Actuarial Notes

Long-Term Care Insurance Multistate Rate Review Framework

By National Association of Insurance Commissioners · 2025 · CP321-103-26

Study guide: Exam CP-321

The NAIC framework for a multi-state actuarial (MSA) review of in-force long-term care insurance (LTCI) rate increase proposals, maintained by the NAIC Health Actuarial (B) Task Force. Insurers voluntarily offer a block for review by an MSA team, which issues an MSA Advisory Report recommending actuarially justified state-by-state rate increases; the December 2025 version moves to a single actuarial rate review methodology and a revised cost-sharing formula.

On the syllabus

  • Exam CP-321 — Outcomes 2f; the NAIC framework of December 2025, Sections V-VI (Actuarial Review; Appendices).

Preface

  • Background
  • 2025 Amendments

I Introduction

  • A. Purpose
    • In 2019 the NAIC charged its Long-Term Care Insurance (EX) Task Force with developing a consistent national approach to reviewing current LTCI rates that results in actuarially appropriate increases being granted by the states in a timely manner and eliminates cross-state rate subsidization.
  • B. State Participation in the MSA Review
  • C. General Description of the MSA Review
  • D. Benefits of Participating in the MSA Review
  • E. Disclaimers and Limitations
  • F. Governing Body and Role of the NAIC Health Actuarial (B) Task Force

II MSA Team

  • A. Qualifications of an MSA Team Member
  • B. Duties of an MSA Team Member
  • C. Participation of an MSA Team Member
  • D. MSA Associate Program
  • E. Conflicts, Confidentiality, and Authority of the MSA Team
  • F. Required NAIC and Compact Resources

III Requesting an MSA Review

  • A. Scope and Eligibility of a Rate Proposals for MSA Review
  • B. Process for Requesting an MSA Review
  • C. Certification

IV Review of the Rate Proposal

  • A. Receipt of a Rate Proposal
  • B. Completion of the MSA Review
  • C. Preparation and Distribution of the MSA Advisory Report
  • D. Timeline for Review and Distribution of the MSA Advisory Report
    • A draft MSA Advisory Report goes to Participating States on Day 1, comments are due on Day 21, and the final report is distributed on Day 35.
  • E. Feedback to the MSA Team

V Actuarial Review

  • A. MSA Team's Actuarial Review Considerations
    • The team assesses the reasonability of assumptions for lapse, mortality, morbidity and interest rates, and validates, adjusts or requests new projections of claim costs and premiums by year.
    • The recommendation is intended to give the same rate per unit in each state following the current rate increase round, leading to higher percentage increases in states that approved lower increases in the past.
    • Consideration of Solvency Concerns
    • Follow-Up Proposals on the Same Block
  • B. Loss Ratio Approach
    • Pricing at issuance is typically based on a lifetime loss ratio target, commonly 60%, and the approach increases future premiums to a level, referred to as make-up premium, at which the original target is attained again.
    • The framework recognizes that the approach produces rate increases that are too high and does not recognize the shrinking block issue; for rate-stabilized business the lifetime loss ratios are broken out, such as in a 58%/85% pattern.
  • C. MSA Approach
      1. Blended if-knew / makeup approach to address the shrinking block issue
      1. Cost-sharing formula that increases the insurer's burden as cumulative rate increases rise
      1. Assumption review
      1. Interest rate / investment return component
      1. Original Assumption Adjustment
      • If original mortality, lapse or investment return assumptions were out of line with industry-average assumptions at the time of original pricing, the original premium is replaced by a "benchmark premium", an adjustment that wears off over 20 years from policy issue.
  • D. RBOs
    • RBOs in the MSA Advisory Report
    • Future RBOs
  • E. Non-Actuarial Considerations

VI Appendices

  • A. Appendix A – MSA Advisory Report Format
  • B. Appendix B – Information Checklist
  • C. Appendix C—Actuarial Approach Detail
  • D. Appendix D—Principles of RBOs Associated with LTCI Rate Increases
  • E. Appendix E—Guiding Principles on LTCI RBOs Presented in Policyholder Notification Materials

VII Exhibits

  • A. Exhibit A—Sample MSA Advisory Report

Sources