NAC687B.107. Insurer to request approval of any increase in premium rate schedule for contracts and certificates issued on or after October 1, 2011.

     1. An insurer shall request approval of any increase in a premium rate schedule, including an exceptional increase, from the Commissioner at least 60 days before providing notice of the increase to the policyholders and shall include in the request:

     (a) The information required by NAC 687B.0585;

     (b) Certification by a qualified actuary that: 

          (1) If the requested rate increase is implemented and the underlying assumptions which reflect moderately adverse conditions are materialized, no further rate increases are anticipated; and

          (2) The premium rate filing is in compliance with the provisions of this section;

     (c) An actuarial memorandum justifying the rate increase that includes: 

          (1) Lifetime projections of earned premiums and incurred claims based on the filed rate increase which include the method and assumptions used in determining the projected values and reflection of any assumptions that deviate from those used for pricing other forms currently available for sale, including, without limitation:

               (I) Separate actual and projected annual values for the 5 years before and the 3 years after the valuation date;

               (II) The development of the lifetime loss ratio, unless the rate increase is an exceptional increase;

               (III) A demonstration of compliance with subsection 2;

               (IV) For an exceptional increase, projections that are limited to the increases in claims expenses attributable to the approved reasons for the exceptional increase; and

               (V) For an exceptional increase, if the Commissioner determines that offsets may exist, projections which use the appropriate net projected experience;

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

          (3) Disclosure of the analysis performed to determine why a rate increase 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;

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

          (5) If it is necessary to maintain consistent premium rates for new certificates and certificates receiving a rate increase, information concerning 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 rate increase by the Commissioner.

     2. The Commissioner may approve an increase in a premium rate schedule if the Commissioner determines that: 

     (a) For an exceptional increase, 70 percent of the present value of projected additional premiums from the exceptional increase will be returned to the policyholders in benefits;

     (b) The rate increase is calculated such 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:

          (1) Fifty-eight percent of the accumulated value of the initial earned premium;

          (2) Eighty-five percent of the accumulated value of previous rate increases on an earned basis;

          (3) Fifty-eight percent of the present value of future projected initial earned premiums; and

          (4) Eighty-five percent of the present value of future projected premiums not included in subparagraph (3) on an earned basis;

     (c) If a long-term care insurance contract has an exceptional increase and any other increase, the values in subparagraphs (2) and (4) of paragraph (b) also include 70 percent for exceptional increase amounts;

     (d) All present and accumulated values used to determine rate increases use the maximum valuation interest rate for contract reserves as specified in paragraph (a) of subsection 2 of NRS 681B.120 and the actuary disclosed as part of the actuarial memorandum the use of any appropriate averages; and

     (e) For a request for an increase in a premium rate schedule that does not comply with subparagraph (1) of paragraph (b) of subsection 1:

          (1) The premium rate filing is in compliance with all other provisions of this section;

          (2) The insurer provided the Commissioner with justification for the request and provided any additional information that the Commissioner may require in order to appropriately review and approve the rate increase; and

          (3) The insurer complied with any additional conditions that the Commissioner may require for approval of the request for an increase in a premium rate schedule.

     3. For each rate increase that is implemented, the insurer shall file updated projections, as described in subparagraph (1) of paragraph (c) of subsection 1, for approval by the Commissioner annually for each of the 3 years following the increase and must include a comparison of actual results to projected values. The Commissioner may extend this period beyond 3 years if actual results are not consistent with projected values from previous projections. For group long-term care insurance contracts that meet the conditions of subsection 11, the projections required by this subsection must be provided to the policyholder in lieu of filing with the Commissioner.

     4. 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 subparagraph (1) of paragraph (c) of subsection 1, must be filed for approval by the Commissioner every 5 years following the end of the required period in subsection 3. For group long-term care insurance contracts that meet the conditions of subsection 11, the projections required by this subsection must be provided to the policyholder in lieu of filing with the Commissioner.

     5. If the Commissioner determines that the actual experience following a rate increase does not adequately match the projected experience and that current projections under moderately adverse conditions demonstrate that incurred claims will not exceed the proportions of premiums specified in subsection 2, the Commissioner may require the insurer to implement:

     (a) An adjustment to the premium rate schedule; or

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

Ê In determining whether the actual experience adequately matches the projected experience, the Commissioner will consider the provisions of subparagraph (5) of paragraph (c) of subsection 1, if applicable. 

     6. If the majority of long-term care insurance contracts or certificates to which an increase is applicable are eligible for the contingent benefit upon lapse, the insurer shall file: 

     (a) The original anticipated lifetime loss ratio and the rate increase that would have been calculated according to subsection 3 had the greater of the original anticipated lifetime loss ratio or 58 percent been used in the calculations described in subparagraphs (1) and (3) of paragraph (b) of subsection 2; and

     (b) A plan, subject to the approval of the Commissioner, for improved administration or claims processing designed to eliminate the potential for further deterioration of the long-term care insurance contract requiring further rate increases or to demonstrate that appropriate administration and claims processing have been implemented or are in effect. If the insurer fails to file a plan pursuant to this paragraph, the Commissioner may impose the requirements of subsection 8. 

     7. The Commissioner will, for all long-term care insurance contracts included in the filing, review the projected lapse rates and past lapse rates during the 12 months following each rate increase to determine if significant adverse lapsation has occurred or is anticipated if:

     (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 long-term care insurance contracts or certificates to which the rate increase is applicable are eligible for the contingent benefit upon lapse. 

     8. If the Commissioner determines that significant adverse lapsation has occurred pursuant to subsection 7, 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 insureds who have long-term care insurance contracts in force and who are 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. For such an offer:

     (a) The offer must:

          (1) Be subject to the approval of the Commissioner;

          (2) Be based on actuarially sound principles but not be based on attained age; and

          (3) Provide that maximum benefits under any new policy accepted by an insured will be reduced by comparable benefits already paid under the existing long-term care insurance contract; and

     (b) The insurer shall maintain the experience of all the replacement insureds separate from the experience of the insureds originally issued the long-term care insurance contracts. In the event of a request for a rate increase on the long-term care insurance contracts, the rate increase must be limited to the lesser of: 

          (1) The maximum rate increase determined based on the combined experience; and

          (2) The maximum rate increase determined based only on the experience of the insureds who were originally issued the long-term care insurance contract plus 10 percent. 

     9. If the Commissioner determines that the insurer has established a persistent practice of filing inadequate initial premium rates for long-term care insurance, the Commissioner may, in addition to the provisions of subsections 7 and 8, prohibit the insurer from: 

     (a) Filing and marketing comparable coverage for a period of up to 5 years; or

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

     10. Subsections 1 to 9, inclusive, do not apply to long-term care insurance contracts for which the long-term care benefits provided by the long-term care insurance contract are incidental if:

     (a) The interest credited internally to determine cash value accumulations, including long-term care, if any, is guaranteed to be not 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: 

          (1) NRS 688A.290 to 688A.360, inclusive, for life insurance; or

          (2) NRS 688A.361 to 688A.369, inclusive, for deferred annuities;

     (c) The policy meets the disclosure requirements of NAC 687B.0683, 687B.0684 and 687B.112;

     (d) The portion of the policy that provides insurance benefits other than long-term care coverage meets the requirements for: 

          (1) Policy illustrations as required in NAC 686A.460 to 686A.479, inclusive, for life insurance; or

          (2) Disclosure in NAC 688A.470 for deferred annuities; and

     (e) An actuarial memorandum is filed with the Division and includes: 

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

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

          (3) A summary of the type of long-term care insurance contract, benefits, renewability, general marketing method and limits on ages of issuance;

          (4) A description and a table of each actuarial assumption used, which includes, for expenses, the percent of premium dollars per long-term care insurance contract and dollars per unit of benefits, if any;

          (5) A description and a table of the anticipated reserves for the long-term care insurance contract and additional reserves to be held in each future year for active lives;

          (6) The estimated average annual premium per long-term care insurance contract and the average issue age;

          (7) A description of the effect of the provisions of the long-term care insurance contract on the required premiums, nonforfeiture values and reserves on the underlying long-term care insurance contract, both for active lives and those in claim status; and

          (8) A statement as to whether underwriting is performed at the time of application. The statement must indicate whether underwriting is used and, if used, the statement must include a description of the type of underwriting used, such as medical underwriting or functional assessment underwriting. For a group long-term care insurance contract, the statement must indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs.

     11. Subsections 5, 7 and 8 do not apply to a group long-term care insurance contract issued to a group described in subsection 1 of NAC 687B.025 if:

     (a) The contract insures 250 or more persons and the policyholder has 5,000 or more eligible employees of a single employer; or

     (b) The policyholder, and not the certificate holder, pays a material portion of the premium, which is not less than 20 percent of the total premium for the group in the calendar year before the year a rate increase is filed. 

     12. This section applies to long-term care insurance contracts and certificates issued in this State on or after October 1, 2011.

     13. As used in this section, “incidental” means that the value of the long-term care benefits provided, as measured at the date of issue, is less than 10 percent of the total value of benefits provided over the life of the long-term care insurance contract.

     (Added to NAC by Comm’r of Insurance by R028-10, 12-16-2010, eff. 10-1-2011)

Notation

REVISER’S NOTE.

      The regulation of the Commissioner of Insurance filed with the Secretary of State on December 16, 2010, (LCB File No. R028-10), which amended this section, contains the following provision not included in NAC:

      “1.  Notwithstanding the provisions of subsection 12 of section 14 of this regulation [NAC 687B.107], section 14 of this regulation [NAC 687B.107] does not apply to a long-term care insurance contract or certificate issued on or after October 1, 2011, until:

      (a) Except as otherwise provided in paragraph (b), April 1, 2012.

      (b) For a certificate issued on or after October 1, 2011, under a group long-term care insurance contract in force on October 1, 2011, for a group described in subsection 1 of NAC 687B.025, the date of the first anniversary of the contract to occur after October 1, 2012.

      2.  As used in this section:

      (a) “Certificate” has the meaning ascribed to it in NAC 687B.015, as amended by section 17 of this regulation.

      (b) “Group long-term care insurance” has the meaning ascribed to it in NAC 687B.025, as amended by section 19 of this regulation.

      (c) “Long-term care insurance contract” has the meaning ascribed to it in section 3 of this regulation [NAC 687B.0303].”