From reviewing LTC rate filings across a dozen states, the common thread is that the actuarial justification documents are written for a single audience: the state insurance department’s actuarial staff. Technical memoranda reference the NAIC Long-Term Care Insurance Model Regulation, cite actual-to-expected loss ratios by policy duration, and present discounted cash flow projections using terminology that assumes familiarity with ASOP No. 18 and the original pricing basis. Connecticut’s HB 05304 changes that dynamic. When the filing triggers a public hearing, the same actuarial narrative must hold up in front of legislators, consumer advocates, and policyholders who have watched their premiums quadruple over the past decade.

On May 6, 2026, the Connecticut House passed HB 05304 by a 146-4 vote, following the Senate’s 35-1 approval on April 30. The bill represents the most aggressive state-level overhaul of the LTC rate filing process since the NAIC adopted its multistate actuarial review framework in 2022. More than 17,000 Connecticut policyholders received rate increases of 50% or more between January 2019 and October 2024, according to CT Insurance Department data reviewed by CT Mirror. A few dozen policyholders absorbed increases as high as 174%. This is the political context in which pricing actuaries will now prepare their next round of Connecticut filings.

What HB 05304 Requires

The law creates six new obligations for carriers and regulators:

The 10% public hearing threshold is notably low. Nationally, carriers requested an average 56% increase in their most recent LTC filings, according to the Milliman/SOA 2024 Rate Increase Survey covering 17 major companies. In Connecticut specifically, Genworth raised rates on over 2,000 policyholders by an average of 97% in 2022, with individual increases ranging from 79% to 173%. Under the new law, every one of those filings would have triggered a public hearing.

The Lifetime Loss Ratio Framework

At the core of every LTC rate increase filing sits the lifetime loss ratio calculation. This is the metric that determines whether a rate increase is actuarially justified, and it is the concept that pricing actuaries must now explain in a public forum.

The lifetime loss ratio equals the present value of projected future claims divided by the present value of projected future premiums. The pricing actuary calculates this ratio and compares it against the original pricing loss ratio target, which for most individual LTC policies sold in the 1990s and early 2000s was approximately 60%. The NAIC Model Regulation sets minimum lifetime loss ratio standards: 58% on the initial premium for pre-rate-stabilized policies, and 60% for rate-stabilized policies issued after the early 2000s.

When actual morbidity, persistency, and investment return experience diverge from original assumptions, the lifetime loss ratio rises above the original target. A block priced at a 60% lifetime loss ratio that now projects an 85% ratio on current premiums has a clear actuarial shortfall. The rate increase filing quantifies that gap and proposes a premium adjustment to bring the projected ratio back toward the original target.

The critical constraint, and the one that will generate the most friction in public hearings, is the NAIC Model Regulation’s prohibition on recovering past losses. The regulation requires that rate increase filings use the lesser of actual and expected past claims when demonstrating loss ratio compliance. This means pricing actuaries cannot file for a rate increase that recoups historical claim costs that exceeded original projections. The filing narrative must be framed entirely around prospective morbidity deterioration: the demonstration that future claims, under updated assumptions, will exceed what current premiums can fund.

This prospective-only framework creates a communication challenge. A policyholder whose premium has already risen from $85 per month in 1994 to over $830 per month (a documented case from CT Public Radio) will reasonably ask why the carrier needs still more. The actuarial answer involves distinguishing between past shortfalls that the carrier absorbed and future shortfalls that have not yet materialized. Explaining that distinction to a public hearing audience, under attorney general scrutiny, requires a different register than a technical memorandum written for a department actuary.

Decomposing the Rate Increase Need

Connecticut’s annual loss ratio disclosure requirement means regulators and the public will see the component drivers behind each rate increase. Every filing decomposes the total increase need into three principal sources, each quantified through its own actuarial study.

Morbidity Deterioration

Pricing actuaries measure morbidity deterioration by comparing actual claim experience to the original pricing-basis incidence rate and continuance tables. The typical filing presents updated incidence rates (the probability that an active policyholder files a claim in a given year, segmented by age and benefit trigger) and continuance tables (the probability that a claimant continues receiving benefits for a given number of months after claim inception). When these tables show higher incidence or longer continuance than original assumptions projected, the morbidity component of the rate increase is established.

Industry data confirms the scale of this driver. Average LTC claim size grew from approximately $110,000 in 2015 to $180,000 in 2024, according to Milliman data from Experience Reporting Forms. Annual incurred claims across the industry reached approximately $17 billion in 2024, an increase of over 80% since 2015. Nearly 50% of total claims dollars now relate to dementia and Alzheimer’s cases, which tend to produce the longest continuance periods.

Lapse Rate Deterioration

Lapse rate deterioration accounts for roughly 31% of total rate increase needs across industry filings, according to American Academy of Actuaries estimates. The filing exhibit shows actual-to-expected lapse ratios by policy duration, where lower-than-expected lapses increase the proportion of the in-force block that reaches claim-eligible ages.

Original pricing assumed annual voluntary lapse rates of 4% to 5%, grounded in experience from other insurance lines. Actual lapse rates settled at approximately 1%, and in many legacy blocks even lower. A 3-percentage-point annual lapse overshoot compounds over 30 years into a policyholder population roughly 26% larger than the pricing actuary anticipated, every additional policyholder representing a potential future claim unfunded by the original premium structure. As Milliman’s illustrative model demonstrates, correcting the lapse assumption from 6% to 1% ultimate on a policy priced in 1992 is one of the largest single contributors to the cumulative 260% to 300% rate increase need.

Investment Return Shortfall

The third component compares the earned rate on assets supporting LTC reserves to the original pricing discount rate. Policies priced in the late 1980s and 1990s assumed investment returns in excess of 8%, reflecting the prevailing bond market at issuance. By 2014, the average industry investment income assumption had fallen to 4.6%, according to Federal Reserve Bank of Chicago research. Carriers that reinvested maturing bonds at 2% to 3% during the post-2008 low-rate period permanently reduced the asset base supporting their LTC obligations.

Milliman’s illustrative scenario shows the impact concretely: adjusting the discount rate from 8% to 4% on a two-year benefit period policy priced in 1992 contributes significantly to the cumulative rate increase need, amplified by the interaction with corrected lapse and morbidity assumptions over a 30-to-40-year benefit horizon.

From Regulator Memoranda to Public Hearings

The procedural shift from a closed regulator review to a public hearing changes what an effective rate filing looks like. Patterns we have seen in states with existing public hearing requirements (such as California’s Department of Insurance prior approval process for property lines) suggest several practical adjustments for LTC pricing actuaries.

First, the filing memorandum needs a plain-language executive summary that bridges technical actuarial concepts to consumer-accessible terms. The lifetime loss ratio becomes “the share of premiums projected to pay future claims.” Prospective morbidity deterioration becomes “updated projections showing that future care costs will exceed what current premiums can cover.” The NAIC past-loss prohibition becomes “we are not asking to recover money already spent on claims; we are asking for premiums sufficient to cover claims that have not yet occurred.”

Second, the three-driver decomposition must be presented with exhibit clarity. Legislators and AG staff will ask for the percentage of the requested increase attributable to each driver. A pie chart or waterfall showing, for example, 31% from persistency, 29% from morbidity, and 20% from claim duration (with the remainder from investment shortfall) gives the hearing a concrete framework rather than a single opaque number.

Third, the filing must anticipate the counter-narrative. Policyholder testimony will center on cumulative increases and premium-to-benefit ratios. One documented Connecticut case shows premiums rising from $85 per month to over $830 per month, a trajectory that looks punitive regardless of actuarial justification. The pricing actuary’s narrative must acknowledge cumulative burden while demonstrating that the requested increase addresses a prospective shortfall that, left unfunded, would threaten the carrier’s ability to pay future claims for all remaining policyholders.

Premium Deficiency Reserves as a Regulatory Signal

Connecticut’s annual loss ratio reporting requirement will make active life reserve adequacy more visible than it has historically been. When a carrier’s gross premium valuation shows that future premiums on an in-force block are insufficient to cover future claims and expenses, the carrier must establish a premium deficiency reserve (PDR). The PDR represents the present value of the shortfall between projected future premiums and projected future claims plus maintenance expenses.

For regulators reviewing annual loss ratio disclosures under HB 05304, the PDR is a signal that original pricing assumptions have permanently deteriorated. A carrier posting PDRs on a Connecticut LTC block while simultaneously filing for a rate increase presents a consistent narrative: the existing premium level is demonstrably inadequate, and the rate increase is the mechanism to eliminate the deficiency. Conversely, a carrier filing for a rate increase while holding no PDR invites the question of whether the increase is truly needed or is an attempt to improve profitability rather than restore adequacy.

The interaction between PDRs and rate increase filings also affects the phasing of approvals. A regulator can approve a rate increase in stages, observing whether the PDR declines after each phase. If the PDR persists after the first approved tranche, that supports the actuarial case for subsequent phases. This gives regulators a quantitative feedback mechanism that was previously available only through the rate filing review itself.

Why This Matters for Pricing Actuaries

Connecticut’s law creates a template that other states will study. With 5.8 million individuals holding standalone LTC coverage nationally and annual incurred claims at $17 billion (Milliman 2024), the LTC rate increase cycle is a political issue in every state with a significant legacy block. The structural features of HB 05304, particularly the 10% hearing threshold and AG investigative authority, could spread through the NAIC compact process or through direct legislative adoption in states where LTC rate increases have generated similar constituent complaints.

For pricing actuaries preparing Connecticut filings, the immediate implications are practical:

The broader signal is that the era of LTC rate filings reviewed exclusively within actuarial departments is ending. Connecticut has formalized public accountability into the process. Pricing actuaries who can communicate actuarial concepts to non-technical audiences, without sacrificing technical rigor, will be the ones whose filings survive scrutiny.

Further Reading

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