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California Passes A.B. 999, LTCI Rate Bill

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Members of the California Assembly have voted 52-27 to approve Assembly Bill 999, a long-term care insurance (LTCI) rate regulation bill.

The bill now goes to Gov. Jerry Brown, D, for signing.

California already requires LTCI carriers to file applications for premium increases on in-force LTCI policies with the insurance commissioner. Before a carrier can get approval for an LTCI premium increase, an actuary who is working for the insurance commissioner must certify that, if the requested premium rate schedule increase is implemented and the underlying assumptions, which reflect moderately adverse conditions, are realized, no further premium rate schedule increases are anticipated.

The new bill would limit the ability of LTCI carriers to take investment returns into account when changing prices on in-force policies. A.B. 999 also would limit the ability of an LTCI carrier to use the claims for a relatively small group of policyholder to justify rate increase requests, backers say. An insurer would have to use the experience for all similar LTCI policy forms issued and retained by an insurer and its affiliates to justify requests for rate increases.

Another provision would require an insurer to let a consumer see the LTCI policy language before the consumer buys the policy. An insurer would have to make a copy of a policy form or certificate form available within 15 calendar days after the consumer asked to see it. The state would create an annual LTCI consumer rate guide that would include a specimen outline of coverage for each product marketed by each insurer listed in the guide.

A.B. 999 would authorize an insurer to ask for a premium rate schedule increase that was lower than the rate increase necessary to provide the required certification if, in the opinion of the insurance commissioner, accepting the lower premium rate schedule increase was in the best interest of California policyholders and other conditions were satisfied.

If modified LTCI premiums would cut the lifetime expected loss ratio to “less than the highest lifetime expected loss ratio for the policy form in the initial filing,” or for requested premium rates in any filing made after Jan. 1, 2013, the insurer would have to lower the requested premiums to increase the lifetime expected loss ratio to a level at least as high as the highest loss ratio already filed.

The bill would limit rate increases to once every 5 years for policies that have been in place since before 2000, and once every 10 years for policies signed since that date.

The bill was introduced by Assemblymember Mariko Yamada, D-Davis, Calif.

California Insurance Commissioner Dave Jones says the carriers that created the state’s LTCI market in the 1980s used inaccurate assumptions to set their rates and set their initial rates too low. 

California lawmakers tried to stabilize LTCI rates in 2000 by enacting state Senate Bill 898.

The law based on S.B. 898 requires that every individual and group LTCI policy be either guaranteed renewable or noncancellable. The law also sets minimum loss ratios for LTCI policies.

LTCI rate increases “threaten the ability of many seniors, especially those on fixed incomes, to maintain or purchase long-term care insurance.” Jones says in a statement.