Market Changes Pushing Update Of LTC Model Act

Consequently, uniform regulation is important to the consumer, she said, but what LTC insurance counselors are finding when consumers come to them for help is that there is not much uniformity. What companies and agents are and are not allowed to do varies by state, Burns said.

One goal of any regulatory efforts should be to remove the guesswork consumers face with what is a complex product, according to Burns.

Uniformity is also important to companies, said Glowacki. With the increase in sales through worksite marketing, uniformity will become more important because lack of uniformity can cause differences in the same contract for employees in the same company, he said. For example, Glowacki continued, employees of the same employer in different states with the same contract could conceivably pay different premiums because of variations in state regulation.

Burns raised another issue regarding the ability of a producer to self-certify and assume the role of LTC specialist. Most states dont require training and when they do, there are so many different programs, she said.

Proper training is needed, she continued, because "there is a lot of activity in this marketplace and not all of it is high caliber." However, she also noted that there are a lot of hard-working agents.

The NAIC could set the standard for what is good training, Burns said.

And, as the current model is examined, it will be important to pay close attention to language, she explained. Companies can avoid being subject to the requirements in current laws, Burns said. As an example, she said a requirement of 12 months of coverage for products advertised or marketed as LTC insurance can be circumvented by offering contracts with coverage for shorter durations. In California, that issue was resolved by including language that says "any product that provides a benefit," Burns added.

Going forward, one goal that will be more important to consumers is to preserve insurability, she explained. Consequently, an option to guarantee that insurability could be a valuable part of a companys LTC offering, Burns said.

Having strong regulation in place will be important because "in the next few years, claims will put pressures on the industry that were not there before, and there is pressure now," said Van Ellet, health and policy team leader in AARPs state legislation department, Washington.

One step that should be taken, he said, is to coordinate information so consumers can make comparisons among LTC products.

Other areas he suggested regulators could look at are agent training and reserving requirements for LTC products.

Adequate capital will be needed not only to pay claims but also to make sure there are proper reserves for LTC business, said Bill Weller, a spokesman for the American Academy of Actuaries, Washington. As the product is sold to younger people, having an adequate reserve of capital will become more important both for the financial well-being of the company as well as the potential impact the cost of capital could have on pricing, he said. (See NU, March 17.)

Another issue raised was what happens to a long term care rider if a universal life policy does not have sufficient cash value to remain in force.

Reproduced from National Underwriter Edition, March 24, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.