lhlcc2010formactuari

							Form and Rate
Issues for
Accident & Health
and Life, Annuity
and Credit
Products
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products




       Presenters

       • Sean Fry, Assistant Director-Accident/Health Section
       • Aaron Jenkins, Insurance Specialist-Life, Annuity and Credit Section
       • Carol Lo, Actuary, Actuarial Section
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


              Presentation Overview

              • Long Term Care (LTC) Products

              • Annuity Nonforfeiture Calculations

              • Medicare Supplement Products
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Partnership Program

                      LHL570(LTC)
                      Insurer Certification Form
                      (28 TAC § 3.3873(a)(2))
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Partnership Program

                Policy or Certificate- Must be Tax Qualified

                (28 TAC §3.3871(a)(1)(B), 28 TAC §3.3847)
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Partnership Program
                Policy or Certificate (continued)

                Inflation Protection Requirements
                (28 TAC §3.3871(a)(1)(C), 28 TAC § 3.3872)
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Partnership Program
                Policy or Certificate (continued)

                Inflation Protection Requirements

                       Person < 61 years of age = Compound
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Partnership Program
                Policy or Certificate (continued)

                Inflation Protection Requirements
                                                            Simple
                       Person >61, but <76 years of age =     or
                                                          Compound
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Partnership Program
                Policy or Certificate (continued)

                Inflation Protection Requirements
                                               Not Required,
                       = or >76 years of age = But Must be
                                                  Offered
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products




                Great Job!
              100 % Correct
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Partnership Program
                Policy or Certificate (continued)

                LHL569(LTC)
                Required Disclosure Notice
                (28 TAC §3.3871(a)(2))
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Forms (Mandated Text):
                (28 TAC §§ 3.3829(b)(8)(9), 3.3842(i)(2))

                   LTC Personal Worksheet
                  (LHL560(LTC))

                   LTC Potential Rate Increase Disclosure Form
                  (LHL561(LTC))

                  Things You Should Know Before You Buy LTC Insurance
                  (LHL567(LTC))
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Forms (Mandated Text): Exception
                (28 TAC §§ 3.3829(b)(8)(9), 3.3842(i)(2))

                  Exception for the LTC Personal Worksheet

                  Text: “For State of Texas”
                        “Company”
                        “Noncancellable/Guaranteed Renewable”
                        “Agent”
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • LTC Web Based Electronic Reporting
                  Reported each year by June 30

              • Link: http://www.tdi.state.tx.us/forms/form10.html
                   Replacement & Lapse Report: LHL562(LTC)
                   Rescission Reporting: LHL563(LTC)
                   Claims Denial Reporting: LHL564(LTC)
                   Long Term Care Policies Sold: LHL565(LTC)
                   Suitability Reporting: LHL566(LTC)
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • Life Policy/Annuity Contracts
                A Long-Term Care (LTC) rider is subject to 28 TAC
                Subchapter Y, Chapter 3. These situations make a rider LTC:

              • If payments under the rider are to be used specifically for or
                restricted to LTC expenses.

              • If the rider extends the benefits beyond exhaustion of the
                contract’s death benefit (extension of benefits)

              • If the cash value of a policy or contract increases as the
                result of LTC or LTC related expenses.
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              Life Policy/Annuity Contracts-Common Omissions

              Outline of Coverage not Included

              Improper Order or Format of the Outline of Coverage

              Exact language of Subchapter Y is not used (extra/deleted
                language) in the Rider or Outline of Coverage

              Rates/(Cost-of-Insurance)/Actuarial requirements not included
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • Life Policy/Annuity Contracts
                An accelerated-of-life insurance benefit is a benefit under a
                life insurance contract which prepays all or a portion of the
                death benefit. This type of a rider is not considered LTC if:

              • It accelerates the death benefit for:
                     terminal illness, medical conditions requiring
                     extraordinary medical intervention
                     permanent institutional confinement,
                     specified diseases (examples: cancer, heart disease,
                     AIDS, Organ Transplants)
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

              Long Term Care

              • Life Policy/Annuity Contracts (continued)
                This type of a rider is not considered LTC if:

              • It pays a lump sum for benefits

              • The payments are not restricted to or conditioned upon the
                receipt of LTC or LTC related expenses
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


               Long Term Care

               Rating Issues:
               Section 1651.053, TIC; 28 TAC 3.3831
               • Missing actuarial certification
               • Missing moderately adverse experience assumption
               • Missing accumulation of at least twelve months actual
                 experience after implementation of prior rate increase
               • Combining experiences of pre-rate stabilized and rate
                 stabilized forms
               • Proposing a series of rate increases
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

                   Annuity Nonforfeiture Calculations

• House Bill 1919 passed during the 81st Texas legislative session.

• Amends Section 1107.006, Texas Insurance Code.

• Requires all optional and fixed maturity date annuities to adhere to the 70/10
  standard.

• The standard is applicable for purposes of the annuity nonforfeiture
  calculations.
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


                   Annuity Nonforfeiture Calculations

 •     The 70/10 Standard:
     –    The maturity date of a contract must not be later than the next
          anniversary of the annuity contract that follows the annuitant’s 70th
          birthday or
     –    The 10th anniversary of the contract
 •    Effective Date is June 1, 2010
 •    Before passage of House Bill 1919, Fixed maturity date annuity contracts did
      not have to comply with the 70/10 standard
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


                 Annuity Nonforfeiture Calculations

•    Optional maturity date contracts already have to comply with the 70/10
     standard.
•    All annuity contracts issued on or after June 1, 2010, must comply with the
     70/10 standard.
•    Contracts to be issued on or after June 1, 2010, that are not in compliance
     must be revised.
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products



                  Annuity Nonforfeiture Calculations
                  Sections 1107.006, 1107.057, 1107.101 – 1107.103 TIC

    •Retrospective Test (accumulation value)

    •Prospective Test (present value)

        Maturity Date = later of:

             • next anniversary after 70th birthday; or
             • 10th anniversary of the contract
Prior to 70/10
70/10
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


              Annuity Nonforfeiture Calculations


  •   Revise Surrender Charge Schedule
  •   Revise Issue Age Limit

         Revised contract or revised contract page (as an insert page) with
         new form number
         Revised specification page with new form number
         Revised actuarial memorandum
         Revised nonforfeiture demonstration
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


               What’ Supp? Medicare Supplement



  •   2010 Standardized Plans (28 TAC § 3.3322)
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


               What’s Supp? Medicare Supplement



  •   2010 Standardized Plans (28 TAC § 3.3322)
  •   Outline of Coverage(LHL 050 Rev. 06/09)(28TAC § 3.3308(c))
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


               What’s Supp? Medicare Supplement



  •   2010 Standardized Plans (28 TAC § 3.3322)
  •   Outline of Coverage(28TAC § 3.3308(c))
  •   1990 Standardized Plans (Discontinued)
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


               What’s Supp? Medicare Supplement



  •   2010 Standardized Plans (28 TAC § 3.3322)
  •   Outline of Coverage(28 TAC § 3.3308(c))
  •   1990 Standardized Plans (Discontinued)
  •   Rates/Actuarial Memorandum
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products


               Medicare Supplement


      Rating Issues:
  •   Effective date of rate increase; 28 TAC § 3.3323
  •   Rate increase on non-credible blocks; 28 TAC § 3.3307(d)
  •   Rate increase request on plan A disabled
  •   Experience must be presented separately by plan
Form and Rate Issues for Accident & Health and Life,
Annuity and Credit Products

    Conclusion & Questions


    Contact Information:

    Aaron Jenkins (Insurance Specialist)
    aaron.jenkins@tdi.state.tx.us


    Carol Lo (Actuary)
    carol.lo@tdi.state.tx.us

    Sean Fry (Assistant Director)
    sean.fry@tdi.state.tx.us