| (a) Loss ratio standards. Except as noted in subsections (b) and (c) of this section, this subsection shall apply to all long-term care insurance policies and certificates. (1) Benefits provided under long-term care insurance policies and certificates shall be deemed reasonable in relation to premiums charged if the expected loss ratio is at least 60%, calculated in a manner which provides for adequate reserving of the long-term care insurance risk. In evaluating the expected loss ratio, due consideration shall be given to all relevant factors, including: (A) statistical credibility of incurred claims experience and earned premiums; (B) the period for which rates are computed to provide coverage; (C) experienced and projected trends; (D) concentration of experience within early policy duration; (E) expected claim fluctuation; (F) experience refunds, adjustments, or dividends; (G) renewability features; (H) all appropriate expense factors; (I) interest; (J) experimental nature of the coverage; (K) policy reserves; (L) mix of business by risk classification; and (M) product features such as long elimination periods, high deductibles, and high maximum limits. (2) Prior to the use of any long-term care policy or certificate form in this state, every insurer shall submit to the commissioner an actuarial memorandum for each such policy which includes claim experience data and assumptions made thereon to sufficiently explain how the rates for such policy form are calculated. The actuarial memorandum submitted shall at least provide information which includes premium rate tables and/or schedules for each risk class and any fees, assessments, dues, or other considerations that will be included in the premium. (b) Initial premium rate filing. (1) Sixty days prior to the use of any long-term care policy or certificate to be issued in this state on or after July 1, 2002, an insurer shall submit the following information to the department: (A) a copy of the disclosure form required by §3.3829(b) of this subchapter (relating to Required Disclosures); (B) an actuarial memorandum or certification which includes at least the following: (i) a statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated; (ii) a statement that the policy design and coverage provided have been reviewed and taken into consideration; (iii) a statement that the underwriting and claims adjudication processes have been reviewed and taken into consideration; (iv) a complete description of the basis for contract reserves that are anticipated to be held under the form, to include: (I) sufficient detail or sample calculations provided so as to have a complete depiction of the reserve amounts to be held; (II) a statement that the assumptions used for reserves contain reasonable margins for adverse experience; (III) a statement that the net valuation premium for renewal years does not increase (except for attained-age rating where permitted); and (IV) a statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses; or, if such a statement cannot be made, a complete description of the situations where this does not occur. The description may include a demonstration of the type and level of change in the reserve assumptions that would be necessary for the difference to be sufficient; (-a-) an aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship; (-b-) if the gross premiums for certain age groups appear to be inconsistent with this requirement, the department may request a demonstration under paragraph (2) of this subsection based on a standard age distribution; and (v) either a statement or comparison as follows: (I) a statement that the premium rate schedule is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefits; or (II) comparison of the premium schedules for similar policy forms that are currently available from the insurer with an explanation of the differences. An insurer will not be required to provide a comparison of every age and set of benefits, period of payment or elimination period; instead, a broad range of expected combinations designed to provide a fair presentation is to be provided. (2) The department may request, and the insurer shall provide, at any time, an actuarial demonstration that benefits are reasonable in relation to premiums. If requested: (A) the actuarial demonstration shall include either premium and claim experience on similar policy forms, adjusted for any premium or benefit differences, relevant and credible data from other studies, or both; and (B) the period in subsection (b)(1) of this section does not include the period during which the insurer is preparing the requested information. (c) Premium rate schedule increases. This subsection applies to premium rate increases for any long-term care policy or certificate delivered or issued for delivery in this state on or after July 1, 2002, except for certificates under a group long-term care insurance policy issued to one or more employers or labor organizations, or to a trust or to the trustees of a fund established by one or more employers or labor organizations, or a combination thereof, for employees or former employees or a combination thereof or for members or former members or a combination thereof, of the labor organizations, which was in force on July 1, 2002, the provisions of this section shall apply on the policy anniversary following January 1, 2003. (1) Exceptional premium rate increases. (A) Exceptional premium rate increases are subject to the requirements of paragraph (2) of this subsection in addition to subparagraphs (B) and (C) of this paragraph. (B) The department may request a review by an independent qualified actuary or a professional actuarial entity of the basis for a request that an increase be considered an exceptional premium rate increase. (C) The department, in determining that the necessary basis for an exceptional premium rate increase exists, shall determine any potential offsets to higher claims costs. (2) All premium rate schedule increases. (A) An insurer shall submit a pending premium rate schedule increase, including an exceptional premium rate increase, to the department not later than the 60th day preceding the date of the notice to the policyholders, and shall include: (i) information required by §3.3829(b) of this subchapter; (ii) certification by a qualified actuary that: (I) no further premium rate schedule increases are anticipated if the requested premium rate schedule increase is implemented and the underlying assumptions, which reflect moderately adverse conditions, are realized; (II) the premium rate filing is in compliance with the provisions of this section; (iii) an actuarial memorandum justifying the rate schedule increase 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, subject to the following: (-a-) annual values for the five years preceding and the three years following the valuation date shall be provided separately; (-b-) the projections shall include the development of the lifetime loss ratio, unless the rate increase is an exceptional increase; (-c-) the projections shall demonstrate compliance with subparagraph (B) of this paragraph; and (-d-) for exceptional premium rate increases: (-1-) the projected experience shall be limited to the increases in claims expenses attributable to the approved reasons for the exceptional premium rate increase; and (-2-) in the event the department determines, as provided in paragraph (1)(C) of this subsection that offsets may exist, the insurer shall 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; Cont'd... |
