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Long-Term Care Insurance Benefits Cut Panel Drafts Principles

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Many long-term care insurance (LTCI) issuers have been increasing premiums for in-force coverage dramatically.

Some of the LTCI issuers give policyholders a choice between paying higher premiums and accepting benefits cuts.

A team of state insurance regulators wants to shape how the LTCI issuers offer policyholders a choice between premium increases and benefits cuts.

The Long-Term Care Insurance Reduced Benefit Options Subgroup is moving ahead with efforts to set up a framework for that project.

The subgroup is asking for comments on a draft set of Reduced Benefit Option Principles.

The subgroup is also asking for comments on a draft of Reduced Benefit Option Consumer Notices Principles.


  • Links to LTCI Reduced Benefit Options Subgroup documents are available here.
  • An article about an LTCI trainer’s ideas about what to tell clients about premium increases is available here.

Comments are due Nov. 9.

The LTCI Reduced Benefit Options Subgroup

The LTCI Reduced Benefit Options Subgroup is an arm of the Long-Term Care Insurance Task Force, which, in turn, is part of the Executive Committee at the National Association of Insurance Commissioners (NAIC).

The NAIC is a Kansas City, Missouri-based group for state insurance regulators. The NAIC set up the task force to give high-level attention to what insurance regulators see as serious problems with LTCI issuers.

The task force has three subgroups:

  • The Reduced Benefit Options Subgroup.
  • The LTCI Financial Solvency Subgroup.
  • The LTCI Multistate Rate Review Subgroup.

At press time, the reduced benefit options subgroup was the only one that had document drafts or meeting materials on its section of the NAIC’s website.

Jessica Altman, the Pennsylvania insurance commissioner, is the chair of the reduction benefit options subgroup.

What Insurers Have Said

Jan Graeber, a senior actuary with the American Council of Life Insurers (ACLI), and Ray Nelson, a consulting actuary with America’s Health Insurance Plans (AHIP), told the reduced benefit options subgroup in August that they believe that no policyholder or insurer should be required to change an in-force contract.

A second principle, they said, is that any LTCI benefits reduction offer made should consider the potential impact on the other LTCI policyholders.

Further, “any offer made should ensure there is no unfair discrimination among policyholders,” Graeber and Nelson wrote in the letter.

“Providing fair and meaningful options to consumers starts with considering all aspects of LTC policies,” Graeber and Nelson said. “Not all LTC policies are the same. Products vary by carrier and by block of business within a carrier.”

Graeber and Nelson said that, in some cases, policyholders may make decisions about reduced benefit option offers based on considerations other than affordability.

The Drafts

The reduced benefit options principles draft includes an introduction that states 17 state insurance departments are involved with shaping the rules for LTCI reduced benefit options.

The five main sections relate to:

  • Fairness for the policyholders that choose the reduced benefit options.
  • Fairness for the policyholders who choose rate increases.
  • Clarity of communications with policyholders who are eligible for reduced benefit options.
  • Efforts to encourage or require LTCI issuers to offer some reduced benefit options.
  • Innovative ideas, such as moves to provide hand railings for LTCI insureds who appear to be at high risk of falling.

The drafters have included a list of five widely established types of reduced benefit options, such as reduced daily benefit levels, and reduced inflation protections.

The drafters describe cash buyouts for LTCI benefits and a co-pay percentage for consumers using their LTCI benefits as less common types of reduced benefit option offers.

The communications principles draft has sections on:

  • How LTCI issuers should handle rate increase letters.
  • Letter readability.
  • Conveying empathy.
  • Issuer contact information.
  • Contact information for people who can help policyholders understand the letter.
  • Rate increase history disclosure.

— Read State Regulators May Form LTCI ‘Rate Hike v. Reduced Benefits’ Panel, on ThinkAdvisor.

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