Materials - Long-Term Care Actuarial (B) Working Group · Date: 3/6/19 . 2019 Spring National Meeting . Orlando, Florida . LONG-TERM CARE ACTUARIAL (B) WORKING GROUP . Friday, April

© 2019 National Association of Insurance Commissioners 1

Date: 3/6/19

2019 Spring National Meeting Orlando, Florida

LONG-TERM CARE ACTUARIAL (B) WORKING GROUP

Friday, April 5, 2019 1:00 – 3:00 p.m.

JW Marriott Orlando—Coquina Ballroom South—Lobby Level

ROLL CALL

Perry Kupferman, Chair California Steven Ostlund Alabama Paul Lombardo Connecticut Craig Wright Florida Weston Trexler Idaho Nicole Boyd Kansas Marti Hooper Maine Kristi Bohn Minnesota Rhonda Ahrens Nebraska Anna Krylova New Mexico Bill Carmello New York Laura Miller Ohio Andrew Schallhorn Oklahoma Tracie Gray Pennsylvania Andrew Dvorine South Carolina Mike Boerner Texas Tomasz Serbinowski Utah NAIC Staff Support: Eric King

AGENDA 1:00 – 1:05 p.m. 1. Call to Order/Roll Call—Perry Kupferman (CA) 1:05 – 1:10 p.m. 2. Consider Adoption of its 2018 Fall National Meeting Minutes—Perry Kupferman (CA) 1:10 – 1:40 p.m. 3. Hear an Update from the American Academy of Actuaries (Academy) on Long-Term Care Insurance (LTCI) Working Group Activities—Academy 1:40 – 2:30 p.m. 4. Consider Adoption of the Long-Term Care Pricing (B) Subgroup Report—Paul Lombardo (CT) 2:30 – 2:45 p.m. 5. Consider Adoption of the Long-Term Care Valuation (B) Subgroup Report —Fred Andersen (MN) 2:45 – 3:00 p.m. 6. Discuss Any Other Matters Brought Before the Working Group—Perry Kupferman (CA) 7. Adjournment W:\National Meetings\2019\Spring\Agenda\LTCAWG.docx

Draft Pending Adoption Attachment Four

Health Actuarial (B) Task Force 11/14/18


Draft: 11/26/18

Long-Term Care Actuarial (B) Working Group San Francisco, California

November 14, 2018 The Long-Term Care Actuarial (B) Working Group of the Health Actuarial (B) Task Force met in San Francisco, CA, Nov. 14, 2018. The following Working Group members participated: Perry Kupferman, Chair (CA); Steve Ostlund (AL); Paul Lombardo (CT); Craig Wright (FL); Weston Trexler (ID); Nicole Boyd (KS); Marti Hooper (ME); Fred Andersen (MN); Rhonda Ahrens (NE); Anna Krylova (NM); Laura Miller (OH); Andrew Schallhorn (OK); Joe Cregan (SC); Raja Malkani (TX); and Tomasz Serbinowski (UT). 1. Adopted its Oct. 2, Sept. 25, Sept. 18 and Summer National Meeting Minutes Ms. Miller made a motion, seconded by Mr. Serbinowski, to adopt the Working Group’s Oct. 2 (Attachment Four-A), Sept. 25 (Attachment Four-B), Sept. 18 (Attachment Four-C), and Aug. 3 (see NAIC Proceedings – Summer 2018, Health Actuarial (B) Task Force, Attachment Four) minutes. The motion passed unanimously.

2. Heard an Update from the Academy on LTCI Work Group Activities Warren Jones (PricewaterhouseCoopers LLP) gave an update (Attachment Four-D) on recent activities of the American Academy of Actuaries’ (Academy) Long-Term Care Valuation Work Group regarding long-term care insurance (LTCI). Dave Plumb (John Hancock Life Insurance Company) gave a summary of the Academy’s Issue Brief, Long-Term Care Insurance: Considerations for Treatment of Past Losses in Rate Increase Requests (Attachment Four-E). 3. Adopted the Report of the Long-Term Care Pricing (B) Subgroup Mr. Lombardo said, since the Summer National Meeting, the Long-Term Care Pricing (B) Subgroup met via conference call Oct. 4, Sept. 27, Sept. 20 and Aug. 30. He said the calls focused on the development of a resource document that explains and compares different LTCI rate increase review methodologies. He said the document was developed to assist the Long-Term Care Insurance (B/E) Task Force with its charge to increase the transparency and predictability of LTCI rate increase reviews for insurers, consumers and state insurance regulators. He said the draft resource document was adopted by the Subgroup on its Oct. 4 conference call. Mr. Lombardo said the Subgroup plans to resume conference calls after the Fall National Meeting to continue discussion of issues related to rate increases on small remaining blocks of LTCI policies, and to address any pricing issues that may be identified by the Long-Term Care Insurance (B/E) Task Force, the Health Actuarial (B) Task Force or the Long-Term Care (B) Actuarial Working Group. Mr. Lombardo said Ms. Ahrens will present a concept for a multistate LTCI rate increase review process during one of the conference calls. He said he wants to gain a better understanding of each state’s LTCI rate review process and any constraints associated with the processes, and the Subgroup will conduct a survey of the states to accomplish this. He said the Subgroup will discuss rate increase review processes on employer group LTCI policies, and how the states review the computation of the actuarial value of landing spots offered by insurers to policyholders to mitigate the effects of LTCI rate increases. Mr. Malkani gave a summary of the LTCI rate increase review methodologies resource document. Mr. Lombardo made a motion, seconded by Mr. Wright, to adopt the report of the Long-Term Care Pricing (B) Subgroup, including its Oct. 4 (Attachment Four-F), Sept. 27 (Attachment Four-G), Sept. 20 (Attachment Four-H) and Aug. 30 (Attachment Four-I) minutes. The motion passed unanimously.

Draft Pending Adoption Attachment Four

Health Actuarial (B) Task Force 11/14/18


4. Adopted an LTCI Rate Increase Review Methodologies Resource Document Mr. Lombardo made a motion, seconded by Mr. Wright, to adopt the LTCI rate increase review methodologies resource document presented by Mr. Malkani (Attachment Four-J). The motion passed unanimously. Mr. Kupferman said the document will be posted to the “Related Documents” tab of the Working Group’s NAIC web page 5. Adopted the Report of the Long-Term Care Valuation (B) Subgroup Mr. Andersen said the Health Actuarial (B) Task Force’s 2019 proposed charges were modified to remove charge B: “Study the minimum standards applicable to statutory reserves for LTCI. Ensure the Health Insurance Reserves Model Regulation (#10) remains open to accommodate any necessary changes to the standards. Enhance a principle-based framework for a set of minimum standards.” He said the Subgroup and the Long-Term Care Actuarial (B) Working Group determined the charge has been completed with the adoption and implementation of Actuarial Guideline LI—The Application of Asset Adequacy Testing to Long-Term Care Insurance Reserves (AG 51). Mr. Andersen said the Subgroup will revisit the reserving issue after a study on reserving methodology and experience is developed by the Academy and the Society of Actuaries (SOA). He said any results of further investigation of reserving will likely involve changes to VM-25, Health Insurance Reserves Minimum Reserve Requirements, of the Valuation Manual instead of Model #10 if it is imbedded in VM-25. He said a model law request to modify Model #10 will no longer be needed, and any reserve standard changes can be implemented through the Valuation Manual. Mr. Andersen said the Subgroup developed guidance for year-end 2018 AG 51 filings. He said the guidance document has been posted to the “Related Documents” tab of the Subgroup’s NAIC web page. Mr. Andersen said morbidity as it relates to LTCI comprises both claim incidence and claim continuance. He said, in the context of “morbidity improvement” as discussed by the Subgroup and the Working Group, only reductions in claim incidence are being considered. Mr. Andersen made a motion, seconded by Mr. Malkani, to adopt the report of the Long-Term Care Valuation (B) Subgroup, including its Oct. 12 minutes (Attachment Four-K). The motion passed unanimously. 6. Heard an Update from the SOA on LTCI Morbidity Improvement Research Dale Hall (SOA) and Matt Morton (LTCG) presented an update (Attachment Four-L) on LTCI morbidity improvement research. Having no further business, the Long-Term Care Actuarial (B) Working Group adjourned. W:\National Meetings\2018\Fall\TF\HA\LTCAWG 11-14-18.docx .

Attachment Health Actuarial (B) Task Force

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Draft: 3/12/19

Long-Term Care Pricing (B) Subgroup Conference Call

February 14, 2019 The Long-Term Care Pricing (B) Subgroup of the Long-Term Care Actuarial (B) Working Group of the Health Actuarial (B) Task Force met via conference call Feb. 14, 2019. The following Subgroup members participated: Paul Lombardo, Chair (CT); Steven Ostlund (AL); Perry Kupferman (CA); Benjamin Ben (FL); Weston Trexler (ID); Marti Hooper (ME); Fred Andersen (MN); William Leung (MO); David Yetter (NC); Rhonda Ahrens (NE); David Sky (NH); Anna Krylova (NM); William Carmello (NY); Lilane Fox (OH); Andrew Dvorine (SC); Raja Malkani (TX); Tomasz Serbinowski (UT); and Timothy Sigman (WV). 1. Discussed All-State LTCI Rate Review Survey Mr. Lombardo said the Subgroup is conducting a survey of the states for information on their long-term care insurance (LTCI) rate review processes. He said survey responses were due Jan. 31. He said 28 states have responded, and he is compiling a summary of the responses. He said a follow-up request to those states that had not responded by the Jan. 31 deadline asking for the reason the state has not responded will be sent soon. 2. Discussed Potential Cross-State Policyholder Subsidization Mr. Lombardo said the Subgroup will discuss the potential subsidization of rate increase amounts for policyholders in the states with lower rate increases by policyholders in the states with higher rate increases. He asked Subgroup members, interested regulators and interested parties to state their concerns related to rate subsidization and offer possible solutions. He said he has reviewed rate increase filings in Connecticut, and he observed that carriers show nationwide earned premium using the rates approved only in Connecticut as the basis. However, he said the incurred claims submitted are on a nationwide basis. He said he has asked carriers that submitted such premium figures to resubmit the filing using actual nationwide premium received. Ms. Ahrens said Nebraska asks for incurred claims on a nationwide basis, due to Nebraska claims experience not being fully credible, and earned premium on a Nebraska-only basis. Mr. Lombardo said Connecticut does not ask for claims projections using Connecticut-only morbidity, and he asked if other states request claims using state-specific morbidity. Mr. Leung said Missouri requests claims projections on a Missouri-only basis. He said if a carrier’s Missouri-only experience is not credible, Missouri will accept nationwide experience as the basis for a rate increase request. Mr. Serbinowski said Utah believes that rates for the same policy should be the same in all states. He said Utah requests Utah-only experience. However, it is used only for informational purposes, as it does not enter into the rate-approval decision. Mr. Andersen said the issue of cross-subsidization is less of a problem now than it was four or more years ago due to changing state rate review practices. Mr. Ostlund said Alabama requests carriers to submit rate action information for states other than Alabama. He said some carriers do not file for rate increases in smaller sates, resulting in even higher increases in the remaining states. Mr. Serbinowski said he recently reviewed a rate increase for a carrier that has two policyholders in Utah. He said the rate increase request was filed in Utah before it was filed in other states that represent almost all of the carrier’s policyholder volume. He said this does not seem to make sense. Ray Nelson (America’s Health Insurance Plans—AHIP) said it is possible that some states not approving rate increases when other states do could result in fairness issues for policyholders in different states. He said there might be issues that prevent a company from filing rate increases in all applicable states at the same time, such as a lag in some states’ approval of a first rate increase request when a second rate increase request is being considered by other states, or the inability to file a rate increase request in a state that has previously approved a multi-year phased-in rate increase.


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Jan Graeber (American Council of Life Insurers—ACLI) said the use of a prospective present value approach to rate review could lessen the problem of cross-state subsidization of rate increases, as this approach determines an adequate rate on a going-forward basis. Mr. Lombardo asked if it is appropriate for those states with too few policyholders credible for rating purposes to defer to the rate increases that a carrier has received approval for in larger, more credible states. Ms. Ahrens said Nebraska does this to some extent, but it is selective as to which states’ rate increase decisions it considers, based on the state’s rate review methodologies and how they compare to the rate review protocol in Nebraska. Mr. Serbinowski said the risk of Utah approving an inappropriate rate increase, given that the rate increase is based on the bulk of a carrier’s experience in other states, is small. Mr. Andersen suggested pursuing a pilot program of applying the Texas and Minnesota rate review methodologies to rate increase filings, and then using the Texas and Minnesota methodologies’ assessment of the rate increase request as a proxy for other states to use for their own rate review determinations. Instead, Ms. Graeber suggested that Minnesota and Texas review the validity and appropriateness of the assumptions used in the rate filing, and individual states could then use these assumptions in conjunction with their respective rate review methodologies to arrive at the appropriate rate increase for that state. Having no further business, the Long-Term Care Pricing (B) Subgroup adjourned. W:\National Meetings\2019\Spring\TF\HA\Conference Calls\2-14 LTCPSG\02-14-19 LTCPSG min.docx


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Draft: 2/13/19 Long-Term Care Pricing (B) Subgroup

Conference Call January 24, 2019

The Long-Term Care Pricing (B) Subgroup of the Long-Term Care Actuarial (B) Working Group of the Health Actuarial (B) Task Force met via conference call Jan. 24, 2019. The following Subgroup members participated: Paul Lombardo, Chair (CT); Greg Campbell (AK); Steven Ostlund (AL); Perry Kupferman (CA); Marti Hooper (ME); Fred Andersen (MN); William Leung and Mary Mealer (MO); David Yetter (NC); Rhonda Ahrens (NE); David Sky (NH); Anna Krylova (NM); Bill Carmello (NY); Andrew Dvorine (SC); Raja Malkani (TX); Tomasz Serbinowski (UT); and Joylynn Fix (WV). 1. Discussed All-State LTCI Rate Review Survey Mr. Lombardo said the Subgroup is conducting a survey of the states for information on their long-term care insurance (LTCI) rate review processes. He said survey responses are due Jan. 31. 2. Discussed Solvency Impact on LTCI Rate Increase Decisions Mr. Lombardo said the Subgroup will continue its discussion from its Jan. 10 conference call about whether regulator LTCI rate increase decisions should consider whether the company has a solvency concern. He said responses during the Jan. 10 conference call indicate that most states do not consider a company’s solvency position when conducting LTCI rate increase reviews. Mr. Serbinowski said company solvency should not be considered when making a rate increase decision. He said delving into a company’s solvency is not the role of a regulator conducting a rate increase review. Ms. Ahrens said she agrees with Mr. Serbinowski. She said a single reviewing state cannot assess a company’s nationwide solvency or the impact that a rate increase in one state has in conjunction with rate increases in other states. She said such solvency analysis will require involving the solvency regulator for the company’s state of domicile, and one way this can be accomplished is via a multi-state rate review structure. Mr. Kupferman said California state law allows a rate increase to be approved if it is necessary to protect company solvency. Mr. Andersen said he believes it should be very infrequent that solvency is used to determine the level of an approved rate increase. Ms. Mealer asked whether states allow guarantee associations to increase rates based on insolvency if a block of LTCI policies that has not been granted a rate increase based on insurer solvency concerns is transferred to a state guarantee association after insolvency. Mr. Lombardo said this is allowed in Connecticut in order to reduce taxpayer liabilities to the guarantee association. Ms. Ahrens said Nebraska also allows this. Mr. Lombardo asked if regulators believe a multi-state rate review process would be beneficial for companies with solvency issues that may be alleviated through rate increases. Mr. Carmello said such a review process would be appropriate. Ms. Ahrens says she believes that states currently often consult with the domiciliary state solvency regulator when solvency is presented as an argument for a rate increase request. Mr. Lombardo asked if the Subgroup wants to bring the issue of multi-state rate review in cases of insolvency to the attention of the Long-Term Care Insurance (B/E) Task Force. Jan Graeber (American Council of Life Insurers—ACLI) said the ACLI agrees that solvency should not be a consideration in the review of a rate increase request, but the ACLI believes the approval of actuarially-justified rate increases will prevent insolvencies from occurring. Mr. Sky said he believes it may be preferable for a company to not receive a rate increase that is actuarially-justified and subsequently have its LTCI policies assumed by a guarantee association rather than have its policyholders face very large rate increases. Mr. Lombardo said the issue of some states and their policyholders subsidizing other states and their policyholders as a result of inconsistent rate increases being approved amongst the states will be discussed during the Subgroup’s next conference call. Having no further business, the Long-Term Care Pricing (B) Subgroup adjourned. W:\National Meetings\2019\Spring\TF\HA\Conference Calls\1-24 LTCPSG\01-24-19 LTCPSG min.docx


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Draft: 1/23/19

Long-Term Care Pricing (B) Subgroup Conference Call January 10, 2019

The Long-Term Care Pricing (B) Subgroup of the Long-Term Care Actuarial (B) Working Group of the Health Actuarial (B) Task Force met via conference call Jan. 10, 2019. The following Subgroup members participated: Paul Lombardo, Chair (CT); Greg Campbell (AK); Steven Ostlund (AL); Craig Wright (FL); Marti Hooper (ME); Fred Andersen (MN); William Leung (MO); David Yetter (NC); Rhonda Ahrens and Michael Muldoon (NE); David Sky (NH); Anna Krylova (NM); Tracie Gray (OH); Andrew Dvorine (SC); Raja Malkani (TX); Tomasz Serbinowski (UT); and Joylynn Fix (WV). 1. Discussed All-State LTCI Rate Review Survey Mr. Lombardo said the Subgroup is conducting a survey of the states (Attachment A) for information on their long-term care insurance (LTCI) rate review processes. He said survey responses are due Jan. 31. He said the survey requests information on actuarial rationale and non-actuarial, or policy, rationale for decisions on rate increase requests. He said that if there are many states where non-actuarial criteria, such as rate caps or policy rationale, outweigh actuarial considerations, then obtaining consistency and transparency in the rate review process nationally will be very difficult. Mr. Lombardo said one purpose of the survey is to use the results to inform the Long-Term Care Insurance (B/E) Task Force as to how the states arrive at rate increase determinations after reviewing rate filings. He said he also wants to present any issues identified through the survey to interested commissioners, possibly at the Spring National Meeting. He said the results of the survey will be summarized, with no contributing state’s information being identifiable. He said the only individuals who will see state-specific information are NAIC staff members responsible for collecting and compiling the responses. Ms. Ahrens and Mr. Lombardo said they are concerned that if responses available to regulators are not linked to a state, then it will be difficult to ask a state for additional information related to any given response. Mr. Lombardo said that if a state is unwilling to provide the information requested via the survey, various insurers have indicated they can provide this information to the Subgroup. Mr. Lombardo said there are states that have approved requested increases for national insurers in full, or nearly in full, for many years. Some of these states are encouraging such insurers to aggressively pursue rate increases in the balance of the states that have denied rate increase requests over the same time period. Mr. Lombardo said this is being done because the states that have consistently approved rate increase requests believe that their policyholders are unfairly subsidizing the rates for policyholders in the states that have not historically approved rate increase requests. Mr. Ostlund requested that subsidization of policyholders in one state by policyholders in other states be an agenda item on a future call. 2. Discussed Solvency Impact on LTCI Rate Increase Decisions Mr. Lombardo asked whether regulator LTCI rate increase decisions should consider whether the company has a solvency concern. He asked if solvency positions should in any way be considered when determining what level of rate increase will be approved. Mr. Andersen said that since 2016, he has approved 108 rate increases, and solvency was not a determining factor in any of them. He said, however, it may be in the best interest of all parties to consider granting larger rate increases when there are extreme company solvency concerns, all other things being equal. He said most LTCI rate review regulation calls for LTCI blocks to be reviewed in isolation, rather than in the context of a company’s overall portfolio of products. Mr. Serbinowski said Utah does not take company solvency into consideration when conducting its LTCI rate increase reviews, but he does not believe solvency, in extreme circumstances, should be prohibited from consideration. Ms. Ahrens said Nebraska will not approve a rate increase that is not actuarially justified, irrespective of solvency issues. She said two companies with identical circumstances, with the sole exception of differing levels of solvency, should receive approval for the same level of rate increase.


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Mr. Lombardo said Connecticut has not asked for information about, or considered, company solvency when conducting its LTCI rate reviews. Mr. Lombardo asked, if solvency is to be considered, whether there should be an NAIC mechanism to let the states know when a specific company is in a compromised solvency position so that this can be considered when conducting an LTCI rate increase review. He said there may already be such a mechanism in place that he is not aware of. Ms. Ahrens said she believes there are existing NAIC mechanisms that can be utilized for this purpose. Mr. Andersen asked, if solvency is to be considered, whether the size of the remaining block of policyholders should be considered in conjunction with solvency. If the size of the remaining block of policyholders is large enough, then a rate increase would be effective in mitigating solvency issues. Having no further business, the Long-Term Care Pricing (B) Subgroup adjourned. W:\National Meetings\2019\Spring\TF\HA\Conference Calls\1-10 LTCPSG\01-10-19 LTCPSG min.docx

Attachment A Health Actuarial (B) Task Force

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All-State LTC Rate Review and Final Rate Decision Survey

1. Is your state requiring LTC carriers to submit rate filings consistent with the LTC Pricing Subgroup Review Template (see email attachment LTC_Price_SG_Review_Template_030118_Final.docx)?

2. What methodology is your state using for LTC rate review: Prospective PV Approach (Texas), Blended If-Knew/Make-up Approach (Minnesota) or Other? If Other, please describe in more detail your methodology. (Descriptions of the Texas and Minnesota approaches can be found in the email attachment Approaches to LTC Rate Increases Final from Pricing Subgroup.docx)

3. If answer to #2 is not the Prospective PV Approach or the Blended If-Knew/Make-up Approach, is your state considering either methodology? If the answer is yes, then please let me know via email, when your state has made a final decision ([email protected]).

4. Has your state adopted the NAIC rate stabilization model? Has your state adopted the 2014 update to the Model Regulation and has your state issued the Model Bulletin that was finalized shortly after the Model Regulation? If yes, is the 2014 update and the Model Bulletin applicable to new business only or all business, including inforce?

5. Does your state use lifetime loss ratios as the primary aspect of an LTC rate increase review? If yes, is this combined with any other methodology and if so, please describe in more detail.

6. For final LTC rate decisions, does your state apply caps? If so, are these caps based upon statutes, regulations or are they applied via an administrative position (point of clarification, if your state requires the spreading of an increase, say over 3 years or more, this isn’t considered the same as a cap)? Please explain all aspects of the cap process in more detail.

7. For final LTC rate decisions, does your state spread the approved rate increase over a certain period of time through a phase-in mechanism? If so, is this phase-in mechanism based upon statutes, regulations or are they applied via an administrative position. Please explain all aspects of the phase-in mechanism in more detail.

8. Does your state apply any restrictions regarding the frequency of rate increases? If so, how often is such a restriction applied and for how many years?

W:\National Meetings\2019\Spring\TF\HA\Conference Calls\1-10 LTCPSG\LTC Rate Review and Final Rate Decision Survey.docx


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9. Is the final decision solely based upon actuarial analysis (i.e. reviewing actuaries decision), a combination of actuarial and policy decision making or a policy decision? If policy decision making is considered, is it specified in state law or other specified rule or at the discretion of the Commissioner/Director/Superintendent?

10. Explain how your state handles the LTC rate review process for multiple form series. Are they reviewed as one large filing or do you require information to be submitted for each form and review the need for a rate increase by form?

11. How does your state evaluate rate increase requests that vary by allowable cells, such as age, with inflation, without inflation, etc?

12. Does your state allow/require limited pay and paid up policies data/experience to be excluded from the experience used to justify the rate increase? Please explain in more detail.

13. Does your state require that LTC renewal rates for closed forms be limited to no more than the company’s new business rates on their currently sold form? If so please explain in more detail.

14. Does your state allow “landing spots or other extra-contractual benefit reduction options”, if so provide detail as to what is preferred/allowed/required in consideration of increases, what additional information your state is interested in, in accepting these options and whether your state prefers/allows/requires something special, like Contingent Nonforfeiture.

15. Does your state consider adjustments for prior rate increase requests that were actuarially justified but were denied, partially denied, and/or delayed by your state? Does your state consider adjustments for pre-rate stability products where the prior rate increase request was voluntarily reduced by the company? If so, please explain your state's method for computing these adjustments.


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Please Note: The LTC Pricing Subgroup is not requesting individual company-specific information through this survey, and the requested information should not be considered to be confidential under either state examination authority or the NAIC Standard Valuation Law (#820). State-specific answers to this survey will be held as regulator-only information, and not shared with other state regulators or the general public. Responses to this survey will be aggregated and reported back through the NAIC LTC Actuarial Working Group and the LTC (B/E) Task Force.


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Draft: 12/12/18

Long-Term Care Pricing (B) Subgroup Conference Call

November 29, 2018 The Long-Term Care Pricing (B) Subgroup of the Long-Term Care Actuarial (B) Working Group of the Health Actuarial (B) Task Force met via conference call Nov. 29, 2018. The following Subgroup members participated: Paul Lombardo, Chair (CT); Perry Kupferman (CA); Marti Hooper (ME); Fred Andersen and Kristi Bohn (MN); William Leung (MO); David Yetter (NC); Rhonda Ahrens and Michael Muldoon (NE); David Sky (NH); Anna Krylova (NM); Andrew Dvorine (SC); Raja Malkani (TX); Tomasz Serbinowski (UT); and Joylynn Fix (WV). 1. Discussed a Multistate Coordinated LTCI Rate Review Proposal Mr. Lombardo said that a concept for a multistate coordinated long-term care insurance (LTCI) rate review was presented to the Long-Term Care Insurance (B/E) Task Force at the Summer National Meeting. Ms. Ahrens provided a summary of the presentation (Attachment A). 2. Discussed an All-State LTCI Rate Review Survey Mr. Lombardo said the Subgroup will conduct a survey of states for information on their LTCI rate review processes. He said the survey will be used to answer a question concerning consistency in information received by states posed by the co-chair of the Long-Term Care Insurance (B/E) Task Force, Director Dean L. Cameron (ID). He said the survey will also attempt to assist the Task Force in completing the following charge: “Assess state activities regarding the regulatory considerations on rate increase requests on blocks and identify common elements for achieving greater transparency and predictability.” Mr. Lombardo said results from the all-state LTCI rate review survey could be used to assist in the further development of the multistate coordinated LTCI rate review proposal. He said a drafting group, composed of members of the Subgroup, will develop the survey. Having no further business, the Long-Term Care Pricing (B) Subgroup adjourned. W:\National Meetings\2019\Spring\TF\HA\Conference Calls\11-29 LTCPSG\11-29-18 LTCPSG min.docx

Long-Term Care Insurance

Multi-State Rate Increase Review Examinations

Proposal to LTC(B/E) CommitteeNAIC Summer National MeetingAugust 5, 2018

Current Process for Long-Term Care Rate Increases

▪ Generally sold and marketed on a nationwide basis

▪ Original rates filed in each state

▪ Rate increases filed in each state▪ Rate increase review is complicated

▪ Requests for additional information often vary by state

▪ Some states have limited resources and/or expertise for review

▪ Some states have minimum exposure requirements for review

2

Existing Coordinated Examination Processes

General multi-state coordination process for market conduct and risk-focused financial examinations

▪ Lead state

▪ Participating states

▪ Memoranda of understanding

▪ Combined review resources based on expertise

▪ Coordinated findings reports and action items

3

Multi-State Coordination through IIPRC

▪ ~40 states participate in the IIPRC for LTC

▪ Advisory committees consider and adopt standards for uniformity

▪ LTCi standards introduced 2010, updated 2017

▪ Currently, the 2nd IIPRC LTCi rate increase request under review

▪ Increases over 15%▪ IIPRC reviews and produces Advisory Findings Report

▪ Insurer files increase individually in each state

▪ Only available to compacting states on forms approved by IIPRC

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Proposal for Coordinated Multi-State LTCi Rate Increase Review

▪ Establish new NAIC subgroup

▪ Initial charge

▪ Develop process for coordinated LTCi rate increase reviews

▪ Ongoing charge

▪ Coordinate future multi-state LTCi rate increase review examinations

▪ Enhance the process as needed

▪ Potential coordination with other subgroups

5

Potential Multi-State LTCi Rate Increase Review Examination Process

▪ New NAIC subgroup calls for examination

▪ States elect to participate

▪ Lead State determined based on available resources and expertise among participating states

▪ Oversight Group established with LTC expertise in policy and/or actuarial areas

6

Potential Multi-State LTCi Rate Increase Review Examination Process (cont.)

▪ Lead State engages Actuarial Review resource – either from participating state resources or consultant

▪ Evaluates if projected adverse experience is justifiable

▪ Oversight Group produces Advisory Findings Report

▪ Summary of Actuarial Review findings

▪ Considerations of fairness/reasonableness

▪ Recommended increase percentage

▪ Insurer files individually with participating states

7

Benefits of Multi-State LTCi Rate Increase Review

▪ One review for insurer

▪ Leverages state resources and expertise

▪ Enhances resources and expertise domestic utilizes in reviewing reserve adequacy

▪ Uniformity in review and results

▪ More equitable treatment of policyholders nationwide

▪ Preserves state by state implementation or legal considerations

▪ May reduce insolvency risks

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Summary

▪ Clear benefits for states, policyholders and industry

▪ State regulation is already enhanced by multi-state coordination

▪ Coordinated LTC rate review is within reach

Recommendation – Create NAIC subgroup to establish process

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