LTC Premium just jumped 35%

[Koolau]

I know parts of my questions have been discussed (in general terms) in other threads e.g. http://www.early-retirement.org/forums/f38/more-on-long-term-care-insurance-32299-2.html

I just got a big increase in my (and DW's) Bankers Life LTC premium (35%). I called the company and they assured me (as I was already aware) that this was not specific to me but to all holders of similar policies. We have had this policy for 10 years and the premium has increased from roughly $1900/yr for both of us to now over $3500/yr. About every 3 years we get an increase, but this one was a doozy. The rep I spoke with assured me that the State of issuance had approved the increase.

I insulted her company (in a nice Christian way as Larry the Cable Guy would say) by suggesting their actuaries must not be very good if they missed the mark by that much over the past 10 years. I also suggested that they were just trying to get out of the business by raising the rates until most folks finally quit paying premiums.

(In a nicer, more Christian way than I had used) she assured me that this was not the case. They intended to stay in the business of offering LTC policies.

Bottom line is that I must now decide whether to keep the policy or drop it. The fact that I've paid premiums over the past 10 years isn't that much of an issue to me. Those are gone and I did have the coverage - though not needed, thankfully. I'm more concerned about whether this policy is worth the roughly $250,000 life-time benefit (each person so that's about $500,000 for both). The daily and total coverage increases 5%/year and that was built into the premium when purchased.

I'm also concerned about similar increases every 2 or 3 years. My policy is relatively unique in that it is qualified to protect my assets even if I exhaust the policy benefits (3 years as I recall) and must go on Medicade. Only 4 states offered this when I bought the policy and I don't know if others have joined in. These 4 states figured they would come out ahead, paying Medicade to folks who managed to survive 3 years of insured stays in a facility rather than beginning Medicade payments much earlier (because folks had no insurance and therefore would quickly go through their savings.)

Anyway, I'd probably drop the coverage at this point if it weren't for the fact that 3 out of DW's and my 4 parents ended their days in NHs due to dementia of one kind or another.

Please exclude the argument for self-insurance (on the basis that I do have a decent retirement "stash") because I'm a belt and suspenders kind of guy. What would be your thinking on MY pros and cons to staying with the program. DW and I are 62 +/- I'd say we have a better than average chance of needing a NH or qualified home care (also covered to a lesser extent by this policy).

None of this makes the difference of whether I go back to w*rk or eat cat food in my waning days, but, as Roseanne Rosanadana would say "It's always something." That much money will affect my lifestyle to some extent.

Any thoughts from those with insight - or especially in similar circumstances - would be appreciated.

 

[REWahoo]

Koolau, you may have see my comments on one of the other LTC threads regarding our situation which is similar to yours. We're the same age and purchased policies similar to yours from CNA, who stopped selling new LTC coveage a couple of years later. Our combined annual premium is ~$1,200 with a 10 year guarantee of premum - which expires in May.

I cringe to think what the premium increase may be, although Grumpy (another poster on the board) had his 10 year guarantee expire on his CNA policy and his increase wasn't nearly as bad as I feared. But that may have been the tip of the iceberg when it comes to future increases.

One of the options I've considered if the rates increase beyond our ability to pay is dropping coverage on one of us. No way in heck to know which one to drop of course, so we might as well flip a coin. Or maybe we'll cancel both policies and take a vacation...

 

[Dawg52]

Koolau, you may have see my comments on one of the other LTC threads regarding our situation which is similar to yours. We're the same age and purchased policies similar to yours from CNA, who stopped selling new LTC coveage a couple of years later. Our combined annual premium is ~$1,200 with a 10 year guarantee of premum - which expires in May.

I cringe to think what the premium increase may be, although Grumpy (another poster on the board) had his 10 year guarantee expire on his CNA policy and his increase wasn't nearly as bad as I feared. But that may have been the tip of the iceberg when it comes to future increases.

One of the options I've considered if the rates increase beyond our ability to pay is dropping coverage on one of us. No way in heck to know which one to drop of course, so we might as well flip a coin. Or maybe we'll cancel both policies and take a vacation...

Just buy a pistol and teach your wife how to use it in case you need some assistance down the road. Of course that means you will have to be on your best behavior from this point forward. Oh well, it was just a thought.

 

[brewer12345]

Koolau, first I would build at leats another 35% increase in rates into your planning in the next couple of years. They drastically underpriced the product and they aren't done raising prices yet, IMO.

Next, I would go get a quote on a new policy and compare it to what you have. If the new policy is competitive, you might consider swapping.

 

[Alan]

I took out LTC policies for DW and I 6 years ago (age 48) with UNUM. At year 3 we had a big increase so we switched to self insurance. I know you don't want to hear that but what was interesting is that we did not lose our premiums and can apply them against covered services in the future.

It's probably the same with your policy if you check into it. Knowing that you won't lose all your premiums may help your decision on what to do next.

 

[Dawg52]

I took out LTC policies for DW and I 6 years ago (age 48) with UNUM. At year 3 we had a big increase so we switched to self insurance. I know you don't want to hear that but what was interesting is that we did not lose our premiums and can apply them against covered services in the future.

It's probably the same with your policy if you check into it. Knowing that you won't lose all your premiums may help your decision on what to do next.

I have a UNUM policy through my old employer. A group policy. Had it for 5 years with no increases although the guarantee rate was for 3 years. If I get a massive increase, I may just drop it.

 

[brewer12345]

For the record, I would not buy one of these policies. The product is not mature enough yet, the industry hasn't really figured out how to price the product, and the risk of inadequate pricing ultimately rests with the customer rather than the insurer. No thanks.

 

[Alan]

I have a UNUM policy through my old employer. A group policy. Had it for 5 years with no increases although the guarantee rate was for 3 years. If I get a massive increase, I may just drop it.

Our policies were not through an employer or other group. Original cost was $1,800/year and we decided that at age 51 we had time to invest the premiums ourselves. Wish we'd made that decision 3 years earlier but the announced price increase (which was to be 18%) did us a favor I think as we feel better now about our choice.

 

[honobob]

I have ten years of CalPERS LTC that is still less than what some people pay for cable each month. Mine is the best coverage. Since I bought young there wasn't must difference between lifetime benefit/5% inflation per year and IN HOME care and the lesser coverages. I can take a lesser coverage in the future if I need to save some money and if I quit before 75 I'll get some money back. If it would double every 10 years fot the next 30 years I'd still have less than one years nursing home costs spent!

If I reach 75 and figure I may only live awhile longer I may drop it then and self insure. I could self insure now but if I'm going to be in a nursing home for any length of time I want to be one of the richest guys there and in one of the best places. I've been to many homes over the years and there are many I would not want to be stuck in.

I really like the in home care feature. My dad would have spent more than 8 years in a home if I was not able to care for him. He did not have enough money to cover that. It is also a burden on the caregiver to "spend" what money a person has if they are not able to make that decision because you really can only guess at how much will be needed.

Go visit a nice place and a not so nice place. I think that will make your decision easy. I would cut back on car or home insurance before this.

 

[ChrisC]

I've had my policy for 5 or 6 years now and haven't had a premium increase yet, with an automatic inflation adjustment component to policy coverage. I think there are many factors that might cause major premium adjustments, including perhaps the asset protection coverage in LTC-Medicaid partnership states. I'd imagine the cost of the protection is quite expensive. And it might not save Medicaid a lot of money too. http://www.gao.gov/new.items/d07231.pdf

 

[samclem]

Koolau,
While only four states got their paperwork submitted in time to participate in the original partnership program, legislation last year re-opened the gates. Many other states now have these programs. The major benefit of partnership-qualified policies is that the policyholder doesn't need to spend down his/her assets to virtually nothing before qualifying for LTC assistance under Medicaid. As I understand it, if you buy a $300K LTC policy, then you qualify for Medicaid coverage once your own assets are depleted down to $300K.

I've had my policy for 5 or 6 years now and haven't had a premium increase yet, with an automatic inflation adjustment component to policy coverage. I think there are many factors that might cause major premium adjustments, including perhaps the asset protection coverage in LTC-Medicaid partnership states. I'd imagine the cost of the protection is quite expensive. And it might not save Medicaid a lot of money too. http://www.gao.gov/new.items/d07231.pdf

The cost of the protection is borne by the Medicaid program, not by the insurers or the policyholders. This factor shouldn't cause LTCI rates to go up.

The government started this program to induce more people to buy these LTCI policies. The idea was that the government would save money, since people who have LTCI are less likely to draw on Medicaid for their LTC needs. If the government "loses" the bet (you outlive your LTCI benefits) then they will allow you to keep more of your money and still let you qualify for Medicaid.

The government would come out ahead if more people buy LTC policies. Right now, given the unsteady state of insurers in general and the premium increases in LTC in particular, I don't think that's likely to happen soon. Also, with public hopes for a rising government safety net that will eventually cover health care, nursing home care, and provide free ponies for everyone, even more folks are taking a wait-and-see approach to this expensive insurance.

 

[Koolau]

Thanks for replies so far. They have given me some food for thought.

Having seen my folks and MIL in "good" places I'd hate to be stuck in a "bad" one. I'm sure that went into my decision to buy LTC as Honobob pointed out.

Dawg, don't think I haven't considered the 9mm solution down the road. Alzheimers and other dementias are much more cruel than death - especially to those who give care and then have to make the decision to (finally) place a loved one in the NH.

Regarding finding another policy, we had to "talk" BL into 'taking' my wife due to her cancer history. They "rated" her as it was which is part of the reason our premiums are so high to begin with (then 35% of that is a big number as well). So finding another willing company to underwrite us (now 10 years older) could be difficult, but it's worth looking into. Who knows, maybe being a 13 year survivor would be a better risk than a 3 year survivor when it comes to underwriting.

REW, I liked the idea of dropping coverage on one. That could be a back up position. Assuming you picked wisely (ooops! make that luckily) it could be a great way to go.

It's good to know we're not the only ones to be hit with big premium increases. As Brewer pointed out, this is somewhat uncharted territory for the Ins. Industry. Maybe they have legit. reasons to raise the premiums since they don't have a track record to go by. I think the life actuaries have several decimal points on their life expectancies. Apparently they have nothing similar to use when setting up a new product. Still, 35% in 3 years!! One thing for certain - I ain't buyin' no stinkin' BL stock anytime soon!! If it's taken them 10 years (and nearly double the premiums) to make any money, they ain't geniuses! End of rant

I've got a month to decided before premium is due. I've info coming from BL. In any case I will check with them about what Alan indicated about the premiums. I hadn't heard that. Perhaps they "front load" the premiums and keep some sort of "cash value" accounting going.

Thanks again for all replies and please keep them coming! (In my best Yakov Schmirnoff immitation) "What a forum!!"

 

[ChrisC]

The cost of the protection is borne by the Medicaid program, not by the insurers or the policyholders. This factor shouldn't cause LTCI rates to go up.

The government started this program to induce more people to buy these LTCI policies. The idea was that the government would save money, since people who have LTCI are less likely to draw on Medicaid for their LTC needs. If the government "loses" the bet (you outlive your LTCI benefits) then they will allow you to keep more of your money and still let you qualify for Medicaid.

The government would come out ahead if more people buy LTC policies. Right now, given the unsteady state of insurers in general and the premium increases in LTC in particular, I don't think that's likely to happen soon. Also, with public hopes for a rising government safety net that will eventually cover health care, nursing home care, and provide free ponies for everyone, even more folks are taking a wait-and-see approach to this expensive insurance.

Not so sure about that. Asset protection (and inflation adjustment) coverage cannot be borne entirely by the Medicaid program. Simply stated, there has to be a premium distinction between a "traditional policy" and a policy that includes extra asset protection, which is probably borne initially by the insured. The GAO report implies there are premium distinctions and also suggests that people who are taking the asset protection coverage are those affluent enough that they would have spent down a lot of their assets before Medicaid coverage would kick in and thus spare Medicaid a lot of "early coverage."

 

[samclem]

Not so sure about that. Asset protection (and inflation adjustment) coverage cannot be borne entirely by the Medicaid program. Simply stated, there has to be a premium distinction between a "traditional policy" and a policy that includes extra asset protection, which is probably borne initially by the insured.

I think the asset protection costs the client nothing. To meet the requirements of the program a "Partnership qualified" plan might have certain features (e.g. inflation protection, etc) that a particular "traditional" plan might not have, but the specific benefit of asset protection comes out of the pocket of Medicaid. From page 7 (bottom) of the doc you cited:

In the four states with Partnership programs, Partnership policies must include certain benefits not generally required of traditional long-term care insurance policies, and insurance companies cannot charge higher premiums for asset protection in Partnership policies.

From page 8:

Officials in states with Partnership programs told us that companies selling long-term care insurance are not permitted to charge Partnership policyholders higher premiums for the asset protection benefit—Partnership and traditional long-term care insurance policies with otherwise comparable benefits must have equivalent premiums. However, Partnership policies are likely to have higher premiums because they are required to have inflation protection and other benefits that are not required for traditional long-term care insurance policies.

The premium distinctions are based on the fact that the "Partnership Qualified" policies have more benefits, not because of the asset protection feature. The insurance companies don't charge for it because it costs them nothing and people shop around (the marketplace is relatively efficient--at least at the "purchase" stage).

The GAO report implies there are premium distinctions and also suggests that people who are taking the asset protection coverage are those affluent enough that they would have spent down a lot of their assets before Medicaid coverage would kick in and thus spare Medicaid a lot of "early coverage."

True-the government isn't saving much money due to these partnership programs. I think it is because only the more wealthy folks even consider LTCI at this point, and only a few--the ones with the most to "protect"-- have explored the intricacies of "qualified partnership plans" vs "traditional" plans. If the industry ever gets its act together and a more general consensus develops that this is an important, feasible part of an overall financial plan (a conclusion I haven't reached myself, yet), then the government might save money by encouraging greater LTCI participation.

 

[samclem]

One other note about the GAO report: Appendix IV contains the comments of the four states that actually had experience with LTC Partnerships (New York, California, Indiana, and Connecticut). Their comments are highly critical of GAOs methodology and findings. These four established their programs before Congressman Henry Waxman succeeded in inserting an ammendment into the 1993 OBRA which closed the door for other states (until the 2005 DRA re-established the ability of the other 46 states to set up their own partnership programs). The four have solid data and more extensive studies indicating the programs are saving Medicaid money, and /or that it will do so in the future. Though the states may have a vested interest in keeping these programs going, I think their real-life experience trumps GAO's notional scenarios and superficial survey data. I also would bet a nickel that Waxman is linked, directly or indirectly, to those who did the GAO [-]hit piece[/-] study.

 

[jimnjana]

I came across the California Consumer Guide to LTC insurance, pretty good laydown of LTC. I had not seen such a comprehensive list of providers and comparison of plans before with rate hike history as well. Sorry if this is already posted on another thread. The link is :
http://www.insurance.ca.gov/0100-co...history-guide/upload/2008LTCCONSUMERGUIDE.pdf

Jim

 

[mickeyd]

LTC policies are a big moneymaker for both agents and insurance companies.

If you insist on paying these higher and higher premium payments, perhaps you should also invest in the individual stock of the company that you choose to insure with. That way, you may be able to get back some of the money that you paid to them.

 

[ziggy29]

The rate hikes (my mom's LTC is being hiked 16% this year and another 18% next year) are why I don't "bite" at LTC. For one thing, who knows what the landscape -- in terms of health care and public policy on long term care -- will look like in 20-30+ years when we'd be most likely to need it. For another, the ability to "lock in lower rates while young" loses a lot of its luster when they can raise those "locked in" rates in the future anyway.

At least in my mom's case, she's ahead of the game financially since they had to pay out quite a bit for my dad's home hospice care when he was dying a few years ago.

 

[Rich_by_the_Bay]

Like, Ziggy, I remain hesitant about LTC coverage. I'd like the reassurance of knowing it's there but it entails so much premium increase risk, carrier risk and risk of governmental policy change (even good change, since that may render all your premiums worthless if Medicare covers part of the private benefits you've been paying for for 25 or more years).

Bearing in mind that LTC itself typically doesn't exceed around 3 years of confinement, we're still in the mode of self-covering that risk if we can, maybe adding a first-to-die life insurance plan at age 65 to boost the worth of the survivor after those years of spending down. If we both end up in a nursing facility, we -- or really our heirs -- will take the biggest hit but adding it all together I just can't talk myself into this product. I realize it's situational.

 

[landover]

What happens to your joint assets in case of state pay for long term care, does it leave any money for your spouse? If state needs you to spend all assets if things go worst, is there a way to avoid that, SPIA, life insurance for surviving spouse? I guess LTC depends a lot on these things. I don't think you will personally care for assets once you are in the LTC situation since getting out alive is hightly unlikely. Delaying social security might help.