Bill Text: MI HB5149 | 2013-2014 | 97th Legislature | Introduced
Bill Title: Insurance; long-term care; accelerated benefits; clarify that long-term care insurance is not an accelerated benefit and define chronic illness. Amends sec. 603 of 1956 PA 218 (MCL 500.603).
Spectrum: Bipartisan Bill
Status: (Passed) 2014-06-04 - Assigned Pa 142'14 [HB5149 Detail]
Download: Michigan-2013-HB5149-Introduced.html
HOUSE BILL No. 5149
November 13, 2013, Introduced by Reps. Cochran, Leonard, Glardon, Goike, Segal and Hovey-Wright and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending section 603 (MCL 500.603), as added by 2003 PA 208.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 603. (1) As used in this section:
(a) "Accelerated benefits" means benefits payable under a life
insurance contract to a policyowner or certificateholder, during
the lifetime of the insured, in anticipation of death or upon the
occurrence of specified life-threatening or catastrophic conditions
as defined by the policy or rider that reduce the death benefit
otherwise payable under the life insurance contract and that are
payable upon the occurrence of a single qualifying event that
results in the payment of a benefit amount fixed at the time of
acceleration. Accelerated benefits do not include benefits payable
to an insured under a long-term care insurance policy.
(b) "Chronic illness" means a permanent medical condition that
results in an individual being unable to attend to basic physical
activities such as eating, toileting, bathing, grooming, dressing,
or ambulating. Chronic illness also includes a permanent severe
cognitive impairment or a similar form of dementia.
(c) (b)
"Qualifying event" means
1 or more of the following:
(i) A medical condition that would result in a drastically
limited life span as specified in the contract.
(ii) A medical condition that has required or requires
extraordinary medical intervention including, but not limited to,
major organ transplant or continuous artificial life support,
without which the insured would die.
(iii) A condition that usually requires continuous confinement
in an eligible institution as defined in the contract if the
insured is expected to remain there for the rest of his or her
life.
(iv) A medical condition that would, in the absence of
extensive or extraordinary medical treatment, result in a
drastically limited life span. Such conditions may include, but are
not limited to, coronary artery disease resulting in an acute
infarction or requiring surgery, permanent neurological deficit
resulting from cerebral vascular accident, end stage renal failure,
acquired immune deficiency syndrome, or other medical conditions
that
the commissioner director
of the department of insurance and
financial services has approved for any particular filing.
(v) A chronic illness.
(vi) (v) Other
qualifying events that the commissioner director
of the department of insurance and financial services approves for
a particular filing.
(2) An accelerated benefit rider and a life insurance policy
with accelerated benefit provisions are primarily mortality risks
rather than morbidity risks and are life insurance benefits subject
to all of the following:
(a) Chapters 40 and 44.
(b)
Shall The rider or
provisions must provide the option to
take the benefit as a lump sum and not as an annuity contingent
upon the life of the insured.
(c)
Shall The rider or
provisions must have no restrictions on
the use of the proceeds.
(d) If any death benefit remains after payment of an
accelerated
benefit, shall the rider
or provisions must not affect
the accidental death benefit provision, if any, by the payment of
the accelerated benefit.
(e)
Shall The rider or
provisions must include the terminology
"accelerated benefit" in the descriptive title and not be described
or marketed as long-term care insurance or as providing long-term
care benefits. This subdivision does not apply to life insurance
policies or riders that provide directly or supplement long-term
care insurance as described in section 3901.
(3) Except as otherwise provided in this section, the insurer
of an accelerated benefit rider or life insurance policy with
accelerated benefit provisions is required to obtain from an
assignee or irrevocable beneficiary a signed acknowledgment of
concurrence
for payout prior to before
the payment of the
accelerated benefit. If the insurer making the accelerated benefit
is itself the assignee under the policy, an acknowledgment is not
required.
(4) An insurer of an accelerated benefit rider or life
insurance policy with accelerated benefit provisions shall provide
a disclosure statement at the time of application and at the time
the accelerated benefit payment request is submitted that receipt
of these accelerated benefits may be taxable and that assistance
should be sought from a personal tax advisor. The disclosure
statement
shall must be prominently displayed on the first page of
the policy or rider and any other related documents. If a
policyowner or certificateholder of an accelerated benefit rider or
life insurance policy with accelerated benefit provisions requests
an acceleration, the insurer shall send a statement to the
policyowner or certificateholder and irrevocable beneficiary
showing any effect that the payment of the accelerated benefit will
have on the policy's cash value, accumulation account, death
benefit, premium, policy loans, and policy liens. The statement
shall disclose that receipt of accelerated benefit payments may
adversely affect the recipient's eligibility for medicaid or other
government
benefits or entitlements , and
may be taxable , and that
assistance should be sought from a personal tax advisor. If a
previous disclosure statement becomes invalid as a result of an
acceleration of the death benefit, the insurer shall send a revised
disclosure statement to the policyowner or certificateholder and
irrevocable beneficiary. If the insurer agrees to accelerate death
benefits, the insurer shall issue an amended schedule page to the
policyholder to reflect, or shall notify the certificateholder
under a group policy of, any new, reduced in-force face amount of
the contract.
(5) A written disclosure, including, but not necessarily
limited to, a brief description of the accelerated benefit and
definitions of the conditions or occurrences triggering payment of
the benefits shall be given to the applicant for an accelerated
benefit rider or life insurance policy with accelerated benefit
provisions.
The description shall must
include an explanation of
any effect of the payment of a benefit on the policy's cash value,
accumulation account, death benefit, premium, policy loans, and
policy liens. For agent solicited insurance, the agent shall
provide
the disclosure form to the applicant prior to before or
concurrently with the application. Acknowledgment of the disclosure
shall be signed by the applicant and writing agent. For a
solicitation by direct response methods, the insurer shall provide
the disclosure form to the applicant at the time the policy is
delivered,
with a notice that a full premium refund shall will be
received if the policy is returned to the company within the free
look period. For group insurance policies, the disclosure form
shall
must be contained as part of the certificate of coverage
or
any related document furnished by the insurer for the
certificateholder.
(6) If there is a premium or cost of insurance charge, the
insurer shall give the applicant for an accelerated benefit rider
or life insurance policy with accelerated benefit provisions a
generic illustration numerically demonstrating any effect of the
payment of a benefit on the policy's cash value, accumulation
account, death benefit, premium, policy loans, and policy liens.
For agent solicited insurance, the agent shall provide the
illustration
to the applicant prior to before
or concurrently with
the application. For a solicitation by direct response methods, the
insurer shall provide the illustration to the applicant at the time
the policy is delivered. For group insurance policies, the
disclosure
form shall must be contained as part of the certificate
of coverage or any related document furnished by the insurer for
the certificateholder.
(7) An insurer of an accelerated benefit rider or life
insurance policy with accelerated benefit provisions with financing
options other than as described in subsection (12)(b) shall
disclose to the policyowner any premium or cost of insurance charge
for the accelerated benefit. The insurer shall make a reasonable
effort to assure that the certificateholder is aware of any
additional premium or cost of insurance charge if the
certificateholder is required to pay a charge. Upon request of the
commissioner,
director of the department of
insurance and financial
services, an insurer shall furnish an actuarial demonstration
disclosing the method of arriving at its cost for the accelerated
benefit.
(8) The insurer of an accelerated benefit rider or life
insurance policy with accelerated benefit provisions shall disclose
to the policyowner any administrative expense charge. The insurer
shall make a reasonable effort to assure that the certificateholder
is aware of any administrative expense charge if the
certificateholder is required to pay the charge.
(9)
An accelerated benefit provision shall be is effective as
follows:
(a) On the effective date of the policy or rider for
accidents.
(b) No more than 30 days after the effective date of the
policy or rider for illness.
(10) The insurer of an accelerated benefit rider or life
insurance policy with accelerated benefit provisions may offer a
waiver
of premium for the accelerated benefit provision in the
absence
of if a regular waiver of premium provision being is not in
effect. At the time the benefit is claimed, the insurer shall
explain any continuing premium requirement to keep the policy in
force.
(11) An insurer of an accelerated benefit rider or life
insurance policy with accelerated benefit provisions shall not
unfairly discriminate among insureds with differing qualifying
events covered under the policy or among insureds with similar
qualifying events covered under the policy. An insurer shall not
apply further conditions on the payment of the accelerated benefits
other than those conditions specified in the policy or rider.
(12) The insurer of an accelerated benefit rider or life
insurance policy with accelerated benefit provisions may do any of
the following:
(a) Require a premium charge or cost of insurance charge for
the accelerated benefit if based on sound actuarial principles. For
group insurance, the additional cost may also be reflected in the
experience rating.
(b) Pay a present value of the face amount. The calculation
shall be based on any applicable actuarial discount appropriate to
the policy design. The interest rate or interest rate methodology
used in the calculation shall be based on sound actuarial
principles and disclosed in the contract or actuarial memorandum.
The maximum interest rate used shall be no greater than the greater
of the current yield on 90-day treasury bills or the current
maximum statutory adjustable policy loan interest rate.
(c) Accrue an interest charge on the amount of the accelerated
benefits. The interest rate or interest rate methodology used in
the calculation shall be based on sound actuarial principles and
disclosed in the contract or actuarial memorandum. The maximum
interest rate used shall be no greater than the greater of the
current yield on 90-day treasury bills or the current maximum
statutory adjustable policy loan interest rate. The interest rate
accrued on the portion of the lien that is equal in amount to the
cash value of the contract at the time of the benefit acceleration
shall be no more than the policy loan interest rate stated in the
contract.
(13) Except as otherwise provided in this subsection, if an
accelerated benefit on an accelerated benefit rider or life
insurance policy with accelerated benefit provisions is payable,
there shall be no more than a pro rata reduction in the cash value
based on the percentage of death benefits accelerated to produce
the accelerated benefit payment. Alternatively, the payment of
accelerated benefits, any administrative expense charges, any
future premiums, and any accrued interest may be considered a lien
against the death benefit of the policy or rider and the access to
the cash value may be restricted to any excess of the cash value
over the sum of any other outstanding loans and the lien. Future
access to additional policy loans may be limited to any excess of
the cash value over the sum of the lien and any other outstanding
policy loans.
(14) If payment of an accelerated benefit on an accelerated
benefit rider or life insurance policy with accelerated benefit
provisions results in a pro rata reduction in the cash value, the
payment
may shall not be applied toward repaying an amount greater
than a pro rata portion of any outstanding policy loans.
(15) For an accelerated benefit rider or life insurance policy
with accelerated benefit provisions, a qualified actuary shall
describe the accelerated benefits, the risks, the expected costs,
and the calculation of statutory reserves in an actuarial
memorandum. The insurer shall maintain in its files descriptions of
the bases and procedures used to calculate benefits payable. These
descriptions and the actuarial memorandum shall be made available
for
examination by the commissioner director
of the department of
insurance and financial services upon request.
(16) If benefits are provided through the acceleration of
benefits under group or individual life policies or riders to an
accelerated benefit rider or life insurance policy with accelerated
benefit provisions, policy reserves shall be determined in
accordance with section 834. All valuation assumptions used in
constructing the reserves shall be determined as appropriate for
statutory valuation purposes by a member in good standing of the
American academy of actuaries. The actuary shall follow both
actuarial standards and certification for good and sufficient
reserves. Reserves in the aggregate should be sufficient to cover
policies upon which no claim has yet arisen and policies upon which
an accelerated claim has arisen. For policies and certificates that
provide actuarially equivalent benefits, additional reserves do not
need to be established. Policy liens and policy loans, including
accrued interest, represent assets of the insurer for statutory
reporting purposes. For a policy on which the policy lien exceeds
the policy's statutory reserve liability, the excess shall be held
as a nonadmitted asset.
