2006 Minnesota Statutes

62S.266 NONFORFEITURE BENEFIT REQUIREMENT.
    Subdivision 1. Applicability. This section does not apply to life insurance policies or riders
containing accelerated long-term care benefits.
    Subd. 2. Requirement. (a) An insurer must offer each prospective policyholder a
nonforfeiture benefit in compliance with the following requirements:
(1) a policy or certificate offered with nonforfeiture benefits must have coverage elements,
eligibility, benefit triggers, and benefit length that are the same as coverage to be issued without
nonforfeiture benefits. The nonforfeiture benefit included in the offer must be the benefit described
in subdivision 5; and
(2) the offer must be in writing if the nonforfeiture benefit is not otherwise described in the
outline of coverage or other materials given to the prospective policyholder.
(b) When a group long-term care insurance policy is issued, the offer required in paragraph
(a) shall be made to the group policy holder. However, if the policy is issued as group long-term
care insurance as defined in section 62S.01, subdivision 15, clause (4), other than to a continuing
care retirement community or other similar entity, the offering shall be made to each proposed
certificate holder.
    Subd. 3. Effect of rejection of offer. If the offer required to be made under subdivision 2 is
rejected, the insurer shall provide the contingent benefit upon lapse described in this section.
    Subd. 4. Contingent benefit upon lapse. (a) After rejection of the offer required under
subdivision 2, for individual and group policies without nonforfeiture benefits issued after July 1,
2001, the insurer shall provide a contingent benefit upon lapse.
(b) If a group policyholder elects to make the nonforfeiture benefit an option to the certificate
holder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon
lapse.
(c) The contingent benefit on lapse must be triggered every time an insurer increases the
premium rates to a level which results in a cumulative increase of the annual premium equal to or
exceeding the percentage of the insured's initial annual premium based on the insured's issue age
provided in this paragraph, and the policy or certificate lapses within 120 days of the due date of
the premium increase. Unless otherwise required, policyholders shall be notified at least 30 days
prior to the due date of the premium reflecting the rate increase.

Triggers for a Substantial Premium Increase

Issue Age

Percent Increase Over Initial Premium

		29 and Under		200
		30-34		190
		35-39		170
		40-44		150
		45-49		130
		50-54		110
		55-59		90
		60		70
		61		66
		62		62
		63		58
		64		54
		65		50
		66		48
		67		46
		68		44
		69		42
		70		40
		71		38
		72		36
		73		34
		74		32
		75		30
		76		28
		77		26
		78		24
		79		22
		80		20
		81		19
		82		18
		83		17
		84		16
		85		15
		86		14
		87		13
		88		12
		89		11
		90 and over		10

(d) On or before the effective date of a substantial premium increase as defined in paragraph
(c), the insurer shall:
(1) offer to reduce policy benefits provided by the current coverage without the requirement
of additional underwriting so that required premium payments are not increased;
(2) offer to convert the coverage to a paid-up status with a shortened benefit period according
to the terms of subdivision 5. This option may be elected at any time during the 120-day period
referenced in paragraph (c); and
(3) notify the policyholder or certificate holder that a default or lapse at any time during the
120-day period referenced in paragraph (c) is deemed to be the election of the offer to convert in
clause (2).
    Subd. 5. Nonforfeiture benefits; requirements. (a) Benefits continued as nonforfeiture
benefits, including contingent benefits upon lapse, must be as described in this subdivision.
(b) For purposes of this subdivision, "attained age rating" is defined as a schedule of
premiums starting from the issue date which increases with age at least one percent per year prior
to age 50, and at least three percent per year beyond age 50.
(c) For purposes of this subdivision, the nonforfeiture benefit must be of a shortened benefit
period providing paid-up, long-term care insurance coverage after lapse. The same benefits,
amounts, and frequency in effect at the time of lapse, but not increased thereafter, will be payable
for a qualifying claim, but the lifetime maximum dollars or days of benefits must be determined
as specified in paragraph (d).
(d) The standard nonforfeiture credit will be equal to 100 percent of the sum of all premiums
paid, including the premiums paid prior to any changes in benefits. The insurer may offer
additional shortened benefit period options, so long as the benefits for each duration equal or
exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture
credit must not be less than 30 times the daily nursing home benefit at the time of lapse. In either
event, the calculation of the nonforfeiture credit is subject to the limitation of this subdivision.
(e) The nonforfeiture benefit must begin not later than the end of the third year following the
policy or certificate issue date. The contingent benefit upon lapse must be effective during the
first three years as well as thereafter.
(f) Notwithstanding paragraph (e), for a policy or certificate with attained age rating, the
nonforfeiture benefit must begin on the earlier of:
(1) the end of the tenth year following the policy or certificate issue date; or
(2) the end of the second year following the date the policy or certificate is no longer subject
to attained age rating.
(g) Nonforfeiture credits may be used for all care and services qualifying for benefits under
the terms of the policy or certificate, up to the limits specified in the policy or certificate.
    Subd. 6. Benefit limit. All benefits paid by the insurer while the policy or certificate is in
premium-paying status and in the paid-up status will not exceed the maximum benefits which
would be payable if the policy or certificate had remained in premium-paying status.
    Subd. 7. Minimum benefits; individual and group policies. There must be no difference
in the minimum nonforfeiture benefits as required under this section for group and individual
policies.
    Subd. 8. Application; effective dates. This section becomes effective January 1, 2002,
and applies as follows:
(a) Except as provided in paragraph (b), this section applies to any long-term care policy
issued in this state on or after January 1, 2002.
(b) For certificates issued on or after January 1, 2002, under a group long-term care insurance
policy that was in force on January 1, 2002, the provisions of this section do not apply.
    Subd. 9. Effect on loss ratio. Premiums charged for a policy or certificate containing
nonforfeiture benefits or a contingent benefit on lapse are subject to the loss ratio requirements
of section 62A.48, subdivision 4, or 62S.26, treating the policy as a whole, except for policies
or certificates that are subject to sections 62S.021, 62S.081, and 62S.265 and that comply with
those sections.
    Subd. 10. Purchased blocks of business. To determine whether contingent nonforfeiture
upon lapse provisions are triggered under subdivision 4, paragraph (c), a replacing insurer that
purchased or otherwise assumed a block or blocks of long-term care insurance policies from
another insurer shall calculate the percentage increase based on the initial annual premium paid
by the insured when the policy was first purchased from the original insurer.
    Subd. 11. Level premium contracts. A nonforfeiture benefit for qualified long-term care
insurance contracts that are level premium contracts must be offered that meets the following
requirements:
(1) the nonforfeiture provision must be appropriately captioned;
(2) the nonforfeiture provision must provide a benefit available in the event of a default in
the payment of any premiums and must state that the amount of the benefit may be adjusted
subsequent to being initially granted only as necessary to reflect changes in claims, persistency,
and interest as reflected in changes in rates for premium paying contracts approved by the
commissioner for the same contract form; and
(3) the nonforfeiture provision must provide at least one of the following:
(i) reduced paid-up insurance;
(ii) extended term insurance;
(iii) shortened benefit period; or
(iv) other similar offerings approved by the commissioner.
History: 1Sp2001 c 9 art 8 s 12; 2002 c 379 art 1 s 113; 2006 c 255 s 53; 2006 c 282
art 17 s 19