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 Academy of Actuaries and who meets the qualification standards of that 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. The lifetime expected loss ratio shall be calculated using the discount rate provided by subdivision (c) of Section 10236.14.

(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) 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) 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) A statement that asset investment yield rate changes have not been used to justify the rate increase unless the insurer can demonstrate that its return on investments is lower than the maximum valuation interest rate for contract reserves for those policies or the commissioner determines that a change in interest rates is justified due to changes in laws or regulations that are retroactively applicable to long-term care insurance previously sold in this state.

(6) 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) (1) The insurer, at its discretion, may request a premium rate schedule increase that is lower than the rate increase necessary to provide the certification required by subdivision (a) or a series of premium rate schedule increases with a present value of not more than the rate increase necessary to provide the certification required by subdivision (a). The commissioner may accept the premium rate schedule increase or series of increases without submission of the certification required by subdivision (a) if all of the following apply:

(A) In the opinion of the commissioner, accepting the lower premium rate schedule increase or increases is in the best interest of California policyholders.

(B) The actuarial memorandum discloses to the commissioner the rate increase necessary to provide the certification required by subdivision (a).

(C) The rate increase filing satisfies all other requirements of this section.

(D) The insurer discloses to policyholders affected by the approved increases the filed increase, the approved premium rate schedule increase or increases, and the amount and timing of any subsequent rate schedule increases included in the rate increase filing whether those subsequent rate schedule increases are approved or not approved by the commissioner.

(2) The commissioner may approve a lower requested premium rate schedule increase and may approve the initial increase or more than just the initial increase requested pursuant to paragraph (1).

(3) If the amount of increase after all increases disclosed pursuant to subparagraph (D) of paragraph (1), whether the increase or increases are approved or not approved by the commissioner, triggers the contingent benefit upon lapse, the commissioner shall require the administration by an insurer of the contingent benefit upon lapse as a condition of approval of a premium rate schedule increase that is lower than the amount necessary to provide the certification required by paragraph (1) of subdivision (a) or with the initial increase and each subsequent increase in a series of premium rate schedule increases. The commissioner may waive this condition of approval if an insurer demonstrates that the waiver is necessary to protect the financial condition of the insurer, including avoidance of further reductions in capital and surplus.

(4) For purposes of paragraph (2) of subdivision (a) of Section 10236.14, the loss ratio calculation shall assume future premiums are based on the total filed rate schedule increase or series of increases disclosed pursuant to subparagraph (D) of paragraph (1), whether the increase or increases are approved or not approved by the commissioner.

(5) Premium rate schedule increases requested pursuant to paragraph (1) or approved as described in paragraph (2) shall comply with the provisions of Sections 10234.6 and 10234.95.

(f) The provisions of this section are applicable to all individual and group policies issued in this state on or after July 1, 2002.

(Amended by Stats. 2016, Ch. 304, Sec. 15. (AB 2884) Effective January 1, 2017.)