3 Alaska Admin. Code § 28.582

Current through September 25, 2024

Section 3 AAC 28.582 - Nonforfeiture benefit requirement

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

(b) To comply with the requirement to offer a nonforfeiture benefit under the provisions of AS 21.53.064;

(1) a policy or certificate 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 (h) of this section; and

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

(c) If the offer required to be made under AS 21.53.064 is rejected, the insurer shall provide the contingent benefit upon lapse described in this section; even if this offer is accepted for a policy with a fixed or limited premium paying period, the contingent benefit on lapse in (d)(2) of this section still applies.

(d) After rejection of the offer required under AS 21.53.064, for individual and group policies without nonforfeiture benefits issued after {March 27, 2022} the insurer shall provide a contingent benefit upon lapse. If 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. A 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 out in (1) of this subsection based on the insured's issue age, and the policy or certificate lapses not later than 120 days after the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least 30 days before the due date of the premium reflecting the rate increase. The triggers for a substantial premium increase shall comply with the following:

(1) The following are triggers for substantial premium increase according to issue age and present increase over initial premium.

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

(2) 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 out 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 (f)(2) of this section is 40 percent or more; unless otherwise required, policyholders shall be notified at least 30 days before the due date of the premium reflecting the rate increase; this provision is in addition to the contingent benefit provided by (1) of this subsection, and if both are triggered, the benefit provided is at the option of the insured; the following are the triggers for a substantial premium increase according to issue age and percent increase over initial premium.

Triggers for a Substantial Premium Increase
Issue Age	Percent Increase Over Initial Premium
Under 65	50%
year of age at least 65 years of age, but under 81 years of age	30%
At least 81 years of age	10%

(e) On or before the effective date of a substantial premium increase as defined in (d)(1) of this section, the insurer shall;

(1) offer to reduce policy benefits provided by the current coverage consistent with the requirements of 3 AAC 28.580 so that required premium payments are not increased;

(2) offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of (h) of this section; this option may be elected during the 120-day period referenced in (d) of this section; and

(3) notify the policyholder or certificate holder that a default or lapse during the 120-day period referenced in (d) of this section shall be considered to be the election of the offer to convert in (2) of this subsection unless the automatic option in (f)(3) of this section applies.

(f) on or before the effective date of a substantial premium increase as defined in (d)(2) of this section, the insurer shall;

(1) offer to reduce policy benefits provided by the current coverage consistent with the requirements of 3 AAC 28.580 so that required premium payments are not increased;

(2) offer to convert the coverage to a paid-up status where the amount payable for each benefit is 90 percent of the amount payable in effect immediately before lapse times the ratio of the number of completed months of paid premiums divided by the number of months m the premium paying period; this option may be elected during the 120-day period referenced in (d)(2) of this section; and

(3) notify the policyholder or certificate holder that a default or lapse during the 120-day period referenced in (d)(2) of this section shall be considered to be the election of the offer to convert in (2) of this subsection if the ratio is 40 percent or more.

(g) For a long-term care policy issued in this state on or after January 1, 2023,

(1) if the policy or certificate was issued at least 20 years before the effective date of the increase, a value of zero percent shall be used in place of all values in the in (d)(1) of this section table; and

(2) values above 100 percent in the table in (d)(1) of this section shall be reduced to 100 percent.

(h) Benefits continued as nonforfeiture benefits, inciting contingent benefits upon lapse in accordance with (d)(1) of this section but (d)(2) of this section, are described as follows in this subsection:

(1) for purposes of this subsection, and (i) of this section attained age rating is a schedule of premiums starting from the issue date; that increases age at least one percent a year before 50 years of age, and at least three percent a year 50 years of age of older;

(2) for purposes of this subsection, the non-forfeiture benefit must be of a shortened benefit period providing paid-up long-term care insurance coverage after lapse; the same 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 (3) of this subsection;

(3) the standard nonforfeiture credit must be equal to 100 percent of the sum of all premiums paid, including the premiums paid before changes in benefits; the insurer may offer additional shortened benefit period options, if the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration; however, the minimum nonforfeiture credit may 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 in limitation of (j) of this section.

(i) Nonforfeiture benefits are subject to the following:

(1) the nonforfeiture benefit may not begin later than the end of the third year following the policy or certificate issue date; the contingent benefit upon lapse must be effective during the first three years as well as thereafter;

(2) notwithstanding (1) of this subsection, for a policy or certificate with attained age rating, the nonforfeiture benefit must begin on the earlier of

(A) the end of the 10th year following the policy or certificate issue date; or

(B) the end of the second year following the date the policy or certificate is no longer subject to attained age rating; and

(3) 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.

(j) All benefits paid by the insurer while the policy or certificate 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.

(k) There may not be a difference in the minimum nonforfeiture benefits as required under this section for group and individual policies.

(l) The requirements set out in this section on and after November 2, 2022, apply as follows:

(1) except as provided in (2) and (3) of this subsection, the provisions of this section apply to a long-term care policy issued in this state on or after {effective date of 3 AAC 28.550 - 3 AAC 28.599};

(2) for certificates issued on or after {effective date of this section} under a group long-term care insurance policy as defined in AS 21.53.200(3)(A), which policy was in before {effective date of 3 AAC 28.550 - 3 AAC 28.599}, the provisions of this section do not apply.

(3) the requirements in (c)(d)(2), and (f) of this section apply to a long-term care insurance policy or certificate issued in this state after January 1, 2023, except that those provisions apply on and after November 2, 2022 to new certificates on a group policy as defined in AS 21.53.200(3)(A).

(m) Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse must be subject to the loss ratio requirements of 3 AAC 28.569 or 3 AAC 28.570, whichever is applicable, treating the policy as a whole.

(n) To determine whether contingent nonforfeiture upon lapse provisions are triggered under (d)(1) or (2) of this section, a replacing insurer that purchased or otherwise assumed one or more 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.

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

(1) the nonforfeiture provision shall be appropriately captioned;

(2) the nonforfeiture provision shall provide a benefit available if there is a default in the payment of premiums and shall state that the amount of the benefit may be adjusted after 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

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

(A) reduced paid-up insurance;

(B) extended term insurance;

(C) a shortened benefit period; or

(D) other similar offerings approved by the director.

3 AAC 28.582

Eff. 3/27/2022, Register 241, April 2022

Authority:AS 21.06.090

AS 21.53.064

AS 21.53.090