20:06:21:06.  Cost-of-living adjustments -- Basis. The annual cost-of-living adjustment may be based on either the medical care component of the federal consumer price index or may be based on a fixed percentage increase of not less than five percent or more than ten percent. The adjustment period must continue for at least ten years or to age 85, whichever is sooner. The maximum lifetime benefit, if any, must be increased by the same percentage as the daily benefit. Annual adjustments must continue during the entire adjustment period regardless of the claims status of the policy.

          An insurer may offer periodic adjustments in lieu of annual adjustments if the adjustments offered are at intervals of no more than three years. If the periodic adjustment is based on a fixed percentage, the adjustment must be at a rate which complies with the annual fixed percentage total over the period used.

          If a company already offers a cost-of-living adjustment endorsement that meets the requirements of this section, other adjustment endorsements may be offered if the director determines that the endorsements are in the public interest.

          If a policy states the maximum policy limit as a time interval, the maximum policy limit is not required to be adjusted. The daily benefit is required to be adjusted.

          Notwithstanding any other provision, an insurer may not be required to increase its maximum lifetime benefit beyond $500,000.

          Source: 16 SDR 208, effective June 3, 1990; 22 SDR 97, effective December 18, 1995.

          General Authority: SDCL 58-17B-4, 58-17B-13.1.

          Law Implemented: SDCL 58-17B-13.

          20:06:21:06.01.  Cost-of-living adjustments -- Minimum standards. An insurer may not offer a long-term care insurance policy unless the insurer also offers to the policyholder, in addition to any other inflation protection, the option to purchase a policy that provides for benefit levels along with benefit maximums to increase. The timing of increases in benefits must be related to reasonably anticipated increases in the costs of long-term care services covered by the policy. Insurers must offer to each policy holder, at the time of purchase, the option to purchase a policy with an inflation protection feature no less favorable than one of the following:

          (1)  An option which guarantees the insured individual the right to periodically increase benefit levels without providing evidence of insurability or health status if the option for the previous period was not declined. The amount of the additional benefit must be no less than the difference between the existing policy benefit and that benefit compounded annually at a rate of at least five percent for the period beginning with the purchase of the existing benefit and extending until the year in which the offer is made;

          (2)  An option which covers a specified percentage of actual or customary and reasonable charges and does not include a maximum specified indemnity amount or limit; or

          (3)  An option which increases benefit levels annually in a manner so that the increases are compounded annually at a rate not less than five percent;

          (4)  The offer may not be required of life insurance policies or riders containing accelerated long-term care benefits.

          Source: 22 SDR 97, effective December 18, 1995; 28 SDR 157, effective May 19, 2002.

          General Authority: SDCL 58-17B-4, 58-17B-13.1.

          Law Implemented: SDCL 58-17B-13, 58-17B-13.1.

          20:06:21:06.02.  Group cost-of-living adjustments -- Exceptions. If the policy is issued to a group, the offer required in SDCL 58-17B-13 and 58-17B-13.1 and in § 20:06:21:06.01 shall be made to the group policyholder. However, if the policy is issued to a group as defined in SDCL 58-17B-2(4)(d), other than a continuing care retirement community, the offering shall be made to each proposed certificateholder.

          Source: 22 SDR 97, effective December 18, 1995.

          General Authority: SDCL 58-17B-13.1.

          Law Implemented: SDCL 58-17B-13.

          20:06:21:06.03.  Cost-of-living adjustments -- Continuation of benefit increases. Inflation protection benefit increases under a policy which contains such benefits shall continue without regard to an insured's age, claim status, or claim history or the length of time the person has been insured under the policy.

          Source: 22 SDR 97, effective December 18, 1995.

          General Authority: SDCL 58-17B-13.1.

          Law Implemented: SDCL 58-17B-13.

          20:06:21:06.04.  Cost-of-living adjustments -- Automatic increases -- Conspicuous offer of constant premium. An offer of inflation protection which provides for automatic benefit increases shall include an offer of a premium which the insurer expects to remain constant. The offer must disclose in a conspicuous manner that the premium may change in the future unless the premium is guaranteed to remain constant.

          Source: 22 SDR 97, effective December 18, 1995.

          General Authority: SDCL 58-17B-13.1.

          Law Implemented: SDCL 58-17B-13.

          20:06:21:06.05.  Cost-of-living adjustments -- Rejection by policyholder. Inflation protection as provided in §§ 20:06:21:06 to 20:06:21:06.04, inclusive, shall be included in a long-term care insurance policy unless an insurer obtains a rejection of inflation protection signed by the policyholder. The rejection shall be considered a part of the application and shall state: "I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy with and without inflation protection. Specifically, I have reviewed Plans (identify the plans) and I reject inflation protection."

          Source: 22 SDR 97, effective December 18, 1995.

          General Authority: SDCL 58-17B-13.1.

          Law Implemented: SDCL 58-17B-13.