United States: IREG Update - The Emerging Regulatory Battleground Over Long-Term Care Insurance Rate Increases

The emerging regulatory battleground over long-term care insurance rate increases

As class action lawsuits challenging premium rate increases on long-term care (LTC) insurance have faced dismissal in recent years, policyholders have become increasingly active on the administrative front, filing grievances with regulators to protest approved rate increases through the administrative hearing process and making efforts to sway regulators to preempt or limit rate increase approvals.


A relatively new product that gained traction in the late 1980s, LTC insurance pays for some or all of the costs of nursing homes, assisted-living facilities and home health care. When insurers first began pricing LTC policy blocks, they had little comparable experience to draw on. Over time and with the benefit of hindsight, it has become clear that the LTC industry as a whole missed the mark in their initial pricing assumptions and underestimated factors such as the number of policies that would lapse, the longevity of policyholders, and rising health care costs. As a result, LTC insurers set premiums too low for those older blocks of business and have since sought regulatory approval for rate increases. Not surprisingly, policyholders have fought back.

The rise and fall of LTC rate increase litigation

Beginning in the late 1990s, insurers have been faced with class action lawsuits challenging LTC rate increases. A common argument has been that LTC insurers defrauded consumers through a "low-ball pricing" or "bait and switch" scheme intended to deceive customers into buying insurance policies at artificially low rates only to increase rates later, leaving policyholders with no choice but to pay up or forfeit their policies. Although causes of action vary from case to case, policyholders have typically brought claims for fraud, unfair or deceptive trade practices, and/or breach of contract. Yet, despite some initial successes, policyholder class actions to challenge LTC insurance rate increases have faltered in recent years.

In 2008, two federal court decisions signaled a sea change in the judicial response to such claims. In Rakes v. Life Investors, the United States Court of Appeals for the Eighth Circuit affirmed a district court's grant of summary judgment to the LTC insurer, finding that policyholders had been duly warned about the possibility of rate increases "on the first page of its policies, in boldface, capital letters." 582 F.3d 886, 894 (8th Cir. 2008).  As such, plaintiffs could not plausibly claim that the insurer had fraudulently misrepresented that policyholders should expect level premiums. Id. Similarly, in Alvarez v. Ins. Co. of N. Am., the United States Court of Appeals for the Third Circuit rejected the policyholders' argument that "guaranteed renewable" language in the policy somehow implied level premiums.  Rather, the court held that the policies explicitly warned that rates could increase and therefore only "guaranteed the right to renew the policy, not the financial ability to renew the policy." 2008 WL 647784, at *3 (3d Cir. 2008).

Then, in 2011, a pair of court decisions applied the "filed rate doctrine" to dismiss claims challenging LTC rate increases. See, Armour v. Transamerica, 2012 WL 234032, at *3 (D. Kan. Jan. 25, 2012); see also Flint v. MetLife, 2011 WL 7463938, at *2 (6th Cir. Dec. 12, 2011). In deference to the unique expertise of state regulators who evaluate and approve insurance premium rates, the filed rate doctrine bars policyholders from challenging insurers over premium rates that have been filed with a state regulatory body.

The precedent set by these recent decisions have proven to be a powerful defense against rate increase challenges.

Administrative proceedings: The new battleground?

As policyholders have failed to prevail against insurers in the courtroom, some have instead petitioned for administrative review of the state's decision to approve rate increases. These administrative proceedings typically have the hallmarks of a litigation, and although the state insurance department is typically the focus, insurers may also get caught in the cross-fire.

For example, in 2009, an insurer's intervention was instrumental in defending the Kentucky Department of Insurance's work when a retired teachers association sought a hearing to challenge Kentucky's approval of LTC rate increases. After discovery, pre-/post-trial briefing, and a four-day trial with fact and expert witnesses, the administrative judge ultimately upheld the rate increases. Similar to a trial, the administrative process subjected the state (and the insurer) to intense scrutiny, resulting in a 60-page opinion analyzing the Department's rationale for approval, including a detailed discussion of whether the Department had applied the proper loss ratio test, whether the insurer supplied accurate data and reasonable projections, and whether the Department had fully complied with all statutory requirements prior to approving the rate increase.

This year, a new proceeding is underway to challenge LTC rate increases that were approved by the Washington Commissioner in July 2015. The policyholder has requested a hearing to determine whether the rate increase approval should "be set aside as legally unfounded and unenforceable," and more specifically whether the Commissioner considered the insurer's past and prospective loss experience in Washington or other similar states. Discovery is now underway and a hearing is set for June 2016.

State agency's responses to policyholder activism

As policyholder outcry grows with each LTC rate increase, state insurance regulators have reacted in myriad ways.

First, the NAIC has been active in developing model language for the states that is designed to account for the interests of both policyholders and insurers, such as the NAIC Long-Term Care Insurance Model Act, Model Regulation, and Model Bulletin. For example, the Model Bulletin, adopted by the NAIC in 2013, suggests more stringent loss ratio tests to be applied in evaluating rate increase applications on older "pre-rate stability" policies, and provides guidance for mitigating the impact of approved rate increases on policyholders.  Many states have adopted portions of the NAIC's model language, both formally and informally. For example, in 2015, Virginia enacted new rules that, in part, incorporate recent revisions to the NAIC's Model LTC Regulation regarding long-term care premium rate increases.  Other states are using, as one metric in the rate increase review process, the new "dual loss ratio" framework in the Model Bulletin, even without formally adopting that Bulletin. 

Second, commissioners in several states are holding public hearings before making decisions on large rate increase requests. In August 2015, in large part due to the volume and magnitude of rate increase applications being filed in that state, Minnesota held a "fact-finding" hearing to gather information from consumers and insurers on how to appropriately evaluate the long-term care industry. This month, the Pennsylvania Insurance Department plans to hold a public hearing on March 10, 2016, in part to explain its process in reviewing and approving LTC rate requests. The Pennsylvania Insurance Department explained that the magnitude of the latest requests—which range from 100 to 130 percent—calls for transparency by having four specific LTC insurers "publicly explain why they are asking for large increases."

Third, some states are instituting formal rate caps on annual LTC rate increases. In February 2015, New Hampshire adopted rules capping the size and frequency of rate increases based on policyholders' ages. See N.H. R.S.A. Ins. §§ 3601.03(b)(1); 3601.08(e); 3601.19; 3601.27. In February 2016, Oklahoma announced that it would cap LTC rate increases at 10 percent annually, and, this year, Maryland intends to hold a public hearing on the possibility of instituting a 15 percent LTC rate increase cap. Other states may be using informal "desk drawer rules" to limit rate increases.

Finally, at least one state appears to be uniformly denying rate increases based on their interpretation of whether the increases are "unfair," "excessive," or "affordable" pursuant to state statutory bases for disapproval. According to recent news articles, Vermont has uniformly denied all LTC rate increase requests on closed blocks of business, taking the position that it is "unfair" to pass along the costs of inaccurate actuarial assumptions to consumers even if those assumptions were reasonable at the time.


As LTC insurers have struggled with rate adequacy on their older blocks of business, rate increase requests on those policy blocks have been commonplace for nearly two decades. Regulatory and policyholder pushback has only increased over time, and is now at a boiling point.  However, regulatory action to severely limit increases may have unintended consequences.  Some carriers have elected to stop new sales in states that have been unwilling to approve necessary rate increases. Other carriers are discontinuing new business altogether in light of the challenging regulatory environment.  As a result, senior citizens in some states may find themselves with fewer LTC options, and states may ultimately be shouldering more of the cost of providing LTC services to their aging populations.


Noteworthy links from the past two weeks



  • US News reported that the Affordable Care Act has not dramatically reduced ER visits [U.S. News & World Report]
  • The federal Office of Inspector General issued an exhaustive report on the initial failures and subsequent recovery of Healthcare.gov [Law360]
  • Membership in "health sharing ministries" (which are exempt from the Affordable Care Act) has grown [U.S. News & World Report]
  • Congress grilled CMS officials over the failure of several Affordable Care Act co-ops and the health of those that remain [Modern Healthcare]

Property and Casualty


  • Fitch Ratings agency opined on the proposed Insurance Capital Standard for Global Systemically Important Insurers [Reuters]
  • The US and EU met to sketch the broad outlines of a potential "covered agreement" governing transatlantic insurance regulation [Law360, The Wall Street Journal]

The IREG Update is edited by Matt Gaul

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
24 Oct 2017, Seminar, Washington, DC, United States

The Dentons Forum for Women Executives invites you to join us for a luncheon featuring guest speaker Liza Mundy, journalist and author. Ms. Mundy recently released her latest book, Code Girls, the riveting untold story of more than 10,000 spirited young American women who cracked German and Japanese codes to help win World War II.

27 Oct 2017, Seminar, New York, United States

Please join us for a milestone event, our 10th annual CLE Seminar for In-House Counsel.

1 Nov 2017, Seminar, Washington, DC, United States

Celebrate the 58th anniversary of Dentons' Government Contracts practice

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.