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Regulators are tweaking a Long Term Care Guidance Manual that they intend to have fully adopted by the National Association of Insurance Commissioners.

The manual is being developed to help regulators evaluate compliance with the new rating requirements of the Long Term Care Insurance model regulation.

The model–adopted by the NAIC in August 2000–took a new approach to premiums charged to contract holders. Instead of requiring fixed loss ratios, such as a 60% initial loss ratio requirement, the model uses market competition to make sure premiums are not excessive and an actuarial certification to make sure they are not inadequate.

If an increase is requested, an insurer would have to prove to regulators that claims will equal 58% of the initial premiums paid and 85% of the increased portion of the premium.

One of the technical points being discussed by regulators and insurers is the certification of the sufficiency of the 58%/85% loss ratio. There was general agreement an actuary should certify that premiums would meet “moderately adverse claims” as well as “adequately match the projected experience.”

Even as regulators establish guides to help them monitor long term care premiums, results from a recent survey issued by the AARP Public Policy Institute in Washington assessed how the current system is regulating LTCI.

The survey suggests that 70%, or 35 state insurance departments, scored a top rating of five out of a range of one to five in terms of extensiveness of LTCI regulation.

For instance, the survey noted that 45 states regularly review both initial premiums for new policies and filings for premium increases (though this review may be limited to certifying the adequacy of the loss ratio.)

And, 84% of states request the rate history of a policy when an insurer wants to increase premiums.

The survey also found that two-thirds of states require insurers to receive prior approval from the department for new premiums or premium increases before they are used.

Of the 15 states designated as “file and use,” the majority performed some sort of review of all rate filings.

However, the survey also said LTCI regulation could be improved in certain areas.

For example, in a little more than half of the states, consumers would have to visit the department themselves and go through the records themselves to find information on rate histories.

Additionally, the AARP survey references findings from a survey conducted by the Larson LTC Group that shows only about half of the states surveyed had ever disapproved or required a modification of a LTCI premium increase.

Other points mentioned by the AARP survey touch on the the quality of review. The survey found:

–only a little more than half (56%) of the individuals reviewing rates are actuaries;

–five states (10%) referred to an actuary as needed;

–17 states (34%) do not use actuaries at all or did not review rates, raising concerns about the ability of regulators in these states to understand the intricacies of LTCI pricing.


Reproduced from National Underwriter Life & Health/Financial Services Edition, May 13, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.