Long term care insurance –Huge Increases in Premiums!

Ms. Savage,
Your article in the Chgo Trib on Sunday discusses 5 things to know about long term care insurance. And you end by saying plan now and sleep well. I think you missed one BIG step #6 is watch out for for large increases in premiums. After 15 years with GE/Genworth, which we purchased when in our mid 50’s, we received a 78% increase in premiums, Now in our 70’s my wife and I can not afford such an increase. Our financial planning had room for increases but 78% can not be absorbed, without a drastic change in lifestyle.
What get’s me the most is that the increase was supposedly approved by the Illinois Dept. of Insurance – but I can not confirm that since they will not reply to the question.
I have seen many articles on this insurance in which the writers quote or use as a source Genworth (which is a GE company) but none comment about Genworth policy of such large and outrageous increases. By the way the increases are supposed to be spread over 3 years, 5/1/15, 5/1/16 and 5/1/17 = 730 days, 3 years = 1095 The policy we purchased was pushed as the best in the market.
As a result my wife and I have reduced our coverage from lifetime to 3 years.
Sleep well. The question is will you publish this about Genworth’s policy or let it go without a printed comment?
Regards,
John & Sue

Terry Says:  Nearly 3 years ago (before I left the Sun–Times) when these premium increases started happening, I did an exhaustive investigation on the issue — talking with the Illinois Insurance Commissioner, and the chairman of Genworth and with executives of several other LTC insurers.  (I made brief reference to that issue in the column posted this week.)

Believe me, having been an advocate of LTC insurance for many, many years I was truly upset –as you are — to see these premium increases.  So here’s what I can tell you.  First, they are completely legitimate –and have been approved by the Illinois insurance commissioner (and insurance commissioners in every state where price increases took place– and that is almost every state.)

Second, while these policies were sold on the “assumption” (and I assumed that, too) that buying early made sense because of lower premiums when you were young and healthy), and you were told they could not increase individual premiums because of your own health situation, there was the ability to raise premiums for everyone in the same policy class.  And that’s just what happened.

Insurance executives admitted then, and the chairman of Genworth has frequently said publicly, that the actuaries they used were simply wrong about the extent to which people would not only hang on to these policies, but actually use them for things like assisted living  — not the dreaded “nursing home”.  In insurance language it’s called “mortality and morbidity.”    All the insurers had to do was convince state insurance commissioners that without an increase in premiums for existing customers they would not be able to service the policies and provide the benefits.  The insurance commissioners were “forced” to grant the premium increases.

That said, the huge increases taken over the past several years to “catch up” are now likely behind us. While there may be small premium increases in the future (just as there is on auto and homeowners insurance), big jumps like that are unlikely.

Don’t give up your policy!  Having three years of coverage (after your likely 100 day deductible) is far better than having NO coverage!  And unless you have dementia or Alzheimer’s, it’s unlikely that you will need more than three years of care.  My own father, now 94, has three years of care — but at present we are using it slowly — for in-home care four hours every day.  That would stretch the use of the policy over far longer than three years if things continue as they are, or perhaps more care will be required.

Oh, and while Genworth used to be owned by GE, today and for the past nearly a decade, it has been a stand-alone publicly traded company.  Their stock has suffered because of all this bad publicity, and because they are also in the mortgage business.

You’re not alone in being upset by this, believe me. But as my grandmother always aid, “don’t cut off your nose to spite your face!”