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Last week, the California Assembly took one more step toward increased industry regulation. Members voted 42–33 in favor of A.B. 999, a bill that seeks to place greater restrictions on LTC insurers and protect the public from unfair rate increases. Coming on the heels of what many already view as aggressive industry regulation, the bill was not a favorite among insurers, who argued that California regulators already have sufficient power to monitor and prevent unreasonable rate increases.

If passed as written by Assembly Member Mariko Yamada, D-Davis, Calif., the bill will mandate that insurers must wait either five or 10 years between rate-change applications, and will also change the way insurers measure loss ratios when applying for rate increases.  

Other bill stipulations include:

Limiting insurers’ ability to adjust rates based on investment performance
Requiring the state insurance commissioner to outline the coverage provided by each LTC policy on the web
Mandating that insurers show consumers the full policy language before coverage is purchased

Among members of the state’s Insurance Committee, there was some conflict as to whether the bill should move forward, but it passed after a 7–5 vote. Meanwhile, state insurance commissioner Dave Jones wholeheartedly supports the bill, saying that unless A.B. 999 becomes law, “consumers can’t count on their premiums to remain stable from year to year.”

Other bill supporters maintain that, despite an existing law regulating LTC rate increases, there is still a substantial disconnect between what consumers expect to pay for coverage and what they actually pay. LTC insurers, they say, continue to underestimate the cost of providing coverage when new policies are introduced.

The bill now moves to the Senate. If passed, insurers warn that LTC premiums will raise across the board, with particularly large jumps in cost at the end of each 5- and 10-year period.


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