technology books: Calif. Legislature Passes Major LTC Insurance Reform Bill

Sunday, September 2, 2012

Calif. Legislature Passes Major LTC Insurance Reform Bill

SACRAMENTO, Calif., Aug. 31 -- The California Department of Insurance issued the following news release:

Insurance Commissioner Dave Jones today announced that the California State Legislature has passed AB 999, authored by Assembly Aging and Long-Term Care Committee Chair Mariko Yamada (D-Davis). The bill, sponsored by Commissioner Jones and the California Department of Insurance, protects consumers from excessive premium rate volatility by modifying the long-term care insurance (LTC) premium rate development process. The measure also allows consumers to make more informed decisions about buying a policy by giving them the chance to review language before purchasing one.

"The rising cost of long-term care insurance is one of the most pressing issues facing senior consumers today," said Commissioner Jones. "What's most disturbing is the size of long-term care rate increases. They threaten the ability of many seniors, especially those on fixed incomes, to maintain or purchase long-term care insurance. AB 999 provides for additional transparency and protections related to long-term care insurance rate increases. I want to thank Assembly Member Mariko Yamada for her leadership in carrying this legislation."

"AB 999 brings needed transparency to the long-term care insurance market and strengthens the Insurance Commissioner's authority to protect consumers from the excessive premium rate hikes that have long plagued the industry," said Assembly Member Yamada. "On behalf of thousands of current policyholders, and millions of California's "seniors-in-waiting", I applaud Insurance Commissioner Dave Jones for sponsoring this legislation."

Long-term care insurance was first sold in California in the early 1980's. Since it was a new product, insurers had no historical experience upon which to rely when setting initial premium rates. As a result, pricing of LTC policies was often based upon what were later found to be inaccurate assumptions. As insurers gained more experience in the market, premium rates increase to compensate for those initial inaccuracies.

In 2000, the Legislature passed SB 898 to stabilize what became escalating rates. However, the rate stabilization features passed years before are not completely restoring predictability as intended to the long-term care insurance market today. Among other things, AB 999 would prevent insurers from passing poor investment returns through to taxpayers and eliminate the practice of insurers "cherry-picking" a small group of policies to justify large rate increases, among other strong consumer protections.

"I urge Governor Jerry Brown to sign this necessary legislation aimed at protecting California's seniors," said Commissioner Jones.

TNS 23SQ 120901-JF78-4010170 StaffFurigay

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