The long-term care industry continues to face a perfect storm. Sales are shrinking, premiums are increasing (especially for women), interest rates remain low, and healthcare expenses keep rising. If you think it’s only the elderly who are feeling the pain, think again! It’s current and future policyholders as well as the young. How do you “weather” this storm?
Why is this perfect storm gaining momentum now? A look at the two categories of long-term care insurance (LTCi) can provide some insight.
The key driver for premium increases is the low interest rates set by the Federal Reserve in recent years. But other factors enter into the equation.
Where you live also impacts premium increases. National media statistics reflect the rate increases reported in most states. Some states, Indiana included, are very active in reviewing insurance carriers’ requests for increases. For instance, the Indiana Department of Insurance has specific tests and data requirements (some related to claims history) that it reviews before permitting a carrier to increase its rates. Even if a state determines a rate increase is justified, it may, and often does, approve a lesser amount.
No one wants to pay higher premiums – that’s a given. But rising resistance from state regulators to approve premium increases have forced several carriers to leave the market. Unfortunately, reducing the carrier options isn’t a good solution.
As a result, one of the biggest remaining carriers of LTCi is asking state insurance regulators for permission to fundamentally revise the way it structures premiums. Traditionally, carriers have kept premiums flat for several years followed by a period of double-digit rate hikes. Genworth has a plan before the National Association of Insurance Commissioners to revise premiums annually. While it may take several years before the association gives it the go-ahead, individual states could act more quickly. This compromise approach has the potential to decrease losses to carriers of LTCi while making rate increases less painful for consumers.
The pressure is on to push premiums upward, but there are still things you can do to minimize the impact of rising rates. Discuss the following options with your financial planner or insurance agent/carrier:
Whether you have an existing long-term care insurance policy or plan to purchase one, the bottom line is you’re going to pay more – especially if you’re a woman. But if you compare the cost of LTCi premiums to the potential future costs of long-term care, LTCi is still a bargain. This will be the case as long as the LTCi industry survives the perfect storm and remains affordable to begin with!