Health Actuarial (B) Task Force

Attachment A

3/23/18

The proposal below from the Health Reserves (B) Subgroup for changes to the Health Insurance Reserves Model Regulation (#10) is intended to clarify that the mortality used in health reserves is the whole life mortality without use of any underwriting adjustments. The current version of Model #10 states that the mortality is not to use selection factors. The amendment extends the exclusion to variations in underwriting, as might be identified in the preferred tables incorporated into the 2017 CSO, or valuation tables for guaranteed issue or other whole life products. Besides adding the exclusion : “and with no adjustment to the mortality rates for variations in underwriting of the whole life insurance coverage” there is an added note to explain the statement.

Since we are proposing a revision to the model regulation, we also take the opportunity to clarify some misleading language. In previous revisions to the model, regulators recognized that whole life mortality was not an appropriate standard for Long Term Care (LTC) and established a separate mortality standard for LTC after January 1, 1997, (or such other date set in state regulations). The current regulation has misleading wording which was pointed out to us in a comment letter on the exposure of the other changes. We now clarify that mortality standard for LTC before 1997 is the same as all other health products, because that was the law then. However, after 1997, different standards apply. The change to Model #10 is clerical in that it only clarifies the previous intent.

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III. Mortality

A. Unless Subsection B or C applies, the mortality basis used for all policies, including except long-term care individual policies and group certificates and for long-term care individual policies or group certificates issued before [January 1, 1997 or the effective date set in state regulations, whichever is later] but not for long-term care individual policies or group certificates issued after [January 1, 1997 or the effective date set in state regulations, whichever is later], shall be according to a table (but without use of selection factors) permitted by law for the valuation of whole life insurance issued on the same date as the health insurance contract and with no adjustment to the mortality rates for variations in underwriting of the whole life insurance coverage.. For long-term care insurance individual policies or group certificates issued on or after [January 1, 1997 or the effective date set in state regulations, whichever is later], the mortality basis used shall be the 1983 Group Annuity Mortality Table without projection. For long-term care insurance individual policies or group certificates issued on or after the effective date of Section 4B(1)(c)(iii), the mortality basis used shall be the 1994 Group Annuity Mortality Static Table.

Note: The reference to “no adjustment to the mortality rates for variations in underwriting” is to allow the use of the Commissioners’ Standard Ordinary (CSO) tables (without use of the selection factors available under certain CSO tables for whole life insurance) regardless of the amount or lack of underwriting used in the issuing of a health insurance policy or certificate.

Alternate proposed by Tomasz Serbinowski (UT):

III.MORTALITY

A.Unless Subsection B or C applies, the mortality basis used for all policies,except long-term care individual policies and group certificates and for long-term care individual policies or group certificates issued on or afterbefore [January 1, 1997, or the effective date set in state regulations, whichever is later],shall be according to a table (but without use of selection factors) permitted by law for the valuation of whole life insurance issued on the same date as the health insurance contract. For long-term care insurance individual policies orandgroup certificates issued on or after [January 1, 1997, or the effective date set in state regulations, whichever is later], and before the effective date of Section 4B(1)(C)(iii),the mortality basis used shall be the 1983 Group Annuity Mortality Table without projection. For long-term care insurance individual policies orandgroup certificates issued on or after the effective date of Section 4B(1)(c)(iii), the mortality basis used shall be the 1994 Group Annuity Mortality Static Table.

W:\National Meetings\2018\Spring\TF\HA\Conference Calls\1-26 HATF\HRSG Model #10 Amendment - Mortality Tables.docx