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Michigan Lawmaker Introduces LTCI Rate Change Bill

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Michigan state Rep. Brandon Dillon, D-Mich., has introduced a measure, Michigan House Bill 5295, that could affect how long-term care insurance (LTCI) carriers go about increasing rates.

If enacted and implemented as written, the bill would limit LTCI carriers to increasing premium rates to an amount equal to or less than “the cumulative change in the consumer price index for medical care” as reported by the federal Bureau of Labor Statistics.

The change in Michigan LTCI rate statutes would take effect July 1.

Dillon has lined up 7 cosponsors.

H.B. 5295 would amend existing Michigan statutes that describe the kinds of benefits an LTCI carrier must offer a policyholder if the carrier imposes a substantial premium increase and the policyholder declines to pay the higher rates.

The statutes, which have applied to both individual and group LTCI policies issued without nonforfeiture benefits since June 2007, create a definition of “substantial premium increase” that decreases for older insureds.

To trigger the requirements, a carrier must increase premiums for a policyholder who was age 90 or older at the time the policy was issued by 10% or more. For a consumer who was 29 or younger at the time an LTCI policy was issued, a carrier can increase premiums up to 200%.

Carriers that increase premiums beyond the trigger amount can comply with the current law by taking steps such as reducing policy benefits enough to keep the premium payments the same, or offering to the convert the policy into a paid-up policy with a shortened benefit period.

Many carriers have applied for premium increases affecting in-force LTCI policies in recent years after reporting that percentage of policyholders who keep their policies has has been much higher than originally expected and that, in some cases, the percentage who file claims has been somewhat higher than expected.

In Connecticut, for example, insurance regulators recently concluded that claims experience justifies increasing premiums on several blocks of in-force LTCI business by an average of 41%.

The governor of Michigan, Rick Snyder, is a Republican.

Republicans have a 62-47 edge in the Michigan House.