Chapter Ins 3

Ins 3.455(8)(b) (b) Reserves for long-term care policies shall be determined in accordance with s. Ins 3.17 (8) (b) using tables established for reserve purposes by a qualified actuary meeting the requirements of s. Ins 6.12 and acceptable to the commissioner.

Ins 3.455(9) (9) Long-term care rate increase standards.

Ins 3.455(9)(a) (a) The initial premium rate schedule provided an insured covered by a long-term care policy may not increase during the initial 3 years in which the policy is in force.

Ins 3.455(9)(b) (b) Except as provided in par. (d), any increase in the premium rate schedule provided an insured after the initial 3-year period is subject to the following:

Ins 3.455(9)(b)1. 1. Any premium rate increase after the initial 3-year period is guaranteed for at least 2 years after its effective date;

Ins 3.455(9)(b)2. 2. For those insureds age 75 or above and whose long term care policy(s) has been in force for at least 10 years, no rate increase shall exceed 10%;

Ins 3.455(9)(b)3. 3. If an insurer of any long-term care policy increases rates for a policy by more than 50% in any 3-year period, the insurer shall discontinue issuing all long-term care policies in this state for a period of 2 years from the effective date of such rate increase.

Ins 3.455(9)(b)3.a. a. If an insurer issues both individual and group long-term care policies, the insurer shall discontinue issuing the type of coverage (individual and/or group) for which rates were increased more than 50% in a 3-year period.

Ins 3.455(9)(b)3.b. b. All rate filings subject to this requirement shall include a past history of all previous rate increases and a certification of the maximum rate increase over the last thirty-five months including the current rate increase as a percent of the premium in the first month of the 35 month period.

Ins 3.455(9)(b)3.c. c. This provision shall also apply to any replacing insurer which purchases or otherwise assumes a block of long-term care policies from a prior insurer. For purposes of this provision, any rate increases of the prior insurer shall apply to the replacing insurer.

Ins 3.455(9)(b)4. 4. The premium charged to an insured may not increase due to either:

Ins 3.455(9)(b)4.a. a. The increasing age of the insured at ages beyond 65; or

Ins 3.455(9)(b)4.b. b. The duration the insured has been covered under the policy.

Ins 3.455(9)(c) (c) Long-term care policies which provide for inflation protection shall be subject to the restrictions contained in pars. (a) and (b). However, the purchase of additional coverage may not be considered a premium rate increase for purposes of determining compliance with par. (b) at the time additional coverage is purchased. The premium charged for the purchase of additional coverage shall be subject to par. (b) for any subsequent premium rate increases.

Ins 3.455(9)(d) (d) The commissioner may institute future rulemaking proceedings to amend the provisions in par. (b) in appropriate circumstances, including the following:

Ins 3.455(9)(d)1. 1. Applicable state or federal law is enacted which materially affects the insured risk.

Ins 3.455(9)(d)2. 2. Unforeseen changes occur in long-term care delivery, insured morbidity or insured mortality.

Ins 3.455(9)(d)3. 3. Judicial interpretations or rulings are rendered regarding policy benefits or benefit triggers resulting in unforeseen claim liabilities.

Ins 3.455(9)(e) (e) Except as provided in par. (f) the provisions of this subsection apply only to long-term care insurance policies and certificates issued from August 1, 1996 to December 31, 2001.

Ins 3.455(9)(f) (f) The provisions of this subsection do not apply to any group long-term care insurance policy or certificate issued to any labor organization or to any trust or trustee of a fund established by any employer or labor organization for members or former members if the group policy was in force prior to August 1, 1996.

Ins 3.455(9m) (9m) Premium rate schedule increases, requesting and determining exceptional rate increases.

Ins 3.455(9m)(a) (a) An insurer shall provide notice of a pending premium rate schedule increase, including an exceptional increase, to the commissioner at least 60 days prior to the notice to the policyholders and shall include all of the following:

Ins 3.455(9m)(a)1. 1. The required disclosure of rating practices to consumers notice as described under s. Ins 3.46 (9) (b).

Ins 3.455(9m)(a)2. 2. A certification by a qualified actuary that the premium rate filing is in compliance with the provisions of this subsection and if the requested premium rate schedule increase is implemented and the underlying assumptions, which reflect moderately adverse conditions, are realized, no further premium rate schedule increases are anticipated.

Ins 3.455(9m)(a)3. 3. An actuarial memorandum justifying the rate schedule change request that includes all of the following:

Ins 3.455(9m)(a)3.a. a. Lifetime projections of earned premiums and incurred claims based on the filed premium rate schedule increase; and the method and assumptions used in determining the projected values, including reflection of any assumptions that deviate from those used for pricing other forms currently available for sale, including all of the following:

i. Annual values for the 5 years preceding and the 3 years following the valuation date shall be provided separately.

ii. Projections including the development of the lifetime loss ratio, unless the rate increase is an exceptional increase.

iii. Projections demonstrating compliance with par. (b).

Ins 3.455(9m)(a)3.b. b. Disclosure of how reserves have been incorporated in this rate increase whenever the rate increase will trigger contingent benefit upon lapse.

Ins 3.455(9m)(a)3.c. c. Disclosure of the analysis performed to determine why a rate adjustment is necessary, which pricing assumptions were not realized and why, and what other actions taken by the insurer have been relied on by the actuary.

Ins 3.455(9m)(a)3.d. d. A statement that policy design, underwriting and claims adjudication practice have been taken into consideration.

Ins 3.455(9m)(a)3.e. e. If it is necessary to maintain consistent premium rates for new certificates and certificates receiving a rate increase, the insurer shall file composite rates reflecting projections of new certificates.

Ins 3.455(9m)(a)4. 4. A statement that renewal premium rate schedules are not greater than new business premium rate schedules except for differences attributable to benefits, unless sufficient justification is provided to the commissioner.

Ins 3.455(9m)(a)5. 5. Sufficient information for review of the premium rate schedule increase by the commissioner.

Ins 3.455(9m)(a)6. 6. For exceptional increases, the projected experience should be limited to the increases in claims expenses attributable to the approved reasons for the exceptional increase. If the commissioner determines that offsets may exist, the insurer shall use appropriate net projected experience.

Ins 3.455(9m)(a)7. 7. The commissioner may request a review by an independent actuary or a professional actuarial body of the basis for a request that an increase be considered an exceptional increase.

Ins 3.455(9m)(b) (b) All premium rate schedule increases shall be determined in accordance with all of the following requirements:

Ins 3.455(9m)(b)1. 1. The commissioner, in determining that the necessary basis for an exceptional increase exists, shall also determine any potential offsets to higher claims costs.

Ins 3.455(9m)(b)2. 2. Exceptional increases shall provide that 70% of the present value of projected additional premiums from the exceptional increase will be returned to policyholders in benefits.

Ins 3.455(9m)(b)3. 3. Premium rate schedule increases shall be calculated such that the sum of the accumulated value of incurred claims, without the inclusion of active life reserves, and the present value of future projected incurred claims, without the inclusion of active life reserves, will not be less than the sum of the following:

Ins 3.455(9m)(b)3.a. a. The accumulated value of the initial earned premium times 58%.

Ins 3.455(9m)(b)3.b. b. Eighty-five percent of the accumulated value of prior premium rate schedule increases on an earned basis.

Ins 3.455(9m)(b)3.c. c. The present value of future projected initial earned premiums times 58%.

Ins 3.455(9m)(b)3.d. d. Eighty-five percent of the present value of future projected premiums not in this subd. 3. c. on an earned basis.

Ins 3.455(9m)(b)4. 4. If a policy form has both exceptional and other increases, the values in subd. 3. b. and d. shall also include 70% for exceptional rate increase amount.

Ins 3.455(9m)(b)5. 5. All present and accumulated values used to determine rate increases shall use the maximum valuation interest rate for contract reserves as specified in s. Ins 3.17. The actuary shall disclose, as part of the actuarial memorandum, the use of any appropriate averages.

Ins 3.455(9m)(c) (c) For each rate increase that is implemented, the insurer shall file for review by the commissioner updated projections as defined in par. (a) 3. a. annually for the next 3 years and include a comparison of actual results to projected values. The commissioner may extend the period to greater than 3 years if actual results are not consistent with projected values from prior projections.

Ins 3.455(9m)(d) (d) If any premium rate in the revised premium rate schedule is greater than 200% of the comparable rate in the initial premium schedule, lifetime projections, as defined in par. (a) 3. a., shall be filed for review by the commissioner every 5 years following the end of the required period in par. (c).

Ins 3.455(9m)(e) (e) If the commissioner has determined that the actual experience following a rate increase does not adequately match the projected experience and that the current projections under moderately adverse conditions demonstrate that incurred claims will not exceed proportions of premiums specified in par. (b), the commissioner may require the insurer to make premium rate schedule adjustments or take other measures to reduce the difference between the projected and actual experience. In determining whether the actual experience adequately matches the projected experience, consideration should be given to par. (a) 3. e., if applicable.

Ins 3.455(9m)(f) (f) If the majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse, the insurer shall file all of the following:

Ins 3.455(9m)(f)1. 1. A plan, subject to commissioner approval, for improved administration or claims processing designed to eliminate the potential for further deterioration of the policy form requiring further premium rate schedule increases, or both, or to demonstrate that appropriate administration and claims processing have been implemented or are in effect; otherwise the commissioner may impose the condition in par. (g).

Ins 3.455(9m)(f)2. 2. The original anticipated lifetime loss ratio, and the premium rate schedule increase that would have been calculated according to par. (b) had the greater of the original anticipated lifetime loss ratio or 58% been used in the calculations described in par. (b) 3. a. and c.

Ins 3.455(9m)(g) (g)

Ins 3.455(9m)(g)1. 1. For a rate increase filing that meets the following criteria, the commissioner shall review, for all policies included in the filing, the projected lapse rates and past lapse rates during the 12 months following each increase to determine if significant adverse lapsation has occurred or is anticipated when all of the following conditions occur:

Ins 3.455(9m)(g)1.a. a. The rate increase is not the first rate increase requested for the specific policy form or forms.

Ins 3.455(9m)(g)1.b. b. The rate increase is not an exceptional increase.

Ins 3.455(9m)(g)1.c. c. The majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse.

Ins 3.455(9m)(g)2. 2. If significant adverse lapsation has occurred, is anticipated in the filing or is evidenced in the actual results as presented in the updated projections provided by the insurer following the requested rate increase, the commissioner may determine that a rate spiral exists. Following the determination that a rate spiral exists, the commissioner may require the insurer to offer, without underwriting, to all in force insureds subject to the rate increase the option to replace existing coverage with one or more reasonably comparable products being offered by the insurer or its affiliates.

Ins 3.455(9m)(g)3. 3. The offer described in subd. 2. shall be subject to the approval of the commissioner, be based on actuarially sound principles, but not be based on attained age, and shall provide that maximum benefits under any new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy.

Ins 3.455(9m)(g)4. 4. The insurer shall maintain the experience of all the replacement insureds separate from the experience of insureds originally issued the policy forms. If a rate increase on the policy form, the rate increase shall be limited to the maximum rate increase determined based on the combined experience or the maximum rate increase determined based only on the experience of the insureds originally issued the form plus 10%, whichever is less.

Ins 3.455(9m)(h) (h) If the commissioner determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates for long-term care, nursing home, and home health care insurance, the commissioner may, in addition to the provisions of par. (g), either prohibit the insurer from filing and marketing comparable coverage for a period of up to 5 years, or prohibit the insurer from offering all other similar coverages and require the insurer to limit marketing of new applications to the products subject to recent premium rate schedule increases.

Ins 3.455(9m)(i) (i) Paragraphs (a) through (h) shall not apply to policies for which the benefits provided by the policy are incidental.

Ins 3.455(9m)(j) (j) Except as provided in pars. (k) and (L) the provisions of this subsection apply to any long-term care, nursing home or home health care policy or certificate issued in this state on or after January 1, 2002.

Ins 3.455(9m)(k) (k) For group long-term care insurance certificates issued to employer-sponsored groups or labor organizations in this state and in force on or after January 1, 2002 the provisions of this subsection shall apply on the first policy anniversary occurring at least 12 months after January 1, 2002.

Ins 3.455(9m)(L) (L) In lieu of filing the projections required by pars. (c) and (d) with the commissioner, an insurer may file projections with the employer if that employer has at least 5,000 eligible employees of whom at least 250 are covered under the policy or the employer pays at least 20% of the annual group premium in the year preceding the increase.

Ins 3.455(10) (10) Initial filing requirements.

Ins 3.455(10)(a) (a) This subsection applies to any long-term care, nursing home and home health care policy issued in this state on or after January 1, 2002.

Ins 3.455(10)(b) (b) An insurer shall file all of the following with the commissioner at least 30 days before making a long-term care insurance policy available for sale:

Ins 3.455(10)(b)1. 1. A copy of the disclosure documents as required by s. Ins 3.46 (9).

Ins 3.455(10)(b)2. 2. An actuarial certification consisting of all the following:

Ins 3.455(10)(b)2.a. a. A statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated.

Ins 3.455(10)(b)2.b. b. A statement that the policy design and coverage provided have been reviewed and taken into consideration.

Ins 3.455(10)(b)2.c. c. A statement that the underwriting and claims adjudication processes have been reviewed and taken into consideration.

Ins 3.455(10)(b)2.d. d. A complete description of the basis for contract reserves that are anticipated to be held under the form.

Ins 3.455(10)(b)2.e. e. Sufficient detail or sample calculations provided so as to have a complete depiction of the reserve amounts to be held.

Ins 3.455(10)(b)2.f. f. A statement that the assumptions used for reserves contain reasonable margins for adverse experience.

Ins 3.455(10)(b)2.g. g. A statement that the net valuation premium for renewal years does not increase except for attained-age rating where permitted.

Ins 3.455(10)(b)2.h. h. A statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses; or if such a statement cannot be made, a complete description of the situations where this does not occur. An aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship. If the gross premiums for certain age groups appear to be inconsistent with this requirement, the commissioner may request a demonstration under subd. 3. based on a standard age distribution.

Ins 3.455(10)(b)2.i. i. A statement that the premium rate schedule is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefit or a comparison of the premium schedules for similar policy forms that are currently available from the insurer with an explanation of the differences.

Ins 3.455(10)(b)3. 3. The commissioner may request an actuarial demonstration that benefits are reasonable in relation to premiums. The actuarial demonstration shall include either premium and claim experience on similar policy forms, adjusted for any premium or benefit differences, relevant and credible data from other studies, or both.

Ins 3.455(10)(b)4. 4. If the commissioner asks for additional information under this provision, the period in par. (b) does not include the period during which the insurer is preparing the requested information.

Ins 3.455 History History: Cr. Register, April, 1991, No. 424, eff. 6-1-91; cr. (9), Register, July, 1996, No. 487, eff. 8-1-96; CR 00-188: cr. (3) (c) to (g), (5) (b) 10. to 13., (d), (9m) and (10), am. (9) (e), r. and recr. (9) (f), Register July 2001, No. 547 eff. 1-1-02; EmR0817: emerg. r. and recr. (3), am. (7) (b) to (d), cr. (7) (e) to (j), eff. 6-3-08; CR 08-032: r. and recr. (3), am. (7) (b) to (d), cr. (7) (e) to (j) Register October 2008 No. 634, eff. 11-1-08; correction in (2) (b) 3. made under s. 13.92 (4) (b) 7., Stats., Register October 2008 No. 634.

Ins 3.455 Note Note: CR 08-032 first applies to policies or certificates issued on or after January 1, 2009 or on the first renewal date on or after January 1, 2009, but no later than January 1, 2010 for collectively bargained policies or certificates.

Ins 3.46 Ins 3.46 Standards for long-term care, nursing home and home health care insurance and life insurance-long-term care coverage.

Ins 3.46(1) (1) Findings. The findings under s. Ins 3.455 (1) are incorporated by reference. The commissioner finds that the adoption of minimum standards, compensation restrictions and disclosure requirements for long-term care and life insurance-long-term care coverage will reduce marketing abuses and will assist consumers in their attempts to understand the benefits offered and to compare different products. The commissioner finds that failure to comply with this section is misleading and deceptive under s. 628.34 (12), Stats., and constitutes an unfair trade practice.

Ins 3.46(2) (2) Applicability.

Ins 3.46(2)(b) (b) This section, except for sub. (10) (b) to (e), does not apply to an individual long-term care policy or life insurance-long-term care coverage, to a group long-term care policy or life insurance-long-term care coverage or a certificate under the group policy, or to a renewal policy or coverage or certificate, if:

Ins 3.46(2)(b)1. 1. The individual long-term care policy or life insurance-long-term care coverage was issued prior to June 1, 1991; or