New York Regrets How It Regulated Long-Term Care Insurance Rates

What You Need to Know

New York officials want to come up with new strategies for implementing LTCI premium increases.
They hope to support product design creativity.
A new entity could protect the customers of failed LTCI issuers.

Insurance regulators in New York state say they want to be more flexible about long-term care insurance rate increases, do more to keep the LTCI issuers solvent and find ways to tempt insurers back into the state’s long-term care planning product market.

Officials at the New York State Department of Financial Services talk outlined their new thinking about the market for stand-alone LTCI coverage and related products, such as life insurance policies that provide LTC benefits, in a report posted Wednesday.

Officials note that the department tried to develop a reasonable approach to balancing LTCI issuers’ need to correct premium pricing problems with older consumers’ need for price stability, but that “premium rate increases in many cases could have been granted sooner and in larger amounts in order to better stabilize the market as a whole and to flatten out eventual rate increases for consumers.

“In this troubled insurance market, it is fair to ask whether earlier rate increases, though no doubt painful to consumers, might have led to less consumer burden in the long run by reducing the need for later, even larger, rate increases; by keeping more insurers in the LTC insurance market, thereby increasing competition and consumer choice; and by shoring up LTC insurers that could otherwise suffer from financial distress that could threaten consumer benefits,” officials add.

What It Means

Now that the oldest baby boomers are turning 77 and near the age when needing formal long-term care becomes common, policymakers seem to be thinking wistfully about how great it would be if private companies could help people pay for care.

If New York state gets on board with an LTC product revival effort, that could push the train out of the station.

The History

U.S. insurers began selling nursing home insurance in the 1960s. They eventually expanded the products to include benefits for home care and other types of care.

The market boomed in the 1980s and 1990s, when interest rates were higher, then faltered in the 2000s after new premium rate rules kicked in, and the issuers discovered that almost every assumption they had made about interest rates and policyholder behavior was wrong.

Most issuers left the market. In New York state, the number of people with private LTCI coverage dropped to 394,000 in 2020, from 754,000 in 2002, according to the report.

The Future

New York department officials note in the report that want to improve their procedures for reviewing insurers’ requests for LTCI premium increases and come up with new ways to balance the interests of the insurers and the insureds, such as being more strict about increases for insureds ages 75 and older than for insureds ages 68 and younger.

The department says it also wants to find ways to help insurers offer new, more affordable types of LTCI coverage in New York state.

They cited the example of a newly approved LTCI policy that lets the policyholders choose from a list of different coverage deductible levels or amounts the policyholders must pay for care out of pocket before the issuer begins to pay LTCI benefits.

A New Guaranty Fund

Although agents may think of long-term care insurance as a sibling of life insurance policies and annuities, states typically regulate it as a health insurance product.

In the past, New York state did not have the kind of guaranty fund that most states have to protect customers of failed LTCI issuers or other health insurance issuers.

New York department officials point out in the new report that the state now is setting up a New York Health Insurer Guaranty Fund, and that the guaranty fund can protect insureds if an LTCI issuer fails.