NAC687B.0686. Requirements for nonforfeiture benefits; contingent benefit upon lapse.

     1. The provisions of this section do not apply to a policy of life insurance or a rider or endorsement to a policy of life insurance that contains accelerated benefits for long-term care.

     2. To satisfy the requirements of NAC 687B.0685:

     (a) A long-term care insurance contract or certificate offered with nonforfeiture benefits must include the elements of the coverage, requirements for eligibility, benefit triggers and length of benefits that are the same as the coverage issued without nonforfeiture benefits;

     (b) If the offer of a nonforfeiture benefit required by NAC 687B.0685 is not otherwise described in the outline of coverage or other materials provided to the applicant, the offer must be set out separately and be in writing; and

     (c) The nonforfeiture benefit included in the offer must conform to the requirements of this section.

     3. If the long-term care insurance contract is issued to a group described in subsection 4 of NAC 687B.025, other than to a retirement community which provides continuing care, the insurer shall make the offer required pursuant to subsection 2 to each proposed certificate holder.

     4. If an applicant rejects the offer of a nonforfeiture benefit required by NAC 687B.0685, the insurer shall provide a contingent benefit upon lapse described in this section.

     5. For a policy with a fixed or limited premium paying period, the insurer shall provide a contingent benefit upon lapse in accordance with subsection 9.

     6. If an applicant rejects the offer of a nonforfeiture benefit required by NAC 687B.0685, for a long-term care insurance contract or certificate without nonforfeiture benefits issued on or after October 1, 2008, the insurer shall provide a contingent benefit upon lapse described in this section.

     7. If a group policyholder chooses to make the nonforfeiture benefit an option to a certificate holder, the certificate must provide the nonforfeiture benefit or the contingent benefit upon lapse described in this section.

     8. A contingent benefit upon lapse is triggered if an insurer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or greater than the percentage of the initial annual premium of the policyholder or certificate holder, based on the issue age of the insured, as described in the following chart entitled “Triggers for a Substantial Premium Increase (I),” and the affected long-term care insurance contract or certificate lapses within 120 days after the due date of the increased premium. The insurer shall provide notice of the rate increase to a policyholder or certificate holder not less than 60 days before the due date of the premium that includes the rate increase. The chart must be set forth as follows:

Triggers for a Substantial Premium Increase (I)
Issue Age	Percent Increase Over Initial Premium
29 and under	200 percent
30-34	190 percent
35-39	170 percent
40-44	150 percent
45-49	130 percent
50-54	110 percent
55-59	90 percent
60	70 percent
61	66 percent
62	62 percent
63	58 percent
64	54 percent
65	50 percent
66	48 percent
67	46 percent
68	44 percent
69	42 percent
70	40 percent
71	38 percent
72	36 percent
73	34 percent
74	32 percent
75	30 percent
76	28 percent
77	26 percent
78	24 percent
79	22 percent
80	20 percent
81	19 percent
82	18 percent
83	17 percent
84	16 percent
85	15 percent
86	14 percent
87	13 percent
88	12 percent
89	11 percent
90 and over	10 percent

     9. A contingent benefit upon lapse is triggered for any long-term care insurance contract with a fixed or limited premium paying period if the insurer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or greater than the percentage of the initial annual premium of the policyholder or certificate holder, based on the issue age of the insured, as described in the following chart entitled “Triggers for a Substantial Premium Increase (II),” the affected long-term care insurance contract or certificate lapses not later than 120 days after the due date of the increased premium and the ratio of the number of completed months of paid premiums divided by the number of months in the premium paying period is 0.4 or more. The provision of this benefit is in addition to the benefit described in subsection 8, and if both benefits are triggered, the insured may choose which benefit must be provided. The insurer shall provide notice of the rate increase to a policyholder or certificate holder not less than 60 days before the due date of the premium that includes the rate increase.

Triggers for a Substantial Premium Increase (II)
Issue Age	Percent Increase Over Initial Premium
64 and under	50 percent
65-79	30 percent
80 and over	10 percent

     10. On or before the effective date of a substantial premium increase described in subsection 8, the insurer shall:

     (a) Offer to reduce long-term care insurance contract benefits provided by the current coverage without the requirement of additional underwriting so that 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 terms of subsection 12 and allow the policyholder or certificate holder to accept this offer at any time during the 120-day period described in subsection 8; and

     (c) Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period described in subsection 8 shall be deemed to be the selection of the offer to convert described in paragraph (b), unless the provisions of paragraph (c) of subsection 11 apply.

     11. On or before the effective date of a substantial premium increase described in subsection 9, the insurer shall:

     (a) Offer to reduce benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased;

     (b) Offer to convert the coverage to a paid-up status where the amount payable for each benefit is equal to 90 percent of the amount payable immediately before the lapse multiplied by the ratio of the number of completed months of paid premiums divided by the number of months in the premium paying period and allow the policyholder or certificate holder to accept this offer at any time during the 120-day period set forth in subsection 9; and

     (c) Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period set forth in subsection 9 shall be deemed to be the selection of the offer to convert described in paragraph (b) if the ratio described in paragraph (b) is 0.4 or more.

     12. For the purpose of determining benefits continued as nonforfeiture benefits, including the contingent benefits upon lapse described in subsection 8 but not the contingent benefits upon lapse described in subsection 9:

     (a) “Attained age rating” means a schedule of premiums starting from the issue date which increases with age of at least 1 percent per year before 50 years of age and at least 3 percent per year at and after 50 years of age.

     (b) The nonforfeiture benefit must be for a shortened benefit period providing paid-up long-term care insurance after lapse. The same benefit amounts and frequency of benefits 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 must be determined as specified in paragraph (c).

     (c) The standard nonforfeiture benefit must be equal to 100 percent of the sum of all premiums paid, including the premiums paid before any change in benefits. The insurer may offer additional options for shortened benefit periods if the benefits for each period are equal to or greater than the standard nonforfeiture benefit for that period, except that the minimum nonforfeiture benefit must not be less than 30 times the daily nursing home benefit in effect at the time of the lapse and is subject to the limitations of subsection 13.

     (d) Except as otherwise provided in paragraph (f), the nonforfeiture benefit must begin not later than the end of the third year following the date of issue of the long-term care insurance contract or certificate.

     (e) Except as otherwise provided in paragraph (f), the contingent benefit upon lapse must be effective from the date of issue of the long-term care insurance contract or certificate.

     (f) For a long-term care insurance contract or certificate with attained age rating, the nonforfeiture benefit must begin on the earlier of:

          (1) The end of the 10th year following the date of issue of the long-term care insurance contract or certificate; or

          (2) The end of the second year following the date on which the long-term care insurance contract or certificate is no longer subject to attained age rating.

     (g) Nonforfeiture benefits 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.

     13. All benefits paid by an insurer while a long-term care insurance contract or certificate is not in premium-paying status and in a paid-up status must not exceed the maximum benefits which would be payable if the long-term care insurance contract or certificate remained in premium-paying status.

     14. The minimum nonforfeiture benefits required by this section must be the same for group and individual long-term care insurance contracts.

     15. Premiums charged for a long-term care insurance contract or certificate containing nonforfeiture benefits or a contingent benefit upon lapse are subject to the loss ratio requirements applicable to the long-term care insurance contract as a whole.

     16. To determine whether the provisions of paragraph (c) of subsection 10 and paragraph (c) of subsection 11 apply, a replacing insurer that purchases or otherwise assumes a block or blocks of long-term care insurance contracts from another insurer shall calculate the percentage increase based on the initial annual premium paid by the policyholder or certificate holder when the long-term care insurance contract was first purchased by the policyholder or certificate holder.

     17. An insurer shall offer a nonforfeiture benefit for any qualified long-term care insurance contract that is a level premium contract. The nonforfeiture benefit provision must:

     (a) Be appropriately captioned;

     (b) Provide a benefit available in the event of a default in the payment of any premiums;

     (c) State that the amount of the benefit may be adjusted only as is necessary to reflect changes in claims, persistency and interest, as reflected in changes in rates for premium-paying contracts approved by the Commissioner for the same contract form; and

     (d) Provide:

          (1) Reduced paid-up insurance;

          (2) Extended-term insurance;

          (3) A shortened benefit period; or

          (4) Any other similar offerings approved by the Commissioner.

     (Added to NAC by Comm’r of Insurance by R121-07, 9-18-2008, eff. 10-1-2008; A by R028-10, 12-16-2010, eff. 10-1-2011)