(a) The commissioner finds that long-term
care policies and life insurance-long-term care coverage are offered and
marketed to a population which is particularly susceptible to pressure sales
tactics and misleading or fraudulent sales activities. These products are also
complex and difficult for most purchasers to analyze and understand.
The purchase of any of these products is
an important and significant decision because of the cost and the significance
of these insurance products in planning and providing for long-term care. This
section and s.
a readopted to provide adequate protection for
Wisconsin insureds and the public.
This section does not apply to an
accelerated benefit coverage of a life insurance policy, endorsement or rider
as described under s.
This section, except for subs. (6) and
(8), does not apply to individual long-term care policy or life
insurance-long-term care coverage, to a group long-term care policy or life
insurance-long-term care coverage or a certificate under the group policy, or
to a renewal policy or coverage or certificate, if:
1. The individual long-term care policy or
life insurance-long-term care coverage was issued prior to June 1,
2. The group policy is issued
prior to June 1, 1991 and all certificates under the policy are issued prior to
June 1, 1991; or
policy is issued prior to June 1, 1991 and the policy is exempt from s.
(c) Section in effect prior to June 1, 1991
and subs. (6) and (8) apply to those policies, coverages or certificates which
qualify for exemption under par. (b).
DEFINITIONS. In this section:
(a) "Basis for continuation of coverage"
means a policy provision that maintains coverage under the existing group
policy when the coverage would otherwise terminate and that is subject only to
the continued timely payment of premium when due. Group policies that restrict
provision of benefits and services to, or contain incentives to use certain
providers or facilities may provide continuation benefits that are
substantially equivalent to the benefits of the existing group policy. The
commissioner shall make a determination as to the substantial equivalency of
benefits, and in doing so, shall take into consideration the differences
between managed care and non-managed care plan, including but not limited to,
provider system arrangements, service availability, benefit levels and
"Basis for conversion of coverage" means a policy provision that an individual
whose coverage under the group policy would otherwise terminate or has been
terminated for any reason, including discontinuance of the group policy in its
entirety or with respect to an insured class, and who has been continuously
insured under the group policy, and any group policy that it replaced, for at
least 3 months immediately prior to termination, shall be entitled to the
issuance of a converted policy by the insurer under whose group policy he or
she is covered, without evidence of insurability.
(c) "Converted policy" means an individual
policy of long-term care insurance providing benefits identical to or benefits
determined by the commissioner to be substantially equivalent to or in excess
of those provided under the group policy from which conversion is made. Where
the group policy form which conversion is made restricts provision of benefits
and services to or contains incentives to use certain providers or facilities,
the commissioner, in making a determination as to the substantial equivalency
of the benefits, shall take into consideration the differences between
managed-care and non-managed-care plans, including but not limited to, provider
system arrangements, service availability, benefit levels and administrative
complexity. The converted policy offered shall be on a form generally available
in the state.
increase" means an increase in premium by an insurer that the commissioner
determines is justified under any of the following circumstances:
1. Changes in laws or rules applicable to
long-term care coverage in this state.
2. Increased and unexpected utilization that
affects the majority of insurers of similar products.
(f) "Incidental" means that the value of the
long-term care benefits provided is less than 10% of the total value of the
benefits provided over the life of the policy measured as of the date of
insurance-long-term care coverage" has the meaning given in s.
(i) "Managed-care plan" is a health care or
assisted living arrangement designed to coordinate patient care or control
costs through utilization review, case management or use of specific provider
(j) "Qualified actuary"
means a member in good standing of the American academy of actuaries.
"Similar policy forms" means all of the
long-term care, nursing home and home health care insurance policies and
certificates offered by an insurer that fall within one of the following
1. Institutional long-term care,
nursing home benefits only.
Non-institutional long-term care, home health care benefits only.
3. Comprehensive long-term care, nursing home
and home health care benefits.
APPLICATION OF THE INSURANCE CODE TO
LONG-TERM CARE, NURSING HOME AND HOME HEALTH CARE GROUP POLICIES. A group or
blanket long-term care policy or certificate may be exempt, under s.
3, Stats., from chs. 600 to 646, Stats.,
and rules adopted under those statutes only if:
(a) The policy is issued for delivery and
delivered in another state;
policy is subject to regulatory requirements substantially similar to those
provided under chs. 600 to 646, Stats., and the rules;
(c) The policy is otherwise exempt under s.
(b) 3, Stats.;
(d) The policy and sufficient information to
enable the office to determine compliance with pars. (a) to (c) is filed with
the office; and
(e) The office
makes a written determination that the policy complies with pars. (a) to (c)
and that the policy is not contrary to the public interest, before the policy
or certificates under the policy are marketed or solicited in this
Insurers shall set and
maintain rates and benefits for long-term care policies so that the loss ratio
is at least:
1. 65%, for individual
2. 65%, for group
policies which issue coverage as the result of solicitation of individuals
through the mail or the mass media, including, but not limited to, print or
3. 75%, for
group policies other than those subject to subd. 2.
For the purpose of this subsection a loss
ratio shall be calculated on the basis of the ratio of the present value of the
expected benefits to the present value of the expected premium over the entire
period of coverage. An insurer shall consider and evaluate the following:
1. Statistical credibility of incurred claims
experience and earned premium over the entire period of coverage;
2. The entire period for which rates have
been computed to provide coverage;
3. Experienced and projected
4. Concentration of
experience within early policy duration;
5. Expected claim fluctuation;
6. Experience refunds, adjustments or
9. Product features such as
elimination periods, deductibles and maximum limits.
10. All appropriate expense
11. Experimental nature of
13. Mix of business by
An insurer shall submit its calculations of the loss ratio for a long-term care
policy at the same time it submits a long-term care policy form and at any time
that it makes a filing for rates under a long-term care policy.
(d) The provisions of this subsection apply
only to policies issued prior to January 1, 2002.
(6)ANNUAL LOSS RATIO REPORT. An insurer shall
annually, not later than April 1, file a report with the office in the form
prescribed by the commissioner regarding its loss ratios and loss experience
under long-term care policies. The report shall be certified to by a qualified
LONG-TERM CARE, NURSING
HOME AND HOME HEALTH CARE POLICIES, CONTINUATION AND CONVERSION REQUIREMENTS.
(a) A group policy, as defined by s.
(c), Stats., which is a long-term care policy
shall provide terminated insureds the right to continue under the group policy
as required under s.
(b) An individual long-term
care policy that provides coverage for a spouse shall permit the spouse to
obtain individual coverage as required under s.
Stats., upon divorce or annulment.
(c) For the purpose of s.
Stats., an insurer provides reasonably similar individual coverage to a person
converting from a long-term care policy only if the insurer offers an
individual policy that is identical to or in excess of the benefits provided
under the terminated coverage.
In addition to offering the individual conversion policy as required under par.
(c), an insurer may also offer the person the alternative of an individual
conversion policy that complies with all of the following:
1. Is not underwritten.
Complies with this section and s.
Provides coverage of care in an institutional setting, if the original policy
provided coverage in an institutional setting.
4. Provides coverage of care in a
community-based setting, if the original policy provided coverage in a
(e) Written application for the converted
policy shall be made and the first premium due, if any, shall be paid as
directed to the insurer within 30 days after notice of termination of group
coverage. The converted policy shall be issued effective on the day following
the termination of coverage under the group policy, and shall be guaranteed
(f) Unless the
group policy from which conversion is made replaced previous group coverage,
the premium for the converted policy shall be calculated on the basis of the
insured's age at inception of coverage under the group policy from which
conversion is made. Where the group policy from which conversion is made
replaced previous group coverage, the premium for the converted policy shall be
calculated on the basis of the insured's age at inception of coverage under the
group policy replaced except when the premium was a composite premium. If the
premium for the policy from which conversion is made was a composite premium
then at conversion the premium shall be based upon attained age at the time of
The offer of
continuation of coverage or issuance of a converted policy shall comply with s.
Stats., except when either of the following occurs:
1. Termination of group coverage resulted
from an individual's failure to make any required payment of premium or
contribution when due.
terminating coverage is replaced not later than 31 days after termination by
group coverage effective on the day following the termination of coverage
providing benefits identical to or in excess of those provided by the
terminating coverage and the premium for which is calculated in a manner
consistent with the requirements of par. (f).
(h) Notwithstanding any other provision of
this section, a converted policy issued to an individual who at the time of
conversion is covered by another long-term care insurance policy that provides
benefits on the basis of incurred expenses, may contain a provision that
results in a reduction of benefits payable if the benefits provided under the
additional coverage, together with the full benefits provided by the converted
policy, would result in payment of more than 100% of incurred expenses. The
provision shall only be included in the converted policy if the converted
policy also provides for a premium decrease or refund that reflects the
reduction in benefits payable.
A converted policy may provide that the benefits payable under the converted
policy, together with the benefits payable under the group policy from which
conversion is made, may not exceed those that would have been payable had the
individual's coverage under the group policy remained in force and
(j) Notwithstanding any
other provision of this section, an insured individual whose eligibility for
group long-term care coverage is based upon his or her relationship to another
person shall be entitled to continuation of coverage under the group policy
upon termination of the qualifying relationship by death or dissolution of
STANDARDS FOR LONG-TERM CARE, NURSING HOME AND HOME HEALTH CARE POLICIES AND
LIFE INSURANCE-LONG-TERM CARE COVERAGE.
1. Policy reserves for life
insurance-long-term care coverage shall be determined in accordance with s.
(g), Stats. Claim reserves must also be
established if a life insurance-long-term care coverage is in claim
2. Reserves for coverage
subject to this paragraph should be based on the multiple decrement model
utilizing all relevant decrements except for voluntary termination rates.
Single decrement approximations are acceptable if the calculation produces
essentially similar reserves, if the reserve is clearly more conservative, or
if the reserve is immaterial. The calculations may take into account the
reduction in life insurance benefits due to the payment of long-term care
benefits. However, in no event shall the reserves for the long-term care
benefit and the life insurance benefit be less than the reserves for the life
insurance benefit assuming no long-term care benefits.
In the development and calculation of
reserves for policies and riders subject to this subsection, due regard shall
be given to the applicable policy provisions, marketing methods, administrative
procedures and all other considerations which have an impact on projected claim
costs, including, but not limited to, the following:
a. Definition of insured events,
b. Covered long-term care
c. Existence of home
convalescence care coverage,
Definition of facilities,
Existence or absence of barriers to eligibility,
f. Premium waiver provision,
h. Ability to raise premiums,
i. Marketing method,
j. Underwriting procedures,
k. Claims adjustment procedures,
L. Waiting period,
m. Maximum benefit,
n. Availability of eligible
o. Margins in claim
p. Optional nature of
q. Delay in eligibility
protection provisions, and
Guaranteed insurability option.
4. Any applicable valuation morbidity table
shall be certified as appropriate as a statutory valuation table by a member of
the American academy of actuaries.
Reserves for long-term care policies
shall be determined in accordance with s.
using tables established
for reserve purposes by a qualified actuary meeting the requirements of s.
and acceptable to the commissioner.
LONG-TERM CARE RATE INCREASE
(a) The initial premium rate
schedule provided an insured covered by a long-term care policy may not
increase during the initial 3 years in which the policy is in force.
Except as provided in par. (d), any
increase in the premium rate schedule provided an insured after the initial
3-year period is subject to the following:
Any premium rate increase after the initial 3-year period is guaranteed for at
least 2 years after its effective date;
2. For those insureds age 75 or above and
whose long term care policy(s) has been in force for at least 10 years, no rate
increase shall exceed 10%;
insurer of any long-term care policy increases rates for a policy by more than
50% in any 3-year period, the insurer shall discontinue issuing all long-term
care policies in this state for a period of 2 years from the effective date of
such rate increase.
a. If an insurer issues
both individual and group long-term care policies, the insurer shall
discontinue issuing the type of coverage (individual and/or group) for which
rates were increased more than 50% in a 3-year period.
b. All rate filings subject to this
requirement shall include a past history of all previous rate increases and a
certification of the maximum rate increase over the last thirty-five months
including the current rate increase as a percent of the premium in the first
month of the 35 month period.
This provision shall also apply to any replacing insurer which purchases or
otherwise assumes a block of long-term care policies from a prior insurer. For
purposes of this provision, any rate increases of the prior insurer shall apply
to the replacing insurer.
The premium charged to an insured may not
increase due to either:
a. The increasing age
of the insured at ages beyond 65; or
b. The duration the insured has been covered
under the policy.
(c) Long-term care policies which provide for
inflation protection shall be subject to the restrictions contained in pars.
(a) and (b). However, the purchase of additional coverage may not be considered
a premium rate increase for purposes of determining compliance with par. (b) at
the time additional coverage is purchased. The premium charged for the purchase
of additional coverage shall be subject to par. (b) for any subsequent premium
commissioner may institute future rulemaking proceedings to amend the
provisions in par. (b) in appropriate circumstances, including the following:
1. Applicable state or federal law is enacted
which materially affects the insured risk.
2. Unforeseen changes occur in long-term care
delivery, insured morbidity or insured mortality.
3. Judicial interpretations or rulings are
rendered regarding policy benefits or benefit triggers resulting in unforeseen
Except as provided in par. (f) the provisions of this subsection apply only to
long-term care insurance policies and certificates issued from August 1, 1996
to December 31, 2001.
provisions of this subsection do not apply to any group long-term care
insurance policy or certificate issued to any labor organization or to any
trust or trustee of a fund established by any employer or labor organization
for members or former members if the group policy was in force prior to August
RATE SCHEDULE INCREASES, REQUESTING AND DETERMINING EXCEPTIONAL RATE INCREASES.
An insurer shall provide notice of a
pending premium rate schedule increase, including an exceptional increase, to
the commissioner at least 60 days prior to the notice to the policyholders and
shall include all of the following:
required disclosure of rating practices to consumers notice as described under
2. A certification by a qualified actuary
that the premium rate filing is in compliance with the provisions of this
subsection and if the requested premium rate schedule increase is implemented
and the underlying assumptions, which reflect moderately adverse conditions,
are realized, no further premium rate schedule increases are
memorandum justifying the rate schedule change request that includes all of the
Lifetime projections of earned
premiums and incurred claims based on the filed premium rate schedule increase;
and the method and assumptions used in determining the projected values,
including reflection of any assumptions that deviate from those used for
pricing other forms currently available for sale, including all of the
i. Annual values for the 5 years
preceding and the 3 years following the valuation date shall be provided
including the development of the lifetime loss ratio, unless the rate increase
is an exceptional increase.
Projections demonstrating compliance with par. (b).
b. Disclosure of how reserves have been
incorporated in this rate increase whenever the rate increase will trigger
contingent benefit upon lapse.
Disclosure of the analysis performed to determine why a rate adjustment is
necessary, which pricing assumptions were not realized and why, and what other
actions taken by the insurer have been relied on by the actuary.
d. A statement that policy design,
underwriting and claims adjudication practice have been taken into
e. If it is
necessary to maintain consistent premium rates for new certificates and
certificates receiving a rate increase, the insurer shall file composite rates
reflecting projections of new certificates.
4. A statement that renewal premium rate
schedules are not greater than new business premium rate schedules except for
differences attributable to benefits, unless sufficient justification is
provided to the commissioner.
Sufficient information for review of the premium rate schedule increase by the
6. For exceptional
increases, the projected experience should be limited to the increases in
claims expenses attributable to the approved reasons for the exceptional
increase. If the commissioner determines that offsets may exist, the insurer
shall use appropriate net projected experience.
7. The commissioner may request a review by
an independent actuary or a professional actuarial body of the basis for a
request that an increase be considered an exceptional increase.
All premium rate schedule
increases shall be determined in accordance with all of the following
1. The commissioner, in
determining that the necessary basis for an exceptional increase exists, shall
also determine any potential offsets to higher claims costs.
2. Exceptional increases shall provide that
70% of the present value of projected additional premiums from the exceptional
increase will be returned to policyholders in benefits.
Premium rate schedule increases shall be
calculated such that the sum of the accumulated value of incurred claims,
without the inclusion of active life reserves, and the present value of future
projected incurred claims, without the inclusion of active life reserves, will
not be less than the sum of the following:
The accumulated value of the initial earned premium times 58%.
b. Eighty-five percent of the accumulated
value of prior premium rate schedule increases on an earned basis.
c. The present value of future projected
initial earned premiums times 58%.
d. Eighty-five percent of the present value
of future projected premiums not in this subd. 3. c. on an earned
4. If a policy
form has both exceptional and other increases, the values in subd. 3. b. and d.
shall also include 70% for exceptional rate increase amount.
All present and accumulated values used to
determine rate increases shall use the maximum valuation interest rate for
contract reserves as specified in s.
. The actuary shall disclose, as part of the
actuarial memorandum, the use of any appropriate averages.
(c) For each rate increase that is
implemented, the insurer shall file for review by the commissioner updated
projections as defined in par. (a) 3. a. annually for the next 3 years and
include a comparison of actual results to projected values. The commissioner
may extend the period to greater than 3 years if actual results are not
consistent with projected values from prior projections.
(d) If any premium rate in the revised
premium rate schedule is greater than 200% of the comparable rate in the
initial premium schedule, lifetime projections, as defined in par. (a) 3. a.,
shall be filed for review by the commissioner every 5 years following the end
of the required period in par. (c).
(e) If the commissioner has determined that
the actual experience following a rate increase does not adequately match the
projected experience and that the current projections under moderately adverse
conditions demonstrate that incurred claims will not exceed proportions of
premiums specified in par. (b), the commissioner may require the insurer to
make premium rate schedule adjustments or take other measures to reduce the
difference between the projected and actual experience. In determining whether
the actual experience adequately matches the projected experience,
consideration should be given to par. (a) 3. e., if applicable.
If the majority of the policies or
certificates to which the increase is applicable are eligible for the
contingent benefit upon lapse, the insurer shall file all of the following:
1. A plan, subject to commissioner approval,
for improved administration or claims processing designed to eliminate the
potential for further deterioration of the policy form requiring further
premium rate schedule increases, or both, or to demonstrate that appropriate
administration and claims processing have been implemented or are in effect;
otherwise the commissioner may impose the condition in par. (g).
2. The original anticipated lifetime loss
ratio, and the premium rate schedule increase that would have been calculated
according to par. (b) had the greater of the original anticipated lifetime loss
ratio or 58% been used in the calculations described in par. (b) 3. a. and
For a rate increase filing that meets the
following criteria, the commissioner shall review, for all policies included in
the filing, the projected lapse rates and past lapse rates during the 12 months
following each increase to determine if significant adverse lapsation has
occurred or is anticipated when all of the following conditions occur:
a. The rate increase is not the first rate
increase requested for the specific policy form or forms.
b. The rate increase is not an exceptional
c. The majority of the
policies or certificates to which the increase is applicable are eligible for
the contingent benefit upon lapse.
2. If significant adverse lapsation has
occurred, is anticipated in the filing or is evidenced in the actual results as
presented in the updated projections provided by the insurer following the
requested rate increase, the commissioner may determine that a rate spiral
exists. Following the determination that a rate spiral exists, the commissioner
may require the insurer to offer, without underwriting, to all in force
insureds subject to the rate increase the option to replace existing coverage
with one or more reasonably comparable products being offered by the insurer or
3. The offer
described in subd. 2. shall be subject to the approval of the commissioner, be
based on actuarially sound principles, but not be based on attained age, and
shall provide that maximum benefits under any new policy accepted by an insured
shall be reduced by comparable benefits already paid under the existing
4. The insurer shall
maintain the experience of all the replacement insureds separate from the
experience of insureds originally issued the policy forms. If a rate increase
on the policy form, the rate increase shall be limited to the maximum rate
increase determined based on the combined experience or the maximum rate
increase determined based only on the experience of the insureds originally
issued the form plus 10%, whichever is less.
(h) If the commissioner determines that the
insurer has exhibited a persistent practice of filing inadequate initial
premium rates for long-term care, nursing home, and home health care insurance,
the commissioner may, in addition to the provisions of par. (g), either
prohibit the insurer from filing and marketing comparable coverage for a period
of up to 5 years, or prohibit the insurer from offering all other similar
coverages and require the insurer to limit marketing of new applications to the
products subject to recent premium rate schedule increases.
(i) Paragraphs (a) through (h) shall not
apply to policies for which the benefits provided by the policy are
(j) Except as provided
in pars. (k) and (L) the provisions of this subsection apply to any long-term
care, nursing home or home health care policy or certificate issued in this
state on or after January 1, 2002.
(k) For group long-term care insurance
certificates issued to employer-sponsored groups or labor organizations in this
state and in force on or after January 1, 2002 the provisions of this
subsection shall apply on the first policy anniversary occurring at least 12
months after January 1, 2002.
In lieu of filing the projections required by pars. (c) and (d) with the
commissioner, an insurer may file projections with the employer if that
employer has at least 5,000 eligible employees of whom at least 250 are covered
under the policy or the employer pays at least 20% of the annual group premium
in the year preceding the increase.
INITIAL FILING REQUIREMENTS.
(a) This subsection applies to any long-term
care, nursing home and home health care policy issued in this state on or after
January 1, 2002.
shall file all of the following with the commissioner at least 30 days before
making a long-term care insurance policy available for sale:
A copy of the disclosure documents as
required by s.
An actuarial certification consisting of
all the following:
a. A statement that the
initial premium rate schedule is sufficient to cover anticipated costs under
moderately adverse experience and that the premium rate schedule is reasonably
expected to be sustainable over the life of the form with no future premium
statement that the policy design and coverage provided have been reviewed and
taken into consideration.
statement that the underwriting and claims adjudication processes have been
reviewed and taken into consideration.
d. A complete description of the basis for
contract reserves that are anticipated to be held under the form.
e. Sufficient detail or sample calculations
provided so as to have a complete depiction of the reserve amounts to be
f. A statement that the
assumptions used for reserves contain reasonable margins for adverse
g. A statement that the
net valuation premium for renewal years does not increase except for
attained-age rating where permitted.
h. A statement that the difference between
the gross premium and the net valuation premium for renewal years is sufficient
to cover expected renewal expenses; or if such a statement cannot be made, a
complete description of the situations where this does not occur. An aggregate
distribution of anticipated issues may be used as long as the underlying gross
premiums maintain a reasonably consistent relationship. If the gross premiums
for certain age groups appear to be inconsistent with this requirement, the
commissioner may request a demonstration under subd. 3. based on a standard age
i. A statement that
the premium rate schedule is not less than the premium rate schedule for
existing similar policy forms also available from the insurer except for
reasonable differences attributable to benefit or a comparison of the premium
schedules for similar policy forms that are currently available from the
insurer with an explanation of the differences.
3. The commissioner may request an actuarial
demonstration that benefits are reasonable in relation to premiums. The
actuarial demonstration shall include either premium and claim experience on
similar policy forms, adjusted for any premium or benefit differences, relevant
and credible data from other studies, or both.
4. If the commissioner asks for additional
information under this provision, the period in par. (b) does not include the
period during which the insurer is preparing the requested
Wis. Admin. Code Office of the Commissioner of Insurance § Ins 3.455
Cr. Register, April,
1991, No. 424, eff. 6-1-91; cr. (9), Register, July, 1996, No. 487, eff.
8-1-96; CR 00-188: cr. (3) (c) to (g), (5) (b) 10. to 13., (d), (9m) and (10),
am. (9) (e), r. and recr. (9) (f), Register July 2001, No. 547 eff. 1-1-02;
EmR0817: emerg. r. and recr. (3), am. (7) (b) to (d), cr. (7) (e) to (j), eff.
6-3-08; CR 08-032: r. and recr. (3), am. (7) (b) to (d), cr. (7) (e) to (j)
Register October 2008 No. 634, eff. 11-1-08; correction in (2) (b) 3. made
(b) 7, Stats., Register October 2008 No.
CR 08-032 first applies to policies or certificates issued on
or after January 1, 2009 or on the first renewal date on or after January 1,
2009, but no later than January 1, 2010 for collectively bargained policies or