simas wrote: ↑Mon Sep 30, 2024 4:42 pm
1) how sure how are you contradicting to what @Kenkat said - does Rate Stability somehow negates the laws math or guarantees no rate increases? of cause not... while not a bad idea by itself (to help stabilize the market) , math is math and if it takes higher premiums to keep companies solvent (due to higher costs), the regulators would be first ones demanding it (and then approving it). You state 'extremely low probability of rate increase' - for how long ? a decade? two decades? exactly, you do not know and cannot predict. if costs go up 100%, rates will go up 'stability regulation' or not, again, this is math.

Your most important point is correct: math is math.

Everything else you stated is wrong.

If costs go up 100% LTC insurance rates will NOT go up 100%.

Why? Because the insurance company knows exactly how much they will have to pay for each day of care 10 years from now, 20 years from now, 30 years from now, 40 years from now, even 50 years from now.

If my policy has a monthly benefit of $10,000 and a 3% compound inflation protection, the insurance company knows that 24 years from now, the most they will pay for each month of care is $10,000 plus 3% compounded growth for 24 years (which = $20,000) (because math is math, you know).

If my monthly benefit is $20,000 and the cost of care at that time is $21,000 per month, the insurance company will only pay me $20,000 per month.

If my monthly benefit is $20,000 and the cost of care at that time is $25,000 per month, the insurance company will only pay me $20,000 per month.

If my monthly benefit is $20,000 and the cost of care at that time is $30,000 per month, the insurance company will only pay me $20,000 per month.

After all, math is math.

I'm sure I've posted this here before, but, please read the following so that you can at least familiarize yourself a little about how the Rate Stability Regulation works:

41 states have enacted strict pricing regulations to help curb rate increases. It is called the “Rate Stability Regulation.” This regulation helps protect consumers who buy long-term care insurance today.

If your state has passed the "Rate Stability Regulation," these new rules ONLY apply to policies purchased after the Rate Stability Regulation became effective in your state.

**UNDER THE OLD RULES**

When a rate increase was requested, the insurance company could price normal profit levels into the rate increase. In many cases, a rate increase resulted in increased profits for the insurance company.

*UNDER THE NEW RULES*

If an insurance company requests a rate increase, it must decrease the profit levels to a cap predetermined by the regulation. Even the rate increase cannot include normal profits, just a small amount to cover administrative costs. Essentially, this regulation removed the profit incentive from rate increases.

**UNDER THE OLD RULES**

The initial pricing capped profits, but more profit could be made when a rate increase was requested.

**UNDER THE NEW RULES**

Higher profits are allowed in the initial pricing, but the higher profits can ONLY be kept IF THEY KEEP PREMIUMS LEVEL.

**UNDER THE OLD RULES**

The insurance companies were NOT allowed to include any “margin for error” in their initial pricing. There was no cushion in the policy if the claims exceeded the original projections.

*UNDER THE NEW RULES*

Every insurance company is REQUIRED to include a “cushion” in their pricing, which is a margin for error. The goal of the “cushion” is to try to avoid the need for any future premium increases.

**UNDER THE OLD RULES**

The insurance companies did NOT have to certify the accuracy of their pricing assumptions. If their assumptions turned out to be wrong, they would request a rate increase.

**UNDER THE NEW RULES**

Insurance companies are required to have a qualified actuary who certifies that no premium increases are anticipated over the life of the policy (i.e. 50+ years). This is why they are required to include a “margin for error” in their pricing.

Please note that the new rules ONLY apply to policies purchased after the Rate Stability Regulation became effective in your state.

Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.