SECTION 3.3820. Requirement To Offer Inflation Protection

(a) No insurer or other entity may offer a long-term care insurance policy or certificate in this state unless such insurer or other entity also offers to the prospective insured, or to the group policyholder, if the group policy will be issued to an employer, labor union, or continuing care retirement center, the option to purchase a policy that provides for benefit levels to increase throughout the interval of coverage to account for reasonably anticipated increases in the costs of long-term care services covered by the policy. Insurers must offer to each applicant, at the time of purchase, the option to purchase a policy that provides the inflation protection set out in paragraphs (1), (2), or (3) of this subsection.

(1) The policy and certificate shall be structured so that benefit levels increase annually, in a manner so that the increases are compounded at a rate not less than 5.0% annually throughout the interval of coverage.

(2) The policy and certificate shall guarantee the policyholder and certificate holder, if applicable, the opportunity to increase benefit levels on the annual policy anniversary date throughout the interval of coverage without providing evidence of insurability or health status, such that the additional benefit amount is not less than 5.0% greater than the original benefit amount, compounded annually. Such increase to benefit levels shall occur automatically unless the policyholders and certificate holders, if applicable, specifically rejected the option to increase in writing within 30 days following the anniversary date of the policy or coverage.

(3) The policy shall cover a specified percentage of actual or reasonable charges throughout the interval of coverage and not include a maximum specified indemnity or per diem amount or limit.

(b) The inflation protection provisions in subsection (a) of this section shall be required to be included in any long-term care insurance policy and certificate unless an insurer obtains a written rejection of inflation protection signed by the prospective policyholder, as provided in this subsection.

(1) The rejection shall be considered part of the application and shall state: "I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy (and certificate, if applicable) with and without inflation protection. I realize that based on current health care cost trends, the benefits provided by a long-term care plan which does not have meaningful inflation protection may be significantly diminished in terms of real value to me, depending on the amount of time which elapses between the date I purchase the policy and the date on which I first become eligible to use them. Specifically I have reviewed Plans ___________, and I reject inflation protection."

(2) The agent shall provide information to assist the prospective policyholder in accurately completing the statement with respect to the plans reviewed by the applicant and specified in paragraph (1) of this subsection.

(c) Where the policy is offered to a group, the offer required by provisions of this subsection shall be made to the group policyholder; except that in the instance where the group policy will not be issued to an employer, labor union, or continuing care retirement community, the offering shall be made to each prospective covered individual.

(d) Inflation protection benefit increases under a policy which contains provisions for such increases, whether automatic or optional with the insured, shall continue without regard to an insured's age, claim status or claim history, or the length of time the person has been insured under the policy.

(e) An offer of inflation protection providing for automatic benefit increases shall include an offer of a premium which the insurer expects to remain constant. Such offer shall disclose in a conspicuous manner, in no smaller than 12-point (where one point is 1/72 of an inch) boldface type, that the premium may change in the future unless the premium is guaranteed to remain constant.

(f) Upon rejection of the inflation protection set forth in subsection (a) of this section, an insurer may offer other forms of inflation protection.

Source Note: The provisions of this §3.3820 adopted to be effective July 20, 1992, 17 TexReg 4769; amended to be effective May 8, 1997, 22 TexReg 3786