Incredible increase in LTC policy premium

[timo2]

I just received a letter from CALPERS indicating that there will be 7 options offered:

1) continue current coverage - lifetime coverage with built in inflation protection -5% increase in premiums in 2013, 5% in 2014, 85% in 2015

2) Maintain Lifetime Coverage with inflation protection but reduce Daily Benefit amount to keep current premium - 5% increase in 2014 and 85% in 2015

3 and 4) Reduce Lifetime coverage to 6 or 3 year benefit period and keep inflation protection - avoid 2013 and 2014 increases but keep 2015 85% increase

5, 6 and 7) Reduce lifetime coverage to 10,6 or 3 year benefit period and drop inflation protection - reduce premium amount and avoid future 2013, 2014, and 2015 premium increases.

8) not mentioned but stop pouring money down this rat hole.

Obviously the way this thing is structured they are counting on lots of folks going the option 5,6,7, or 8 route.

There is supposed to be a subsequent letter with actual premium amounts tailored to each policy holder I assume.

That's not the best set of choices. They must have really messed up their initial estimates.

When my LTC plan retooled, one of the choices (the one I chose) that dropped the inflation from 5% to 4% and keep the same premium and daily benefit. And people were crabby about our choices. Good thing they weren't given these ones.

 

[timo2]

One question on CALPERS - were the original rates so low that the increase is really 85% of nothing? Just wondering.

 

[Koolau]

Did you read the fine print when you bought your policy? If you did, then you would have known that rates were not guaranteed until the end of time. If it was fully disclosed, you have nothing to squeal about.

I did indeed read the policy and discussed the policy with the agent. So, YES, I was aware that rates could go up. The agent asked the question (memory fades, so not a quote): 'Insurance companies live and die by the actuarial tables, so they know what they are doing.' IOW, the agent was assuring me that, while rates could "wander" a bit (even down as some life insurance rates have because folks are living longer) rates were unlikely to go "way" up. I would say doubling the rates in 10 years is "way" up.

"Lapse rates" was NOT discussed in the policy nor did the agent talk about it. IOW, the Ins. Co. did, indeed, cover themselves with their disclosure. But, using your term, I DO think I have a right to "squeel" when rates double in 10 years. Rates went from "affordable" to nearly "unaffordable".

Keep in mind that folks were encouraged to buy in early to keep their rates low. It's not like car insurance where yearly claims are more or less immediately reflected in the next year's rates. The rates on LTC didn't go up (for me and for most) for 10 years. Once we had made a big up-front investment, the rates doubled. You can suggest this was something "disclosed", but that doesn't make it less "squeal" worthy. While I agree that it is perfectly legal, it WAS disclosed and even the insurance regulators went along with it, I can bloody well squeal all I want. Just like most folks (maybe even you, brewer) squealed when the gummint bailed out the banks and others. Of course, YMMV.

 

[ejman]

One question on CALPERS - were the original rates so low that the increase is really 85% of nothing? Just wondering.

Policy covers nursing home to $162/day, Residential Care facility to $81/day. It has a 5%/year inflation protection, a 90 day deductible and lifetime coverage. Premiums are currently $1,908/year for the two of us (Ages 64 and 62). The proposed increase for 2013, 2014 and 2015 would bring the premium to $3892 by 2015, an increase of 104%.

 

[Carlos2]

Still a good Day

Policy covers nursing home to $162/day, Residential Care facility to $81/day. It has a 5%/year inflation protection, a 90 day deductible and lifetime coverage. Premiums are currently $1,908/year for the two of us (Ages 64 and 62). The proposed increase for 2013, 2014 and 2015 would bring the premium to $3892 by 2015, an increase of 104%.

Even with the 85% increase, your rate is GREAT compared to today's prices. You have a lifetime coverage which is pretty much extinct now. Younger folks can't get 4 or 5 years for that price these days.

 

[brewer12345]

I did indeed read the policy and discussed the policy with the agent. So, YES, I was aware that rates could go up. The agent asked the question (memory fades, so not a quote): 'Insurance companies live and die by the actuarial tables, so they know what they are doing.' IOW, the agent was assuring me that, while rates could "wander" a bit (even down as some life insurance rates have because folks are living longer) rates were unlikely to go "way" up. I would say doubling the rates in 10 years is "way" up.

"Lapse rates" was NOT discussed in the policy nor did the agent talk about it. IOW, the Ins. Co. did, indeed, cover themselves with their disclosure. But, using your term, I DO think I have a right to "squeel" when rates double in 10 years. Rates went from "affordable" to nearly "unaffordable".

Keep in mind that folks were encouraged to buy in early to keep their rates low. It's not like car insurance where yearly claims are more or less immediately reflected in the next year's rates. The rates on LTC didn't go up (for me and for most) for 10 years. Once we had made a big up-front investment, the rates doubled. You can suggest this was something "disclosed", but that doesn't make it less "squeal" worthy. While I agree that it is perfectly legal, it WAS disclosed and even the insurance regulators went along with it, I can bloody well squeal all I want. Just like most folks (maybe even you, brewer) squealed when the gummint bailed out the banks and others. Of course, YMMV.

Haaaahahahaha!!! You took what the agent said at face value? PT Barnum was right.

I don't know why you are bringing the bank bailouts into this - its completely irrelevant. You bought an insurance contract that had certain items specified/guaranteed and others that were unguaranteed. Nobody got bailed out or got regulatory forbearance in the LTC space. Rate increases are a regular part of the business of insurance.

You can squeal/whine/bitch/cry about whatever you like. Heck, I regularly spend time complaining about the injustice that is gravity. Doesn't mean you have a shred of substance behind it.

No, I was not squealing about bailouts. I was extremely busy at that point in time.

 

[ejman]

Even with the 85% increase, your rate is GREAT compared to today's prices. You have a lifetime coverage which is pretty much extinct now. Younger folks can't get 4 or 5 years for that price these days.

I'm not sure it makes sense to compare the rate to what I would have to pay if I bought a policy today. After all, the reason to buy a policy early is precisely to get the lower rate . Don't forget that I have already paid $21,000 into this policy since I bought it in 1998 when I was 48 years old.

 

[Mmm Rrr]

Don't forget that I have already paid $21,000 into this policy since I bought it in 1998 when I was 48 years old.

And also don't forget that you've been insured for those 15 years, less of a chance for a claim than in old age, but a chance nonetheless. So you've already gotten something for the $21,000.

I too have investigated LTC insurance a couple of times in the last 10 years (60 now) and have decided not to purchase. I made the decision in partnership with my 28 year-old DD since the risk could affect her inheriting whatever is left over. Her take on it was "It's your money, if you have to spend it on your LTC, that's what it's there for".

 

[Carlos2]

Do You realize...

I'm not sure it makes sense to compare the rate to what I would have to pay if I bought a policy today. After all, the reason to buy a policy early is precisely to get the lower rate . Don't forget that I have already paid $21,000 into this policy since I bought it in 1998 when I was 48 years old.

I am under the assumption that the $162/day for nursing home care and $81/day residential care facility was what you bought when you first bought the policy in 1998. However, you do realize that because of the 5% inflation rate you should have about $325/day for nursing home care and about $162/day for residential care facility.

This is the other advantage to buying early. The 5% inflation rider is also working for you.

 

[ejman]

I am under the assumption that the $162/day for nursing home care and $81/day residential care facility was what you bought when you first bought the policy in 1998. However, you do realize that because of the 5% inflation rate you should have about $325/day for nursing home care and about $162/day for residential care facility.

This is the other advantage to buying early. The 5% inflation rider is also working for you.

No, your assumption is incorrect. The $162 nursing home and $81 residential care facility is what I would get TODAY.

 

[timo2]

I just received a letter from CALPERS indicating that there will be 7 options offered:

1) continue current coverage - lifetime coverage with built in inflation protection -5% increase in premiums in 2013, 5% in 2014, 85% in 2015

2) Maintain Lifetime Coverage with inflation protection but reduce Daily Benefit amount to keep current premium - 5% increase in 2014 and 85% in 2015

3 and 4) Reduce Lifetime coverage to 6 or 3 year benefit period and keep inflation protection - avoid 2013 and 2014 increases but keep 2015 85% increase

5, 6 and 7) Reduce lifetime coverage to 10,6 or 3 year benefit period and drop inflation protection - reduce premium amount and avoid future 2013, 2014, and 2015 premium increases.

8) not mentioned but stop pouring money down this rat hole.

Obviously the way this thing is structured they are counting on lots of folks going the option 5,6,7, or 8 route.

There is supposed to be a subsequent letter with actual premium amounts tailored to each policy holder I assume.

I'm intrigued by option 3, the 6 year with inflation. Would your current premium go down (before the 2013, 2014, and 2015 premium increases)? Statistics appear to point toward 6 years being sufficient.

 

[ejman]

I'm intrigued by option 3, the 6 year with inflation. Would your current premium go down (before the 2013, 2014, and 2015 premium increases)? Statistics appear to point toward 6 years being sufficient.

I won't know for certain until I get my individual price quote letter but the way I read their letter, there will be an 85% increase from the current premium in 2015 if I were to choose option 3.

 

[Carlos2]

Wrong Assumption

No, your assumption is incorrect. The $162 nursing home and $81 residential care facility is what I would get TODAY.

My assumption can be wrong, but the 5% inflation rider was still in effect. So that means you started out with about $81 for nursing home care and about $40 for residential care. In either case it should be about double from what you initially started out with 15 years ago.

 

[gerrym51]

No, your assumption is incorrect. The $162 nursing home and $81 residential care facility is what I would get TODAY.

what kind of policy did you buy in 1998. does not sound like the compound 5 percent inflation plan

 

[ejman]

Carlos2, gerrym51 Thank you for your questions. This made me go back to my original documents. The policy started in October 1998. Coverage at that time was UP TO $137/day for Nursing home and UP TO $68/ day for residential care facility. Premiums then were $1,176 per year for the 2 of us. Over the years there were a number of increases ( I don't remember how many 5-6?) where the option was to either increase the premiums or decrease the coverage or some combination. Starting in 2007 the premiums started going up no matter which option you selected unless you switched to a limited time period (6 or 3 years coverage). So by now I'm paying $1,908 per year for coverage of $162 for Nursing home and $81 for residential care facility.

Looking at it this way, I'm paying 62% more for an increase in coverage of 18%. Wonderful!

 

[gerrym51]

Carlos2, gerrym51 Thank you for your questions. This made me go back to my original documents. The policy started in October 1998. Coverage at that time was UP TO $137/day for Nursing home and UP TO $68/ day for residential care facility. Premiums then were $1,176 per year for the 2 of us. Over the years there were a number of increases ( I don't remember how many 5-6?) where the option was to either increase the premiums or decrease the coverage or some combination. Starting in 2007 the premiums started going up no matter which option you selected unless you switched to a limited time period (6 or 3 years coverage). So by now I'm paying $1,908 per year for coverage of $162 for Nursing home and $81 for residential care facility.

Looking at it this way, I'm paying 62% more for an increase in coverage of 18%. Wonderful!

the reason i ask is that it sounds like no compound inflation increase was purchased in 1998. i can only go by what my wife and i purchased in 2003.

4 year policies/50 day deductible/5 percent compund/150 a day then about 240 now. total 2700 a year-so far no increases in last 10 years.

the key thing is your policy is lifetime benefits and ours only 4 years.

if i might say i think your policy was underpriced in 1998.

just an opinion

 

[ejman]

the reason i ask is that it sounds like no compound inflation increase was purchased in 1998. i can only go by what my wife and i purchased in 2003.

4 year policies/50 day deductible/5 percent compund/150 a day then about 240 now. total 2700 a year-so far no increases in last 10 years.

the key thing is your policy is lifetime benefits and ours only 4 years.

if i might say i think your policy was underpriced in 1998.

just an opinion

No, the policy included inflation protection to a max of 5% per year. It may or may not have been underpriced at the time. I did not compare with other policies available back then. I bought precisely because of the lifetime coverage amount and inflation protection. I see little value in my particular circumstances in getting a policy with a short limited benefit period say 3 or 4 years. According to FIRECALC I could self insure for the expected expenses ($178,000 benefits for my policy) if I were to pick a 3 year option and still have a reasonable chance of portfolio survival.

 

[gerrym51]

No, the policy included inflation protection to a max of 5% per year. It may or may not have been underpriced at the time. I did not compare with other policies available back then. I bought precisely because of the lifetime coverage amount and inflation protection. I see little value in my particular circumstances in getting a policy with a short limited benefit period say 3 or 4 years. According to FIRECALC I could self insure for the expected expenses ($178,000 benefits for my policy) if I were to pick a 3 year option and still have a reasonable chance of portfolio survival.

then how is it only up to 162 dollars. also is it 5 percent simple or 5 percent compound. ther is a difference in some policies

also if it was not underpriced in 1998 why is calpers raising price

 

[ejman]

then how is it only up to 162 dollars. also is it 5 percent simple or 5 percent compound. ther is a difference in some policies

also if it was not underpriced in 1998 why is calpers raising price

As I tried to explain in post #90 (poorly obviously), there have been 5 or 6 price increases since 1998. At each price increase we had the option of accepting the price increase, decreasing coverage and keeping premium the same or a combination. for several of these increases I elected to reduce coverage and keep the premium the same. I don't know what the current premium would be If I had elected to just keep paying the increase premiums but I bet you that it would be higher than the 62% increase I've had for the 18% increase in coverage.

I don't really know what assumptions CALPERS made when they offered the policy in 1998. Maybe they assumed everything would be peachy and the market crashes of 2000-2002 and 2008 would never occur in the future, short term interest rates would never decline to zero, there would be global peace and universal brotherhood etc

 

[gerrym51]

As I tried to explain in post #90 (poorly obviously), there have been 5 or 6 price increases since 1998. At each price increase we had the option of accepting the price increase, decreasing coverage and keeping premium the same or a combination. for several of these increases I elected to reduce coverage and keep the premium the same. I don't know what the current premium would be If I had elected to just keep paying the increase premiums but I bet you that it would be higher than the 62% increase I've had for the 18% increase in coverage.

I don't really know what assumptions CALPERS made when they offered the policy in 1998. Maybe they assumed everything would be peachy and the market crashes of 2000-2002 and 2008 would never occur in the future, short term interest rates would never decline to zero, there would be global peace and universal brotherhood etc

when you say you decreased coverage-by years or dollar amount?


because of the 5-6 coverage changes i honestly can't say what i think about the policy.

 

[ejman]

when you say you decreased coverage-by years or dollar amount?


because of the 5-6 coverage changes i honestly can't say what i think about the policy.

Decreased coverage by decreasing the benefit dollar amount.

As to what to think about the policy, you and me both. Like I said at the beginning of the thread, I'll wait and see what the detailed proposal is but I have a feeling that it's going to be dropsville for me.

 

[mickeyd]

But, it's sort of like a poker game where you have a lot in the pot. You may stay instead of fold. We've had our policies for about 14 years and rates have doubled. YMMV

I read an article on LTCi a few years ago and it mentioned that the industry had miscalculated on the number of LTC policyholders who have terminated their coverage w/o making a claim. Seems that they factored in a piece that indicated that if you jack up the rates enough the company will be able to shake off a good number of policyholders who did nothing but paid premiums. Too many of those guys are sticking around and hoping for a "payoff."

Evidently insurance companies love people who pay premiums over and over yet never file a claim.

 

[ejman]

I read an article on LTCi a few years ago and it mentioned that the industry had miscalculated on the number of LTC policyholders who have terminated their coverage w/o making a claim. Seems that they factored in a piece that indicated that if you jack up the rates enough the company will be able to shake off a good number of policyholders who did nothing but paid premiums. Too many of those guys are sticking around and hoping for a "payoff."

Evidently insurance companies love people who pay premiums over and over yet never file a claim.

Well, with a doubling of price over the next 3 years along with the prior 15 year doubling at least (If I'd kept the initial coverage going) I suspect they are going to succeed in shaking me off... Currently I feel I'm walking around with a bright neon "sucker" sticker on my forehead

 

[akck]

Policy covers nursing home to $162/day, Residential Care facility to $81/day. It has a 5%/year inflation protection, a 90 day deductible and lifetime coverage. Premiums are currently $1,908/year for the two of us (Ages 64 and 62). The proposed increase for 2013, 2014 and 2015 would bring the premium to $3892 by 2015, an increase of 104%.

If you want to compare to another PERS plan, when I retire, mine will be $3,588 for both of us and covers $200/day with a $300,000 maximum benefit. The benefit increases by a simple 5% per year and equates to just over 4 years of coverage for nursing homes. There is a no inflation option and a compounded inflation option, which I can't justify paying the premium.

Based on the plan differences, your rate increase is not out of line with what I'll be paying. Actually, it makes me think that we won't be seeing a big increase in the near future.

 

[Carlos2]

PERS Choices

I remember considering buying a CALPERS plan about six years ago. I was in my mid forties and did not want to commit to LTC at that time. I remember you had a lot of choices that could be chosen. Since the economy tanked, they closed enrollment. I then chose to go to Genworth which had a comprehensive plan which includes residential, assisted living and home care.

CALPERS is not an insurance company, but is making all of the same moves that the insurance companies are making which is increasing rates.