Long-term care insurers have been imposing significant rate increases for almost a decade, and the trend has the attention of the regulators in each state.
The regulators’ national group created a task force earlier this year to address the issue. The task force is working to even out the differences in increases experienced by policyholders across different states. IN the end, however, this will mean higher costs for those who have thus far been spared.
Long-term care insurance covers what Medicare generally does not: long nursing home stays, health care aides at home, adult day care and parts of assisted living. The most common benefits, which are generally paid in the form of a daily benefit, pay for care at home. According to a 2016 federal report, about half of Americans turning 65 will develop a disability sufficiently serious to require long-term care services. One in seven will need assistance for more than five years.
Why have premiums been growing at such a clip? There are several reasons, but two of the more serious causes involved the predictions insurers made some two decades ago, underestimating how long policyholders would live and overestimating how many people would drop their policies, thus freeing insurers from having to pay claims.
The resultant financial pressures have left only a dozen or so companies selling new coverage, down from 100-plus in the market’s golden days. For many existing policies, companies are seeking rate increases. Not all states have granted them, which has effectively led to policyholders in certain states subsidizing those in others. Regulators approved higher premiums on at least 84,000 policyholders at one insurer alone during Q2.
As hard as it may be to accept, it could make sense to pay the higher rate if you can still afford it. Buying a similar policy would likely cost far more now, and the same level of coverage is often not available. Often, it is technically still a good deal.
For those people unable to absorb the full increase, cutting benefits would be the next best option. If you’re in your 70s or 80s, try reducing the inflation rate. In your 50s or 60s? Reduce your daily benefit rate and let it grow with inflation.
If you simply cannot afford to pay any longer, you might still walk away with something by converting your old policy to a new one worth the cumulative amount in premiums you already paid. You should know that this is the most attractive option for insurers, as it reduces their liability, and your insurance company is therefore likely to steer you in this direction.
For more information, please read:
Your Long-Term Care Insurance Rate Spiked. Now What? | New York Times