Current through Register Vol. 63, No. 9, September 1, 2024
(1) This rule applies as follows:
(a) Except as provided in subsection (b) of
this section, this rule applies to any long-term care insurance policy or
certificate issued in this state on or after March 1, 2006 and prior to January
1, 2016.
(b) For certificates
issued on or after March 1, 2005 under a group long-term care insurance policy
as defined in ORS 743.652(3)(a)
that was in force on March 1, 2005, this rule applies on the policy anniversary
following March 1, 2006.
(2) An insurer shall obtain approval of a
premium rate schedule increase from the Director of the Department of Consumer
and Business Services, including an exceptional increase as defined in section
(3) of this rule, prior to the notice to the policyholders and shall include
the following in the submission to the director:
(a) Information required by OAR
836-052-0556;
(b) Certification by a qualified actuary
that:
(A) If the requested premium rate
schedule increase is implemented and the underlying assumptions that reflect
moderately adverse conditions are realized, no further premium rate schedule
increases are anticipated; and
(B)
The premium rate filing is in compliance with this rule; or
(C) The insurer may request a premium rate
schedule increase that is less than what is required under this rule and the
director may approve such premium rate schedule increase, without submission of
the certification required under this subsection, if the actuarial memorandum
discloses the premium rate schedule necessary to make the certification
required under OAR 836-052-0676(2)(b),
the premium rate schedule increase filing satisfies all other requirements of
this rule and is, in the opinion of the director, in the best interest of
policyholders.
(c) 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, as follows:
(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 according to OAR
836-052-0666, unless the rate
increase is an exceptional increase;
(iii) The projections shall demonstrate
compliance with section (3) of this rule; and
(iv) For exceptional increases:
(I) The projected experience must be limited
to the increases in claims expenses attributable to the approved reasons for
the exceptional increase; and
(II)
In the event the director determines as provided in OAR
836-052-0508(1)(d)
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 insurer have been relied on by the actuary;
(D) A statement that policy design,
underwriting and claims adjudication practices have been taken into
consideration; and
(E) Composite
rates reflecting projections of new certificates, in the event that it is
necessary to maintain consistent premium rates for new certificates and
certificates receiving a rate increase; 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 OAR
836-052-0566(2)(b)(D)
is projected to be exhausted.
(d) 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
(e)
Sufficient information for review and approval of the premium rate schedule
increase by the director.
(3) As used in this rule, "exceptional
increase" means only those increases filed by an insurer as exceptional for
which the director determines the need for the premium rate increase is
justified, owing to changes in statutes or rules applicable to long-term care
insurance in this state or owing to increased and unexpected utilization that
affects the majority of insurers of similar products. An exceptional increase
is subject to the following provisions:
(a)
Except as provided in this rule, an exceptional increase is subject to the same
requirements as other premium rate schedule increases.
(b) The director may request a review by an
independent actuary or a professional actuarial body of the basis for a request
that an increase be considered an exceptional increase.
(c) The director, in determining that the
necessary basis for an exceptional increase exists, shall also determine any
potential offsets to higher claims costs.
(4) All premium rate schedule increases shall
be determined in accordance with the following requirements:
(a) Each exceptional increase shall provide
that 70 percent of the present value of projected additional premiums from the
exceptional increase will be returned to policyholders in benefits;
(b) Each premium rate schedule increase 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:
(A) The accumulated value of the initial
earned premium times 58 percent;
(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 58 percent; and
(D) 85 percent of the present value of future
projected premiums not in paragraph (C) of this subsection on an earned basis.
(c) In the event that a
policy form has both exceptional and other increases, the values in subsection
(b)(B) and (D) of this section will also include 70 percent for exceptional
rate increase amounts; and
(d) All
present and accumulated values used to determine rate increases shall use the
maximum valuation interest rate specified in ORS
733.310 for the valuation of
life insurance issued on the same date as the long-term care insurance. The
actuary shall disclose as part of the actuarial memorandum the use of any
appropriate averages.
(5) For each rate increase that is
implemented, the insurer shall file for review and approval by the director
updated projections, as defined in section (2)(c)(A) of this rule, annually for
the next three years and include a comparison of actual results to projected
values. The director may extend the period to greater than three years if
actual results are not consistent with projections values from prior
projections. For group insurance policies that meet the conditions in section
(12) of this rule, the projections required by this section shall be provided
to the policyholder in lieu of filing with the director.
(6) 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 section (2)(c)(A)
of this rule, shall be filed for review and approval by the director every five
years following the end of the required period in section (5) of this rule. For
group insurance policies that meet the conditions in section (12) of this rule,
the projections required by this section shall be provided to the policyholder
in lieu of filing with the director.
(7)
(a) If
the director has determined that the actual experience following a rate
increase does not adequately match the projected experience and that the
current projection under moderately adverse conditions demonstrates that
incurred claims will not exceed proportions of premiums specified in section
(4) of this rule, the director may require the insurer to implement any of the
following:
(A) Premium rate schedule
adjustments; or
(B) Other methods
to reduce the difference between the projected and actual experience.
(b) In determining
whether the actual experience adequately matches the projected experience,
consideration shall be given to section (2)(c)(E) of this rule, if applicable.
(8) 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) 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 increase, 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 section (9) of this rule;
and
(b) The original anticipated
lifetime loss ratio and the premium rate schedule increase that would have been
calculated according to section (4) of this rule had the greater of the
original anticipated lifetime loss ratio or 58 percent been used in the
calculations described in section (4)(a)(A) and (C) of this rule.
(9)
(a) 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 a significant adverse lapse 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.
(b) In the event significant adverse lapse
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:
(A) The director may require the insurer to
offer, without underwriting, to all in force insureds subjected 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.
(B) An offer under paragraph (A) of this
subsection shall:
(i) Be subject to the
approval of the director;
(ii) Be
based on actuarially sound principles, but not be based on attained age;
(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; and
(iv) Shall credit any unearned premium to the
new coverage.
(C) 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 ten percent.
(10) 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 section (9) of this rule, prohibit the insurer from doing
either of the following:
(a) Filing and
marketing comparable coverage for a period of up to five years; or
(b) Offering all other similar coverages and
limiting marketing of new applications to the products subject to recent
premium rate schedule increases.
(11) Sections (1) to (10) of this rule do not
apply to policies for which long-term care benefits provided by the policy are
incidental if the policy complies with all of the provisions of this section.
For the purpose of this section, "incidental" means that the value of the
long-term care benefits provided is less than ten percent of the total value of
the benefits provided over the life of the policy. These values shall be
measured as of the date of issue. The provisions are as follows:
(a) The interest credited internally to
determine cash value accumulations, including long-term care, if any, must be
guaranteed not to be less than the minimum guaranteed interest rate for cash
value accumulations without long-term care set forth in the policy.
(b) The portion of the policy that provides
insurance benefits other than long-term care coverage must meet the
nonforfeiture requirements for those benefits.
(c) The policy must meet the disclosure
requirements under OAR
836-052-0706 for long-term care
insurance policies.
(d) The
portion of the policy that provides insurance benefits other than long term
care coverage must meet the requirements as applicable for life and annuity
policies.
(e) An actuarial
memorandum that includes the following items must be filed with the director:
(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 must indicate whether
underwriting is used and, if used, the statement must 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.
(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.
(12)
Sections (6) and (8) of this rule do not apply to group insurance policies as
defined in ORS 743.652(3)(a)
when:
(a) The policies insure 250 or more
persons and the policyholder has 5,000 or more eligible employees of a single
employer; or
(b) 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.
Stat. Auth.: ORS
731.244
Stats. Implemented: ORS
742.005,
743.018,
743.650 &
743.652
