Long Term Care Insurance 60% premium hike--yikes!

[brewer12345]

You may be correct but the way I read this Long-Term-Care Rate Hikes Loom-Kiplinger the REASON they missed the claims utilization is that folks haven't dropped their policies in the expected numbers. No point in debating the issue as it "is what it is" when it comes to rate hikes. A real bummer, but LTC may still be something that some of us are willing to buy. YMMV

Actually, you are both right plus there is a third reason for the trainwreck: interest rates. Most carriers didn't or couldn't hedge a low interest rate scenario.

 

[pb4uski]

You may be correct but the way I read this Long-Term-Care Rate Hikes Loom-Kiplinger the REASON they missed the claims utilization is that folks haven't dropped their policies in the expected numbers. No point in debating the issue as it "is what it is" when it comes to rate hikes. A real bummer, but LTC may still be something that some of us are willing to buy. YMMV

If you had mentioned lower than expected lapses in your prior post I would have agreed with that part. The link you provided cites both higher than expected utilization and lower than expected lapses, and then we have interest rates which is critical to any long-term insurance contract.

While I'm not keen on the product, if I was buying one I think I would lean towards NML.

 

[OrcasIslandBound]

We have had long term care coverage since it was offered to my previous MegaCorp about 25 years ago in our early 30's. It was a portable policy. We had no kids at the time and I thought it would be good for us just to buy that coverage. The bill was $1080 per year for 2 of us. We'll, over the years, we've been hit with one 70% increase a few years back + several inflation coverage increases. We pay $227 a month for both of us. ($2724/year for both, half of that for each) Coverage is $255 max daily nursing home benefit for each of us. Unlimited lifetime max coverage. The coverage comes to $7756 for each of us per month max. I don't know how much we've paid over the years for this coverage. Probably ~ $35K or more. I wouldn't dream of canceling it today. I expect that before we reach the age of 70, we'll be hit with one or two more 50% increases. We're both 57 today. Hope this helps. John Hancock Policy.

 

[ziggy29]

This is exactly why I will not buy the product. They encourage you to "lock it in" while you are young and rates are affordable, and then when you get older and more likely to need it, they jack up the rates so you can't afford it any more.

 

[mathjak107]

time will tell if all the latest policy's issued were under priced too and if they will pan out that way but it certainly would be a great way to market them . you may be right .


the flip side is though as insurers they can't afford to scare away all those older premium paying customers most of whom have little in claims. as well as if these increases are the norm they won't get younger buyers either.

so while your theory sounds good I doubt in the insurance business which counts on large pools of clients that it would play out that way by design.

more likely a case of early policy's were way underpriced ..

 

[Texas Proud]

I have a LTC policy with NW Mutual. Its small, $55 per day with inflation increases. Costs me abt $95/ mo. My wife wanted it. I wasnt keen on it. It has a 25 week waiting period! Seems like a lot. What do you all think? While she is comforted by hers( same amount), Males on my side have been independant til then end, then they die at home historically.


Sent from my iPhone using Early Retirement Forum

Not a great policy... $55 per day probably will not even pay for the meals...

 

[mathjak107]

we need 350-400 a day as of now in our area - nyc.

it is likely if we live in to our 80's the premiums we paid in would really run about 1 years coverage .

 

[Delawaredave5]

Are there any "catastrophic" LTC care policies out there that kick in only after the insured pays for the first 3 years, for example ?

Believe I read that about 1/2 of population requires some nursing home care and that 95% (might even be higher) of all nursing home stays are less than 3 years.

Wondering if there are policies, reasonably priced, where we would pay for first 3 years care and insurance company would take over for years 4 onward.

This would allow me to self insure for 98% of outcomes and have insurance cover extreme events and preserve assets for my spouse.

 

[bingybear]

I have a LTC policy with NW Mutual. Its small, $55 per day with inflation increases. Costs me abt $95/ mo. My wife wanted it. I wasnt keen on it. It has a 25 week waiting period! Seems like a lot.

Are there any "catastrophic" LTC care policies out there that kick in only after the insured pays for the first 3 years, for example ?

This would allow me to self insure for 98% of outcomes and have insurance cover extreme events and preserve assets for my spouse.

DDave... looks like Al in Ohio may have your plan. 25 month waiting period (4 years---note looking online waiting and elimination period seem to be the same) Al did not note if his policy is unlimited coverage or not.

It does get less expensive with increasing elimination period. I'm not sure if it gets cheap enough. Why don't you hit up some LTC providers and see what they have to offer? I'd be interested in the result.

I expect the best for me would be the unlimited protected assets from a partnership plan. But these only seem to be available in IL and NY... Not sure how that works in another state. Even with reciprocity, I'm not sure the unlimited would port to a state that does not offer unlimited protection. I think the reciprocity states only have to honor up to the level of excluded assets to what they allow in partnership LTCI in their state.

 

[athena53]

I should have been clearer in my post, that any rate increase usually require regulatory approval, but I thought that would be common knowledge. The reality is that most companies won't apply for a premium increase unless there is a reasonable basis for doing so and most are approved in whole or in part. In this case, things must be pretty bad if NYID, one of the most conservative departments in the country, approved a 60% premium increase.

My understanding is that the actuaries have missed the mark big time on utilization and it is not as near as predictable as you suggest (unlike life insurance mortality, which is quite predictable for large groups), and that is why many of the bigger, more established players have exited the LTC business.

I agree with this and I'm an actuary. I ESPECIALLY agree about the NY State Insurance Department! Insurance companies in any state need to supply reams of statistics and justification for any rate change for any product (with the possible exception of individually-negotiated rates on large commercial property and casualty coverages). The Insurance Department typically counters back with every reason the rate change you asked for is excessive (and no mention of areas where you might have made overly optimistic assumptions) and it takes a lot of negotiation to get a rate increase approved. Typically a company gets less than it asked for.

I was with a GE insurance sub when it was acquired by a very large insurer. One particularly good segment of the business was sold to Berkshire Hathaway, but the rest went to the acquiring company- except Genworth. They didn't want that.

DH and I are self-insuring. I think it's a good bet; he's 77 and has enough health issues that if he were to go into a nursing home he probably wouldn't last more than a few years. I could fund that and still be OK for my own retirement.

 

[mickeyd]

When LTCi surfaced 30+ years ago I was in the insurance business and, over the years, I attended dozens of seminars that were hosted by various insurance companies. All seminars offered continental breakfast. Some even sprang for lunch. I remember comments that this was a great product to SELL. I don't recall ever hearing about how wonderful it was for the client.

I've opted to self-fund that aspect of risk and will always think that I have made a smart choice. The other choice still makes insurance agents happy.

 

[audreyh1]

DDave... looks like Al in Ohio may have your plan. 25 month waiting period (4 years---note looking online waiting and elimination period seem to be the same) Al did not note if his policy is unlimited coverage or not.

It does get less expensive with increasing elimination period. I'm not sure if it gets cheap enough. Why don't you hit up some LTC providers and see what they have to offer? I'd be interested in the result.

I expect the best for me would be the unlimited protected assets from a partnership plan. But these only seem to be available in IL and NY... Not sure how that works in another state. Even with reciprocity, I'm not sure the unlimited would port to a state that does not offer unlimited protection. I think the reciprocity states only have to honor up to the level of excluded assets to what they allow in partnership LTCI in their state.

25 weeks. ~6 months.

You misread the original.

A catastrophic LTC Insurance policy with multi year waiting period is a missing product.

 

[mathjak107]

DDave... looks like Al in Ohio may have your plan. 25 month waiting period (4 years---note looking online waiting and elimination period seem to be the same) Al did not note if his policy is unlimited coverage or not.

It does get less expensive with increasing elimination period. I'm not sure if it gets cheap enough. Why don't you hit up some LTC providers and see what they have to offer? I'd be interested in the result.

I expect the best for me would be the unlimited protected assets from a partnership plan. But these only seem to be available in IL and NY... Not sure how that works in another state. Even with reciprocity, I'm not sure the unlimited would port to a state that does not offer unlimited protection. I think the reciprocity states only have to honor up to the level of excluded assets to what they allow in partnership LTCI in their state.

yep , i couldn't care less about the 3 years coverage in my nys partnership plan. the beneits after the insurance runs out are priceless .

 

[athena53]

We have an insurance salesman in our church who's let me know that he's ALWAYS available if I want to buy LTC insurance because I'm likely to be a long way away from going "on claim". (I'm 62, completed 3 35-mile charity bike rides this summer and have 2 more planned, and my most urgent medical problem is a raging case of poison ivy for which I plan to seek attention at a Doc-in-the-Box today.) DH- well, not so much.


Another piece of research in the decision should be the criteria the company uses to decide that you have a valid claim. Kramer, on "Mad Money", excoriated the unnamed company that collected premiums from his father for years, then said he wasn't incapacitated enough to collect when he had a stroke and had to go to a nursing home. Kramer fought them to the mat and won, but said he netted little after legal fees.

 

[ejman]

...

A catastrophic LTC Insurance policy with multi year waiting period is a missing product.

Yes, at least here in Oregon. I've checked with multiple insurance companies and agents, looking for a LTC policy with a three year waiting period and 100% coverage afterwards and none are to be found.

The excuse I get for the lack of such a policy is that being that the average nursing home stay is less than three years then heirs could sue the insurance company for taking advantage of the buyer and selling an unsuitable product. The response sounds fishy to me but that's what I usually get.

 

[audreyh1]

Yes, at least here in Oregon. I've checked with multiple insurance companies and agents, looking for a LTC policy with a three year waiting period and 100% coverage afterwards and none are to be found.

The excuse I get for the lack of such a policy is that being that the average nursing home stay is less than three years then heirs could sue the insurance company for taking advantage of the buyer and selling an unsuitable product. The response sounds fishy to me but that's what I usually get.

It really doesn't exist. Kitces bemoaned the lack of this option, which should be much cheaper.

Agree - fishy response.

 

[Ready]

I have spent considerable time researching LTC policies, and have always come to the conclusion they are simply bad investments. Insurance salespeople always push the peace of mind, and the fear that waiting will only increase your annual premiums.

But a careful read through any of these policies will clearly tell you that regardless of what your annual premiums begin with when you first take out the policy, they can go up by quite significant amounts each year. The salespeople will assure you this is not the case due to state insurance regulations. But clearly reading this thread, you will see that companies are announcing substantial increases to their policies.

Throughout my career I have reviewed and negotiated thousands of contracts. The basic process to review these deals is to start with the question, if I give you X$, what will I get back? Price increases over time are inevitable, but always must be based on either a fixed percentage, or an industry standard CPI figure. Fixed percentages are better because they protect against runaway inflation. But at least CPI gives you some protection against companies who simply underpriced their policies in the early years and now want to sock it to their customer base.

I would never agree to any deal where the company can raise their prices however they wish, and my only recourse is to abandon the policy and lose the money I've invested so far. You are giving them all the leverage, and keeping none for yourself.

These policies are simply bad deals. There is a (weak) argument to be made that people who have just enough savings to live on, but would be devastated by an LTC expense, may need this sort of protection. However, I suspect this is exaggerated by the LTC industry, and not all that valid of an argument.

I'm all for buying homeowners insurance to protect against total loss of your home. But trying to insure against needing an LTC visit with one of these policies is just a bad investment for everyone except the salespeople who earn big fat commissions for selling them.

 

[REWahoo]

I have spent considerable time researching LTC policies, and have always come to the conclusion they are simply bad investments.

That's a given - LTC is insurance, not an investment. The question that needs answering is whether LTC is good insurance (adequately offsets a financial risk at a reasonable cost) and that is clearly in doubt.

 

[topsider]

After reading about LTC on this forum and researching and reading feedback and claims articles on the net, we cancelled our LTC with Genworth. Had the insurance since 2008, monthly premiums were $207 for both. What did it for us is the fact that many people not only had large premium increases (we never had one) BUT the fact that when they went to make a claim, Genworth and other companies pushed back hard with all kinds of nonsensical "not covered" responses. When we get to the point of needing LTC, say 70's and 80's, the last thing I want is to fight with an insurance company over whether or not we are covered after having spent tens of thousands in premiums. The industry is changing and we have too. While we paid we had insurance...but no more...we would rather be smart now than screwed later. To each their own, but this was a decision for us that allows us to sleep better.

 

[Options]

All the reasons I'll never buy LTC in a nutshell:

FWIW, I think it is a terrible product and would never buy it. YMMV.

+1

We were hit with that last year, but at around 30% from NY-Life. One of the reasons we bought from them is that they had never had a history of rate increases.... Until they did.

...

Ouch.

There is nothing to keep them from raising premiums again.

...

+1

...

As in all insurance situations, you have to ask yourself "Do you feel lucky? Well, do you, punk?" (apologies to Clint). Can you cover the downside "risk" yourself or do you feel the need to spread the risk over a larger number of folks.

...

This. And the Punk feels lucky. Here's why:

Not sure I want to hang around if I need a nursing home or the type of care that requires LTCI. I don't want to be hand fed (or tube fed) and planted in front of a TV every day. DH and I are in agreement on that and it is addressed in our medical directives.
...

+1
Emphasis added.

We have had long term care coverage ...over the years, we've been hit with one 70% increase a few years back + several inflation coverage increases...I expect that before we reach the age of 70, we'll be hit with one or two more 50% increases...

Ouch.

This is exactly why I will not buy the product. They encourage you to "lock it in" while you are young and rates are affordable, and then when you get older and more likely to need it, they jack up the rates so you can't afford it any more.

Bingo.

time will tell if all the latest policy's issued were under priced too and if they will pan out that way but it certainly would be a great way to market them...more likely a case of early policy's were way underpriced...

Emphasis added.

When LTCi surfaced 30+ years ago I was in the insurance business and, over the years, I attended dozens of seminars that were hosted by various insurance companies. All seminars offered continental breakfast. Some even sprang for lunch. I remember comments that this was a great product to SELL. I don't recall ever hearing about how wonderful it was for the client.

...

Emphasis added

...Had the insurance since 2008, monthly premiums were $207 for both. What did it for us is the fact that many people not only had large premium increases (we never had one) BUT the fact that when they went to make a claim, Genworth and other companies pushed back hard with all kinds of nonsensical "not covered" responses. When we get to the point of needing LTC, say 70's and 80's, the last thing I want is to fight with an insurance company over whether or not we are covered after having spent tens of thousands in premiums. The industry is changing and we have too. While we paid we had insurance...but no more...we would rather be smart now than screwed later...

+1
Emphasis added

 

[BarbWire]

We have had long term care coverage since it was offered to my previous MegaCorp about 25 years ago in our early 30's. It was a portable policy. We had no kids at the time and I thought it would be good for us just to buy that coverage. The bill was $1080 per year for 2 of us. <snip> Unlimited lifetime max coverage. The coverage comes to $7756 for each of us per month max. I don't know how much we've paid over the years for this coverage. Probably ~ $35K or more. I wouldn't dream of canceling it today. I expect that before we reach the age of 70, we'll be hit with one or two more 50% increases. We're both 57 today. Hope this helps. John Hancock Policy.

Very similar story here: bought in my 30s from Megacorp, policy is now with John Hancock. Cost of living adjustments every three years, with one big hike last year due to rate adjustments. Now, at 57, I pay about $1000 per year. I have scaled my policy so that it will cover assisted living/memory care, but not skilled nursing; I will self-insure for the difference if necessary.

Unlimited lifetime max coverage. When the policy moved from Met Life to John Hancock, the JH guy advised me to never let this go. No one offers this anymore.

Why buy before I'm in my 70s and can decide if I need it or am wealthy enough to self insure? LTC insurance isn't old-age insurance: if you have a stroke in your 40s, or are in a horrific car accident you may need LTC. And there's a good chance you'll need if for more than 90 days, (the exclusion period). I don't have family who could drop everything and be my caregivers.

My parents bought LTC insurance about 15 years ago at ages 70 and 75. After a few years they turned down the COLA, deciding they had sufficient assets to self-insure for the difference in costs created by ongoing inflation. That froze their premiums. Their policies had lifetime caps of $154K.

Fast forward: my father paid about $36K in premiums, and only got $28K in payout (he never went into a nursing home, so they covered his home health care at a lower rate). Bad investment? Sure, but he had peace of mind. That's insurance.

My mother paid about $28K in premiums, which were then waived when she went on payout. She has dementia and is in a facility. She, now 87, will likely go through her $154K in 3.5 years, and then we will have to cover the $6K per month until her body finally gives out. Bad investment? Clearly not.

I may follow the same strategy: at some point decline the COLA and decide to self-insure for some portion of LTC expenses.

BTW, NY Life has been fabulous to work with for my parents' claims. No push back at all about whether they should be paid.

Again, remember that LTC isn't just a problem for the elderly. Do you have people who would take care of you now if catastrophe hits?

At least, that's my thinking....

 

[brewer12345]

Do you have people who would take care of you now if catastrophe hits?

If Sturm, Ruger & Co. can't be called upon, my old buddy Evan Williams will round up the Percocet boys and get the task done in a jiffy.

 

[mathjak107]

we realized that if we tried to self insure in reality a large chunk of money had to be kept safe ,liquid and secure and not at risk since an extended downturn could wipe out a major portion of that money.

just losing the ability to invest that chunk would negate the fact we could have invested it ,paid a premium and had more left over .

most folks who claim they will self insure do not , they just leave everything invested and hope they do not need it or get caught.

one other factor too is the stay at home spouse makes alot of decisions as well as being concerned for their own survival.

many expenses ,and things for the spouse that needs care gets pushed aside for fear of over spending from their own funds they will need.

all in all when we looked into the insurance there were so many advantages that we had to be foolish not to protect ourselves.

the real deal is all about the stay at home spouse, not the spouse that needs the care..

one major problem with thinking family members will help care for you.

if there are siblings look out.

one always steps up to the plate and the rest step back.

more families have been broken up over this . i had issues in my own family when my dad spent 5 years in a home.

if wives are involved good luck. once they start with why are you helping when your brothers or sisters are not divorce can be in the cards.

usually the one that steps up takes the financial hit as well as in their time and they begin to resent the others.

our estate attorney told us the bulk of all his business now is those who called their plan "self insuring "

in reality there was no plan other than just keep the money fully invested with the rest and hope you don't need it .

now when something happens the stay at home spouse goes in to survival mode and wants to preserve as much of that money that was called self insuring money as they can , usually with only partial success at that point .

we figure we will do the insurance thing until we can't afford it if it gets that high as opposed to the alternatives which end up not really being a plan if the time hits ..

usually there is nothing different in place or ready to go with so called self insuring plans . nothing is ever a problem until it is a problem as they say and it all sounds like a plan until it isn't as likely any elder care attorney can tell you ..

 

[Golden sunsets]

we realized that if we tried to self insure in reality a large chunk of money had to be kept safe ,liquid and secure and not at risk since an extended downturn could wipe out a major portion of that money. just losing the ability to invest that chunk would negate the fact we could have invested it ,paid a premium and had more left over . most folks who claim they will self insure do not , they just leave everything invested and hope they do not need it or get caught. one other factor too is the stay at home spouse makes alot of decisions as well as being concerned for their own survival. many expenses ,and things for the spouse that needs care gets pushed aside for fear of over spending from their own funds they will need. all in all when we looked into the insurance there were so many advantages that we had to be foolish not to protect ourselves. the real deal is all about the stay at home spouse, not the spouse that needs the care.. one major problem with thinking family members will help care for you. if there are siblings look out. one always steps up to the plate and the rest step back. more families have been broken up over this . i had issues in my own family when my dad spent 5 years in a home. if wives are involved good luck. once they start with why are you helping when your brothers or sisters are not divorce can be in the cards. usually the one that steps up takes the financial hit as well as in their time and they begin to resent the others. our estate attorney told us the bulk of all his business now is those who called their plan "self insuring " in reality there was no plan other than just keep the money fully invested with the rest and hope you don't need it . now when something happens the stay at home spouse goes in to survival mode and wants to preserve as much of that money that was called self insuring money as they can , usually with only partial success at that point . we figure we will do the insurance thing until we can't afford it if it gets that high as opposed to the alternatives which end up not really being a plan if the time hits .. usually there is nothing different in place or ready to go with so called self insuring plans . nothing is ever a problem until it is a problem as they say and it all sounds like a plan until it isn't as likely any elder care attorney can tell you ..

Mathjack; you nailed all of the salient points. And if one does plan on purchasing policies I don't advise waiting past 60 to purchase as nearly any medical condition that turns up in the very extensive medical evaluation that is done will disqualify the applicant. We purchased at 60 and 62. Policies are for 4 years, 5%/yr cola's, roughly 220/day as of 2015, includes home health care option and the premiums have been raised about 35% in the 7 years that we have owned them. We are keeping them and SWAN. It you can afford the premiums they are worth it IMO.

 

[Ready]

My father passed away last year after spending three years in assisted living/nursing care. The first year he was in a very nice place with a restaurant serving three meals a day. His fee was $4,000 per month. After his ability to function declined, we needed to move him into a smaller facility where they could watch him 24 hours per day. The room was smaller, and the service not quite as nice. The fee there was $3,000.

He did not have LTC, but between his pension and SS, he earned about $3,000 per month. So there was a small deficit that needed to be covered by savings each month, but nothing that was going to devastate him.

Had he purchased LTC, he would have been covered for up to three years of coverage. So even in the more expensive place, that would have represented $144,000 in coverage. So if self insuring for $144,000 is out of the question, then you may have to consider LTC.

However, looking at the retirement figures that most of the forum members have posted over the years, I would suspect that for the majority, a worst case of $144,000 would not bankrupt them. And to get that $144,000 in worst case protection, he would have likely had to pay $30,000-$40,000 in coverage. Taking that money and investing it would likely result in a future value of around $65,000, so the net savings is really not all that significant.

And, many policies have all types of limitations and exclusions regarding when you can receive coverage. For my Dad, we elected to decide when the time was right and where he would reside.