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Mass. Regulators Study LTC Insurance

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The Massachusetts Division of Insurance is undertaking a study to find out who is buying long-term care insurance in the state and what kind of policy they are acquiring, officials say.

The study could be the basis of a push by the DOI to convince state legislators to pass the Long Term Care Insurance Model Act advanced by the National Association of Insurance Commissioners, Kansas City, Mo. That model would give the division more authority to regulate LTC sales and rates, says Kevin Beagan, director of the division’s rating bureau. He expects results of the study will be ready to present to legislators in October.

Among other points, the study will look at how many people have LTC insurance in Massachusetts, their age and average premium, according to Chris Goetcheus, a DOI spokesman. It will also scrutinize marketing practices and examine such policy features as benefit amounts, elimination periods, lapse rates and levels of home care vs. strictly nursing home coverage.

The survey, which expands on several earlier state surveys, will enable regulators to assess changes in the Massachusetts LTC insurance market after a law regulating individual policies became effective Jan. 1, 2001. That law requires LTC carriers to meet certain standards, such as sufficient disclosure about policy benefits.

That law did not apply to group plans, however, Goetcheus notes. A bill before the state legislature would expand DOI jurisdiction to cover plans sold through employers, unions and associations.

“We’d welcome that,” says Goetcheus.

Beyond that law, DOI officials hope facts uncovered by the study would make it easier to convince the legislature that it needs need new regulatory powers. Regulators hope the study would “demonstrate the evolution of the market and show why regulations might not be as sufficient as they should be,” Beagan says.

“We in Massachusetts review long term care rates the same way we review medical insurance rates,” he adds. “But it’s a different product. Unlike with medical insurance, long term care insurance collects a good deal of premium before it ever pays any benefits.”

Among continuing concerns to the DOI is that many agents selling LTC in the state lack training, Beagan declares.

“We don’t have any ability to require agents to get prior training in long term care insurance, and for that reason we are looking to get carriers to beef up marketing and training programs,” he says

[Although the current model law does not impose detailed training requirements on LTC producers, an NAIC working group is considering amendments to the model that would add requirements for agent education, including eight hours of training every 24 months.]

Beagan notes adoption of the model act would also give more power to the DOI to regulate rates.

Among other powers, the proposed law would enable the DOI to assure LTC insurance premiums provide adequate profit margins to carriers, to forestall potential rate increases.

It also would require carriers to reimburse policyholders for rate increases the DOI later deemed to be unnecessary. In addition, it would authorize the state insurance commissioner to review and approve a carrier’s administration and claim practices.

Adoption of the model act would also impose a requirement to protect policyholders if their carrier imposed a significant premium rate increase they could not afford, Beagan notes. The requirement, known as the contingent benefit, would offer policyholders who could no longer afford a policy an alternative, such as a lower cost policy with reduced benefit payouts.

A pending bill would also give the DOI authority to cover plans sold through employers, unions and associations


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