BILL NUMBER: AB 389 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Member Saldana
FEBRUARY 23, 2009
An act to amend Section 10236.13 of
Sections 10236.12 and 10236.13 of, and to add Section 10236.16 to,
the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 389, as amended, Saldana. Long-term care insurance.
Existing law provides for regulation of insurers, including
insurers issuing policies of long-term care insurance, by the
Insurance Commissioner. Existing law requires actuaries used by the
commissioner to review rate applications submitted by insurers
relative to long-term care insurance, whether by employment or by
contract, to be members of the American Academy of Actuaries with at
least 5 years' relevant experience.
This bill would delete the requirement for 5 years' relevant
experience and instead require that the members of the academy
employed or contracted for this purpose be qualified to review
long-term care insurance rates. The bill would authorize the
commissioner to contract with qualified independent actuaries for
this purpose. The bill would require the costs and expenses of the
actuarial reviews to be charged to the insurer. The bill would
authorize the commissioner to adopt regulations in this regard and
would make other technical changes.
Existing law prohibits an insurer from increasing the premium for
an individual or group long-term care insurance policy or a specified
certificate unless the insurer received prior approval from the
Insurance Commissioner. Existing law requires the insurer to submit
to the commissioner all proposed premium rate schedule increases that
include certain specified information, such as an actuarial
memorandum justifying the rate schedule change and a statement that
renewal premium rate schedules are not greater than new business
premium rate schedules.
This bill would make a technical, nonsubstantive change.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10236.12 of the
Insurance Code is amended to read:
10236.12. All actuaries used by the commissioner to review rate
applications submitted by insurers pursuant to this chapter, whether
employed by the department or secured by contract, shall be members
of the American Academy of Actuaries with at least five
years' relevant experience in long-term care insurance industry
pricing. If the department does not have actuaries with the
experience required by this section, the commissioner shall contract
with actuaries to review all rate applications submitted by insurers
pursuant to this chapter. If the department has actuaries that have
experience required by this section, but not enough of those
experienced actuaries to perform the volume of work required by this
chapter, the commissioner may contract with independent actuaries, as
necessary qualified to review long-term care
insurance rates. The commissioner may contract with qualified
independent actuaries to review rate applications submitted by
insurers pursuant to this chapter. The costs and expenses of the
actuarial reviews of premium rate schedules subject to Section
10236.11, 10236.14, or 10236.15 shall be charged to the insurer
.
If the commissioner contracts with independent actuaries, the
commissioner shall promulgate regulations no later than January 1,
2002, to maintain the confidentiality of rate filings and proprietary
insurer information and to avoid conflicts of interest.
SEC. 2. Section 10236.13 of the
Insurance Code is amended to read:
10236.13. No insurer may increase the premium for an individual
or group long-term care insurance policy or certificate approved for
sale under this chapter unless the insurer has received prior
approval for the increase from the commissioner.
The insurer shall submit to the commissioner for approval all
proposed premium rate schedule increases, including at least all of
the following information:
(a) Certification by an actuary, who is a member of the American
Society Academy of Actuaries and who is
in good standing with that society
organization , that:
(1) If the requested premium rate schedule increase is implemented
and the underlying assumptions, which reflect moderately adverse
conditions, are realized, no further premium rate schedule increases
are anticipated.
(2) The premium rate filing is in compliance with the provisions
of this section.
(b) An actuarial memorandum justifying the rate schedule change
request that includes all of the following:
(1) Lifetime projections of earned premiums and incurred claims
based on the filed premium rate schedule increase, and the method and
assumptions used in determining the projected values, including
reflection of any assumptions that deviate from those used for
pricing other forms currently available for sale.
(A) Annual values for the five years preceding and the three years
following the valuation date shall be provided separately.
(B) The projections shall include the development of the lifetime
loss ratio.
(C) For policies issued with premium rate schedules approved under
Section 10236.11, the projections shall demonstrate compliance with
subdivision (a) of Section 10236.14. For all other policies, the
projections shall demonstrate compliance with Section 10236.1.
(D) In the event If the commissioner
determines that a premium rate increase is justified due to changes
in laws or regulations that are retroactively applicable to long-term
care insurance previously sold in this state, then:
(i) The projected experience should be limited to the increases in
claims expenses attributable to the changes in law or regulations.
(ii) In the event If the
commissioner determines that potential offsets to higher claims costs
may exist, the insurer shall be required to use appropriate net
projected experience.
(2) Disclosure of how reserves have been incorporated in this rate
increase.
(3) Disclosure of the analysis performed to determine why a rate
adjustment is necessary, which pricing assumptions were not realized
and why, and what other actions taken by the company have been relied
on by the actuary.
(4) A statement that policy design, underwriting, and claims
adjudication practices have been taken into consideration.
(5) In the event that If
it is necessary to maintain consistent premium rates for new
certificates and certificates receiving a rate increase, the insurer
shall file composite rates reflecting projections of new
certificates.
(c) A statement that renewal premium rate schedules are not
greater than new business premium rate schedules except for
differences attributable to benefits, unless sufficient justification
is provided to the commissioner.
(d) Sufficient information for approval of the premium rate
schedule increase by the commissioner.
(e) The provisions of this section are applicable to all
individual and group policies issued in this state on or after July
1, 2002.
SEC. 3. Section 10236.16 is added to the
Insurance Code , to read:
10236.16. The commissioner may adopt regulations to implement the
provisions of this article.
SECTION 1. Section 10236.13 of the Insurance
Code is amended to read:
10236.13. No insurer may increase the premium for an individual
or group long-term care insurance policy or certificate approved for
sale under this chapter unless the insurer has received prior
approval for the increase from the commissioner.
The insurer shall submit to the commissioner for approval all
proposed premium rate schedule increases, including, but not limited
to, all of the following information:
(a) Certification by an actuary, who is a member of the American
Society of Actuaries and who is in good standing with that society,
that:
(1) If the requested premium rate schedule increase is implemented
and the underlying assumptions, which reflect moderately adverse
conditions, are realized, no further premium rate schedule increases
are anticipated.
(2) The premium rate filing is in compliance with the provisions
of this section.
(b) An actuarial memorandum justifying the rate schedule change
request that includes all of the following:
(1) Lifetime projections of earned premiums and incurred claims
based on the filed premium rate schedule increase, and the method and
assumptions used in determining the projected values, including
reflection of any assumptions that deviate from those used for
pricing other forms currently available for sale.
(A) Annual values for the five years preceding and the three years
following the valuation date shall be provided separately.
(B) The projections shall include the development of the lifetime
loss ratio.
(C) For policies issued with premium rate schedules approved under
Section 10236.11, the projections shall demonstrate compliance with
subdivision (a) of Section 10236.14. For all other policies, the
projections shall demonstrate compliance with Section 10236.1.
(D) In the event the commissioner determines that a premium rate
increase is justified due to changes in laws or regulations that are
retroactively applicable to long-term care insurance previously sold
in this state, then:
(i) The projected experience should be limited to the increases in
claims expenses attributable to the changes in law or regulations.
(ii) In the event the commissioner determines that potential
offsets to higher claims costs may exist, the insurer shall be
required to use appropriate net projected experience.
(2) Disclosure of how reserves have been incorporated in this rate
increase.
(3) Disclosure of the analysis performed to determine why a rate
adjustment is necessary, which pricing assumptions were not realized
and why, and what other actions taken by the company have been relied
on by the actuary.
(4) A statement that policy design, underwriting, and claims
adjudication practices have been taken into consideration.
(5) In the event that it is necessary to maintain consistent
premium rates for new certificates and certificates receiving a rate
increase, the insurer shall file composite rates reflecting
projections of new certificates.
(c) A statement that renewal premium rate schedules are not
greater than new business premium rate schedules except for
differences attributable to benefits, unless sufficient justification
is provided to the commissioner.
(d) Sufficient information for approval of the premium rate
schedule increase by the commissioner.
(e) The provisions of this section are applicable to all
individual and group policies issued in this state on or after July
1, 2002.