Tennessee Regulation Helps Curb Long-Term Care Insurance Rate Increases

Tennessee enacted a long-term care insurance regulation on August 14th, 2004. Tennessee residents purchasing long-term care insurance after that date are protected by Tennessee’s Rate Stability Regulation*.

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

Of the 13 companies selling long-term care insurance in Tennessee today, 10 of them have NOT had any rate increases on any of the policies they’ve sold in Tennessee since the effective date of this regulation (8/14/2004).

Approximately 92.9% of the long-term care insurance rate increases in Tennessee have been on policies purchased before August 14th, 2004. Policies purchased before August 14th, 2004 are NOT protected by Tennessee’s Rate Stability Regulation.

Of the policies purchased after August 14th, 2004 which have had rate increases, the average rate increase has been 34.68% (cumulative). The median rate increase has been 22.00% (cumulative).

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Profit Incentive

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BEFORE 8/14/2004

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 8/14/2004

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 8/14/2004

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 8/14/2004

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 8/14/2004

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 8/14/2004

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 Tennessee, these regulations only apply to policies purchased in Tennessee after the regulation became effective. These regulations became effective in Tennessee on August 14th, 2004. All policies purchased after August 14th, 2004 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.