Section R20-6-1006. Inflation Protection

A.      An insurer shall not offer a long-term care insurance policy unless the insurer offers, at the time of purchase, in addition to any other inflation protection, the option to purchase a policy with an inflation protection provision to address the reduction or limitation on the value of benefits that may result from inflation over time. The terms of the required provision shall be no less favorable than the following:

1.      A provision that provides for increases in benefit levels compounding annually at a rate of no less than 5%;

2.      A provision that allows an insured to periodically increase benefit levels without providing evidence of insurability or health status, if the insured did not decline the option for the previous period. The increased benefit shall be no less than the difference between the existing benefit and that benefit compounded annually at a rate of no less than 5% from the purchase of the existing benefit until the year in which the offer is made; or

3.        A provision for coverage of a specified percentage of actual or reasonable charges that is not subject to a maxi- mum indemnity amount or limit.

B.       If the policy is issued to a group, the insurer shall extend the offer required by subsection (A) to the group policyholder; except, if the policy is issued under A.R.S. § 20-1691.04(C) to a group, other than to a continuing care retirement community, the insurer shall make the offer to each proposed certificate- holder.

C.      An insurer is not required to make the offer in subsection (A) for life insurance policies or riders with accelerated long-term care benefits.

D.      An insurer shall include the information listed in this subsec- tion in or with the outline of coverage.

1.        A graphic comparison of the benefit levels of a policy that increases benefits over the policy period with a pol- icy that does not increase benefits. The graphic compari- son shall show benefit levels over at least a 20-year period.

2.        Any expected premium increases or additional premiums to pay for automatic or optional benefit increases. If pre- mium increases or additional premiums will be based on the attained age of the applicant at the time of the increase, the insurer shall provide a revised schedule of attained-age premiums. An insurer may use a hypotheti- cal or a graphic demonstration for this disclosure.

E.       Inflation-protection benefit increases shall continue without regard to an insured’s age, claim status, claim history, or length of time insured under the policy.

F.       An insurer's offer of inflation protection that provides for auto- matic benefit increases shall include an offer of a premium that the insurer expects to remain constant. The insurer shall dis- close in the offer in a conspicuous manner that the premium may change in the future unless the premium is guaranteed to remain constant.

G.      An insurer shall include in a long-term care insurance policy inflation protection as provided in subsection (A)(1) unless an insurer obtains a rejection of inflation protection signed by the insured as required in subsection (H). The rejection may be either on the application form or on a separate form.

H.      A rejection of inflation protection is deemed part of an appli- cation and shall state: “I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy with and without inflation protection. Specifically, I

reviewed Plans [insert description of plans], and I reject infla- tion protection.”

Historical Note

Adopted effective August 10, 1992 (Supp. 92-3). R20-6- 1006 recodified from R4-14-1006 (Supp. 95-1). R20-6- 1006 renumbered to R20-6-1007; new Section R20-5- 1006 renumbered from R20-6-1005 and amended by final rulemaking at 10 A.A.R. 4661, effective January 3, 2005

(Supp. 04-4).