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Old 02-03-2010, 03:33 AM   #121
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I came late to this party, but I just got my LTC policy bill and the premiums jumped AGAIN. I've had the policy for 10 years and the premiums have nearly doubled - most of the increase coming in the last couple of years. I understood when I purchased the policy that the premiums were not guaranteed, but I was led to believe the company understood the business well enough that premiums should be reasonably static. Of course, again, no guarantees

In the quote below (if I understand his post) dgoldenz suggests the reason rates go up is because: "A LTC policy has an ever-increasing benefit." Yes, my policy has a 5% inflation rider. But I was already paying a premium for that. So WHAT ever-increasing benefit are we talking about Seems to me, the companies simply didn't (don't?) have a clue as to what claim experience they would (will?) have. Otherwise, they simply want to get out of an unprofitable business and raising premiums is a good way to get folks to drop their policies - I'm seriously considering that myself. I don't see any relationship between LTC and regular health insurance. The insurer knows to the PENNY how much my benefit will be if I need LTC. Even if LTC goes up by 30%/year, I still only get a 5% increase in benefit (which I pay for). So in WHAT way is LTC insurance like health insurance (where new treatments are constantly added, prices for services are uncontrolled, govt. programs such as medicare/medicade push costs down to the insured, etc.)?

I understand the part about the insurer not knowing, for instance, how long I will be in LTC (i.e., how much of the possible benefit I might end up using). However, that's what actuaries are for. I can see the companies tweeking their rates for differing rates of usage of their product, but how could they miss it by a factor of almost 2?

I actually called the company last year and was told that basically, that was what happened. They didn't plan for how much their benefits would actually be exercised. It was probably not gracious (heck, it's just their customer service person) but I "suggested" a company with no better actuaries than theirs probably didn't deserve my business. Silence on the other end.

Well... End of rant.

I don't mean to cast aspersions, and maybe I misinterpreted the post. If so, maybe dgoldenz could take another stab at why my premiums keep going up when my benefit has not changed. (Remember - I'm already paying for the inflation rider.)



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LTC is like medical insurance - the premiums are never guaranteed because the only limit to what a company can pay out is the lifetime maximum benefit. A life insurance company knows that the maximum it can pay out is the amount of the coverage. You're either dead or you're not dead, there is no in-between. A disability policy pays a fixed amount per month that is determined at the beginning of the contract. A LTC policy has an ever-increasing benefit. Going by your logic, health insurance premiums should also stay exactly the same forever. That would be working out really well for the insurance companies right now if the premiums today were the same as they were 20 years ago just because the companies "guessed wrong" on the cost of care.
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Old 02-03-2010, 10:33 AM   #122
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Originally Posted by Koolau View Post
I came late to this party, but I just got my LTC policy bill and the premiums jumped AGAIN. I've had the policy for 10 years and the premiums have nearly doubled - most of the increase coming in the last couple of years. I understood when I purchased the policy that the premiums were not guaranteed, but I was led to believe the company understood the business well enough that premiums should be reasonably static.
Yep. This is the main reason why I'm not even strongly considering LTCI for now. (There are other potential reasons related to future public policy decisions, but that's minor compared to this one.)

The folks offering LTC push the "low locked in payments" for younger folks, but in reality you're not locking in anything other than guaranteed insurability (as long as you keep making the payments) and knowing that rate increases will apply to an entire group and not single you out.

I'm leery of a fairly new product that insurers don't fully know how to price and for benefits where the actual cost is tied more to health care inflation rather than inflation overall.
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Old 02-03-2010, 10:42 AM   #123
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Yep. This is the main reason why I'm not even strongly considering LTCI for now. (There are other potential reasons related to future public policy decisions, but that's minor compared to this one.)

The folks offering LTC push the "low locked in payments" for younger folks, but in reality you're not locking in anything other than guaranteed insurability (as long as you keep making the payments) and knowing that rate increases will apply to an entire group and not single you out.

I'm leery of a fairly new product that insurers don't fully know how to price and for benefits where the actual cost is tied more to health care inflation rather than inflation overall.
I agree. I'd be a lot less leery if future rate increases were capped. I'd understand paying more for the insurance to begin with... at any rate I'm on the sidelines until Fed Gov't decides if they are going to get into the LTCI business or subsidize LTCI for the masses.
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Old 02-03-2010, 12:47 PM   #124
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The actual experience of owning LTC policies has been a lot less stable than we had expected. Insurance companies are making bets that you WILL NOT use the policy at all (die early and quickly) or have much less use than your max limit. The reality has been that people are living longer and using more of the benefits, thus the insurance companies are not making as much money as they thought they would. The result is higher premiums. From our point of view, we are making a bet that the insurance will be there when we need it and there is always the possibility of an early disability or severe illness.

All in all, we probably would not have purchased LTC insurance 8 years ago if we knew what we know today about it. At the time, it seemed like a good idea at a good price. Especially when you have had relatives who spent 5 or more years in assisted living and nursing homes.
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Old 02-03-2010, 01:13 PM   #125
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Originally Posted by Koolau View Post
I came late to this party, but I just got my LTC policy bill and the premiums jumped AGAIN. I've had the policy for 10 years and the premiums have nearly doubled - most of the increase coming in the last couple of years. I understood when I purchased the policy that the premiums were not guaranteed, but I was led to believe the company understood the business well enough that premiums should be reasonably static. Of course, again, no guarantees

In the quote below (if I understand his post) dgoldenz suggests the reason rates go up is because: "A LTC policy has an ever-increasing benefit." Yes, my policy has a 5% inflation rider. But I was already paying a premium for that. So WHAT ever-increasing benefit are we talking about Seems to me, the companies simply didn't (don't?) have a clue as to what claim experience they would (will?) have. Otherwise, they simply want to get out of an unprofitable business and raising premiums is a good way to get folks to drop their policies - I'm seriously considering that myself. I don't see any relationship between LTC and regular health insurance. The insurer knows to the PENNY how much my benefit will be if I need LTC. Even if LTC goes up by 30%/year, I still only get a 5% increase in benefit (which I pay for). So in WHAT way is LTC insurance like health insurance (where new treatments are constantly added, prices for services are uncontrolled, govt. programs such as medicare/medicade push costs down to the insured, etc.)?

I understand the part about the insurer not knowing, for instance, how long I will be in LTC (i.e., how much of the possible benefit I might end up using). However, that's what actuaries are for. I can see the companies tweeking their rates for differing rates of usage of their product, but how could they miss it by a factor of almost 2?

I actually called the company last year and was told that basically, that was what happened. They didn't plan for how much their benefits would actually be exercised. It was probably not gracious (heck, it's just their customer service person) but I "suggested" a company with no better actuaries than theirs probably didn't deserve my business. Silence on the other end.

Well... End of rant.
Claim costs are not the only unknown in LTC insurance. In most cases, people buy in their early 60's, but most claims occur in the 80's. In between, the company expects to invest your money, earn a lot of interest, and eventually pay a bunch of their claim costs from the investment earnings. "Investments" in this case are overwhelmingly bonds. So if interest rates don't match the pricing assumption, the company comes up short.

Then there is the lapse rate. The most profitable customer is the one who buys the policy, keeps it for 15-20 years, then drops it before they get sick. All that premium piled up, then no claims. In the early days of LTCi, some companies assumed annual lapse rates of 5-10%. That didn't happen. Lapse rates turned out to be in the 1-2% range. More problems with profits.

Of course, other companies went out on a limb regarding underwriting, basically taking risks that the more conservative declined. That didn't work so well, either.

I thought that most of the bad news had already worked its way through the repricing system. It obviously hasn't for you. I wonder what the experience has been for other people who post here and bought LTCi.

[Here's a small commercial. If LTC insurers were required to provide nonforfeiture benefits (reduced paid up insurance) like life insurers are, then you could walk away from this company with a paid up policy for some fraction of your full insurance amount, and shift your future premiums to someone else.]
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Old 02-03-2010, 01:21 PM   #126
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LTC insurance seems like a great business. Convince people they should buy LTC insurance as early as possible, charge people huge premiums for decades, keep increasing rates until people can't afford to pay anymore and decide to drop their policy, keep the premiums paid to date...
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Old 02-05-2010, 03:30 PM   #127
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In the quote below (if I understand his post) dgoldenz suggests the reason rates go up is because: "A LTC policy has an ever-increasing benefit." Yes, my policy has a 5% inflation rider. But I was already paying a premium for that. So WHAT ever-increasing benefit are we talking about Seems to me, the companies simply didn't (don't?) have a clue as to what claim experience they would (will?) have. Otherwise, they simply want to get out of an unprofitable business and raising premiums is a good way to get folks to drop their policies - I'm seriously considering that myself. I don't see any relationship between LTC and regular health insurance. The insurer knows to the PENNY how much my benefit will be if I need LTC. Even if LTC goes up by 30%/year, I still only get a 5% increase in benefit (which I pay for). So in WHAT way is LTC insurance like health insurance (where new treatments are constantly added, prices for services are uncontrolled, govt. programs such as medicare/medicade push costs down to the insured, etc.)?
Your policy has a 5% inflation rider, but the insurance company does not know how many years it will take before you need to exercise your benefits. If you are using them 5 years down the line, they are paying out a much lower benefit than if you are using them 30 years down the line. It's the job of the actuaries to properly price the product by knowing on average how long it will take for people to use the benefits, how many will lapse their policies, how many will die before using the policy, how many will use the policy for 12 months, 3 years, 5 years, etc. These are difficult things to determine given the uncertainty in the market, even for actuaries. Many of them guessed wrong and now people are paying the price.

As I stated earlier, LTC has not been around all that long (~40 years) and as others have also said, people live a lot longer today given the advances in medicine than they did 20-30 years ago. A relative of mine had an old Transamerica LTC policy from the 1980's with very rich benefits that do not even exist today, and the premium was dirt cheap. A few years ago, Transamerica decided to pull out of the LTC market and doubled his rates, then raised them another 50% the following year. That's what happens when an insurer leaves the market - they stop supporting their products. While the company is still selling the insurance, they don't want new policyholders to be scared off by news of rate increases for people already insured. Once they stop selling, all bets are off.

I am just curious - what company do you have your policy with?
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Old 02-05-2010, 11:22 PM   #128
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So what we are hearing from a few people in the know about how LTC companies operate is that they are all basically pond scum that can't be trusted to deliver on the product they sold you at the price you were expecting. If I buy a LTC policy, it has a defined benefit value of X years at y $ a year. Let's say $100K a year for 5 years = $500K. If I buy at age 55, and have a 5 % inflation rider, then they know exactly the max my benefits will increase by my actuarial lifespan.

Everything you folks say just means they guessed wrong on usage and on how long people would live and are now screwing elderly people who have had policies for many years and now are being priced out of them. They did not guess wrong on how much they will pay out if everyone were to claim the max benefit. That was and is known - they just figured they wouldn't have to pay it.

At least with life insurance the rates don't go up. I have a 30 year term policy I bought at 50 - I pay far less per month for a benefit that exceeds my LTC policy and it won't change until I am 80.

Don't give us that crap about how the poor insurance companies need the extra revenue - they are no better than the banking scum that are being bailed out while the average person suffers. I have LTC insurance, and the more i read and hear, the more I am thinking about cutting my losses and dropping it. What's the point of paying in for 25 years and then have rates triple to the point where I can't afford it anyway?

I am rapidly moving to the group that thinks this is one of the biggest scams around - just as bad as variable annuities. The only people who make out are the salesmen and they could care less if you live or die after they make their sale.
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Old 02-06-2010, 12:28 AM   #129
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So what we are hearing from a few people in the know about how LTC companies operate is that they are all basically pond scum that can't be trusted to deliver on the product they sold you at the price you were expecting. If I buy a LTC policy, it has a defined benefit value of X years at y $ a year. Let's say $100K a year for 5 years = $500K. If I buy at age 55, and have a 5 % inflation rider, then they know exactly the max my benefits will increase by my actuarial lifespan.

Everything you folks say just means they guessed wrong on usage and on how long people would live and are now screwing elderly people who have had policies for many years and now are being priced out of them. They did not guess wrong on how much they will pay out if everyone were to claim the max benefit. That was and is known - they just figured they wouldn't have to pay it.

At least with life insurance the rates don't go up. I have a 30 year term policy I bought at 50 - I pay far less per month for a benefit that exceeds my LTC policy and it won't change until I am 80.

Don't give us that crap about how the poor insurance companies need the extra revenue - they are no better than the banking scum that are being bailed out while the average person suffers. I have LTC insurance, and the more i read and hear, the more I am thinking about cutting my losses and dropping it. What's the point of paying in for 25 years and then have rates triple to the point where I can't afford it anyway?

I am rapidly moving to the group that thinks this is one of the biggest scams around - just as bad as variable annuities. The only people who make out are the salesmen and they could care less if you live or die after they make their sale.
Life insurance rates have 100+ years of history to work with in figuring claims. There's also only 2 options - you're either dead or you're not dead. With long term care, you could be using the benefits for 1 year, 3 years, 5 years, 20 years (unlikely, but possible). If you have an unlimited benefit, there is no cap on the amount of benefits to be paid out. If you have a limited benefit, they are determining how many people will use the full benefit and how many will die before benefits are exhausted, lapse, or never use it. Given the limited history of LTC, that can be difficult to project well into the future. As stated many times in this thread, you might pay for 20-30 years before ever using it. While the inflation rider is built in, the actuaries still have to be reasonably accurate to avoid disaster. That's the problem with the LTC policies of the 1980's - the benefits were so rich and the premiums were so low that they had no other choice unless they went bankrupt. Genworth, John Hancock, and some of the mutual companies (with much higher premiums than Genworth/JH) seem to be in it for the long haul, which is a positive sign. I would be very hesitant to buy from a company that is new to the LTC market.
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Old 02-06-2010, 12:58 AM   #130
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Life insurance rates have 100+ years of history to work with in figuring claims. There's also only 2 options - you're either dead or you're not dead. With long term care, you could be using the benefits for 1 year, 3 years, 5 years, 20 years (unlikely, but possible). If you have an unlimited benefit, there is no cap on the amount of benefits to be paid out. If you have a limited benefit, they are determining how many people will use the full benefit and how many will die before benefits are exhausted, lapse, or never use it. Given the limited history of LTC, that can be difficult to project well into the future. As stated many times in this thread, you might pay for 20-30 years before ever using it. While the inflation rider is built in, the actuaries still have to be reasonably accurate to avoid disaster. That's the problem with the LTC policies of the 1980's - the benefits were so rich and the premiums were so low that they had no other choice unless they went bankrupt. Genworth, John Hancock, and some of the mutual companies (with much higher premiums than Genworth/JH) seem to be in it for the long haul, which is a positive sign. I would be very hesitant to buy from a company that is new to the LTC market.
If you buy unlimited coverage, then I can understand your logic. But few people buy unlimited coverage. most buy a defined number of years with defined benefits. Even with an inflation rider, there is absolute certainty as to the total maximum amount that can be paid out for any given period of time.

That's where your logic collapses. I don't really care about what happened in the 1980s. Very few boomers purchased LTC in the '80s. Most of us bought in the late '90s or 2000's if we bought at all. What you keep saying is that policies issued in the last 10 to 15 years still have a very large element of uncertainty for insurance comapnies and that will continue for many years. To put it in an indiscreet term - bullhockey. There is no relation to most medical insurance - most policies today don't have limits and face unlimited increases in payouts. LTC companies know EXACTLY what their maximum liability for every policy holder is and nothing you can say is going to change that fact. X benefits times Y years times and an inflation factor is a known equation. There are no unknowns to this number. The only thing the companies don't know is how many people will drop coverage, die early and never claim, or die before they use up their max benefits. -0- is the number of people who will exceed their max calculated benefit. It can only happen with those who have unlimited coverage and they are a very small percentage of policy holders. If it's the problem you seem to say, then companies should stop selling that level of coverage instead of screwing everyone else because of their inability to do simple math.

I've been involved in calculating medical capitation rates for TRICARE contracts and I can tell you that medical insurance companies pay a fortune to consultants to make sure they get the rates right. Yes, they can raise the rates after a period of time, but most of these contracts are for 10 years and they are limited as to what they can do during that period.

It seems that LTC companies went into a line of business without having a clue to what they were doing and still, after 40 years, keep falling back on the same old excuses.

Obviously you are a salesperson or have some other financial involvement with LTC care (other than as a user). No one can keep defending something that is so flawed and not have a financial interest.
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Old 02-06-2010, 01:08 AM   #131
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If you buy unlimited coverage, then I can understand your logic. But few people buy unlimited coverage. most buy a defined number of years with defined benefits. Even with an inflation rider, there is absolute certainty as to the total maximum amount that can be paid out for any given period of time.

That's where your logic collapses. I don't really care about what happened in the 1980s. Very few boomers purchased LTC in the '80s. Most of us bought in the late '90s or 2000's if we bought at all. What you keep saying is that policies issued in the last 10 to 15 years still have a very large element of uncertainty for insurance comapnies and that will continue for many years. To put it in an indiscreet term - bullhockey. There is no relation to most medical insurance - most policies today don't have limits and face unlimited increases in payouts. LTC companies know EXACTLY what their maximum liability for every policy holder is and nothing you can say is going to change that fact. X benefits times Y years times and an inflation factor is a known equation. There are no unknowns to this number. The only thing the companies don't know is how many people will drop coverage, die early and never claim, or die before they use up their max benefits. -0- is the number of people who will exceed their max calculated benefit. It can only happen with those who have unlimited coverage and they are a very small percentage of policy holders. If it's the problem you seem to say, then companies should stop selling that level of coverage instead of screwing everyone else because of their inability to do simple math.

I've been involved in calculating medical capitation rates for TRICARE contracts and I can tell you that medical insurance companies pay a fortune to consultants to make sure they get the rates right. Yes, they can raise the rates after a period of time, but most of these contracts are for 10 years and they are limited as to what they can do during that period.

It seems that LTC companies went into a line of business without having a clue to what they were doing and still, after 40 years, keep falling back on the same old excuses.

Obviously you are a salesperson or have some other financial involvement with LTC care (other than as a user). No one can keep defending something that is so flawed and not have a financial interest.
I am not sure how the logic here is flawed - you could say the same about health insurance. "The lifetime maximum is $5 million, so that is the absolute maximum they will have to pay out." For every single policyholder, the payout will be somewhere between $0 and $5 million. Therefore, they should calculate the rates correctly from the first day of coverage. If that was true, why do health insurance rates increase 15-25% per year? The insurance company already knows the maximum payout, so according to your logic, they should have already priced the product correctly. It is irrelevant whether I sell LTC, health insurance, life insurance, or anything else, these are simple facts no matter who I am or what I do.
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Old 02-06-2010, 03:50 AM   #132
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Maybe the logic with LTC insurance and health insurance is the same, but EVERYONE needs health insurance. There is the presumption that one can self insure for LTC. With no limits being placed on the insurance industry, I'm beginning to think I should take the DIY/Medicade route. I'm really bummed by the whole thing.
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Old 02-06-2010, 11:37 AM   #133
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I am not sure how the logic here is flawed - you could say the same about health insurance. "The lifetime maximum is $5 million, so that is the absolute maximum they will have to pay out." For every single policyholder, the payout will be somewhere between $0 and $5 million. Therefore, they should calculate the rates correctly from the first day of coverage. If that was true, why do health insurance rates increase 15-25% per year? The insurance company already knows the maximum payout, so according to your logic, they should have already priced the product correctly. It is irrelevant whether I sell LTC, health insurance, life insurance, or anything else, these are simple facts no matter who I am or what I do.
What you are saying is simply not true. I have BC/BS Standard, a plan that covers several million people. There is no lifetime maximum - in fact, there is no lifetime maximum of the majority of company/government plans. That's why there are capitation rates (the amount a company thinks it will pay per person per year) and that's why they change. If I have a family of four, and we have the bad luck to get some really bad medical conditions, it could cost BC/BS several hundred thousand a year for several years. The key is that they mitigate that by group insurance. Not everyone gets sick every year. Being a group policy, they can't drop me no matter how sick we are or how much it costs.

You keep harping on the fact that max medical insurance costs are known. That's not true except for the minority of individual policy holders not in any type of group plan who do have maximums.

The facts, as you say, are simple. LTC companies, in their greed and avarice, ignored good business practice in order sign up new clients. 40 years later they are still claiming they don't know how to predict costs. If that's the case, they should fold up their tents and go home.
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Old 02-06-2010, 08:23 PM   #134
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What you are saying is simply not true. I have BC/BS Standard, a plan that covers several million people. There is no lifetime maximum - in fact, there is no lifetime maximum of the majority of company/government plans. That's why there are capitation rates (the amount a company thinks it will pay per person per year) and that's why they change. If I have a family of four, and we have the bad luck to get some really bad medical conditions, it could cost BC/BS several hundred thousand a year for several years. The key is that they mitigate that by group insurance. Not everyone gets sick every year. Being a group policy, they can't drop me no matter how sick we are or how much it costs.

You keep harping on the fact that max medical insurance costs are known. That's not true except for the minority of individual policy holders not in any type of group plan who do have maximums.

The facts, as you say, are simple. LTC companies, in their greed and avarice, ignored good business practice in order sign up new clients. 40 years later they are still claiming they don't know how to predict costs. If that's the case, they should fold up their tents and go home.
Let me ask you this - what's the premium on your BC/BS standard plan? The entire premium paid, not just your portion. I am willing to bet it's at least $1000 per month for a family, probably closer to $1500-2000 per month. The premium for your plan is likely several times higher than the premium for an individual health insurance plan for a healthy individual. Would you prefer the LTC companies just charge 2-4x the current premiums for everybody from day one so that they never go up?

According to your logic, any plan that has a limited maximum expense should be properly priced from day one and never see a rate increase. There are millions of people with both group and individual health insurance that can attest to the fact that despite their policies having annual and/or lifetime maximums on specific services, the premiums continue to rise. The fact remains that there is a projected expense and an actual expense. When the actual expense far exceeds the projected expense, you have a few options - raise rates for everyone, take a major loss and raise rates for a different product to make up the difference, or pull out of the market (which leads to raising rates for everyone). Which would you prefer?
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Old 02-06-2010, 11:32 PM   #135
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Let me ask you this - what's the premium on your BC/BS standard plan? The entire premium paid, not just your portion. I am willing to bet it's at least $1000 per month for a family, probably closer to $1500-2000 per month. The premium for your plan is likely several times higher than the premium for an individual health insurance plan for a healthy individual. Would you prefer the LTC companies just charge 2-4x the current premiums for everybody from day one so that they never go up?

According to your logic, any plan that has a limited maximum expense should be properly priced from day one and never see a rate increase. There are millions of people with both group and individual health insurance that can attest to the fact that despite their policies having annual and/or lifetime maximums on specific services, the premiums continue to rise. The fact remains that there is a projected expense and an actual expense. When the actual expense far exceeds the projected expense, you have a few options - raise rates for everyone, take a major loss and raise rates for a different product to make up the difference, or pull out of the market (which leads to raising rates for everyone). Which would you prefer?
You're a really good snake oil salesman. I'll bet you could sell ice to Eskimos. I'll give you a different answer - I want, and expect, the sellers of a long term policy that won't be used for 20, 30 or even 40 years, to exercise enough diligence so that people can afford the premiums when they need the services. That means pricing LTC correctly up front when the policies are sold. Right now it's a bait and switch game. Let's say my premium at 55 was $1,400 a year. Easily affordable at that time. In 15 years it goes up to $2,500 a year. If I'm still working, that's probably doable. If not, something has to go. But at 25 years, when I'm 80, and premiums jump to $4,000 and I am retired and living on savings and SS, I may well have to drop the policy. This is classic bait and switch - I want LTC companies to tell me that coverage is available at what price when I need it or why should I even buy it? I have no desire to pay premiums for 25 years and then find myself priced out of the market.

The fact that LTC is not subsidized by employers or the government is even more reason to have fair and uniform pricing - let's call it regulation - if the premiums will ultimately be 3 times what I start with, then I expect that should be factored in and that I would pay higher premiums up front and that I could then make an informed decision now - not have to worry about it in 25 years when my brain may be mush.

So the answer to your question :"Would you prefer the LTC companies just charge 2-4x the current premiums for everybody from day one so that they never go up?" is damn right I would. That way I would know upfront that I can't afford it rather than being scammed 25 years later.

LTC policies are sold through fear - do you want to be a burden to your kids, do you want to be a smelly medicaid facility, etc. The problem is that, even if you buy the policy, you may not be able to carry it through to when you need it. If you analyze it with a clear and unemotional mind, factor in the cost, the probable rate increases, and the possibility that the firm you use could well disappear in 25 years, it looks like a really bad deal for the consumer. And all this doesn't even include all the crap I've seen people go through when they actually try to collect on a claim.

Right now the LTC companies are like the mob - you pay for protection, but you never really know if you will be able to keep paying so you can get it.
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Old 02-06-2010, 11:49 PM   #136
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You're a really good snake oil salesman. I'll bet you could sell ice to Eskimos. I'll give you a different answer - I want, and expect, the sellers of a long term policy that won't be used for 20, 30 or even 40 years, to exercise enough diligence so that people can afford the premiums when they need the services. That means pricing LTC correctly up front when the policies are sold. Right now it's a bait and switch game. Let's say my premium at 55 was $1,400 a year. Easily affordable at that time. In 15 years it goes up to $2,500 a year. If I'm still working, that's probably doable. If not, something has to go. But at 25 years, when I'm 80, and premiums jump to $4,000 and I am retired and living on savings and SS, I may well have to drop the policy. This is classic bait and switch - I want LTC companies to tell me that coverage is available at what price when I need it or why should I even buy it? I have no desire to pay premiums for 25 years and then find myself priced out of the market.

The fact that LTC is not subsidized by employers or the government is even more reason to have fair and uniform pricing - let's call it regulation - if the premiums will ultimately be 3 times what I start with, then I expect that should be factored in and that I would pay higher premiums up front and that I could then make an informed decision now - not have to worry about it in 25 years when my brain may be mush.

So the answer to your question :"Would you prefer the LTC companies just charge 2-4x the current premiums for everybody from day one so that they never go up?" is damn right I would. That way I would know upfront that I can't afford it rather than being scammed 25 years later.

LTC policies are sold through fear - do you want to be a burden to your kids, do you want to be a smelly medicaid facility, etc. The problem is that, even if you buy the policy, you may not be able to carry it through to when you need it. If you analyze it with a clear and unemotional mind, factor in the cost, the probable rate increases, and the possibility that the firm you use could well disappear in 25 years, it looks like a really bad deal for the consumer. And all this doesn't even include all the crap I've seen people go through when they actually try to collect on a claim.

Right now the LTC companies are like the mob - you pay for protection, but you never really know if you will be able to keep paying so you can get it.
No snake oil here, just giving you answers to your questions. I am not sure why you would want to pay a higher premium now, which is basically a built-in rate increase from the start. In your example, you went from $1500 for 15 years to $2500 to $4000....what if you started using the benefits in year 2 of your $1500 payment?

There is no bait and switch - every LTC application requires the insureds to sign an acknowledgment that premiums are not guaranteed and subject to an increase in the future. The pages include questions on whether the insureds would be able to continue paying premiums if the rates were increased. If they can't, they are advised not to purchase the policy.

You still haven't answered the basis behind the question at hand - should all policies in all types of insurance that have a limited maximum benefit be correctly priced and never have the rates increased? Once again, according to the logic you are applying here, the answer is yes. Disability insurance has non-cancellable provisions that the premiums can never be increased. Of course, these policies are much more expense than ones that can. People scoff at the high price of LTC for something they likely will not need for years to come, how many would really buy it if the insurance company had to guarantee the premiums for life and double or triple the rates?
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Old 02-07-2010, 07:04 AM   #137
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The fact that LTC is not subsidized by employers or the government is even more reason to have fair and uniform pricing

LTC policies are sold through fear - do you want to be a burden to your kids, do you want to be a smelly medicaid facility, etc. The problem is that, even if you buy the policy, you may not be able to carry it through to when you need it.

Right now the LTC companies are like the mob - you pay for protection, but you never really know if you will be able to keep paying so you can get it.
Regarding your comments above, LTC is subsidized. To the extent your health care costs (including LTC premiums) are greater thean 7.5% of your AGI (I think), you can deduct them on your Federal return. In the state I live in, LTC insurance premiums can be deducted directly from your taxable income--I beleive threre are other states that allow this as well.

Regarding purchases made through fear and your reference to the mob---I don't think it would be too cynical to say that fear/initidation is not an uncommon practice for many salesman who are pressuring consumers to buy something. Life insurance and disabilty insurance immediately come to mind, as do snake oil salesmen who promote non-proven cures for cancer, diabetes, etc. People need to take some resposnibility for their lives and be able to say "no" if they don;t think a purcahse is in their best interest. I am pretty sure nobody from Genworth is going burn your house down if you don't buy a policy.

I have a LTC policy with Genworth--I am 47, and bought a policy along with my wife a couple of years ago. I knew full well that when I made the purchase there was no guarantee of guarantee of future premiums. That was risk I was willing to take, and, yes, it is possible that GE may end up pricing me out of the market. Bad investment/decision on my part.

But even if I am priced out of the market in 20 years, keep in mind, that I will have been covered for 20 years---between now and then I could be in an accident, have an ailment that might require I need long term care while I am still relatively young. Yes, I did buy the policy for when I am elderly, but I do accure a benefit now-the certainty that I am covered today in the event I am incapaable of caring for myself.
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Old 02-07-2010, 03:43 PM   #138
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No snake oil here, just giving you answers to your questions. I am not sure why you would want to pay a higher premium now, which is basically a built-in rate increase from the start. In your example, you went from $1500 for 15 years to $2500 to $4000....what if you started using the benefits in year 2 of your $1500 payment?

There is no bait and switch - every LTC application requires the insureds to sign an acknowledgment that premiums are not guaranteed and subject to an increase in the future. The pages include questions on whether the insureds would be able to continue paying premiums if the rates were increased. If they can't, they are advised not to purchase the policy.
Pretty disingenuous. I thought Beowulf was being snarky when he said you were a shill for the insurance industry, but after reading your responses I now think he was right on the nose.

Why would you want to pay a higher premium now? So you would know what to expect in the future and you could trust your payments wouldn't rise significantly. You would understand what you are buying. If you can't get the premiums right, don't sell the product.

Every LTC policy states the premiums are not guranteed. Of course it does, just like all the other legalistic small print scammers use to get your money and keep it. But that's not how it's represented when it's sold. "It's just a legal requirement, no big deal. Sign here and here and here and here...".

I've sat through a couple of sales pitches for LTC, and there is a big play on FUD, with reassurances that the policy will sove the problems. And once the company has a few years of your money it's pretty hard to drop the policy and throw it all away, so you keep paying until you are priced out of the ability to pay. I suspect that in the future there will be hearings and investigations, and many of the insurance companies will get their wrists slapped for misleading practices. Of course, by then the people who sold the policies will be retired and out of reach. Same thing, different day.
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Old 02-07-2010, 04:24 PM   #139
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Pretty disingenuous. I thought Beowulf was being snarky when he said you were a shill for the insurance industry, but after reading your responses I now think he was right on the nose.

Why would you want to pay a higher premium now? So you would know what to expect in the future and you could trust your payments wouldn't rise significantly. You would understand what you are buying. If you can't get the premiums right, don't sell the product.

Every LTC policy states the premiums are not guranteed. Of course it does, just like all the other legalistic small print scammers use to get your money and keep it. But that's not how it's represented when it's sold. "It's just a legal requirement, no big deal. Sign here and here and here and here...".

I've sat through a couple of sales pitches for LTC, and there is a big play on FUD, with reassurances that the policy will sove the problems. And once the company has a few years of your money it's pretty hard to drop the policy and throw it all away, so you keep paying until you are priced out of the ability to pay. I suspect that in the future there will be hearings and investigations, and many of the insurance companies will get their wrists slapped for misleading practices. Of course, by then the people who sold the policies will be retired and out of reach. Same thing, different day.
Here's the thing....the premiums are right, for now. If you went in a nursing home tomorrow, you'd get the benefits for the premium you paid. Life insurance is a fixed single lump-sum payout, LTC and health insurance are not fixed and the benefits paid out could be all over the map, from $0 to the lifetime max (if there is one), or somewhere in between. It is very difficult to determine the average benefits paid well into the future when the amount varies so greatly from person to person. Once again, according to your logic, health insurance should not be sold because the premiums rise each year since they "can't get it right". Would you prefer the insurance companies to just make health insurance $10k per month guaranteed for life to make sure the premiums never go up? Yeah, lots of people would buy that.

If all of the LTC companies were raising rates every year to the point they became unbearable, nobody would buy the product. There is a fine balance between keeping claims paid in line with premiums taken in, and killing your business altogether. Companies know that agents who sell their policies will be less likely to recommend a product if it just had a rate increase.

On a side note, the acknowledgment that premiums are not guaranteed and may increase is not buried in the fine print of the application and policy There are usually 2-3 pages fully devoted to pointing it out in big, bold print, with a signature required on each page.
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Old 02-07-2010, 04:55 PM   #140
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Dgolden is slinging apologist garbage as usual. This should be a great reminder to everyone: READ THE FINE PRINT!

Now, on to the meat of it. LTC policies are one of the hardest products for life insurers to successfully underwrite. There is huge competitive pressure and a lot of demand for commissions on the part of dgolden and his ilk on one side. On the other side of things, insurers are using scanty historical data to help the estimate what the reserves should be (read: the actuaries make a wild guess). And this is a rough liability to have, since it is extremely sensitive to lapse rates and it is very, very long duration (longer than most available fixed income assets). To give you an idea, having your annual lapse rate off by 1% is big money. So insurers hedged their bets by not guaranteeing premiums. I have been saying for years that LTC does not do a very good job of offloading the risk to the insurer because of their ability to jack premiums. I imagine this is becoming clear to more and more policyholders...
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