1Amending Title 40 (Insurance) of the Pennsylvania Consolidated
2Statutes, providing for definitions, for conversion of
3viatical settlement benefits, for proceeds of viatical
4settlement contract, for additional requirements of a
5viatical settlement contract, for requirements regarding
6viatical settlement contract proceeds, for viatical
7settlement provider duties, for exemption, for claims, for
8duties of department and for duties of Department of Public
9Welfare.

10The General Assembly of the Commonwealth of Pennsylvania
11hereby enacts as follows:

12Section 1. Title 40 of the Pennsylvania Consolidated
13Statutes is amended by adding a chapter to read:

14CHAPTER 35

15CONVERSION OF

16VIATICAL SETTLEMENT BENEFITS

17Sec.

183501. Definitions.

193502. Conversion of viatical settlement benefits.

203503. Proceeds of viatical settlement contract.

213504. Additional requirements of a viatical settlement

1contract.

23505. Requirements regarding viatical settlement contract
3proceeds.

43506. Viatical settlement provider duties.

53507. Exemption.

63508. Claims.

73509. Duties of department.

83510. Duties of Department of Public Welfare.

9§ 3501. Definitions.

10The following words and phrases when used in this chapter
11shall have the meanings given to them in this section unless the
12context clearly indicates otherwise:

13"Long-term care services." The term includes, but is not
14limited to, home health services, assisted living services,
15skilled nursing services, adult day services and nursing home
16services.

17§ 3502. Conversion of viatical settlement benefits.

18The owner of a policy as defined in section 2 of the act of
19July 4, 2002 (P.L.699, No.107), known as the Viatical
20Settlements Act, with a face value in excess of $10,000 may
21enter into a viatical settlement contract as defined under
22section 2 of the Viatical Settlements Act, provided the minimum
23value for the policy is greater than its cash surrender value or
24accelerated death benefit available at the time of the
25application of the viatical settlement contract, in exchange for
26payments directly to a health care provider for Medicaid-covered
27long-term care services for the recipient of the services in
28accordance with this chapter when the viatical settlement
29contract takes effect.

30§ 3503. Proceeds of viatical settlement contract.

1(a) Medicaid eligibility.--To the extent allowable under
2Federal or State law, the proceeds of a viatical settlement
3contract entered into under this chapter may not be considered
4as a resource or asset in determining the eligibility of an
5applicant for or recipient of Medicaid and shall only be used as
6allowed for long-term care services in accordance with this
7chapter, provided that Federal or State Medicaid funds may not
8be used for the Medicaid recipient's care until the available
9proceeds are expended, except for the amount provided for in
10section 3504(a)(1) (relating to additional requirements of a
11viatical settlement contract).

12(b) Tax exemption.--The proceeds of a viatical settlement
13contract entered into under this chapter may not be considered
14income taxable under Article III of the act of March 4, 1971
15(P.L.6, No.2), known as the Tax Reform Code of 1971.

16§ 3504. Additional requirements of a viatical settlement
17contract.

18(a) Contents.--In addition to the requirements of the act of
19July 4, 2002 (P.L.699, No.107), known as the Viatical
20Settlements Act, a viatical settlement contract entered into
21under section 3502 (relating to conversion of viatical
22settlement benefits) must include the following:

23(1) That the lesser of 5% of the face value of the life
24insurance policy or $5,000 is reserved and payable to the
25viator's estate or a named beneficiary upon the death of the
26insured under the policy that is the subject of the viatical
27settlement contract for burial or final expenses.

28(2) That the balance of proceeds of the viatical
29settlement contract that are unpaid at the death of the
30insured must be paid to the viator's estate or a named

1beneficiary.

2(3) The total amount payable on behalf of the recipient
3of such services pursuant to the viatical settlement
4contract.

5(b) Filing and approval.--A viatical settlement contract
6form entered into under this chapter must be filed and approved
7by the department.

8§ 3505. Requirements regarding viatical settlement contract
9proceeds.

10(a) Account and administration.--The proceeds of the
11viatical settlement contract entered into under section 3502
12(relating to conversion of viatical settlement benefits),
13including any interest accrued, shall be held in an irrevocable
14Federal or State insured account for the benefit of the
15recipient of the services and administered in accordance with
16this chapter.

17(b) Choosing services and prohibition.--The type of long-
18term care services payable from the irrevocable Federal or State
19insured account shall be chosen only by the recipient of the
20services. An attempt by a person to require the use of a
21specific long-term care provider to obtain long-term care
22services under this chapter is strictly prohibited and
23constitutes a violation of the act of July 22, 1974 (P.L.589,
24No.205), known as the Unfair Insurance Practices Act.

25§ 3506. Viatical settlement provider duties.

26(a) Bond, insurance or deposit.--A viatical settlement
27provider that enters into a viatical settlement contract under
28section 3502 (relating to conversion of viatical settlement
29benefits) shall maintain one of the following:

30(1) A surety bond executed and issued by an insurer

1authorized to issue bonds in the amount of $500,000 in this
2Commonwealth. A surety bond issued shall be in the favor of
3the Commonwealth and shall specifically authorize recovery by
4the commissioner on behalf of a person in this Commonwealth
5who sustained damages as the result of an erroneous act, a
6failure to act or a conviction of fraud or unfair practices,
7by the viatical settlement provider.

8(2) A policy of errors and omissions insurance covering
9the legal liability resulting from a viatical settlement
10provider's erroneous act or failure to act in the capacity of
11a viatical settlement provider. The policy shall be in the
12sum of no less than $500,000 per occurrence and in the
13aggregate.

14(3) A deposit of cash or certificates of deposit or a
15combination thereof in the amount of $500,000 with the
16department.

17(b) Advertising and marketing materials.--Advertising and
18marketing materials used by a viatical settlement provider under
19this chapter shall be filed with the department.

20§ 3507. Exemption.

21For purposes of this chapter, the provisions of section 10(g)
22(1)(ii)(A) of the act of July 4, 2002 (P.L.699, No.107), known
23as the Viatical Settlements Act, do not apply to a policy that
24is the subject of a viatical settlement contract that has been
25in force for two years or more.

26§ 3508. Claims.

27A claim against a viatical settlement provider from an owner
28of a policy, the owner's estate, a beneficiary or other person
29regarding the viatical settlement contract may not exceed the
30face amount of the policy less the proceeds paid under the

1viatical settlement contract and the amount of premiums paid
2subsequent to entering into the viatical settlement contract. A
3payment of a claim by a viatical settlement provider shall be
4made from the funds established under section 3506(a) (relating
5to viatical settlement provider duties).

6§ 3509. Duties of department.

7The department shall conduct periodic market examinations of
8each viatical settlement provider regarding the viatical
9settlement contracts entered into under this chapter in
10accordance with section 16 of the act of July 4, 2002 (P.L.699,
11No.107), known as the Viatical Settlements Act.

12§ 3510. Duties of Department of Public Welfare.

13(a) Written notice.--The Department of Public Welfare shall,
14as part of the application for enrollment in the Medicaid
15program and other materials provided by the Department of Public
16Welfare, provide written notice of the options provided under
17this chapter.

18(b) Rules.--The Department of Public Welfare may adopt rules
19in consultation with the department to implement this chapter to
20ensure that:

21(1) the proceeds from the viatical settlement contract
22are distributed directly to a health care provider providing
23long-term care services in accordance with this chapter;

24(2) eligibility for Medicaid is determined without
25considering the balance of the viatical settlement proceeds
26under section 3504(b)(1) (relating to additional requirements
27of a viatical settlement contract); and

28(3) Medicaid and applied income payments begin the day
29following the exhaustion of the viatical settlement proceeds
30as provided under this chapter.

1Section 2. This act shall take effect in 60 days.