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Connecticut Rejects LTCI Increase

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Officials at the Connecticut Insurance Department have rejected a second attempt by Mutual of Omaha Insurance Company to increase long-term care insurance (LTCI) rates in their state.

Mutual of Omaha, Omaha, Neb., has been seeking an average increase of about 33% on block of 337 LTCI policies that are still in force in Connecticut.

The Connecticut department also rejected a similar increase request in September 2011.

Mutual of Omaha says LTCI benefits payments have been higher than it expected and that guidelines prepared by Milliman Inc., Seattle, in 2009 show that experience at any given policy durtion have been worse than the actuaries had anticipated when the affected policies were priced back in the 1990s.

The company has projected that the Connecticut specific lifetime “loss ratio,” or ratio of LTCI claims payments to LTCI premium revenue, would be 160% with the increase and 182% without the increase, officials say.

Paul Lombardo, an insurance actuary in the Connecticut department, concludes that the overall Mutual of Omaha LTCI losss ratio in Connecticut is still low.

“The combined inception-to-date loss ratio in Connecticut and on a nationwide basis are 12.30% and 40.79% respectively,” Lombardo writes in an analysis of Mutual of Omaha’s rate increase request. “They are both lower than what the original pricing anticipated.”

In Connecticut, the ratio of actual claims to expected claims is 0.25, Lombardo says.

Nationwide, he says, the actual-to-expected ratio is 0.83.

Connecticut requires the LTCI loss ratio to be at least 60% over the life of the policy.

If current trends continue, “the requested increase would have resulted in Mutual of Omaha’s loss ratio falling below the state’s mandatory minimum of 60%,” officials say in a summary of their findings.

The Connecticut department believes that losses in Connecticut have been so low that policyholders there have been subsidizing policyholders in other states, officials say.

In Connecticut, a company that objects to a department decision can file a request for an administrative hearing under the state’s Uniform Administrative Procedure Act (UAPA). If the insurance commissioner affairs the original determination, the company can then appeal to the state superior court, a department representative says.

Representatives from Mutual of Omaha were not immediately available to comment on the rate decision.