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Massachusetts makes long-term care insurance rate deal

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Insurance regulators in Massachusetts say they have negotiated a long-term care insurance rate increase deal with 16 LTCI issuers.

The Massachusetts Division of Insurance agreement will cap LTCI increases in the Bay State at 40 percent.

Related: John Hancock to end individual LTCI sales

If an issuer increases rates more than 10 percent, it must hold the increases imposed in any given year to 10 percent or less per year.

An issuer also must give the policyholder a variety of options for reducing the impact of a rate increase, including an increase in the elimination period, a reduction in the policy’s maximum benefit period, a reduction in inflation protection, or a reduction in the daily benefit amount.

Massachusetts will call the period when an issuer is phasing in a double-digit increase the “rate change period.” An insurer cannot ask for another increase during the rate change period.

One year after an LTCI increase, an issuer must send regulators experience data showing whether or not the claims justified the increase.

“If a carrier’s claims experience does not justify the rate increase placed on file today, the carrier must reduce premiums to meet that experience,” officials say in a deal summary.

Officials have implemented the agreement by amending rate increase requests for policies covering about 55,000 Massachusetts residents.

Traditionally, insurance regulators in many states have opposed LTCI rate increases, arguing that increases may hurt retirees. Insurers say they have no choice but to raise rates. Insurers say their claim costs are much higher than expected, because of inaccurate assumptions about how policyholders would behave. Insurers also have less cash than they expected to pay LTCI claims, because low interest rates have hurt earnings on their bond portfolios.

Daniel Judson, the Massachusetts insurance commissioner, acknowledged concerns about issuer finances in a statement about the deal.

The rate amendments placed on file “advance the division’s dual mission of protecting consumers and ensuring the solvency of the insurance marketplace,” Judson said in the statement.

Florida insurance regulators recently announced a deal of their own that calls for LTCI issuers to phase in rate increases over three years, then hold rates steady for seven years.


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