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State regulators could team up to set up a system that would help issuers of long-term care insurance increase prices more quickly.

The topic came up this weekend in Boston, at the National Association of Insurance Commissioners (NAIC) summer national meeting.

Members of the NAIC’s Long-Term Care Insurance Task Force talked about the idea of creating a multi-state LTCI rate approval system Sunday, at a task force session.

(Related: LTCI Issuers May Be Counting on Health Improvement That Isn’t Coming: Prudential)

“More discussion is expected in  the near term via conference call,” according to a meeting summary.

The task force is a child of two top-level NAIC committees: the Health Insurance and Managed Care Committee and the Financial Condition Committee.

Dean Cameron, the Idaho insurance director, and David Altmaier, the Florida insurance commissioner, are the task force co-chairmen. They led the discussion of the multi-state rate review system proposal.

LTCI Rate Increase Environment

Twenty years ago, consumer groups, many regulators and executives at many LTCI issuers agreed that LTCI premiums should be locked in at the initial levels, to protect older policyholders who might be living on limited, fixed incomes. Because of that philosophy, states impose strict rules and procedures on issuers that want to increase LTCI premiums.

Regulators in some states, including California and Connecticut, continue to take a strict approach when considering LTCI rate increases.

Regulators in many other states have been granting LTCI rate increase requests more readily, because of concerns about LTCI issuer solvency.

In most states, guaranty fund associations are in charge of trying to make good on the benefits promised to consumers by failed insurers. Few guaranty fund associations build up significant reserves by collecting regular dues. Most guaranty associations cope with the cost of member insurer failures by sending bills for assessments to the surviving insurers.

(Related: Guaranty Funds Post Penn Treaty Unit Policyholder Details)

Regulators fear a wave of LTCI failures could lead to big guaranty fund assessment bills for the surviving issuers, and expose the policyholders to gaps between the benefits originally promised and guaranty fund benefits.

Most states cap LTCI benefits guaranty fund protection at $300,000, and guaranty funds may not protect all, or any, of the benefits related to policy add-ons, such as inflation adjustment riders.

Multi-State LTCI Rate Review Proposal

The Long-Term Care Insurance Task Force has included documents describing the multi-state LTCI rate review system in a task force meeting document packet.

Proposal supporters note that state insurance regulators already team up for some purposes, such as conducting financial examinations: In those situations, the participating states usually use memoranda of understanding to decide who does what.

Officials also talk about an established regulatory coordination organization, the Interstate Insurance Product Regulation Commission (IIPRC).

The IIPRC handles product regulatory filings for specified products for the participating states.

About 40 states already use the IIPRC to handle LTCI product filings.

The IIPRC has only a limited ability to help with LTCI rate increase filings, according to supporters of the multi-state LTCI rate review system proposal.

The IIPRC handles LTCI rate increase requests only for IIPRC-approved product forms.

The IIPRC itself can handle increase requests for less than 15%. For requests for bigger increases, the IIPRC simply prepares an advisory report. The insurer still has to file a separate increase request with each state, multi-state review system supporters say.

Supporters of the new proposal want the NAIC to set up an LTCI rate increase review system subgroup.

  • The subgroup would recruit states as members.
  • The participating states would sign memoranda of understanding, appoint a lead state and form an oversight group.
  • The lead state would supply the actuaries needed to analyze an increase request.
  • The oversight group would review the actuaries’ work and come up with a recommended percentage rate increase.
  • The insurer would still have to file an increase request with each state, but each state would start with the work of the multi-state review team in hand.
  • Each state could decide for itself what to do with the percentage increase recommendation.

Supporters of the multi-state review process say it could help states with limited resources, simplify the increase request process for insurers, and lead to more uniformity in results.

Increasing state-to-state uniformity would make the treatment of LTCI policyholders in different states more fair, proposal supporters say.

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