Section 40. Definitions

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Applicant" means in the case of an individual long-term care insurance policy, the person who seeks to contract for such benefits, or in the case of a group long-term care insurance policy, the proposed certificateholder.

"Certificate" means any certificate or evidence of coverage issued under a group long-term care insurance policy, which policy has been delivered or issued for delivery in this Commonwealth.

"Commission" means the Virginia State Corporation Commission.

"Exceptional increase" means only those increases filed by an insurer and identified as exceptional for which the commission determines the need for the premium rate increase is justified (i) due to changes in laws or regulations applicable to long-term care coverage in this Commonwealth, or (ii) due to increased and unexpected utilization that affects the majority of insurers of similar products. Except as provided in 14VAC5-200-153, exceptional increases are subject to the same requirements as other premium rate schedule increases. The commission, in determining that the necessary basis for an exceptional increase exists, shall also determine any potential offsets to higher claims costs.

"Expected loss ratio" means the ratio of the present value of future benefits to the present value of future premiums over the entire period of the contract.

"Group long-term care insurance" means a long-term care insurance policy which complies with § 38.2-3521.1 or 38.2-3522.1 of the Code of Virginia delivered or issued for delivery in this Commonwealth.

"Incidental," as used in 14VAC5-200-153 J, 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. These values shall be measured as of the date of issue.

"Insurer" means any insurance company, health services plan, fraternal benefit society, health maintenance organization, or any other similar organization.

"Long-term care insurance" means any insurance policy or rider primarily advertised, marketed, offered or designed to provide coverage for not less than 12 consecutive months for each covered person on an expense incurred, indemnity, prepaid, or other basis, for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, personal care, mental health or substance abuse services, provided in a setting other than an acute care unit of a hospital. Such term includes group and individual annuities and life insurance policies or riders which provide directly or which supplement long-term care insurance issued by insurers. Such term also includes a policy or rider which provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. Long-term care insurance shall not include any insurance policy which is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage. With regard to life insurance, this term does not include life insurance policies which accelerate the death benefit in accordance with § 38.2-3115.1 of the Code of Virginia specifically for one or more of the qualifying events of terminal illness, medical conditions requiring extraordinary medical intervention, or permanent institutional confinement, and which provide the option of a lump-sum payment for those benefits and in which neither the benefits nor the eligibility for the benefits is conditioned upon the receipt of long-term care. Notwithstanding any other provision contained herein, any product advertised, marketed or offered as long-term care insurance shall be subject to the provisions of this chapter. Health maintenance organizations, cooperative nonprofit life benefit companies and mutual assessment life, accident and sickness insurers shall apply to the commission for approval to provide long-term care insurance prior to issuing this type of coverage.

"Policy" means any individual or group policy of insurance, contract, subscriber agreement, certificate, rider or endorsement delivered or issued for delivery in this Commonwealth by an insurer.

"Qualified actuary" means a member of the American Academy of Actuaries.

"Qualified long-term care insurance contract" or "federally tax-qualified long-term care insurance contract" means:

1. An individual or group insurance contract that meets the requirements of § 7702B(b) of the Internal Revenue Code of 1986 (26 USC § 7702B(b)), as follows:

a. The only insurance protection provided under the contract is coverage of qualified long-term care services. A contract shall not fail to satisfy the requirements of this subdivision 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. The contract does not pay or reimburse expenses incurred for services or items to the extent that the expenses are reimbursable under Title XVIII of the Social Security Act (42 USC § 1395 et seq.), or would be so reimbursable but for the application of a deductible or coinsurance amount. The requirements of this subdivision do not apply to expenses that are reimbursable under Title XVIII of the Social Security Act only as a secondary payor. A contract shall not fail to satisfy the requirements of the subdivision 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;

c. The contract is guaranteed renewable within the meaning of § 7702B(b)(1)(C) of the Internal Revenue Code of 1986;

d. The contract does not provide for a cash surrender value or other money that can be paid, assigned, pledged as collateral for a loan, or borrowed except as provided in subdivision 1 e of this definition;

e. All refunds of premiums and all policyholder dividends or similar amounts under the contract are to be applied as a reduction in future premiums or to increase future benefits, except that a refund on the event of death of the insured or a complete surrender or cancellation of the contract cannot exceed the aggregate premiums paid under the contract; and

f. The contract meets the consumer protection provisions set forth in § 7702B(g) of the Internal Revenue Code of 1986 and this chapter; or

2. The portion of a life insurance contract that provides long-term care insurance coverage by rider or as part of the contract that satisfies the requirements of § 7702B(b) and (e) of the Internal Revenue Code of 1986.

"Similar policy forms" means all of the long-term care insurance policies and certificates issued by an insurer in the same long-term care benefit classification as the policy form being considered. Certificates of groups as set forth in subsections A and C of § 38.2-3521.1 of the Code of Virginia are not considered similar to certificates or policies otherwise issued as long-term care insurance, but are similar to other comparable certificates with the same long-term care benefit classifications. For purposes of determining similar policy forms, long-term care benefit classifications are defined as follows: institutional long-term care benefits only, noninstitutional long-term care benefits only, or comprehensive long-term care benefits.

Historical Notes

Derived from Regulation 40, Case No. INS910239, § 5, eff. January 1, 1992; amended, Volume 17, Issue 04, eff. December 1, 2000; Volume 18, Issue 06, eff. February 1, 2002; Volume 19, Issue 12, eff. April 1, 2003; Volume 23, Issue 17, eff. September 1, 2007; Volume 31, Issue 18, eff. September 1, 2015.

Statutory Authority

§§ 12.1-13, 38.2-223, and 38.2-5202 of the Code of Virginia.