Date:July 23, 2001
To:All Long Term Care Insurance Companies Doing Business in Wisconsin
From:Connie L. O'Connell
Subject:Amendments to Sections Ins. 3.455 and 3.46, Wis. Adm. Code

This bulletin is to inform you that on July 1, 2001, significant amendments were made to Wisconsin's long term care insurance administrative rules, ss. Ins. 3.455 and 3.46, Wis. Adm. Code. Please note these changes do not become effective until January 1, 2002 for policies issued on or after that date. The changes to Wisconsin's long term care insurance regulations are materially consistent with the recent rating practice and consumer protection provisions of the NAIC Long Term Care Insurance Model Act and Regulation.

The following is a brief description of the major changes:

Section 3.455(5), Wis. Adm. Code, regarding Loss Ratio Requirements

The loss ratio requirements contained in s. Ins. 3.455(5)(a), Wis. Adm. Code, will apply only to policies issued prior to January 1, 2002.

Section 3.455(9), Wis. Adm. Code, regarding Long Term Care Rate Increase Standards

The long term care insurance rate increase standards contained in s. 3.455(9)(a) to (f), Wis. Adm. Code, apply only to those policies issued from August 1, 1996 up to and including those policies issued on December 31, 2001.

Section 3.455(9m), Wis. Adm. Code, regarding Premium Rate Schedule Increases, Requesting and Determining Exceptional Rate Increases

This section establishes the method whereby a long-term care insurer may file for a rate increase with OCI. Certain provisions and standards are activated with the implementation of a rate increase. These include minimum documentation for the filing and, unless a rate increase filing is found to be an exceptional rate increase, loss ratio standards of 85% for all new business written under the new rates and 58% on all existing business under the new rates. This section also establishes the method to request and obtain a finding from OCI that the rate increase is considered an exceptional increase.

In addition, this section provides that OCI may suspend a long term care insurer's authority to write any new long term care insurance business if it determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates

Except for group long-term care insurance certificates, the provisions of this section apply to policies issued on or after January 1, 2002.

Section Ins. 3.455(10), Wis. Adm. Code, regarding Initial Filing Requirements

This section sets forth the requirements for initial premium rate filings. Of note, all such filings will require an actuarial certification that states:

". . . the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated."

Section Ins. 3.46(9)(b) to (j), Wis. Adm. Code, regarding Disclosure When Soliciting

This section establishes disclosure requirements concerning premium rates and rate increases at the time of application or enrollment. Insurers will be required to disclose information to consumers regarding premium rate increase history for the policy form being sold or similar policy forms.

Section Ins. 3.46(19), Wis. Adm. Code, regarding Nonforfeiture Benefit Requirements for Long Term Care

This section combines the mandatory offer for a shortened benefit period nonforfeiture option previously found in s. Ins. 3.46(11m), Wis. Adm. Code, with the new contingent benefit upon lapse requirement for those policies where the applicant elects not to purchase the shortened benefit period nonforfeiture option under the mandatory offer.

Appendices

Appendix 1, Outline of Coverage, has been amended and Appendix 2, Personal Worksheet has been recreated. Appendix 5, Potential Rate Increase Disclosure Form, is a new form that provides consumers with information regarding premium rate schedules, rate schedule adjustments, potential rate revisions, and policyholder options in the event of a rate increase.

These amendments are effective for those long term care insurance policies issued on or after January 1, 2002. The changes to Wisconsin's long-term care insurance regulations may require that insurers revise their currently approved long-term care policy forms. Insurers will need to review the complete text of the regulations in order to determine the action needed to comply with the new requirements.

Questions concerning the disclosure requirements and contingent benefit upon lapse requirements may be directed to Diane Dambach, Chief, Accident & Health Section. Ms. Dambach can be reached by e-mail at diane.dambach@wisconsin.gov or by phone at (608)266-0106. Questions concerning initial rate filing requirements and rate increase filing requirements may be directed to Laura Iliff, Actuary. Ms. Iliff can be reached by e-mail at laura.iliff@oci.state.wi.us or by phone at (608)266-3060.

Thank you.