Carriers are still filing large premium increases on long-term care blocks sold in the 1980s, 1990s and early 2000s. The Milliman and SOA 2024 Rate Increase Survey, covering 17 companies representing over 75% of US LTC premium, puts the average requested increase at 56% and the average state approval at 28% of the amount requested. That second figure has barely moved across three survey rounds, and the distance between the two is the part nobody has funded.

Key Takeaways

Three Assumptions That Failed Together

Each of the three pricing errors would have required a rate adjustment on its own. What made the legacy blocks unrecoverable is that they were not independent.

Lapse was the largest. Carriers priced standalone LTC assuming voluntary lapse in the mid-single digits, roughly 4% to 5% a year, by analogy to other lines. Actual experience came in near 1%, and lower in many blocks. The behavioral reason is that guaranteed-renewable LTC carries real option value: a policyholder holding a $300 per day benefit with inflation protection is holding something worth hundreds of thousands of dollars, and people do not surrender that voluntarily.

The arithmetic compounds. A three-percentage-point annual overshoot accumulates over thirty years into an in-force population roughly 26% larger than priced, every one of them an unfunded future claim. And the extra policyholders are not average. Those who lapse skew healthy, so the cohort that stayed was disproportionately the cohort that would claim.

Morbidity failed in the same direction. Early pricing assumed LTC experience would track life insurance mortality. The SOA's later work showed it resembling annuitant mortality instead, reflecting anti-selection among purchasers, with both claim incidence and claim duration exceeding assumption. Medical advances extended the period of disability without restoring independence.

Interest removed the offset. Reserves were assumed to earn 6% to 8%. Carriers reinvesting maturing bonds at 2% to 3% from 2008 through 2021 permanently reduced the asset base behind the liabilities. The same conditions that suppressed returns also pulled adult children into work and out of informal caregiving, raising formal care demand.

A 56% Ask Settled at 28% of the Amount

The survey covers 16 of the 17 participants in detail: 37 nationwide filings, more than 1,000 individual state submissions, average requested increase 56%, average approval 28% of the amount requested, with 73% of filings fully or partially approved and 75% varying the request across benefit characteristics rather than applying a flat percentage. Time from filing to approval averaged six months, improved from seven in 2021.

The stability of the 28% is the finding. It was 29% in the 2021 survey and is essentially unchanged now, across three iterations and a change in the national review framework. That is not a negotiation outcome, it is an equilibrium: carriers file what the actuarial math indicates, states approve roughly what they believe policyholders will absorb without mass lapsation, and the difference stays where it was.

Where it stays is on the balance sheet, and it does not appear in the rate filing. A valuation actuary cannot reserve to the indicated premium, because the indicated premium will not be collected. The gap between actuarially indicated and state-approved increases is an implicit unfunded liability that has to be carried in asset adequacy testing rather than resolved in pricing, and it recurs with every filing cycle at the same ratio.

The federal program shows the same arithmetic without the state-by-state overlay. OPM approved increases of up to 86% for FLTCIP's roughly 267,000 enrollees, phased across January 2024, January 2025 and January 2026, taking one documented enrollee from $76.27 to $141.90 a month. It was the first increase in seven years. More telling than the number is that OPM suspended new enrollments in December 2022 and extended the suspension for 24 months from December 19, 2024, citing volatility in long-term care costs and a diminished insurance market.

The Framework Built to Fix This Did Not Move the Ratio

The NAIC adopted the Long-Term Care Insurance Multistate Actuarial Review Framework in April 2022 precisely to address interstate inconsistency.

It caps the Multi-State Actuarial Team's recommendation at 100% of current rates for any state, standardizes review of actuarial justification so the same experience data is not re-analyzed in every jurisdiction, eliminates cross-state rate subsidization, and adds a policyholder communication checklist.

The 2024 survey's 28% average approval is statistically indistinguishable from the pre-framework 29%. The variance it was built to compress is also still there: California, Florida, New Jersey, New York and Texas remain the states requiring the most effort, consistent with the 2021 and 2016 surveys, while other states have approved increases exceeding 100% of current premium in exchange for stability guarantees or phasing.

The equity consequence runs the opposite way from the intuition. A policyholder in a permissive state watches premiums double or triple. A policyholder in a restrictive state pays less and holds more carrier insolvency risk on the same policy form. The 100% cap protects against an extreme single-year increase and, by construction, extends the period over which the legacy shortfall stays unresolved.

Underneath all of it sits an unsettled reserving question. Carriers still disagree on whether to admit 2020 through 2022 experience into forward assumptions, when the pandemic both raised mortality among existing claimants and suppressed new claim incidence. A carrier that credits that mortality into its morbidity basis holds lower reserves than one treating the period as a transient shock, on identical blocks, and the Milliman survey records the question as open.

Further Reading

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