Paul Lombardo (Photo: Allison Bell/ALM) Paul Lombardo (Photo: Allison Bell/ALM)

Poorly thought out efforts to fight long-term care insurance (LTCI) rate increases could have unintended consequences, state insurance regulators said Monday, in Chicago.

In some cases, regulators said, increase limits in one state, or several states, may push up the size of the rate increases an insurer is asking for in other states.

Paul Lombardo, an insurance regulator with the Connecticut Insurance Department, suggested that unrealistic restrictions on LTCI rate increases could also threaten an insurer’s solvency.

(Related: ILTCI Conference Attendees Soldier On)

He said insurance producers recently came to the Connecticut department and asked regulators there to stop approving LTCI rate increases.

Lombardo recalled asking the producers, “Do you honestly think that’s the answer?”

If the producers’ proposal pushed an issuer out of business, “How do you explain getting 20% on the dollar for your policy, if that?” Lombardo asked.

Lombardo appeared on a panel at the 2019 Intercompany Long Term Care Insurance Conference along with Rhonda Ahrens of Nebraska, Jessica Altman of Pennsylvania and Fred Andersen of Minnesota.

Altman said she does get many questions about LTCI rates.

“It’s the hardest thing I have to deal with,” Altman said.

But Altman said she finds that legislators and others are open to learn about the reasons for the increases, when they can see that insurers are being open.

Ahrens said Nebraska rejects rate hike notification letters that seek to put the rate hikes in an overly positive, misleading light.

“We require companies to be as forthright as possible,” Ahrens said.

Altman and Andersen said they would like to see insurers coming to them with new ideas about how to offer consumers protection against long-term care risk, and for making existing types of LTCI products work better.

Andersen talked about seeing a table showing that traditional, stand-alone LTCI continues to be the best way to maximize the amount of protection a consumer has against catastrophic long-term care risk.

“I don’t want to give up on the stand-alone long-term care insurance,” Andersen said.

The Conference

Earlier in the day, Peggy Hauser kicked off the proceedings by announcing that the ILTCI Association, a nonprofit group, has succeeded at attracting 1,100 people to the Sheraton Grand Chicago for the conference, which started Sunday and is set to end Wednesday.

Traditionally, the conference has served insurance company executives and actuaries affiliated with the Society of Actuaries. In recent years, the ILTCI Association has built up a session track aimed at LTCI agents and brokers. This year, the producer track attracted about 230 producer attendees, Hauser said.

The ILTCI Association gave a lifetime achievement award to Stephen Moses, who has been fight for years against what he sees as misguided moves to have Medicaid nursing home benefits crowd out private LTCI coverage.

Ideas

Here are some of the ideas coming up at the conference Monday.

1. Treat market conduct examiners well.

Stephanie Duchene of Mayer Brown LLP, Michele Jordan of John Hancock, and Allison Kusel of Genworth appeared at a panel on market conduct examination procedures and trends.

A market conduct exam looks at an insurer’s pricing and marketing strategies, in an effort to protect consumers and maintain public confidence in insurance.

The panelists talked about the need to give state insurance departments’ market conduct examiners the data and other resources they need to conduct their exams, and to maintain a cordial, professional relationship with the examiners.

Jordan said she always John Hancock’s responses to examiners’ questions to make sure the responses answer the questions in a concise but complete way.

“Don’t skimp,” she said.

The panelists also discussed the need to consider, in an age of open offices, how market conduct examiners will be accommodated when they show up.

All of the panelists agreed that, no matter what kinds of arrangements a company’s own workers have, market conduct examiners need offices with doors.

Duchene said market conduct examiners will be appreciative if the office is well-ventilated.

Jordan said the examiners’ office also should have a lock, a desk, a telephone, a printer, a scanner, and, if possible, windows.

She remembered one examiner walking into the examiners’ office at her company and being pleasantly surprised. “There’s a view?” the examiner asked. “Normally, they put us in the basement.”

2. Reinsurers are not going to buy all of insurers’ bad old blocks of LTCI business.

Tom Gallagher of Evercore ISI said the problem is that the reinsurance will usually be too expensive for insurers and reinsurers to close deals.

To close a typical LTCI block transfer deal today, an insurer would have to hand the reinsurer the block’s reserves, and an extra payment that amounts to about 50% of the reserves.

“Most companies are not prepared to absorb that,” Gallagher said.

3. LTCI issuers, and life insurers and annuity issuers, should go beyond recognizing that some insureds have dementia.

Dr. Anitha Rao, a neurologist who specializes in dementia care, came to the ILTCI Conference to promote Neurocern, a digital system she has developed that can automate the process of conducting a thorough neurology exam interview.

The system asks a patient’s caregiver a series of questions.

The system then determines what kind of dementia the patient is likely to have, provides a life expectancy estimate, predicts what the patient’s care costs might be, and offers some ideas about care management.

The system is necessary because insurers now rely heavily on screening tools that indicate whether a patient has some kind of mild, moderate or severe impairment, and nothing else, Rao said in an interview at the conference.

Primary care doctors rarely have enough training or experience to diagnose dementia properly, and there are only about 600 neurologists who specialize in dementia care in the entire country, Rao said.

One result is that patients with forms of dementia other than Alzheimer’s disease often get inappropriate treatments for their conditions, and another result is that insurers often have only a vague idea of how their insureds’ with dementia are doing, Rao said.

By providing more precise information about the insureds’ state of brain health, “we’re de-risking dementia,” Rao said.

— Read NAIFA Launches Long-Term Care Planning Centeron ThinkAdvisor.

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