Update on LTCI in Massachusetts: Law Passed, Implementation Stalled

The Affordable Care Act has been front-page news from well before its passage in 2010 up through its present turbulent phase of getting up and running.  Questions, concerns, and controversies have abounded and continue to do so.  What impact will it have on benefits?  On premiums?  On cost to the taxpayer? 

Similar questions are commonplace for all health-related insurance, and long-term care insurance (LTCI) is no exception.  For LTCI one of the most pressing questions is how rapidly state insurance departments will permit premiums to rise on existing policies.  When the premium reaches some distressingly high level, policyholders inevitably allow their policy to lapse, and the welcome shield this form of private insurance provided for the taxpayer is eliminated. 

States vary on how they have balanced the interests of insurance companies as opposed to those of policyholders on LTCI rate increase filings.  Though correctly known as a “liberal” state on many issues, Massachusetts has been far from that on this one.  Rather, it has been highly indulgent to the companies.  Now, however, the possibility of change is in the air. 

My previous post on Over 65 introduced LTCI and covered collective efforts a number of us have been making to change the way the Massachusetts Division of Insurance (DOI) responds to filings for premium increases.  In October 2012, those efforts achieved a measure of success with the passage of a new law: “An Act Establishing Standards for Long-Term Care Insurance.”  LTCI had never previously been a legislative entity in its own right in Massachusetts.  Now, finally, it is. 

Enactment of the law obligated the DOI to undertake certain steps of follow-up. That process is substantially behind schedule.  For all a number of us who are paying attention could tell as of several days ago, it was at an absolute standstill.  The DOI has not said why.  On December 17th it did issue a bulletin announcing its revised plans for catching up with some–but not all–of the required follow-up. 

For policyholders, prospective policyholders, and those focused on public policy in this arena, the new law’s centerpiece is its message to the DOI to make a major reversal in its long-standing orientation on responding to insurance companies’ LTCI rate increase filings.  Without explaining why, in 2012 it did begin to handle rate increase filings less permissively. However, for more than a decade previously, its approach had been clear and simple: approve all filings.  Whatever the DOI’s current plan for the longer term–unknown–the new law both requires and advises it to embrace rate stabilization. 

The jeopardy of rising premiums has had a prominent presence not only in Massachusetts but also on a national basis for a long time.  Over thirteen years ago, in October 2000, an editorial in National Underwriter, “The Newsweekly of Property & Casualty Insurance,” deplored that “some policyholders who kept their insurance in force for years ended up with nothing.”  Why?  Because “they were hit with such massive rate increases that they could no longer afford the premiums and had to let their policies lapse,” a result the editorial called “scandalous.”  

The industry’s regulators were similarly minded.  In 2000, the National Association of Insurance Commissioners (NAIC) set about to make a major revision in its Long-Term Care Insurance Model Regulation, amending it to include standards to address and advance rate stabilization.  

NAIC is not a governmental entity, and its Model Regulation is only advisory. It does not, in itself, have the force of law.  But now in Massachusetts it does because, in one of the new law’s three provisions covering rate stabilization, it mandates that the commissioner “promulgate rules and regulations…consistent with the standards set forth in the 2009 National Association of Insurance Commissioners Long-Term Care Model Regulation.”  Among those standards are a number promoting rate stabilization.  

Two other provisions of the new law also address rate stabilization. One enables the commissioner to hold a hearing on a rate increase filing both on his own initiative and, what is even more significant, in response to a motion of the attorney general. The other requires the commissioner to study “methods to stabilize rates” and prepare a report of its findings for the legislature.   

The new law is good news for both policyholders and prospective policyholders, but the number who have so far benefitted from it has to be exceedingly small since it only applies to policies issued as of 1 January 2013.  Whatever that number–currently unknown–it is surely dwarfed by the number of policies issued previously: approximately 153,000 as of the end of 2008, according to the DOI.  Those earlier policies are referred to as the “Old Book.”  What the new emphasis on rate stabilization holds in store for them is one of the burning questions remaining to be answered. 

In a bulletin issued at the end of 2012, the DOI designated 1 January through 31 October 2013 as a transition period for the new law.  That period is now over.  Before it ended, we could well have expected the DOI to have issued three documents: regulations–or, at the least, draft regulations–for the new law; revised regulations–or, at the least, draft revised regulations–for the Old Book policies; and the report on “methods to stabilize rates.”  

Not one of those three documents has yet appeared, and for two of them, deadlines the DOI announced in writing have come and gone.  Regarding Old Book policies, the DOI wrote in the bulletin issued nearly a year ago that it would issue revised regulations for them “sufficiently in advance of October 31, 2013 to enable Carriers to meet the requirements of the revised regulations.”  On December 17th–only a few days ago–the DOI issued another bulletin extending the transition period through July 1, 2014 “while the Division continues with its work to complete all appropriate regulations impacted by this statute.” As for the report to be submitted to the legislature, in a document issued in May 2013, the DOI indicated that it would be completed by this past July.  It has not yet announced a new date. 

How will the momentum for rate stabilization evolve?  Much depends on the content of those three documents yet to appear.  As for the two sets of regulations, getting them in place is going to be time-consuming at best since before a set of regulations becomes final there needs to be a draft as well as time set aside for hearings and comments.  The DOI has now announced its intention to have all pertinent regulations completed by this coming July 1st.  Especially at issue in their development is how the Division proposes to handle upcoming rate increase filings for Old Book policies. Minimally the DOI should now also let us know when it is planning to complete its report for the legislature.  

It is good to have the new law, but the process of implementing it as well as addressing matters closely linked to it still has a long way to go. 

Kenneth M. Deitch, 75, has a PhD in economics and is a long-time educator.  He has testified before committees of the Massachusetts legislature on long-term care insurance. This is his second post on Over 65 on long-term care insurance.