LTC insurance premium "surprise"

[mask]

Quote:

Originally Posted by Independent Maybe you could get more technical. The only ratio I can think of that would have come over from life insurance was lapse rates. They can't keep getting lower and lower because zero is the lower bound. If it's a matter of requested rate increases aren't getting approved, do you have numbers on what percent of the typical request goes through? (Company names would help here.)

I am returning to this forum after a long time. So sorry for the super delayed response. I hope you find this helpful.

This article addresses some of points in your post and provides a good summary of what's going on.

A. LTC products were underpriced because:
1. Lapse ratio was underestimated
2. Higher life expectancy is causing longer claim cycle
3. More claims volume than anticipated

Information on % approval rates for rate increase is available in the 10K (annual reports) of LTC insurers. I search (googled) for example "10K Genworth Long Term Care Insurance".

I found this: genworth 10K
I then searched for 'rate increase' and here is an extract:
'...In this regard, we began filing for a rate increase of 18% on two blocks of older long-term care insurance policies in November 2010. As of December 31, 2011, we have received approvals in 39 states which represent approximately 65% of the targeted premiums. The state approval process of an in-force rate increase and the amount of the rate increase varies, and in certain states the decision to approve or decline can take up to two years. Upon approval, premium increases may only occur on an insured's billing anniversary date. Therefore, the benefits of any rate increase may not be fully realized until the implementation is complete...'

For list of LTC Insurers search "List of Long-Term Insurance Companies in USA" or narrow the search results by state.

[Brat]

Here is a report of a case in Oregon against Banker's Life:

Bankers Life hit with Oregon class-action lawsuit over long-term care insurance | OregonLive.com

[Alex in Virginia]

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.

What you might want to do is to contact your state's Insurance Commissioner's office and find out whether your company has a premium increase application in process because insurance companies must have LTC premiums approved (after jumping through a bunch of hoops). That's what I did starting about 3 or 4 years ago. I was at least able to get advance notice that (first) something was cooking, and then (this year) that the sucker was ready to come out of the oven.

Latest news: John Hancock will be jacking up premiums this year for LTC policies issued in Maryland. Anticipated increase for lifetime coverage policies: 90%.

Alex in Virginia

[REWahoo]

I did noodle around on my state's insurance website and stumbled across a 10 year history of LTC rate increases for the companies listed below. Could be helpful to many here as the information provides information on all increases by the listed company, regardless of state:

• Bankers Life and Casualty Company (PDF)
• Genworth Life Insurance Company (PDF)
• LifeSecure Insurance Company (PDF)
• Massachusetts Mutual Life Insurance Company (PDF)
• MedAmerica Insurance Company (PDF)
• Mutual of Omaha Insurance Company (PDF)
• New York Life Insurance Company (PDF)
• Northwestern Long Term Care Insurance Company (PDF)
• Physicians Mutual Insurance Company (PDF)
• State Farm Mutual Automobile Insurance Company (PDF)
• Transamerica Life Insurance Company (PDF)
• United of Omaha Life Insurance Company (PDF)
• United Security Assurance Company of Pennsylvania (PDF)

[REWahoo]

Once again, I'm updating this thread I started almost four years ago.

The other shoe finally dropped. After 14 years without an increase to our LTC premiums I received notice today that they will be going up by 50%. While that is a huge increase percentage wise, our annual premiums were less than $600 each and will increase to $875. The 50% number is roughly an increase of 3% compounded annually over the 14 year period.

We have the option of reducing coverage on either or both our policies rather than paying the increase, but for now I think $875/yr for a policy which, after annual inflation adjustments, will pay out more than $215,000 in benefits is worth keeping. This is subject to change should the rates continue to climb or if our net worth stays healthy as we get older and we feel we can self-insure.

[MooreBonds]

Quote:

Originally Posted by REWahoo but for now I think $875/yr for a policy which, after annual inflation adjustments, will pay out more than $215,000 in benefits is worth keeping. This is subject to change should the rates continue to climb or if our net worth stays healthy as we get older and we feel we can self-insure.

I would tend to agree with your assessment. My homeowner's policy provides coverage of up to $250,000 for replacement in the event my house suffers damage, and my annual premiums run about $750/year - with a $2,500 deductible.

I'd say the chances of me (or anyone else) needing nursing care of up to $200,000 are substantially greater than my house suffering some damage that would need up to $250k in repair/replacement!

Of course, the big unknown is how much more your premiums may rise in the future...but even then, I would consider your situation 'fair', compared to my homeowner's policy.

[Live And Learn]

Quote:

Originally Posted by REWahoo Once again, I'm updating this thread I started almost four years ago. The other shoe finally dropped. After 14 years without an increase to our LTC premiums I received notice today that they will be going up by 50%. While that is a huge increase percentage wise, our annual premiums were less than $600 each and will increase to $875. The 50% number is roughly an increase of 3% compounded annually over the 14 year period. We have the option of reducing coverage on either or both our policies rather than paying the increase, but for now I think $875/yr for a policy which, after annual inflation adjustments, will pay out more than $215,000 in benefits is worth keeping. This is subject to change should the rates continue to climb or if our net worth stays healthy as we get older and we feel we can self-insure.

$875 per YEAR is awesome so I am with you - keep the coverage ! And the increase % is why we like to have fluff in our budgets before we ER.

[HFWR]

Mine is $1546/yr for I don't remember the coverage offhand. But no notice of increase as of yet...

[REWahoo]

Quote:

Originally Posted by HFWR Mine is $1546/yr for I don't remember the coverage offhand. But no notice of increase as of yet...

Lots of variables on how the policies were/are priced: age, sex, daily benefit amount, waiting period, length of coverage, inflation adjustment, etc.

[HFWR]

Quote:

Originally Posted by REWahoo Lots of variables on how the policies were/are priced: age, sex, daily benefit amount, waiting period, length of coverage, inflation adjustment, etc.

How much sex, or how little...

[HFWR]

Quote:

Originally Posted by REWahoo Lots of variables on how the policies were/are priced: age, sex, daily benefit amount, waiting period, length of coverage, inflation adjustment, etc.

Don't have all the info here at w*rk, but my notes say $4500/mo, total $270k, 3% inflation adjusted. Bought policy about 1.5 years ago.

[REWahoo]

Update to this old thread.

Two years ago we were notified of our first premium increase:

Quote:

Originally Posted by REWahoo After 14 years without an increase to our LTC premiums I received notice today that they will be going up by 50%. While that is a huge increase percentage wise, our annual premiums were less than $600 each and will increase to $875. The 50% number is roughly an increase of 3% compounded annually over the 14 year period. We have the option of reducing coverage on either or both our policies rather than paying the increase, but for now I think $875/yr for a policy which, after annual inflation adjustments, will pay out more than $215,000 in benefits is worth keeping. This is subject to change should the rates continue to climb or if our net worth stays healthy as we get older and we feel we can self-insure.

Today we were notified our LTC insurance premiums were going up another 30%. That's a increase of 95% in rates during the 16 years we've had the insurance. The premium for each of us is now $1,138, a compound increase of 4.3% per year.

Edit: Note the policies have a 5% per year inflation rider, so the increase in benefits continues to exceed the increase in premiums - FWIW.

[Dawg52]

I dropped mine a couple of years ago. It was a group plan I had through my old employer. The policy was just a bare bones plan anyway and with the steep rate increases I decided to self insure. Being single I don't have to worry about securing a portfolio for a spouse.

[OrcasIslandBound]

Our policies are over 20 years old. They are $27xx per year. Increased 80% a while back. Sometimes you just have to look the other way and pay the bills knowing that despite what appears to be a ripoff, it's still the right decision.

Sent from my Nexus 4 using Early Retirement Forum mobile app

[Chuckanut]

My fear is that as I grow older I will be literally priced out of the market about the time I am most likely to need the insurance.

[razztazz]

Quote:

My fear is that as I grow older I will be literally priced out of the market about the time I am most likely to need the insurance.

That's probably how the things are priced in the first place.

[Sunset]

Quote:

Originally Posted by REWahoo Update to this old thread. Two years ago we were notified of our first premium increase: Today we were notified our LTC insurance premiums were going up another 30%. That's a increase of 95% in rates during the 16 years we've had the insurance. The premium for each of us is now $1,138, a compound increase of 4.3% per year. Edit: Note the policies have a 5% per year inflation rider, so the increase in benefits continues to exceed the increase in premiums - FWIW.

I have questions/concerns as to the inflation rider:

1. perhaps only kicks in once you start collecting on the policy ?
2. If applies each year of policy from the start would be good, but probably is limited to CPI and not automatic 5% (so last 2 years would total 1.5% inflation).

If it really was 5% per year, then if I bought a 200K policy ten years ago, wouldn't I consider it a 325K policy now ? (approximate number).

[REWahoo]

Quote:

Originally Posted by Chuckanut My fear is that as I grow older I will be literally priced out of the market about the time I am most likely to need the insurance.

Quote:

Originally Posted by razztazz That's probably how the things are priced in the first place.

I view LTC insurance much like term life insurance - and I think of the economic value in much the same way. I'm willing to pay the premiums now as a prolonged stay in a care facility and the resulting hit to our financial well-being would likely be more severe the younger we are. The older we get (and the shorter our remaining lifespans) the less we will need in our nest egg - thus we may be OK dropping the coverage in a few years and self-insuring.

[REWahoo]

Quote:

Originally Posted by Sunset I have questions/concerns as to the inflation rider: If it really was 5% per year, then if I bought a 200K policy ten years ago, wouldn't I consider it a 325K policy now ? (approximate number).

^ This

The initial maximum policy benefit was $109,500 (May of 2000). The maximum benefit "...will be increased by 5% of the limit in effect on the previous anniversary date." The policy will now pay (effective May 2016) a maximum benefit of $239K.

That was the point I was making regarding the fact that while the premiums have increased by 95% over the past 16 years, the benefits have gone up 118%.

[mathjak107]

we need at least 120k a year in our area and that is today . 20 plus years from now who knows what it will be .

we took 300 dollars a day for 3 years with a 5% inflation adder each year .

i am 63 and wife 65 . we took it two years ago and pay 7900.00 a year for both of us but we have a ny partnership plan which has other great perks when the insurance runs out . we also get back up to 1600.00 from the state as a tax credit .