Sec. 31.14.02.04. Initial Filing Requirements

A. Applicability.

(1) Sections B.-D. of this regulation apply to any long-term care policy issued in Maryland on or after October 1, 2002 and before September 1, 2017.

(2) Sections E.-H. of this regulation apply to any to any long-term care policy issued in Maryland on or after September 1, 2017.

B. An insurer shall provide the following information to the Commissioner at least 60 days before making a long-term care insurance form available for sale:

(1) A copy of the disclosure documents required by Regulation .03 of this chapter; and

(2) An actuarial certification consisting of at least the following:

(a) A statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated;

(b) A statement that the policy design and coverage provided have been reviewed and taken into consideration;

(c) A statement that the underwriting and claims adjudication processes have been reviewed and taken into consideration;

(d) A complete description of the basis for contract reserves that are anticipated to be held under the form, to include:

(i) Sufficient detail or sample calculations provided so as to have a complete depiction of the reserve amount to be held;

(ii) A statement that the assumptions used for reserves contain reasonable margins for adverse experience;

(iii) A statement that the net valuation premium for renewal years does not increase; and

(iv) A statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses or, if such a statement cannot be made, a complete description of the situations where this does not occur; and

(e) One of the following:

(i) A statement that the premium rate schedule is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefits; or

(ii) A comparison of the premium schedules for similar policy forms that are currently available from the insurer with an explanation of the differences.

C. In providing the statement required by §B(2)(d)(iv) of this regulation, the insurer may base this statement on the following:

(1) An aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship; or

(2) If the gross premiums for certain age groups appear to be inconsistent with the requirement in §B(2)(d)(iv) of this regulation, the Commissioner may request a demonstration under §D of this regulation based on a standard age distribution.

D. Additional Information.

(1) The Commissioner may request an actuarial demonstration that benefits are reasonable in relation to premiums.

(2) The actuarial demonstration shall include:

(a) Premium and claim experience on similar policy forms, adjusted for any premium or benefit differences;

(b) Relevant and credible data from other studies; or

(c) Information described in §D(2)(a) and (b) of this regulation.

(3) If the Commissioner asks for additional information under this section, the period in §B of this regulation does not include the period during which the insurer is preparing the requested information.

E. An insurer shall provide the following information to the Commissioner at least 60 days before making a long-term care insurance form available for sale:

(1) A copy of the disclosure documents required by Regulation .03 of this chapter;

(2) An actuarial certification consisting of at least the following:

(a) A statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated;

(b) A statement that the policy design and coverage provided have been reviewed and taken into consideration;

(c) A statement that the underwriting and claims adjudication processes have been reviewed and taken into consideration;

(d) A statement that the premiums contain one of the following:

(i) At least the minimum composite margin for moderately adverse experience as specified in §G(1) of this regulation; or

(ii) The specification of and justification for a lower margin as required by §G(2) of this regulation; and

(e) One of the following:

(i) A statement that the premium rate schedule is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefits; or

(ii) A comparison of the premium schedules for similar policy forms that are currently available from the insurer with an explanation of the differences;

(f) A statement that reserve requirements have been reviewed and considered. Support for this statement shall include:

(i) Sufficient detail or sample calculations to provide a complete depiction of the reserve amounts to be held; and

(ii) A statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses; and

(g) If the statement required in §E(2)(f)(ii) of this regulation cannot be made, a complete description of the circumstances under which this does not occur; and

(3) An actuarial memorandum prepared, dated and signed by a member of the American Academy of Actuaries that:

(a) Addresses and supports each specific item required as part of the actuarial certification;

(b) Provides at least the following information:

(i) An explanation of the review performed by the actuary before making the statements in §E(2)(b) and (c) of this regulation;

(ii) A complete description of pricing assumptions;

(iii) Sources and levels of margins incorporated into the gross premiums that are the basis for the statement made in the actuarial certification under §E(2)(a) of this regulation;

(iv) An explanation of the analysis and testing performed in determining the sufficiency of the margins provided for in §E(2)(d) of this regulation, to include a clear description of the deviations in margins between ages, sexes, plans or states other than those produced utilizing generally accepted actuarial methods for smoothing and interpolating gross premium scales; and

(v) A demonstration that the gross premiums include the minimum composite margin specified in §E(2)(d) of this regulation.

F. In providing the statement required by §E(2)(f)(ii) of this regulation, the insurer may base this statement on the following:

(1) An aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship; or

(2) If the gross premiums for certain age groups appear to be inconsistent with the requirement in §E(2)(f)(ii) of this regulation, the Commissioner may request a demonstration under §H of this regulation based on a standard age distribution.

G. The following provisions apply to the statement required under §E(2)(d) of this regulation:

(1) For the purposes of the actuarial certification under §E(2)(d)(i) of this regulation, a composite margin may not be less than 10 percent of lifetime claims;

(2) For the purposes of the actuarial certification under §E(2)(d)(ii) of this regulation, a composite margin less than 10 percent may be justified in uncommon circumstances, if the following is submitted:

(a) Full justification of the proposed amount; and

(b) Methods to monitor developing experience that would be the basis for withdrawal of approval for the lower margins;

(3) A composite margin lower than otherwise considered appropriate for the standalone long-term care policy may be justified for long-term care benefits if it is:

(a)Provided through a life insurance policy or an annuity contract; and

(b)The lower composite margin is justified by appropriate actuarial demonstration addressing margins and volatility when considering the entirety of the product; and

(4) A greater margin may be appropriate if the insurer has less credible experience to support its assumptions used to determine the premium rates.

H. Additional Information.

(1) In any review of the actuarial certification and actuarial memorandum required by §E of this regulation, the Commissioner may request review by an independent actuary with experience in long-term care pricing.

(2) If the Commissioner asks for additional information under this section, the period in §E of this regulation does not include the period during which the insurer is preparing the requested information.