HF 2254

as introduced - 87th Legislature (2011 - 2012) Posted on 02/15/2012 01:47pm

A bill for an act
relating to insurance; permitting accelerated benefits available under a life
insurance policy to include long-term care coverage; permitting use of life
insurance cash value to pay premiums on long-term care insurance; amending
Minnesota Statutes 2010, section 61A.072, subdivisions 1, 5; proposing coding
for new law in Minnesota Statutes, chapter 61A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 61A.072, subdivision 1, is amended to
read:

Subdivision 1.

Definitions.

(a) "Accelerated benefits" covered under this section are
benefits payable under the life insurance contract:

(1) to a policyholder or certificate holder, during the lifetime of the insured, in the
anticipation of death or upon the occurrence of a specified life-threatening or catastrophic
condition as defined by the policy or rider;

(2) that reduce the death benefit otherwise payable under the life insurance contract;
and

(3) 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.

(b) "Qualifying event" means one or more of the following:

(1) a medical condition that would result in a drastically limited life span as specified
in the contract;

(2) a medical condition that has required or requires extraordinary medical
intervention, such as, but not limited to, major organ transplant or continuous artificial life
support without which the insured would die;

(3) 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 the
insured's life;

(4) 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, one or more of the following:

(i) coronary artery disease resulting in an acute infarction or requiring surgery;

(ii) permanent neurological deficit resulting from cerebral vascular accident;

(iii) end stage renal failure;

(iv) Acquired Immune Deficiency Syndrome; or

(v) other medical conditions that the commissioner shall approve for any particular
filing; deleted text begin or
deleted text end

(5) new text begin a determination by a health care provider that the insured is in need of long-term
care; or
new text end

new text begin (6) new text end other qualifying events that the commissioner approves for a particular filing.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to life insurance contracts issued on or after that date.
new text end

Sec. 2.

Minnesota Statutes 2010, section 61A.072, subdivision 5, is amended to read:

Subd. 5.

Disclosures.

(a) The terminology "accelerated benefit" shall be included
in the descriptive title. Products regulated under this section shall not be described or
marketed as long-term care insurance or as providing long-term care benefits new text begin , unless the
product provides long-term care benefits in compliance with chapter 62S new text end .

(b) A disclosure statement is required at the time of application for the policy or
rider 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 be prominently displayed on the first
page of the policy or rider and any other related documents.

(c)(1) 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. The description shall
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.

(i) In the case of agent-solicited insurance, the agent shall provide the disclosure
form to the applicant prior to or concurrently with the application. Acknowledgment of
the disclosure shall be signed by the applicant and writing agent.

(ii) In the case of 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 be received if the policy is returned to the company within
the free look period.

(iii) In the case of group insurance policies, the disclosure form shall be contained
as part of the certificate of coverage or any related document furnished by the insurer
for the certificate holder.

(2) If there is a premium or cost of insurance charge, the insurer shall give the
applicant 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.

(i) In the case of agent-solicited insurance, the agent shall provide the illustration to
the applicant prior to or concurrently with the application.

(ii) In the case of a solicitation by direct response methods, the insurer shall provide
the illustration to the applicant at the time the policy is delivered.

(iii) In the case of group insurance policies, the disclosure form shall be contained
as part of the certificate of coverage or any related document furnished by the insurer
for the certificate holder.

(3) Disclosure of premium charge.

(i) An insurer with financing options other than as described in subdivision 9,
paragraph (a), clauses (2) and (3), shall disclose to the policy owner any premium or cost
of insurance charge for the accelerated benefit. The insurer shall make a reasonable effort
to assure that the certificate holder is aware of any additional premium or cost of insurance
charge if the certificate holder is required to pay a charge.

(ii) An insurer shall furnish an actuarial demonstration to the state insurance
department when filing the product disclosing the method of arriving at its cost for the
accelerated benefit.

(4) The insurer shall disclose to the policy owner any administrative expense charge.
The insurer shall make a reasonable effort to assure that the certificate holder is aware of
any administrative expense charge if the certificate holder is required to pay the charge.

(d) When a policy owner or certificate holder requests an acceleration, the insurer
shall send a statement to the policy owner or certificate holder 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.
In addition, receipt of an accelerated benefit payment may be taxable and assistance
should be sought from a personal tax advisor. When 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 policy owner or certificate holder and irrevocable
beneficiary. When the insurer agrees to accelerate death benefits, the insurer shall issue an
amended schedule page to the policyholder or notify the certificate holder under a group
policy to reflect any new reduced in-force face amount of the contract.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to life insurance contracts issued on or after that date.
new text end

Sec. 3.

new text begin [61A.075] LONG-TERM CARE BENEFITS; USE OF LIFE INSURANCE
CASH VALUE PERMITTED.
new text end

new text begin An owner of a life insurance policy that has a cash value may borrow against that
cash value as necessary to pay premiums on long-term care insurance that complies with
chapter 62S.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end