Older Americans shopping for long-term-care insurance policies and current owners of long-term-care (LTC) policies may be in for a bit of a shock when they get their renewal statements or coverage quotes. Long-term-care insurance carriers have gotten approval from state regulators for double-digit percentage increases in insurance premiums, to help cover cost and offset adverse trends in the long-term-care industry.
According to industry publication, InvestmentNews, Genworth Financial Inc. recently received approval from 22 state regulators to raise insurance premiums an average of 58%! Unfortunately, Genworth Financial is not the only long-term-care provider seeking sizable increases. Massachusetts Mutual Life Insurance Co., more commonly known at Mass Mutual, requested premium increases this year of 77% on three-quarters of its long-term-care insurance policies.
Substantial policy rate hikes are becoming a common occurrence in the long-term-care insurance industry. Genworth Financial had 28% average policy rate hikes in both 2016 and 2017. Other long-term-care insurance carriers have stopped writing new business, or have exited the business entirely including well-known companies like John Hancock, Penn Treaty America Insurance and Prudential Financial.
As evidenced by the enormous annual policy rate hikes and the number of insurance companies exiting the business, the long-term-care insurance industry is in serious trouble. In 2017 fewer than 70,000 new LTC policies were sold, just one-tenth the number of policies sold twenty years ago. The long-term-care industry continues to face numerous financial and economic challenges that will continue to make it difficult for insurance carriers to provide policies to people seeking long-term-care coverage. Increasing longevity, rapidly increasing health-care costs, persistently low bond yields and poor actuarial projections have all led to rapidly increasing premiums and low policy sales. This in turn leads to a situation known in the insurance industry as adverse selection. Adverse selection refers to situations where buyers and sellers do not have access to the same information. In this case, people who are unwilling to pay the high insurance premiums are abandoning or eschewing LTC policies, and only those people who are very likely to need expensive long-term-care services will keep or purchase the policies (providing they are able to be underwritten). We are beginning to see evidence of this vicious circle today.
What can consumers do?
Affordable traditional LTC insurance policies are increasingly scare and difficult to find, and costly when they are available. Consumers who already own LTC insurance policies should evaluate whether they can continue to afford the policy premiums, along with the anticipated future increases. People shopping for traditional LTC policies should be wary of the high annual policy increases and the number of providers exiting the industry. For these reasons, other alternatives may be worth exploring.
Family members and friends are an excellent source of affordable low-level care, where available. Busy modern lives, careers and distance often create obstacles to this type of care, however, especially for extended time periods. More often than not, however, costly skilled nursing care becomes necessary as time progresses.
Ultimately, the answer to costly long-term-care for most elderly Americans will be to save enough to pay for their desired level of health care. Some financial strategies are better suited to reaching this goal than others, however. Please give the planners at Bollin Wealth Management LLC a call at 419-878-3934 to find out if these strategies can help you or a loved one better prepare for long-term-care.