RE: Long Term Care Insurance Rate Increase Hearing October 27, 2016

Dear Commissioner Redmer:

I am submitting these comments for the hearing record regarding the premium increase hearing on October 27th in the event I am unable to comment by phone about the requested rate increases on that date. As you know, I have been a long time participant in the National Association of Insurance Commissioner’s (NAIC) consumer participation program, and I frequently testify and comment on behalf of consumers during the proceedings of the NAIC Senior Issue Task Force (SITF) and other NAIC Committees and subgroups.

Rate increases in long term care insurance have been an ongoing topic of concern for the NAIC members, and specifically for the SITF, as members have struggled for decades to regulate the pricing of long term care insurance and prevent large, unexpected rate increases. Since the 1990’s and at least 3 regulatory attempts by the NAIC to limit these increases, this now seems to be a failed regulatory task.

The large ongoing rate increases being requested in Maryland and other states and the continuing inability of state regulators to protect their consumers, regardless of the regulatory controls that states establish, are obvious. Regardless of how pricing is regulated, companies continue to demand these rate increases leaving behind anguished policyholders struggling to pay those increased premiums. The pain inflicted on Maryland policyholders is evident in the testimony already submitted for this hearing by the very people who will be paying those increased costs. Policyholders who have spoken out in their testimony represent hundreds, maybe thousands more policyholders unaware of the hearing, unable to participate, or simply assuming that their protest is useless.

These policyholders have a series of untenable choices. Faced with paying steadily increasing premiums late in life robs people of resources for other needs, and pushes some people into dropping coverage, some of whom may later require help from the state’s Medicaid program.

Some may have previously downgraded their benefits to reduce a rate increase, and now have little room for further downgrades, making retention of their policy impossible.

I am not certain which NAIC consumer protections Maryland has adopted, or the extent of your regulatory authority, but here are some suggestions for mitigating the effect of these ongoing rate increases on consumers.

• No amount of a rate increase should be applied to any of the company’s administrative costs
• No amount of a rate increase should be applied to any agent compensation
• Any rate increase of 20% or more during the lifetime of the policy form should require offsetting reductions in company expenses
• Any cumulative rate increase of 50% during the lifetime of the policy form should require the company to pool all of their existing long term care policy forms issued, bought, or assumed by the company to calculate the amount of a rate increase
• Any cumulative rate increase greater that 50% during the life of the policy form should not be granted, except when company solvency is in question

A rate increase notice should allow 90 days of consideration by the policyholder and a referral in writing for face-to-face counseling with the Maryland State Health Insurance Program (SHIP) to ensure that policyholders have all the information they need to make an informed decision about their benefits, options, and any benefit reductions.

• Policyholders who have previously downgraded their daily benefit amount to an amount less than 70% of the current cost of nursing home care, and reduced their duration of coverage to 2 years should be exempt from any further rate increases
• Policyholders age 70 or older who’ve had their policy for at least 10 years should be exempt from any rate increases
• Policyholders age 80 or older should be exempt from any rate increases, regardless of the duration of their coverage
• Policyholders who have had their policies for 10 or more years should have the option of choosing a paid-up benefits equal to the premiums they’ve previously paid
  • The amount of benefits subsequently paid under their paid-up policy should qualify as protected assets under the state Medicaid program
• Any policyholder who reduces or drops their inflation protection should be entitled to retain the current amount of their inflated daily benefit amount and lifetime benefit amount
  • The amount of benefits subsequently paid under their paid-up policy should qualify as protected assets under the state Medicaid program

I am well aware that some of my suggestions are extreme, and some would require a change in state law or regulations. But after three decades of helping policyholders hang on to coverage through numerous rate increases I believe companies should bear the burden of decisions they’ve made about the products they’ve sold, not policyholders.

The burden of mistaken assumptions and experience should not be borne by consumers who placed their trust in the industry by buying this coverage. Consumers have no expertise to verify assumptions made by actuaries that result in the premium they’ve agreed to pay. Policyholders don’t participate in the profitability of an insurance product, except to the extent that they rely on the benefits they’ve been sold. And policyholders certainly wouldn’t participate in any excess profit a company made based on their previous assumptions.

Policyholders have done what the federal and state governments asked, and the industry has promoted, by taking responsibility to pay for their own care. They should not now be faced with losing both the premiums they’ve invested in that promise and the benefits they bought.

Thank you for the opportunity to comment on the subject of your hearing. I hope you’re able to mitigate some of the effects of these rate increases on the policyholders in your state.

Sincerely,

Bonnie Burns, Consultant