SB1441 - 522R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 20-1691.08, Arizona Revised Statutes, is amended to read:

START_STATUTE20-1691.08. Rate and form review; disapproval; definition

A. A person shall not deliver or issue for delivery in this state any long‑term care insurance policy or rate unless the person has first filed the form or rate with the director and the director has approved the form or rate. Unless the director issues an order affirmatively approving or disapproving the form or rate within thirty forty‑five days after filing, the form or rate is deemed approved. On written notice given to the insurer within the thirty day period, the director may extend the thirty day review period for up to fifteen additional days. After notifying the insurer in writing within the forty‑five-day period, the director may extend the forty‑five-day review period by an additional forty‑five days to allow the department to conduct an independent actuarial review of the requested rate.

B. The director shall disapprove a rate or form if either:

1. The rate is not in compliance with this article or any rules adopted pursuant to this article.

2. The form contains provisions that are ambiguous, misleading or deceptive, that encourage misrepresentation of the coverage or that are contrary to this title or of any rule adopted pursuant to this title.

C. In the review and approval of long-term care insurance rate increases, the director shall consider:

1. The actuarial assumptions that are used by the insurer to support the requested rate increase.

2. Documentation demonstrating that the actuarial assumptions used by the insurer to support the rate increase are based on actuarial and historical data that represent the experience of policyholders in this state, which may include specific data on canceled and lapsed policies in this state, data on experience relating to the payment of claims in this state and data relating to policies ended as a result of policyholder deaths in this state. If the independent actuary whose services are used by the director pursuant to subsection D of this section determines that the actuarial and historical data representing policyholder experience in this state is not credible based on presently accepted actuarial standards of practice, the director shall consider documentation based on experience from a comparable state as determined by the independent actuary.

3. Documentation that illustrates the need for the rate increase, including a description of how the information contained in the long‑term care exhibit included in the insurer's three most recent annual statements demonstrates a need for the requested rate increase.

D. In considering a rate increase, the department shall review the actuarial assumptions and projections used by the insurer to support the proposed rate increase, including whether the proposed rate increase is reasonably adequate to cover the future costs of policyholder claims in this state. In reviewing the soundness of the actuarial assumptions and projections used by the insurer to support the rate increase, the director shall use the services of an independent actuary who is not affiliated with the insurer and who has experience in long-term care insurance pricing and pay the independent actuary's costs from the insurance examiners' revolving fund established pursuant to section 20-159. These costs may be charged to and reimbursed by the insurer pursuant to section 20-159, subsections B and C. The department shall provide on the department's website a list of the department‑specific contract employment opportunities for independent actuaries and a link to the state procurement office to apply for those positions.

E. After reviewing the request for the rate increase, the director shall do one of the following:

1. Approve a single increase of the requested amount.

2. Approve a series of scheduled rate increases that are actuarially equivalent to the single amount requested by the insurer. The entire series and the schedule determined by the director would be approved at one time as part of the current rate increase filing.

3. Decline to approve any rate increase if the actuarial assumptions or projections used by the insurer or documentation furnished by the insurer does not adequately substantiate a need for the rate increase.

F. Any premium increase shall only be applied to a policy on the policy's anniversary date.

C. G. If the director disapproves a rate or form, the director shall send the insurer a written notice specifying the reason for disapproval. The insurer may request a hearing pursuant to title 41, chapter 6, article 10 to contest the disapproval. It is unlawful for the insurer to issue or use a rate or form that has been disapproved.

D. H. At any time after notice and for cause shown, the director may issue an order withdrawing approval of any form or rate for any reason listed in subsection B of this section. The insurer may request a hearing pursuant to title 41, chapter 6, article 10 to contest the director's order.

E. I. An insurer shall not issue or use a rate or form after the effective date of an order withdrawing approval.

F. J. The director, by order, may exempt from the requirements of this section for as long as the director deems proper any insurance rate or form specified in the order, to which, in the director's opinion, this section may not practicably be applied or the filing and approval of which are, in the director's opinion, not desirable or necessary for the protection of the public.

K. For the purposes of this section, "independent actuary" means a person who is a member in good standing of the American academy of actuaries, who is contracted by the department for the purpose of reviewing a rate increase filing submitted by an insurer and who is not either employed by the department or affiliated with an insurer. END_STATUTE

Sec. 2. Title 20, chapter 6, article 15, Arizona Revised Statutes, is amended by adding section 20-1691.13, to read:

START_STATUTE20-1691.13. Notification; premium increases; change of benefits; renewal

A. An insurer shall notify its policyholders in writing at least ninety days in advance of the policy's annual anniversary date of any premium increase or change in benefits approved pursuant to section 20‑1691.08. A sample of the premium increase notifications to policyholders shall be included in the rate increase filing to the department and shall contain all of the following:

1. A disclosure of the amount of the premium increase over the prior policy period premium.

2. If the increase will be implemented in a series, the implementation schedule of the premium increase.

3. A list of options available to the policyholder that will reduce the amount of the premium increase, which shall include at least the option to reduce the percentage of future inflation benefits for the policy before requiring the policyholder to reduce any earned or paid up benefits on the policy. The option to reduce the percentage of future inflation benefits shall remain available to the policyholder at any time during the lifetime of the policy. If no inflation protection exists on the policy at the time of the premium increase, the insurer shall also offer the policyholder the option to lower the existing policy benefits, the option to increase elimination periods and other options to reduce the amount of the premium increase.

4. A prominent disclosure that premiums are subject to future increases.

5. An offer of any contingent benefit to the policyholder if the current policy lapses and the benefit is triggered.

6. A list of current policyholder benefits, including the current and pending status of return of premium on death and survivorship benefits to enable the policyholder to make an informed decision regarding actions the policyholder may take to reduce the amount of the premium increase.

B. At least ninety days before the policy's annual anniversary date, an insurer shall mail written notice to the policyholder that includes an explanation of the extent to which any premium increase is due to the actual or expected aggregate claims experience of the policyholders insured on that policy form.END_STATUTE

Sec. 3. Rulemaking exemption

For the purposes of implementing this act, the department of insurance is exempt from the rulemaking requirements of title 41, chapter 6, Arizona Revised Statutes, for one year after the effective date of this act.