Current through Register Vol. 48, No. 12, March 22, 2024
a)
This Section shall apply as follows:
1)
Except as provided in subsection (a)(2), this Section applies to any long-term
care policy or certificate issued in this State on or after July 1,
2018.
2) For certificates issued on
or after July 1, 2018, under a group long-term care insurance policy as defined
in Section 351A-1(e)(1) of the Code, which was in force prior to July 1, 2018,
the provisions of this Section shall apply on the policy anniversary following
January 1, 2019.
b) An
insurer shall provide notice of a pending premium rate schedule increase,
including an exceptional increase, to the Director at least 30 days prior to
the notice to the policyholders and shall include:
1) Information required by Section
2012.62;
2) Certification by a qualified actuary that:
A) If the requested premium rate schedule
increase is implemented and the underlying assumptions, which reflect
moderately adverse conditions, are realized, no further premium rate schedule
increases are anticipated;
B) The
premium rate filing is in compliance with the provisions of this
Section;
C) The insurer may request
a premium rate schedule increase less than what is required under this Section
and the Director may approve that premium rate schedule increase, without
submission of the certification in subsection (b)(2)(A), if:
i) the actuarial memorandum discloses the
premium rate schedule increase necessary to make the certification required
under subsection (b)(2)(A);
ii) the
premium rate schedule increase filing satisfies all other requirements of this
Section; and
iii) the premium rate
schedule increase filing is, in the opinion of the Director, in the best
interest of policyholders;
3) An actuarial memorandum justifying the
rate schedule change request that includes:
A) Lifetime projections of earned premiums
and incurred claims based on the filed premium rate schedule increase and the
method and assumptions used in determining the projected values, including
reflection of any assumptions that deviate from those used for pricing other
forms currently available for sale.
i) Annual
values for the 5 years preceding and the 3 years following the valuation date
shall be provided separately;
ii)
The projections shall include the development of the lifetime loss ratio,
unless the rate increase is an exceptional increase;
iii) The projections shall demonstrate
compliance with subsection (c); and
iv) For exceptional increases, the projected
experience should be limited to the increases in claims expenses attributable
to the approved reasons for the exceptional increase. In the event the Director
determines, as provided in the definition of "exceptional increase" found in
Section
2012.30, that offsets
may exist, the insurer shall use appropriate net projected
experience;
B) Disclosure
of how reserves have been incorporated in this rate increase whenever the rate
increase will trigger contingent benefit upon lapse;
C) Disclosure of the analysis performed to
determine why a rate adjustment is necessary, which pricing assumptions were
not realized and why, and what other actions taken by the company have been
relied on by the actuary;
D) A
statement that policy design, underwriting and claims adjudication practices
have been taken into consideration;
E) In the event that it is necessary to
maintain consistent premium rates for new certificates and certificates
receiving a rate increase, composite rates, filed by the insurer, reflecting
projections of new certificates; and
F) A demonstration that actual and projected
costs exceed costs anticipated at the time of initial pricing under moderately
adverse experience and that the composite margin specified in Section
2012.64(b)(2)(D)
is projected to be exhausted;
4) A statement that renewal premium rate
schedules are not greater than new business premium rate schedules except for
differences attributable to benefits, unless sufficient justification is
provided to the Director; and
5)
Sufficient information for review and approval of the premium rate schedule
increase by the Director.
c) All premium rate schedule increases shall
be determined in accordance with the following requirements:
1) Exceptional increases shall provide that
70% of the present value of projected additional premiums from the exceptional
increase will be returned to policyholders in benefits;
2) Premium rate schedule increases shall be
calculated such that the sum of the lesser of the accumulated value of incurred
claims, without the inclusion of active life reserves, or the accumulated value
of historic expected claims, without the inclusion of active life reserves,
plus the present value of future projected incurred claims, projected without
the inclusion of active life reserves, will not be less than the sum of the
following:
A) The accumulated value of the
initial earned premium times the greater of:
i) 58%; or
ii) the originally filed loss
ratio;
B) 85% of the
accumulated value of prior premium rate schedule increases on an earned
basis;
C) The present value of
future projected initial earned premiums times the greater of:
i) 58%; or
ii) the originally filed loss ratio;
and
D) 85% of the present
value of future projected premiums not in subsection (c)(2)(C) on an earned
basis;
3) In the event
that a policy form has both exceptional and other increases, the values in
subsections (c)(2)(B) and (D) will also include 70% for exceptional rate
increase amounts;
4) All present
and accumulated values used to determine rate increases shall use the maximum
valuation interest rate for contract reserves specified in 50 Ill. Adm. Code
2004 (Accident and Health Reserves). The actuary shall disclose as part of the
actuarial memorandum the use of any appropriate averages; and
5) The present value of future projected
incurred claims calculated in subsection (c)(2) shall be on a best estimate
basis.
d) For each rate
increase that is implemented, the insurer shall file for review and approval by
the Director updated projections, as defined in subsection (b)(3)(A), annually
for the next 3 years and include a comparison of actual results to projected
values. The Director may extend the period to greater than 3 years if actual
results are not consistent with projected values from prior projections. For
group insurance policies that meet the conditions in subsection (k), the
projections required by this subsection (d) shall be provided to the
policyholder in lieu of filing with the Director.
e) If any premium rate in the revised premium
rate schedule is greater than 200% of the comparable rate in the initial
premium schedule, lifetime projections, as defined in subsection (b)(3)(A),
shall be filed for review and approval by the Director every 5 years following
the end of the required period in subsection (d). For group insurance policies
that meet the conditions in subsection (k), the projections required by this
subsection (e) shall be provided to the policyholder in lieu of filing with the
Director.
f) If the Director has
determined that the actual experience following a rate increase does not
adequately match the projected experience, and that the current projections
under moderately adverse conditions demonstrate that incurred claims will not
exceed proportions of premiums specified in subsection (c), the Director:
1) May require the insurer to implement any
of the following:
A) Premium rate schedule
adjustments; or
B) Other measures
to reduce the difference between the projected and actual experience.
2) Should give consideration to
subsection (b)(3)(E) when determining whether the actual experience adequately
matches the projected experience.
g) If the majority of the policies or
certificates to which the increase is applicable are eligible for the
contingent benefit upon lapse, the insurer shall file a plan, subject to
Director approval, for improved administration or claims processing designed to
eliminate the potential for further deterioration of the policy form requiring
further premium rate schedule increases, or both, or to demonstrate that
appropriate administration and claims processing have been implemented or are
in effect. Otherwise, the Director may impose the condition in subsection
(h).
h) Significant Adverse
Lapsation
1) For a rate increase filing that
meets the following criteria, the Director shall review, for all policies
included in the filing, the projected lapse rates and past lapse rates during
the 12 months following each increase to determine if significant adverse
lapsation has occurred or is anticipated:
A)
The rate increase is not the first rate increase requested for the specific
policy form or forms;
B) The rate
increase is not an exceptional increase; and
C) The majority of the policies or
certificates to which the increase is applicable is eligible for the contingent
benefit upon lapse.
2) In
the event significant adverse lapsation has occurred, is anticipated in the
filing or is evidenced in the actual results as presented in the updated
projections provided by the insurer following the requested rate increase, the
Director may determine that a rate spiral exists. Following the determination
that a rate spiral exists, the Director may require the insurer to offer,
without underwriting, to all in force insureds subject to the rate increase,
the option to replace existing coverage with one or more reasonably comparable
products being offered by the insurer or its affiliates.
A) The offer shall:
i) Be subject to the approval of the
Director;
ii) Be based on
actuarially sound principles, but not be based on attained age; and
iii) Provide that maximum benefits under any
new policy accepted by an insured shall be reduced by comparable benefits
already paid under the existing policy.
B) The insurer shall maintain the experience
of all the replacement insureds separate from the experience of insureds
originally issued the policy forms. In the event of a request for a rate
increase on the policy form, the rate increase shall be limited to the lesser
of:
i) The maximum rate increase determined
based on the combined experience; and
ii) The maximum rate increase determined
based only on the experience of the insureds originally issued the form plus
10%.
i) If the Director determines that the
insurer has exhibited a persistent practice of filing inadequate initial
premium rates for long-term care insurance, the Director may, in addition to
the provisions of subsection (h), prohibit the insurer from either of the
following:
1) Filing and marketing comparable
coverage for a period of up to 5 years; or
2) Offering all other similar coverages and
limiting marketing of new applications to the products subject to recent
premium rate schedule increases.
j) Subsections (a) through (i) shall not
apply to policies for which the long-term care benefits provided by the policy
are "incidental", as defined in Section 2012.30, if the policy complies with
all of the following provisions:
1) The
interest credited internally to determine cash value accumulations, including
long-term care, if any, are guaranteed not to be less than the minimum
guaranteed interest rate for cash value accumulations without long-term care
set forth in the policy;
2) The
portion of the policy that provides insurance benefits other than long-term
care coverage meets the nonforfeiture requirements, as applicable, in either of
the following:
A) Section 229.2 of the
Code;
B) Section 229.4 of the
Code;
3) The policy meets
the disclosure requirements of Sections 351A-9.1 and 351A-9.2 of the
Code;
4) The portion of the policy
that provides insurance benefits other than long-term care coverage meets the
requirements, as applicable, in the following:
A) Policy illustrations as required by 50
Ill. Adm. Code 1406;
B) Disclosure
requirements in 50 Ill. Adm. Code 1551;
5) An actuarial memorandum is filed with the
Director that includes:
A) A description of
the basis on which the long-term care rates were determined;
B) A description of the basis for the
reserves;
C) A summary of the type
of policy, benefits, renewability, general marketing method, and limits on ages
of issuance;
D) A description and a
table of each actuarial assumption used. For expenses, an insurer must include
percent of premium dollars per policy and dollars per unit of benefits, if
any;
E) A description and a table
of the anticipated policy reserves and additional reserves to be held in each
future year for active lives;
F)
The estimated average annual premium per policy and the average issue
age;
G) A statement as to whether
underwriting is performed at the time of application. The statement shall
indicate whether underwriting is used and, if used, the statement shall include
a description of the type or types of underwriting used, such as medical
underwriting or functional assessment underwriting. Concerning a group policy,
the statement shall indicate whether the enrollee or any dependent will be
underwritten and when underwriting occurs; and
H) A description of the effect of the
long-term care policy provision on the required premiums, nonforfeiture values
and reserves on the underlying insurance policy, both for active lives and
those in long-term care claim status.
k) At the request of the insurer, the
Director may also consider other options that may be made available to insureds
that may mitigate the impact of the rate increases on the insured population or
alternative actuarial methodologies relating to the rate increase. The insurer
shall provide an explanation and demonstration on how the methodology is
actuarially justified and/or how the new mitigation option may reasonably
benefit insureds. No alternative method/approach may be used until it has been
accepted by the Director.
l)
Subsections (f) and (h) shall not apply to group insurance policies as defined
in Section 351A-1(e)(1) of the Code if:
1) The
policies insure 250 or more persons and the policyholder has 5,000 or more
eligible employees of a single employer; or
2) The policyholder, and not the
certificateholders, pays a material portion of the premium, which shall not be
less than 20% of the total premium for the group in the calendar year prior to
the year a rate increase is filed.