Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products

2. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products

3. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Presenters • Sean Fry, Assistant Director-Accident/Health Section • Aaron Jenkins, Insurance Specialist-Life, Annuity and Credit Section • Carol Lo, Actuary, Actuarial Section

4. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Presentation Overview • Long Term Care (LTC) Products • Annuity Nonforfeiture Calculations • Medicare Supplement Products

5. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Partnership Program • LHL570(LTC) • Insurer Certification Form • (28 TAC § 3.3873(a)(2))

6. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Partnership Program • Policy or Certificate- Must be Tax Qualified • (28 TAC §3.3871(a)(1)(B), 28 TAC §3.3847)

7. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Partnership Program • Policy or Certificate (continued) • Inflation Protection Requirements • (28 TAC §3.3871(a)(1)(C), 28 TAC § 3.3872)

8. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Partnership Program • Policy or Certificate (continued) • Inflation Protection Requirements • Person < 61 years of age = Compound

9. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Partnership Program • Policy or Certificate (continued) • Inflation Protection Requirements • Person >61, but <76 years of age = Simple or Compound

10. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Partnership Program • Policy or Certificate (continued) • Inflation Protection Requirements • = or >76 years of age = Not Required, But Must be Offered

11. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Great Job! 100 % Correct

12. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Partnership Program • Policy or Certificate (continued) • LHL569(LTC) • Required Disclosure Notice • (28 TAC §3.3871(a)(2))

13. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Forms (Mandated Text): • (28 TAC §§ 3.3829(b)(8)(9), 3.3842(i)(2)) •  LTC Personal Worksheet • (LHL560(LTC)) •  LTC Potential Rate Increase Disclosure Form • (LHL561(LTC)) •  Things You Should Know Before You Buy LTC Insurance (LHL567(LTC))

14. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Forms (Mandated Text): Exception • (28 TAC §§ 3.3829(b)(8)(9), 3.3842(i)(2)) •  Exception for the LTC Personal Worksheet •  Text: “For State of Texas” • “Company” • “Noncancellable/Guaranteed Renewable” • “Agent”

15. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • LTC Web Based Electronic Reporting •  Reported each year by June 30 • Link: http://www.tdi.state.tx.us/forms/form10.html •  Replacement & Lapse Report: LHL562(LTC) •  Rescission Reporting: LHL563(LTC) •  Claims Denial Reporting: LHL564(LTC) •  Long Term Care Policies Sold: LHL565(LTC) •  Suitability Reporting: LHL566(LTC)

16. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • Life Policy/Annuity Contracts • A Long-Term Care (LTC) rider is subject to 28 TAC Subchapter Y, Chapter 3. These situations make a rider LTC: • If payments under the rider are to be used specifically for or restricted to LTC expenses. • If the rider extends the benefits beyond exhaustion of the contract’s death benefit (extension of benefits) • If the cash value of a policy or contract increases as the result of LTC or LTC related expenses.

17. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • Life Policy/Annuity Contracts-Common Omissions • Outline of Coverage not Included • Improper Order or Format of the Outline of Coverage • Exact language of Subchapter Y is not used (extra/deleted language) in the Rider or Outline of Coverage • Rates/(Cost-of-Insurance)/Actuarial requirements not included

18. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • Life Policy/Annuity Contracts • An accelerated-of-life insurance benefit is a benefit under a life insurance contract which prepays all or a portion of the death benefit. This type of a rider is not considered LTC if: • It accelerates the death benefit for: •  terminal illness, medical conditions requiring extraordinary medical intervention •  permanent institutional confinement, •  specified diseases (examples: cancer, heart disease, AIDS, Organ Transplants)

19. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • Life Policy/Annuity Contracts (continued) • This type of a rider is not considered LTC if: • It pays a lump sum for benefits • The payments are not restricted to or conditioned upon the receipt of LTC or LTC related expenses

20. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Long Term Care • Rating Issues: • Section 1651.053, TIC; 28 TAC 3.3831 • Missing actuarial certification • Missing moderately adverse experience assumption • Missing accumulation of at least twelve months actual experience after implementation of prior rate increase • Combining experiences of pre-rate stabilized and rate stabilized forms • Proposing a series of rate increases

21. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Annuity Nonforfeiture Calculations • House Bill 1919 passed during the 81st Texas legislative session. • Amends Section 1107.006, Texas Insurance Code. • Requires all optional and fixed maturity date annuities to adhere to the 70/10 standard. • The standard is applicable for purposes of the annuity nonforfeiture calculations.

22. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Annuity Nonforfeiture Calculations • The 70/10 Standard: • The maturity date of a contract must not be later than the next anniversary of the annuity contract that follows the annuitant’s 70th birthday or • The 10th anniversary of the contract • Effective Date is June 1, 2010 • Before passage of House Bill 1919, Fixed maturity date annuity contracts did not have to comply with the 70/10 standard

23. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Annuity Nonforfeiture Calculations • Optional maturity date contracts already have to comply with the 70/10 standard. • All annuity contracts issued on or after June 1, 2010, must comply with the 70/10 standard. • Contracts to be issued on or after June 1, 2010, that are not in compliance must be revised.

24. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Annuity Nonforfeiture Calculations • Sections 1107.006, 1107.057, 1107.101 – 1107.103 TIC • Retrospective Test (accumulation value) • Prospective Test (present value) • Maturity Date = later of: • next anniversary after 70th birthday; or • 10th anniversary of the contract

25. Prior to 70/10

26. 70/10

27. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Annuity Nonforfeiture Calculations • Revise Surrender Charge Schedule • Revise Issue Age Limit •  Revised contract or revised contract page (as an insert page) with new form number •  Revised specification page with new form number •  Revised actuarial memorandum •  Revised nonforfeiture demonstration

28. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • What’ Supp? Medicare Supplement • 2010 Standardized Plans (28 TAC § 3.3322)

29. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • What’s Supp? Medicare Supplement • 2010 Standardized Plans (28 TAC § 3.3322) • Outline of Coverage(LHL 050 Rev. 06/09)(28TAC § 3.3308(c))

30. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • What’s Supp? Medicare Supplement • 2010 Standardized Plans (28 TAC § 3.3322) • Outline of Coverage(28TAC § 3.3308(c)) • 1990 Standardized Plans (Discontinued)

31. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • What’s Supp? Medicare Supplement • 2010 Standardized Plans (28 TAC § 3.3322) • Outline of Coverage(28 TAC § 3.3308(c)) • 1990 Standardized Plans (Discontinued) • Rates/Actuarial Memorandum

32. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Medicare Supplement • Rating Issues: • Effective date of rate increase; 28 TAC § 3.3323 • Rate increase on non-credible blocks; 28 TAC § 3.3307(d) • Rate increase request on plan A disabled • Experience must be presented separately by plan

33. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products • Conclusion & Questions • Contact Information: • Aaron Jenkins (Insurance Specialist) • aaron.jenkins@tdi.state.tx.us • Carol Lo (Actuary) • carol.lo@tdi.state.tx.us • Sean Fry (Assistant Director) • sean.fry@tdi.state.tx.us