(1) Except as provided in §A(2) of this regulation, this regulation applies to any long-term care policy or certificate issued in Maryland on or after September 1, 2017.
(2) For certificates issued on or after the effective date of this amended regulation under an employer group long-term care insurance policy as defined in Regulation .02B(1) of this chapter if the policy was in force at the time this amended regulation became effective, the provisions of this regulation shall apply on the policy anniversary following March 1, 2018.
B. Premium Rate Increase Filing Requirements.
(1) An insurer shall provide notice of a pending premium rate schedule increase, including an exceptional increase, to the Commissioner at least 30 days before issuing the notice to the policyholders.
(2) The notice to the Commissioner required by §B(1) of this regulation shall include:
(a) Information required by Regulation .03 of this chapter;
(b) Certification by a qualified actuary that:
(i) If the requested premium rate schedule increase is implemented and the underlying assumptions, which reflect moderately adverse conditions, are realized, no further premium rate schedule increases are anticipated; and
(ii) The premium rate filing is in compliance with the provisions of this regulation;
(c) An actuarial memorandum justifying the rate schedule change request that includes:
(i) Lifetime projections of earned premiums and incurred claims based on the filed premium rate schedule increase;
(ii) The method and assumptions used in determining the lifetime projections described in §B(2)(c)(i) of this regulation, including reflection of any assumptions that deviate from those used for pricing other forms currently available for sale;
(iii) Disclosure of how reserves have been incorporated in this rate increase whenever the rate increase will trigger contingent benefit on lapse;
(iv) Disclosure of the analysis performed to determine why a rate adjustment is necessary, which pricing assumptions were not realized and why, and what other actions taken by the insurer have been relied on by the actuary;
(v) A statement that policy design, underwriting and claims adjudication practices have been taken into consideration; and
(vi) If it is necessary to maintain consistent premium rates for new certificates and certificates receiving a rate increase, the insurer will need to file composite rates reflecting projections of new certificates;
(d) A statement that renewal premium rate schedules are not greater than new business premium rate schedules except for differences attributable to benefits, unless sufficient justification is provided to the Commissioner; and
(e) Sufficient information for review and approval of the premium rate schedule increase by the Commissioner.
(3) The lifetime projection and assumptions required to be filed under §B(2)(c)(i) and (ii) of this regulation shall comply with the following requirements:
(a) Annual values for the 5 years preceding and the 3 years following the valuation date shall be provided separately;
(b) The projections shall include the development of the lifetime loss ratio, unless the rate increase is an exceptional increase;
(c) The projections shall demonstrate compliance with §C of this regulation; and
(d) For exceptional increases:
(i) The projected experience shall be limited to the increases in claims expenses attributable to the approved reasons for the exceptional increase; and
(ii) If the Commissioner determines as provided in Regulation .07C of this chapter that offsets may exist, the insurer shall use appropriate net projected experience.
(4) The insurer may request and the Commissioner may approve a premium rate schedule increase less than what is required under this regulation without submission of the certification in §B(2)(b)(i) of this regulation, if:
(a) The actuarial memorandum discloses the premium rate schedule increase necessary to make the certification required under §B(2)(b) of this regulation;
(b) The premium rate schedule increase filing satisfies all other requirements of this regulation; and
(c) The premium rate schedule is, in the opinion of the Commissioner, in the best interest of policyholders.
C. All premium rate schedule increases shall be determined in accordance with the following requirements:
(1) Exceptional increases shall provide that 70 percent of the present value of projected additional premiums from the exceptional increase will be returned to policyholders in benefits;
(2) Premium rate schedule increases shall be calculated such that the sum of the lesser of the accumulated value of actual incurred claims, without the inclusion of active life reserves, or the accumulated value of historic expected claims, with the inclusion of active life reserves, plus the present value of the future expected incurred claims, projected without the inclusion of active life reserves, will not be less than the sum of the following:
(a) The accumulated value of the initial earned premium times 58 percent;
(b) 85 percent of the accumulated value of prior premium rate schedule increases on an earned basis;
(c) The present value of future projected initial earned premiums times 58 percent; and
(d) 85 percent of the present value of future projected premiums not in §C(2)(c) of this regulation on an earned basis;
(3) Expected claims shall be calculated as follows:
(a) Original filing assumptions shall be assumed until new assumptions are filed as part of a rate increase;
(b) New assumptions shall be used for all periods beyond each requested effective date of a rate increase;
(c) For each calendar year, expected claims shall be based on in-force business at the beginning of the calendar year;
(d) Expected claims shall include margins for moderately adverse experience that are:
(i) Amounts included in the claims that were used to determine the lifetime loss ratio consistent with the original filing; or
(ii) Amounts as modified in any rate increase filing.
(4) If a policy form has both exceptional and other increases, the values in §C(2)(b) and (d) shall also include 70 percent for exceptional rate increase amounts;
(5) All present and accumulated values used to determine rate increases, including the lifetime loss ratio consistent with the original filing reflecting margins for moderately adverse experience, shall use the maximum valuation interest rate for contract reserves as specified in Regulation .13 of this chapter; and
(6) The actuary shall disclose as a part of the actuarial memorandum the use of any appropriate averages.
D. Updated Projections.
(1) For each rate increase that is implemented, the insurer shall file for approval by the Commissioner updated projections, as described in §B(2)(c)(i) and (ii) of this regulation, annually for the next 3 years and include a comparison of actual results to projected values.
(2) The Commissioner may extend the period to greater than 3 years if actual results are not consistent with projected values from prior projections.
(3) For group insurance policies that meet the conditions in §K of this regulation, the projections required by this section shall be provided to the policyholder instead of filing with the Commissioner.
E. Lifetime Projections.
(1) If any premium rate in the revised premium rate schedule is greater than 200 percent of the comparable rate in the initial premium schedule, lifetime projections, as described in §B(2)(c)(i) and (ii) of this regulation, shall be filed for approval by the Commissioner every 5 years following the end of the required period in §D of this regulation.
(2) For group insurance policies that meet the conditions in §L of this regulation, the projections required by this section shall be provided to the policyholder instead of filing with the Commissioner.
F. Commissionerís Authority if Actual Experience Does Not Match Projected Experience.
(1) If the Commissioner has determined that the actual experience following a rate increase does not adequately match the projected experience and that the current projections under moderately adverse conditions demonstrate that incurred claims will not exceed proportions of premiums specified in §C of this regulation, the Commissioner may require the insurer to implement any of the following:
(a) Premium rate schedule adjustments; or
(b) Other measures to reduce the difference between the projected and actual experience.
(2) In determining whether the actual experience adequately matches the projected experience, consideration shall be given to §B(2)(c)(vi) of this regulation, if applicable.
G. Filing Required if Rate Increase Causes Eligibility for Contingent Benefit.
(1) If the majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse, the insurer shall file:
(a) A plan, subject to the Commissionerís approval, for improved administration;
(b) A plan, subject to the Commissionerís approval, for improved claims processing; or
(c) Both plans, if applicable.
(2) A plan filed in accordance with §G(1) of this regulation shall:
(a) Demonstrate that it is designed to eliminate the potential for further deterioration of the policy form requiring further premium rate schedule increases; or
(b) Demonstrate that appropriate administration or claims processing, or both, has been implemented or is in effect.
(3) If the insurer fails to file a plan required by §G(1) of this regulation or fails to receive approval from the Commissioner of the plan filed under §G(1) of this regulation, the Commissioner may impose the requirements in §H of this regulation.
H. Lapse Rates.
(1) The Commissioner shall review, for all policies included in the filing, the projected lapse rates and past lapse rates during the 12 months following each increase to determine if significant adverse lapsation has occurred or is anticipated, if a rate increase filing meets the following criteria:
(a) The rate increase is not the first rate increase requested for the specific policy form or forms;
(b) The rate increase is not an exceptional increase; and
(c) The majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse.
(2) If the Commissioner determines during the review described in §H(1) of this regulation that significant adverse lapsation has occurred, is anticipated in the filing, or is evidenced in the actual results as presented in the updated projections provided by the insurer following the requested rate increase, the Commissioner may determine that a rate spiral exists.
(3) If the Commissioner determines that a rate spiral exists as described in §H(2) of this regulation, the Commissioner may require the insurer to offer, without underwriting, to all in force insureds subject to the rate increase the option to replace existing coverage with one or more reasonably comparable products being offered by the insurer or its affiliates.
(4) The offer required by §H(3) of this regulation shall:
(a) Be subject to the approval of the Commissioner;
(b) Be based on actuarially sound principles, but not be based on attained age; and
(c) Provide that maximum benefits under any new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy.
(5) Maintenance of Experience. The insurer shall maintain the experience of all the replacement insureds separate from the experience of insureds originally issued the policy forms. In the event of a request for a rate increase on the policy form, the rate increase shall be limited to the lesser of:
(a) The maximum rate increase determined based on the combined experience; and
(b) The maximum rate increase determined based only on the experience of insureds originally issued the form plus 10 percent.
I. If the Commissioner determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates for long-term care insurance, the Commissioner may, in addition to the provisions of §H of this regulation, prohibit the insurer from:
(1) Filing and marketing comparable coverage for a period of up to 5 years;
(2) Offering all other similar coverages; or
(3) Limiting marketing of new applications to the products subject to recent premium rate schedule increases.
J. Exemption for Incidental Coverage.
(1) Sections AI of this regulation do not apply to policies for which the long-term care benefits provided by the policy are incidental, as defined in Regulation .02B(3) of this chapter, if the policy complies with all of the following requirements:
(a) The interest credited internally to determine cash value accumulations, including long-term care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;
(b) The portion of the policy that provides insurance benefits other than long-term care coverage meets the nonforfeiture requirements as applicable in any of the following:
(i) The standard nonforfeiture requirements for life insurance found in Insurance Article, Title 16, Subtitle 3, Annotated Code of Maryland;
(ii) The standard nonforfeiture requirements for individual deferred annuities found in Insurance Article, Title 16, Subtitle 5, Annotated Code of Maryland; or
(iii) The requirements for variable annuities found in COMAR 31.09.04;
(c) The policy meets the disclosure requirements of Insurance Article, §§18-108 and 18-117, Annotated Code of Maryland;
(d) The portion of the policy that provides insurance benefits other than long-term care coverage meets the requirements as applicable in the following:
(i) Policy illustrations for life insurance as required by COMAR 31.09.09;
(ii) Disclosure requirements for annuities as required by COMAR 31.15.04; and
(iii) Disclosure requirements for variable annuities as required by COMAR 31.09.04;
(e) An actuarial memorandum is filed with the Commissioner that includes:
(i) A description of the basis on which the long-term care rates were determined;
(ii) A description of the basis for the reserves;
(iii) A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;
(iv) A description and a table of each actuarial assumption used;
(v) A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;
(vi) The estimated average annual premium per policy and the average issue age;
(vii) A statement as to whether underwriting is performed at the time of application; and
(viii) A description of the effect of the long-term care policy provision on the required premiums, nonforfeiture values, and reserves on the underlying insurance policy, both for active lives and those in long-term care claim status.
(2) For the expense assumptions used in §J(1)(e)(iv) of this regulation, an insurer shall include percent of premium dollars per policy and dollars per unit, if any.
(3) Contents of Statement on Underwriting.
(a) The statement required by §J(1)(e)(vii) of this regulation shall indicate whether underwriting is used.
(b) If underwriting is used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting.
(c) If coverage is under a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs.
K. Sections F and H of this regulation do not apply to employer group long-term care insurance if:
(1) The policies insure 250 or more individuals and the policyholder has 5,000 or more eligible employees of a single employer; or
(2) The policyholder, and not the certificate holders, pays a material portion of the premium, which may not be less than 20 percent of the total premium for the group in the calendar year before the year a rate increase is filed.