THE SENATE	S.B. NO.	722
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII

A BILL FOR AN ACT

relating to long-term care insurance.

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

SECTION 1. The legislature finds that Hawaii has a long history of respecting and helping its kupuna. Accordingly, the legislature finds that additional protections are needed to help seniors avoid inadvertent lapses or terminations of their long-term care insurance for nonpayment of premiums. This Act amends the current law by requiring that notice of a lapse of coverage or cancellation be sent by certified mail or commercial delivery service to the policyholder. The legislature also finds that this will provide proof that the cancellation notice was mailed and delivered. This Act also provides for the reinstatement of coverage if the insurer is provided proof that during the period preceding the expiration of the grace period following the mailing of the cancellation notice, the policyholder or certificate holder was cognitively impaired or had a loss of functional capacity.

The legislature further finds that the changes effected under this Act will have a relatively minor impact on insurers when compared with the consequences that would befall policyholders whose long-term care insurance lapses.

The legislature also finds that the need for additional protections is best illustrated by the by the tragic turn of events faced by an elderly couple in Virginia, whose confusion allowed their long-term care insurance to lapse. Over eleven years the couple had faithfully paid an insurer about $50,000 in premiums, which would have entitled them to about $600,000 in benefits through their joint policy. Then, during a visit to his bank, the husband mistakenly stopped the automatic premium payment system that his son had set up. The insurer then sent notices to the couple that their long-term care insurance coverage was about to end because they had stopped making payments. Unfortunately, the elderly couple did not understand the notices and did not act to prevent the cancellation. Their son found the insurer's notices months later when his mother became ill and needed to use her long-term care insurance benefits.

In this case, the son was the parents' designated third party, meaning that the insurer should have notified him of any change to his parents' policy. The insurer claimed that it sent such a notice to him, however, the son claimed that he did not receive it. That state's insurance regulations offered the family no legal recourse other than to bring a lawsuit against the insurer. That option would have been far too expensive for the family, and similarly, purchasing a new long-term care insurance policy was prohibitively expensive. Ultimately, the elderly couple had to sell their condominium and downsize into a modest apartment, and the mother now receives care through a medicaid program.

The purpose of this Act is to help Hawaii's kupuna prevent lapses or terminations for their long-term care insurance policies.

SECTION 2. Section 431:10H-209, Hawaii Revised Statutes, is amended to read as follows:

"[[]§431:10H-209[]] Lapse or termination for nonpayment of premium. (a) No individual long-term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least thirty days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated in section 431:10H-208 at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by [~~first class United States mail, postage prepaid~~] certified mail or commercial delivery service and notice may not be given until thirty days after a premium is unpaid. Notice shall be deemed to have been given as of five days after the date of mailing. The policy or certificate shall not lapse or be terminated earlier than sixty days after the date of mailing of the notice.

(b) Coverage under a long-term care insurance policy or certificate that lapses shall be reinstated if:

(1) The insurer is provided proof that during the period from thirty days prior to the mailing of the notice in subsection (a) through sixty days following the mailing of the notice, the insured was cognitively impaired or had a loss of functional capacity; and

(2) The insured or any of the persons designated in section 431:10H-208 requests reinstatement within five months following the termination of the policy or certificate and renders payment of past due premiums, where appropriate.

For the purposes of this subsection, the standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity as contained in the policy or certificate."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on January 1, 2016.

INTRODUCED BY:	_____________________________