The National Association of Insurance Commissioners (NAIC) has changed the NAIC's Long-Term Care Insurance Model Regulation.
All of the states and other jurisdictions that belong to the NAIC considered the proposed revision at a plenary session — or meeting for all voting NAIC members — Tuesday, at the NAIC's summer meeting in Louisville, Ky. A vote tally was not immediately available.
A document showing a final version of the changes made to the NAIC Model 641 was included in a meeting packet. The changes call for issuers of LTCI coverage to give more justification from actuaries for initial rates and for any proposed rate increases. Every year, an insurer subject to the regulation changes would have to get a member of the American Academy of Actuaries to certify that the rates for currently marketed LTCI products were high enough to cover anticipated costs under moderately adverse conditions.
If the actuary could not certify that the rates were enough to be sustainable under moderately adverse conditions, the insurers would have to provide an action plan for re-establishing adequate margins within 60 days.
If an insurer were increasing rates, a minimum percentage of the revenue from prior and current rate increases would have to go to the policyholders.
See also: Trade groups oppose LTCI proposal.
If rate increases led to a high lapse rate, an insurance commissioner could determine that a "rate spiral" — or self-sustaining chain of rate increases and enrollment decreases — exists. If a commissioner found that a block was affected by a rate spiral, and the insurer sold other, comparable policies, the commissioner could make the insurer replace the rate-spiral policies with the comparable policies without putting the insureds through a new round of underwriting.
"If the commissioner determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates for long-term care insurance," the commissioner could limit the insurer's ability to file and market comparable products, or even to sell similar coverage, according to the regulation revision text.
The NAIC is a group for insurance regulators in states, U.S. territories and the District of Columbia. Jurisdictions often base their own insurance laws and regulations on NAIC models, but they can choose whether or not to do so.
See also: Massachusetts drafts LTCI rate regs.