California Regulation Helps Curb Long-Term Care Insurance Rate Increases

California enacted a long-term care insurance regulation on July 1st, 2002. California residents purchasing long-term care insurance after that date are protected by California’s Rate Stability Regulation* (except participants in Cal-PERS long-term care program).

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

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Profit Incentive

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BEFORE 7/1/2002

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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UNDER THE OLD RULES

Profits were capped in the initial pricing, but more profit could be made when  rate increase was requested.

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AFTER 7/1/2002

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.
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UNDER THE NEW RULES

Higher profits are allowed in the initial pricing, but the higher profits can ONLY be kept IF THEY KEEP PREMIUMS LEVEL.

Margin for Error

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BEFORE 7/1/2002

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 7/1/2002

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 7/1/2002

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 7/1/2002

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 California, these regulations only apply to policies purchased in California after the regulation became effective. These regulations became effective in California on July 1st, 2002. All policies purchased after July 1st, 2002 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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Click to download spreadsheet of rate increases on policies sold in California BEFORE July 1st, 2002

Click to download spreadsheet of rate increases on policies sold in California AFTER July 1st, 2002

Click to download spreadsheet of ALL rate increases on policies sold in California

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.

I'm Ready for Quotes