Monday, February 13, 2017

No. 203: Long-Term Care Insurance Premium Increase Requests Approved by the Massachusetts Division of Insurance

On January 20, 2017, the Massachusetts Division of Insurance (DOI) issued a press release announcing its approval of long-term care (LTC) insurance premium increases requested by 16 LTC insurance companies. In some cases, the increases pertain to blocks of business in runoff; that is, where companies are not issuing new LTC insurance policies. In virtually every case, the increases are significantly smaller than the increases requested by the companies, and in most cases the increases are spread over a few years. Here are the companies:
American General Life Ins Co
Bankers Life & Casualty Co
Berkshire Life Ins Co of America
CMFG Life Ins Co
John Hancock Life Ins Co
Lincoln National Life Ins Co
MetLife Ins Co of Connecticut
Metropolitan Life Ins Co
Mutual of Omaha Ins Co
New York Life Ins Co
Provident Life & Accident Ins Co
RiverSource Life Ins Co
Time Ins Co
Union Security Ins Co
United of Omaha Life Ins Co
Unum Life Ins Co of America
Missing from the list are Genworth Life Insurance Company and Northwestern Long Term Care Insurance Company, two prominent companies that are still issuing LTC insurance policies. Genworth is a special case, which I discuss later. I asked Northwestern to comment on its omission from the list. A spokeswoman said the company has not filed an LTC insurance premium increase request in Massachusetts but plans to do so in the near future.

Nature of the Increases
Among the 16 companies, the original filing dates of the premium increase requests are from June 2012 to January 2016. The requested increases range from 0 to 303 percent, with most of the requests in the range of 30 to 60 percent. Most of the increases approved by the DOI range from 20 to 40 percent, in most instances to be spread over two to four years. The increases relate to about 55,000 Massachusetts policyholders. Details are in a spreadsheet DOI provided.

The Genworth Statement
I asked Genworth to comment on its omission from the list. A spokeswoman provided this statement:
The Division of Insurance has not taken action on Genworth's filings which have been pending for years. Massachusetts lags behind virtually every other state in taking timely action in response to rate increase filings and in granting necessary rate increases, which are vital to ensuring that Genworth is able to meet its policyholder obligations in the future. Genworth participated in a lengthy dialogue with the Division over the company's rate increase filings, which were first filed in 2012, but ultimately was not able to reach a negotiated settlement with the Division, and the Division took no action on Genworth's long pending rate filings. If other states took the same approach as Massachusetts, solvency issues would arise. Massachusetts' unwillingness to take timely action on actuarially justified rate increases, as virtually every other state has done, in effect means that Genworth policyholders in other states are subsidizing policyholders in Massachusetts. Accordingly, Genworth has been constrained to file a lawsuit against the Division to resolve these issues. Genworth does not comment on pending litigation.
The Genworth Lawsuit
On January 9, 2017, Genworth filed a lawsuit in state court against the Massachusetts Commissioner of Insurance. Genworth seeks a declaratory judgment and injunctive relief. The complaint describes in detail the developments over the past four years relating to Genworth and the DOI. Here I attempt to summarize the developments briefly.

In December 2012, Genworth filed requests for premium increases, and provided actuarial justification. The requested increases ranged from 35 to 134 percent. Within a month, the DOI, without indicating any actuarial or legal basis, said it would review the request only if Genworth amended its filing to impose a 10 percent limit on the increases.

In May 2013, Genworth reduced its requested increase to 10 percent. The DOI did not respond for several months. In September 2013, the DOI asked for additional information, which Genworth provided. In October 2013, the DOI asked for more additional information, which Genworth provided. In December 2013, the DOI said it closed the file with the assertion that Genworth had not provided the requested information. However, the DOI reopened the file after Genworth protested. On January 21, 2014, the Boston Globe reported that the DOI was putting all pending requests for LTC insurance premium increases on indefinite hold pending the issuance of regulations. The DOI has not issued regulations.

Over the years, Genworth sought, without success, to have the DOI approve the request or, in the alternative, disapprove the request so that the company could appeal the disapproval through administrative and/or court proceedings. Six in-person meetings in Boston between DOI officials and Genworth executives took place during 2015 and 2016. In a July 2016 meeting, the DOI suggested that Genworth invoke a "deemer" provision of Massachusetts law allowing the company to consider that the requests were deemed approved when the requests were not acted upon, and to implement the increases. In October 2016, Genworth informed the DOI that the company would invoke the deemer provision within 30 days.

Yet negotiations continued, with the DOI finally offering to approve 10 percent increases for each of the next four years. Genworth rejected the offer. In December 2016, a DOI attorney said the deemer provision did not apply. Genworth then filed its lawsuit. (See Genworth v. Judson, Superior Court, Suffolk County, Massachusetts, Case No. BLS 17-0073.)

General Observations
Insurance regulators face a dilemma in dealing with requests to approve large increases in LTC insurance premiums. On the one hand, when they disapprove, or approve smaller increases, they threaten the solvency of the insurance companies. On the other hand, when they approve large increases, they impose a heavy burden on LTC insurance policyholders, many of whom are elderly and have difficulty handling the increases. In the latter situation, allowing policyholders to avoid the increases by reducing the benefits imposes a different but still potentially heavy burden on the policyholders. The dilemma notwithstanding, I think it is unconscionable for a regulator to drag its feet for years after receiving a request for an increase in LTC insurance premiums.

Available Material
I am offering a complimentary 31-page PDF consisting of the DOI press release and spreadsheet (2 pages) and the Genworth complaint (29 pages).  Email and ask for the February 2017 package relating to the Massachusetts DOI's handling of requests for LTC insurance premium increases.