BEFORE THE COMMISSIONER OF SECURITIES AND INSURANCE
MONTANA STATE AUDITOR
In the matter of the amendment of ARM 6.6.3104A, and the adoption of New Rule I pertaining to Long-Term Care
NOTICE OF AMENDMENT AND ADOPTION
TO: All Concerned Persons
1. On April 30, 2015, the Commissioner of Securities and Insurance (CSI), Montana State Auditor, published MAR Notice No. 6-215 pertaining to the public hearing on the proposed amendment and adoption of the above-stated rules at page 398 of the 2015 Montana Administrative Register, Issue Number 8.
2. The Commissioner of Securities and Insurance, Montana State Auditor, has amended ARM 6.6.3104A, and adopted New Rule I (ARM 6.6.3125) exactly as proposed.
3. On May 20, 2015, a public hearing was held on the proposed amendment and adoption of the above-stated rules. Comments were received by the May 28, 2015, deadline.
4. The CSI has thoroughly considered the comments and testimony received. All comments received for the proposed rule amendment and new rule were submitted jointly by two commenters. A summary of the comments received and the responses are as follows:
COMMENT NO. 1: The commenters stated the new requirement that a notice of lapse of coverage be sent via a method providing delivery confirmation places an undue administrative burden upon the insurer. They believe it increases costs as well as the risk of inadvertent noncompliance. They stated that ARM 6.6.3104A(1)(a) and (2) provides sufficient protection by allowing designation of an alternate recipient of lapse notification.
RESPONSE NO. 1: The benefits the new notification requirements provide to the insured outweigh the relatively minimal additional expense placed upon the insurer. An insured whose long-term care policy lapses often loses access to benefits of hundreds of thousands of dollars. Conversely, an insurer will likely pay at most a few dollars per lapse notification under the new requirement, and will send these notifications to only a small percentage of its insured population. While the CSI understands the concerns with inadvertent noncompliance, an insurer is obligated to comply with Montana law, and the lapse notification is not an arbitrary and arcane process susceptible to error, but one which could be implemented systematically. Finally, the CSI agrees that ARM 6.6.3104A(1)(a) and (2) provide important consumer protection as currently drafted, but these amendments offer further important safeguards, including to those insureds who do not designate an alternate recipient of lapse notification.
COMMENT NO. 2: The commenters stated that the proposed notification requirement would not significantly increase lapse protection for an insured. They noted that utilizing delivery confirmation does not guarantee an insured will respond to the notice in a timely manner.
RESPONSE NO. 2: The purpose for this amendment is not solely to guarantee an insured responds to a lapse notification. The delivery confirmation receipt requirement provides a recordkeeping safeguard that allows parties to verify whether a lapse notification was sent at all, and ensures such records are available to the insured for a sufficient period of time. However, requiring an insured or other mail recipient to affirmatively acknowledge receipt of delivery also lends the mailing added significance to the recipient and increases the likelihood that he or she will actually review the document.
COMMENT NO. 3: The commenters support the NAIC Long-Term Care Insurance Model Regulation, upon which the current ARM 6.6.3104A is based. The model requires delivery via first-class mail. The commenters believe this model reflects national consensus regarding a balance between insurer obligations and consumer protections, and that the CSI should not deviate from it. They also pointed out that, to their knowledge, only one other jurisdiction has departed from this model.
RESPONSE NO. 3: The CSI supports the NAIC model regulation. However, states often depart from model language when other regulatory conditions are more appropriate in their respective jurisdictions. In this case, the CSI believes that the amendment provides important additional consumer protections justifying deviation from the model. Additionally, the NAIC is in the process of developing new long-term care model language. Therefore, to the extent a consensus exists, it will likely deteriorate as states consider whether to adopt the new model.
COMMENT NO. 4: The commenters note that recently passed HB 118 permits insurers to utilize electronic delivery of notices to satisfy any otherwise-manual delivery process required under the Insurance Code. The commenters point out that HB 118 would thus allow electronic delivery as a substitute for the enhanced delivery requirements proposed under ARM 6.6.3104A. The commenters suggest an affirmative reference to electronic delivery may be helpful in clarifying the applicability of HB 118 to these circumstances.
RESPONSE NO. 4: The CSI agrees that insurers may rely upon electronic delivery to satisfy the proposed notification obligations, so long as the insurer adheres to the specific requirements contained in HB 118. The Insurance Code and associated rules contain numerous references to various methods of delivery, and none of those references discuss electronic delivery as an alternative. HB 118 provides overarching authorization for insurers to utilize electronic delivery under certain conditions, and for that reason it is unnecessary to insert a specific, redundant reference to electronic delivery in ARM 6.6.3104A.
COMMENT NO. 5: The commenters stated that with respect to New Rule I (ARM 6.6.3125), they would prefer that the CSI adopt the statement in the NAIC Model Bulletin and the NAIC Model LTC Regulation #641 which "require the use of the maximum valuation interest rate as the only basis for discounting of projected values or accumulating past experience with respect to future rate increases."
RESPONSE NO. 5: The CSI agrees, in part, with using only the maximum valuation interest rate. Currently, ARM 6.6.3124(4) already addresses using the maximum valuation interest rate to determine "all present and accumulated values used to determine rate increases[.]" The purpose of New Rule I (ARM 6.6.3125) is slightly different, and addresses the specific use of investment income as a rationale for a rate increase. Therefore the CSI believes New Rule I (ARM 6.6.3125) serves an additional function and is reasonably necessary.
COMMENT NO. 6: The commenters noted that it would take time to change current industry practice, and requested that both amended ARM 6.6.3104A and New Rule I (ARM 6.6.3125) have a delayed effective date of six months to allow time to conform.
RESPONSE NO. 6: With respect to amended ARM 6.6.3104A, the comment is well-taken and it has been given a delayed effective date of six months. New Rule I (ARM 6.6.3125) codifies the CSI's long-held understanding of 33-22-1121(2), MCA. New Rule I (ARM 6.6.3125) is not a departure from current practice, and thus a delayed effective date is not warranted.
5. January 30, 2016, will be the effective date for ARM 6.6.3104A only.
/s/ Nick Mazanec /s/ Jesse Laslovich
Nick Mazanec Jesse Laslovich
Rule Reviewer Chief Legal Counsel
Certified to the Secretary of State July 20, 2015.