NU Online News Service, May 7, 2:12 p.m. – Regulators are tweaking a long-term care guidance manual that they are preparing for the National Association of Insurance Commissioners, Kansas City, Mo.

The authors hope the manual will help regulators evaluate insurers’ compliance with the NAIC’s new long-term care insurance model regulation.

The model, adopted by the NAIC in August 2000, takes a new approach to regulating long-term care insurance rates.

Instead of requiring a fixed loss ratio, such as setting a rule that the initial claims amount to 60% of the initial premium revenue, the model tries to use market competition to keep insurers from charging rates that are too high, and an actuarial certification process to keep insurers from charging rates that are unrealistically low.

If an insurer in a state that has implemented the model regulation requested permission to increase rates, it would have to prove to regulators that future claims would equal 58% of the initial premiums paid and eat up 85% of the extra revenue generated by the increase.

Regulators and insurers are still discussing actuarial certification of the sufficiency of the 58/85% loss ratio. Negotiators appear to be in general agreement that an actuary should certify that premiums will meet “moderately adverse claims” as well as “adequately match the projected experience.”