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Massachusetts may update long-term care hybrid rules

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Insurance regulators in Massachusetts may apply more of the state’s requirements for stand-alone long-term care insurance to provisions in life insurance policies and annuity contracts that provide long-term care benefits.

Related: Massachusetts makes long-term care insurance rate deal

The LTC hybrid regulation proposal is part of a collection of three LTC-related regulatory updates under review at the Massachusetts Division of Insurance.

One of the proposed regulation updates would make Massachusetts rules for stand-alone long-term care insurance more like the rules in a model regulation for LTCI that was developed by the National Association of Insurance Commissioners.

A second proposed update would make it clear that separate sets of disclosure rules apply to long-term care insurance and to specified disease insurance products, such as cancer insurance and critical illness insurance.

The third proposed update would change the rules for life-LTC and annuity-LTC hybrids.

The Massachusetts Division of Insurance plans to hold a hearing on the draft regulations at 10 a.m. March 8 in Boston, in its offices, according to a hearing notice.

The draft LTCI regulation update would add a definition for “adult day health program” to the regulation’s list of definitions and let an issuer use a medical-insurance-style deductible rather than an elimination period in the coverage design.

The draft update would also require an issuer to build in more room for problems when setting the premiums for a new product, set annual LTCI rate certification requirements, and change the division’s standards for approving LTCI rate increase requests.

A second draft update, for an individual accident and sickness insurance regulation, would make it clear that separate rate standards apply to long-term care insurance policies and to specified disease policies.

The drafters of the third draft, the hybrid product draft, want to make it clear that the rules apply to LTC provisions included with group life policies as well as to LTC provisions included with individual life policies and annuity contracts.

Another addition would apply Massachusetts’ LTCI requirements to any accelerated benefits linked to chronic illness.

Similar, the updated regulation would apply the state’s LTCI requirements to any “special benefits” in a hybrid. The update drafters define a “special benefit” as a provision, other than an accelerated benefits provision, that is “advertised, marketed or offered as long-term care insurance.”

The drafters also want LTC hybrid issuers to show that they understand the LTC benefits they’re offering, by including an actuarial memorandum with the initial product filing.

An actuary is someone who understands the math used to design and set reserves for insurance products.

An actuary should describe the risks and expected costs associated with an LTC benefit in a hybrid product when the issuer files the forms for the product with state regulators, according to the regulation update draft.

“The carrier shall maintain in its files descriptions of the bases and procedures used to calculate benefits payable under these provisions,” according to the update draft. “These descriptions shall be made available for examination by the commissioner upon request.”


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