Battle Flares Over Long-Term Care Insurance Rate Hike Rules

What You Need to Know

Some regulators want special rules for the oldest insureds and phase-ins of big increases.
Trade groups said regulators should stick with rules meant to keep insurers in business.
Genworth said some moves to soften rate increase blows may create confusion or lead to bigger total increases.

Some state insurance regulators are still trying to fight for long-term care insurance premium increase review rules that protect people in their 80s, 90s or 100s who have held on to their policies for decades, through years of LTCI market turmoil.

Insurers “generally have lower rate increases for those at very advanced ages with high-duration policies that have had substantial past rate increases,” according to a summary of what many state insurance regulators have told the National Association of Insurance Commissioners’ Long-term Care Actuarial Working Group.

Genworth, insurance trade trade groups and some regulators say any moves that might weaken LTCI issuers’ efforts to stay in business will do more harm than good.

“Deviating from actuarial principles may lead to inadequate premiums, jeopardizing insurer stability and consumer protection,” according to a letter to the LTC Actuarial Working Group signed by Jan Graeber of the American Council of Life Insurers and Ray Nelson of America’s Health Insurance Plans.

“While addressing affordability issues for older age policyholders is important, it is crucial to maintain a focus on actuarial soundness and fairness in setting premiums,” Graeber and Nelson told the working group.

The working group is preparing to hold a conference call meeting on LTCI rate hike review rules July 2. The group has been trying since 2019 to develop one consistent review strategy for as many states as possible, to speed up the reviews, make the review process simpler and faster, and increase the odds that similar policyholders in different states will end up with similar outcomes.

Coming up with one rate review strategy might not be possible, Graeber and Nelson said.

What it means: States’ efforts to improve how they regulate your clients’ long-term care insurance rates might face gridlock.

The history: Insurers sold huge amounts of individual and group long-term care insurance from the 1970s through about 2005, based on an understanding that the aging of the baby boomers would create a huge need for private insurance to pay for home care, nursing home care and other forms of care.

Insurers got almost everything else about long-term care insurance wrong. Because of inaccurate assumptions about claims, how long customers would cling to their policies and the interest rates insurers could earn on their investments, prices turned out to be much lower than insurers needed to make the numbers work.

Insurers have imposed premium increases of 100% or more on millions of insureds, and, in spite of the premium increases, some issuers have gone through rehabilitation or liquidation proceedings.

The NAIC began the current rate review strategy project because of concerns that some states were approving much bigger premium increases than others, and that the insureds in the states with the big increases were subsidizing the insureds in the states with low or no increases.

But the insureds themselves have argued that the insurers have been in a much better position to analyze the LTCI market and shoulder the costs related to forecasting errors than the insureds, and that letting the issuers stay in business while the insureds suffer for the issuers’ errors is unfair.