Oregon Long-Term Care Insurance Rules

Oregon regulations and required provisions for long-term care

You have already studied how a long-term care policy works — the activities-of-daily-living benefit triggers, the free-look period, inflation protection, the third-party designee that protects against unintentional lapse, and the standard exclusions. This section covers the other half: the Oregon administrative rules that govern how a producer may sell long-term care coverage in this state, and the two Oregon programs a policy can qualify for.

These rules live in OAR chapter 836, division 52. Most of them apply to the producer personally, not only to the insurer.

Training for insurance producers (OAR 836-052-0639)

A producer must complete long-term care training before soliciting long-term care coverage in Oregon. This is separate from, and additional to, the general continuing education requirement for the producer’s license.

The rule sets out how completion is proved:

• When the training provider notifies the producer that the course and its examination have been passed, the producer sends that notice of completion to every insurer for which the producer transacts, or will transact, long-term care insurance in Oregon
• The insurer approves or disapproves the verification and returns it to the producer
• The producer submits the approved notice of completion to the Director at license renewal, alongside the report on continuing education compliance
• A course taken online or by self-study must include an examination, and the producer does not satisfy the training requirement unless that examination is passed with a score of not less than 70 percent

Standards for marketing (OAR 836-052-0706)

Every insurer marketing long-term care coverage in Oregon, directly or through its producers, must establish marketing procedures and producer training requirements that assure any marketing activity — including any comparison of policies by its producers — is fair and accurate, and that excessive insurance is not sold or issued. It must also establish auditable procedures for verifying compliance.

Several duties land at the point of sale:

• This notice must be displayed prominently on the first page of both the outline of coverage and the policy (or the certificate, for group coverage): “Notice to buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations.”
• The producer must inquire and otherwise make every reasonable effort to identify whether the applicant already holds health or long-term care insurance, and the types and amounts of it. For a qualified long-term care contract, the inquiry into other health insurance is not required
• At solicitation, the producer must give written notice that a senior insurance counseling program approved by the Director is available, with its name, address and telephone number
• The terms “noncancellable” and “level premium” may be used only where the policy, certificate or rider actually conforms to the rule that defines them
• The applicant must be given an explanation of the contingent benefit upon lapse
• Copies of the required rating practices disclosure forms must be provided to the applicant

On top of everything already prohibited by Oregon’s trade practices law, four practices are prohibited in long-term care marketing:

• Twisting — knowingly making a misleading representation, or an incomplete or fraudulent comparison of policies or insurers, to induce a person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert a policy, or to take out a policy with another insurer
• High-pressure tactics — employing any marketing method that induces, or tends to induce, the purchase of insurance through force, fright or threat, whether explicit or implied, or through undue pressure
• Cold-lead advertising — using, directly or indirectly, any marketing method that fails to disclose in a conspicuous manner that a purpose of the method is the solicitation of insurance and that contact will be made by an insurer or producer
• Misrepresentation of a material fact in selling or offering to sell a long-term care policy

Where a policy is endorsed or sold through an association, the association’s primary responsibility is to educate its members about long-term care in general so they can make informed decisions, and it must disclose in any solicitation the specific nature and amount of the compensation it receives — fees, commissions, administrative fees and other financial support — along with a description of how the policies and the insurer were selected. Failure to meet the rule’s filing and certification requirements is an unfair trade practice.

Advertising (OAR 836-052-0696)

Long-term care advertising carries its own filing and retention rule, separate from the general prohibition on false advertising:

• At the Director’s request, an insurer must provide a copy of any long-term care advertisement intended for use in Oregon — written, radio or television — for review or approval
• All advertisements must be retained by the insurer for at least three years from the date the advertisement was first used

Appropriateness of the recommended purchase (OAR 836-052-0726)

Oregon requires the sale to be suitable, and places the duty on the insurer and the producer together. Each insurer must develop and use suitability standards, train its producers in the use of them, and keep a copy available for the Director to inspect. The producer must use the insurer’s suitability standards when marketing long-term care insurance.

The procedures must take three things into account:

• The applicant’s ability to pay for the proposed coverage, and other pertinent financial information
• The applicant’s goals or needs with respect to long-term care, and the advantages and disadvantages of insurance in meeting them
• The values, benefits and costs of the applicant’s existing insurance, compared with the values, benefits and costs of the recommended purchase or replacement

The instrument for collecting that is the Long-Term Care Insurance Personal Worksheet, presented to the applicant at or before application in not less than 12-point type. The completed worksheet must be returned to the insurer before the insurer considers the applicant for coverage — the one exception being employer group long-term care sold to employees and their spouses. Information obtained through the worksheet may not be sold or disseminated outside the insurer or the agency.

At the same time the worksheet is provided, the applicant must also receive the disclosure form “Things You Should Know Before You Buy Long-Term Care Insurance.”

If the applicant does not meet the insurer’s financial suitability standards, or declines to provide the information, the insurer may reject the application — or, alternatively, send the applicant a letter and keep the returned letter, or a record of some other verification of the applicant’s intent, in the applicant’s file. Insurers report suitability statistics to the Director annually by May 1: applications received from Oregon residents, how many applicants declined to provide worksheet information, how many did not meet the standards, and how many chose to proceed after receiving a suitability letter.

This rule does not apply to life insurance policies that accelerate benefits for long-term care.

Guarantee of insurability as an optional benefit (OAR 836-052-0616)

An insurer may not offer a long-term care policy in Oregon unless it also offers the policyholder inflation protection. The buyer chooses among the forms the rule allows, and one of them is the guarantee of insurability, often called the guaranteed purchase option.

Under that option:

• The insured is guaranteed periodically increased benefit levels without having to provide evidence of insurability or health status, unless the policyholder declines a periodic increase
• Each increase is at least the difference between the existing benefit and that benefit compounded annually at not less than 3 percent from the purchase of the existing benefit
• Benefit increases occur automatically unless the insured specifically rejects the option to increase
• The option must be offered every year through at least the insured’s attained age 76
• The additional premium is priced at the insured’s attained age at the time of each offer
• The insurer continues making offers regardless of the insured’s age while the insured is in claim, if the claim began at or before age 76
• The producer must furnish a personalized illustration at the point of sale showing the expected pattern of future premiums and benefits under this option compared with a policy carrying automatic inflation protection that qualifies for partnership status

This is a different thing from the guaranteed insurability rider you studied on disability income coverage, even though the underlying idea — buying more coverage later without new evidence of health — is the same.

The alternatives Oregon requires an insurer to be able to offer are benefit levels that increase annually, compounded at not less than 3 percent, or coverage of a specified percentage of actual or reasonable charges with no maximum indemnity amount or limit. If the buyer wants no inflation protection at all, the insurer must obtain a signed rejection, which becomes part of the application and states that the buyer reviewed the outline of coverage and the graphs comparing benefits and premiums with and without inflation protection.

Inflation protection increases continue without regard to the insured’s age, claim status, claim history, or how long the person has been insured.

Qualified LTC plans and Partnership provisions (OAR 836-052-0531)

Oregon operates a Long Term Care Insurance Partnership Program. A policy is a qualified long term care insurance partnership policy only if it meets all of the following:

• It was issued on or after January 1, 2008 — or exchanged into partnership status on or after that date — and covered an insured who was a resident of Oregon, or of another state with a reciprocal agreement, when coverage first became effective
• It is a qualified long term care insurance policy
• It meets Oregon’s Long Term Care Insurance Act and division 52, and the NAIC long term care insurance model act and model regulation requirements incorporated by federal law
• It provides inflation protection scaled to the buyer’s age at purchase:

Age at purchase	Inflation protection required
Under 61	Compound annual protection at least equivalent to the 3 percent compounding option
61 through 75	Protection at least equivalent to one of the rule’s inflation options
76 and older	Optional, but anything provided must comply with the rule

An insurer may satisfy the requirement with a guarantee of automatic benefit increases of not less than the annual percentage change in the Consumer Price Index, or another index the Director approves. For a buyer who has not attained age 61, those index adjustments must be made on a compounding basis.

A buyer may adjust their inflation protection as they age, and the policy keeps partnership status as long as the protection continues to meet the minimum for the attained age. For that reason, all options through age 76 must be accepted to retain partnership status — though declining one option does not prevent the insured from accepting a later one, and the insurer must notify the policyholder at each periodic increase that declining will imperil partnership status.

The disclosure obligations are specific:

• A producer soliciting or offering to sell a policy intended to qualify must give every prospective applicant the partnership notice prescribed by the rule, together with the required Outline of Coverage
• A partnership policy or certificate delivered in Oregon must include a Partnership Disclosure Notice explaining the benefits and stating that, at the time issued, the policy is a qualified state long term care insurance partnership policy
• When the insurer becomes aware that a policyholder has initiated action that will result in the loss of partnership status, it must explain the effect in writing and advise how to retain the status if that is possible. If the status is lost, the insurer must explain the reason in writing
• At the insured’s request, the insurer must provide the Approved Long Term Care Partnership Program Policy Summary

An insurer must file a policy for approval for use as a partnership policy, and must report to the United States Secretary of Health and Human Services on benefits paid and policy terminations.

A long term care policy that is not a qualified partnership policy may be exchanged for one, subject to underwriting and any increased premium. The exchanged policy is treated as newly issued and so becomes eligible for partnership status.

Sidenote

Know this...

The reason a partnership policy is attractive is that benefits paid under it let the insured protect an equivalent amount of assets when applying for Medicaid. That Medicaid asset disregard is administered under Oregon’s medical assistance rules, not under this insurance rule. OAR 836-052-0531 governs what makes a policy a partnership policy; the medical assistance rules govern what the disregard is worth.

Lesson summary

• A producer must complete long-term care training before soliciting LTC coverage, send the notice of completion to each insurer, and report it to the Director at license renewal. An online or self-study course requires an examination passed at 70 percent or better (OAR 836-052-0639).
• LTC marketing requires the notice-to-buyer legend on the outline of coverage and the policy, an inquiry into existing coverage, and written notice at solicitation that an approved senior insurance counseling program is available. Twisting, high-pressure tactics, cold-lead advertising and misrepresentation of a material fact are prohibited (OAR 836-052-0706).
• LTC advertisements go to the Director on request and are retained by the insurer for at least three years from first use (OAR 836-052-0696).
• Suitability is a shared duty. The insurer writes the standards and trains producers; the producer presents the Personal Worksheet and “Things You Should Know Before You Buy Long-Term Care Insurance” at or before application. Insurers report to the Director annually by May 1 (OAR 836-052-0726).
• Inflation protection must be offered. The guarantee of insurability option gives periodic increases with no evidence of insurability, offered every year through at least attained age 76, priced at attained age (OAR 836-052-0616).
• A partnership policy must have been issued on or after January 1, 2008, be a qualified LTC policy, and carry inflation protection scaled to age at purchase — compound below 61, an equivalent option from 61 to 75, optional at 76 and over (OAR 836-052-0531).