California commissioner announces new legislation for long term care insurance

Long Term Care Insurance

California Long Term Care Insurance

AB 999 has been passed by a vote of five to three.

The California Department of Insurance has issued a press release that detailed Commissioner Dave Jones’s announcement regarding the passing of AB 999, which was authored by Assembly Aging and Long Term Care Committee Chair, Mariko Yamada (D-Davis).

Commissioner Jones had sponsored the bill, as did the California Department of Insurance.

It has been written to increase consumer protection from the risk of excessive premium rate volatility, through the modification of the existing calculation process for the rates for LTC insurance.

This measure is also designed to provide consumers with the ability to obtain more information so that they can educate themselves regarding the purchasing of this type of policy, as they will have access to the language of the coverage ahead of the actual purchase.

Commissioner Jones explained that “Perhaps the most urgent issue currently facing senior consumers today is the rising cost of long-term care insurance.” He went on to say that the new bill will help to control “a troubling trend in the number and size of long-term care rate increases. Without this legislation, consumers, many on fixed incomes, will continue to face uncertainty, never knowing what rates to expect from year to year.”

Yamada also stated that people have a longer life span and must come to understand that there are many costs associated with long term care, for which adequate coverage can be a necessity for financial survival. He added that he was honored to partner with Commissioner Jones in “setting a high bar” for the LTC industry within the state. Yamada feels that the bill brings vital transparency and a greater degree of protection for consumers who are shopping for this important type of policy.

The state first started allowing LTC coverage to be sold in the early 1980s, and has had no historical experience among its insurers before that time. This made it challenging for the calculations of their premium rates to be performed. The result of this was that many policies were essentially priced on whatever the insurer suspected might be right, but that they later determined to have been inaccurate.

Over time, insurers became more experienced with setting long term care premiums and started to calculate more accurate rates, but were also increasing them in order to make up for the losses from the inaccuracies in previous years. This type of poor investment practice would be prevented with the new bill.


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