LTCi Rate Increases: States Push Back

Officials at the Connecticut Insurance Department have rejected a second attempt by Mutual of Omaha Insurance Company to increase long-term care insurance (LTCI) rates in their state.  The Nebraska-based carrier has been seeking an average increase of about 33% on block of 337 LTCI policies that are still in force in Connecticut.  The Connecticut department also rejected a similar increase request in September 2011.

Connecticut requires the LTCI loss ratio to be at least 60% over the life of the policy.  Mutual of Omaha was claiming a projected loss ratio of over 180% if the rate increase were not approved.  Connecticut state actuaries countered that the actual loss ratio on this small block of LTCi business would be more likely around 40% at worst, well below the states threshold for a rate increase.

This follows similar rejections by certain states over the on-going rate increase requests of John Hancock, some of the highest the industry has seen since the 90s.  Arizona and Wyoming, for instance, reduced the increase that Hancock had proposed for certain blocks of their acquired LTCi business (primarily Fortis) from 40-60% down to 25%.  Those states made a distinction between those policies that were issued with un-capped benefits (unlimited increases of 5% compound and 5% simple on available pool of benefits and access to them, as well as unlimited payout periods) and those that had capped benefit increases.

Other states took note.  As the state-by-state rate increase requests of LTCi carriers continues, it is expected that more Departments of Insurance will withhold the rubber stamp and take a closer look at the rational and accounting procedures used to justify the requested rate increases. 

On the other side of the coin, insurers are making the rate increases as painless as possible, offering multiple options for policyholders to reduce benefits to “step-points” not available in the original contracts.