MetLife vindicated in class-action lawsuit over LTC rate hikes

A federal appeals court declined to reinstate a class-action lawsuit last Friday over long-term care insurance rate hikes by MetLife.

The four plaintiffs, residents of St. Louis, brought suit against MetLife in February 2022 for recovery of premiums paid for inflation protection under LTCi policies.

Plaintiffs had purchased a “5% Automatic Compound Inflation Protection Rider,” which contained a clause stating the insured’s benefit will “automatically increase each year with no corresponding increase in premiums.”

The rider also stated that “Your premium is not expected to increase as a result of the benefit amounts increases provided by this Rider. However, We reserve the right to adjust premiums on a class basis.”

In one case, the plaintiff’s initial base annual premium was $2,182.61. His additional annual charge for the inflation rider was $2,334.96.

However, after purchasing the LTC product in 2007, plaintiffs claimed they began receiving notices of “substantial increases in premium” about eight years later. The lawsuit alleges that MetLife made fraudulent misrepresentations and concealed material facts about the effect of the inflation rider on their premiums.

'An unrealistic number'

MetLife, when it announced the increases, informed plaintiffs that when it initially priced the long-term care insurance products, it considered many factors including persistency rates, mortality rates and morbidity rates, the lawsuit said.

“Between when Plaintiffs purchased their policies and when Met Life implemented each of the rate increases, the persistency rate did not change, the mortality rate did not change, nor did the morbidity rate change,” the lawsuit states. “The only appreciable change … was that the future daily benefit amount for purchasers of the rider, projected over decades, increased to an unrealistic number and provided the sole basis for the implementation of class-wide rate increases.”

For example, in some cases, plaintiffs claim MetLife could be on the hook for paying a $275-per-day daily benefit for three years.

MetLife exited the LTCi market in 2010, claiming the “financial challenges” facing the industry were too great. A popular product in the 1990s and early 2000s, early LTCi were built with assumptions that turned out to be faulty. Americans lived longer than expected, didn’t lapse their LTCi policies at rates the industry expected and nursing home care costs skyrocketed.

It led to insurers like Genworth and MetLife to seek repeated rate hikes from beleaguered state regulators. And the rate hikes continue.

MetLife customers in Ohio saw a 144% increase in their annual premiums for long-term care insurance, according to a letter the insurance company sent policyholders in July.

The rate increase affected around 8,300 Ohioans, said Judi Mahaney, a spokesperson for the insurance company, told the Cincinnati Inquirer.

MetLife does not comment on litigation, Mahaney told InsuranceNewsNet.

Judges sides with MetLife

Plaintiffs claimed common law fraud, fraudulent concealment, violation of state consumer unfair and deceptive practices protection acts, and breach of the implied covenant of good faith and fair dealing.

MetLife filed a motion to dismiss for failure to state a claim. MetLife based its defense on the “filed-rate doctrine,” and claimed plaintiffs must be dismissed because they did not challenge insurance rates or rules before the Missouri Department of Insurance.

The filed-rate doctrine is “a formidable defense to premium rate increase litigation,” Faegre Drinker Biddle & Reath attorneys explained. Under the filed-rate doctrine, a regulated entity cannot charge rates for its services other than those properly filed with the proper regulatory authority.

Conversely, a plaintiff seeking relief from a regulated entity cannot recover “damages measured by comparing the filed-rate and the rate that might have been approved absent alleged misconduct.”

The district court agreed and sided with MetLife in dismissing the lawsuit.

“No matter how Plaintiffs attempt to frame their claims, it is clear they are asking the Court to review rates that have been filed with and deemed reasonable by the Missouri Department of Insurance, which is exactly what the filed-rate doctrine was designed to prohibit,” the opinion reads.

The Court of Appeals for the Eighth Circuit dismissed the appeal in a two-sentence opinion.

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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.