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Regulators are discussing whether existing regulation of long term care insurance needs to be revised to reflect changes occurring in the market.

The most recent talks among regulators at the National Association of Insurance Commissioners, Kansas City, Mo., focused on pricing and reserving.

Previous discussions have focused on issues including pooling by combining similar forms of business into pools for re-rating purposes, and an annual rate certification to make sure rates continue to comply with established requirements.

The review is being undertaken not only because regulators want to make sure that changes in the market are properly regulated but also because they want feedback on the impact of variations between state requirements and the NAIC’s Long Term Care model act and regulation.

The size of rate increase requests was offered as one reason why it was important to look at how current laws work. Unfortunately, when companies need rate increases, they are not 5-10% but more in the range of 30%,? said Frank Dino, a life actuary with the Florida insurance department.

Dino says all rating cells or blocks of policies need to comply with requirements of the model, not simply an aggregate test of those blocks.

But others, such as Bill Weller, representing America’s Health Insurance Plans, Washington, have argued that the intent of this provision was to allow the regulators to review the general level of key assumptions for pricing (including margins) and not that all cells have sufficient margin to meet tests in the model reg.

However, Dino said that if some LTC riders do not have sufficient surplus, then that might not be reflected in an aggregate test. For instance, regulators discussed an inflation rider and how the sufficient reserves depended on how many consumers purchased it.

Competition is causing pricing to be reduced and, often aggregate tests are being used, Dino said. The current model did not intend to permit underpricing of coverage, he added.


Reproduced from National Underwriter Edition, May 28, 2004. Copyright 2004 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.