Summary: The National Association of Insurance Commissioners' (NAIC) long-term care insurance standards, which provide a national model for the states, have improved significantly in the past 5 years. Although state standards have also improved, many states have not adopted key NAIC standards, and insurers have not incorporated more recent NAIC standards into their policies. In addition, NAIC standards do not adequately address several significant issues. For example, the absence of uniform terms, definitions, and eligibility criteria makes it hard for consumers to understand what benefits will be provided under what circumstances and how certain provisions can limit eligibility. Consumers also face considerable pricing risks, such as unpredictable pricing increases, that may force many policyholders to lapse policies and lose their investment in premiums. Finally, in the absence of standards, consumers are limited in their options to upgrade policies and are vulnerable to sales abuses created by high first-year commissions. GAO believes that additional standards are needed to address these issues. While these standards would likely increase premiums, GAO believes that they would significantly improve consumer protection in a rapidly evolving, complex market. Many states still have not adopted NAIC standards, however, and Congress may want to pass legislation setting minimum federal standards for long-term care insurance.
