California Gov. Jerry Brown, D., has signed state Assembly Bill 999, a long-term care insurance (LTCI) rate regulation bill that has been in the works for years.
State lawmakers signed off on A.B. 999 in August.
The law is set to take effect Jan. 1, 2013.
In the past, California business groups have sometimes succeeded with efforts to go to court to block implementation of new state laws, such as a law that would have required large employers in the state to provide health coverage or else pay a penalty.
California has been using an LTCI rate law that was adopted in 2000. The state’s current LTCI rate law sets minimum loss ratios for LTCI policies and requires insurers to get insurance commissioner for LTCI rate increases.
An actuary working for the insurance commissioner must certify that a requested rate increase is likely to eliminate the need for future rate hikes.
If the law based on the new bill takes effect on schedule and works as bill drafters expect, the new law will require an insurer to get the commissioner’s permission to use low returns on invested assets to justify an increase.
The insurer will have to show the commissioner either that its investment return “is lower than the maximum valuation interest rate for contract reserves for those policies,” or that retroactive changes in laws or regulations have justified a change in interest rate assumptions, according to the bill text.
The law based on A.B. 999 also would limit the ability of an LTCI carrier to use the claims for one group of policyholder to justify a rate increase request. 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 put a limit on LTCI rate increases that would be tied to a policy’s lifetime expected loss ratio.