2. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products

3. Presenters Sean Fry, Assistant Director-Accident/Health Section Aaron Jenkins, Insurance Specialist-Life, Annuity and Credit Section Carol Lo, Actuary, Actuarial Section

4. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Presentation Overview Long Term Care (LTC) Products Annuity Nonforfeiture Calculations Medicare Supplement Products

5. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Partnership Program LHL570(LTC) Insurer Certification Form (28 TAC § 3.3873(a)(2))

6. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Partnership Program Policy or Certificate- Must be Tax Qualified (28 TAC §3.3871(a)(1)(B), 28 TAC §3.3847)

7. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Partnership Program Policy or Certificate (continued) Inflation Protection Requirements (28 TAC §3.3871(a)(1)(C), 28 TAC § 3.3872)

8. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Partnership Program Policy or Certificate (continued) Inflation Protection Requirements Person < 61 years of age = Compound

9. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Partnership Program Policy or Certificate (continued) Inflation Protection Requirements Person >61, but <76 years of age = Simple or Compound

10. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Partnership Program Policy or Certificate (continued) Inflation Protection Requirements = or >76 years of age = Not Required, But Must be Offered

11. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Great Job! 100 % Correct

12. Long Term Care LTC Partnership Program Policy or Certificate (continued) LHL569(LTC) Required Disclosure Notice (28 TAC §3.3871(a)(2))

13. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Forms (Mandated Text): (28 TAC §§ 3.3829(b)(8)(9), 3.3842(i)(2)) LTC Personal Worksheet (LHL560(LTC)) LTC Potential Rate Increase Disclosure Form (LHL561(LTC)) Things You Should Know Before You Buy LTC Insurance (LHL567(LTC))

14. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Forms (Mandated Text): Exception (28 TAC §§ 3.3829(b)(8)(9), 3.3842(i)(2)) Exception for the LTC Personal Worksheet Text: For State of Texas Company Noncancellable/Guaranteed Renewable Agent

15. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care LTC Web Based Electronic Reporting Reported each year by June 30 Link: http://www.tdi.state.tx.us/forms/form10.html Replacement & Lapse Report: LHL562(LTC) Rescission Reporting: LHL563(LTC) Claims Denial Reporting: LHL564(LTC) Long Term Care Policies Sold: LHL565(LTC) Suitability Reporting: LHL566(LTC)

16. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care Life Policy/Annuity Contracts A Long-Term Care (LTC) rider is subject to 28 TAC Subchapter Y, Chapter 3. These situations make a rider LTC: If payments under the rider are to be used specifically for or restricted to LTC expenses. If the rider extends the benefits beyond exhaustion of the contracts death benefit (extension of benefits) If the cash value of a policy or contract increases as the result of LTC or LTC related expenses.

17. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care Life Policy/Annuity Contracts-Common Omissions Outline of Coverage not Included Improper Order or Format of the Outline of Coverage Exact language of Subchapter Y is not used (extra/deleted language) in the Rider or Outline of Coverage Rates/(Cost-of-Insurance)/Actuarial requirements not included

18. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care Life Policy/Annuity Contracts An accelerated-of-life insurance benefit is a benefit under a life insurance contract which prepays all or a portion of the death benefit. This type of a rider is not considered LTC if: It accelerates the death benefit for: terminal illness, medical conditions requiring extraordinary medical intervention permanent institutional confinement, specified diseases (examples: cancer, heart disease, AIDS, Organ Transplants)

19. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care Life Policy/Annuity Contracts (continued) This type of a rider is not considered LTC if: It pays a lump sum for benefits The payments are not restricted to or conditioned upon the receipt of LTC or LTC related expenses

20. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Long Term Care Rating Issues: Section 1651.053, TIC; 28 TAC 3.3831 Missing actuarial certification Missing moderately adverse experience assumption Missing accumulation of at least twelve months actual experience after implementation of prior rate increase Combining experiences of pre-rate stabilized and rate stabilized forms Proposing a series of rate increases

21. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Annuity Nonforfeiture Calculations House Bill 1919 passed during the 81 st Texas legislative session. Amends Section 1107.006, Texas Insurance Code. Requires all optional and fixed maturity date annuities to adhere to the 70/10 standard. The standard is applicable for purposes of the annuity nonforfeiture calculations.

22. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Annuity Nonforfeiture Calculations The 70/10 Standard: –The maturity date of a contract must not be later than the next anniversary of the annuity contract that follows the annuitants 70th birthday or –The 10th anniversary of the contract Effective Date is June 1, 2010 Before passage of House Bill 1919, Fixed maturity date annuity contracts did not have to comply with the 70/10 standard

23. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Annuity Nonforfeiture Calculations Optional maturity date contracts already have to comply with the 70/10 standard. All annuity contracts issued on or after June 1, 2010, must comply with the 70/10 standard. Contracts to be issued on or after June 1, 2010, that are not in compliance must be revised.

24. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Annuity Nonforfeiture Calculations Sections 1107.006, 1107.057, 1107.101 – 1107.103 TIC Retrospective Test (accumulation value) Prospective Test (present value) Maturity Date = later of: next anniversary after 70 th birthday; or 10 th anniversary of the contract

25. Prior to 70/10

26. 70/10

27. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Annuity Nonforfeiture Calculations Revise Surrender Charge Schedule Revise Issue Age Limit Revised contract or revised contract page (as an insert page) with new form number Revised specification page with new form number Revised actuarial memorandum Revised nonforfeiture demonstration

28. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products What Supp? Medicare Supplement 2010 Standardized Plans (28 TAC § 3.3322)

29. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Whats Supp? Medicare Supplement 2010 Standardized Plans (28 TAC § 3.3322) Outline of Coverage(LHL 050 Rev. 06/09)(28TAC § 3.3308(c))

30. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Whats Supp? Medicare Supplement 2010 Standardized Plans (28 TAC § 3.3322) Outline of Coverage(28TAC § 3.3308(c)) 1990 Standardized Plans (Discontinued)

31. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Whats Supp? Medicare Supplement 2010 Standardized Plans (28 TAC § 3.3322) Outline of Coverage(28 TAC § 3.3308(c)) 1990 Standardized Plans (Discontinued) Rates/Actuarial Memorandum

32. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Medicare Supplement Rating Issues: Effective date of rate increase; 28 TAC § 3.3323 Rate increase on non-credible blocks; 28 TAC § 3.3307(d) Rate increase request on plan A disabled Experience must be presented separately by plan

33. Form and Rate Issues for Accident & Health and Life, Annuity and Credit Products Conclusion & Questions Contact Information: Aaron Jenkins (Insurance Specialist) aaron.jenkins@tdi.state.tx.us Carol Lo (Actuary) carol.lo@tdi.state.tx.us Sean Fry (Assistant Director) sean.fry@tdi.state.tx.us