Pennsylvania Insurance Commissioner Announces Significant Reductions in Long Term Care Insurance Rate Increase Requests

HARRISBURG, Pa., April 26, 2016 /PRNewswire-USNewswire/ -- Insurance Commissioner Teresa Miller today announced significant reductions in rate increase requests for long term care insurance. The reductions will affect 81 percent of policyholders of four long term care insurance companies. A public hearing on these requests took place in March. These rate increase requests ranged as high as 130 percent on some policies.  Commissioner Miller said all four companies are offering options that may further reduce or eliminate any rate increase for many policyholders, in return for accepting some type of reduced benefit.

Governor Tom Wolf praised the announcement as a win-win for Pennsylvania.

"Commissioner Miller is continuing her excellent work to protect Pennsylvanians, while also maintaining a healthy environment for insurers across the Commonwealth," said Governor Tom Wolf. "While we must strive to do even more, today's announcement is yet another example of the Insurance Department's commitment to being an effective watchdog for the consumers of the state, as they saved Pennsylvanians nearly $81 million in potential health insurance rate increases just last year."

"At a public hearing we heard testimony from consumers about how these often large rate increases for long term care policies would be a financial burden. I took that into account when making my final rate approvals," Commissioner Miller said.  "As noted at the hearings, the Insurance Department must also consider the financial health of the companies to make sure they can pay claims over time which is another consumer protection. These rate approvals accomplish this balance between consumer and company needs."

Long term care insurance began several decades ago as a way for individuals to pay over a long period of time for care they may need in later years. However, the insurance industry initially made several assumptions about these rates which turned out to be erroneous, resulting in significant financial losses by many long term care insurers, and leading these companies to request large premium increases.

Financial problems in the long term care field have led many insurers to no longer sell these policies. The National Association of Insurance Commissioners reported that approximately 100 companies sold long term care policies nationally in 2002, but that number had fallen to just 16 in 2015.

Commissioner Miller held a public hearing March 10 on rate increase requests filed by four insurers, covering 46,525 policies in Pennsylvania. Companies had an opportunity to explain the reasons for their rate increase requests, the Insurance Department explained its process in reviewing the requests, and consumers offered testimony on the impact the rate increases would have on them.

Following close review of the company filings and the hearing testimony, Commissioner Miller is announcing the rate approvals seen below, as well as options for consumers to reduce or avoid any rate increase by agreeing to benefit reductions. 

As part of Governor Wolf's commitment to transparency in government, the Insurance Department now publishes decision summaries for long term care rates. These are consumer-friendly summaries of the request and the department's determination. They are available online at www.insurance.pa.gov, under the Consumers tab, by clicking on "Long Term Care Rate Filings".  This page is organized by the date on which each company's original filing was received by the Insurance Department.  The decision summaries for Metropolitan Life Insurance Company and Unum Life Insurance Company of America are under the March 5, 2015 listing.  The decision summaries for Genworth Life Insurance Company and John Hancock Life Insurance Company are under the February 20, 2106 listing.

"I believe the reduced premium increases, along with the option for many policyholders to further reduce or even eliminate premium increases while still keeping important long term care benefits, provides consumers with the most protection from large rate increases possible -- while still making sure these companies have the financial means to pay claims when they are filed," Commissioner Miller said.

Policyholders should call their insurer and discuss carefully any proposed benefit reductions to ensure that they clearly understand what reduction they are agreeing to in return for avoiding or reducing a premium increase.

MEDIA CONTACT:   Ron Ruman, 717-787-3289

List of rate approvals:

Metropolitan Life Insurance Company:

• Requested an average 50% rate increase, with increases ranging from 43 to 60%, depending on the policy, for 6,573 policyholders. 
• The Insurance Department approved a 20% increase for all policies. 
• Metropolitan Life is offering policyholders options to lower the premium increase, by agreeing to lower the daily benefit, lengthen the elimination period (the period of time the policyholder would receive care before the insurance kicks in), or shorten the benefit period (the length of time the insurance will pay for care). 
• Metropolitan Life is also offering policyholders a paid-up policy option.  This provides policyholders who decide to stop paying premiums, a benefit equal to the total of all premiums paid to that point, or 30 times the daily nursing home benefit when the policy lapsed, whichever is greater.

Genworth Life Insurance Company:

• Requested an average 80% rate increase, with increases ranging from 33 to 130%, depending on the policy, for 27,551 policyholders.  The company sought higher rate increases for policies with lifetime benefits than for policies with limited benefit periods.
• The Insurance Department approved a 30% increase for policies with lifetime benefits, and a 20% increase for policies with limited benefit periods. 
• Genworth is offering policyholders the option to reduce their premium increase by agreeing to lower their daily benefit, lengthen their elimination period, or shorten the benefit period.  Policyholders can also accept a paid-up policy option.

Unum Life Insurance Company of America:

• Requested an average 81% rate increase, with increases ranging from 63 to 94%, depending on the policy, for 4,829 policyholders. 
• Unum requested three 24.8% increases on policies with uncapped 5% compound inflation riders, with the increases implemented one year apart, compounding to a 94% increase over three years.  Unum requested three 17.7% increases on policies with uncapped 5% simple inflation riders, compounding to a 63% increase over three years.
• The Insurance Department approved the requests as submitted, but has directed the company to implement the increases over four years instead of three, which will result in four 18% increases on policies with uncapped 5% compound inflation riders, and four 13% increases on policies with uncapped 5% simple inflation riders. 
• Unum is offering policyholders with the uncapped compound or simple riders the option of no premium increase, if they agree to reduce their future inflation indexing from 5% to 3%.  This is called a "landing spot" option.
• Unum is also offering reductions in premium increases for policyholders who agree to lower their daily benefit, lengthen their elimination period, or shorten their benefit period.  Policyholders can also accept a paid-up policy option.

John Hancock Life Insurance Company (USA):

• Requested an average 22% increase, with increases ranging from 2.5 to 88%, depending on the policy, for 7,572 policyholders. 
• The Insurance Department approved an increase on these policies but capped the increase at 20%. In other words, policyholders scheduled to receive increases over 20% will receive a 20% increase while those scheduled to receive increases under 20% will receive the increase requested by the company.
• John Hancock is offering some policyholders with inflation riders the option to reduce future inflation indexing, to avoid any premium increase.  Policyholders who accept this "landing spot" option will keep all past inflation rider benefit increases.
• Policyholders who accepted landing spots in the past will be offered new landing spot options to avoid the current increase.
• The company is also offering reduced premium increases in return for lowering the daily benefit, lengthening the elimination period, or shortening the benefit period.

SOURCE Pennsylvania Insurance Department