Developing reduced benefit options for LTC policyholders

In order to provide insureds with additional options after being informed of premium increases, long-term care (LTC) insurers often present reduced benefit options (RBOs) within policyholder notice letters. Recently, companies have offered RBOs that weren’t available before the rate change.

In some cases, policyholders can use these innovative RBOs to target similar premiums after the rate increase is implemented, to alleviate financial strain for those who need it.

But not all RBOs are created equal. In this article, Milliman’s Robert Eaton and Nebraska Department of Insurance’s Rhonda Ahrens explore two methods of developing RBOs: the future loss ratio neutral approach and the cash flow neutral approach.