North Carolina has a regulation to protect long-term care policyholders from the large rate increases which have occurred on many of the earlier LTCi policies.
Long-term care insurance premiums used to be calculated according to the amount of claims the insurer projected to pay. When actual claims proved to be much higher than projected claims, the insurers were allowed to request (and they received) some very large premium increases.
To try to avoid large, long-term care insurance rate increases, and to promote more stable premiums over time, North Carolina has enacted one of the stricter LTC insurance regulations in the country.
This regulation requires that before any long-term care insurance policy can be sold to a resident of North Carolina, the insurance company must first provide the North Carolina Department of Insurance with certification from a qualified actuary that the policy is priced appropriately enough so that no future premium increases are anticipated.
A new long-term care insurance policy cannot be sold to a North Carolina resident unless the policy has this certification in place.
The actuary must certify that: “…the premium rate schedule is reasonably expected to be sustainable over the life of the (policy) form with no future premium increases anticipated.”
North Carolina’s regulation requires that a “cushion” be priced into the policies so that even if the actuarial assumptions are not met, a premium increase may still not be required. In other words, the actuaries must price into the policy a “margin of error”.
Before this regulation was enacted, Insurance Companies were not allowed to have a margin of error when they priced their policies. Because the insurance companies were not allowed to have a margin of error, the pricing on some earlier policies has proven to be inadequate which has led to the need for premium increases.
IMPORTANT: Not every long-term care policy is covered by this regulation.
Not every LTC policy is covered under this regulation. This regulation only protects those who purchased their long-term care policy in North Carolina after February 1st, 2003. Policies that were purchased before that date are not governed by this regulation.
How well has this regulation worked?
11 companies sell more than 90% of the long-term care insurance policies that are purchased today. 7 of those 11 companies have not had any premium increases on any of the policies they’ve sold in North Carolina since this regulation took effect on February 1st, 2003.
Those 7 companies are (alphabetically): Genworth, Lifesecure, Mass Mutual, New York Life, Northwestern Mutual, Thrivent and Transamerica.
The other 4 leading companies have each had just one rate increase on only a small portion of the policies they’ve sold in North Carolina since February 1st, 2003.
Bankers Life & Casualty had one premium increase ranging between 5% and 27.5% on the policy forms it released in November, 2003. All of the other LTCi policy forms Bankers Life & Casualty has issued in North Carolina since November, 2003 have not had any premium increases.
John Hancock had one premium increase of 39.1% on the two policy forms it released in July, 2003. All of the other LTCi policy forms John Hancock has issued in North Carolina since July, 2003 have not had any premium increases.
Medamerica had one premium increase of 7.5% on the policy forms it released in January, 2005. All of the other LTCi policy forms Medamerica has issued in North Carolina since January, 2005 have not had any premium increases.
Mutual of Omaha had one premium increase of 11% on the policy forms it released in November, 2004. And Mutual of Omaha had one premium increase of 14.3% on the policy forms it released in February, 2005. All of the other policy forms Mutual of Omaha has issued in North Carolina since February, 2005 have not had any premium increases.
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