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Regulation and Compliance > State Regulation

Senior panel to consider LTCI model update

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State insurance regulators will be considering two long-term care insurance (LTCI) rate regulation efforts at an upcoming meeting.

The Senior Issues Task Force, an arm of the National Association of Insurance Commissioners (NAIC), has put proposed changes to the NAIC’s LTCI model regulation and a proposed model LTCI rate increase bulletin on the agenda for a two-day LTCI meeting.

The task force plans to start the meeting June 10 in Reston, Va.

The NAIC’s executive committee approved an LTCI model update development project in December 2012.

The proposed LTCI model regulation revisions could change the explanations and documentation an insurer would have to give when filing initial rates.

An insurer would have to show that the premiums are high enough to accommodate “moderately adverse experiance.”

The “composite margin” for an insurer without much experience to support its premium rate-setting assumptions would amount toat least 10 percent of expected lifetime claims.

In some cases, if an insurer could fully justify a lower margin, and propose acceptable methods for monitoring claims experience, the insurer could have a margin under 10 percent, according to the proposal text.

In a drafting note, drafters say the task force would like help from the American Academy of Actuaries with developing the minimum standards that an insurer could use to justify having the composite margin be less than 10 percent.

If a state adopted the proposed revisions, an insurance commissioner would have to get the actuarial memorandum supporting an insurer’s LTCI prices reviewed either by an insurance department actuary with LTCI pricing experience or by an independent LTCI pricing actuary.

The proposed model LTCI rate increase bulletin would require an insurer that gets its full LTCI rate increase request approved to wait at least two years to implement another increase. 

For an increase, the recommended loss ratio would be 60 percent for the current rate schedule and 80 percent for any individual policy premium increase filed after the effective date of the new regulation. For a group plan premiums increase filed after the regulation took effect, the recommended loss ratio would be 75 percent, according to the proposal text.

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