Members the California Assembly have voted 42-33 to approve A.B. 999, a bill that could put new limits on long term care insurers’ ability to raise prices.

The bill was sponsored by the California Department of Insurance and introduced by Assembly Member Mariko Yamada, D-Davis, Calif.

In implemented as written, the bill would:

  • Require insurers to wait either 5 or 10 years between rate-change applications.California
  • Limit insurers’ ability to adjust rates to reflect investment performance.
  • Change the methods LTC insurers use for measuring loss ratios when they are applying for rate increases.
  • Require the insurance commissioner to post an outline of coverage for each LTC insurance policy on the Web.
  • Require LTC insurers to show consumers the policy language before the consumers buy coverage.
  • Allow the commissioner to approve rate any LTC insurance rate increase feelings that were shown to be necessary to protect the financial condition of the insurer.

Members of the California Assembly Appropriations Committee voted 11-6 to approve the bill; members of the body’s Insurance Committee approved the bill by a 7-5 vote.

Unless A.B. 999 becomes law, “consumers can’t count on their premiums to remain stable from year to year,” California Insurance Commissioner Dave Jones says in a statement about the bill.

The California Legislature passed an LTC insurance rate bill in 2000, but the law created by that bill has not completely restored predictability to the California LTC insurance market, officials say.

The existing LAW sets the minimum expected loss ratio for the typical LTC insurance policy at 60% for a policy written before Dec. 31, 2009, and at 70% for a policy written on or after Dec. 31, 2009. An actuary must certify that the premium rate schedule on the increase application can cover anticipated claims costs under moderately adverse conditions, and that no further premiums increases are expected.

A.B. 999 is necessary because, despite the existence of the 2000 law, LTC insurers continue to underestimate the cost of providing coverage when they introduce new policies, bill supporters say.

Insurers and other bill opponents have argued that California regulators already have the tools they need to prevent rate increases that are truly unreasonable or are due to factors that an insurer should have considered when setting the initial coverage prices.

Passing A.B. 999 could lead to an overall increase in LTC insurance premiums and big spikes in rates at the end of the 5-year and 10-year freeze periods, insurers say, according to Assembly legislative analysts.

Other LTC insurance coverage from National Underwriter Life & Health: