State Regulation of Long-Term Care Insurance

PURPOSE

The purpose of this inspection was to obtain current information on consumer problems and State regulation of private long-term care (LTC) insurance.

BACKGROUND

This inspection was requested by Congressman Ron Wyden, Chairman of the House Small Business Subcommittee on Regulation, Business Opportunities, and Energy. Long-term care insurance policies provide "coverage for not less than 12 consecutive months for one or more necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance or personal care services, provided in a setting other than an acute care unit of a hospital." 1 Long-term care insurance has grown significantly only recently. The number of LTC policies has increased from 125,000 in 1986 to more than 1.6 million in 1990. In 1986, the National Association of Insurance Commissioners (NAIC) developed the first Long-Term Care Insurance Model Act in collaboration with the Department of Health and Human Services (HHS) and insurance industry representatives. The following year, it issued its first model regulation. The model act and regulation provide States with minimum standards to use in crafting LTC insurance laws and regulations. The NAIC modifies the model act and regulation frequently to improve policyholder coverage and strengthen consumer protection. Both were revised most recently in December 1990. A lag exists before States adopt model changes, and new State standards usually do not apply to policies already in effect. While States have primary responsibility for regulating private insurance, the Federal government has played a role in regulating Medicare supplemental insurance, commonly known as Medigap insurance. In 1980, Congress enacted the Baucus amendment to the Social Security Act. The amendment defines minimum standards that policies must meet before they can be marketed as certified Medigap policies. Congress enacted further Medigap controls in the Omnibus Budget Reconciliation Act of 1990. Currently, no Federal laws govern LTC insurance. 1As defined in section 4A of the NAIC Long-Term Care Insurance Model Act.