LTC Increase

[ferco]

Unbelieveable.......Wife and I bought a John Hancock LTC policy in 2/04 as a level premium 10 year paid policy. We received a notice yesterday of a 90 % (that's N-I-N-E-T-Y percent) increase effective with the next premium 2/12. It was / is our understanding that we were buying a level premium policy that would be paid IN FULL in 10 years. In their letter, JH states that the reason for the increase is that they underestimated what their "claims experience" would be and that due to the low investment returns they have to increase rates.
Has anyone else had this experience recently. It sounds like a breach of contract, but I need to read the contract carefully and the fine print before calling the agent and company tomorrow.
One of the LTC blogs said that if you have net worth of 1.5 mill (not me) you can and probably should self-insure......I definitely plan to do this with the disability policy, since at age 57, and semi-retired I doubt if I'll ever be disabled long enough to rationalize continuing paying for this insurance (I'll just keep a couple of years expenses in a cash account)

 

[East Texas]

Do you mind giving me your state? I've been expecting an increase in my level premium (not 10 year paid policy) and should receive my renewal notice in about 30 days. I spoke with the Texas DOI a few months ago because I didn't see any rate approval for JH for Texas. She said it was still pending. They asked for a 42% rate increase; however, discussions were still on-going between DOI and JH when I called. I suspect they'll get their 42%, just spread over the next several years instead of the whole increase at one time.

I keep checking the Texas_DOI_LTC_Rate_Increases and haven't seen anything since June 2010. I was expecting a rate increase last January since JH announced the changes in September 2009. Didn't happen. At least not to me.

According to the "rules" (may be just Texas), LTC companies are supposed to give options to keep the premium lower if a substantial rate increase is put into play. That may mean lowering your inflation percent, coverage, etc.

LTC is just like any other insurance. The pool of premiums should be enough to cover the actuarial risk. Unfortunately, LTC companies are now saying they didn't have enough claims experience to correctly rate policies back then.

My homeowners and auto insurance premiums go up all the time so I'm not surprised LTC premiums are going up. My spouse's policy comes up for renewal next month; however, that contract for both premium and coverage is locked in until 2013. My renewal - also a 2004 policy - will be the one with the greatest surprise since I also have a level premium and guaranteed 5% annual inflation in coverage.

Read your contract. There will be something about raising the premium of your risk pool / contract type / something similar. Essentially they do not guarantee rates will stay the same.

You can also call the agent that issued the policy and have him/her explain your options.

 

[dgoldenz]

I've said it before, but having a 10-pay doesn't eliminate the risk of rate increases, and the rate increases are higher than a lifetime-pay because they are jammed into a shorter timeframe. If your policy was a lifetime-pay instead of 10-pay, your increase probably would have been 20-40% instead of 90%. There is no guarantee that rates won't be raised within the 10 years before the policy is fully paid up.

 

[rescueme]

One of the LTC blogs said that if you have net worth of 1.5 mill (not me) you can and probably should self-insure......

True. This was the guidence given to us by our (elder law) attorney upon review of our estate and the various issues we covered.

 

[East Texas]

dgoldenz, do you have any way of knowing if Texas DOI approved the JH increase?

 

[Koolau]

It amazes me that the LTC companies could miss it so badly. My policy went up about 40% a couple of years ago. The BIG factor (I couldn't believe they were so honest) was they didn't count on so many folks actually keeping their policies in force as they got older. IOW, they had "planned" on folks paying for 8 or 10 years (during relatively healthy years) and then dropping the policies about the time they would otherwise have started needing them. Each year I consider dropping the policy. Each year I visit a "facility" and see their prices (locally, over $100K/year!) So far, I guess I'm going to "stay". Darned if you do and darned if you don't. YMMV

 

[l2ridehd]

Most LTC contracts have a fixed amount they pay. X number of $$ per day for X years. Mine is $200 a day for up to 3 years. So I am buying 365 x 200 x 3 or a maximum payout of $219,000. Doesn't seem very hard to price that. Yes they have not done so well with returns, but that is why I buy insurance, to move the risk to someone else. If the returns had been great, would my premium drop? The answer is no. They took a risk and so did I. Sometimes they win, sometimes I win. If my rates go up, I will buy from someone else.

 

[pb4uski]

Most LTC contracts have a fixed amount they pay. X number of $$ per day for X years. Mine is $200 a day for up to 3 years. So I am buying 365 x 200 x 3 or a maximum payout of $219,000. Doesn't seem very hard to price that. Yes they have not done so well with returns, but that is why I buy insurance, to move the risk to someone else. If the returns had been great, would my premium drop? The answer is no. They took a risk and so did I. Sometimes they win, sometimes I win. If my rates go up, I will buy from someone else.

If the returns had been better your premium probably would not have dropped, but it would not have gone up as much as it did (or is going to).

 

[dgoldenz]

dgoldenz, do you have any way of knowing if Texas DOI approved the JH increase?

I have no idea, contacting the state DOI or JH would be the best way to find out.

Most LTC contracts have a fixed amount they pay. X number of $$ per day for X years. Mine is $200 a day for up to 3 years. So I am buying 365 x 200 x 3 or a maximum payout of $219,000. Doesn't seem very hard to price that. Yes they have not done so well with returns, but that is why I buy insurance, to move the risk to someone else. If the returns had been great, would my premium drop? The answer is no. They took a risk and so did I. Sometimes they win, sometimes I win. If my rates go up, I will buy from someone else.

Other than rare and unusual circumstances, the LTC policy you buy today will be the best rates you will ever get. In order to replace a policy with an inflation benefit, you'd have to apply for more coverage in the future at an older age and probably in worse health, usually making it an exercise in futility. Let's say you bought a $4500/mo policy with 5% compound inflation at age 55. To replace that policy 10 years later, you will now have to buy a $7330/mo policy and you are 10 years older. The price for the second policy even if you were in good health will be about 3x the price of the original. For this reason, LTC replacements are very rare and scrutinized heavily by the insurance companies when they review the application to make sure it is a suitable replacement for the insured.

 

[Birdie Num Nums]

True. This was the guidence given to us by our (elder law) attorney upon review of our estate and the various issues we covered.

That's $1.5M per person, right? Not for a couple?

 

[rescueme]

That's $1.5M per person, right? Not for a couple?

That was for a couple, based upon private care costs in our state.

Here's a statement from the below referenced document:

"As an example, assuming the average stay in a nursing home is three years, costs can easily surpass $225,000 for the entire long term care event."

http://www.genworth.com/content/etc....dat/2010_Cost_of_Care_Survey_Full_Report.pdf​

Again, that depends on the level of care, the state of residence, and your ability to pay.​

If you're willing to draw down on assets and have a slightly lower level of existance, you still have the Medicad option, regardless of your level of net worth that can be liquidated to supply funds for you/spouse's needs.​

Nobody will know the need for care in the future, and even if you could afford an LTC policy to offset those unknown needs. Our elder-law attorney has many years of practice and is using personal data for situations he's been involved with for many years to form his "opinion" (which we paid for). In fact, that $1.5M exceeds the average noted in the attached report (as it should).​

 

[tightasadrum]

Oh no. We have LTC policies for 50%, with JH. It's been really hard to write that check each January. I'm not happy to hear people's rates are going up at this time. If mine jumped that much (90%), I'd drop it.
Another issue I fret over is blanket liability insurance. If the injured's lawyer can just get the amount of insurance you have, and will then set that as the easy money to go after, why have it at all?

 

[East Texas]

Oh no. We have LTC policies for 50%, with JH. It's been really hard to write that check each January. I'm not happy to hear people's rates are going up at this time. If mine jumped that much (90%), I'd drop it.

The way I see it, writing a check once a year for a couple of thousand dollars is substantially better than paying $70,000 out of pocket each year.

Another issue I fret over is blanket liability insurance. If the injured's lawyer can just get the amount of insurance you have, and will then set that as the easy money to go after, why have it at all?

I'm not sure where you got the idea an attorney can only sue you for the amount of liability you carry. They can go after all your assets (some are exempt), your half of community property assets, and future earnings. Insurance simply insulates you from having your life ripped apart if you carry enough coverage.

I hear people say all the time "they can't get blood out of a turnip". Let's look at this from another perspective. Let's say you were the seriously injured party in a car accident that was clearly not your fault. The other person only has the minimum liability coverage required by their state law. In this example you have $200,000 in current and future medical costs, lost wages, and property damage. Are you really going to be happy being stuck with $175,000 in bills? This is why we carry insurance. Not only enough to protect us from losing our financial future; but, to also carry insurance to cover ourselves (UMBI/UIMBI for example). As for us, we carry the very highest liability coverages our insurance company offers and then we have an umbrella on top of that. It's a pretty inexpensive price for financial peace of mind.

 

[tightasadrum]

The way I see it, writing a check once a year for a couple of thousand dollars is substantially better than paying $70,000 out of pocket each year.


I'm not sure where you got the idea an attorney can only sue you for the amount of liability you carry. They can go after all your assets (some are exempt), your half of community property assets, and future earnings. Insurance simply insulates you from having your life ripped apart if you carry enough coverage.

Yep, I'm prepared to fork over $2K/year. But $4K or more per annum? Don't know.

I didn't mean to imply that all the lawyer would go after is the insurance amount. But I've heard that the first thing they find out is how much insurance coverage you have. That's because they feel your insurance coverage is the easy part to get. The rest of your assets will take more w*rk for the lawyer to pry away from you, in court. So, by having high levels of liability, you have immediately set the table for a feast instead of a sack lunch for the lawyer to feed on.

DW had her car accident at the end of March. The other driver was fully at fault, probably texting, but had only $50000 liability coverage. (It was amazing how easy that information was to get by the way.) DW's initial hospital bills took most of that. She's had two more operations and therapy on going. Who knows what the total actual costs will finally be. We haven't hired an attorney, but the driver's assets most likely wouldn't cover it with a settlement anyway. As it turns out though, we're a no-fault insurance state. I carry the maximum liability. So MY insurance covers it. How fair is that? My insurance company can opt to sue the driver, but apparently that's not very likely to happen. So where is the incentive for a large umbrella policy?

 

[East Texas]

The incentive of an umbrella policy is it also covers you in case the other party is at fault and between the other party and your underlying auto insurance you don't have enough coverage.

There's also the issue of us being in a litigious society - some people look for any venue to increase their income so they'll sue at the drop of a hat. If you have enough coverage (especially an umbrella policy) your insurance company will vigorously defend you in a court of law at no cost to you.

As for your last statement about your insurance company covering your wife's medical bills - that's what they're supposed to do if you have the right coverage. Then, in most cases, they'll go after the other party.

This is why you pay insurance. You don't want financial destruction in case you have an at-fault accident and you want to make sure your family, passengers in your car, and the other party are taken care of in case you caused the accident.

 

[youbet]

The way I see it, writing a check once a year for a couple of thousand dollars is substantially better than paying $70,000 out of pocket each year.

A bit of an over-simplification..........

In the end, the holders of LTC policies will pay, through their premiums, the entire cost of that same group's LTC expences plus fees and profit for the insurance carrier. It has to be that way or the insurance companies would simply go out of busines. Most policy holders will pay in more in premiums than they collect. A few will collect far more than they paid in. That's how insurance works.

Now, assuming self-insuring is a viable option, then purchasing LTC insurance (assuming you can find a policy with the features you want - I can't - and issued by a company you trust), is just like any other insurance purchase decision. Do you want to bear the risk individually or do you want to share it with others in a group?

 

[East Texas]

I'd rather pay a couple of thousand dollars a year for my homeowner's insurance even though the odds of my having a loss are pretty slim. If I knew for certain I would drop dead instead of having a lingering illness, then I wouldn't need LTC.

I prefer to pay premiums and shift the financial risk to a pool instead of incurring all of it myself.

Just my humble opinion.

 

[youbet]

I'd rather pay a couple of thousand dollars a year for my homeowner's insurance even though the odds of my having a loss are pretty slim.

I agree with that. It was easy to find a homeowners policy with the features I wanted. And there were a number of companies with well published records of good customer service and records of paying legitimate claims.

If I knew for certain I would drop dead instead of having a lingering illness, then I wouldn't need LTC.

I'm having a bit of trouble with LTCI. I can't find a policy that does what I want: A long waiting period (say 2 years) with corresponding low premiums (due to the small probability of ever using the policy).

 

[East Texas]

I bought my JH policy through USAA. We never discussed an extended elimination period because I simply wasn't interested in one. I don't even know where to steer you to find the answer unless you call JH or another reputable company directly.

 

[MovingtotheCove]

Sorry to hear about your LTC story. We've heard a lot of very larger increases being passed through....take it or leave it. We are lucky in that we did a single pay for our LTC a number of years ago....tough to fork over that cash at the time but the good news is they can't increase our rates...policy through Allianz.

 

[ziggy29]

The way I see it, writing a check once a year for a couple of thousand dollars is substantially better than paying $70,000 out of pocket each year.

Sure, if that $2,000 didn't keep going up because these insurers are chronically underpricing the product.

 

[Rich_by_the_Bay]

Sure, if that $2,000 didn't keep going up because these insurers are chronically underpricing the product.

What Ziggy said. Plus you may be one of the 60% who pay for decades but never use it, plus you get your hopefully long-delayed benefits in deflated dollars (unless you buy a COLA policy - even more expensive), you lose your investment opportunity on the premium amounts, plus you take the risk of duplication of benefits if the federal health policy veers toward gov't help for LTC down the road.

There is no easy or glib answer to this one - I sure don't know the best course, though for now we are self-insuring with fingers crossed. Analyze carefully and make your choices, but it is more than just "my benefits will be greater than my premiums," IMHO.

 

[ERD50]

I'd rather pay a couple of thousand dollars a year for my homeowner's insurance even though the odds of my having a loss are pretty slim. ...

Just my humble opinion.

Big differences though. With my homeowner's, I pay year-by-year. I'm not locked into a 10 year or more schedule where they can raise the rates within that contract period.

If HO gets too expensive, I can decide to go 'naked' (would need to pay off my mortgage though). I still got my money's worth for the years I paid for and was covered. I didn't pay now for future coverage.

It would make an interesting poll - anyone drop their HO insurance? It would make some sense for many of us, but OTOH, many of us probably carry umbrella ins, and they will require HO (or probably charge you the equiv) - so maybe it's a moot point?

-ERD50

 

[ziggy29]

Big differences though. With my homeowner's, I pay year-by-year. I'm not locked into a 10 year or more schedule where they can raise the rates within that contract period.

If HO gets too expensive, I can decide to go 'naked' (would need to pay off my mortgage though). I still got my money's worth for the years I paid for and was covered. I didn't pay now for future coverage.

Another way to look at it: Homeowners insurance is like annually renewable term life insurance where you only pay for your *current* risk against current events -- if your risk increases later it will be reflected in future contracts when the risk is higher. LTCI is more like whole life(or 20- to 30-year term) where you pay more now because your risk will rise later. In essence you are "pre-paying" for some additional future risk.

The big difference is that insurers know how to reliably price life insurance and generally don't sock you with repeated rate increases for the same level of coverage in future years. And it is this difference which has convinced me to pass on LTCI, at least for now.

 

[Nords]

Inflation riders aren't just a good idea, they're essential-- and worth every penny.

In late 1992 (age 58) my father was aware that his genetics weren't good-- his father was in a care facility, and Grandpa ended up spending another 10 years there with dementia. Dad purchased LTC insurance from a company that was eventually bought by John Hancock.

The policy covered $100/day up to $120K. He bought an inflation rider that boosted those limits by 5%/year for 20 years. (The 20th boost occurs in Dec 2012.) The current limit is $240/day. The care facility charges $214/day for a semi-private room in a large western city, and that number's about the middle of the pack for large cities. By my rough calculations, when the payout limit is reached the care facility's prices will just be catching up to the insurance company's payout.

Of course there are additional expenses beyond $214/day, and they're not covered by Medicare/Medigap: prescription blood pressure & pain med, dental exams, even haircuts. It's not uncommon for families to hire additional caregivers (beyond the care facility staff) for an extra hour or two of help at certain busy times of day. Physical therapy may be necessary (or at least useful) for far longer than the Medicare limits. Dad doesn't have any behavioral problems (yet), and that therapy is not inexpensive (if indeed a care facility will tolerate behavior issues). Dad's not in an Alzheimer's memory-care unit, and that's more expensive.

The premiums have been fixed at just over $600/year for nearly 20 years. Of course this is obscenely low for the benefits received, and he earned all of his premiums back in just the first two months of payout. But even if he'd been paying $4000/year he'd still be receiving 4x the benefits.

The real challenge today is figuring out if retirees have the ability to (1) save $3K-$4K/year on their own and (2) invest it to grow to pay a similar benefit. I'm guessing "No" in both cases. LTC offers not only risk-sharing but the discipline of enforced savings.

I'm hoping that by the time I'm 60 years old, the LTC insurance companies will have a handle on the expenses and be able to price their policies realistically. Even if we go with the federal program, they're still underwritten by Hancock & Met Life. Somewhere between ages 60 and 70 my spouse and I should make the decision on whether or not to buy the insurance or go without. My inclination is that by that age we'll be finishing up the process of taking risks with our excess assets and should be considering using them to buy insurance.

By our standards the insurance industry has just 9-19 years to get its act together, just about the same amount of time the Federal government has left on Social Security & Medicare. It'll be interesting to see who gets to the finish line before bankruptcy.