By Bill Broich
A recent announcement by two major LTC players has caused many people to reconsider their insurance planning. The two largest sellers of long-term care insurance are filing requests to raise premiums on existing LTC insurance policies. Manulife Financial, the parent of John Hancock, wants to raise premiums on half of its in-force business by an average of 25%.
Genworth Financial has started filing for rate increases of 6% to 13% on in-force business written between 2003 and 2012.
The biggest issue being faced by the carriers is that more people than anticipated are keeping their LTC policies, plus the low interest rate environment hasn’t helped.
Since 1980 when LTC insurance was introduced as a roadmap to assure seniors that there would be enough money to pay for nursing home care, the industry has been faced with increasing and mounting premium increases. In addition, many companies have left this segment of the industry and sold their book of business. From nearly 35 LTC insurance carriers those continuing in the business as of 2013have fallen below 10.
The original planning for LTC insurance coverage was made in error. Many companies planned for a certain level of insured cancelling. The estimates were way too low and that has amounted to far more claims being filed that ever estimated. In addition to actuarial mistakes, the very low interest rate available for premium investment has caused a major correction with premiums.
LTC protection was originally in the health care reform agenda of the Obama Administration, it is now excluded. The need for nursing home care is ever expanding as the baby boomers age. With the increasing numbers of those needing care coupled with the increase of life expectancy, more and more care is needed. The question is simple, who will pay and how will they pay. In 2012 the average cost of nursing home care exceeded $70,000 for a semi-private room on a national basis. By 2040 the percentage of elderly individuals in need of nursing home care could exceed 15%.
In addition to unstable premium planning, just to buy a LTC policy the applicant must also qualify. Qualifications can be financial as well as medical. It is estimated that less than 40% of those who apply are accepted.
A very good source for long term care planning topics is www.elderlawanswers.com.