Incredible increase in LTC policy premium

E

ejman

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We have had a LTC policy with CALPERS since 1998 and have paid about $21K for a basic policy currently covering 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). There are about 150,000 members enrolled but enrollment has been closed for a few years now.

We just received a notice "You are receiving this notice because your policy provides lifetime benefits and built in inflation protection. Policies of this type are subject to the 2013 and 2014 five percent premium increase, as well as the 2015 premium increase of approximately 85 PERCENT".

To my way of thinking, the value of the LTC policy is precisely in the lifetime benefits and inflation protection part. I'm sure the premium will be considerably lower if we change the policy to say a 3 year benefit period but then what's the point? A 3 year benefit is $177k and according to Firecalc my portfolio could handle that.

I'm conflicted and very tempted to just drop it but would certainly appreciate your input.
 
According to this, three years will cover the vast majority of nursing home stays:

  • the median length of stay in a nursing home before death was 5 months
  • the average length of stay was longer at 14 months due to a small number of study participants who had very long lengths of stay
  • 65% died within 1 year of nursing home admission
  • 53% died within 6 months of nursing home admission

​
Click to expand...
Length of Stay in Nursing Homes at the End of Life | GeriPal - Geriatrics and Palliative Care Blog
 
REWahoo said:
According to this, three years will cover the vast majority of nursing home stays:

Length of Stay in Nursing Homes at the End of Life | GeriPal - Geriatrics and Palliative Care Blog
Click to expand...

Thanks. Yes but in the back of my head I think - a Firecalc success rate of say 60% would cover the majority of retirements but do I feel comfortable with that? The majority of folks at this forum seem to think that 100% + is the minimum acceptable level (The + means a lower withdrawal than even the 100% result requires). So translating that to the nursing home is outlier coverage worth it?
 
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This highlights one of the major concerns I have with LTC insurance. Once your plan is "closed" to new members and they start siphoning policyholders to newer plans, they can effectively kill the value of the insurance by hiking rates astronomically. I don't see any way to protect against this, so whatever premiums I pay will always be impossible to plan.
 
Ouch!

IMO, if regulators had been on the ball in 1998, they would have required LTC insurers to have reduced paid-up benefits in their policies. If they had, your premium would have been higher initially, but you'd have the option of stopping premiums now and still having some reduced, paid-up benefit. But, they didn't and you don't.

I'd look at what a new, similar policy would cost today with another carrier (assuming your health is okay). Note that if the daily benefit was $162 in 1998, it may be $198 today due to your 5% increases, so that's what you need to replace.

Since rates have gone up for most insurers, and especially for lifetime benefits (insurers discovered they even had more short term claims on lifetime benefit policies than on limited benefit policies) you may discover that your increased rate is still better than an insurance alternative.

Then, it comes down to whether you really need insurance. As you've said, you may be at the point of just self insuring this risk. Lots of threads on that.
 
ejman said:
Thanks. Yes but in the back of my head I think - a Firecalc success rate of say 60% would cover the majority of retirements but do I feel comfortable with that? The majority of folks at this forum seem to think that 100% + is the minimum acceptable level (The + means a lower withdrawal than even the 100% result requires).
Click to expand...
If you look closely at the Length of Stay chart, the "success" rate at three years looks much closer to 90-95% than 60%. And if you need more than three years, you'll still have the funds in your portfolio you didn't have to use because of your LTC coverage. If you drop the coverage entirely and are fortunate (or should that be unfortunate) enough to survive longer than three years in a nursing home, will your portfolio cover a longer stay?
 
ejman said:
We just received a notice "You are receiving this notice because your policy provides lifetime benefits and built in inflation protection. Policies of this type are subject to the 2013 and 2014 five percent premium increase, as well as the 2015 premium increase of approximately 85 PERCENT".
Click to expand...

This is one reason why I have not purchased a long term care policy. I know of a number of people whose policy premium has gone up dramatically over the past three years. In other words, as they get nearer the point where they might have to use the insurance, they are being forced out of the policy through premium increases they cannot afford. Or, they are forced to take a reduced benefit to keep the premium reasonable. Either way, this does not sound very good to me.

Since most long term care situations don't last more than a few years, I think there are better ways of covering that cost - longevity insurance with a single premium, buying extra pension credits if possible, delaying SS until 70. I am sure there are other ways. All of these promise extra income to help pay for care, don't allow one to be forced out by large premium increases, and still pay benefits even if a person is perfectly healthy until the day they drop dead. Am I wrong about this?
 
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ejman said:
\The majority of folks at this forum seem to think that 100% + is the minimum acceptable level (The + means a lower withdrawal than even the 100% result requires). So translating that to the nursing home is outlier coverage worth it?
Click to expand...

I think the idea of 100% certainty or even 90% certainty is a myth. There are to many exogenous factors that can mess things up. I would not use that level of certainty for anything as the costs can be astronomical. It's the old 80/20 rule. The first 80% requires the least time, effort, energy and money. The last 20% can cost more than the first 80%.
 
Stanley said:
I think the idea of 100% certainty or even 90% certainty is a myth. There are to many exogenous factors that can mess things up. I would not use that level of certainty for anything as the costs can be astronomical. It's the old 80/20 rule. The first 80% requires the least time, effort, energy and money. The last 20% can cost more than the first 80%.
Click to expand...

I agree with you. Certainty in human affairs (except death and taxes as the old saying goes) is not possible. I dunno I'm really starting to think it was a mistake to start this LTC policy but maybe the shock will wear off... But then with a shrinking member base and no new members I'm sure this is not the last price increase shocker
 
Short answer... the only reason we keep out 20+ year old policy is because of the $50,000 invested in it so far, and the fact of risk increase.. Only $100/day benefits.

You can check the average cost of LTC for your state here:
https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html

Average nursing home care for our area (basic care) is about $70K... Friend on Long Island pays $105K.

The average stay in a nursing home for persons over 45, who are discharged, is a little over a year.

Average Length of Nursing Home Stay | ElderWeb

If I were to do it over again, would not opt for the expense, as we don't have enough to protect, but that may be a matter of "luck". When we bought into LTC, I had recovered from colon cancer, and DW a stroke. We're both normally healthy now. Another friend's spouse was in LTC for 5 years, back when the annual costs were about $50-$60K. Back in 2002, it wiped out his nest egg.

To do it over again, I probably would have bought a more expensive home... taken a chance on the lookback period (now 5 years)... and used the home as protection for the surviving spouse, if nursing home costs depleted our assets. It's a tricky balancing act.
 
Independent said:
Ouch!

IMO, if regulators had been on the ball in 1998, they would have required LTC insurers to have reduced paid-up benefits in their policies. If they had, your premium would have been higher initially, but you'd have the option of stopping premiums now and still having some reduced, paid-up benefit. But, they didn't and you don't.

I'd look at what a new, similar policy would cost today with another carrier (assuming your health is okay). Note that if the daily benefit was $162 in 1998, it may be $198 today due to your 5% increases, so that's what you need to replace.

Since rates have gone up for most insurers, and especially for lifetime benefits (insurers discovered they even had more short term claims on lifetime benefit policies than on limited benefit policies) you may discover that your increased rate is still better than an insurance alternative.

Then, it comes down to whether you really need insurance. As you've said, you may be at the point of just self insuring this risk. Lots of threads on that.
Click to expand...

The $162 is the current daily benefit. From the limited research I've done other carrier rates would be somewhat higher but since they all can increase the rates pretty much at will I am not sure how to proceed in this rat maze
 
ejman said:
. I dunno I'm really starting to think it was a mistake to start this LTC policy but maybe the shock will wear off... But then with a shrinking member base and no new members I'm sure this is not the last price increase shocker
Click to expand...

Is there any cap on the yearly increases? Or does the policy holder shoulder all the risks?
 
imoldernu said:
Short answer... the only reason we keep out 20+ year old policy is because of the $50,000 invested in it so far, and the fact of risk increase.. Only $100/day benefits.

You can check the average cost of LTC for your state here:
https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html

Average nursing home care for our area (basic care) is about $70K... Friend on Long Island pays $105K.

The average stay in a nursing home for persons over 45, who are discharged, is a little over a year.

Average Length of Nursing Home Stay | ElderWeb

If I were to do it over again, would not opt for the expense, as we don't have enough to protect, but that may be a matter of "luck". When we bought into LTC, I had recovered from colon cancer, and DW a stroke. We're both normally healthy now. Another friend's spouse was in LTC for 5 years, back when the annual costs were about $50-$60K. Back in 2002, it wiped out his nest egg.

To do it over again, I probably would have bought a more expensive home... taken a chance on the lookback period (now 5 years)... and used the home as protection for the surviving spouse, if nursing home costs depleted our assets. It's a tricky balancing act.
Click to expand...

Yes it is. Thank you for the links. It's interesting that 8% of men and 13% of women stay longer than 3 years. And that tail end risk is what worries me and keeps me from unpluging so far (plus the $21 k already thrown down this rat hole)
 
My aunt has been in long term care for 5+ years now. She and my uncle had LTC insurance at one point, but let it go due to price increases. A short time later my aunt became disabled and cycled between home, hospital, nursing home, and home again several times. Each event would have been treated separately and LTC would not have covered it. At some point she could no longer remain at home and went into an adult foster home. If she still had LTC insurance it would have covered the past 5 years. She is 80 years old and has been disabled for 10 years and could certainly live for many more years. It is a sad time to go through. :(
 
powerplay said:
My aunt has been in long term care for 5+ years now. She and my uncle had LTC insurance at one point, but let it go due to price increases. A short time later my aunt became disabled and cycled between home, hospital, nursing home, and home again several times. Each event would have been treated separately and LTC would not have covered it. At some point she could no longer remain at home and went into an adult foster home. If she still had LTC insurance it would have covered the past 5 years. She is 80 years old and has been disabled for 10 years and could certainly live for many more years. It is a sad time to go through. :(
Click to expand...

That's the worry. dropping the LTC just as one is about to need it. The Gods seem to have a sense of humor about such things...
 
ejman said:
No cap - policy holder shoulders all risks.
Click to expand...

Is the cost set in some formulaic way? or can the provider arbitrarily increase prices (say just to increase profit)?
 
photoguy said:
Is the cost set in some formulaic way? or can the provider arbitrarily increase prices (say just to increase profit)?
Click to expand...
All it says on that is: " We cannot change any of the terms of your coverage on our own, except that in the future we may increase the premiums you pay. Your premiums will never increase due solely to a change of your health or age. CALPERS can however change your premiums but only if we change the premium schedule on an issue age basis for all similar coverage"
 
ejman said:
We have had a LTC policy with CALPERS since 1998 and have paid about $21K for a basic policy currently covering 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). There are about 150,000 members enrolled but enrollment has been closed for a few years now.

We just received a notice "You are receiving this notice because your policy provides lifetime benefits and built in inflation protection. Policies of this type are subject to the 2013 and 2014 five percent premium increase, as well as the 2015 premium increase of approximately 85 PERCENT".

To my way of thinking, the value of the LTC policy is precisely in the lifetime benefits and inflation protection part. I'm sure the premium will be considerably lower if we change the policy to say a 3 year benefit period but then what's the point? A 3 year benefit is $177k and according to Firecalc my portfolio could handle that.
Click to expand...

REWahoo said:
If you look closely at the Length of Stay chart, the "success" rate at three years looks much closer to 90-95% than 60%. And if you need more than three years, you'll still have the funds in your portfolio you didn't have to use because of your LTC coverage. If you drop the coverage entirely and are fortunate (or should that be unfortunate) enough to survive longer than three years in a nursing home, will your portfolio cover a longer stay?
Click to expand...

Stanley said:
This is one reason why I have not purchased a long term care policy. I know of a number of people whose policy premium has gone up dramatically over the past three years. In other words, as they get nearer the point where they might have to use the insurance, they are being forced out of the policy through premium increases they cannot afford. Or, they are forced to take a reduced benefit to keep the premium reasonable. Either way, this does not sound very good to me.

Since most long term care situations don't last more than a few years, I think there are better ways of covering that cost - longevity insurance with a single premium, buying extra pension credits if possible, delaying SS until 70. I am sure there are other ways. All of these promise extra income to help pay for care, don't allow one to be forced out by large premium increases, and still pay benefits even if a person is perfectly healthy until the day they drop dead. Am I wrong about this?
Click to expand...

This combination factors:
  • Unpredictable premiums
  • Statistically short stays
  • Desire for self control

has led us to not buy LTC and to self insure via our portfolio and some of the methods described above by Stanley. I use the Fido RIP tool, which has a good "what if" tab that includes self-funded LTC as a choice; it tells us we'd be OK for a 3 yr stay.
 
The Long Term Care Policy available at the Hemlock Society remains affordable.
 
My parents bought a LTC policy years ago. My dad could have used it and gone into a nursing home. Instead we as a family decided to keep him at home as long as possible. The last 18 months of his life we got lots of help from Hospice Care which was covered by Medicare. Mom has had some problems but is not yet ready for full nursing home care. She has been in and is not out of an assisted care facility and is now at home with my brother and sainted sister in law providing assistance for her. My guess is that she will probably never go into a nursing home with the way my family thinks about such things. My very frail next door neighbor probably could have been admitted to a nursing home several years ago and started collecting on his LTC insurance. Instead his family with help from me have worked to keep him at home as long as possible. He has recently gone into an excellent assisted care facility and as yet has not collected on his LTC insurance. I took him to a medical appointment yesterday and seeing how he is declining I cannot imagine how he could live long enough to ever come out ahead on his LTC policy. These personal experiences and what I see in threads like this one have convinced me that LTC insurance is not a good idea...........except for the insurance companies.
 
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