Long-term care premium increases soar: Elder law attorneys become the go-to professional

Long-term care insurer John Hancock has begun the process of seeking sharp premium increases nationwide for certain types of coverage.  Initial reports from shocked policyholders surfaced in two midwestern states that have approved increases that are sometimes nearly double the previous premium.  ElderLawAnswers contacted the insurer and learned that it is going state to state asking for rate hikes it says are averaging 40 percent. 
The Chicago Sun-Times profiled an Illinois couple who just received news in the mail of a 90 percent premium rate increase.  The couple, who live on a fixed income, will see their annual premium shoot up from $3,893.40 to $7,385.52 a year.  Meanwhile, the Minneapolis Star-Tribune reports that premiums are soaring by 20 to 90 percent for thousands of Minnesotans who have Hancock policies.  One man profiled will see his annual premium jump nearly 50 percent.
It appears that the largest increases are on policies where the insurer has its greatest exposure to loss – policies that include compound inflation coverage or lifetime coverage, or both.  The rate increases come on the heels of recent announcementsby several long-term care insurers that they are leaving the marketplace entirely.  John Hancock, which is a subsidiary of giant Canadian insurer Manulife, has apparently chosen the route of steeply raising premiums rather than exiting the market.    
“The long-term care industry is still young, and only now is seeing actual usage data which indicate the need for rate increases,” Hancock’s Vice President Corporate Communications, Roy Anderson, told ElderLawAnswers.  “It is mainly this new experience – not the current economy – that is driving the change in our future claims projections and the subsequent need to increase premiums so we are able to meet all of our claims obligations going forward.”
Anderson suggested that affected policyholders can keep their premiums level by trimming their benefits package, for example by reducing the future inflation rate on their daily benefit.  If they did this, he said, they would be able to keep the benefit level that has already accrued.     
Anderson also noted that “even with the increase the resulting premiums for all policyholders will be less than what customers would pay for a new policy today adjusted for benefit differences.”
In most states, long-term care rates can rise only after the rate increase has been accepted by the state department of insurance, meaning that it will be a long process for John Hancock’s increases to reach every state.  However, nearly every state grants at least some such rate requests, and in many states the increase must be approved if the insurance company can demonstrate that it will lose money otherwise.
All this is not making it any easier for officials to convince consumers to finance their own long-term care protection.  “Government will not be able to keep up as the population ages,” Minnesota Commerce Commissioner Michael Rothman told the Star-Tribune, “but it’s hard to convince someone to buy insurance now if they worry they might not be able to afford it in the future.”

For an Investment News article speculating that long-term care insurance “may go the way of the dinosaur,” click here.
For an article on how to cope with long-term care insurance rate hikes, click here.
For more on how to reduce long-term care insurance costs, click here.
For more on long-term care insurance, click here.

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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