Current through Register Vol. 50, No. 9, September 20, 2024
A.
Section
1939 shall apply as follows.
1. Except as provided in
§1939. A 2,
§1939 applies to any long-term care
policy or certificate issued in this state on or after January 1,
2018.
2. For certificates issued on
or after the effective date of this amended regulation under a group long-term
care insurance policy as defined in
R.S.
22:1184(4)(a), which policy
was in force at the time this amended regulation became effective, the
provisions of
§1939 shall apply on the policy anniversary
following January 1, 2018.
B. An insurer shall request approval of a
pending premium rate schedule increase, including an exceptional increase, to
the commissioner at least 45 days prior to the notice to the policyholders and
shall include:
1. information required by
§1915;
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 §1939;
c.
the insurer may request a premium rate schedule increase less than what is
required under
§1939 and the commissioner may approve
such premium rate schedule increase, without submissions of the certification
in §1939.
B.2 a, if the actuarial memorandum discloses
the premium rate schedule increase necessary to make the certification required
under §1939.
B.2 a, the premium rate schedule increase
filing satisfies all other requirements of
§1939 and is, in the opinion of the
commissioner, 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 five years preceding and the three 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
§1939 C; and
iv. for exceptional increases:
(a). the projected experience should be
limited to the increases in claims expenses attributable to the approved
reasons for the exceptional increase; and
(b). in the event the commissioner determines
as provided in
§1905 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, the insurer will need to file composite
rates 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
§1917. 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 commissioner; and
5. sufficient information for review and
approval of the premium rate schedule increase by the commissioner.
C. All premium rate schedule
increases shall be determined in accordance with the following requirements:
1. exceptional increases shall provide that
70 percent 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 the future expected 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 58 percent and the lifetime loss
ratio consistent with the original filing including margins for moderately
adverse experience;
b. 85 percent
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 58 percent and
the lifetime loss ratio consistent with the original filing including margins
for moderately adverse experience; and
d. 85 percent of the present value of future
projected premiums not in
§1939. C.2.c on an
earned basis;
3.
expected claims shall be calculated based on the original filing assumptions
assumed until new assumptions are filed as part of a rate increase. New
assumptions shall be used for all periods beyond each requested effective date
of a rate increase. Expected claims are calculated for each calendar year based
on the in-force at the beginning of the calendar year. Expected claims shall
include margins for moderately adverse experience; either amounts included in
the claims that were used to determine the lifetime loss ratio consistent with
the original filing or as modified in any rate increase filing;
4. in the event that a policy form has both
exceptional and other increases, the values in
§1939. C.2.b and d
will also include 70 percent for exceptional rate increase amounts;
and
5. all present and accumulated
values used to determine rate increases, including the lifetime loss ratio
consistent with the original filing reflecting margins for moderately adverse
experience, shall use the maximum valuation interest rate for contract reserves
as defined annually under
R.S.
22:753. The actuary shall disclose as part of
the actuarial memorandum the use of any appropriate averages.
D. For each rate increase that is
implemented, the insurer shall file for approval by the commissioner updated
projections, as defined in
§1939. B.3 a, annually
for the next three years and include a comparison of actual results to
projected values. The commissioner may extend the period to greater than three
years if actual results are not consistent with projected values from prior
projections. For group insurance policies that meet the conditions in
§1939 K, the projections required by
§1939. D shall be
provided to the policyholder in lieu of filing with the commissioner.
E. If any premium rate in the revised premium
rate schedule is greater than 200 percent of the comparable rate in the initial
premium schedule, lifetime projections, as defined in
§1939. B.3 a, shall be
filed for approval by the commissioner every five years following the end of
the required period in
§1939. D For group
insurance policies that meet the conditions in
§1939 K, the projections required by
§1939. E shall be
provided to the policyholder in lieu of filing with the commissioner.
F.
1. If
the commissioner 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
§1939 C, the commissioner 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. In determining whether the actual
experience adequately matches the projected experience, consideration should be
given to §1939.
B.3 e, if applicable.
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
commissioner 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 commissioner may impose the
condition in
§1939. H
1-2.
H.
1. For a rate increase filing that meets the
following criteria, the commissioner 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 are 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 commissioner may determine
that a rate spiral exists. Following the determination that a rate spiral
exists, the commissioner 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
commissioner;
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
percent.
I. If the commissioner determines that the
insurer has exhibited a persistent practice of filing inadequate initial
premium rates for long-term care insurance, the commissioner may, in addition
to the provisions of
§1939. H 1-2, prohibit
the insurer from either of the following:
1.
filing and marketing comparable coverage for a period of up to five 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.Section 1939. A through I
shall not apply to policies for which the long-term care benefits provided by
the policy are incidental, as defined in §1905, 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 any of the following:
a.R.S.
22:936;
b.R.S.
22:952; and
c.R.S.
22:914;
3. the policy meets the disclosure
requirements of
R.S.
22:1186(H), (I), and
(J);
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 Regulation 55;
b. disclosure requirements in Regulation
28;
5. an actuarial
memorandum is filed with the insurance department 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.Section 1939. F and H shall
not apply to group insurance policies as defined in
R.S.
22:1184(4)(a) where:
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
certificate holders, pays a material portion of the premium, which shall not be
less than 20 percent of the total premium for the group in the calendar year
prior to the year a rate increase is filed.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
22:1186(A),
22:1186(E),
22: 1188(C), 22:1189, and 22:1190.
