Insurance Commissioner Dave Jones Announces Legislature Passes Major Long-term Care Insurance Reform

[Crabcake Johnny]

INSURANCE COMMISSIONER DAVE JONES ANNOUNCES LEGISLATURE PASSES MAJOR LONG-TERM CARE INSURANCE REFORM BILL
Commissioner Urges Governor to Sign AB 999 into Law


Insurance Commissioner Dave Jones today announced that the California State Legislature has passed AB 999, authored by Assembly Aging and Long-Term Care Committee Chair Mariko Yamada (D-Davis). The bill, sponsored by Commissioner Jones and the California Department of Insurance, protects consumers from excessive premium rate volatility by modifying the long-term care insurance (LTC) premium rate development process. The measure also allows consumers to make more informed decisions about buying a policy by giving them the chance to review language before purchasing one.

“The rising cost of long-term care insurance is one of the most pressing issues facing senior consumers today,” said Commissioner Jones. “What’s most disturbing is the size of long-term care rate increases. They threaten the ability of many seniors, especially those on fixed incomes, to maintain or purchase long-term care insurance. AB 999 provides for additional transparency and protections related to long-term care insurance rate increases. I want to thank Assembly Member Mariko Yamada for her leadership in carrying this legislation.”

“AB 999 brings needed transparency to the long-term care insurance market and strengthens the Insurance Commissioner’s authority to protect consumers from the excessive premium rate hikes that have long plagued the industry,” said Assembly Member Yamada. “On behalf of thousands of current policyholders, and millions of California’s “seniors-in-waiting”, I applaud Insurance Commissioner Dave Jones for sponsoring this legislation.”

Long-term care insurance was first sold in California in the early 1980’s. Since it was a new product, insurers had no historical experience upon which to rely when setting initial premium rates. As a result, pricing of LTC policies was often based upon what were later found to be inaccurate assumptions. As insurers gained more experience in the market, premium rates increase to compensate for those initial inaccuracies.

In 2000, the Legislature passed SB 898 to stabilize what became escalating rates. However, the rate stabilization features passed years before are not completely restoring predictability as intended to the long-term care insurance market today. Among other things, AB 999 would prevent insurers from passing poor investment returns through to taxpayers and eliminate the practice of insurers “cherry-picking” a small group of policies to justify large rate increases, among other strong consumer protections.

“I urge Governor Jerry Brown to sign this necessary legislation aimed at protecting California’s seniors,” said Commissioner Jones.

 

[supersupps]

There has never been a better comm than Dave Jones... he is like a god.. no one will ever exceed his intellect

 

[Guest]

There has never been a better comm than Dave Jones... he is like a god.. no one will ever exceed his intellect

So you are suggesting (or saying?) that his office should have ignored the entire issue?

Mr. Jones was ELECTED by the people of California to work FOR the people of California and not be bought and paid for by the carriers, NAIFA, NAHU, or the large agent IM/FMOs.

And people wonder why they make agents take a course in ethics?

 

[csalter]

As a consumer on this board and not an agent, I can tell you that I am proud of this new legislation. I had mentioned a little while back, how I noticed that California seemed to pay more attention to the rate increases on long term care compared to most other states. This solidifies my initial impressions. I don't know how this will impact you as agents if at all, but I am feeling really good for people on a fixed income having a policy that will not see 40 and 50 percent increases that they cannot afford after paying years into the policy.

This is one of the few times lately that one can say that they are proud to be in California.

 

[Arthur Rudnick]

I have mixed feelings on this Bill, and possibly others to follow.

It is the job of each state's DOI to look out for the best interests of their consumers. Yes, no one likes rate increases on LTCi, nor any other insurance products.

Rates on insurance policies are set by the carriers and approved by the state.

Rates are set to provide the carriers with enough in Reserves to pay future claims. Over the years, various factors cause those projected Reserves to be less than required. In fact, it's the states that set the Reserve percentages that a carrier must maintain. If Reserves are not adequate then the company requests a rate increase. It is up to the DOI to either approve, deny or modify the requested increase.

But here's the problem:
If a carrier has a legitimate concern with their Reserves on a particular block of business and is denied a rate increase, at the end of the day, the carrier has a potential problem down the road.

What determines whether a rate increase in excessive or not? If the state requires that 65% of all premium dollars should be put aside for Reserves, and a carrier needs a 30% rate increase to maintain that amount, is that excessive?

If a particular state announces it's going to take a tough stance on rate increases, carriers will stop doing business in that state, leaving the consumer with less options when looking for a policy.

On the other hand, one would think that after almost 40 years of selling this product the actuaries would finally get it right. And, in spite of the LTC Model Act of 2002 (I think) rates continue to increase.

How do we end this continuous rate increase spiral?
I'm not sure, but here's what I think:

Just about every LTCi carrier today are large financial institutions. They are all public companies. (I may be wrong, but I believe that the only exception is MedAmerica, who's only product is LTCi).

If a carrier calls it wrong and loses money on a block of business and must pump more dollars into that block in order to maintain the mandated Reserve amount, let them make up that shortage from their profits and/or their assets of their other businesses. A policyholder should not be burdened with additional costs just because the insurance company doesn't know how to price their product properly. This way, the company and their shareholders are responsible, not the policyholder.

That's the way it works in every other business, why not insurance?

 

[csalter]

Arthur, I understand the dilemma. However, from a regular guy's point of view, big businesses like to pass on all costs to the consumer. It was not nice to find out that when we went through the horricble financial crisis that the execs were acceptng stimulus money for their businesses but they were still receiving millions of dollars in pay and bonuses. I am sorry but the priorities are not ranked appropriately. The average consumer should not experience all of the pain and if millions of dollars can still be provided to top executives then there is no need to continually increase premiums the way they do.

 

[Arthur Rudnick]

previously posted by csalter

Arthur, I understand the dilemma. However, from a regular guy's point of view, big businesses like to pass on all costs to the consumer. It was not nice to find out that when we went through the horricble financial crisis that the execs
were acceptng stimulus money for their businesses but they were still receiving millions of dollars in pay and bonuses. I am sorry but the priorities are not ranked appropriately. The average consumer should not experience all of the pain
and if millions of dollars can still be provided to top executives then there is no need to continually increase premiums the way they do.

I hear you, but this thread is about CA and rate increases.

Executive pay is a conversation for another day.

 

[Justin Bilyj]

Correct me if I am wrong, North Western Mutual isn't a public company and offers ltci. The recruiter told me they are the only ones who have't raised their rates on ltci (maybe because it was too expensive in the first place...

 

[jacobtn]

I am an agent, and I believe this bill is bad for both agents and consumers. There is a guarantee issue health ins policy that the state of tn mandates there cannot be anyone refused on here if they are coming off group coverage, or COBRA. Guess what, companies costs are so high insuring these sick folks that they charge over 1000 bucks a month for 1 person, and oh by the way pay agents no commission.

So the bill was so supposed to help the consumer, but no one can afford to buy the plan, and us agents are screwed out of any compensation. Yeah the government solves ins problems well don't they?

Arthur, I understand the dilemma. However, from a regular guy's point of view, big businesses like to pass on all costs to the consumer. It was not nice to find out that when we went through the horricble financial crisis that the execs were acceptng stimulus money for their businesses but they were still receiving millions of dollars in pay and bonuses. I am sorry but the priorities are not ranked appropriately. The average consumer should not experience all of the pain and if millions of dollars can still be provided to top executives then there is no need to continually increase premiums the way they do.

 

[csalter]

Well the topic is rate increases in California. This is all interrelated. Executives get their bonuses and salaries from the administrative fees from insurers and that cannot be dismissed.

I am not sure of the solution, but I will say this. A lot has to do with everyone trying to make their products sales look good to their investors. Their seems to always have to be a spike in sales and revenue to seem as if business is doing well. At some point it really has to level off. This pressure is killing the American public even on necessary items such as healthcare. I am not a big fan of Obama's financial policies, but I can see how the disproportionate distribution of wealth in our country needs to be addressed. The government may not be able to solve the problem, but at least they will make an attempt. The rates for ltci would only continue to rise if left to the insurance companies and they would then be able to exceed their numbers of lapsed policies because the average senior would not be able to afford the policies in time. I would like to see an attempt at change than none at all. The other thing that I have noticed when it comes to this forum has been once one company makes changes to either reduce benefits or increase rates, the others (for the most part) follow shortly. Again, the average consumer has no choice.