Why Long-Term Care Policy Premiums are Rising so Sharply

I have been writing about the fragility of the long-term care insurance market for a while. e.g. Traditional Long-Term Care Insurance is Getting Ugly but Explore the Alternatives.

See also here. Per a news article,

Consumers around the country have seen steep increases in their premiums on long-term care policies. In a 2016 survey, the consulting firm Milliman found that regulators approved rate increases of 40 percent or more on about half the requests that insurers made. A little more than a quarter of their requests secured premium increases of 20 to 39 percent. The Milliman survey’s 26 respondents had annual premiums that represented 73 percent of the long-term care industry. . .

So, why are big increases being allowed now?

Castro explained that, when long-term care insurance was introduced in the 1990s, insurers looked at consumer behavior with other insurance products when making projections on the number of policyholders who would make long-term care claims and when predicting the cost of claims.

“It turns out that those assumptions were overly optimistic,” Castro said, “and most companies’ long-term care rates were too low to keep up with the cost of claims that were made years later. People are living longer and submitting more claims – and more expensive claims – than expected. The combination of all these factors resulted in insurers needing more money to be able to pay future claims.”

. . .“This whole notion that private-insurance entities are going to be our saviors is just nonsense,” he said. “There are a lot of baby boomers about to retire and are facing long-term care issues. … I’m convinced that the whole notion of private insurance at this point is flawed.”

I rarely see clients which can afford long-term care insurance. There are really only three ways to pay for long-term care in a nursing home: (1) private pay aka out-of-your pocket and selling your property (2) Long-term Care Insurance, and (3) Medicaid. MEDICARE WILL NOT PAY FOR NURSING HOME (expect for a very narrow time (no more than 100 days) and for a narrow reason.)

Unless you desire to liquidate all your assets and savings, I recommend families initiate planning. Just like you plan for tax liability and take advantage of the rules which limit your tax liability, as you plan your estate for death, you should simultaneously plan for the nursing home.

Here are some other articles if you are interested in learning more.

Can Medicaid place a lien on the house even if you didn’t go to the nursing home? Yes!

The Possible $77,563 Annual Nursing Home bill

Major New Benefits in Medicare Advantage May Help People Stay in their Homes Longer

The Evolution of Long-Term Care Services

If you’re caring for Mom or Dad, your own finances are in danger

Traditional Long-Term Care Insurance is Getting Ugly but Explore the Alternatives

How the Proposed Medicaid Work-Requirements May Affect Seniors and their Caregivers