Rate Stability Rules

The National Association of Insurance Commissioners (NAIC) developed Rate Stability Rules to make it harder for insurance companies to raise Long-Term Care Insurance premiums. Rate Stability Rules are also known as Long-Term Care Insurance Model Regulation. 

Rate Stability Rules help prevent price errors found with older legacy policies. It also places more rules and guidelines on companies, actuaries, and regulators. These guidelines combined help ensure premiums remain stable but affordable.

The guidelines require insurance companies to:

• Plan their pricing as if near zero people would lapse their policies.

• Plan for low interest rates. 

• Account for gender when pricing policies. Claim data shows women live longer and thrive longer in care settings, meaning they're riskier to insure. 

• Adjust mortality and morbidity assumptions. Claims data shows policyholders live longer and prefer different types of care than previously assumed. Companies are required to price for those changed assumptions. 

• Plan an extra buffer to cover possible mistakes in price planning, diminishing the risk of future rate increases. 

• Follow new rules surrounding premium increase requests. 

• Eliminate "profit" from their reasons for requesting or approving a rate increase. 

• Price policies on rate stability and prevent underpricing. 

• Price current plans at least as much as older plans with rate increases. 

• Verify the accuracy of their pricing assumptions with actuarial certifications. This helps ensure that premiums are not expected to increase over the lifetime of the policies. 

The vast majority of rate increases have occurred on Long-Term Care Insurance policies issued before these new rules went into effect. 

Any policy issued after the state adopted these rules has clear guidelines about what the policy does and does not cover and how that coverage functions. This gives consumers peace of mind about purchasing a Long-Term Care Insurance policy. To learn more, read our article on Long-Term Care Insurance regulations.