Current through Register Vol. 24-06, March 15, 2024
(1)
(a)
Except as provided in (b) of this subsection, this section applies to any
long-term care policy or certificate issued in this state on or after January
1, 2009.
(b) For certificates
issued on or after January 1, 2009, under a group long-term care insurance
policy as defined in
RCW
48.83.020(6)(a), which
policy was in force before January 1, 2009, the provisions of this section
apply on the first policy anniversary following January 1, 2009.
(2) The issuer must provide notice
of a pending premium rate schedule increase, including an exceptional increase,
to the commissioner at least thirty days prior to giving the notice to the
policyholders and must include:
(a)
Information required by WAC
284-83-035;
(b) Certification by a qualified actuary
that:
(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;
(ii) The
premium rate filing is in compliance with the provisions of this
section;
(c) An
actuarial memorandum justifying the rate schedule change request that includes:
(i) 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.
(A)
Annual values for the five years preceding and the three years following the
valuation date must be provided separately.
(B) The projections must include the
development of the lifetime loss ratio, unless the rate increase is an
exceptional increase.
(C) The
projections must demonstrate compliance with subsection (3) of this
section.
(D) 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 commissioner determines
that offsets may exist, the issuer must use appropriate net projected
experience;
(ii) Disclosure of how reserves have been
incorporated in this rate increase whenever the rate increase will trigger
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, and what other actions taken by the issuer have been
relied on by the actuary;
(iv) A
statement that policy design, underwriting and claims adjudication practices
have been taken into consideration; and
(v) Composite rates reflecting projections of
new certificates, if it is necessary to maintain consistent premium rates for
new certificates and certificates receiving a rate increase;
(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 commissioner; and
(e) Sufficient information for review of the
premium rate schedule increase by the commissioner.
(3) All premium rate schedule increases must
be determined in accordance with the following requirements:
(a) Exceptional increases must provide that
seventy 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 must be
calculated so 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 fifty-eight
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 fifty-eight percent;
and
(iv) Eighty-five percent of the
present value of future projected premiums not in (b)(iii) of this subsection
on an earned basis;
(c)
In the event that a policy form has both exceptional and other increases, the
values in (b)(ii) and (iv) of this subsection will also include seventy percent
for exceptional rate increase amounts; and
(d) All present and accumulated values used
to determine rate increases must use the maximum valuation interest rate for
policy reserves as specified in the accounting practices and procedures manuals
adopted by the National Association Of Insurance Commissioners, except as
otherwise provided by
RCW
48.05.073. The actuary must disclose as part
of the actuarial memorandum the use of any appropriate averages.
(4) For each rate increase that is
implemented, the issuer must file for review by the commissioner updated
projections, as defined in subsection (2)(c)(i) of this section, 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 set forth in subsection
(11) of this section, the projections required by this subsection may be
provided to the policyholder in lieu of filing with the commissioner.
(5) If any premium rate in the revised
premium rate schedule is greater than two hundred percent of the comparable
rate in the initial premium schedule, lifetime projections, as defined in
subsection (2)(c)(i) of this section, must be filed for review by the
commissioner every five years following the end of the required period in
subsection (4) of this section. For group insurance policies that meet the
conditions in subsection (11) of this section, the projections required by this
subsection may be provided to the policyholder in lieu of filing with the
commissioner.
(6)
(a) If the commissioner determines 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 (3) of this section, the commissioner may
require the issuer to implement either premium rate schedule adjustments or
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 subsection (2)(c)(v) of this section, as
applicable.
(c) For purposes of
this section:
(i) The term "adequately match
the projected experience" requires more than a comparison between actual and
projected incurred claims. Other assumptions should be taken into
consideration, including lapse rates (including mortality), interest rates,
margins for moderately adverse conditions, or any other assumptions used in the
pricing of the product.
(ii) It is
to be expected that the actual experience will not exactly match the issuer's
projections. During the period that projections are monitored, the commissioner
will determine whether there is an adequate match if the differences in earned
premiums and incurred claims are not in the same direction (both actual values
higher or lower than projections) or the difference as a percentage of the
projected is not of the same order.
(7) If the majority of the policies or
certificates to which the increase is applicable are eligible for the
contingent benefit upon lapse, the issuer must file:
(a) 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 subsection (8) of this
section; and
(b) The original
anticipated lifetime loss ratio, and the premium rate schedule increase that
would have been calculated according to subsection (8) of this section, had the
greater of the original anticipated lifetime loss ratio or fifty-eight percent
been used in the calculations described in subsection (3)(b)(i) and (iii) of
this section.
(8)
(a) For a rate increase filing that meets the
following criteria for all policies included in the filing, the commissioner
must review the projected lapse rates and past lapse rates during the twelve
months following each increase to determine if significant adverse lapsation
has occurred or is anticipated:
(i) The rate
increase is not the first rate increase requested for the specific policy form
or forms;
(ii) The rate increase is
not an exceptional increase; and
(iii) The majority of the policies or
certificates to which the increase is applicable are eligible for the
contingent benefit upon lapse.
(b) If 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 issuer 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 issuer to offer 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 issuer or its affiliates without
underwriting.
(i) The offer shall:
(A) Be subject to the approval of the
commissioner;
(B) Be based on
actuarially sound principles, but not be based on attained age; and
(C) Provide that maximum benefits under any
new policy accepted by the insured must be reduced by comparable benefits
already paid under the existing policy.
(ii) The issuer must 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 will be limited to the lesser
of:
(A) The maximum rate increase determined
based on the combined experience; and
(B) The maximum rate increase determined
based only on the experience of the insureds originally issued the form plus
ten percent.
(9) If the commissioner determines that the
issuer has exhibited a persistent practice of filing inadequate initial premium
rates for long-term care insurance, in addition to the provisions of subsection
(8) of this section, the commissioner may prohibit the issuer 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) Subsections (1) through (9) of this
section do not apply to policies for which the long-term care benefits provided
by the policy are incidental, as defined in WAC
284-83-010, 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:
(i)Chapter 48.76 RCW;
(ii)RCW 48.23.420 through 48.23.450;
and
(iii)RCW 48.18A.050;
(c) The policy meets the
disclosure requirements of
RCW
48.83.070(2) and
48.83.080;
(d) The portion of the
policy that provides insurance benefits other than long-term care coverage
meets the applicable requirements in the following:
(i) Policy illustrations as required by
chapter 48.23A RCW;
(ii) Disclosure
requirements in WAC
284-23-300 through
284-23-370; and
(iii) Disclosure requirements in RCW
48.18A.030;
(e) An
actuarial memorandum is filed with the insurance department that includes:
(i) A description of the basis on which the
long-term care rates were determined;
(ii) A description of the basis for the
reserves;
(iii) A summary of the
type of policy, benefits, renewability, general marketing method, and limits on
ages of issuance;
(iv) A
description and a table of each actuarial assumption used. For expenses, the
issuer must include percent of premium dollars per policy and dollars per unit
of benefits, if any;
(v) A
description and a table of the anticipated policy reserves and additional
reserves to be held in each future year for active lives;
(vi) The estimated average annual premium per
policy and the average issue age;
(vii) 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
must indicate whether the enrollee or any dependent will be underwritten and
when underwriting occurs; 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.
(11) Subsections (6) and (8) of this section
do not apply to group insurance policies as defined in
RCW
48.83.020(6)(a), if:
(a) The policies insure two hundred fifty or
more persons and the policyholder has five thousand or more eligible employees
of a single employer; or
(b) The
policyholder, and not the certificate holder, pays a material portion of the
premium, which must not be less than twenty percent of the total premium for
the group in the calendar year prior to the year a rate increase is
filed.
Statutory Authority:
RCW
48.02.060,
48.83.070,
48.83.110,
48.83.120,
48.83.130(1), and
48.83.140(4)(a).
08-24-019 (Matter No. R 2008-09), §
284-83-090, filed 11/24/08,
effective 12/25/08.