Actuarial Notes

Long-Term Care

By Actuarial Standards Board · 2022 · ASOP No. 18

Study guide: Exam CP-321

The Actuarial Standards Board's guidance to actuaries performing actuarial services with respect to long-term care (LTC) benefit plans, including LTC insurance and public programs. This revised edition (Doc. No. 206) was adopted in March 2022 and is effective for actuarial services performed on or after September 1, 2022; its scope was widened to cover hybrid products, public programs and long-range financial projections of Medicaid programs, and its title changed from "Long-Term Care Insurance" to "Long-Term Care".

On the syllabus

  • Exam CP-321 — Outcomes 2g; the standard excluding its Appendices.

Transmittal Memorandum

  • ASOP No. 18 was adopted by the ASB in 1991 and revised in January 1999; the ASB approved a proposal to revise it in 2019 because of regulatory developments and emerging government-run LTC insurance programs.
  • The exposure draft was issued in March 2021 with a comment deadline of September 1, 2021; four comment letters were received.

1 Purpose, Scope, Cross References, and Effective Date

  • 1.1 Purpose
    • Gives guidance to actuaries performing actuarial services with respect to LTC benefit plans, including LTC insurance and public programs.
  • 1.2 Scope
    • Applies to actuaries designing, pricing, or determining funding of an LTC benefit plan, and to actuaries measuring or evaluating LTC liabilities within one; plans with short-term (for example, less than twelve consecutive months) and long-term benefit durations are included.
    • Does not apply to actuarial services for LTC benefits for Medicaid-eligible recipients, unless the services are for a long-range financial projection (generally more than five years) of LTC benefit expenditures and eligible recipients under the Medicaid program.
  • 1.3 Cross References
  • 1.4 Effective Date

2 Definitions

  • 2.1 Assisted Living Facility
  • 2.2 Home Care
  • 2.3 Insurer
  • 2.4 Long-Term Care (LTC)
    • A wide range of health and social services, which may include adult day care, custodial care, home care, hospice care, intermediate nursing care, respite care, and skilled nursing care, but generally not care in a hospital.
  • 2.5 Long-Term Care Benefit Plan (or LTC Benefit Plan)
  • 2.6 Nonforfeiture Benefits
    • Benefits that are available if premiums are discontinued.
  • 2.7 Nursing Home

3 Analysis of Issues and Recommended Practices

  • 3.1 Coverage and Plan Features
    • The actuary should take into account all pertinent provisions of the LTC benefit plan, including benefit eligibility, covered services, benefit amounts, benefit payment duration, and other coverage features that may significantly impact cost.
  • 3.2 Assumption Setting
    • The actuary may include a margin or provision for adverse deviation (PAD) when setting assumptions, appropriate for the intended purpose.
    • 3.2.1 Morbidity Assumptions
    • 3.2.2 Mortality Assumptions
    • 3.2.3 Acceleration of Benefits under Life Insurance Contracts
    • 3.2.4 Voluntary Termination (Lapse) Assumptions
    • 3.2.5 Operating Expense Assumptions
    • 3.2.6 Tax Assumptions
    • 3.2.7 Investment Return Assumptions
    • 3.2.8 Mix-of-Business Assumptions
    • 3.2.9 Change-Over-Time Assumptions
    • 3.2.10 Alternative LTC Arrangements
    • 3.2.11 Sensitivity Testing
      • Before assumptions are finalized, the actuary should perform sensitivity testing of reasonable variations in assumptions and reasonable correlations of assumptions, expanding the range when the supporting data have limited credibility.
  • 3.3 Premium Rate Recommendations
    • An initial premium rate schedule should have a reasonable likelihood of being sufficient without future rate adjustments.
  • 3.4 Reserve Determination and Asset Adequacy Analysis
    • Reserves typically required by and appropriate for LTC benefit plans are premium reserves, contract reserves, and claim reserves for both reported claims and incurred but not reported claims.
  • 3.5 Experience Monitoring
  • 3.6 Reliance on Data, Other Information, or a Model Supplied by Others
  • 3.7 Documentation

4 Communications and Disclosures

  • 4.1 Required Disclosures in an Actuarial Report
  • 4.2 Additional Disclosures in an Actuarial Report
  • 4.3 Confidential Information

Appendix 1 Background and Current Practices

  • Background
  • Current Practices
  • Definition of Selected Terms

Appendix 2 Comments on the Exposure Draft and Responses

Sources