Long-Term Care Rate Hikes Troubling
As members of the Baby Boom generation move into retirement and beyond, long-term care insurance policies to help cover the costs of assisted living or nursing homes are becoming more and more of a necessity, rather than a luxury.
Unfortunately, the cost of these policies is rapidly become prohibitive for a large segment of our aging population, according to a recent story in the Richmond Times-Dispatch.
In the story, staff writer John Reid Blackwell notes that such policies date back nearly four decades and that millions of Americans have been paying the premiums for them.
“Yet costs for long-term care insurance have been rising dramatically in recent years, the result of numerous factors including miscalculations by the insurance companies that have sold policies,” according to the story. “Faced with higher-than-expected payouts on long-term care policies and lower-than-expected investment returns on premiums paid, some insurers have exited the market entirely.
“Other major providers such as Henrico County-based Genworth Financial Inc. and Boston-based John Hancock Financial, a division of Canadian insurance company Manulife Financial, have sought approval from state insurance regulators across the country to raise premium rates. The rising rates mean that people who may have been paying for a policy for many years are seeing double-digit percentage increases on premiums that can already run several thousand dollars a year.”
“This phenomenon in recent years of very significant premium rate increases for long-term care insurance is something that is pretty widespread in this country,” Jacqueline K. Cunningham, Virginia’s commissioner of insurance, is quoted as saying. “It is something that we have been keeping our eye on, and it is definitely a source of concern. We have gotten complaints from a lot of people who are concerned about the rate increases they have gotten.”
In Virginia alone, Blackwell noted, regulators have approved 82 rate increases sought by 33 legal entities for long-term care policies between Jan. 1, 2009, through Aug. 14, 2013, according to a study conducted for the State Corporation Commission’s Bureau of Insurance last year by members of the American Academy of Actuaries.
“The average annual premium increase was 36 percent, with a range of increases from 8 percent to 100 percent. As of Dec. 31, 2012, there were 259,159 individuals in Virginia covered by long-term care insurance policies, according to the report.
“A number of these policyholders have received financially challenging rate increases on their policies,” the report said.
“As a result, ‘some policyholders are not able to afford their current LTCI premiums and are having to reduce their policy benefits, if able to do so, or allow their coverage to lapse,’ the report said.”