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John Hancock raising Long Term Care rates 32%
Old 05-04-2010, 10:30 AM   #1
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John Hancock raising Long Term Care rates 32%

Just a heads up for those considering long term care insurance as I know there have been many threads here on it....starting in June, John Hancock will be raising rates on policies that have a 5% compound inflation rider by approximately 32% across the board, and reducing couples preferred discounts by 5%. No mention of how the change will effect current policyholders (and I'm sure some of you here have JH policies), though hopefully the new increases will allow current policyholders' rates to remain the same.
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Old 05-04-2010, 10:37 AM   #2
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Health care economics are flat out broken. There's really no sugar-coating it.
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Old 05-04-2010, 10:37 AM   #3
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Thanks for the heads up. You took the question right out of my mouth (how will the change effect current policy holders?).
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Old 05-04-2010, 10:43 AM   #4
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Health care economics are flat out broken. There's really no sugar-coating it.
As noted by JH in their statement, it's very difficult to predict the actual claims of something as new as LTC when costs keep rising and you have a fixed benefit increase every year. I think everyone agrees the system is broken and the costs are spiraling out of control whether it's health insurance or long term care insurance or just flat-out costs paying things in cash. Genworth has not raised rates though, making them that much more competitive unless they end up doing the same thing...

On a side note, they also are discontinuing LTC policies that have a lifetime benefit, likely since the benefit is potentially unlimited. They do claim that less than 4% of all policies sold include a lifetime benefit, probably because they are so expensive.
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Old 05-04-2010, 11:55 AM   #5
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Originally Posted by dgoldenz View Post
....starting in June, John Hancock will be raising rates on policies that have a 5% compound inflation rider by approximately 32% across the board, and reducing couples preferred discounts by 5%. No mention of how the change will effect current policyholders (and I'm sure some of you here have JH policies), though hopefully the new increases will allow current policyholders' rates to remain the same.
They must have my father under surveillance.

Thanks for the heads up.
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Old 05-04-2010, 12:02 PM   #6
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As noted by JH in their statement, it's very difficult to predict the actual claims of something as new as LTC when costs keep rising
True, but unfortunately the industry also encourages young people to "lock in" low rates while they are young, but that sales pitch is hollow when they can and do frequently jack up those "locked in" rates because they lack the ability to properly price it.

In reality, it doesn't appear that *anything* related to health care can be "locked in" indefinitely, because costs *always* rise too much and too quickly.
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Old 05-04-2010, 12:43 PM   #7
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In reality, it doesn't appear that *anything* related to health care can be "locked in" indefinitely, because costs *always* rise too much and too quickly.
Trees don't grow to the moon and neither will healthcare costs. Just a question of when, not if, healthcare costs will be brought under control...

Though I will admit I'm not holding my breath just yet
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Old 05-04-2010, 01:01 PM   #8
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Just a heads up for those considering long term care insurance
I think Baby Boomers will be OK; after that who knows.

There will be options for LTC - medicare/medicade, the new health care bill and future expansion. We have gotten our medications (mostly) paid for why does anyone think that baby boomers won't get LTC paid.

There are also, some out of the box options - don't buy health ins and go to jail or commit a non violent crime and go to a minimum security jail. The federal jail system gives very good health care.
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Old 05-04-2010, 03:47 PM   #9
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Originally Posted by ziggy29 View Post
True, but unfortunately the industry also encourages young people to "lock in" low rates while they are young, but that sales pitch is hollow when they can and do frequently jack up those "locked in" rates because they lack the ability to properly price it.

In reality, it doesn't appear that *anything* related to health care can be "locked in" indefinitely, because costs *always* rise too much and too quickly.
I had a discussion about LTC premium increases with an agent recently. She kept saying "costs, costs, costs" like some have pointed out here. Then I stopped her in her tracks when I mentioned that policies are written for specified benefits - some with inflation riders, but still "fixed" as far as the benefit is concerned. If LTC patient costs increase 1000% each year, the "cost" to the insurance company is the same e.g., $205/day in 2009 and $215 in 2010 or whatever the policy is written for. These "costs" to the insurance company are known to the penny. These costs do NOT go up.

What the LTC insurers missed was the larger nuber of claims they would actually experience and the number of folks who WOULDN'T lapse their policies before they got old enough to use them. In short, they didn't know what they were doing when they got into the business. Now, the policy holders (yeah, me!) are paying for their incompetence.
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Old 05-04-2010, 03:51 PM   #10
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I had a discussion about LTC premium increases with an agent recently. She kept saying "costs, costs, costs" like some have pointed out here. Then I stopped her in her tracks when I mentioned that policies are written for specified benefits - some with inflation riders, but still "fixed" as far as the benefit is concerned. If LTC patient costs increase 1000% each year, the "cost" to the insurance company is the same e.g., $205/day in 2009 and $215 in 2010 or whatever the policy is written for. These "costs" to the insurance company are known to the penny. These costs do NOT go up.

What the LTC insurers missed was the larger nuber of claims they would actually experience and the number of folks who WOULDN'T lapse their policies before they got old enough to use them. In short, they didn't know what they were doing when they got into the business. Now, the policy holders (yeah, me!) are paying for their incompetence.
From what I am hearing, rates will not be changing for existing policyholders. John Hancock has been much lower priced than other companies for years (except Genworth). You can buy LTC from a mutual company for twice the price, but that's just essentially an already-built-in rate increase. The big problem is people are living much longer than expected and being kept alive by modern medicine. 20 years ago there weren't near as many life-extending medical treatments as there are today. That's another story for another day though...
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Old 05-04-2010, 05:19 PM   #11
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The other big driver of LTC policy costs is long term interest rates. It is quite hard for insurers to duration match LTC reserves with really long duration assets, so most of them have asset liability mismatches on LTC blocks. So when rates drop for an extended period, profitability suffers. For new policies, prices have to rise in this interest rate environment, no question.

I think LTC is an immature product that does not really shift the risk from the policyholder. We'll see in 20 years whether this has changed.
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Old 05-05-2010, 03:25 PM   #12
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Not at all surprised at this JH increase. They have to make a profit now that they are not a mutual company and ManuLife demands that they produce a profit for the stockholders.

LTC policies will continue to be quite pricey. Consider self insuring for this risk.
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Old 05-05-2010, 03:36 PM   #13
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Not at all surprised at this JH increase. They have to make a profit now that they are not a mutual company and ManuLife demands that they produce a profit for the stockholders.

LTC policies will continue to be quite pricey. Consider self insuring for this risk.
LTC from the mutual companies is about twice the price of JH and Genworth...
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Old 05-05-2010, 05:11 PM   #14
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And JH wasn't a mutual for several years before Manulife bought them. Mutuality is irrelevant in this case.
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Old 05-05-2010, 09:50 PM   #15
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LTC from the mutual companies is about twice the price of JH and Genworth...
Is there an easy way to find these prices to compare?
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Old 05-05-2010, 09:57 PM   #16
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Is there an easy way to find these prices to compare?
Not really, unfortunately....an agent could run the comparisons, but I don't know of any websites to run them yourself.
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Old 05-06-2010, 09:04 AM   #17
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Not really, unfortunately....an agent could run the comparisons, but I don't know of any websites to run them yourself.
Then how can you make a broad statement like mutual companies charge twice what JH does?

If you've got a spreadsheet, the information on it is public (rates are filed with insurance depts, they aren't trade secrets). Can you post it?
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Old 05-06-2010, 09:13 AM   #18
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I had a discussion about LTC premium increases with an agent recently. She kept saying "costs, costs, costs" like some have pointed out here. Then I stopped her in her tracks when I mentioned that policies are written for specified benefits - some with inflation riders, but still "fixed" as far as the benefit is concerned. If LTC patient costs increase 1000% each year, the "cost" to the insurance company is the same e.g., $205/day in 2009 and $215 in 2010 or whatever the policy is written for. These "costs" to the insurance company are known to the penny. These costs do NOT go up.

What the LTC insurers missed was the larger nuber of claims they would actually experience and the number of folks who WOULDN'T lapse their policies before they got old enough to use them. In short, they didn't know what they were doing when they got into the business. Now, the policy holders (yeah, me!) are paying for their incompetence.
I'll agree with this. Care costs shouldn't be a big driver of premium rates. The mis-pricing of LTC insurance invovled some big errors on lapse rates. I'd thought the lapse assumption has been cleaned up by now. I'd guess that Brewer is right about investment income.
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Old 05-06-2010, 09:19 AM   #19
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Then how can you make a broad statement like mutual companies charge twice what JH does?

If you've got a spreadsheet, the information on it is public (rates are filed with insurance depts, they aren't trade secrets). Can you post it?
Because I sell long term care insurance and have run many comparisons

The rates are public information, but you would still need to get them from somewhere. You can request them from each insurance company based on a given set of parameters, but it's not something you will find posted publicly online unless you are an agent. There are many variables and optional riders with LTC and unless you know what you're looking at, you may not have an apples-to-apples comparison. Companies like Mass Mutual, Guardian, and Northwest Mutual will have much, much higher rates than JH and Genworth.

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I'll agree with this. Care costs shouldn't be a big driver of premium rates. The mis-pricing of LTC insurance invovled some big errors on lapse rates. I'd thought the lapse assumption has been cleaned up by now. I'd guess that Brewer is right about investment income.
I think much of mispricing results from errors in calculating how many people will simply die before ever needing care, not necessarily the lapse ratios, though that is part of it. As medical technology gets better, people are kept alive longer and longer as we all know. The LTC policies sold in the 70's and 80's often have MUCH better benefits than those available today at a lower price, so anyone who has one is not going to drop it unless they simply can't afford it.
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Old 05-06-2010, 10:47 AM   #20
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Because I sell long term care insurance and have run many comparisons
Companies like Mass Mutual, Guardian, and Northwest Mutual will have much, much higher rates than JH and Genworth.
Kaneohe's too polite to say that you need to back up your flat assertions with links or data.

Otherwise you're just talking trash. You may be right, but it's still trash.
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