Current through Register Vol. 63, No. 9, September 1, 2024
(1)
This rule applies as follows:
(a) Except as
provided in section (1)(b) of this rule, this rule applies to any long-term
care policy or certificate issued in this state on or after January 1, 2016.
(b) For certificates issued on or
after January 1, 2016 under a group long-term care insurance policy as defined
in ORS 743.652(4),
which policy was in force at the time this amended rule became effective, the
provisions of this section shall apply on the policy anniversary following July
1, 2016.
(2) An insurer
shall obtain approval of a premium rate increase from the Director of the
Department of Consumer and Business Services 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)
(i) 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; and
(ii) The premium rate filing is in compliance
with the provisions of this rule; or
(B) The insurer may request a premium rate
schedule increase less than what is required under this rule and the director
may approve such premium rate schedule increase, without submission of the
certification in subsection (b) of this section, if the actuarial memorandum
discloses the premium rate schedule increase necessary to make the
certification required under subsection (b) of this section, the premium rate
schedule increase filing satisfies all other requirements of this section, 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 all of the
following:
(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; and
(iii) The projections shall demonstrate
compliance with section (3) of this rule; and
(B) For exceptional increases:
(i) The projected experience should 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 836-052-0676(3)(c)
that offsets may exist, the insurer shall use appropriate net projected
experience.
(C)
Disclosure of how reserves have been incorporated in this rate increase
whenever the rate increase will trigger contingent benefit upon lapse.
(D) 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.
(E) A statement that policy design,
underwriting and claims adjudication practices have been taken into
consideration.
(F) In the event
that it is necessary to maintain consistent premium rates for new certificates
and certificates receiving a rate increase, the insurer must file composite
rates reflecting projections of new certificates.
(G) 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)
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 the director to review and approve the premium rate
schedule increase.
(3)
All premium rate schedule increases shall be determined in accordance with all
of the following requirements:
(a)
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.
(b)
Premium rate schedule increases shall be calculated such that the sum of the
lesser of the accumulated value of actual 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)
Eighty-five 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) Eighty-five percent of the present value
of future projected premiums not in paragraph (C) of this subsection on an
earned basis.
(c)
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.
(d) If 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.
(e) 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 specified in
ORS 733.310. The actuary shall
disclose as part of the actuarial memorandum the use of any appropriate
averages.
(4) For each
rate increase that is implemented, the insurer shall file for 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 projected values from prior
projections. For group insurance policies that meet the conditions in section
(11) of this rule, the projections required by this section shall be provided
to the policyholder in lieu of filing with the director.
(5) 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 approval by the director every five years
following the end of the required period in section (4) of this rule. For group
insurance policies that meet the conditions in section (11) of this rule, the
projections required by this section shall be provided to the policyholder in
lieu of filing with the director.
(6)
(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 projections under moderately adverse conditions demonstrate that
incurred claims will not exceed proportions of premiums specified in section
(3) of this rule, the director 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.
(b) In determining
whether the actual experience adequately matches the projected experience,
consideration should be given to section (2)(c)(F) of this rule, if applicable.
(7) 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 section (8)
of this rule.
(8)
(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 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.
(b) 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
ten percent.
(9) 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 (8) of this rule, prohibit the insurer from 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.
(10) Sections (1) to (9) of this rule shall
not apply to policies for which the long-term care benefits provided by the
policy are incidental, as defined in OAR
836-052-0676(11),
if the policy complies with all of the following provisions:
(a) 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.
(b) 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) ORS
743.204 to
743.222; and
(B) ORS
743.275 to
743.295.
(c) The policy meets the disclosure
requirements of ORS 743.650 to
743.656.
(d) 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 OAR
836-051-0500 to
836-051-0600; and
(B) Disclosure requirements in OAR
836-051-0900 to
836-051-0925.
(e) An actuarial memorandum is
filed with the department that includes all of the following:
(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. For a group policy, the statement must
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.
(11)
Sections (6) and (8) of this rule shall not apply to group insurance policies
as defined in ORS 743.652(3) if:
(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: Sec. 9, Ch. 486, OL 2007 (Enrolled SB
191) ORS 744.088
