When long-term care insurance first became available in the 1970s, companies had limited information on how to price this new type of insurance so that they could pay claims decades into the future. Some companies assumed that a significant percent of people would drop their policies at some point, like they do with life insurance. Years later, more policyholders than expected had kept their policies. Policyholders are also living longer, meaning they are using more benefits. In addition, low interest rate returns are not keeping pace with increases in the costs of long-term care services.
The Oregon Insurance Division recently approved rate increases for 22 companies that averaged 26 percent. The companies had requested rate increases that averaged 45 percent, but the division was able to reduce the increases to lessen the impact on consumers.
In 2006, Oregon made changes requiring companies to price long-term care insurance more conservatively by building a margin into the initial rate. Today, company actuaries must certify that premiums will cover anticipated costs over the life of a policy, even under "moderately adverse conditions." Moderately adverse conditions could include below average returns on investments. The division also requires that the companies or agents that sell long-term care insurance disclose certain information to consumers, including a company's rate history and the fact that premiums may increase over time.
In June 2011, the division convened a work group of consumer and industry representatives to seek input on a variety of long-term care insurance issues, including pending requests for significant rate increases. As a result, the Insurance Division has asked companies to notify policyholders of their intentions for future rate increases.
More recently, the division significantly reduced many long-term care rate increase requests, in order to give policyholders the ability to maintain their coverage or to adjust their benefits so that they can still afford it.
Your age and the benefits you select are key factors in determining how much you pay for long-term care insurance. For example, will your policy pay a daily benefit for two years worth of coverage or for the rest of your life? How long must you wait (the elimination period) before your policy starts paying? Do you have inflation protection? Also, your price may vary based on your health rating (preferred, standard, sub-standard). Many companies will offer couples discounts.
No. Once you buy a policy, rates will not increase based on your own age or health. However, rates may go up for other factors. For example, if all the consumers with your policy are submitting more claims than expected, you would likely see a rate increase.
Some companies may request another substantial increase next year, and we will review those requests, taking into account any new information that is available. We have asked carriers to notify their policyholders of their intentions for further rate increases. This will give consumers more information to use in deciding if they want to reduce benefits to keep premiums lower or give up their policies. You should carefully consider these options and the impact they would have on your policy, especially if you have a partnership policy. Talk to your financial adviser about what would be the most appropriate for your situation.
In many cases, you can lower benefits to keep the price of your policy down. For example, you may be able to reduce the daily or monthly amount your policy will pay or the number of years you will have benefits. Or, you might be able to increase the number of days you would have to wait (the elimination period) before the policy starts paying benefits. Some companies allow you to select reduced inflation protection coverage. Inflation protection helps guard against increases in the costs of care. Another option in many cases is to stop paying premiums but get benefits equal to the premiums you have already paid. Your policy will outline your options or you can call your company to ask about your choices.
You may choose to shop around for alternative coverage, but you should not cancel coverage before your new policy is in effect. However, even with a large rate increase, your policy is generally less expensive than a new policy with the same benefits. So while your rates may be increasing, you may be unlikely to find a cheaper plan with comparable benefits.
Some plans offer non-forfeiture benefits, which means you would be guaranteed at least the value you paid into the plan if you stop paying your premiums. This is a good way to protect the money you paid into the plan; however, you would not be entitled to the money unless you had a claim.
You should not purchase any long-term care insurance if you currently receive or may soon receive Medicaid benefits, if you have limited assets and can't afford the premiums over the lifetime of your policy, or if your only source of income is a Social Security benefit or Supplemental Security Income. If youre thinking about buying long-term care insurance, its important to talk to your financial adviser about how this type of insurance fits into your broader personal finance strategy.