HIV AIDS Resource Guide/HIV-AIDS Resource Guide.iso/STAT/PROP_FED/HSA02_01.ASC

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/* Part two of Section 2 of the proposed Health Security Act
follows. */
            Section 2109   TOTAL FEDERAL BUDGET; ALLOTMENTS
TO STATES.
    (a)  Total Federal Budget.
        (1)  Fiscal years 1996 through 2003. Subject to

paragraph (5)(C), for purposes of this part, the total

Federal budget for State plans under this part for each of

fiscal years 1996 through 2003 is the following:

            (A)  For fiscal year 1996, $4.5 billion.

            (B)  For fiscal year 1997, $7.8 billion. (C)  For

            fiscal year 1998, $11.0 billion. (D)  For fiscal

            year 1999, $14.7 billion. (E)  For fiscal year

            2000, $18.7 billion. (F)  For fiscal year 2001,

            $26.7 billion. (G)  For fiscal year 2002, $35.5

            billion. (H)  For fiscal year 2003, $38.3 billion.

        (2)  Subsequent fiscal years.For purposes of this part,
the total Federal budget for State plans under this part for
each fiscal year after fiscal year 2003 is the total Federal
budget under this subsection for the preceding fiscal year
multiplied by


            (A)  a factor (described in paragraph (3))
reflecting the change in the CPI for the fiscal year, and


            (B)  a factor (described in paragraph (4))
reflecting the change in the number of individuals with
disabilities for the fiscal year.


        (3)  CPI increase factor.For purposes of paragraph
(2)(A), the factor described in this paragraph for a fiscal
year is the ratio of


            (A)  the annual average index of the consumer price
index for the preceding fiscal year, to


            (B)  such index, as so measured, for the second
preceding fiscal year.


        (4)  Disabled population factor. For purposes of
paragraph (2)(B), the factor described in this paragraph for a
fiscal year is 100 percent plus (or minus) the percentage
increase (or decrease) change in the disabled population of the
United States (as determined for purposes of the most recent
update under subsection (b)(3)(D)).


        (5)  Additional funds due to medicaid offsets.


            (A)  In general. Each participating State must
provide the Secretary with information concerning offsets and
reductions in the medicaid program resulting from home and
community-based services provided disabled individuals under
this part, that would have been paid for such individuals under
the State medicaid plan but for the provision of similar
services
under the program under this part. At the time a State first
submits its plan under this title and before each subsequent
fiscal year (through fiscal year 2003), the State also must
provide the Secretary with such budgetary information (for each
fiscal year through fiscal year 2003), as the Secretary
determines to be necessary to carry out this paragraph.

            (B)  Reports. Each State with a program under this
part shall submit such reports to the Secretary as the
Secretary may require in order to monitor compliance with
subparagraph (A).

            (C)  Adjustments to federal budget.

    (i)  In general. For each fiscal year (beginning with
fiscal year 1996 and ending with fiscal year 2003) and based on
a review of information submitted under subparagraph (A), the
Secretary shall determine the amount by which the total Federal
budget under subsection (a) will increase. The amount of such
increase for a fiscal year shall be limited to the reduction in
Federal expenditures of medical assistance (as determined by
Secretary) that would have been made under title XIX of the
Social Security Act for home and community based services for
disabled individuals but for the provision of similar services
under the program under this part.

    (ii)  Annual publication. The Secretary shall publish
before the beginning of such fiscal year, the revised total
Federal budget under this subsection for such fiscal year (and
succeeding fiscal years before fiscal year 2003).

            (D)  No duplicate payment. No payment may be made
to a State under this section for any services to the extent
that the State received payment for such services under section
1903(a) of the Social Security Act.

            (E)  Construction. Nothing in this subsection shall
be construed as requiring States to determine eligibility for
medical assistance under the State medicaid plan on behalf of
individuals receiving assistance under this part.

    (b)  Allotments to States.

        (1)  In general. The Secretary shall allot to each
State for each fiscal year an amount that bears the same ratio
to the total Federal budget for the fiscal year (specified
under paragraph (1) or (2) of subsection (a)) as the State
allotment factor (under paragraph (2) for the State for the
fiscal year) bears to the sum of such factors for all States
for that fiscal year.

        (2)  State allotment factor.

            (A)  In general. For each State for each fiscal
year, the Secretary shall compute a State allotment factor
equal to the sum of

   (i)  the base allotment factor (specified in subparagraph
(B)), and

    (ii)  the low income allotment factor (specified in
subparagraph (C)), for the State for the fiscal year.

            (B)  Base allotment factor. The base allotment
factor, specified in this subparagraph, for a State for a
fiscal year is equal to the product of the following:

  (i)  Number of individuals with disabilities. The number of
individuals with disabilities in the State (determined under
paragraph (3)) for the fiscal year.

    (ii)  80 percent of the national per capita budget. 80
percent of the national average per capita budget amount
(determined under paragraph (4)) for the fiscal year.

    (iii)  Wage adjustment factor. The wage adjustment factor
(determined under paragraph (5)) for the State for the fiscal
year.
     (iv)  Federal matching rate.The Federal matching rate
(determined under section 2108(b)) for the fiscal year.

            (C)  Low income allotment factor. The low income
allotment factor, specified in this subparagraph, for a State
for a fiscal year is equal to the product of the following:
  (i)  Number of individuals with disabilities. The number of
individuals with disabilities in the State (determined under
paragraph (3)) for the fiscal year.

    (ii)  10 percent of the national per capita budget. 10
percent of the national average per capita budget amount
(determined under paragraph (4)) for the fiscal year.

    (iii)  Wage adjustment factor. The wage adjustment factor
(determined under paragraph (5)) for the State for the fiscal
year.

    (iv)  Federal matching rate. The Federal matching rate
(determined under section 2108(b)) for the fiscal year.

    (v)  Low income index. The low income index (determined
under paragraph (6)) for the State for the preceding fiscal
year.

        (3)  Number of individuals with disabilities. The
number of individuals with disabilities in a State for a fiscal
year shall be determined as follows:

            (A)  Base. The Secretary shall determine the number
of individuals in the State by age, sex, and income category,
based on the 1990 decennial census, adjusted (as appropriate)
by the March 1994 current population survey.

            (B)  Disability prevalence level by population
category. The Secretary shall determine, for each such age,
sex, and income category, the national average proportion of
the population of such category that represents individuals
with disabilities. The Secretary may conduct periodic surveys
in order to determine such proportions.

            (C)  Base disabled population in a State. The
number of individuals with disabilities in a State in 1994 is
equal to the sum of the products, for such each age, sex, and
income category, of


    (i)  the population of individuals in the State in the
category (determined under subparagraph (A)), and

    (ii)  the national average proportion for such category
(determined under subparagraph (B)).

            (D)  Update. The Secretary shall determine the
number
of individuals with disabilities in a State in a fiscal year
equal to the number determined under subparagraph (C) for the
State increased (or decreased) by the percentage increase (or
decrease) in the disabled population of the State as determined
under the current population survey from 1994 to the year
before the fiscal year involved.
        (4)  National per capita budget amount. The national
average per capita budget amount, for a fiscal year, is
            (A)  the total Federal budget specified under
subsection (a) for the fiscal year; divided by
            (B)  the sum, for the fiscal year, of the numbers
of individuals with disabilities (determined under paragraph
(3)) for all the States for the fiscal year.
        (5)  Wage adjustment factor. The wage adjustment
factor, for a State for a fiscal year, is equal to the ratio of
            (A)  the average hourly wages for service workers
(other than household or protective services) in the State, to
            (B)  the national average hourly wages for service
workers (other than household or protective services). The
hourly wages shall be determined under this paragraph based on
data from the most recent decennial census for which such data
are available.
        (6)  Low income index. The low income index for each
State for a fiscal year is the ratio, determined for the
preceding fiscal year, of
            (A)  the percentage of the State's population that
has income below 150 percent of the poverty level, to
            (B)  the percentage of the population of the United
States that has income below 150 percent of the poverty level.
Such percentages shall be based on data from the most recent
decennial census for which such data are available, adjusted by
data from the most recent current population survey as
determined appropriate by the Secretary.
    (c)  State Entitlement. This part constitutes budget
authority in advance of appropriations Acts, and represents the
obligation of the Federal Government to provide for the payment
to States of amounts described in subsection (a).
    Part 2   MEDICAID NURSING HOME IMPROVEMENTS
            Section 2201   REFERENCE TO AMENDMENTS.
    For amendments to the medicaid program under title XIX of
the Social Security Act to improve nursing home benefits under
such program, see part 2 of subtitle C of title IV.
    Part 3   PRIVATE LONG-TERM CARE INSURANCE
        Subpart A    General Provisions
            Section 2301   FEDERAL REGULATIONS; PRIOR
APPLICATION OR CERTAIN REQUIREMENTS.
    (a)  In General. The Secretary, with the advice and
assistance of the Advisory Council, as appropriate, shall
promulgate regulations as necessary to implement the provisions
of this part, in accordance with the timetable specified in
subsection (b).
    (b)  Timetable for Publication of Regulations.
        (1)  Federal register notice. Within 120 days after the
date a majority of the members are first appointed to the
Advisory Council pursuant to section 2302, the Secretary shall
publish in the Federal Register a notice setting forth the
projected timetable for promulgation of regulations required
under this part. Such timetable shall indicate which
regulations are proposed to be published by the end of the
first, second, and third years after appointment of the
Advisory Council.
        (2)  Final deadline. All regulations required under
this part shall be published by the end of the third year after
appointment of the Advisory Council.
  (c)  Provisions Effective Without Regard to Promulgation of
Regulations.

        (1)  In general. Notwithstanding any other provision of
this part, insurers shall be required, not later than 6 months
after the enactment of this Act, regardless of whether final
implementing regulations have been promulgated by the
Secretary, to comply with the following provisions of this
part:

            (A)  Section 2321(c) (standard outline of
coverage);
            (B)  Section 2321(d) (reporting to State insurance
commissioners);
          (C)  Section 2322(b) (preexisting condition
exclusions);

            (D)  Section 2322(c) (limiting conditions on
benefits);

            (E)  Section 2322(d) (inflation protection);

             (F)  Section 2324 (sales practices);

           (G)  Section 2325 (continuation, renewal,
replacement, conversion, and cancellation of policies); and

           (H)  Section 2326 (payment of benefits).

        (2)  Interim requirements. Before the effective date of
applicable regulations promulgated by the Secretary
implementing requirements of this part as specified below, such
requirements will be considered to be met

            (A)  in the case of section 2321(c) (requiring a
standard outline of coverage), if the long-term care insurance
policy meets the requirements of section 6.G.(2) of the NAIC
Model Act and of section 24 of the NAIC Model Regulation;

            (B)  in the case of section 2321(d) (requiring
reporting to the State insurance commissioner), if the insurer
meets the requirements of section 14 of the NAIC Model
Regulation;

            (C)  in the case of section 2322(c)(1) (general
requirements concerning limiting conditions on benefits), if
such policy meets the requirements of section 6.D. of the NAIC
Model Act;

            (D)  in the case of section 2322(c)(2) (limiting
conditions on home health care or community-based services) if
such policy meets the requirements of section 11 of the NAIC
Model Regulations;

            (E)  in the case of section 2322(d) (concerning
inflation protection), if the insurer meets the requirements of
section 12 of the NAIC Model Regulation;

            (F)  in the case of section 2324(b) (concerning
applications for the purchase of insurance), if the insurer
meets the requirements of section 10 of the NAIC Model
Regulation;

            (G)  in the case of section 2324(d) (concerning
compensation for the sale of policies), if the insurer meets
the requirements of the optional regulation entitled "Permitted
Compensation Arrangements" included in the NAIC Model
Regulation;

            (H)  in the case of section 2324(g) (concerning
sales through employers or membership organizations), if the
insurer and the membership organization meet the requirements
of section 21.C. of the NAIC Model Regulation;

            (I)  in the case of section 2324(h) (concerning
interstate sales of group policies), if the insurer and the
policy meet the requirements of section 5 of the NAIC Model
Act; and

            (J)  in the case of section 2325(f) (concerning
continuation, renewal, replacement, and conversion of
policies), if the insurer and the policy meet the requirements
of section 7 of the NAIC Model Regulation.

            Section 2302   NATIONAL LONG-TERM CARE INSURANCE
ADVISORY COUNCIL.

   (a)  Appointment. The Secretary shall appoint an advisory
board to be known as the National Long-Term Care Insurance
Advisory Council.

    (b)  Composition.

        (1)  Number and qualifications of members. The Advisory
Council shall consist of 5 members, each of whom has
substantial expertise in matters relating to the provision and
regulation of long-term care insurance. At least one member
shall have experience as a State insurance commissioner or
legislator with expertise in policy development with respect
to, and regulation of, long-term care insurance.

        (2)  Terms of Office.

            (A)  In general. Except as otherwise provided in
this subsection, members shall be appointed for terms of office
of 5 years.

            (B)  Initial members. Of the initial members of the
Council, one shall be appointed for a term of 5 years, one for
4 years, one for 3 years, one for 2 years, and one for 1 year.

            (C)  Two-term limit. No member shall be eligible to
serve in excess of two consecutive terms, but may continue to
serve until such member's successor is appointed.

        (3)  Vacancies. Any member appointed to fill a vacancy
occurring before the expiration of the term of such member's
predecessor shall be appointed for the remainder of such term.
       (4)  Removal. No member may be removed during the
member's term of office except for just and sufficient cause.

  (c)  Chairperson. The Secretary shall appoint a Chairperson
from among the members.

    (d)  Compensation.
        (1)  In general. Except as provided in paragraph (3),
members of the Advisory Council, while serving on business of
the Advisory Council, shall be entitled to receive compensation
at a rate not to exceed the daily equivalent of the rate
specified for level V of the Executive Schedule under section
5316 of title 5, United States Code.
        (2)  Travel. Except as provided in paragraph (3),
members of the Advisory Council, while serving on business of
the Advisory Council away from their homes or regular places of
business, may be allowed travel expenses (including per diem in
lieu of subsistence) as authorized by section 5703(b) of title
5, United States Code, for persons in the Government service
employed intermittently.
        (3)  Restriction. A member of the Advisory Council may
not be compensated under this section if the member is
receiving compensation or travel expenses from another source
while serving on business of the Advisory Council.
    (e)  Meetings. The Advisory Council shall meet not less
often than 2 times a year at the direction of the Chairperson.
    (f)  Staff and Support.
      (1)  In general. The Advisory Council shall have a
salaried executive director appointed by the Chairperson, and
staff appointed by the executive director with the approval of
the Chairperson.

        (2)  Federal entities. The head of each Federal
department and agency shall make available to the Advisory
Council such information and other assistance as it may require
to carry out its responsibilities.

   (g)  General Responsibilities. The Advisory Council shall

        (1)  provide advice, recommendations, and assistance to
the Secretary on matters relating to long-term care insurance
as specified in this part and as otherwise required by the
Secretary;

      (2)  collect, analyze, and disseminate information
relating to long-term care insurance in order to increase the
understanding of insurers, providers, consumers, and regulatory
bodies of the issues relating to, and to facilitate
improvements in, such insurance;

        (3)  develop for the Secretary's consideration proposed
models, standards, requirements, and procedures relating to
longterm care insurance, as appropriate, with respect to the
content and format of insurance policies, agent and insurer
practices concerning the sale and servicing of such policies,
and regulatory activities; and

      (4)  monitor the development of the long-term care
insurance market (including policies, marketing practices,
pricing, eligibility and benefit preconditions, and claims
payment procedures) and advise the Secretary concerning the
need for regulatory changes.

    (h)  Specific Matters for Consideration. The Advisory
Council shall consider, and provide views and recommendations
to the Secretary concerning, the following matters relating to
long-term care insurance:
        (1)  Uniform terms, definitions, and formats.The
Advisory Council shall develop and propose to the Secretary
uniform terminology, definitions, and formats for use in long-
term care insurance policies.
        (2)  Standard outline of coverage. The Advisory Council
shall develop and propose to the Secretary a standard format
for use by all insurers offering long-term care policies for
the outline of coverage required pursuant to section 2321(c).
        (3)  Premiums. The Advisory Council shall consider, and
make recommendations to the Secretary concerning I24  (A)
whether Federal standards should be established governing the
amounts of and rates of increase in premiums in long-term care
policies, and I24  (B) if so, what factors should be taken into
account (and whether such factors should include the age of the
insured, actuarial information, cost of care, lapse rates,
financial reserve requirements, insurer solvency, and tax
treatment of premiums, and benefits.
        (4)  Upgrades of coverage. The Advisory Council shall
consider, and make recommendations to the Secretary concerning,
whether Federal standards are needed governing the terms and
conditions insurers may place on insured individuals'
eligibility to obtain improved coverage (including any
restrictions considered advisable with respect to premium
increases, agent commissions, medical underwriting, and age
rating).
        (5)  Threshold conditions for payment of benefits. The
Advisory Council shall
            (A)  consider, and make recommendations to the
Secretary concerning, the advisability of establishing
standardized sets of threshold conditions (based on degrees of
functional or cognitive impairment or on other conditions) for
payment of covered benefits;
            (B)  to the extent found appropriate, recommend to
the Secretary specific sets of threshold conditions to be used
for such purpose;
            (C)  develop and propose to the Secretary, with
respect to assessments of insured individuals' levels of need
for purposes of receipt of covered benefits
    (i)  professional qualification standards applicable to
individuals making such determinations; and

  (ii)  uniform procedures and formats for use in performing
and documenting such assessments.

      (6)  Dispute resolution. The Advisory Council shall
consider, and make recommendations to the Secretary concerning,
procedures that insurers and States should be required to
implement to afford insured individuals a reasonable
opportunity
to dispute denial of benefits under a long-term care insurance
policy.

        (7)  Sales and servicing of policies. The Advisory
Council shall consider, and make recommendations to the
Secretary concerning

            (A)  training and certification to be required of
agents involved in selling or servicing long-term care
insurance policies;

            (B)  appropriate limits on commissions or other
compensation paid to agents for the sale or servicing of such
policies;

            (C)  sales practices that should be prohibited or
limited with respect to such policies (including any financial
limits that should be applied concerning the individuals to
whom such policies may be sold); and

            (D)  appropriate standards and requirements with
respect to sales of such policies by or through employers and
other entities, to employees, members, or affiliates of such
entities.

        (8)  Continuing care retirement communities. The
Advisory Council shall consider, and make recommendations to
the Secretary concerning, the extent to which the long-term
care insurance aspects of continuing care retirement community
arrangements should be subject to regulation under this part
(and the Secretary, in consultation with the Secretary of the
Treasury, shall consider such recommendations and promulgate
appropriate regulations).

  (i)  Activities. In order to carry out its responsibilities
under this part, the Advisory Council is authorized to

        (1)  consult individuals and public and private
entities with experience and expertise in matters relating to
long-term care insurance (and shall consult the National
Association of Insurance Commissioners);

        (2)  conduct meetings and hold hearings;

        (3)  conduct research (either directly or under grant
or contract);

        (4)  collect, analyze, publish, and disseminate data
and information (either directly or under grant or contract);
and

        (5)  develop model formats and procedures for insurance
policies and marketing materials; and develop proposed
standards, rules, and procedures for regulatory programs.

    (j)  Authorization of Appropriations. There are authorized
to be appropriated, for activities of the Advisory Council,
$1,500,000 for fiscal year 1995, and $2,000,000 for each
succeeding fiscal year.

             Section 2303   RELATION TO STATE LAW.

    Nothing in this part shall be construed as preventing a
State from applying standards that provide greater protection
to insured individuals under long-term care insurance policies
than the standards promulgated under this part, except that
such State standards may not be inconsistent with any of the
requirements of
this part or of regulations hereunder.

            Section 2304   DEFINITIONS.

    For purposes of this part:

        (1)  Activity of daily living. The term "activity of
daily living" means any of the following: eating, toileting,
dressing, bathing, and transferring.

        (2)  Adult day care. The term "adult day care" means a
program providing social and health-related services during the
day to six or more adults with disabilities (or such smaller
number as the Secretary may specify in regulations) in a
community group setting outside the home.

        (3)  Advisory council. The term "Advisory Council"
means the National Long-Term Care Insurance Advisory Council
established pursuant to section 2302.

        (4)  Certificate. The term "certificate" means a
document issued to an individual as evidence of such
individual's coverage under a group insurance policy.

      (5)  Continuing care retirement community. The term
"continuing care retirement community" means a residential
community operated by a private entity that enters into
contractual agreements with residents under which such entity
guarantees, in consideration for residents' purchase of or
periodic payment for membership in the community, to provide
for such residents' future long-term care needs.

        (6)  Designated representative. The term "designated
representative" means the person designated by an insured
individual (or, if such individual is incapacitated, pursuant
to an appropriate administrative or judicial procedure) to
communicate with the insurer on behalf of such individual in
the event of such individual's incapacitation.

        (7)  Home health care. The term "home health care"
means medical and nonmedical services including such services
as homemaker services, assistance with activities of daily
living, and respite care provided to individuals in their
residences.

        (8)  Insured individual. The term "insured individual"
means, with respect to a long-term care insurance policy, any
individual who has coverage of benefits under such policy.

        (9)  Insurer. The term "insurer" means any person that
offers or sells an individual or group long-term care insurance
policy under which such person is at risk for all or part of
the cost of benefits under the policy, and includes any agent
of such person.

        (10)  Long-term care insurance policy. The term "long
term care insurance policy" has the meaning given that term in
section 4 of the NAIC Model Act, except that the last sentence
of such section shall not apply.

        (11)  NAIC model act. The term "NAIC Model Act" means
the Long-Term Care Insurance Model Act published by the NAIC,
as amended through January 1993.

        (12)  NAIC model regulation. The term "NAIC Model
Regulation" means the Long-Term Care Insurance Model Regulation
published by the NAIC, as amended through January 1993.

        (13)  Nursing facility. The term "nursing facility"
means a facility licensed by the State to provide to residents

            (A)  skilled nursing care and related services for
residents who require medical or nursing care;

            (B)  rehabilitation services for the rehabilitation
of injured, disabled, or sick individuals, or

            (C)  on a regular basis, health-related care and
services to individuals who because of their mental or physical
condition require care and services (above the level of room
and board) which can be made available to them only through
institutional facilities.

        (14)  Policyholder. The term "policyholder" means the
entity which is the holder of record of a group long-term care
insurance policy.

        (15)  Residential care facility. The term "residential
care facility" means a facility (including a nursing facility)
that

            (A)  provides to residents medical or personal care
services (including at a minimum assistance with activities of
daily living) in a setting other than an individual or single
family home, and

            (B)  does not provide services of a higher level
than can be provided by a nursing facility.

        (16)  Respite care. The term "respite care" means the
temporary provision of care (including assistance with
activities of daily living) to an individual, in the
individual's home or another setting in the community, for the
purpose of affording such individual's unpaid caregiver a
respite from the responsibilities of such care.

      (17)  State insurance commissioner. The term "State
insurance commissioner" means the State official bearing such
title, or, in the case of a jurisdiction where such title is
not used, the State official with primary responsibility for
the regulation of insurance.

        Subpart B    Federal Standards and Requirements

           Section 2321   REQUIREMENTS TO FACILITATE
UNDERSTANDING AND COMPARISON OF BENEFITS.

   (a)  In General. The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations designed to standardize formats and
terminology used in long-term care insurance policies, to
require insurers to provide to customers and beneficiaries
information on the range of public and private long-term care
coverage available, and to establish such other requirements as
may be appropriate to promote consumer understanding and
facilitate comparison of benefits, which shall include at a
minimum the requirements specified in this section.

    (b)  Uniform Terms, Definitions, and Formats. Insurers
shall be required to use, in long-term care insurance policies,
uniform terminology, definitions of terms, and formats, in
accordance with regulations promulgated by the Secretary, after
considering recommendations of the Advisory Council.

    (c)  Standard Outline of Coverage.
        (1)  In general. Insurers shall be required to develop
for each long-term care insurance policy offered or sold, to
include as a part of each such policy, and to make available to
each potential purchaser and furnish to each insured individual
and policyholder, an outline of coverage under such policy that
            (A)  includes the elements specified in paragraph
(2),
            (B)  is in a uniform format (as prescribed by
Secretary on the basis of recommendations by the Advisory
Council),
            (C)  accurately and clearly reflects the contents
of the policy, and
            (D)  is updated periodically on such timetable as
may be required by the Secretary (or more frequently as
necessary to reflect significant changes in outlined
information).
        (2)  Contents of outline. The outline of coverage for
each long-term care insurance policy shall include at least the
following:
            (A)  Benefits. A description of
    (i)  the principal benefits covered, including the extent
of
            (I)  benefits for services furnished in residential
care facilities, and
            (II)  other benefits,
    (ii)  the principal exclusions from and limitations on
coverage,

    (iii)  the terms and conditions, if any, upon which the
insured individual may obtain upgraded benefits, and

   (iv)  the threshold conditions for entitlement to receive
benefits.

            (B)  Continuation, renewal, and conversion. A
statement of the terms under which a policy may be

    (i)  returned (and premium refunded) during an initial
examination period,

    (ii)  continued in force or renewed,

   (iii)  converted to an individual policy (in the case of
coverage under a group policy),

            (C)  Cancellation. A statement of the circumstances
in which a policy may be terminated, and the refund or
nonforfeitures benefits (if any) applicable in each such
circumstance, including

    (i)  death of the insured individual,

    (ii)  nonpayment of premiums,

    (iii)  election by the insured individual not to renew,

    (iv)  any other circumstance.

            (D)  Premium. A statement of

    (i)  the total annual premium, and the portion of such
premium attributable to each covered benefit,

   (ii)  any reservation by the insurer of a right to change
premiums,

    (iii)  any limit on annual premium increases,

    (iv)  any expected premium increases associated with
automatic or optional benefit increases (including inflation
protection), and

   (v)  any circumstances under which payment of premium is
waived.

            (E)  Declaration concerning summary. A statement,
in bold face type on the face of the document in language
understandable to the average individual, that the outline of
coverage is a summary only, not a contract of insurance, and
that the policy contains the contractual provisions that
govern.

            (F)  Cost/value comparison.

   (i)  Information on average costs (and variation in such
costs) for nursing facility care (and such other care as the
Secretary may specify) and information on the value of benefits
relative to such costs.

    (ii)  A comparison of benefits, over a period of at least
20 years, for policies with and without inflation protection.

    (iii)  A declaration as to whether the amount of benefits
will increase over time, and, if so, a statement of the type
and amount of, any limitations on, and any premium increases
for, such benefit increases.

            (G)  Tax treatment. A statement of the Federal
income tax treatment of premiums and benefits under the policy,
as determined by the Secretary of the Treasury.

            (H)  Other. Such other information as the Secretary
may require.

    (d)  Reporting to State Insurance Commissioner. Each
insurer shall be required to report at least annually, to the
State insurance commissioner of each State in which any long-
term care insurance policy of the insurer is sold, such
information, in such format, as the Secretary may specify with
respect to each such policy, including

        (1)  the standard outline of coverage required pursuant

to subsection (c);

        (2)  lapse rates and replacement rates for such

        policies; (3)  the ratio of premiums collected to

        benefits paid; (4)  reserves;

        (5)  written materials used in sale or promotion of
such policy; and

        (6)  any other information the Secretary may require.

    (e)  Comparison of Long-Term Care Coverage Alternatives.
Each insurer shall be required to furnish to each individual
before a long-term care insurance policy of the insurer is sold
to the individual information on the conditions of eligibility
for, and benefits under, each of the following:

        (1)  Policies offered by the insurer. The standard
outline of coverage, and such other information as the
Secretary may specify, with respect to each long-term care
insurance policy offered by the insurer.

        (2)  Comparison to other available private insurance.
Information, in such format as may be required under this part,
on

            (A)  benefits offered under long-term care
insurance policies of the insurer (and the threshold conditions
for receipt by an insured individual of each such benefit); and

            (B)  additional benefits available under policies
offered by other private insurers (to the extent such
information is made available by the State insurance
commissioner).

        (3)  Public programs; regional alliances. Information
furnished to the insurer, pursuant to section 2342(b)(2), by
the State in which such individual resides, on conditions of
eligibility for, and long-term care benefits (or the lack of
such benefits) under

            (A)  each public long-term care program
administered by the State,

            (B)  the Medicare programs under title XVIII of the
Social Security Act; and

            (C)  each regional alliance operating in the State.

            Section 2322   REQUIREMENTS RELATING TO COVERAGE.

   (a)  In General. The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements with respect
to the terms of and benefits under long-term care insurance
policies, which shall include at a minimum the requirements
specified in this section.

     (b)  Limitations on Preexisting Condition Exclusions.

        (1)  Initial policies. A long-term care insurance
policy may not exclude or limit coverage for any service or
benefit, the need for which is the result of a medical
condition or disability because an insured individual received
medical treatment for, or was diagnosed as having, such
condition before the issuance of the policy, unless

            (A)  the insurer, prior to issuance of the policy,
determines and documents (with evidence including written
evidence that such condition has been treated or diagnosed by a
qualified health care professional) that the insured individual
had such condition during the 6-month period (or such longer
period as the Secretary may specify) ending on the effective
date of the policy; and

            (B)  the need or such service or benefit begins
within 6 months (or such longer period as the Secretary may
specify) following the effective date of the policy.
        (2)  Replacement policies. Solely for purposes of the
requirements of paragraph (1), with respect to an insured
individual, the effective date of a long-term care insurance
policy issued to replace a previous policy, with respect to
benefits which are the same as or substantially equivalent to
benefits under such previous policy, shall be considered to be
the effective date of such previous policy with respect to such
individual.
    (c)  Limiting Conditions on Benefits.
        (1)  In general. A long-term care insurance policy may
not
            (A)  condition eligibility for benefits for a type
of service on the need for or receipt of any other type of
service (such as prior hospitalization or institutionalization,
or a higher level of care than the care for which benefits are
covered);
            (B)  condition eligibility for any benefit (where
the need for such benefit has been established by an
independent assessment of impairment) on any particular medical
diagnosis (including any acute condition) or on one of a group
of diagnoses;
            (C)  condition eligibility for benefits furnished
by licensed or certified providers on compliance by such
providers with conditions not required under Federal or State
law; or
            (D)  condition coverage of any service on provision
of such service by a provider, or in a setting, providing a
higher level of care than that required by an insured
individual.
        (2)  Home care or community-based services. A long-term
care insurance policy that provides benefits for any home care
or community-based services provided in a setting other than a
residential care facility
            (A)  may not limit such benefits to services
provided by registered nurses or licensed practical nurses;
            (B)  may not limit such benefits to services
furnished by persons or entities participating in programs
under titles XVIII and XIX of the Social Security Act and in
part 1 of this subtitle; and
            (C)  must provide, at a minimum, benefits for
personal assistance with activities of daily living, home
health care, adult day care, and respite care.
        (3)  Nursing facility services. A long-term care
insurance policy that provides benefits for any nursing
facility services
            (A)  must provide benefits for such services
provided by all types of nursing facilities licensed by the
State, and
          (B)  may provide benefits for care in other
residential facilities.

        (4)  Prohibition on discrimination by diagnosis. A long-
term care insurance policy may not provide for treatment of
            (A)  Alzheimer's disease or any other progressive
degenerative dementia of an organic origin,
            (B)  any organic or inorganic mental illness,
            (C)  mental retardation or any other cognitive or
mental impairment, or
/* A non-discrimination provision related to AIDS. */
            (D)  HIV infection or AIDS, different from the
treatment of any other medical condition for purposes of
determining whether threshold conditions for the receipt of
benefits have been met, or the amount of benefits under the
policy.
    (d)  Inflation Protection.
        (1)  Requirement to offer. An insurer offering for sale
any long-term care insurance policy shall be required to afford
the purchaser the option to obtain coverage under such policy
(upon payment of increased premiums) of annual increases in
benefits at rates in accordance with paragraph (2).
        (2)  Rate increase in benefits. For purposes of
paragraph (1), the benefits under a policy for each year shall
be increased by a percentage of the full value of benefits
under the policy for the previous year, which shall be not less
than 5 percent of such value (or such other rate of increase as
may be determined by the Secretary to be adequate to offset
increases in the costs of long-term care services for which
coverage is provided under the policy).
        (3)  Requirement of written rejection. Inflation
protection in accordance with paragraph (1) may be excluded
from the coverage under a policy only if the insured individual
(or, if different, the person responsible for payment of
premiums) has rejected in writing the option to obtain such
coverage.
            Section 2323   REQUIREMENTS RELATING TO PREMIUMS.
   (a)  In General. The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements applicable to
premiums for long-term care insurance policies, which shall
include at a minimum the requirements specified in this
section.

    (b)  Limitations on Rates and Increases. The Secretary,
after considering recommendations of the Advisory Council, may
establish by regulation such standards and requirements as may
be determined appropriate with respect to

        (1)  mandatory or optional State procedures for review
and approval of premium rates and rate increases or decreases;

        (2)  limitations on the amount of initial premiums, or
on the rate or amount of premium increases;

        (3)  the factors to be taken into consideration by an
insurer in proposing, and by a State in approving or
disapproving, premium rates and increases; and

        (4)  the extent to which consumers should be entitled
to participate or be represented in the rate-setting process
and to
have access to actuarial and other information relied on in
setting rates.

            Section 2324   REQUIREMENTS RELATING TO SALES
PRACTICES.

   (a)  In General. The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements applicable to
the sale or offering for sale of long-term care insurance
policies, which shall include at a minimum the requirements
specified in this section.

    (b)  Applications. Any insurer that offers any long-term
care insurance policy (including any group policy) shall be
required to meet such requirements with respect to the content,
format, and use of application forms for long-term care
insurance as the Secretary may require by regulation.

    (c)  Agent Training and Certification. An insurer may not
sell or offer for sale a long-term care insurance policy
through an agent who does not comply with minimum standards
with respect to training and certification established by the
Secretary after consideration of recommendations by the
Advisory Council.

    (d)  Compensation for Sale of Policies. Compensation by an
insurer to an agent or agents for the sale of an original long
term care insurance policy, or for servicing or renewing such a
policy, may not exceed amounts (or percentage shares of
premiums or other reference amounts) specified by the Secretary
in regulations, after considering recommendations of the
Advisory Council.

  (e)  Prohibited Sales Practices. The following practices by
insurers shall be prohibited with respect to the sale or offer
for sale of long-term care insurance policies:

        (1)  False and misleading representations.Making any
statement or representation

            (A)  which the insurer knows or should know is
false or misleading (including the inaccurate, incomplete, or
misleading comparison of long-term care insurance policies or
insurers), and

            (B)  which is intended, or would be likely, to
induce any person to purchase, retain, terminate, forfeit,
permit to lapse, pledge, assign, borrow against, convert, or
effect a change with respect to, any long-term care insurance
policy.

        (2)  Inaccurate completion of medical history. Making
or causing to be made (by any means including failure to
inquire about or to record information relating to preexisting
conditions) statements or omissions, in records detailing the
medical history of an applicant for insurance, which the
insurer knows or should know render such records false,
incomplete, or misleading in any way material to such
applicant's eligibility for or coverage under a long-term care
insurance policy.

        (3)  Undue pressure. Employing force, fright, threat,
or other undue pressure, whether explicit or implicit, which is
intended, or would be likely, to induce the purchase of a long
term care insurance policy.

        (4)  Cold lead advertising. Using, directly or
indirectly, any method of contacting consumers (including any
method designed to induce consumers to contact the insurer or
agent) for the purpose of inducing the purchase of long-term
care insurance (regardless of whether such purpose is the sole
or primary purpose of the contact) without conspicuously
disclosing such purpose.

    (f)  Prohibition on Sale of Duplicate Benefits. An insurer
or agent may not sell or issue to an individual a long-term
care insurance policy that the insurer or agent knows or should
know provides for coverage that duplicates coverage already
provided in another long-term care insurance policy held by
such individual (unless the policy is intended to replace such
other policy).

   (g)  Sales Through Employers or Membership Organizations.

        (1)  Requirements concerning such arrangements. In any
case where an employer, organization, association, or other
entity (referred to as a "membership entity") endorses a long
term care insurance policy to, or such policy is marketed or
sold through such membership entity to, employees, members, or
other individuals affiliated with such membership entity

            (A)  the insurer offering such policy shall not
permit its marketing or sale through such entity unless the
requirements of this subsection are met; and

          (B)  a membership entity that receives any
compensation for such sale, marketing, or endorsement of such
policy shall be considered the agent of the insurer for
purposes of this part.

        (2)  Disclosure and information requirements. A
membership entity that endorses a long-term care insurance
policy, or through which such policy is sold, to individuals
affiliated with such entity, shall

            (A)  disclose prominently, in a form and manner
designed to ensure that each such individual who receives
information concerning any such policy through such entity is
aware of and understands such disclosure

     (i)  the manner in which the insurer and policy were
selected;

    (ii)  the extent (if any) to which a person independent of
the insurer with expertise in long-term care insurance analyzed
the advantages and disadvantages of such policy from the
standpoint of such individuals (including such matters as the
merits of the policy compared to other available benefit
packages, and the financial stability of the insurer), and the
results of any such analysis;

    (iii)  any organizational or financial ties between the
entity (or a related entity) and the insurer (or a related
entity);

    (iv)  the nature of compensation arrangements (if any) and
the amount of compensation (including all fees, commissions,
and other forms of financial support) for the endorsement or
sale of such policy; and

            (B)  make available to such individuals, either
directly or through referrals, appropriate counseling to assist
such individuals to make educated and informed decisions
concerning the purchase of such policies.

            Section 2325   CONTINUATION, RENEWAL, REPLACEMENT,
CONVERSION, AND CANCELLATION OF POLICIES.

   (a)  In General. The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements applicable to
the renewal, replacement, conversion, and cancellation of long
term care insurance policies, which shall include at a minimum
the requirements specified in this section.

    (b)  Insured's Right to Cancel During Examination Period.
Each individual insured (or, if different, each individual
liable for payment of premiums) under a long-term care
insurance policy shall have the unconditional right to return
the policy within 30 days after the date of its issuance and
delivery, and to obtain a full refund of any premium paid.

    (c)  Insurer's Right to Cancel (or Deny Benefits) Based on
Fraud or Nondisclosure. An insurer shall have the right to
cancel a long-term care insurance policy, or to refuse to pay a
claim for benefits, based on evidence that the insured falsely
represented or failed to disclose information material to the
determination of eligibility to purchase such insurance, but
only if

        (1)  the insurer presents written documentation,
developed at the time the insured applied for such insurance,
of the insurer's request for the information thus withheld or
misrepresented, and the insured individual's response to such
request;

        (2)  the insurer presents medical records or other
evidence showing that the insured individual knew or should
have known that such response was false, incomplete, or
misleading;

        (3)  notice of cancellation is furnished to the insured
individual before the date 3 years after the effective date of
the policy (or such earlier date as the Secretary may specify
in regulations); and

        (4)  the insured individual is afforded the opportunity
to review and refute the evidence presented by the insurer
pursuant to paragraphs (1) and (2).

  (d)  Insurer's Right to Cancel for Nonpayment of Premiums.

        (1)  In general. Insurers shall have the right to
cancel long-term care insurance policies for nonpayment of
premiums, subject to the provisions of this subsection and
subsection (e) (relating to nonforfeiture).

        (2)  Notice and acknowledgement.

            (A)  In general. The insurer may not cancel
coverage of an insured individual until

    (i)  the insurer, not earlier than the date when such
payment is 30 days past due, has given written notice to the
insured individual (by registered letter or the equivalent) of
such intent, and

    (ii)  30 days have elapsed since the insurer obtained
written acknowledgment of receipt of such notice from the
insured individual (or the designated representative, at the
insured individual's option or in the case of an insured
individual
determined to be incapacitated in accordance with paragraph
(4)).

            (B)  Additional Requirement for Group Policies. In
the case of a group long-term care insurance policy, the notice
and acknowledgement requirements of subparagraph (A) apply with
respect to the policyholder and to each insured individual.

        (3)  Reinstatement of coverage of incapacitated
individuals. In any case where the coverage of an individual
under a long-term care insurance policy has been canceled
pursuant to paragraph (2), the insurer shall be required to
reinstate full coverage of such individual under such policy,
retroactive to the effective date of cancellation, if the
insurer receives from such individual (or the designated
representative of such individual), within 5 months after such
date

            (A)  evidence of a determination of such
individual's incapacitation in accordance with paragraph (4)
(whether made before or after such date), and

            (B)  payment of all premiums due and past due, and
all charges for late payment.

        (4)  Determination of incapacitation. For purposes of
this subsection, the term "determination of incapacitation"
means a determination by a qualified health professional (in
accordance with such requirements as the Secretary may
specify), that an insured individual has suffered a cognitive
impairment or loss of functional capacity which could
reasonably be expected to render the individual permanently or
temporarily unable to deal with business or financial matters.
The standard used to make such determination shall not be more
stringent than the threshold conditions for the receipt of
covered benefits.

        (5)  Designation of representative. The insurer shall
be required

            (A)  to require the insured individual, at the time
of sale or issuance of a long-term care insurance policy

    (i)  to designate a representative for purposes of
communication with the insurer concerning premium payments in
the event the insured individual cannot be located or is
incapacitated, or

  (ii)  to complete a signed and dated statement declining to
designate a representative, and

            (B)  to obtain from the insured individual, at the
time of each premium payment (but in no event less often than
once in each 12-month period) reconfirmation or revision of
such designation or declination.

    (e)  Nonforfeiture.

        (1)  In general. The Secretary, after consideration of
recommendations by the Advisory Council, shall by regulation
require appropriate nonforfeiture benefits with respect to each
long-term care insurance policy that lapses for any reason
(including nonpayment of premiums, cancellation, or failure to
renew, but excluding lapses due to death) after remaining in
effect beyond a specified minimum period.

        (2)  Nonforfeiture benefits. The standards established
under this subsection shall require that the amount or
percentage of nonforfeiture benefits shall increase
proportionally with the
amount of premiums paid by a policyholder.
  (f)  Continuation, Renewal, Replacement, and Conversion of
Policies.

      (1)  In general. Insurers shall not be permitted to
cancel, or refuse to renew (or replace with a substantial
equivalent), any long-term care insurance policy for any reason
other than for fraud or material misrepresentation (as provided
in subsection (c)) or for nonpayment of premium (as provided in
subsection (d)).

        (2)  Duration and renewal of policies. Each long-term
care insurance policy shall contain a provision that clearly
states
            (A)  the duration of the policy,
            (B)  the right of the insured individual (or
policyholder) to renewal (or to replacement with a substantial
equivalent),
            (C)  the date by which, and the manner in which,
the option to renew must be exercised, and
            (D)  any applicable restrictions or limitations
(which may not be inconsistent with the requirements of this
part).
        (3)  Replacement of policies.
            (A)  In general. Except as provided in subparagraph
(B), an insurer shall not be permitted to sell any long-term
care insurance policy as a replacement for another such policy
unless coverage under such replacement policy is available to
an individual insured for benefits covered under the previous
policy to the same extent as under such previous policy
(including every individual insured under a group policy) on
the date of termination of such previous policy, without
exclusions or limitations that did not apply under such
previous policy.
            (B)  Insured's option to reduce coverage. In any
case where an insured individual covered under a long-term care
insurance policy knowingly and voluntarily elects to substitute
for such policy a policy that provides less coverage,
substitute policy shall be considered a replacement policy for
purposes of this part.
        (3)  Continuation and conversion rights with respect to
group policies.
            (A)  In general. Insurers shall be required to
include in each group long-term care insurance policy, a
provision affording to each insured individual, when such
policy would otherwise terminate, the opportunity (at the
insurer's option, subject to approval of the State insurance
commissioner) either to continue or to convert coverage under
such policy in accordance with this paragraph.
            (B)  Rights of related individuals. In the case of
any insured individual whose eligibility for coverage under a
group policy is based on relationship to another individual,
the insurer  be required to continue such coverage upon
termination of  the relationship due to divorce or death.
            (C)  Continuation of coverage. A group policy shall
be considered to meet the requirements of this paragraph with
respect to rights of an insured individual to continuation of
coverage if coverage of the same (or substantially equivalent)
benefits for such individual under such policy is maintained,
subject only to timely payment of premiums.

            (D)  Conversion of coverage. A group policy shall
be considered to meet the requirements of this paragraph with
respect to conversion if it entitles each individual who has
been continuously covered under the policy for at least 6
months before the date of the termination to issuance of a
replacement policy providing benefits identical to,
substantially equivalent to, or in excess of, the benefits
under such terminated group policy

    (i)  without requiring evidence of insurability with
respect to benefits covered under such previous policy, and

    (ii)  at premium rates no higher than would apply if the
insured individual had initially obtained coverage under such
replacement policy on the date such insured individual
initially obtained coverage under such group policy.

        (4)  Treatment of substantial equivalence.

            (A)  Under secretary's guidelines. The Secretary,
after considering recommendations by the Advisory Council,
shall develop guidelines for comparing long-term care insurance
policies for the purpose of determining whether benefits under
such policies are substantially equivalent.

            (B)  Before effective date of secretary's
guidelines. During the period prior to the effective date of
guidelines published by the Secretary under this paragraph,
insurers shall comply with standards for determinations of
substantial equivalence established by State insurance
commissioners.

        (5)  Additional requirements.Insurers shall comply with
such other requirements relating to continuation, renewal,
replacement, and conversion of long-term care insurance
policies as the Secretary may establish.

            Section 2326   REQUIREMENTS RELATING TO PAYMENT OF
BENEFITS.

   (a)  In General. The Secretary, after considering (where
appropriate) recommendations of the Advisory Council, shall
promulgate regulations establishing requirements with respect
to claims for and payment of benefits under long-term care
insurance policies, which shall include at a minimum the
requirements specified in this section.

  (b)  Standards Relating to Threshold Conditions for Receipt
of Covered Benefits. Each long-term care insurance policy shall
meet the following requirements with respect to identification
of, and determination of whether an insured individual meets,
the threshold conditions for receipt of benefits covered under
such policy:

        (1)  Declaration of threshold conditions.

            (A)  In general. The policy shall specify the level
(or levels) of functional or cognitive mental impairment (or
combination of impairments) required as a threshold condition
of entitlement to receive benefits under the policy (which
threshold condition or conditions shall be consistent with any
regulations
promulgated by the Secretary pursuant to subsection (B)).
            (B)  Secretarial responsibility. The Secretary
(after considering the views of the Advisory Council on current
practices of insurers concerning, and the appropriateness of
standardizing, threshold conditions) may promulgate such
regulations as the Secretary finds appropriate establishing
standardized thresholds to be used under such policies as
preconditions for varying levels of benefits.
        (2)  Independent professional assessment. The policy
shall provide for a procedure for determining whether the
threshold conditions specified under paragraph (1) have been
met with respect to an insured individual which
            (A)  applies such uniform assessment standards,
procedures, and formats as the Secretary may specify, after
consideration of recommendations by the Advisory Council;
            (B)  permits an initial evaluation (or, if the
initial evaluation was performed by a qualified independent
assessor selected by the insurer, a reevaluation) to be made by
a qualified independent assessor selected by the insured
individual (or designated representative) as to whether the
threshold conditions for receipt of benefits have been met;
            (C)  permits the insurer the option to obtain a
reevaluation by a qualified independent assessor selected and
reimbursed by the insurer;
            (D)  provides that the insurer will consider that
the threshold conditions have been met in any case where
    (i)  the assessment under subparagraph (B) concluded that
such conditions had been met, and the insurer declined the
option under subparagraph (C), or
    (ii)  assessments under both subparagraphs (B) and (C)
concluded that such conditions had been met; and

            (E)  provides for final resolution of the question
by a State agency or other impartial third party in any case
where assessments under subparagraphs (B) and (C) reach
inconsistent conclusions.

        (3)  Qualified independent assessor. For purposes of
paragraph (2), the term "qualified independent assessor" means
a licensed or certified professional, as appropriate, who

           (A)  meets such standards with respect to
professional qualifications as may be established by the
Secretary, after consulting with the Secretary of the Treasury,
and

            (B)  has no significant or controlling financial
interest in, is not an employee of, and does not derive more
than 5 percent of gross income from, the insurer (or any
provider of services for which benefits are available under the
policy and in which the insurer has a significant or
controlling financial interest).

  (c)  Requirements Relating to Claims for Benefits. Insurers
shall be required

        (1)  to promptly pay or deny claims for benefits
submitted by (or on behalf of) insured individuals who have
been
determined pursuant to subsection (b) to meet the threshold
conditions for payment of benefits;

        (2)  to provide an explanation in writing of the
reasons for payment, partial payment, or denial of each such
claim; and

        (3)  to provide an administrative procedure under which
an insured individual may appeal the denial of any claim.

        Subpart C    Enforcement

            Section 2342   STATE PROGRAMS FOR ENFORCEMENT OF
STANDARDS.

    (a)  Requirement for State Programs Implementing Federal
Standards. In order for a State to be eligible for grants under
this subpart, the State must have in effect a program
(including such laws and procedures as may be necessary) for
the regulation of long-term care insurance which the Secretary
has determined

        (1)  includes the elements required under this subpart,
and

        (2)  is designed to ensure the compliance of long-term
care insurance policies sold in the State, and insurers
offering such policies and their agents, with the requirements
established pursuant to subpart B.

    (b)  Activities Under State Program. A State program
approved under this subpart shall provide for the following
procedures and activities:

        (1)  Monitoring of insurers and policies. Procedures
for ongoing monitoring of the compliance of insurers doing
business in the State, and of long-term care insurance policies
sold in the State, with requirements under this part, including
at least the following:

            (A)  Policy review and certification. A program for
review and certification (and annual recertification) of each
such policy sold in the State.

            (B)  Reporting by insurers. Requirements of annual
reporting by insurers selling or servicing long-term care
insurance policies in the State, in such form and containing
such information as the State may require to determine whether
the insurer (and policies) are in compliance with requirements
under this part.

            (C)  Data collection. Procedures for collection,
from insurers, service providers, insured individuals, and
others, of information required by the State for purposes of
carrying out its responsibilities under this part (including
authority to compel compliance of insurers with requests for
such information).

            (D)  Marketing oversight. Procedures for monitoring
(through sampling or other appropriate procedures) the sales
practices of insurers and agents, including review of marketing
literature.

            (E)  Oversight of administration of benefits.
Procedures for monitoring (through sampling or other
appropriate procedures) insurers' administration of benefits,
including monitoring of

  (i)  determinations of insured individuals' eligibility to
receive benefits, and

    (ii)  disposition of claims for payment.
        (2)  Information to insurers. Procedures for
furnishing, to insurers selling or servicing any long-term care
insurance policies in the State, information on conditions of
eligibility for, and benefits under, each public long-term care
program administered by the State, in order to enable them to
comply with the requirement under section 2321(e)(3).
        (3)  Consumer complaints and dispute resolution.
Administrative procedures for the investigation and resolution
of complaints by consumers, and disputes between consumers and
insurers, with respect to long-term care insurance, including
            (A)  procedures for the filing, investigation, and
adjudication of consumer complaints with respect to the
compliance of insurers and policies with requirements under
this part, or other requirements under State law; and
            (B)  procedures for resolution of disputes between
insured individuals and insurers concerning eligibility for, or
the amount of, benefits payable under such policies, and other
issues with respect to the rights and responsibilities of
insurers and insured individuals under such policies.
      (4)  Technical assistance to insurers. Provision of
technical assistance to insurers to help them to understand and
comply with the requirements of this part, and other State
laws, concerning long-term care insurance policies and business
practices.

  (c)  State Enforcement Authorities. A State program meeting
the requirements of this subpart shall ensure that the State
insurance commissioner (or other appropriate official or
agency) has the following authority with respect to long-term
care insurers and policies:

        (1)  Prohibition of sale. Authority to prohibit the
sale, or offering for sale, of any long-term care insurance
policy that fails to comply with all applicable requirements
under this part.

        (2)  Plans of correction. Authority, in cases where the
business practices of an insurer are determined not to comply
with requirements under this part, to require the insurer to
develop, submit for State approval, and implement a plan of
correction which must be fulfilled within the shortest period
possible (not to exceed a year) as a condition of continuing to
do business in the State.

        (3)  Corrective action orders. Authority, in cases
where an insurer is determined to have failed to comply with
requirements of this part, or with the terms of a policy, with
respect to a consumer or insured individual, to direct the
insurer (subject to appropriate due process) to eliminate such
noncompliance within 30 days.

        (4)  Civil money penalties. Authority to assess civil
money penalties, in amounts for each violative act up to the
greater of $10,000 or three times the amount of any commission
involved

            (A)  for violations of subsections (d) (concerning
compensation or sale of policies), (e) (concerning prohibited
sales practices), and (f) (prohibition on sale of duplicate
benefits) of section 2324,

            (B)  for such other violative acts as the Secretary
may specify in regulations, and

          (C)  in such other cases as the State finds
appropriate.

        (5)  Other authorities. Such other authorities as the
State finds necessary or appropriate to enforce requirements
under this part.

    (d)  Records, Reports, and Audits. As a condition of
approval of its program under this part, a State must agree to
maintain such records, make such reports (including expenditure
reports), and cooperate with such audits, as the Secretary
finds necessary to determine the compliance of such State
program (and insurers and policies regulated under such
program) with the requirements of this part.

    (e)  Secretarial Responsibilities.

        (1)  Approval of state programs. The Secretary shall
approve a State program meeting the requirements of this part.

        (2)  Information on medicare benefits. The Secretary
shall furnish, to the official in each State with chief
responsibility for the regulation of long-term care insurance,
a description of the Medicare programs under title XVIII of the
Social Security Act which makes clear the unavailability of
longterm benefits under such programs, for distribution by such
State official to insurers selling long-term care insurance in
the State, in accordance with subsection (b)(2).

            Section 2342   AUTHORIZATION OF APPROPRIATIONS FOR
STATE PROGRAMS.

    There are authorized to be appropriated $10,000,000 for
fiscal year 1996, $10,000,000 for fiscal year 1997, $7,500,000
for fiscal year 1998, and $5,000,000 for fiscal year 1999 and
each succeeding fiscal year, for grants to States with programs
meeting the requirements of this part, to remain available
until expended.

             Section 2343   ALLOTMENTS TO STATES.

  The allotment for any fiscal year to a State with a program
approved under this part shall be an amount determined by the
Secretary, taking into account the numbers of long-term care
insurance policies sold, and of elderly individuals residing,
in the State, and such other factors as the Secretary finds
appropriate.

            Section 2344   PAYMENTS TO STATES.

    (a)  In General. Each State with a program approved under
this part shall be entitled to payment under this title for
each fiscal year in an amount equal to its allotment for such
fiscal year, for expenditure by such State for up to 50 percent
of the cost of activities under such program.

    (b)  State Share of Program Expenditures. No Federal funds
from any source may be used as any part of the non-Federal
share of expenditures under the State program under this
subpart.

    (c)  Transfer and Deposit Requirements. The Secretary shall
make payments under this section in accordance with section
6503 of title 31, United States Code.
           Section 2345   FEDERAL OVERSIGHT OF STATE
ENFORCEMENT.

   (a)  In General. The Secretary shall periodically review
State regulatory programs approved under section 2341 to
determine whether they continue to comply with the requirements
of this part.

    (b)  Notice of Determination of Noncompliance. The
Secretary shall promptly notify the State of a determination
that a State program fails to comply with this part, specifying
the requirement or requirements not met and the elements of the
State program requiring correction.

    (c)  Opportunity for Correction.

        (1)  In general. The Secretary shall afford a State
notified of noncompliance pursuant to subsection (b) a
reasonable opportunity to eliminate such noncompliance.
      (2)  Correction plans. In a case where substantial
corrections are needed to eliminate noncompliance of a State
program, the Secretary may

            (A)  permit the State a reasonable time after the
date of the notice pursuant to subsection (b) to develop and
obtain the Secretary's approval of a correction plan, and
            (B)  permit the State a reasonable time after the
date of approval of such plan to eliminate the noncompliance.
  (d)  Withdrawal of Program Approval. In the case of a State
that fails to eliminate noncompliance with requirements under
this part by the date specified by the Secretary pursuant to
subsection (c), the Secretary shall withdraw the approval of
the State program pursuant to section 2341(e).

            Section 2346   EFFECT OF FAILURE TO HAVE APPROVED
STATE PROGRAM.

     (a)  Restriction on Sale of Long-Term Care Insurance.

        (1)  In general. No insurer may sell or offer for sale
any long-term care insurance policy, on or after the date
specified in subsection (c), in a State that does not have in
effect a regulatory program approved under section 2341(e).

        (2)  Application of prohibition. For purposes of
paragraph (1), an insurance policy shall not be considered to
be sold or offered for sale in a State solely because it is
sold or offered to a resident of such State.

    (b)  Civil Money Penalty.

        (1)  In general. An insurer shall be subject to a civil
money penalty, in an amount up to the greater of $10,000 or
three times any commission involved, for each incident in which
the insurer sells, or offers to sell, an insurance policy to an
individual in violation of subsection (a).

        (2)  Enforcement procedure. The Secretary shall enforce
the provisions of this subsection in accordance with the
procedures provided under section 5412 of this Act.
    (c)  Effective Date.
        (1)  In general. The date specified in this subsection,
for purposes of subsection (a), with respect to any requirement
under this part, is the date one year after the date the
Secretary first promulgates regulations with respect to such
requirement.
        (2)  Exception. To the extent that a State demonstrates
to the Secretary that State legislation is required to meet any
such requirement, the State shall not be regarded as failing to
have in effect a program in compliance with this part solely on
the basis of its failure to comply with such requirement before
the first day of the first calendar quarter beginning after the
close of the first regular session of the State legislature
that begins after the promulgation of the regulation imposing
such requirement. For purposes of the preceding sentence, in
the case of a State that has a 2-year legislative session, each
year of such session shall be deemed to be a separate regular
session of the State legislature.
        Subpart D    Consumer Education Grants
            Section 2361   GRANTS FOR CONSUMER EDUCATION.
    (a)  Grant Program Authorized. The Secretary is authorized
to make grants
        (1)  to States,
      (2)  to regional alliances (at the option of States
within which such Alliances are located), and

        (3)  to national organizations representing insurance
consumers, long-term care providers, and insurers, for the
development and implementation of long-term care information,
counseling, and other programs.

    (b)  Applications.

        (1)  In general. Each State or organization seeking a
grant under this section shall submit to the Secretary an
application, in such format and containing such information as
the Secretary may require.

        (2)  Goals. Programs under this section shall be
directed at the goals of increasing consumers' understanding
and awareness of options available to them with respect to long-
term care insurance (and alternatives, such as public long-term
care programs), including

           (A)  the risk of needing long-term care;

            (B)  the costs associated with long-term care
services;

            (C)  the lack of long-term care coverage under the
Medicare program, Medicare supplemental (Medigap) policies, and
standard private health insurance;

          (D)  the limitations on (and conditions of
eligibility for) long-term care coverage under State programs;

            (E)  the availability, and variations in coverage
and
cost, of private long-term care insurance;
            (F)  features common to many private long-term care
insurance policies; and
            (G)  pitfalls to avoid when purchasing a long-term
care insurance policy.
        (3)  Activities. An application for a grant under this
section shall indicate the activities the State or organization
would carry out under such grant, which activities may include
            (A)  coordination of the activities of State
agencies and private entities as necessary to carry out the
State's program under this section;
          (B)  collection, analysis, publication, and
dissemination of information,

            (C)  conducting or sponsoring of consumer
education, outreach, and information programs,

            (D)  providing (directly or through referral)
counseling and consultation services to consumers to assist
them in choosing long-term care insurance coverage appropriate
to their circumstances, and

            (E)  other appropriate activities.

        (4)  Priority for innovation. In awarding grants under
this section, the Secretary shall give priority to applications
proposing to use innovative approaches to providing
information, counseling, and other assistance to individuals
who might benefit from, or are considering the purchase of,
long-term care insurance.

    (c)  Period of Grants. Grants under this section shall be
for not longer than 3 years.

    (d)  Evaluations and Reports.

        (1)  By grantees to the secretary. Each recipient of a
grant under this section shall annually evaluate the
effectiveness of its program under such grant, and report its
conclusions to the Secretary.

        (2)  By the secretary to the congress. The Secretary
shall annually evaluate, and report to the Congress on, the
effectiveness of programs under this section, on the basis of
reports received under paragraph (1) and such independent
evaluation as the Secretary finds necessary.

    (e)  Authorization of Appropriations. There are authorized
to be appropriated, for grants under this section

        (1)  $10,000,000 for each of fiscal years 1995 through
1997 for grants to States, and

        (2)  $1,000,000 for each of fiscal years 1995 through
1997, for grants to eligible organizations.

    Part 4   TAX TREATMENT OF LONG-TERM CARE INSURANCE AND
SERVICES

          Section 2401   REFERENCE TO TAX PROVISIONS.

    For amendments to the Internal Revenue Code of 1986
relating to the treatment of long-term care insurance and
services, see subtitle G of title VII.
    Part 5   TAX INCENTIVES FOR INDIVIDUALS WITH DISABILITIES
WHO WORK
          Section 2501   REFERENCE TO TAX PROVISION.
    For amendment to the Internal Revenue Code of 1986
providing for a tax credit for cost of personal assistance
services required by employed individuals, see section 7901.
    Part 6   DEMONSTRATION AND EVALUATION
            Section 2601   DEMONSTRATION ON ACUTE AND LONG-TERM
CARE INTEGRATION.
  (a)  Program Authorized. The Secretary of Health and Human
Services shall conduct a demonstration program to test the
effectiveness of various approaches to financing and providing
integrated acute and long-term care services described in
subsection (b) for the chronically ill and disabled who meet
eligibility criteria under subsection (c).

    (b)  Services and Benefits.

        (1)  In general. Except as provided in paragraph (2),
the following services and benefits shall be provided under
each demonstration approved under this section:

            (A)  Comprehensive benefit package. All benefits
included in the comprehensive benefit package under title I of
this Act.

            (B)  Transitional benefits. Specialized benefits

relating to the transition from acute to long-term care,

including

    (i)  assessment and consultation,

    (ii)  inpatient transitional care,

    (iii)  medical rehabilitation,

    (iv)  home health care and home

care,

    (v)  caregiver support, and

    (vi)  self-help technology.

            (C)  Long-term care benefits. Long-term care

benefits, including

    (i)  adult day care,

    (ii)  personal assistance services,

    (iii)  homemaker services and chore services;

    (iv)  home-delivered meals;

    (v)  respite services;

    (vi)  nursing facility services in specialized care

units;

    (vii)  services in other residential settings including
community supported living arrangements and assisted living
facilities; and
  (viii)  assistive devices and environmental modifications.
            (D)  Habilitation services. Specialized
habilitation services for participants with developmental
disabilities.
        (2)  Variations in minimum benefits.
            (A)  In general. Subject to the requirement of
subparagraph (B), demonstrations may omit specified services
listed under subparagraphs (C) and (D) of paragraph (1), or
provide additional services, as found appropriate by the
Secretary in the case of a particular demonstration, taking
into consideration factors such as
    (i)  the needs of a specialized group of eligible
beneficiaries;
  (ii)  the availability of the omitted benefits under other
programs in the service area; and

   (iii)  the geographic availability of service providers.

            (B)  Breadth requirement. In approving variant
demonstrations pursuant to subparagraph (A), the Secretary
shall ensure that demonstrations under this section, taken as a
group, adequately test financing and delivery models covering
the entire array of services and benefits described in
paragraph (1).

    (c)  Eligibility Criteria. The Secretary shall establish
eligibility criteria for individuals who may receive services
under demonstrations under this section. Under such criteria,
any of the following may be found to be eligible populations
for such demonstrations:

        (1)  Individuals with disabilities who are entitled to
services and benefits under a State program under part 1 of
this subtitle.

        (2)  Individuals who are entitled to benefits under
parts A and B of title XVIII of the Social Security Act.

        (3)  Individuals who are entitled to medical assistance
under a State plan under title XIX of the Social Security Act,
and are also

            (A)  individuals described in paragraph (2), or

            (B)  individuals eligible for supplemental security
income under title XVI of that Act.

    (d)  Application.

        (1)  In general. Each entity seeking to participate in
a demonstration under this section shall submit an application,
in such format and containing such information as the Secretary
may require, including the information specified in this
subsection.

        (2)  Service delivery. The application shall state the
services to be provided under the demonstration (either
directly by the applicant or under other arrangements approved
by the Secretary), which shall include services specified
pursuant to subsection (b) and

            (A)  enrollment services;
           (B)  client assessment and care planning;
          (C)  simplified access to needed services;
            (D)  integrated management of acute and chronic
care, including measures to ensure continuity of care across
settings and services;
            (E)  quality assurance, grievance, and appeals
mechanisms; and
            (F)  such other services as the Secretary may
require.
        (3)  Consumer protection and participation. The
applicant shall provide evidence of consumer participation
            (A)  in the planning of the demonstration
(including a showing of support from community agencies or
consumer interest groups); and
            (B)  in the conduct of the demonstration, including
descriptions of methods and procedures to be used
    (i)  to make available to individuals enrolled in the
demonstration information on self-help, health promotion and
disability prevention practices, and enrollees' contributions
to the costs of care;
    (ii)  to ensure participation by such enrollees (or their
designated representatives, where appropriate) in care planning
and in decisions concerning treatment;
  (iii)  to handle and resolve client grievances and appeals;
     (iv)  to take enrollee views into account in quality
assurance and provider contracting procedures; and

   (v)  to evaluate enrollee satisfaction with the program.

        (4)  Applicant qualifications. Applicants for grants
under this section shall meet eligibility criteria established
by the Secretary, including requirements relating to

          (A)  adequate financial controls to monitor
administrative and service costs,

            (B)  demonstrated commitment of the Board of
Directors or comparable governing body to the goals of
demonstration,

            (C)  information systems adequate to pay service
providers, to collect required utilization and cost data, and
to provide data adequate to permit evaluation of program
performance, and

          (D)  compliance with applicable State laws.

    (e)  Payments to Participants. An entity conducting a
demonstration under this section shall be entitled to receive,
with respect to each enrollee, for the period during which it
is providing to such enrollee services under a demonstration
under this section, such amounts as the Secretary shall
provide, which
amounts
        (1)  may include risk-based payments and non-risk based
payments by governmental programs, by third parties, or by
project enrollees, or any combination of such payments, and
        (2)  may vary by project and by enrollee.
    (f)  Number and Duration of Demonstration Projects.
        (1)  Request for applications. The Secretary shall
publish a request for applications under this section not later
than one year after enactment of this Act.
        (2)  Number and duration. The Secretary shall authorize
not more than 25 demonstrations under this section, each of
which shall run for 7 years from the date of the award.
    (g)  Evaluation and Reports. The Secretary shall evaluate
the demonstration projects under this section, and shall submit
to the Congress
        (1)  an interim report, by three years after enactment,
describing the status of the demonstration and characteristics
of the approved projects; and
        (2)  a final report, by one year after completion of
such demonstration projects, evaluating their effectiveness
(including cost-effectiveness), and discussing the advisability
of including some or all of the integrated models tested in the
demonstration as a benefit under the comprehensive benefit
package under title I of this Act, or under the programs under
title XVIII of the Social Security Act.
    (h)  Authorization of Appropriations.
        (1)  For secretarial responsibilities.
            (A)  In general. There are authorized to be
appropriated $7,000,000 for fiscal year 1996, and $4,500,000
for each of the 6 succeeding fiscal years, for payment of costs
of the Secretary in carrying out this section (including costs
for technical assistance to potential service providers, and
research and evaluation), which amounts shall remain available
until expended.
            (B)  Set-aside for feasibility studies. Of the
total amount authorized to be appropriated under subparagraph
(A), not less than $1,000,000 shall be available for studies of
the feasibility of systems to provide integrated care for
nonaged populations (including physically disabled children and
adults, the chronically mentally ill, and individuals with
disabilities, and combinations of these groups).
        (2)  For covered benefits. There are authorized to be
appropriated $50,000,000 for the first fiscal year for which
grants are awarded under this section, and for each of the four
succeeding fiscal years, for payment of costs of benefits for
which no public or private program or entity is legally
obligated to pay.
            Section 2602   PERFORMANCE REVIEW OF THE LONG-TERM
CARE PROGRAMS.
  (a)  In General.The Secretary of Health and Human Services
shall prepare and submit to the Congress

      (1)  an interim report, not later than the end of the
seventh full calendar year beginning after the date of the
enactment of this Act, and

        (2)  a final report, not later than two years after the
date of the interim report, evaluating the effectiveness of the
programs established and amendments made by this subtitle (and
including at a minimum the elements specified in subsection
(b)).
  (b)  Elements of Assessment. The evaluations to be made, and
included in the reports required pursuant to subsection (a),
include at least the following:

        (1)  State service delivery programs. An evaluation of
States' effectiveness in meeting the needs for home and
communitybased services (including personal assistance services)
of individuals with disabilities (including individuals who do,
and who do not, meet the eligibility criteria for the service
program under part 1, individuals of different ages, type and
degree of disability, and income levels, members of minority
groups, and individuals residing in rural areas).

        (2)  Service access. An evaluation of the degree of (and
obstacles to) access of individuals with disabilities to needed
home and community-based services and to inpatient services.

        (3)  Quality. An evaluation of the quality of long-term
care services available.

        (4)  Private insurance. An evaluation of the performance
of the private sector in offering affordable long-term care
insurance that provides adequate protection against the costs of
long-term care, and of the effectiveness of Federal standards
and State enforcement, pursuant to part 3, in adequately
protecting long-term care insurance consumers.

        (5)  Cost issues. An evaluation of the effectiveness of
amendments made by this subtitle in containing the costs of long
term care, and in limiting the share of such costs borne by
individuals with lower incomes.

        (6)  Service coordination and integration. An evaluation
of the effectiveness of the programs established or amended
under this subtitle in achieving coordination and integration of
longterm care services, and of such services with acute care
services and social services, and in ensuring provision of
services in the least restrictive setting possible.