Hi, Terry. In 2005, at age 56, I purchased LTC insurance through my employer, the federal government. I recently received a letter from Long Term Care Partners, Portsmouth, NH, saying that John Hancock, the insurer of the Federal Long Term Care Insurance Program (FLTCIP)…says “Unfortunately, recent analysis of the program, using updated assumptions based on identifies trends and actual claims experience indicates that the current FLTCIP premiums are not sufficient to meet the program’s future, projected claims costs. As a result, there is a need to increase premiums.” To keep the same coverage, my current premium of $451.78 will increase to $1,021.03. However, I have some other choices. I can keep my same payment option with unlimited benefit period and maximum lifetime benefit, if I reduce my automatic compound inflation option (ACIO) from 4% to .090%. And, I have other options available – I can reduce my ACIO to 2.65% for $736.40 per month or I can choose a paid-up limited benefit ($60,074). The daily benefit amount for 4% ACIO and the Paid-up option is $492.22. The daily benefit for the .90% and the 2.65% goes up to $508.72. Any advice you can give me is greatly appreciated. Thank you. Elizabeth

Terry Says:

I know this is a horrible situation.  It has happened already to everyone who purchased LTC insurance. And now the insurance companies have convinced the govt they will go broke if they don’t raise premiums.  What happened is that the insurers mis-calculated the appropriate premium — and only recently figured out that people never give up these policies (like happens with life insurance), and that in fact they are actually USING the benefits they purchased –and living longer.

Most of these policies are regulated by state insurers (except the Federal plan) and I really went to the mat about three years ago with the Illinois Insurance commissioner and his team.  But they have little leverage when the insurers can demonstrate they simply can’t pay benefits if they don’t raise premiums.  It is a shock!

My advice:  Don’t drop your coverage.  And don’t settle for coverage in the amount of total premiums you have already paid.  That’s what they hope you’ll do!!  Instead shorten the term to 3 or 4 years instead of lifetime.  And keep some inflation coverage, but not the max.  This way you’ll have some coverage to buy your way into one of the better nursing homes should care be needed.  Or get some care if you can stay in your home and not be forced immediatly into a state-funded Medicaid nursing home.

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