§431:10H-207.5 - Premium rate schedule increases.

[§431:10H-207.5] Premium rate schedule
increases. (a) This section shall apply as follows:

(1) Except as provided in paragraph (2), this section
applies to any long-term care policy or certificate issued in this State after
December 31, 2007; and

(2) For certificates issued after June 30, 2007,
under a group long-term care insurance policy, as defined in paragraph (1) of
the definition of "group long-term care insurance" in section
431:10H-104, which policy was in force on July 1, 2007, this section shall
apply on the policy anniversary following July 1, 2007.

(b) An insurer shall provide notice of a
pending premium rate schedule increase, including an exceptional increase, to
the commissioner at least thirty days prior to the notice to the policyholders
and shall include:

(1) Information required by section 431:10H-221;

(2) A certification by a qualified actuary that:

(A) 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

(B) The premium rate filing is in compliance
with this section;

(3) An actuarial memorandum justifying the rate
schedule change request that includes:

(A) Lifetime projections of earned premiums
and incurred claims based on the filed premium rate schedule increase and the
method and assumptions used in determining the projected values, including
reflection of any assumptions that deviate from those used for pricing other
forms currently available for sale; provided that:

(i) Annual values for the five years preceding
and the three years following the valuation date shall be provided separately;

(ii) The projections shall include the
development of the lifetime loss ratio, unless the rate increase is an
exceptional increase;

(iii) The projections shall demonstrate
compliance with subsection (c); and

(iv) For exceptional increases, the projected
experience should be limited to the increases in claims expenses attributable
to the approved reasons for the exceptional increase. If the commissioner
determines, as provided in paragraph (4) of the definition of "exceptional
increase" in section 431:10H-104, that offsets may exist, the insurer shall
use appropriate net projected experience;

(B) Disclosure of how reserves have been
incorporated in this rate increase whenever the rate increase will trigger a
contingent benefit upon lapse;

(C) 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 company have been
relied on by the actuary;

(D) A statement that policy design,
underwriting, and claims adjudication practices have been taken into
consideration; and

(E) If it is necessary to maintain consistent
premium rates for new certificates and certificates receiving a rate increase,
the insurer shall file composite rates reflecting projections of new
certificates;

(4) 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

(5) Sufficient information for the review of the premium
rate schedule increase by the commissioner.

(1) Exceptional increases shall provide that seventy
per cent of the present value of projected additional premiums from the
exceptional increase shall be returned to policyholders in benefits;

(2) Premium rate schedule increases shall be
calculated so that the sum of the accumulated value of incurred claims, without
the inclusion of active life reserves, and the present value of future
projected incurred claims, 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 fifty-eight per cent;

(B) Eighty-five per cent of the accumulated
value of prior premium rate schedule increases on an earned basis;

(D) Eighty-five per cent of the present value
of future projected premiums not in subparagraph (C) on an earned basis;

(3) If a policy form has both exceptional and other
increases, the values in paragraph (2)(B) and (D) shall also include seventy
per cent for exceptional rate increase amounts; and

(4) All present and accumulated values used to
determine rate increases shall use the maximum valuation interest rate for
contract reserves, as applicable, as specified in sections 431:5-303 and
431:5-307. The actuary shall disclose as part of the actuarial memorandum the
use of any appropriate averages.

(d) For each rate increase that is
implemented, the insurer shall file for review by the commissioner updated
projections, as provided in subsection (b)(3)(A), annually for the next three
years, and include a comparison of actual results to projected values. The
commissioner may extend the period to greater than three years if actual
results are not consistent with projected values from prior projections. For
group insurance policies that meet the conditions in subsection (k), the
projections required by this subsection shall be provided to the policyholder
in lieu of filing with the commissioner.

(e) If any premium rate in the revised premium
rate schedule is greater than two hundred per cent of the comparable rate in
the initial premium schedule, lifetime projections, as provided in subsection
(b)(3)(A), shall be filed for review by the commissioner every five years
following the end of the required period in subsection (d). For group
insurance policies that meet the conditions in subsection (k), the projections
required by this subsection shall be provided to the policyholder in lieu of
filing with the commissioner.

(f) 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 subsection (c), the commissioner may require the insurer to
implement any of the following:

(1) Premium rate schedule adjustments; or

(2) Other measures to reduce the difference between
the projected and actual experience.

In determining whether the actual experience
adequately matches the projected experience, consideration should be given to
subsection (b)(3)(E), if applicable.

(g) 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:

(1) A plan, subject to the commissioner's approval,
for improved administration or claims processing designed to eliminate the
potential for further deterioration of the policy form requiring further
premium rate schedule increases, or both, or to demonstrate that appropriate
administration and claims processing have been implemented or are in effect;
otherwise the commissioner may impose the condition in subsection (h); and

(2) The original anticipated lifetime loss ratio and
the premium rate schedule increase that would have been calculated according to
subsection (c), had the greater of the original anticipated lifetime loss ratio
or fifty-eight per cent been used in the calculations described in subsection
(c)(2)(A) and (C).

(h) For a rate increase filing that meets the
following criteria, the commissioner shall review, for all policies included in
the filing, the projected lapse rates and past lapse rates during the twelve
months following each increase to determine if significant adverse lapsing has
occurred or is anticipated:

(1) The rate increase is not the first rate increase
requested for the specific policy form or forms;

(2) The rate increase is not an exceptional increase;
and

(3) The majority of the policies or certificates to
which the increase is applicable are eligible for the contingent benefit upon
lapse.

If significant adverse lapsing 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. Following
the determination that a rate spiral exists, 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;
provided that the offer shall be subject to the approval of the commissioner,
be based on actuarially sound principles but not on attained age, and provide
that maximum benefits under any new policy accepted by an insured shall be
reduced by comparable benefits already paid under the existing policy.

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 the maximum rate increase determined based on the combined experience or the
maximum rate increase determined based only on the experience of the insureds
originally issued the form plus ten per cent.

(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, in addition to
subsection (h), may prohibit the insurer from either of the following:

(1) Filing and marketing comparable coverage for a
period of up to five years; or

(2) Offering all other similar coverages and limiting
marketing of new applications to the products subject to recent premium rate
schedule increases.

(j) Subsections (a) to (i) shall not apply to
policies for which the long-term care benefits provided by the policy are
incidental, as defined in section 431:10H-104, if the policy complies with all
of the following provisions:

(1) 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;

(2) 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:

(A) Section 431:10D-104; and

(B) Section 431:10D-107;

(3) The policy meets the disclosure requirements of
sections 431:10H-113 and 431:10H-114;

(4) The portion of the policy that provides insurance
benefits, other than long-term care coverage, meets the requirements as
applicable in the following:

(A) Policy illustrations as required by part
IV of article 10D; and

(B) Disclosure requirements, as applicable, in
article [10D]; and

(5) An actuarial memorandum is filed with the
commissioner that includes:

(A) A description of the basis on which the
long-term care rates were determined;

(B) A description of the basis for the
reserves;

(D) A description and a table of each
actuarial assumption used. For expenses, an insurer shall include per cent of
premium dollars per policy and dollars per unit of benefits, if any;

(E) A description and a table of the
anticipated policy reserves and additional reserves to be held in each future
year for active lives;

(F) The estimated average annual premium per
policy and the average issue age;

(G) A statement as to whether underwriting is
performed at the time of application. The statement shall indicate whether
underwriting is used and, if used, the statement shall include a description of
the type or types of underwriting used, such as medical underwriting or
functional assessment underwriting. Concerning a group policy, the statement
shall indicate whether the enrollee or any dependent will be underwritten and
when that underwriting occurs; and

(H) 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.

(k) Subsections (f) and (h) shall not apply to
group insurance policies as defined in paragraph (1) of the definition of
"group long-term care insurance" in section 431:10H-104 where:

(1) The policies insure two hundred fifty or more
persons and the policyholder has five thousand 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 shall not be less than
twenty per cent of the total premium for the group in the calendar year prior
to the year a rate increase is filed.

(l) "Exceptional increase" for
purposes of this section shall be as defined in section 431:10H-104. [L 2007, c
233, pt of §4]