Panel Sketches Out Multistate Long-Term Care Insurance Rate Review System

State insurance regulators are designing a program that could help oversee rate increase requests for big blocks of long-term care insurance (LTCI) business.

The Long-Term Care Insurance Multistate Rate Review Subgroup — an arm of the National Association of Insurance Commissioners — has posted a draft framework for creating a Multi-State Actuarial LTCI Rate Review Team.

The officials who developed the draft have suggested that it could apply to rate increase proposals that might affect at least 5,000 LTCI policyholders in at least 20 states.

The new draft is a revision of a draft posted this past spring.

State Regulators Post LTC Insurance Rate Review Draft

The multistate rate review team would prepare advisory reports that states could use to consider rate increase requests. States could still make their own decisions, but subgroup members are hoping the multistate approach would reduce the amount of time and money insurers have to devote to managing national rate increase requests.

LTCI Rate Review Background

Creating a multistate LTCI rate review process is of keen interest to regulators because insurers have requested and implemented hundreds of LTCI rate increase requests in the past decade. And some smaller insurers that focused mainly or exclusively on the LTCI market, including Penn Treaty and Senior Health Insurance Co. of Pennsylvania, have entered rehabilitation.

U.S. insurers wrote billions of dollars’ worth of LTCI coverage from the late 1960s to the early 2010s. Most issuers assumed that earnings on investments in bonds would be much higher than they’ve been, and that policyholders would be much more likely to drop the coverage than they were.

Issuers have responded to worries about weak reserves by asking regulators for many increases over 50%, or even over 100%.

In one rate increase filing, actuaries suggested that a company’s claims experience could justify a request for a 1,331% rate increase.

Policyholders say they were told over and over that issuers would try to hold LTCI premiums steady. They also argue that the issuers should bear the brunt of inaccurate assumptions whenever possible because the issuers were in a much better position to make assumptions and deal with inaccurate assumptions than the policyholders.

But regulators have become increasingly quick to approve even very large rate increase requests, in part because of the Penn Treaty and Senior Health Insurance Co. of Pennsylvania failures.

New York state regulators, for example, recently approved 68.3% premium increases for some Genworth Financial LTCI policies sold in that state.

The New Draft

In the original draft, officials addressed concerns about insurer solvency and confidentiality.

In the new draft, regulators have put in sample language that could be used in assessments of LTCI issuers that have poorly performing blocks of LTCI business but are in a strong financial position.

Adjustments to the usual burden-sharing formula could be shifted in favor of the insurer “when an insurer’s solvency position is dependent on a certain level of rate increase approval,” according to new language in the new draft. “That is not the case with this insurer or filing.”

The framework subgroup said in the original draft that the actuarial review team’s work would be “protected from disclosure by the confidentiality provisions contained within their state’s laws and regulations.”

In the new draft, the subgroup says an issuer would get “the same protection from disclosure, if any, as provided by the confidentiality provisions contained within their state’s laws and regulations.”

The team will offer an issuer the same protection from disclosure,

In the new draft, officials note that the multistate review team framework could be used to assess requests for LTCI premium decreases as well as for premium increases.

The new draft also includes provisions:

• Stating that insurance department consultants could not be multistate actuarial rate review team members.
• Requiring that at least one member of the team be a member of the American Academy of Actuaries, which is a professional group for actuaries.
• Indicating that states’ use of the multistate actuarial rate review team’s advisory reports would be likely to evolve over time.

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