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Life insurers seek nationally coordinated plan to deal with LTC rate issues

The life and health industries want to speed up the process of setting long-term care rate increases on a nationwide basis, but some state regulators are reluctant to do so.

Industry representatives at a National Association of Insurance Commissioners conference in Milwaukee pressed state regulators to ratchet up the premium rate approval process. They want to quickly move the discussion from the state level to the entire country and to allow for the development of a "predictable process" using a shared framework for all parties.

Each rate increase should be granted based upon an actuarial analysis of the block of business, not how well other lines of insurance in the company are doing, according to Paul Graham of the American Council of Life Insurers and Bill Weller, an actuary representing America's Health Insurance Plans.

Insurers are paying more than $9 billion a year in long-term care claims, and that figure is expected to jump sharply as blocks age. They see substantially higher premiums as a key to shoring up their LTC reserves.

Reserving issues related to LTC policies have hit a number of big companies, including Berkshire Hathaway Inc., General Electric Co. and Genworth Financial Inc., the latter of which is hoping its problems will be addressed in a long-delayed merger with China Oceanwide Holdings Ltd. Insurers want "timely, predictable and consistent approvals," on a national basis, according to the industry representatives at the conference.

Graham was adamant that the financial health of any company's LTC business should not be expected to be subsidized by other lines of insurance within the company, as that has a negative effect on policyholders, shareholders and insurers, he said. Such an approach is "not equitable" to these policyholders, Graham said, adding that rate increases shouldn't be made or not made based on an insurer’s current overall health.

Denying or delaying price increases that are actuarially justified harms policyholders and may make future rates hikes even higher, Graham and Weller told regulators.

Some state insurance regulators want to make sure any solution keeps power with the states, not centralized by the NAIC. Others are concerned that regulators do not have the full picture of the scope of LTC liabilities across the industry.

"There are parts of the proposal we agree with and parts of the proposal that give us heartburn," Dean Cameron, who co-chairs the task force, said in a conversation with reporters. Cameron said he takes issue with the concept of a nationwide, "one-size-fits-all" solution to the LTC issue or the creation of a national apparatus. Regulators have to develop a system that works within the state insurance system, said Cameron, who is also Idaho’s top insurance regulator. He also dismissed the idea that the industry's rate increase plan should be handled by the NAIC leadership.

Washington State Insurance Commissioner Mike Kreidler raised the concern that state regulators do not have a "big picture" idea of the financial health of the industry. In remarks following the task force meeting, Kreidler said it would be helpful to have a review of all closed and open blocks of LTC business.

"That's what needs to happen," said Kreidler, who vice-chaired the task force last year.