CHA Comments on Reduced Benefit Options for LTC Insurance Rate Increases

CHA Comments on Reduced Benefit Options for LTC Insurance Rate Increases

Bonnie Burns of California Health Advocates submitted this letter to the National Association of Insurance Commissioners (NAIC) Chair and their Long Term Care Insurance Task Force. Burns comments on the critical importance of policyholders knowing and understanding their rights and reduced benefit options when facing rate increases to their long term care insurance policies.

Read the comments below for more information.


July 28, 2020




Commissioner Altman, Chair
NAIC Workstream #3
Long-Term Care Insurance (EX) Task Force


California Health Advocates Comments on Workgroup Principals


We appreciate the opportunity to comment on this important topic and appreciate the principals laid out for the work stream. We view modification of existing long term care insurance contracts to be a very important topic with serious implications for policyholders. It is critical that policyholders have a clear understanding of any options they are offered and the long term consequences of any changes they might make to their existing benefits or contracts.


Our experience with a variety of options insurers have offered as part of a premium increase informs our comments on this topic. Many of these notices were multi-page notices informing policyholders of a premium increase that also offered complex options to reduce the effect of those increases.


  • Some insurers offered a limited number of choices, while others offered a wide range of options that included a resulting premium for each choice.
  • Some insurers offered a few options encouraging policyholders to call for information about others and the resulting reduction in premium.
  • Some described options in detail, others provide little information.


There are no clear requirements for what options can be offered, how they are described, what information must be included, or how or in what format that information is presented to policyholders. In some instances these notices seemed to be drafted to give one option more prominence than another. Several agents complained to us that these notices were intended to promote lapses, or a shortened benefit period without further premium payments. All of these issues points to a need for a common form and format and instruction on content for these notices.


Our primary concern for policyholders is that long standing coverage be preserved and that the options they select to reduce cost maintain reasonable amounts and duration of coverage. Most policyholders that came to our organization or the local SHIPs were confused about the information they received and worried about losing coverage or making the wrong choice. Some considered just giving up their coverage.


Some clients needed to combine options to achieve a reasonable premium going forward, and leave room to exercise additional options if later premium increases occurred. Having individual help to sort through their options and financial circumstances resulted in retention of meaningful coverage at a price a policyholder was able to pay.


One issue that had to be considered time and again was to ensure that a policyholder didn’t reduce their daily benefit amount so low that they had no room for further reduction in the event of subsequent premium increases. Clients had little understanding or appreciation for which benefit option had more importance than another if further premium increases occurred that required additional decisions about coverage.


We are concerned that one reduced benefit option (RBO) in particular may be promoted over other options that might be available. Each one of these options can apply differently to a policyholder depending on their own unique situation. These include their current age, their health conditions and near term need for benefits, their financial condition, their current marital status, potential caregivers, and their ability to receive benefits at home or their need for institutional care. These are all factors to be considered in making changes to their existing benefits and their ongoing ability to finance those benefits.


In regard to inflation protection in particular, all of the factors cited about apply to decisions about eliminating that benefit, reducing it, or retaining the current benefit. Some insurers have offered to drop it entirely but had no option to reduce it. We think every insurer should offer the option to reduce inflation protection to a lower percentage for those policyholders who could benefit from retention of some amount of inflation protection. In other cases, particularly when a policyholder is of an advanced age it might not make sense to retain any inflation protection and instead rely on the current already inflated amount. In no circumstances should insurers be allowed to claw back current inflated benefits if inflation protection is modified or dropped.


Attached is a document we drafted for the SHIP programs and is in use in the California SHIP (HICAP). In that document we attempt to explain each option we’ve seen to help SHIP counselors understand the function of each option. We also point out that one or more of these options might have more value to one policyholder than another, depending on their particular financial situation, their age, and how close they might be to using their benefits. Policyholders deserve the right to tailor their coverage to their current situation and they need clear, concise plain language information about each option they are offered.


Thank you for the opportunity to comment on this important work.



Bonnie Burns
NAIC Consumer Representative
Training and Policy Specialist
California Health Advocates

Karen Fletcher
Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.