Ask Terry Questions Long term care insurance

Long term care insurance

By Terry Savage on August 23, 2014 | Insurance & Annuities

After reading several articles you wrote suggesting long term care insurance, my wife and I purchased policies thru Met Life about 8 years ago. Our premiums are about $1,100 for each policy per year. Since then, Met Life, along with many other companies stopped offering LTC. We recently received notice that our premiums would be increasing 88%! Apparently they underestimated what their costs would be. We recently retired, and a $1,900 per year rate increase really seems outrageous. They gave us an option to keep our rates where they are by reducing our daily rate benefit from $200 a day to $100. That would be about half of the estimated nursing home cost.

What are your thoughts about the rate increase, and do you have any suggestions? Do we have the right to protest to the Illinois Insurance Commission, or some other agency?


Terry Says:  Almost two years ago, I wrote a three-part series castigating the insurers for these policy increases (including my own).    Yes, they absolutely did mis-estimate the number of policies that would actually be used (they used life insurance mortality tables, where many policies lapse unused); and they mis-estimated the rising cost of care, and the length of use of the policies they sold.  They really missed the target!

Even worse, they didn’t raise premiums for many years until they were finally forced to acknowledge the problem, which was hugely exacerbated by this extended period of low interest rates, forced on all of us by the Fed.  That meant the insurers couldn’t earn enough on their reserves.

So almost every policy sold in the past decade (except recent ones) has seen a huge increase,  almost doubling in price.  That should be enough to do it — for a while, unless low rates continue longer than currently expected.  So people who buy today — and I hope they do — shouldn’t be exposed to such dramatic increases, although they may expect smaller annual premium increases along the way.

What should you do?  Go visit a Medicaid nursing home.  There you will learn the true cost of not being insured.  If there’s any way you can maintain your current premium,  I would suggest you try to do that.  OR cut the benefit period down to two years or three if you have a longer coverage.  (Don’t forget, you will likely pay the first 100 or 90 days of care out of pocket –and that could be as much as $25,000!)

But having $200 a day in coverage will “buy” your way into a private nursing facility, not a state- funded Medicaid nursing home.  Or will buy you at least some care at home, not forcing you into a nursing home!  That has been a tremendous help already to family; my father now age 93, just started receiving some home health care this year.  Believe me, we are all grateful for his LTC policy (for which I paid for many years).

Oh, and I see I failed to answer your question about the state regulators.  In that series, which I think is still available in my HuffPost archives linked to, I talked personally to the top regulators in Illinois — in outrage, at the time, about the fact that they “allowed” these increases in rates.  But the law says that an insurer can get a rate increase if they can “make the case” that their entire company policy base might be in jeopardy if an increase isn’t granted.  When you look at the numbers and the issues of “mortality” and “morbidity” — the insurers have a very good case now.  It’s just a shame they didn’t see this coming!



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