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Minnesota regulators wonder what to do about LTCI

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The Minnesota Department of Commerce is wrestling with ideas about how to respond to increases in long-term care insurance (LTCI) premiums.

The department recently brought consumers, regulators, actuaries, consumer advocates and industry representatives to St. Paul, Minn., for a hearing on LTCI issues. The department posted an audio recording of the hearing and many written versions of the presentations on its website.

Vincent Bodnar, an actuary with the Society of Actuaries Long-Term Care Insurance Section, testified that LTCI issuers’ costs are much higher than expected because consumers are keeping their policies at a higher rate than predicted, consumers are living longer than expected, and the interest rates the issuers get on their own investments are only about half of what was originally expected when many of the hardest-hit policies were affected, back in the 1990s.

Deb Newman, a longtime Minnesota LTCI broker, told regulators most of her clients understand the need for the increases once she explains the reasons.

“Over 99 percent of the policyholders have kept the policies, even with the increases,” Newman said. She said that having a private LTCI option is important, and that regulators have to provide the flexibility to help keep the issuers viable.

She brought in LTCI policyholders and claimants to talk about how their coverage had helped them.

Other consumers and consumer advocates who commented attacked the idea of making it any easier for issuers to pass their higher costs on to policyholders.

The hearing packet included an e-mail from a consumer who complained about a proposed 40 percent LTCI premium increase, and that the increase would cause many policyholders to drop their policies. The insurer “would pocket all the interest or investment profits,” the consumer wrote. “How can that be possible? You would think there would be some protection on this scam.”

Ricard Lanpher, an LTCI policyholder with the Certified Investment Management Analyst and Certified Financial Manager designation, provided a slidedeck with the title, “A Ponzi scheme that would make Bernie Madoff blush.”

Joseph Belth, a retired insurance professor, told the regulators in a written comment that he believes there are many reasons why private insurance cannot be a good solution for handling LTC risk, in part because the probability of loss is high, knowing whether a covered loss has occurred is open to debate, and insured people and their families have a great deal of control over whether and when a loss will occur. If LTCI is going to continue to exist, insurers should notify consumers when they apply for the increases, and regulators should cap increases to 5 percent or 10 percent, Belth said.

Rhonda Ahrens, a regulator from the Nebraska Department of Insurance, and Robyn Rowen, a witness who represented the American Council of Life Insurers and America’s Health Insurance Plans, encouraged Minnesota to handle rate increase concerns by replacing its rate review approach with an approach based on the latest National Association of Insurance Commissioners (NAIC) models and model updates.

Minnesota has been requiring insurers to show that proposed LTCI increases are fair and reasonable. The NAIC model regulation has implicit reasonable and fairness requirements built in and a newer NAIC LTCI premium increase model bulletin creates a process states can use to work together on rate reviews, Ahrens said.

See also: Public LTC costs may threaten states’ credit ratings

The model bulletin approach sets policyholder notification requirements, and it improves the requirements for the benefits that the policyholders who drop their policies due to the increases they will get, Ahrens said.

Rowen noted that the bulletin model creates a system in which insurers that get full LTCI rate increase requests approved agree not to ask for future increases on the affected policies for at least three years.