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§ 7702B. Treatment of qualified long-term care insurance
(a)
In general
For purposes of this title—
(1)
a qualified long-term care insurance contract shall be treated as an accident and health insurance contract,
(2)
amounts (other than policyholder dividends, as defined in section
808, or premium refunds) received under a qualified long-term care insurance contract shall be treated as amounts received for personal injuries and sickness and shall be treated as reimbursement for expenses actually incurred for medical care (as defined in section
213
(d)),
(3)
any plan of an employer providing coverage under a qualified long-term care insurance contract shall be treated as an accident and health plan with respect to such coverage,
(b)
Qualified long-term care insurance contract
For purposes of this title—
(1)
In general
The term “qualified long-term care insurance contract” means any insurance contract if—
(A)
the only insurance protection provided under such contract is coverage of qualified long-term care services,
(B)
such contract does not pay or reimburse expenses incurred for services or items to the extent that such expenses are reimbursable under title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount,
(D)
such contract does not provide for a cash surrender value or other money that can be—
other than as provided in subparagraph (E) or paragraph (2)(C),
(2)
Special rules
(A)
Per diem, etc. payments permitted
A contract shall not fail to be described in subparagraph (A) or (B) of paragraph (1) by reason of payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate.
(B)
Special rules relating to medicare
(C)
Refunds of premiums
Paragraph (1)(E) shall not apply to any refund on the death of the insured, or on a complete surrender or cancellation of the contract, which cannot exceed the aggregate premiums paid under the contract. Any refund on a complete surrender or cancellation of the contract shall be includible in gross income to the extent that any deduction or exclusion was allowable with respect to the premiums.
(c)
Qualified long-term care services
For purposes of this section—
(1)
In general
The term “qualified long-term care services” means necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services, which—
(2)
Chronically ill individual
(A)
In general
The term “chronically ill individual” means any individual who has been certified by a licensed health care practitioner as—
(i)
being unable to perform (without substantial assistance from another individual) at least 2 activities of daily living for a period of at least 90 days due to a loss of functional capacity,
(ii)
having a level of disability similar (as determined under regulations prescribed by the Secretary in consultation with the Secretary of Health and Human Services) to the level of disability described in clause (i), or
(iii)
requiring substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment.
Such term shall not include any individual otherwise meeting the requirements of the preceding sentence unless within the preceding 12-month period a licensed health care practitioner has certified that such individual meets such requirements.
(B)
Activities of daily living
For purposes of subparagraph (A), each of the following is an activity of daily living:
A contract shall not be treated as a qualified long-term care insurance contract unless the determination of whether an individual is a chronically ill individual described in subparagraph (A)(i) takes into account at least 5 of such activities.
(3)
Maintenance or personal care services
The term “maintenance or personal care services” means any care the primary purpose of which is the provision of needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual (including the protection from threats to health and safety due to severe cognitive impairment).
(4)
Licensed health care practitioner
The term “licensed health care practitioner” means any physician (as defined in section 1861(r)(1) of the Social Security Act) and any registered professional nurse, licensed social worker, or other individual who meets such requirements as may be prescribed by the Secretary.
(d)
Aggregate payments in excess of limits
(1)
In general
If the aggregate of—
(A)
the periodic payments received for any period under all qualified long-term care insurance contracts which are treated as made for qualified long-term care services for an insured, and
(B)
the periodic payments received for such period which are treated under section
101
(g) as paid by reason of the death of such insured,
exceeds the per diem limitation for such period, such excess shall be includible in gross income without regard to section
72. A payment shall not be taken into account under subparagraph (B) if the insured is a terminally ill individual (as defined in section
101
(g)) at the time the payment is received.
(2)
Per diem limitation
For purposes of paragraph (1), the per diem limitation for any period is an amount equal to the excess (if any) of—
(3)
Aggregation rules
For purposes of this subsection—
(4)
Dollar amount
The dollar amount in effect under this subsection shall be $175 per day (or the equivalent amount in the case of payments on another periodic basis).
(e)
Treatment of coverage provided as part of a life insurance contract
Except as otherwise provided in regulations prescribed by the Secretary, in the case of any long-term care insurance coverage (whether or not qualified) provided by a rider on or as part of a life insurance contract—
(1)
In general
This title shall apply as if the portion of the contract providing such coverage is a separate contract.
(2)
Application of section
7702
Section
7702
(c)(2) (relating to the guideline premium limitation) shall be applied by increasing the guideline premium limitation with respect to a life insurance contract, as of any date—
(3)
Application of section
213
No deduction shall be allowed under section
213
(a) for charges against the life insurance contract’s cash surrender value described in paragraph (2), unless such charges are includible in income as a result of the application of section
72
(e)(10) and the rider is a qualified long-term care insurance contract under subsection (b).
(f)
Treatment of certain State-maintained plans
(1)
In general
If—
(A)
an individual receives coverage for qualified long-term care services under a State long-term care plan, and
(B)
the terms of such plan would satisfy the requirements of subsection (b) were such plan an insurance contract,
such plan shall be treated as a qualified long-term care insurance contract for purposes of this title.
(g)
Consumer protection provisions
(1)
In general
The requirements of this subsection are met with respect to any contract if the contract meets—
(2)
Requirements of model regulation and Act
(A)
In general
The requirements of this paragraph are met with respect to any contract if such contract meets—
(i)
Model regulation
The following requirements of the model regulation:
(I)
Section
7A (relating to guaranteed renewal or noncancellability), and the requirements of section 6B of the model Act relating to such section
7A.
(X)
Section
12 (relating to requirement to offer inflation protection), except that any requirement for a signature on a rejection of inflation protection shall permit the signature to be on an application or on a separate form.
(XI)
Section
23 (relating to prohibition against preexisting conditions and probationary periods in replacement policies or certificates).
(B)
Definitions
For purposes of this paragraph—
(i)
Model provisions
The terms “model regulation” and “model Act” mean the long-term care insurance model regulation, and the long-term care insurance model Act, respectively, promulgated by the National Association of Insurance Commissioners (as adopted as of January 1993).
(ii)
Coordination
Any provision of the model regulation or model Act listed under clause (i) or (ii) of subparagraph (A) shall be treated as including any other provision of such regulation or Act necessary to implement the provision.
(iii)
Determination
For purposes of this section and section
4980C, the determination of whether any requirement of a model regulation or the model Act has been met shall be made by the Secretary.
(4)
Nonforfeiture requirements
(A)
In general
The requirements of this paragraph are met with respect to any level premium contract, if the issuer of such contract offers to the policyholder, including any group policyholder, a nonforfeiture provision meeting the requirements of subparagraph (B).
(B)
Requirements of provision
The nonforfeiture provision required under subparagraph (A) shall meet the following requirements:
(ii)
The nonforfeiture provision shall provide for a benefit available in the event of a default in the payment of any premiums and 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 appropriate State regulatory agency for the same contract form.
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