New Jersey Regulation Helps Curb Long-Term Care Insurance Rate Increases

New Jersey enacted a long-term care insurance regulation on June 16th, 2006. New Jersey residents purchasing long-term care insurance after that date are protected by New Jersey’s Rate Stability Regulation*.

The regulation has helped curb long-term care insurance rate increases in New Jersey 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 6/16/2006

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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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 6/16/2006

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.
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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 6/16/2006

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 6/16/2006

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 6/16/2006

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 6/16/2006

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 New Jersey, these regulations only apply to policies purchased in New Jersey after the regulation became effective. These regulations became effective in New Jersey on June 16th, 2006. All policies purchased after June 16th, 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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Click to download spreadsheet of rate increases on policies sold in New Jersey BEFORE June 16th, 2006

Click to download spreadsheet of rate increases on policies sold in New Jersey AFTER June 16th, 2006

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

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