Genworth LTC strikes again

[Newventurer]

Like the rest of us these insurance companies have been chasing yield and may not have priced in the extended period of extremely low rates. They are not known for ‘eating’ losses.

 

[Dash man]

We’re having a difficult time finding a nursing home that will accept my MIL on Medicaid. It seems those that accept Medicaid only do so for a limited number of beds and have long waiting lists for those. DW and I have LTC, but her parents don’t and we’re finding it difficult to place her in a new place. The memory care she is in now doesn’t accept Medicaid, so we have to move her.

 

[Winemaker]

DMIL paid $100/month to Genworth from age 50 til she passed almost 89. She had about $25,000 paid back over the years, but DW had to stomp, fight, claw and scream for every nickel. But it is insurance, the only way to win is to lose.

 

[athena53]

We’re having a difficult time finding a nursing home that will accept my MIL on Medicaid. It seems those that accept Medicaid only do so for a limited number of beds and have long waiting lists for those.

One of the reasons is that when people agree to self-pay for X years (typically 2 or 3) and the home agrees to accept Medicaid after that, they're immediately put into a Medicaid bed. This is what happened with my Uncle. The place was fine and he was getting good care but he was in a semi-private room with only a curtain separating him from his roommate. So, people on Medicaid from the start have a hard time finding open Medicaid beds.

 

[Banned LTC Salesman]

Curious where you got this formulation: I never heard it before. I am single and my annual Genworth premium is $3400. I bought it at $2300 at age 55 and I'm now 61. That's a big rise, obviously, but it is still way below one-half of one percent of my net worth and is very good coverage. I keep it because my own research has demonstrated that it is a bargain, still, for the coverage, at least in terms of what my dollars would buy today.

I thought of the formula myself.
I looked at my investments and I asked myself, "Would I alter my investment mix in such a way as to gain an extra 50 basis points each year, if I might lose hundreds of thousands of dollars of principal?"

The answer was no.

 

[Banned LTC Salesman]

We’re having a difficult time finding a nursing home that will accept my MIL on Medicaid. It seems those that accept Medicaid only do so for a limited number of beds and have long waiting lists for those. DW and I have LTC, but her parents don’t and we’re finding it difficult to place her in a new place. The memory care she is in now doesn’t accept Medicaid, so we have to move her.

... and as the Baby Boomers start to turn 80 (in only 8 years) and Congress continues to slow down the growth of Medicaid funding, the waiting lists are only going to get longer.

 

[Banned LTC Salesman]

DMIL paid $100/month to Genworth from age 50 til she passed almost 89. She had about $25,000 paid back over the years, but DW had to stomp, fight, claw and scream for every nickel. But it is insurance, the only way to win is to lose.

If your DMIL bought a long-term care policy in the 1970's or the 1980's, it's a miracle that you got anything from the policy. The policies sold in the 1970's and 1980's were TERRIBLE.

Regulators enacted major reforms for long-term care insurance in 1993, 1996, 2000 & 2005 but the reforms were NOT retroactive. Nearly every policy purchased before 1993 was a piece of junk.

When my DMIL needed to use her long-term care policy, all we did was contact one of the national home care agencies and they handled it for us. This particular home care agency processes thousands of long-term care insurance claims every year. All we had to do was sign a couple of HIPAA forms and they took care of the rest. The claim was approved in about three weeks.

They handled the claim for free. It makes sense.
The home care agencies get paid by the long-term care insurance companies.
They have a financial incentive to set up a system to speedily process long-term care insurance claims.

 

[Chuckanut]

It would seem logical that there would be a "death spiral" with long-term care insurance, but that has not been the experience with any insurer.

Perhaps the 'death spiral' occurred when many companies decided to no longer offer the insurance? Just a thought.

 

[Banned LTC Salesman]

Perhaps the 'death spiral' occurred when many companies decided to no longer offer the insurance? Just a thought.

There has not been any death spiral. If you can share an example of a long-term care insurer experiencing a "death spiral" please do so.

The companies that decided to stop selling new long-term care policies did so because they did not want to comply with the Rate Stability Regulation. After the Rate Stability Model Regulation was passed, about 80 companies stopped offering new policies, leaving about 20. Now there are about 13.

The fact that they stopped selling new policies did not create a death spiral because LTC insurance is reserve-priced.

All of the companies that stopped selling new policies are still paying their claims. The claims totals are reported to the NAIC every year.

 

[athena53]

The fact that they stopped selling new policies did not create a death spiral because LTC insurance is reserve-priced.

What do you mean by "reserve-priced"? Never heard that term before.

 

[Banned LTC Salesman]

What do you mean by "reserve-priced"? Never heard that term before.

Long-term care insurance is "reserve-priced". Reserves are set aside 10, 20, even 30 years in advance of expected claims thereby protecting the younger policyholders from a death spiral even after all the older policyholders have passed away.

Other types of insurance like medical, auto or home insurance base their pricing on the prior year's claims. That's not how long-term care insurance is priced because it has a long-term horizon.

 

[aja8888]

Long-term care insurance is "reserve-priced". Reserves are set aside 10, 20, even 30 years in advance of expected claims thereby protecting the younger policyholders from a death spiral even after all the older policyholders have passed away.

Other types of insurance like medical, auto or home insurance base their pricing on the prior year's claims. That's not how long-term care insurance is priced because it has a long-term horizon.

Do you work in the insurance industry or are you retired from it?

 

[athena53]

My in-laws divorced and FIL is in a nursing home on Medicaid now. MIL visits him and makes sure he has good care but it isn’t bankrupting her. Seems to be a viable option.

DH and I actually talked about divorcing after our full church wedding, when he was 65 and I was 50. We were fine with being married in the eyes of the church but didn't like the fact that it had implications for the state. We never could bring ourselves to do it and he died peacefully without ever seeing the inside of a nursing home. I have to admit that when he was diagnosed with leukemia at age 78 with little hope of successful treatment we were grateful to have avoided the nightmare scenario of his developing Alzheimer's (his mother developed it late in life) and needing LTC.

At this age (65) and thoroughly enjoying my independence, I can't imagine getting remarried anyway even if I do meet a good man.

 

[athena53]

Long-term care insurance is "reserve-priced". Reserves are set aside 10, 20, even 30 years in advance of expected claims thereby protecting the younger policyholders from a death spiral even after all the older policyholders have passed away.

And reserves can turn out to be grossly inadequate due to erroneous initial assumptions. I'm a retired FCAS, so not involved in LTC pricing but trust me, the same thing happens in LTC.

 

[Chuckanut]

At this age (65) and thoroughly enjoying my independence, I can't imagine getting remarried anyway even if I do meet a good man.

That seems to be the view of at least half the women I know who are in that late 50's to 60's age range. They give various reasons: emotional entanglements, reduced SS checks, independence, step child issues, and the financial dangers of getting tied to another person's situation in life.



Back to LTC, find some way to give me a reasonably priced policy that has a long waiting period (say a year) and I will buy it. My fear is not LTC costs for two or three years. My fear is the cost for 5+ years. Not sure about year four yet.

 

[joeea]

My in-laws divorced and FIL is in a nursing home on Medicaid now. MIL visits him and makes sure he has good care but it isn’t bankrupting her. Seems to be a viable option.

Are you saying that "divorce" is the option?

 

[athena53]

Are you saying that "divorce" is the option?

If you enter LTC after the five-year lookback period, yes. If one if the ex-spouses tries to qualify for Medicaid earlier than that, I believe Medicaid can ignore the divorce and look at combined assets. Not sure whether they try to distinguish between a divorce due to genuine incompatibilities and one done to protect assets. You'd be on shaky ground if you were still living together and representing yourselves as husband and wife a year after the divorce.

 

[samclem]

Even after a big rate increase less than 5% of policyholders lapse their policy. About 50% lower their benefits and about 45% keep their benefits the same and pay the higher premium.

The reason older policies have had such large rate increases is due to the unexpected popularity of long-term care insurance. Insurers assumed that about 4% of policyholders each year would let their policies lapse. Instead, only about 1% of policyholders each year let their policies lapse.

This resulted in about twice as many in-force policies (after 20 years) than the insurers had projected. All the "profit" they had projected from the lapsed policies did not materialize. With twice as many in-force policies, claims are twice as high as they had projected, resulting in a justification for some very large rate increases.

Fortunately, new policies have very different pricing regulations and more conservative pricing models.

[Banned LTC Salesman],
It sounds like you know a bit about the LTCI industry. Can you provide some insight into a question many people here have: Why is it impossible to buy a LTCI policy that offers "high-deductible" protection? There are many posts on this board from people looking for true LTC insurance--protection against a LTC cost calamity. They are willing and able to cover, say, the first 2 years of LTC costs, but want insurance to cover costs beyond that (either indefinite coverage or coverage for years 3-5 when the Medicaid lookback window might be over and so costs could be covered by Medicaid if appropriate asset protection steps were taken on day one of LTC). It would seem, based on available info on NH stays and the normal duration of LTCI claims, that insurance of this type would be considerably less expensive than the offerings we see today (typically with 90-180 day elimination periods).


Thanks

 

[Banned LTC Salesman]

And reserves can turn out to be grossly inadequate due to erroneous initial assumptions. I'm a retired FCAS, so not involved in LTC pricing but trust me, the same thing happens in LTC.

... and if the reserves are inadequate, the insurers are still on the hook to pay the claims anyway. They've got other assets.

 

[Banned LTC Salesman]

Back to LTC, find some way to give me a reasonably priced policy that has a long waiting period (say a year) and I will buy it. My fear is not LTC costs for two or three years. My fear is the cost for 5+ years. Not sure about year four yet.

There are policies with 365 day elimination period.

A healthy 55 year old couple could share a million dollars of LTCi benefits for about $170 per month per spouse. That policy would have a 365-day elimination period.

That seems reasonably priced to me.

 

[MrLoco]

That seems to be the view of at least half the women I know who are in that late 50's to 60's age range. They give various reasons: emotional entanglements, reduced SS checks, independence, step child issues, and the financial dangers of getting tied to another person's situation in life.



Back to LTC, find some way to give me a reasonably priced policy that has a long waiting period (say a year) and I will buy it. My fear is not LTC costs for two or three years. My fear is the cost for 5+ years. Not sure about year four yet.

As someone else said, you can find LTC policies with long elimination periods. In fact when you sign up and are accepted ( remember only about 50% of applicants are even accepted); you chose the DBA (daily benefit amount), elimination period, additional riders, etc. Each option obviously will affect your premium. My wife and I chose a policy with a 180 day elimination period. This keeps the premiums reasonable (for now), plus I really like the partnership plan component of being able to shield whatever the insurance pays from MEdicaid if we ever need to go down that road in the future.


As far as the cost beyond 5 years; the average stay in a nursing home is about 14 months for a male and 2.5 years for a female. Of course you could be one of the outliers on the curve, but there is probably a greater chance that you would stay longer in a memory care center or an assisted living facility.


It is all a hedge. In 25 years the cost of a private room in a nursing home in my state is estimated to be between 18,000 and 20,000 a month. In 25 years our policy ( with a 3% compound inflation rider) will still only cover 50% of the monthly cost. We should be able to pay the difference. Hopefully. Trying to find a policy to cover 100% of the cost in 25-30 years will incur astronomical premiums that may contiue to rise.


We can only plan so much and then do the best we can.

 

[Chuckanut]

There are policies with 365 day elimination period.

A healthy 55 year old couple could share a million dollars of LTCi benefits for about $170 per month per spouse. That policy would have a 365-day elimination period.

That seems reasonably priced to me.

We will have to agree to disagree on what is a good price. And I don't want them able to raise the price to nearly un-affordable levels as I get nearer to the age when I might use it. My old life insurance policy had a maximum price built into it every year. While it was high (about 2x the expected price) I made sure I could afford it when I bought the policy. Afford it, yes. Like it, no.



In my state I can't find the long elimination periods. Or maybe the insurance guys just don't want to sell them to me? Not enough commission?

 

[Banned LTC Salesman]

We will have to agree to disagree on what is a good price. And I don't want them able to raise the price to nearly un-affordable levels as I get nearer to the age when I might use it. My old life insurance policy had a maximum price built into it every year. While it was high (about 2x the expected price) I made sure I could afford it when I bought the policy. Afford it, yes. Like it, no.



In my state I can't find the long elimination periods. Or maybe the insurance guys just don't want to sell them to me? Not enough commission?

How big is your portfolio? Over one million or under one million?

"And I don't want them able to raise the price to nearly un-affordable levels as I get nearer to the age when I might use it."

What makes you think they can raise your rates as you get older?

 

[capjak]

We will have to agree to disagree on what is a good price.

What price with guaranteed no increase would it take to be a "good price"?

The policy I am looking at is a hybrid whole life plus inflation rider and it is not cheap but does effectively have a 2 year deductible (i.e. only pays $4500 a month first 2 years than the rider pays at inflation prices). I have reported on it previously.

As there are only two options for Lifetime benefit, National Guardian Life (traditional LTCi) and One America (hybrid) both which have guarenteed single premium (i.e. no increase in cost over life(s) of policy owners).

 

[Banned LTC Salesman]

What price with guaranteed no increase would it take to be a "good price"?

The policy I am looking at is a hybrid whole life plus inflation rider and it is not cheap but does effectively have a 2 year deductible (i.e. only pays $4500 a month first 2 years than the rider pays at inflation prices). I have reported on it previously.

As there are only two options for Lifetime benefit, National Guardian Life (traditional LTCi) and One America (hybrid) both which have guarenteed single premium (i.e. no increase in cost over life(s) of policy owners).

If you go with the OneAmerica, I'd do a 20pay instead of a single-pay?

With NGL why not do a 10pay instead of a single pay?