Although oversight of the LTCI industry is largely the responsibility of  states, the federal government also plays a role in the oversight of LTCI. States Have Made Efforts to Improve Oversight of Rate Setting, Though Some Consumers Remain More Likely to Experience Rate Increases Than Others

In recent years, many states have made efforts to improve oversight of rate  setting, though some consumers remain more likely to experience rate  increases than others. While regulators in most of the 10 states we reviewed told us that they  expect these more comprehensive standards will be successful, they noted  that more time is needed to know how well the standards will work. Regulators from the states in our review also use other standards or  practices to oversee rate setting, several of which are intended to keep  premium rates more stable. Specifically, consumers may face  more risk of a rate increase depending on when they purchased their  policy, from which company their policy was purchased, and which state  is reviewing a proposed rate increase on their policy. Many States Adopted More Comprehensive Rate Setting Standards since 2000, but It Is Too Soon to Determine the Effectiveness of the Standards

Since 2000, NAIC estimates that more than half of states nationwide have  adopted new rate setting standards for LTCI. States that adopted new  standards generally moved from the use of a single standard designed to  ensure that premiums were not set too high to the use of more  comprehensive standards designed to enhance rate stability and provide  other protections for consumers. Although a growing number of consumers will be protected by the more  comprehensive standards going forward, as of 2006 many consumers had  policies that were not protected by these standards. Some Consumers May Remain More Likely to Experience Rate Increases Than Others

Although some states are working to improve oversight of rate setting and  to help ensure LTCI rate stability by adopting the more comprehensive  standards and through other efforts, there are other reasons why some  consumers may remain more likely to experience rate increases than  others. States may implement the standards differently, and other  oversight efforts, such as the extent to which states work with companies,  also affect approval of increases. States in Our Review Oversee Claims Settlement Practices Using Consumer Complaints and Examinations, and Several States Are Considering Additional Protections

The 10 states in our review have standards established by law and  regulations for governing claims settlement practices. Specifically,  the standards are designed to ensure the timely investigation and payment  of claims and prompt communication with consumers about claims. One way the states monitor  compliance is by reviewing consumer complaints on a case-by-case basis  and in the aggregate to identify trends in company practices. Three of these states review these data as part of broader  analyses of the LTCI market during which they also review, for example,  financial data and information on companies’ claims settlement practices. The second way that states monitor company compliance with claims  settlement standards is by using market conduct examinations. In addition to their efforts to monitor compliance with claims settlement  standards, regulators from six of the states in our review reported that  their state is considering or may consider adopting additional consumer  protections related to claims settlement. Also, a group of representatives from NAIC  member states was formed in March 2008 to consider whether to  recommend developing provisions to include an independent review  process in the NAIC LTCI models. Such an addition may be useful, as  regulators from three states told us that they lack the authority to resolve  complaints involving a question of fact, for example, when the consumer  and company disagree on a factual matter regarding a consumer’s  eligibility for benefits.
Why GAO Did This Study

As the baby boom generation ages, the demand for long-term care services is likely to grow and could strain state and federal resources. The increased use of long-term care insurance (LTCI) may be a way of reducing the share of long-term care paid by state and federal governments. Oversight of LTCI is primarily the responsibility of states, but over the past 12 years, there have been federal efforts to increase the use of LTCI while also ensuring that consumers purchasing LTCI are adequately protected. Despite this oversight, concerns have been raised about both premium increases and denials of claims that may leave consumers without LTCI coverage when they begin needing care. This statement focuses on oversight of the LTCI industry's (1) rate setting practices and (2) claims settlement practices. This statement is based on findings from GAO's June 2008 report entitled Long-Term Care Insurance: Oversight of Rate Setting and Claims Settlement Practices (GAO-08-712). For that report, GAO reviewed information from the National Association of Insurance Commissioners (NAIC) on all states' rate setting standards. GAO also completed 10 state case studies on oversight of rate setting and claims settlement practices, which included structured reviews of state laws and regulations, interviews with state regulators, and reviews of state complaint information. GAO also reviewed national data on rate increases implemented by companies.

What GAO Found

Many states have made efforts to improve oversight of rate setting, though some consumers remain more likely to experience rate increases than others. NAIC estimates that since 2000 more than half of states nationwide have adopted new rate setting standards. States that adopted new standards generally moved from a single standard that was intended to prevent premium rates from being set too high to more comprehensive standards intended to enhance rate stability and provide other protections for consumers. Although a growing number of consumers will be protected by the more comprehensive standards going forward, as of 2006 many consumers had policies not protected by these standards. Regulators in most of the 10 states GAO reviewed said that they think the more comprehensive standards will be effective, but that more time is needed to know how well the standards will work. State regulators in GAO's review also use other standards or practices to oversee rate setting, several of which are intended to keep premium rates more stable. Despite state oversight efforts, some consumers remain more likely to experience rate increases than others. Specifically, consumers may face more risk of a rate increase depending on when they purchased their policy, from which company their policy was purchased, and which state is reviewing a proposed rate increase on their policy. Regulators in the 10 states GAO reviewed oversee claims settlement practices by monitoring consumer complaints and conducting examinations in an effort to ensure that companies are complying with standards. Claims settlement standards in these states largely focus on timely investigation and payment of claims and prompt communication with consumers, but the standards adopted and how states define timeliness vary notably across the states. Regulators told GAO that reviewing consumer complaints is one of the primary methods for monitoring companies' compliance with state standards. In addition to monitoring complaints, these regulators also said that they use examinations of company practices to identify any violations in standards that may require further action. Finally, state regulators in 6 of the 10 states in GAO's review reported that their states are considering additional protections related to claims settlement. For example, regulators in several states said that their states were considering an independent review process for consumers appealing claims denials. Such an addition may be useful as some regulators said that they lack authority to resolve complaints where, for example, the company and consumer disagree on a factual matter, such as a consumer's eligibility for benefits. In commenting on a draft of GAO's report issued on June 30, 2008, NAIC compiled comments from its member states. Member states said that the report was accurate but seemed to critique certain aspects of state regulation, including differences among states, and make an argument for certain reforms. The draft reported differences in states' oversight without making any conclusions or recommendations.