08-04: Long-Term Care, Medicare Supplement and Health Insurance Issues
To: All Health and Long-Term Care Insurers
From: Linda Bohrer, Director, Fred Heese, Director
Re: Long-Term Care, Medicare Supplement and Health Insurance Issues
Date: February 7, 2008
The purpose of this bulletin is to clarify some of the laws affecting long-term care, medicare supplement and health insurance contracts issued in the State of Missouri, as well as to remind carriers of certain provisions in the law. It is important that carriers have specific, consistent guidance on these issues that are of special concern to Missouri, including those resulting from administrative and other differences among states.
1) Long-Term Care Rates and Reserves
Long-term care rates and reserves must presume sufficient provision for moderately adverse deviation to obviate the need for future rate changes for reasonably foreseeable experience development. They should not assume morbidity improvement, and should include provision for morbidity deterioration. Mortality assumptions for long-term care reserves must follow statutory valuation annuity standards with mortality improvements. Persistency risk assumed by carriers should not be presumed to transfer to insureds via rate increases, e.g., when persistency is higher than initially assumed in rates. Long-term care rate increases cannot be justified until and unless credible experience deteriorates beyond the level provided for moderately adverse experience for all assumptions. (See RSMo §376.1100 and 20 CSR 400-4.100(16).)
2) Rate Discounts on Individual Health Policies, Including LTC and Medicare Supplement Contracts
Discounts to individual insureds are not allowable on individual forms unless the discount is based upon the reduced hazard that the individual represents. It should not be based upon application for, issuance or continuance of a policy on a second person. If credible actuarial data indicates a reduced risk, discounts may be acceptable on joint policies or on individual policies where the living arrangement, e.g., marriage, reduces the risk.
Discounts to list-billed, association, or commonly marketed insureds are not appropriate on individual forms. Such discounts might be appropriate on group forms.
Under individual coverage, charging different rates for the same coverage with the same hazard or risk factors is unfair discrimination and therefore a violation of RSMo §375.936(11). Unfair discrimination under the Unfair Trade Practices Act is based upon actuarial risk classes.
Any questions should be addressed to:
David J. Hippen, FSA, MAAA, FLMI
Life & Health Actuary.
Missouri Department of Insurance, Financial Institutions and Professional Registration
301 West High Street, Suite 530
Jefferson City, MO 65102
573-526-4983
David.Hippen@insurance.mo.gov