The NAIC wants states to work together to make long-term care insurance rates more uniform across the country.
The National Association of Insurance Commissioners (NAIC) is considering establishing a multi-state review process to approve long-term care insurance rate hikes. The proposal was floated by the group’s Long-Term Care Insurance Task Force at its recent summer conference in Boston, and will continue to be discussed at future meetings.
A multi-state LTCI rate review system will shorten what is currently a lengthy process and create a uniform standard for approving rate increases, the NAIC contends. As the task force noted in a brief detailing its recommendation, each state approves rates differently. Therefore, LTCI rates may vary widely for residents.
By working together, states can also dip into a larger pool of actuarial knowledge to evaluate LTCI rate increase requests. According to the NAIC brief, “A combined process for rate review can not only leverage our individual resources to complete individual rate review tasks but can also provide a cross-training opportunity to make each of our states stronger as individual regulators.”
Keeping LTCI Insurers Solvent
Regulators and consumer groups have pushed to keep LTCI rate hikes to a minimum in order to spare long-term policyholders from paying ever-increasing premiums. This tactic has led some states — such as California and Connecticut — to limit LTCI rate increases.
Conversely, other states have been more inclined to authorize rate increases so LTCI providers stay solvent. If an LTCI insurer fails, a state guaranty fund collects money from other insurers to ensure policyholders receive their guaranteed benefits — a scenario regulators hope to avoid.
At the same time, some insurers have taken measures to address a future surge in LTCI claim payouts. Prudential recently bulked up its LTCI reserves by $1.4 billion after it concluded morbidity rates were unlikely to improve significantly. Although it stopped issuing LTCI policies in 2012, Prudential oversees 211,156 in-force contracts, of which about 5,000 have active claims.
How It Would Work
The NAIC task force provided an outline of how the multi-state review process would work under an LTCI subgroup. First, a lead state would take charge, with other states voluntarily joining in and establishing an oversight committee.
Actuaries from the lead state would evaluate the rate application, which the oversight committee also reviews. The oversight committee would then recommend a percentage increase.
Insurers still need to file a rate request in each state, but regulators in that state would have the oversight group’s report before them. Individual state insurance agencies could decide whether to approve the recommended increase or not.
The LTCI proposal mirrors other coordinated efforts among state insurance regulators. For example, regulators band together to review insurance company financials. In addition, the Interstate Insurance Product Regulation Commission (IIPRC) oversees rate filings for specific products in participating states.
Although some 40 states use the IIPRC to review LTCI rate filings, the commission limits its work to only approved products. Further, the IIPRC cannot approve rate hikes above 15%. For higher increases, the IIPRC simply makes a recommendation. Even under the IIPRC system, insurers must file separately in each state.No action was taken on the LTCI rate proposal at the recent meeting. That said, the task force expects to hold discussions on the topic at its 2019 fall conference.