LTCI MSA Framework
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2022 NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS 11
State responses will be confidential pursuant to the Master Agreement, and aggregated results of feedback surveys
will not specifically identify state responses. The MSA Team and state insurance regulators welcome feedback from
insurers on their experience using the MSA Review Process. This collective feedback will aid the Task Force in
understanding the practical effects of the MSA Review in achieving the goal of developing a more consistent state-
based approach for reviewing LTCI rate proposals that result in actuarially appropriate increases being granted by
the states in a timely manner and eliminates cross-state rate subsidization. The feedback will also help refine the
review process, improve future reports to better meet participants’ needs, and make updates to this MSA
Framework. Finally, the feedback will assist NAIC leadership in making decisions regarding the technology and staff
resources needed for the continued success of the project. Aggregated feedback results will be shared with
Participating States and insurers as determined appropriate.
V. ACTUARIAL REVIEW
A. MSA Team’s Actuarial Review Considerations
In conducting its actuarial review of a rate proposal, the MSA Team will consider assumptions, projections, and other
information provided by the insurer as outlined in Appendix B. The MSA actuarial review process will be evaluated
and evolve over time as more rate proposals are reviewed.
The Minnesota and Texas approaches ensure remaining policyholders do not make up for losses associated with
past policyholders. Professional judgment is used to address agreed upon policy issues, including the handling of
incomplete or non-fully credible data. The Minnesota approach also considers adverse investment expectations
related to the decline in market interest rates, and a cost-sharing formula is applied. The Texas approach ensures
rate changes reflect prospective changes in expectations. More detail of each approach is provided in the following
sections.
The MSA Team will consider the following in performing their review, applying their expertise and professional
judgement to the review, and reviewing the actuarial formulas and results:
• Review insurer experience, insurer narrative explanation, and relevant industry studies.
• Assess reasonability of assumptions for lapse, mortality, morbidity, and interest rates.
• Validate and adjust or request new projections of claim costs and premiums by year.
o Validate that the patterns of claims and premium projections over time reasonably align those
reflected in the assumptions.
o Adjust or request new projections of claims and premium to the extent that any underlying
assumptions are deemed unreasonable or unsupported by the MSA Team. Any differences will initially
result in correspondence between the MSA Team and the insurer via SERFF.
o After verifying loss ratio compliance, apply both the Minnesota and Texas approaches for each rate
proposal submitted.
In developing a recommendation, the MSA Team will apply a balanced approach and professional judgement for
each rate proposal based on the characteristics of the block reviewed to determine the most appropriate method.
The MSA Team’s recommendation will not be the lowest or the highest percentage method just because it is the
lowest or the highest. Rather, the recommendation may be the result of either the Texas or Minnesota approach, a
blend of the two approaches: or using professional judgement, the MSA Team may recommend a rate increase
outside of these two approaches. Other methods may evolve over time that may be incorporated into the future
process that generate similar or unique results. In applying professional judgement, (e.g., when considering the
extent to which less-than-fully credible older-age morbidity should be projected to cause adverse experience), a
balanced approach is applied as opposed to denying a rate increase, which could lead to a spike in the future, or
approving the rate increase as if there was full credibility, which could lead to rates that could be too high. As the
MSA Team reviews more rate proposals, it will consider and evaluate the characteristics of the rate proposals as it
refines the blending of the two methods.