Life-LTC Hybrids Confuse Regulators, Too

Even many state insurance regulators, and consumer advocates with a formal role at the National Association of Insurance Commissioners (NAIC), have a hard time understanding some of the terms related to life insurance provisions that can be used to pay for long-term care (LTC) services.

That confusion came up in October, when members of the NAIC’s Senior Issues Task Force were completing their work on a proposed update of the Shopper’s Guide to Long-Term Care Insurance.

(Related: How to Get Your Long Term Care Insurance Client Approved: The Application)

The NAIC is a group for insurance regulators. It cannot normally change states’ insurance laws or regulations itself, but states often start with NAIC models when developing their own laws and regulations.

The LTC shopper’s guide model is one of several insurance consumer guide models the NAIC has developed in an effort to help consumers understand how insurance products work.

The guide was developed in 1999. It was last updated in 2013.

Members of the Senior Issues Task Force have been working on a new update for months.

On Oct. 29, during a conference call meeting, members of the task force talked about a section of the guide update draft that talks about life-LTC hybrids. Regulators from California proposed a new version of that section. California regulators want the guide to inform consumers about the extra costs and potential pitfalls involved associated with life-LTC hybrids.

Bonnie Burns, a California health advocate with an official appointment from the NAIC to help represent consumers’ interests in NAIC proceedings, said she liked the section, according to the conference call meeting minutes.

But Wayne Mehlman, a representative from the American Council of Life Insurers, objected to the language, noting that it related to chronic illness riders, not to LTC riders on life and annuity contracts.

Mehlman asked Steve Schoonveld, an insurance company representative present on the call, to help explain the various types of riders available.

Schoonveld told the task force members on the call that chronic illness riders are not subject to LTC regulations. He also told the task force members that some phrases present in other types of riders, such as “discount value” and “present value,” are not included in LTC death benefit riders.

Members of the task force ended up rejecting California’s life-LTC hybrid language. Later, they agreed to approve the draft as a whole.

The guide draft now goes to the NAIC’s Health Insurance and Manage Care Committee for review.

That committee is preparing to hold an in-person session Friday, at the NAIC’s fall national meeting in San Francisco.


Links to information about the LTCI shopper’s guide project and other Senior Issues Task Force projects are available here.

— Read Life-LTC Hybrid Sales Soar: LIMRAon ThinkAdvisor.

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