The National Association of Insurance Commissioners has hired a consulting firm to survey 19 insures from seven states to gather and then analyze long-term care insurance premium rates, a process that the organization expects to furnish results by summer.
The firm, which was not identified yet*, is set to begin the data call by the end of February and anticipates completing it by the end of June. The Jan. 6 notice says its executive-level Long-Term Care Insurance Task Force should an actionable report from the firm no later than the summer national meeting in August.
Specifically, the company will update the regulators draft data call and then conduct its own to ferret out where rate imbalance issues are and how to correct them.
Virginia confirmed it will be one of the seven jurisdictions involved. It is home to Genworth Financial, the largest of the LTC providers. Virginia State Cooperation Commission, Bureau of Insurance Commissioner Scott A. White now heads the Financial Condition Committee of the NAIC.
The NAIC budgeted $110,000 for the initiative. It reviewed proposals from eight companies in the process and chose one based on a standard array of professional factors.
The standard-setting group’s LTC task force has been working on right-sizing premium increases across the states. This is occurring so that policyholders in some jurisdictions aren’t subsidizing those in others because state regulators are granting different levels of rate increases for a company based on decisions that could be arbitrary, political, negotiated or just habitual.
For example, a 2016 40% rate increase request for Senior Health Insurance Company of Pennsylvania’s (SHIP) policy forms in Minnesota noted that it had to leave Florida out of its calculations for a standardized nationwide rate increase request. That’s because it didn’t; want all other policyholders to in effect subsidize Florida policyholders, which are much more expensive for the company. LTC claims in the Sunshine State appear to be costly and SHIP suggested its regulators don’t allow premium increases to offset this.
“Florida experience is excluded from nationwide experience to eliminate the subsidy Florida would require due to its unfavorable experience and difficulty in getting rate increases approved,” stated the actuarial memo supporting the rate revision plan from SHIP’s actuarial firm. Milliman.
This kind of state-by-state variety of regulatory response can produce inequities for policyholders and hard feelings between states that feel they are taking the brunt of the rate request burden for an insurer’s long-term solvency while others strain to keep premiums affordable for the elderly; as part of the dual regulatory’ mandate of solvency and consumer protection, both considerations are considered, to varying degrees.
This state-by-state variation is part of an overall effort to rehabilitate and possibly recharge the LTC industry. Combination annuity and life insurance LTC products may represent the future of LTC, but the NAIC must simultaneously grapple with the industry’s past actuarial very long-tail shortcomings.
A report presented to the Treasury Department’s advisory committee on insurance by one of the centers of the Gerontology Institute at the University of Massachusetts, Boston, using data from trade association and other sources shows premium rates have largely doubled over the two decades from 1995 to 2015. The 2018 report shows claims incurred in just the short period of 2013 to 2015 totaled about a third of all LTC claims paid in the previous 20 years, from 1992 to 2012.
The stated goal of the NAIC work stream is to achieve “actuarially appropriate increases” given to insurers in a “timely manner.” The selected consulting firm will “describe to the NAIC Members the current level of rate inequity among states’ policyholders” when it completes the project.
Currently, in some cases, LTC rate filing requests among different states do show some insurers asking for increases below what is truly actuarially justified presumably to avoid sticker shock for the consumer and to make the request more palatable to the state regulator. In other cases, insurers ask for increases staggered over several years.
For example, Continental General Insurance Co., which has been filing rate increase requests in many states, recently stated in an Ohio rate increase request filing that the rate increase justified would be 66% but the request is for only 15% because it “believes this is in line with the Department’s requirements for the expedited review process.” However, Continental added that it might ask for more premium rate increases at a later date on the filed policy forms.
Some insurers with closed LTC blocks are simultaneously raising rates while offering reduced benefits for maintaining premiums, or converting coverage to “paid up” status with a reduced benefit account value.
Others are looking to improve health outcomes, which could reduce claims over time.
Prudential Financial, which stopped selling LTC in 2012, recently proposed wellness plan initiatives for LTC policyholders o promote safe independent living in their homes and quality of life.
“Initially our plan is to offer this to insureds not on claim, but we may expand these offers to even insureds who are on claim at a later date,” Prudential said in a recent regulatory filing. To address low participation rates, the company suggested a nominal gift card or souvenir of $25. If the effort is successful in New Mexico, New Jersey and other sample states, Prudential would seek to expand the program, it said.
“Other than the possibility of containing future claim costs to some extent by making these programs available to our insureds there is no financial incentive here to benefit Prudential,” the company told regulators about its voluntary, non-underwriting-related wellness plan concepts.
The wellness plan for group and individual LTC policyholders in some states could commence 60 days after Prudential’s Nov. 26 letter to New Mexico Insurance Superintendent John Franchini — so presumably by the end of January.
(On the compliance front, Prudential wrote informed state regulators it had reviewed its wellness plan offering with its domiciliary regulator, the New Jersey Department of Banking and Insurance, and it had okayed “the two programs discussed in this letter and the gift card incentive program we would also like to use.”)