NAIC Tackles Long-Term Care Insurance Rate Reform

State insurance commissioners are stepping in to help sort out the persistent pricing problems associated with long-term care insurance, problems that have plagued the industry for decades.

Meeting in Orlando, the National Association of Insurance Commissioners voted to form a task force focused on LTCi market stability. Its most significant, and most controversial, charge is to harmonize rate review processes across state lines.

Charge language tasks the group with "developing a consistent national approach for reviewing long-term care insurance rates that result in actuarially appropriate increases being granted by the states in a timely manner, and eliminates cross-state rate subsidization."

The move comes eight months after regulators tabled a request to study the idea during the NAIC Summer Meeting in Boston. Members, industry representatives and consumer groups criticized the idea at that meeting.

Birny Birnbaum, executive director of the Center for Economic Justice, remains critical.

"Regulators may be putting shareholder and management interests above consumer interests," he said via email. "Shareholders put up capital with the understanding it was a risky investment with the potential for losing their money; consumers made no such agreement.

"We are further concerned about broader industry efforts to get regulator support for 'restructuring mechanisms' that may free LTC insurers to separate/discard unprofitable LTCi books of business at the expense of policyholders and taxpayers."

Badly Underpriced

The first meeting of the Long-Term Care Insurance (EX) Task Force is tentatively scheduled to be held in Kansas City during the NAIC Insurance Summit the first week of June. Virginia Insurance Commissioner Scott A. White will chair the task force and Colorado Insurance Commissioner Michael Conway will serve as vice chair.

A popular product in the 1990s, LTCi was badly underpriced. Many insurers sought, and continue to seek, significant rate hikes to stabilize their books.

For example, Blue Cross Blue Shield of Florida policyholders have been notified by mail in recent weeks that annual premiums for their coverage will increase by an average of 94 percent through 2021.

The company originally requested a 280 percent hike but state regulators refused to grant that, telling the company the request was not "adequately demonstrated to be reasonable in relation to the benefits provided," according to a consent order by the state Office of Insurance Regulation.

While many insurers got out of the LTCi business, others are back as the baby boomer population ages and long-term care hedging demand remains strong. Pennsylvania Insurance Commissioner Jessica Altman called LTCi rate hike requests "probably the most challenging" issue on her plate.

With a broad healthcare background and expertise in long-term care issues, Altman is expected to be on the task force.

"Large rate increases are never good, but we want to make sure that at the end of the day, the insurance company has the funds to make good on the bargain that they made with the consumer," Altman told InsuranceNewsNet during a March conversation in her office. "Rate increases can be a part of ensuring that that happens. An insurance company that can’t pay its claims is not an insurance company at all."

'An Ongoing Challenge'

The uniform rate hike proposal is relatively simple: streamline the LTCi rate review process so multiple state insurance departments are not duplicating the same work, while insurers are not answering the same questions over and over. Time and money would be saved and a uniformity would emerge over time.

NAIC developed a similar uniform process for market conduct and other financial examinations.

A second part of the task force's charge is to "identify options to provide consumers choice regarding modifications to long-term care insurance contract benefits where policies are no longer affordable due to rate increases."

The task force is to deliver a proposal to the Executive Committee by the 2020 Fall National Meeting. Unless otherwise extended or modified by the Executive Committee, the task force and its charges will expire Jan. 31, 2021.

"A basic concern of the NAIC is ensuring policyholders receive the benefit of their policies when they need it," said NAIC President Eric Cioppa in a news release. "Long-term care insurance is no different. The market dynamics of longer lifespans, increasing cost of care, and underpriced legacy policies have been an ongoing challenge to market stability."

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.

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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.