Mass. to issue new rules for long-term care plans

Draft regulations to rein in the rapidly rising costs of long-term care insurance don’t include what many policyholders and consumer advocates wanted: a plan to cap rate increases.

The rules, proposed this week by the state Division of Insurance, would include greater and more regular disclosures by insurance companies about the financial performance of the policies, such as the amount paid in claims, which could signal rate increases. They also call for stricter oversight of companies offering these policies, which cover the costs of nursing homes and assisted living facilities.

But the proposed rules don’t take steps to place limits on annual rate increases — measures sought by consumer groups, advocates for the elderly, and Attorney General Martha Coakley. Premiums have jumped at double-digit rates in recent years, with some insurers filing proposals to double their rates. Those proposals ultimately were scaled back.


Deb Thomson, a consultant for the Massachusetts chapter of the National Academy of Elder Law Attorneys, said the disclosure rules and other provisions, such as requiring special training and licensing of agents that sell long-term insurance, will provide consumers with important and needed protections.

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But Thomson said she is concerned that insurance companies will still be allowed to collect more premiums than they need to pay claims, which will make the policies unaffordable. The proposed rules also leave uncertain how state regulators will deal with requests to raise premiums.

Massachusetts Insurance Commissioner Joseph Murphy said his agency doesn’t have the authority to limit rates; it would require an act of the Legislature to gain that power. Murphy and other officials in his office also worry that capping rates would hamstring regulators and prevent them from approving higher increases needed to keep a company solvent and able to provide coverage.

But the proposed rules do help consumers, Murphy said, by ensuring that regulators will be able to spot potential financial problems with an insurance company before it is forced to ask for a massive rate increase.

“The regulations will allow the Division of Insurance to maintain the authority to disapprove rates that are excessive and unfounded,” Murphy said.


Long-term care insurance, introduced in the 1980s, was designed to fill the gap between Medicare, the health insurance for the elderly that only covers short-term rehabilitation and recovery services, and Medicaid, the program for the poor that pays for long-term care if a senior meets the lower income requirements.

But rates have risen rapidly because of an aging population, rising health care costs, and mistaken assumptions by insurance companies that more policyholders would stop paying or drop the plans before they collected benefits. Insurers initially set prices too low and have been further hampered by low interest rates, which cut into their investment income.

Several companies have stopped selling new long-term care plans because of losses.

The companies that remain in business need the flexibility to raise premiums to cover their costs, said Thomas McInerney, the chief executive of Genworth Financial, one of the largest long-term care insurers in the country.

Without a viable private insurance product, the burden of paying for long-term care will fall on taxpayers, McInerney said. “That’s why I think in the end, while its hard for governors and insurance commissioners, they are willing to work with us.”


Genworth has proposed increasing its premium on some of its oldest policies by an average 50 percent, McInerney said. Murphy has not approved rate increases pending the adoption of the new rules.

Consumer groups, industry representatives, and regulators, including those from Coakley’s office, met in 2013 to try and come up with formal rules to help contain costs. The attorney general’s staff is reviewing the proposed changes, said Brad Puffer, a spokesman for the office.

The insurance division plans to hold hearings on its proposed regulations this summer, before formally adopting them later in the year.

Deirdre Fernandes can be reached at Follow her on Twitter @fernandesglobe.