Alabama Regulation Helps Curb Long-Term Care Insurance Rate Increases

Alabama enacted a long-term care insurance regulation on July 1st, 2006. Alabama residents purchasing long-term care insurance after that date are protected by Alabama’s Rate Stability Regulation*.

The regulation has helped curb long-term care insurance rate increases in Alabama because it forces long-term care insurance companies to lower their profits if they seek a rate increase.

Of the 12 companies selling long-term care insurance in Alabama today, 8 of them have NOT had any rate increases on any of the policies they’ve sold in Alabama since the effective date of this regulation (7/1/2006).

Approximately 96.6% of the long-term care insurance rate increases in Alabama have been on policies purchased before July 1st, 2006. Policies purchased before July 1st, 2006 are NOT protected by Alabama’s Rate Stability Regulation.

Of the policies purchased after July 1st, 2006 which have had rate increases, the average rate increase has been 18.72% (cumulative). The median rate increase has been 15.0% (cumulative).

Scroll to the bottom of this page to view the spreadsheets containing the data.

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Profit Incentive

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BEFORE 7/1/2006

Under the old rules, when a rate increase was requested the insurance company could price normal profit levels into the rate increase. In many cases, a rate increase would result in increased profits for the insurance company.

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AFTER 7/1/2006

Under the new rules, if an insurance company requests a rate increase they must decrease the profit levels in their pricing to a cap that is pre-determined by the new regulation. This regulation has removed the profit motive from rate increases.

Margin for Error

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BEFORE 7/1/2006

Under the old rules, the insurance companies were NOT allowed to include in their pricing any “margin for error”. There was no cushion priced into the policy in the event their claims exceeded their original projections. This resulted in a lot of rate increases.

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AFTER 7/1/2006

Under the new rules, every insurance company is REQUIRED to include a “cushion” in their pricing–a margin for error. The goal of the “cushion” is to try to avoid the need for any future premium increases.

Actuarial Certification

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BEFORE 7/1/2006

Under the old rules, the insurance companies did NOT have to certify the accuracy of their pricing assumptions.  If their assumptions turned out to be wrong, they would just request a rate increase.

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AFTER 7/1/2006

Under the new rules, the insurance companies are required to have a qualified actuary certify that no premium increases are anticipated over the life of the policy.  This is why they are required to include a “margin for error” in their pricing.

Not all policies are covered under these new regulations.

Although these regulations are working very well in Alabama, these regulations only apply to policies purchased in Alabama after the regulation became effective. These regulations became effective in Alabama on July 1st, 2006. All policies purchased after July 1st, 2006 ARE protected by these regulations.

*Many group policies (like the Federal Long-Term Care Insurance Program, CalPERS, and other self-funded groups) do not have to comply with the Rate Stability Regulation.

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Shop and Compare for Long Term Care

Our focus is to help you get the coverage you want, from a top insurance company, for the lowest possible premium.