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Regulation and Compliance > State Regulation

Editorial Comment: A Nod Here And A Slap There

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In the coming weeks, many insurance heads will be weighing in on the latest Government Accounting Office report on long term care insurance. Published in late June 2008, the 41-page document covers LTC claims and rates. (See our initial story on it here.) For now, let’s take a look at the overall thrust.

Our initial story about the report makes it clear that Congressional leaders will be using the findings in the report to justify probes into some “troubling issues” about LTC insurance that they say the report identifies. For instance, Rep. John Dingell, chairman of the House Energy and Commerce Committee, is quoted as talking about the “troubling weaknesses” the report found in the states’ ability to protect consumers from “abusive” practices.

“If the insurance industry is not up to the task of correcting these problems swiftly and treating vulnerable policyholders and their families fairly,” Rep. Dingell warned, “then Congress will need to consider steps to ensure, strong, uniform national standards.”

For the industry, hearing such warnings can be more than a little vexing, especially since providers, distributors and regulators have spent the last several years strengthening LTC insurance standards and practices. Indeed, in recent years, most industry leaders have felt the business is now operating on the firmest footing ever.

The GAO report does acknowledge improvements. For instance, the Table on page 16 of the report gives a capsule summary of year 2000 revisions to the National Association of Insurance Commissioners’ model regulation on LTC insurance (see the actual report here). As LTC professionals know, these revisions were implemented to improve LTC rate stability and related consumer concerns.

The Table identifies the revisions and gives amplifying information about each one. For a refresher, here they are:

  • Actuarial certification of initial premium rates and rate increases
  • Higher loss ration standard for rate increases
  • Enhanced reporting requirements after a rate increase
  • Disclosure of the potential for rate increases to consumers
  • Protections for consumers facing rate increases

However, while recognizing those changes, the GAO report also dings their implementation, bringing their effectiveness into question. Some examples:

  • “Although a growing number of consumers will be protected by the more comprehensive standards going forward,” the report says on page 17, “as of 2006, many consumers had policies that were not protected by these standards.”
  • Following the revisions, “many states began to replace their loss ratio standard with more comprehensive rate setting standards based on NAIC’s changes,” the report continues, noting that NAIC estimates that by 2006, over half the states had adopted the more comprehensive standards. But, it adds, “many consumers have policies not protected by the more comprehensive standards, either because they live in states that have not adopted these standards or because they bought policies issued prior to implementation of these standards.”
  • In states that have adopted the more comprehensive standards, the report continues, “many policies in force in 2006 were likely to have been issued before states began adopting these standards in the early 2000s.”

Hello? Is anybody home? Those comments reference experience as of 2006?EUR”not mid-2008. And they reflect GAO’s analysis of 2006 NAIC and unidentified industry information, pretty vague stuff. That means the above statements need to be taken with more than the proverbial grain of salt.

The report does try to make its criticisms more current than 2006, by pointing out that 2 out of 10 states reviewed had not yet adopted the new standards as of January 2008. One of the 2 states indicated it does plan to adopt, the report continues. But it says a regulator from the other state “told us that the state had chosen not to adopt the standards at least in part because its regulatory environment is already sufficiently rigorous.”

That is the gist of the entire report. A nod here followed by a slap there.

It would be hard to conceive of a government report that does not take such an approach. To come out with heavy praise of the LTC insurance business (or any business) and little or no criticism would invite all kinds of accusations–of the report being biased, deceptive and untrustworthy. Government reports just don’t do that.

Still, since some legislators?EUR”like Rep. Dingell?EUR”are already threatening Congressional action if the industry doesn’t “swiftly” address report-identified problems, the industry and its state regulators should not sit idly by until the dust settles.

Instead, they should 1) read and analyze the report; 2) apply critical thinking to the points, data and conclusions; 3) develop a list of inaccurate or incomplete statements, complete with supporting data and information; 4) develop a list of areas where the report is spot-on, again with supporting data and information; and 5) distribute reports of their own, complete with their own proposals concerning regulation.

This should be done in the sprit of engagement, not retaliation. It should be done with a desire to inform and educate, not to pillory and pummel. And it should be done with acknowledgement that some problems did and do exist, not a Pollyannaish portrayal of all things LTC. This is essential so that decision makers can come to accurate conclusions about whatever proposals they may be presented. They need a complete understanding of the industry and its regulation as both operate today. The American public deserves nothing less.


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