§4980C Requirements for Issuers of Qualified Long-term Care Insurance Contracts

Summary

Insurance companies that sell qualified long-term care policies must follow certain consumer-protection rules. If they don’t, they owe a tax of $100 for each insured person for every day the rules are broken. The IRS can reduce or cancel the tax if the failure happened for a good reason and was not on purpose, and if the tax would be unreasonably large compared with the mistake. The rules require following key parts of the national model rules about applications and replacements; reporting (including an annual report of the percent of claims denied for each class of business, not counting denials for waiting periods or preexisting conditions); marketing and filing standards (no lying about important facts and no rule forcing agents to ask about accident-and-sickness insurance); suitability of sales; providing an outline of coverage and a shopper’s guide; a right to return with refunds within 30 days of return or denial; policy summaries and group certificates; monthly reports on accelerated death benefits; and an incontestability period. If an application is approved, the company must deliver the policy or certificate within 30 days. If a claim is denied, the company must give a written reason and all related information within 60 days after a written request. Saying in the policy and its outline that it is intended to be a qualified long-term care insurance contract under section 7702B also meets these rules. A stricter State law counts as meeting the federal requirements.