I. California Insurance Code Requirements

1. Prohibited Provisions

There are a number of prohibited provisions identified in the Code. LTC contracts cannot be issued under a renewal provision less favorable to insureds than guaranteed renewable for life. They cannot be cancelled, nonrenewed, or terminated for any reason other than nonpayment of premium. Additionally, long-term care contracts are prohibited from establishing a new waiting period for benefits if a policy is replacing or is being converted from another contract from the same insurer (with the exception of an increase in benefits, which may be temporarily excluded for up to 6 months).

Other prohibited provisions include the following:

• Limiting benefits to skilled nursing facilities only;
• Paying significantly different benefits for levels of facility care lower than skilled nursing;
• Defining benefits payable based on a definition of usual and customary, usual and reasonable, or similar language;
• Terminating coverage or increasing premiums for a spouse following divorce from an insured;
• Providing a payment for an additional, specific benefit which is less than 5 times the daily facility benefit; or
• Providing a daily amount for home-care or community-based care benefits which is less than that required by the Insurance Code (at least $50 per day or 50% of the facility-care benefit, whichever is higher).

2. California Partnership for Long-Term Care

LTC partnerships allow those who have exhausted or at least used some of their private LTC benefits to apply for Medicaid coverage without having to meet the same means-testing requirements. The partnership between LTC coverage and Medicaid works by disregarding some or all assets of applicants for Medicaid who have exhausted private LTC benefits and by exempting those assets from estate recovery after the insured's death. The partnership program was created to encourage those who would not otherwise do so to purchase LTC insurance, to reduce the incentives to transfer assets to qualify for Medicaid sooner, and to contain Medicaid spending on LTC services.

As a condition of issuer participation in California LTC partnerships, issuers must provide written evidence to the Department of Insurance that procedures are in place to assure that no agent, broker, solicitor, or individual will be authorized to market, sell, solicit, or otherwise contact any person for the purpose of marketing a Partnership Long-Term Care Insurance Policy or Certificate unless that person has completed 8 hours of education on long-term care in general, and 8 hours of training in a live classroom setting on the California Partnership for Long-Term Care in particular. Such assurances must be provided in the form of a document signed by the agent, broker, solicitor, or individual and a representative of the company attesting to the completion of the required training and submitted to the Department of Insurance.

3. Marketing Standards and Responsibilities Including HICAP

The Insurance Code defines a variety of marketing standards to which insurers and its agents must adhere. Among them are the following:

• Procedures to insure that excessive insurance will not be sold or issued;
• That agents meet the continuing education requirements;
• A notice to applicants and insureds that the Health Insurance Counseling and Advocacy Program (HICAP) exists to aid persons, free of charge, in understanding and determining whether a particular long term care insurance policy is in their best interest;
• A current list of Area Agencies on Aging or other HICAP providers in California; and
• Several other publications, such as the Department of Aging's long term care insurance shopper's guide, are required to be given to every prospect or applicant.

A part of this section in the Insurance Code is a discussion of inappropriate practices, such as twisting, the use of high pressure tactics and the ramifications of cold lead advertising. In any advertisement or other marketing device intended to result in a person inquiring about long term care insurance, the advertisement or response card must clearly indicate whether an agent will contact the individual.