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CA Department of Insurance

Insurance Commissioner Jones Applauds Assembly Passage of Long-Term Care Legislation

News: 2011 Press Release

For Release: June 2, 2011
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Insurance Commissioner Jones Applauds Assembly Passage of Long-Term Care Legislation
AB 999 Needed to Help Stem Tide of Excessive Rate Increases

Insurance Commissioner Dave Jones today announced that the Assembly passed AB 999, authored by Assembly Member Mariko Yamada (D-Davis), by a vote of 42 to 33. The bill, sponsored by the California Department of Insurance, protects consumers from excessive premium rate volatility by modifying the long-term care insurance 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 the language before purchasing one. The bill now moves to the Senate for consideration.

"Insurance commissioners throughout the country are seeing a growing and disturbing trend of long-term care rate increases and we're not expecting that to diminish without regulatory action," said Commissioner Jones. "Unless this bill becomes law, consumers can't count on their premiums to remain stable from year to year."

Long-term care (LTC) 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 increased to compensate for those initial inaccuracies. In 2000, the Legislature passed SB 898 to stabilize what became escalating rates. However, the rate stabilization features aren't completely restoring predictability to the long-term care insurance market.    

AB 999 would:

  • Require a waiting period of five to 10 years between rate applications; 
  • Prevent insurers from passing poor investment returns through to taxpayers;
  • Eliminate the practice of insurers "cherry-picking" a small group of policies to justify large rate increases;
  • Prohibit insurers from using a loss ratio that is a "moving target" to justify raising rates merely to make a profit; and,
  • Require insurers to allow consumers to view policy language prior to purchasing the policy.

"As our population ages, long-term care needs increase. It's my job to ensure that seniors continue to have access to this insurance without jeopardizing the financial stability and well-being of themselves and their families," Commissioner Jones said.

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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