Some state insurance regulators are talking about the idea of offering quicker long-term care insurance (LTCI) rate increase reviews to insurers that promise not to file any additional rate increases for five years.
The National Association of Insurance Commissioners (NAIC) could include the “optional rate increase review” proposal in a guidance manual for the NAIC’s LTCI model regulation.
The optional rate increase review proposal came up last week at a meeting of the Long-Term Care Actuarial Working Group. The working group is convened at the NAIC’s summer meeting in Louisville, Ky.
In one version of the proposal, drafters acknowledge that, “It has been difficult for insurance companies to anticipate all of the trends that affect the claims incidence and severity of these products.”
Drafters say a state insurance commissioner could let an issuer of LTCI policies written in the past, under old rules and old, mistaken assumptions, have an expedited rate review. The issuer could use the fast-track process if it agreed to share the cost of experience deviations from the expected with the policyholder; send the policyholder a clear, detailed notification letter; refrain from filing for additional increases for at least five years; and refrain from filing for any additional increases unless experience is at least 15 percent worse than now expected.
The Kansas Insurance Department developed the original version of the principles shaping the proposal. Some of the people debating the proposal are referring to the original document as the “Kansas Principles document.”
Summaries of past working group meeting notes show that representatives of insurers and consumer groups have raised questions about the idea of including an optional, subjective approach to LTCI rate reviews in a guidance manual.
Birny Birnbaum of the Center for Economic Justice said at one point that he thought regulators were basing revisions of the draft on what the insurance industry was willing to accept.
William Weller, a consultant for America’s Health Insurance Plans (AHIP), and Steve Clayburn, a representative for the American Council of Life Insurers (ACLI), wrote to say they thought the numerical limits included in one version of the draft would create unsustainable rates, because the limits would not let an insurer increase LTCI rates enough to handle emerging risks.
Weller and Clayburn said the proposal would empower insurance departments to adopt new standards at any time.
“The NAIC processes should be used to encourage and increase consistency in how the states address rate increase requests,” Weller and Clayburn said.