Insurance regulators vow to have a single LTC rate review plan by the fall

Image shows the words, "NAIC LTC Rate Review." — Regulators plan to settle on a single long-term care rate review policy this year.

By John Hilton

State insurance regulators have tried for several years to develop a singular multi-state actuarial (MSA) rate review framework for long-term care products.

Paul Lombardo of the Connecticut Insurance Department promised it will happen by the fall meeting of the National Association of Insurance Commissioners. That meeting is scheduled for Nov. 16-20 in Denver.

"We will make sure that we consider everything and we work towards a single methodology that we can gain consensus on," Lombardo said Saturday during a meeting of the Long Term Care Insurance Task Force. "That's the hope and the desire and it will get done. I promise you."

NAIC regulators are moving forward with the Minnesota process for handling LTC rate reviews.

LTC insurance is a big market, but also has a long and troubled history of inaccurate assumptions. Many carriers have either left the LTC business entirely, are seeking repeated rate hikes, or both.

State regulators are troubled by the inconsistency and unfairness creeping into the LTC insurance premiums being set by states using wildly different processes. Many of those LTC products that are failing actuarily were sold nationally.

In December, an LTC working group heard presentations by Texas and Minnesota regulators about their very different approaches to LTC rate hike requests.

Two rate review methods

The Texas approach relies upon a formula intended to prevent the recoupment of past losses by calculating the actuarially justified rate increase for premium-paying policyholders based solely on projected future claims and premiums.

The approach ensures that active policyholders do not pay for the past claims of policyholders who no longer pay premium. A "contract reserve" is the key.

Minnesota developed a cost-sharing formula that weighed the impacts on both policyholders and financially vulnerable insurers, Anderson said in the December meeting. Minnesota regulators worked with attorneys on "cost-sharing" concepts that sought to fairly distribute the cost burden, he added.

Lombardo, director of the Life & Health Division at CID, noted that the different approaches do produce different results.

Jan Graeber is senior actuary for the American Council of Life Insurers. Industry LTC providers would like more details on how the models work, she said.

"Just a simple chart that said these characteristics we gave more weight to this method, and these characteristics more weight to this," Graeber said. "I understand that you're going forward with the Minnesota method, but as you talk about potentially making adjustments to that method, I think it would help for us to have an understanding of how you guys looked at the two methods before."

Some state regulators had concerns about transparency, Lombardo noted, and choosing the Minnesota method is an attempt to "get more buy in from those states and those commissioners that are hesitant because of the varying degrees of the differences between the two methodologies."

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.