California Governor Signs Long-term Care Insurance Bill

On October 6, 2015 California’s Governor Jerry Brown signed into law Senate Bill 575, requiring annual notifications of certain nonforfeiture benefits under long-term care insurance contracts. Under current law, an insurer is required to offer, at the time of application for a long-term care insurance contract, an option to purchase a shortened benefit period nonforfeiture benefit. In addition, under existing law the Insurance Commissioner may require a long-term care insurer to provide a contingent benefit upon lapse as a condition of approving a rate increase on any block of business for which a contingent benefit upon lapse is not otherwise available.

Senate Bill 575 provides that, when a shortened benefit period nonforfeiture benefit or contingent benefit upon lapse is conferred, the insurer must annually notify the policyholder or certificate holder and, if elected, at least one individual designated by the policyholder or certificate holder of (a) the availability of the shortened benefit period nonforfeiture benefit or contingent benefit upon lapse, (b) the dollar amount of the shortened benefit period nonforfeiture benefit or contingent benefit upon lapse calculated up to 60 days prior to the date of the annual notice, and (c) the name, address, and telephone number of the insurer for questions about the benefit. The bill also requires the insurer to mail to and receive from each policyholder or certificate holder a form that allows the policyholder or certificate holder to submit one of the following: (1) a written designation of the name, address, and telephone number of at least one person, in addition to the policyholder or certificate holder who is to receive the annual notice described above, (2) a confirmation that the policyholder or certificate holder designates the same person previously designated to receive that notice, or (3) a waiver signed and dated by the policyholder or certificate holder electing not to designate additional persons to receive the annual notice.

Insurers subject to the annual notice requirements of SB 575 must send the first annual notice to affected policyholders by July 1, 2016.