partnership Program policy. The 53 following shall apply: 54 (1) All offers of exchange shall be subject to the outline 55 of coverage provisions set forth under section 1111 and all 56 applicable regulations. 57 (2) Policies exchanged under this provision, if there is no 58 change in coverage material to the risk, shall not be subject to 59 any medical underwriting or approval process. SB0548A02955 - 2 -
1 (3) Any portion of the policy that was issued prior to the 2 exchange date shall be priced based on the policyholder's age 3 when the policy was originally issued. 4 (4) Any portion of the policy that is added as a result of 5 the exchange may be priced based on the policyholder's age at 6 the time of the exchange. 7 (5) Any addition to a policy as a result of any exchange 8 shall be subject to the right to return set forth under section 9 1110 and all applicable regulations. 10 Section 4. Sections 1112, 1113 and 1114 of the act, added 11 December 15, 1992 (P.L.1129, No.148), are amended to read: 12 Section 1112. Authority to Promulgate Regulations.--The 13 department shall promulgate reasonable regulations to establish 14 minimum standards for marketing practices, [agent] producer 15 compensation arrangements, [agent] producer testing, penalties 16 and reporting practices for long-term care insurance. 17 Section 1113. Marketing and Advertising Prohibited.--No 18 policy may be advertised, marketed or offered as long-term care 19 [or nursing home] insurance unless it complies with the 20 provisions of this article. 21 Section 1114. Penalties.--In addition to any other penalties 22 provided by the laws of this Commonwealth, an insurer or [agent] 23 producer found to have violated requirements relating to the 24 regulations of long-term care insurance or the marketing of such 25 insurance shall be subject to a civil penalty of up to three 26 times the amount of any commissions paid for each policy 27 involved in the violation or ten thousand dollars ($10,000), 28 whichever is greater. 29 Section 5. Section 1703 of the act, added December 18, 1992 30 (P.L.1519, No.178), is amended to read: 31 Section 1703. Coverage and Limitations.--(a) This article 32 shall provide coverage to the following persons for the policies 33 and contracts specified in subsection (b): 34 (1) To persons who, regardless of where they reside, except 35 for nonresident certificate holders under group policies or 36 contracts, are the beneficiaries, assignees or payees of the 37 persons covered under paragraph (2). 38 (2) To persons who are owners of or certificate holders 39 under these policies or contracts or, in the case of unallocated 40 annuity contracts, to the persons who are the contract holders 41 and who: 42 (i) are residents; or 43 (ii) are not residents, but only under all of the following 44 conditions: 45 (A) the insurers which issued such policies or contracts are 46 domiciled in this Commonwealth; 47 (B) such insurers never held a license or certificate of 48 authority in the states in which such persons reside; 49 (C) these states have associations similar to the 50 association created by this article; and 51 (D) these persons are not eligible for coverage by those 52 associations. 53 (b) (1) This article shall provide coverage to the persons 54 specified in subsection (a) for direct, nongroup life, health, 55 annuity and supplemental policies or contracts, for certificates 56 under direct group policies and contracts and for unallocated 57 annuity contracts issued by member insurers, except as limited 58 by this article. Annuity contracts and certificates under group 59 annuity contracts include, but are not limited to, guaranteed SB0548A02955 - 3 -
1 investment contracts, deposit administration contracts, 2 unallocated funding agreements, allocated funding agreements, 3 structured settlement agreements, lottery contracts and any 4 immediate or deferred annuity contracts. 5 (2) This article shall not provide coverage for any of the 6 following: 7 (i) Any portion of a policy or contract not guaranteed by 8 the insurer or under which the risk is borne by the policy or 9 contract holder. 10 (ii) Any policy or contract of reinsurance, unless 11 assumption certificates have been issued. 12 (iii) Any portion of a policy or contract to the extent that 13 the rate of interest on which it is based: 14 (A) averaged over the period of four (4) years prior to the 15 date on which the association becomes obligated with respect to 16 such policy or contract, exceeds a rate of interest determined 17 by subtracting two (2) percentage points from Moody's Corporate 18 Bond Yield Average averaged for the same four-year period or for 19 such lesser period if the policy or contract was issued less 20 than four (4) years before the association became obligated; and 21 (B) on and after the date on which the association becomes 22 obligated with respect to such policy or contract, exceeds the 23 rate of interest determined by subtracting three (3) percentage 24 points from Moody's Corporate Bond Yield Average as most 25 recently available. 26 (iv) Any plan or program of an employer, association or 27 similar entity to provide life, health or annuity benefits to 28 its employes or members to the extent that such plan or program 29 is self-funded or uninsured, including, but not limited to, 30 benefits payable by an employer, association or similar entity 31 under: 32 (A) a Multiple Employer Welfare Arrangement as defined in 33 section 514 of the Employee Retirement Income Security Act of 34 1974; 35 (B) a minimum premium group insurance plan; 36 (C) a stop-loss group insurance plan; or 37 (D) an administrative services only contract. 38 (v) Any portion of a policy or contract to the extent that 39 it provides dividends or experience rating credits or provides 40 that any fees or allowances to be paid to any person, including 41 the policyholder or contract holder, in connection with the 42 service to or administration of such policy or contract. 43 (vi) Any policy or contract issued in this Commonwealth by a 44 member insurer at a time when it was not licensed or did not 45 have a certificate of authority to issue such policy or contract 46 in this Commonwealth. 47 (vii) Any unallocated annuity contract issued to an employe 48 benefit plan protected under the Federal Pension Benefit 49 Guaranty Corporation. 50 (viii) Any portion of any unallocated annuity contract which 51 is not issued to or in connection with a specific employe, union 52 or association of natural persons benefit plan or a government 53 lottery. 54 (c) (1) The benefits for which the association may become 55 liable shall in no event exceed the lesser of: 56 (i) the contractual obligations for which the insurer is 57 liable or would have been liable if it were not an impaired or 58 insolvent insurer; or 59 (ii) (A) With respect to any one life, regardless of the SB0548A02955 - 4 -
1 number of policies or contracts, the following shall apply: 2 (I) Three hundred thousand ($300,000) dollars in life 3 insurance death benefits, but not more than one hundred thousand 4 ($100,000) dollars in net cash surrender and net cash withdrawal 5 values for life insurance. 6 (II) [One hundred thousand ($100,000) dollars] Three hundred 7 thousand ($300,000) dollars in health insurance benefits, 8 including any net cash surrender and net cash withdrawal values. 9 (III) Three hundred thousand ($300,000) dollars in annuity 10 benefits, including one hundred thousand ($100,000) dollars in 11 net cash surrender and net cash withdrawal values. 12 (IV) Three hundred thousand ($300,000) dollars in long-term 13 care insurance benefits, as defined under section 1103, 14 including any cash surrender and net cash withdrawal values. 15 (B) With respect to each individual participating in a 16 governmental retirement plan established under section 401, 17 403(b) or 457 of the Internal Revenue Code of 1986 covered by an 18 unallocated annuity contract or the beneficiaries of each such 19 individual if deceased, in the aggregate, three hundred thousand 20 ($300,000) dollars in annuity benefits, including one hundred 21 thousand ($100,000) dollars in net cash surrender and net cash 22 withdrawal values. 23 (C) With respect to any one contract holder covered by any 24 unallocated annuity contract not included in clause (B), five 25 million ($5,000,000) dollars in benefits, irrespective of the 26 number of such contracts held by that contract holder. 27 (2) The association shall not, however, be liable to expend 28 more than three hundred thousand ($300,000) dollars in the 29 aggregate with respect to any one individual under subparagraph 30 (ii)(A) and (B) of paragraph (1). 31 Section 6. The amendment of section 1703(c)(1)(ii)(A)(II) 32 and (IV) shall apply to an insolvency occurring on or after the 33 effective date of this section. 34 Section 7. The amendment of section 1103 of the act shall 35 apply to all policies issued on or after the effective date of 36 this act. 37 Section 8. This act shall take effect as follows: 38 (1) Sections 5 and 6 of this act and this section shall 39 take effect immediately. 40 (2) The remainder of this act shall take effect in 60 41 days. G10L90DMS/SB0548A02955 - 5 -