LTC insurance premium "surprise"

[chinaco]

Pulling this one back up.... here is a new article on the topic.

Keeping Ahead of the Long-Term Care Domino

[Independent]

I thought this was interesting:

Quote:

According to the study, the respondents’ greatest fear regarding the possibility of a long-term illness is not - running out of money (10 percent), or - dying (11 percent), or - ending up in a nursing home (26 percent). The overwhelming fear is “being a burden on my family” (53 percent).

[2B]

My father's premium went up repeatedly. The older he became the higher the increase and they eventually became astronomical. He would be offered an opportunity to apply for a "new plan" at a lower rate but it required a "physical" from a company nurse. This was essentially a way to price out people that were becoming close to actually needing the coverage.

Anyone who knows me knows I essentially hate all insurance companies, insurance salespeople and insurance products except for the traditional "risk sharing" products involving liability, auto and home type insurance (ie. immediate protection for a short, defined coverage). I have a self-funded LTC approach. If I don't need it, my heirs will be much happier.

[kumquat]

This article may explain some of it.

Quote:

“While increasing lifespan is a good thing, for the long-term-care industry it means that people are living longer and reaching the age where frailty and dementia are more likely to occur, and [insurance] carriers are consequently paying far more claims than originally priced for,” she says. In other words, when the product was being created, actuaries made an educated guess about how many claims there would be, and didn’t come close.

[samclem]

Quote:

Originally Posted by kumquat This article may explain some of it.

Of course, these were the same companies that therefore made more money on their life insurance business because folks lived longer. Don't hold your breath waiting for a refund of premiums. "That line of products has nothing to do with this line of products".

In addition to a larger amount of claims paid, folks who had the early policies figured out they had a good deal and didn't abandon the policies at the rate expected. That was another surprise.

[chinaco]

It definitely happens. Healthy lifestyle (not obese, non-smoker, etc)... live long and eventually need LTC.

It makes sense if one equates the longer one live (in old age), the greater the probability of some debilitating disease brings on the need for LTC.

Quote:

Center for Retirement Research Finds Healthy Pay Higher Costs than Unhealthy in Retirement

Center for Retirement Research Finds Healthy Pay Higher Costs than Unhealthy in Retirement | Advisor One

[Danmar]

@kumquat. Yes I read that article on the weekend. I did that as a shareholder in Manulife(by far the worst performer in my portfolio) not as a LTC consumer. You can blame the insurance co's for much that is wrong with US healthcare but not everything. When considering these issues, I am happy to be a Canadian. MFC sure is a dog though. It seemed at the time that their John Hancock purchase was brilliant. Not any more. I personally knew the previous CEO and CFO and they were very arrogant and smug. I wonder if they still are?

[Independent]

Quote:

Originally Posted by chinaco It definitely happens. Healthy lifestyle (not obese, non-smoker, etc)... live long and eventually need LTC. It makes sense if one equates the longer one live (in old age), the greater the probability of some debilitating disease brings on the need for LTC. Center for Retirement Research Finds Healthy Pay Higher Costs than Unhealthy in Retirement | Advisor One

I looked at the CRR paper here: http://crr.bc.edu/images/stories/Briefs/ib_10-8.pdf

They are looking at out-of-pocket expenses from the individual's view. So a longer lived individual pays Medicare parts B and D and Medigap insurance premiums for more years. If those premiums go up at about the same rate as the discount rate, they are just adding up the total number of years that people pay premiums and, surprise, healthy people pay premiums for more years.

It's not clear from the brief description on LTC costs that they are any higher for the healthier group. Healthier people presumably enter nursing homes at older ages, but it's not clear that they have any experience to claim that the healthier have longer stays in the nursing homes. That is, does a healthy person who enters a nursing home at 85 stay in the nursing home any longer than a less healthy person who enters a nursing home at 80?

[dgoldenz]

Quote:

Originally Posted by Independent I looked at the CRR paper here: http://crr.bc.edu/images/stories/Briefs/ib_10-8.pdf They are looking at out-of-pocket expenses from the individual's view. So a longer lived individual pays Medicare parts B and D and Medigap insurance premiums for more years. If those premiums go up at about the same rate as the discount rate, they are just adding up the total number of years that people pay premiums and, surprise, healthy people pay premiums for more years. It's not clear from the brief description on LTC costs that they are any higher for the healthier group. Healthier people presumably enter nursing homes at older ages, but it's not clear that they have any experience to claim that the healthier have longer stays in the nursing homes. That is, does a healthy person who enters a nursing home at 85 stay in the nursing home any longer than a less healthy person who enters a nursing home at 80?

Anyone entering a nursing home with LTC paying a benefit has to have lost 2 of the 6 ADL's anyway, so there are no "healthy" people going into a nursing home that are on LTC claim.

[chinaco]

Quote:

Originally Posted by dgoldenz Anyone entering a nursing home with LTC paying a benefit has to have lost 2 of the 6 ADL's anyway, so there are no "healthy" people going into a nursing home that are on LTC claim.

It looks to me like the paper concludes: Just because one is healthy now, does not mean they will experience lower health care costs during their lifetime.... therefore, plan adequately.

But they did not supply data on LTC.

They were just pointing out that people sometimes draw the wrong conclusions because they are healthy.

Quote:

Households planning for retirement need to decide how much to set aside for health care costs and whether to purchase Medigap and/or long-term care insurance. Those currently in good health would be unwise to infer that they will continue to enjoy lower than average health care costs. The reality is that even the currently healthy can expect to eventually suffer from one or more chronic diseases, which often results in high out-of-pocket and long-term care costs.

If one is already unhealthy or has serious health care problems.... it may be too late to get LTCi. Insurance companies may not offer insurance to them or it may be so expensive that it is not practical.

[Independent]

Quote:

Originally Posted by dgoldenz Anyone entering a nursing home with LTC paying a benefit has to have lost 2 of the 6 ADL's anyway, so there are no "healthy" people going into a nursing home that are on LTC claim.

"Healthy" in the study meant healthy at age 65, apparently defined as no symptoms of "diabetes, cancer, lung disease, heart disease, and stroke".

[REWahoo]

Annual update: Three years after our 10 year guarantee of premium expired our LTC rates remain unchanged. Our annual premium billing notices arrived yesterday and the amount due is the same as it was when we first obtained the policies in May of 2000.

Yes, I'm fully aware I'm tempting fate by continuing to post about our good fortune in having no rate increase for the past 13 years.

No, I don't think our luck will last, but I plan to enjoy it while it does.

[Ally]

Which company? We just signed my husband up with Genworth. They wouldn't take me.

[REWahoo]

Our policy is with CNA, who stopped offering new LTC coverage around 2003.

[73ss454]

Quote:

Originally Posted by REWahoo Our policy is with CNA, who stopped offering new LTC coverage around 2003.

Since they are out of the business for almost 10 years maybe they just forgot about you. Once and a while you just get lucky.

[REWahoo]

Quote:

Originally Posted by 73ss454 Since they are out of the business for almost 10 years maybe they just forgot about you. Once and a while you just get lucky.

I suppose it's a dead giveaway (note the pun) that you're getting old when you start associating 'getting lucky' with LTC premiums....

[73ss454]

Quote:

Originally Posted by REWahoo I suppose it's a dead giveaway (note the pun) that you're getting old when you start associating 'getting lucky' with LTC premiums....

Yeah, I remember "getting lucky" meant something years ago but I just can't place it.

[Nords]

Quote:

Originally Posted by REWahoo Annual update: Three years after our 10 year guarantee of premium expired our LTC rates remain unchanged. Our annual premium billing notices arrived yesterday and the amount due is the same as it was when we first obtained the policies in May of 2000. Yes, I'm fully aware I'm tempting fate by continuing to post about our good fortune in having no rate increase for the past 13 years. No, I don't think our luck will last, but I plan to enjoy it while it does.

I wonder if this is one of those situations where you're supposed to start setting aside extra funds to save up for the day when they actually raise the premiums. "You've saved for retirement, now it's time to start saving for long-term care insurance."

Maybe you could calculate your payoff ratio as "total payout divided by premiums paid in" and see how much longer you're ahead of the game.

Ideally you'd just keep paying until you die and never need to make a claim, right? Does that mean you win or you lose?

[REWahoo]

Quote:

Originally Posted by Nords Ideally you'd just keep paying until you die and never need to make a claim, right?

Yes...

Quote:

Originally Posted by Nords Does that mean you win or you lose?

...and yes again.

[dmdunca44]

Ideally you'd just keep paying until you die and never need to make a claim, right? Does that mean you win or you lose?

Considering my strong family history of Alzheimer's, if I never have to file a claim, that would be a huge win. I hope my family never has to file a claim for me......