Virginia Legislation to Strengthen Third Party Designee Notices Fails to Advance | Wolters Kluwer Financial Services
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  • Virginia Legislation to Strengthen Third Party Designee Notices Fails to Advance

    Gina Stephan

    by Gina M. Stephan, Esq., Senior Insurance Compliance Analyst, Risk & Compliance, Wolters Kluwer Financial Services

    Published February 11, 2014

    On January 8, 2014, HB 719 was introduced in the Virginia General Assembly. The bill would require that a long-term care insurer must provide a notice of lapse or termination of the policy or certificate for nonpayment of premium via certified mail or commercial delivery. The policy cannot lapse until at least 60 days after the notice is sent. Also, the policy or certificate must include a provision that allows the coverage to be reinstated after lapsing if the insurer is provided proof that the policyholder or certificate holder was cognitively impaired or had a loss of functional capacity before the expiration of the grace period.

    The current regulation, 14 VAC 5-200-65, requires that a 30-day notice of termination for nonpayment of premium be sent by first-class mail.

    The New York Times published an interesting backstory to the filing of HB 719 by House Delegate McClellan on January 31st. In short, Michael Pirron, a third party designee for his parents’ long-term care insurance policy, claimed to never have received a cancellation notice of the policy lapsing for nonpayment of premium. The legislation would provide additional consumer protections to older people who are long-term care insurance policyholders or certificate holders by strengthening the type of notice that the insurer needs to provide in the case of nonpayment of premium and also an additional criteria for reinstatement of coverage.

    HB 719 was referred to the House Committee on Commerce and Labor, and on January 28th, a subcommittee took a vote and failed to recommend sending the bill to the full House of Delegates (5-5 tie vote). Therefore, the bill is “dead”. However, according to the New York Times blog post, “Virginia Bureau of Insurance officials [sic] have told Michael Pirron that they will consider requiring certified mail notifications for long-term care policy cancellations.”

    Out of curiosity, I took a look at what other states require for third party designee notices. Most of the states require that a copy of the notice of cancellation, nonrenewal or conditional renewal sent to the third party designee must be governed by the same law and policy provisions which govern the notice sent to the senior citizen insured. I also came across my colleague’s previous Compliance Corner post regarding third-party designee notices from 2012.

    I’ll be interested to see if the Virginia Bureau of Insurance ends up amending its unintentional lapse regulation, especially after the publicity of the issue in the New York Times.

    Editor’s Recommendation: Stay on top of changing insurance laws with NILS INsource.

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