Commissioner Scott Kipper, Chair, Senior Issues Task
Attention: Jane Sung, NAIC Health Policy Counsel
444 North Capitol Street NW,
Washington, DC 20001
Subject: Consumer Disclosure Documents and Long-Term Care Insurance Premium Increases
Dear Commissioner Kipper:
The Senior Issues Task Force will be discussing recommendations of the former NAIC EX Committee on Long-Term Care Insurance at the Spring meeting in New Orleans. The EX Committee had begun work on the issue of disclosure documents that would help consumers understand how to deal with premium increases in their long-term care insurance. Their work on these increases and disclosure documents had not been completed when the EX Committee was dissolved, and that work has now returned to the Senior Issues Task Force.
California Health Advocates has for many years expressed concern about the impact of rate increases on older policyholders, worked to ensure that options were available to mitigate the effect of these rate increases, and advocated for strong regulatory standards to ensure that future premium increases would not be necessary except in extraordinary circumstances. And yet, many companies have imposed large increases of 40% or more in recent years, including those that had been approved under more stringent rate stability standards adopted in the Model Regulation in 2000 and by many states.
We are concerned that the recommendations made by the EX Committee did not address other issues that should be part of any notices policyholders receive about a premium increase. Such a notice should include the total premium amount that has already been paid and clearly describe multiple increases if they will occur over more than one year.
In addition, it is critical that notices about a premium increase include specific information about any alternatives available to a policyholder under state law that might mitigate such an increase. For instance, Section 27 of the Model Regulation allows an insured individual to reduce their benefits in return for a lower premium that is calculated on their age when they purchased their coverage. Section 28 allows for Contingent Benefit on Lapse, a paid-up benefit equal to premiums paid, depending on the age of the policyholder and the cumulative percentage increase of their premium. Some states may have additional alternatives; companies may offer other alternatives as well.
Any notice about a premium increase should also include information about where a policyholder can get help understanding their options, and information about the effect of each choice they might have to reduce or mitigate the effect of a premium increase. One source would be the state insurance department and another would be the state’s SHIP.
We believe close attention must be paid to how these notices will be drafted, and suggest that the SITF solicit the help of Professor Brenda Cude, another NAIC consumer representative, to help with verbatim language that should be required in a disclosure document of this type. We think it is critical for policyholders to clearly understand a notice about a premium increase, and what if anything they can do to minimize the effect on their personal finances. We would also encourage the Task Force to consider once again exempting policyholders beyond a certain age from rate increases, which some companies have done voluntarily.
Consumer group representatives urge the Task Force to fully explore all these issues before finalizing the work on such an important disclosure notice.
Bonnie Burns, California Health Advocates
Birny Birnbaum, the Center for Economic Justice
Andrea Routh, NAIC Consumer Representative
Adam Linker, NAIC Consumer Representative
Elizabeth Abbot, NAIC Consumer Representative
Timothy Jost, NAIC Consumer Representative
Barbara Yondorf, NAIC Consumer Representative
Brenda Cude, NAIC Consumer Representative