The State Corporation Commission (SCC) has revised the rules governing long-term care insurance. Effective September 1, 2015, the rule revisions strive to protect consumers and place heightened scrutiny on long-term care insurers seeking to raise premium rates.
Over the past several years, large and frequent long-term care premium rate increases have occurred because of insurers’ inability to adequately anticipate future claim costs given the lack of credible experience data that was available when the products were originally designed and priced. The increases have been a financial hardship on policyholders who are faced with difficult choices such as reducing their benefits, if given the option, or allowing their coverage to lapse.
The revisions adopted by the Commission are not expected to eliminate premium increases in the future. Changes to the regulatory framework governing these policies require a balancing of multiple interests, including consumer protection and insurer solvency.
The revised rules do strengthen the rate review process. Insurers will now be required to continuously monitor market experience and insurers will undergo a more deliberate review and justification of any planned premium adjustments. The rules governing notices to policyholders of any rate adjustments have been enhanced. And, consumers are going to be provided greater disclosure regarding premium rate practices as well as the potential for future premium adjustments.
The revised rules, in part, incorporate recent revisions of the National Association of Insurance Commissioners’ model regulation regarding long-term care premium rate increases.
The majority of the rule revisions apply to all policies. Some rules apply depending on when the policy was issued – prior to October 1, 2003; between October 1, 2003; and August 31, 2015; on or after September 1, 2015. These dates coincide with previous rules governing these products.
For existing policies, future premium increase requests may be less frequent as a result of the new rules. When rate requests are received, they will be subjected to a strengthened review process. For new policies issued on or after September 1, 2015, the rules require insurers to adopt a more conservative approach for the initial pricing of their policies. For all policies, insurers are required to be more active in managing long-term care insurance rates.
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