A problem that has been floating around in the long-term care insurance industry is one for the insurers themselves. According to a recent article in the New York Times, it was discussed how many policyholders in New York, among many other states, are now getting letters from their insurers informing them that they are going to have a rate increase of 48 to 60 percent!
This is not the experience that makes someone feel warm and fuzzy about their insurer. Especially after buying the policy that will make a huge difference in their life when they need to access the benefits.
The problem, and why these drastic rate increases are happening is explained in the article. To summarize, insurers use actuaries who determine the risk the company is going to face, and more importantly how to price that risk so the company can stay in business, make a profit, and still pay its claims.
“Insurance regulators in many states have been approving large increases in long-term care premiums for older policies, as it became clear that insurers badly misjudged the pricing on the policies and are losing money on them. In particular, regulators say, insurers overestimated the number of consumers who would let their policies lapse before filing claims. That means more people are holding on to the policies, raising the likelihood of more claims” (Carrins, 2015, pp. 2).
The reality of long-term care insurance is twofold. One, 70% of people age 65 and older will need some form of long-term care services that will not be covered by Medicare. Two, long-term care services are incredibly expensive with quality home care services starting around $25 through an agency, up to $500 per day for residential facility based care.
The bet that insurers made on policyholders letting those policies lapse, not having to pay out potentially hundreds of thousands of dollars on a single claim did not hold true, and now they need to make adjustments.
That is why it is crucial you take the time to investigate all the companies you are considering for long-term care insurance. You should review their records with the State insurance regulators to see how often they request rate increases, how much those requests are for in terms of percentage increase, and how they are rated by 3rd parties (Standard & Poor, Moody’s, etc.). You want to see if they have the financial strength to pay out large claims without taking a rate increase or finding a way out of paying the claim at all!
It is a lot of work to take on, and that is why by working with a trained, licensed, and skilled professional you can avoid this costly mistake in California long-term care planning.
Fill out the form to the right of this page to contact your California long-term care specialist today for a no-cost, no-obligation review of all your options, and the companies that can provide them.
Carrins, A., (9/2/2015), Managing The Costs Of Long Term Care Insurance, New York Times, retrieved 9/7/15 http://www.nytimes.com/2015/09/03/your-money/managing-the-costs-of-long-term-care-insurance.html?_r=0