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The Pennsylvania Code website reflects the Pennsylvania Code changes effective through 54 Pa.B. 1806 (March 30, 2024).

31 Pa. Code § 89a.123. Nonforfeiture benefit requirement.

§ 89a.123. Nonforfeiture benefit requirement.

 (a)  Nonforfeiture benefits shall be offered under the following:

   (1)  A policy or certificate offered with nonforfeiture benefits shall 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 shall be the benefit described in subsection (e).

   (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.

 (b)  If the offer made for nonforfeiture benefits is rejected, the insurer shall provide the contingent benefit upon lapse described in this section.

 (c)  After rejection of the offer for nonforfeiture benefits for individual and group policies without nonforfeiture benefits issued after March 16, 2002, the insurer shall provide a contingent benefit upon lapse.

   (1)  If a group policyholder elects to make the nonforfeiture benefit an option to the certificateholder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

   (2)  The contingent benefit on lapse shall be triggered every time an insurer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured’s initial annual premium in this paragraph based on the insured’s issue age, and the policy or certificate lapses within 120 days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least 30 days prior to the due date of the premium reflecting the rate increase.

 Triggers for a Substantial Premium Increase

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

   (3)  On or before the effective date of a substantial premium increase as defined in paragraph (2), the insurer shall meet the following conditions:

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

     (ii)   Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of subsection (e). This option may be elected during the 120-day period referenced in subsection (d)(3).

     (iii)   Notify the policyholder or certificateholder that a default or lapse during the 120-day period referenced in subsection (d)(3) shall be deemed to be the election of the offer to convert in subsection (d)(4).

 (d)  Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse, are described in this subsection as follows:

   (1)  For purposes of this subsection, attained age rating is defined as a schedule of premiums starting from the issue date which increases age at least 1% per year prior to age 50, and at least 3% per year beyond age 50.

   (2)  For purposes of this subsection, the nonforfeiture benefit shall be of a shortened benefit period providing paid-up long-term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) will be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in paragraph (3).

   (3)  The standard nonforfeiture credit will be equal to 100% of the sum of all premiums paid, including the premiums paid prior to changes in benefits. The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall be at least 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 limitation of subsection (f).

   (4)  The nonforfeiture benefit shall begin by the end of the 3rd year following the policy or certificate issue date. The contingent benefit upon lapse shall be effective during the first 3 years as well as thereafter. For a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of either the end of the 10th year following the policy or certificate issue date or the end of the 2nd year following the date the policy or certificate is no longer subject to attained age rating.

   (5)  Nonforfeiture credits may be used for the care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

 (e)  The benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid up status will not exceed the maximum benefits which would be payable if the policy or certificate had remained in premium paying status.

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

 (g)  The requirements in this section are effective March 17, 2003, and apply as follows:

   (1)  Except as provided in paragraph (2), this section applies to a long-term care policy issued in this Commonwealth on or after March 16, 2002.

   (2)  For certificates issued on or after March 16, 2002, under a group long-term care insurance policy as defined in section 1103 of the act (40 P. S. §  991.1103), which policy was in force on March 16, 2002, this section does not apply.

 (h)  Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit on lapse shall be subject to the loss ratio requirements of §  89a.117 (relating to loss ratio) treating the policy as a whole.

 (i)  To determine whether contingent nonforfeiture upon lapse provisions are triggered under subsection (d)(3), a replacing insurer that purchased or otherwise assumed 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.

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

   (1)  The nonforfeiture provision shall be appropriately captioned.

   (2)  The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of premiums and shall state that 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 Commissioner for the same contract form.

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

     (i)   Reduced paid-up insurance.

     (ii)   Extended term insurance.

     (iii)   Shortened benefit period.

     (iv)   Other similar offerings approved by the Commissioner.

Cross References

   This section cited in 31 Pa. Code §  89a.105 (relating to policy practices and provisions); and 31 Pa. Code §  89a.120 (relating to standards for marketing).

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