State Corporation Commission tightens rules on increases in long-term care premiums

Published March 31, 2015 by Paula C. Squires

The State Corporation Commission (SCC) has revised rules governing long-term care insurance. Effective Sept. 1, the revisions are designed to protect consumers and increase scrutiny on long-term care insurers seeking to raise premium rates.

According to the SCC, large and frequent long-term care premium rate increases have occurred during the past several years. The increases often are the result of insurers' inability to adequately anticipate future claim costs given the lack of credible experience data available when the products were originally designed and priced.

The SCC said in a news release that such 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 coverage to lapse.

The revisions adopted by the commission are not expected to eliminate future premium increases. Nonetheless, the SCC says they strengthen the rate review process. Insurers will now be required to continuously monitor market experience, and they will undergo a more deliberate review and justification of any planned premium adjustments.

In addition, rules governing notices to policyholders of any rate adjustments have been enhanced. Consumers also will 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 Oct. 1, 2003; between Oct. 1, 2003 and Aug. 31, 2015; on or after Sept. 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, the SCC says. When rate requests are received, the commission said they will be subjected to a strengthened review process.

For new policies issued on or after Sept 1, 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 the long-term insurance rates.