Unintended Consequences of Restricting LTCi Rate Hikes
LTCI carriers have argued that rigid state insurance pricing rules have limited their ability to respond to changes in market and economic conditions and that such rules have failed to accommodate new information about how the LTCI market really works.
Analysts in the New York office of Fitch Ratings agree. The insurance industry ratings firm believes that rate rules may be partly responsible for the departure of many carriers from the LTCI market.
Members of the California Insurance Committee have voted 5-3 to approve Assembly Bill 999 that would limit the ability of LTCI carriers to take investment returns into account when changing prices on in-force policies. It would also limit the ability of an LTCI carrier to use the claims for a relatively small group of policyholder to justify rate increase requests. An insurer would have to use the experience for all similar LTCI policy forms issued and retained by an insurer and its affiliates to justify requests for rate increases.
The bill still must be approved by the Senate Appropriations Committee before it can have a shot at going to the Senate floor.
California Insurance Commissioners Dave Jones is supporting A.B. 999: “This bill will curb a troubling trend in the number and size of long-term care rate increases,” Jones says in a statement. “Without this legislation, consumers, many on fixed incomes, will continue to face uncertainty, never knowing what rates to expect from year to year.”
Editorial comment: This is just one more area in which a state government – with the intent of protecting the consumer from greedy insurance companies – has unintentionally created marketing conditions that make it more difficult to provide a risk mitigation strategy (long-term care insurance) for those that want and need it. As an LTCi policyowner myself, I want my insurance company to be properly capitalized to pay my claims when submitted. If premiums go up and I have to adjust my coverage to be able to afford at least some coverage against the risk of the high cost of “taking too long to die”, so be it. I’d rather have state officials become more educated and knowledgeable about how insurance works than randomly slapping restrictions on insurance companies that result in their leaving the market.
