Regulation of Long-Term Care Insurance in Massachusetts

The time may come when any one of us will need outside help with certain basic activities, referred to collectively as the activities of daily living or ADLs.   Long-term care insurance (LTCI) is a resource for covering some or all of the costs of providing the care needed in that unfortunate situation.  It is not for everyone.  It is a suitable type of insurance for those who simultaneously want to protect any assets they may have accumulated and can afford paying the premiums year after year either indefinitely or until the need to make a claim arises.  The initial premiums can be larger or smaller, depending upon the amount of coverage purchased.  Any costs of care paid through this type of insurance do not become a burden on the public budget.   

Eleven years ago, my wife and I bought LTCI.  At the time we were utterly unaware that stability of premiums was a significant issue.  And for nearly six years it wasn’t, at least not for us. 

Then suddenly things changed.  Early in 2008, we learned that the Massachusetts Division of Insurance (DOI) had approved our company’s filing for a 72.8 percent annual premium increase.

The benefits were not increasing at all, only the premiums. 

We were astonished to say the least.  Increasing premiums had not been built into our planning, and an increase of over 70 percent was stunning.  It is true that the front of both policies carries a notice that premiums can rise.  But in 2002, the agent  gave us every indication to believe that the notice was merely pro forma and that the chance of any increase–let alone one so extremely large–was remote. 

Once the unpleasant reality had sunk in, I decided to look into how this company might have fared elsewhere.  Had it made similar filings in other jurisdictions?  If so, how had they responded?   I found that the company had made essentially similar filings in around forty other states (and DC).  Like Massachusetts, some others had also approved 72.8 percent, but substantially more than the majority of them had not, and among those, not one had approved an increase remotely approaching 72.8 percent.   

It has now been five years since I first learned of the enormous increase in our premiums and then of the large discrepancy between how our company’s filing was handled in Massachusetts and in so many other states, that is, of how far Massachusetts was from the mainstream.  Since then,  I have been at work on this issue.  Fortunately I have not been alone.  A number of others have also been engaged and are excellent allies.  Some are other policyholders, and some are public officials.  

The thrust of our collective effort has been to try to bring about change in how the DOI in Massachusetts regulates LTCI premiums.  Our aim has been to have this process become much more even-handed as between the interests of policyholders and those of insurance companies.  Naturally my wife and I and the several other policyholders who have joined this effort have something to gain from it.  But so, too, do the many other owners of LTCI in Massachusetts, approximately 150,000 of them as of 2008.  Of course not all of them have their policies with our company, but they are all subject to the DOI’s decisions on any filings for premium increases their respective companies may submit. 

The full history of this endeavor is too long to cover here in detail.  The effort remains ongoing,   and indeed it recently achieved a milestone.  This past fall the legislature passed and the Governor signed into law Chapter 312 of the Acts of 2012, An Act Establishing Standards for Long-Term Care Insurance.  As passed, the law itself only pertains to policies issued after the beginning of 2013, but one of its encouraging provisions directs the Commissioner of Insurance to “conduct an investigation to identify the best methods to stabilize rates and prevent exceptional rate increases….”   A related provision establishes a working group to advise the Commissioner on rate stabilization, with the Attorney General as one of its members. 

Some months ago, the Division began receiving input from members of the working group and others.  One item submitted is a letter from the Office of the Attorney General.   Throughout, it is strongly worded on behalf of LTCI policyholders, and this sentence is pivotal:  “Because current policyholders, at the time they purchased their policies, did not receive adequate disclosure (and/or were misled concerning the possibility) of substantial increases in premiums, any such substantial increase during the life of existing policies is unfair or deceptive.” 

It is not hard to have some perspective on what has prompted the Division’s long history of making extremely company-friendly rulings on rate filings.  Until recently, it was regulating LTCI without any specific legal underpinning on this type of insurance and was therefore understandably reluctant either to turn down filings or even to work out significant modifications in them.  Now, with the new law in place, it is in a strong position to handle things quite differently.  In addition, it has been given a clear signal to do so from both the legislature and the Attorney General’s Office.  Many rate stabilization problems, and especially those faced by the owners of the older LTCI policies, still need to be addressed formally, but a new pathway for the Division to follow has now been well marked.   

Kenneth M. Deitch, 74, has a PhD in economics and is a long-time educator.  He has testified before committees of the Massachusetts legislature in support of legislation on long-term care insurance.