PA 09-216—sHB 6279

Insurance and Real Estate Committee

AN ACT CONCERNING ACCELERATED BENEFITS OF LIFE INSURANCE POLICIES

SUMMARY: This act expands what constitutes a “qualifying event” for purposes of receiving an accelerated death benefit payment under a life insurance policy. By law, life insurers and fraternal benefit societies may include an accelerated benefit option in life insurance policies. The option pays benefits during an insured person's life upon the occurrence of a qualifying event, reducing the insurance benefit payable upon death.

The act (1) allows an insured person to collect the benefit when he or she is confined at home or in an acute care hospital, in addition to other institutions already allowed by law, due to a medically determinable condition; (2) eliminates a requirement that a licensed or certified health care provider render the person's care; and (3) specifies that the medically determinable condition that results in the insured's confinement must have resulted in the person being deemed chronically ill for the purposes of federal Internal Revenue Code.

The act allows insurers to pay accelerated benefits due to confinement in lump sum or periodic payments, instead of only in a lump sum as under prior law.

By law, the insurance commissioner may adopt regulations necessary to implement the accelerated death benefit statutes. The act specifically authorizes him to address, in any such regulations, medically determinable conditions that are considered qualifying events.

EFFECTIVE DATE: January 1, 2010

DEFINITION OF QUALIFYING EVENT

Prior law defined a “qualifying event” as a:

1. medically determinable condition, such as coronary artery disease, myocardial infarction, stroke, kidney failure, or liver disease, that can be expected to result in death within about 12 months;

2. medical condition that would result in death within about 12 months in the absence of extensive or extraordinary medical treatment; or

3. medically determinable condition that has caused the insured person to be confined for at least six months in an institution other than an acute care hospital where he or she receives necessary care and treatment for an injury, illness, or loss of functional capacity from a certified or licensed health care provider, where it has been medically determined that he or she is expected to remain confined until death.

The act leaves intact the first two parts of the “qualifying event” definition, but it changes the third part to a medically determinable condition that has caused the insured person to be (1) considered a “chronically ill individual” for purposes of the federal Internal Revenue Code and (2) confined for at least six months in his or her place of residence or in an institution that provides necessary care and treatment of an injury, illness, or loss of functional capacity, where it has been medically determined that he or she is expected to remain confined until death.

Chronically Ill Individuals

Internal Revenue Code 101(g) refers to the definition of “chronically ill individual” given in I. R. C. 7702B(c)(2), excluding terminally ill individuals. I. R. C. 7702B(c)(2) defines a “chronically ill individual” as a person whom a licensed health care practitioner certifies as (1) being unable to perform, without substantial assistance from another individual, at least two activities of daily living for a period of at least 90 days due to a loss of functional capacity, or a similar level of disability as determined under regulations, or (2) requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment. A licensed health care practitioner must have certified within the preceding 12 months that the individual meets the requirements. Activities of daily living include eating, toileting, transferring, bathing, dressing, and continence.