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NAIC looks to model laws to smooth out LTC rate inconsistency across states

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NAIC looks to model laws to smooth out LTC rate inconsistency across states

The National Association of Insurance Commissioners' newly formed Long-Term Care Executive Task Force will pursue the creation of model laws as a way to increase uniformity among states when dealing with rate reviews for the troubled business line.

In the task force's first public meeting, its chair, Virginia Insurance Commissioner Scott White, said the group is in the "planning stages," which will likely continue through the end of August.

Over the past year, S&P Global Market Intelligence has reported that some state regulators are changing how they look at carriers' rate increase requests with a view to being part of a nationwide solution. Vermont, for example, has begun considering approving rate increases for a handful of companies after not having granted one since at least 2014.

On the other hand, some states that have consistently granted long-term care rate increase requests expressed they may be tougher on future requests because of concerns that their residents are subsidizing those in other states.

The increasing disparity between states, along with significant rate increases and the threat of insolvencies, led the NAIC membership to unanimously make dealing with long-term care insurance it number 1 priority for 2019.

The executive level task force was formed at the NAIC's spring meeting and charged with developing a consistent national approach for reviewing long-term care insurance rates. The goals are that states grant actuarially appropriate increases in a timely manner and that consumers are provided with "meaningful options" to reduce their benefits where premium increases have become unaffordable.

The group started its work with a series of calls beginning in May, which White described as "educational in nature" and which were intended to provide a shared knowledge base between the 36 states that joined the task force.

The task force then had its first in-person meeting at the NAIC's Insurance Summit in Kansas City, Mo., in June, with 25 commissioners in attendance and participation from 35 of the 36 states overall. White characterized the discussions there as "very productive" and said the members of the task force are "quite serious" about coming up with meaningful solutions.

Six workstreams

The task force is now breaking down its focus into six workstreams, which may eventually evolve into full-scale working groups, White said.

The first workstream is a multistate review of rate practices, which will be led by Colorado Insurance Commissioner Michael Conway. White said this is the centerpiece of the task force and will focus on the different actuarial methodologies used by states. The methodologies used by Minnesota and Texas will be a central part of the evaluation.

White said the group has coalesced around two different approaches for a consistent national approach to rate reviews, though these may change. One approach would involve "expanding the scope of the interstate compacts," while the other would be the "development of a multi-state examination model," he said.

Another workstream, led by Texas Insurance Commissioner Kent Sullivan, will explore alternatives for protecting policyholders from guaranty fund caps, and look at potential inequities that could result from states having inconsistent approaches to rate increase decisions.

The third workstream will center around ensuring that insurers are sending notices that allow customers to fully understand their options, especially when it comes to reducing benefits, while a fourth has been evaluating insurers' reserves and how to balance rate increase decisions with reserving assumptions.

Additionally, Washington Insurance Commissioner Mike Kreidler will lead a key group that will examine "non-actuarial variances" among states when it comes to approving rate increases.

"Obviously we all know that not all states base their final rate decisions solely on actuarial analysis, so an essential objective of this workstream is going to be just to better understand what's the rationale behind those factors that are not of an actuarial basis," White said. He added that the group is considering developing a "model set" of non-actuarial practices.

The executive level task force will also be aided by a group that is exploring whether additional data is needed to support the work of the task force.

Although some of these workstreams may eventually conduct their business as working groups with open sessions, others will continue operating confidentially until their work becomes more finalized, White said. The task force intends to deliver a proposal on the various long-term care issues to the NAIC's Executive Committee by the fall 2020 national meeting.

"I would say we have a lot of work to do," White said.