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News: 2012 Press Release

For Release: September 28, 2012
Media Calls Only: 916-492-3566
Insurance Commissioner Dave Jones Applauds Governor for Signing AB 999
Bill Will Protect Consumers from Excessive Rate Hikes for Long-Term Care Insurance

Insurance Commissioner Dave Jones today announced that Governor Jerry Brown has signed AB 999, authored by Assembly Aging and Long-Term Care Committee Chair Mariko Yamada. The bill is sponsored by Commissioner Jones and the California Department of Insurance. AB 999 will protect consumers from excessive premium rate volatility by modifying the long-term care (LTC) insurance premium rate development process. The measure also allows consumers to make more informed decisions about buying a LTC insurance policy by giving them the chance to review policy language before purchasing one.

"I am very pleased that Governor Brown has signed this important legislation. The rising cost of long term care insurance is one of the most pressing issues facing well-intentioned consumers today," said Commissioner Jones. "What's most disturbing is the size of long-term care rate increases. They threaten the ability of many seniors, especially those on fixed incomes, to maintain or purchase long-term care insurance. AB 999 will provide additional transparency and much-needed protections for policyholders related to long term care insurance rate increases," added Jones.

Long-term care insurance was first sold in California in the early 1980s. 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 passed years before are not completely restoring predictability as intended to the long-term care insurance market today. Considered to be one of the strongest LTC insurance consumer protection measures in the country, AB 999 will prevent insurers from passing poor investment returns on to policyholders and eliminate the practice of insurers "cherry-picking" a small group of policies to justify large rate increases, in addition to other strong consumer protections. 

"I want to thank Assembly Member Mariko Yamada for her leadership in carrying this important consumer protection legislation and Governor Jerry Brown for signing it," said Commissioner Jones.

The measure becomes effective on January 1, 2013.

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The California Department of Insurance, established in 1868, is the largest consumer protection agency in California, regulating the $123 billion insurance marketplace. In 2012 the California Department of Insurance received more than 160,000 calls from consumers and helped recover over $64 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP. Out-of-state callers, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

If you are a member of the public wishing information, please visit our Consumer Services.

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