State regulators may require issuers of long-term care insurance (LTCI) to get more advice from actuaries when setting and changing rates. Members of the Health Insurance and Managed Care Committee at the National Association of Insurance Commissioners (NAIC) have agreed to approve a draft of proposed changes to the group’s Long-Term Care Insurance Model Regulation.
California voted against adoption, officials say. Many insurers once bragged that they never raised their LTCI rates. Since 2005, however, insurers in the market have asked for a series of big increases.
The carriers — including the nonprofit, self-funded California Public Employees’ Retirement System (CALPERS) — have blamed low earnings on investment portfolios and the discovery that holders of LTCI coverage are much more likely to keep their policies than the actuaries had originally expected.
The NAIC’s existing model LTCI rate regulation already requires an insurer to certify that the initial rate schedule is enough to cover “moderately adverse experience,” and that a proposed increase should eliminate the need for further increases even under moderately adverse conditions. In the new draft regulations, officials would require insurers to provide more actuarial analysis in rate filings.
When setting rates at the beginning, actuaries would have to show, for example, that they had reviewed and considered reserve requirements. A member of the American Academy of the Actuaries would have to sign a memorandum that would address and support each specific item required in the actuarial certification.
The draft regulations also include new annual rate certification requirements.