Current through Register Vol. 56, No. 18, September 16, 2024
(a) This section
applies to any individual long-term care policy issued in this State on or
after January 18, 2006 and for which initial rates were filed pursuant to
11:4-34.8.
(b) A carrier shall request approval of a
revised premium rate schedule, including an exceptional increase, from the
Commissioner at least 60 days prior to sending the notice to be provided to the
policyholders, and the carrier's request shall include:
1. Information required by
11:4-34.7 concerning disclosure of
rating practices;
2. Certification
by a qualified actuary that:
i. If the
requested premium rate schedule increase is implemented and the underlying
assumptions for the revised rate filing which reflect moderately adverse
conditions are realized, no further premium rate schedule increases are
anticipated; and
ii. The premium
rate filing is in compliance with the provisions of
11:4-34.1 8;
3. An actuarial memorandum justifying the
rate schedule change request that includes:
i. Lifetime projections of earned premiums
and incurred claims (on a year-to-year basis), 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;
ii. Disclosure of how reserves have been
incorporated in this rate increase whenever the rate increase will trigger a
contingent benefit upon lapse;
iii.
Disclosure of the analysis performed to determine why a rate adjustment is
necessary, which pricing assumptions were not realized and why, a comparison of
the pricing assumptions and current assumptions and what other actions taken by
the carrier have been relied on by the actuary; and
iv. A statement that policy design,
underwriting and claims adjudication practices have been taken into
consideration;
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 whose cost
exceeds the assumed cost in the initial premium;
2. Premium rate schedule increases that are
not exceptional shall be calculated such that the sum of the accumulated value
of incurred claims, without the inclusion of active life reserves, and the
present value of future projected incurred claims, without the inclusion of
active life reserves, will not be less than the sum of the following:
i. The accumulated value of the initial
earned premium times 58 percent;
ii. Eighty-five percent of the accumulated
value of prior premium rate schedule increases on an earned basis;
iii. The present value of future projected
initial earned premiums times 58 percent; and
iv. Eighty-five percent of the present value
of future projected premiums not in (c)2iii above on an earned basis;
3. In the event that a policy form
has both exceptional and other increases, the values in (c)2ii and iv above
will also include seventy percent for exceptional rate increase amounts;
and
4. All present and accumulated
values used to determine rate increases shall use the maximum valuation
interest rate for contract reserves as specified in
11:4-6.1 6.
(d) For each rate increase that is
implemented, the carrier shall file for approval by the Commissioner updated
projections, as defined in (b)3i above, 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 insure 250 or more persons where the policyholder has 5,000 or
more eligible employees of a single employer or where the policyholder pays 20
percent or more of the total premium for the group in the calendar year prior
to the year a rate increase is filed, the projections required by this
subsection 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 150 percent of the
comparable rate in the initial premium schedule, lifetime projections, as
defined in (b)3i above, shall be filed for approval by the Commissioner every
five years following the end of the required period in (d) above.
(f) If the Commissioner has determined that
the actual experience following a rate increase does not adequately match the
projected experiences and that the current projections under moderately adverse
conditions demonstrate that incurred claims will not exceed proportions of
premiums specified in (c) above, the Commissioner may require the carrier to
implement either of the following:
1. Premium
rate schedule adjustments; or
2.
Other measures to reduce the difference between the projected and actual
experience.
(g) If 25
percent or more of the policies to which the increase is applicable are
eligible for the contingent benefit upon lapse, the carrier shall file:
1. A plan, subject to Commissioner approval,
for improved administration and/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 (h) below; and
2. The original anticipated lifetime loss
ratio, and the premium rate schedule increase that would have been calculated
according to (c) above had the greater of the original anticipated lifetime
loss ratio or 58 percent been used in the calculations described in (c)2i and
iii above.
(h) If 25
percent or more of the policies to which a rate increase is applicable are
eligible for contingent benefit upon lapse, 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.
(i) In the event significant adverse
lapsation has occurred, is anticipated in the filing or is evident in the
actual results as presented in the updated projections provided by the carrier
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 carrier 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
carrier or its affiliates. If the carrier or its affiliates are no longer
offering one or more reasonably comparable products, the Commissioner may take
other steps, including requiring pooling of all of the carrier's long term care
policies for rating purposes, or disapproving or reducing rate increase
requests.
1. The offer shall:
i. Be subject to the approval of the
Commissioner;
ii. Be based on
actuarially sound principles, but not 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
2. The carrier 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.
(j)
If the Commissioner determines that the carrier 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 (i) above,
prohibit the carrier 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.
(k) Subsections (a) through (j) above shall
not apply to policies for which the long-term care benefits are incidental,
provided 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, is
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 N.J.S.A. 17B:25-l9,
17B:25-20 or N.J.A.C. 11:4-
44.3(b);
3. The policy meets the
disclosure requirements of
17B:27E-6;
4. The portion of the policy that provides
insurance benefits other than long-term care coverage meets the requirements,
as applicable, in N.J.A.C. 11:4-52 and
17B:28-1 et seq.; and
5. An actuarial memorandum is filed that
includes:
i. A description of the rates for
long-term care coverage and a description of the basis on which the long-term
care rates were determined;
ii. A
description of the basis for the separate reserves for long-term
care;
iii. A summary of the type of
policy, benefits, renewability, general marketing method, and limits on age of
issuance;
iv. A description and
table of each actuarial assumption, including expense factors used in
determining long-term care rates;
v. A description and method of calculation of
the anticipated long-term care policy reserves and additional long-term care
reserves to be held in each future year for active lives, including a copy of
or citation to any published or available mortality or morbidity
tables;
vi. The estimated
distribution of annual premium per policy and the estimated distribution of
issue ages;
vii. A statement as to
whether underwriting for long-term care 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; and
viii. 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, including:
(1) A demonstration that
the benefits other than long-term care benefits satisfy the minimum
nonforfeiture requirements cited in (k)2 above; and
(2) A demonstration that the benefits are
incidental as defined in
11:4-34.2.
