LTC Insurance: More $ or Less Benefits?

Kaiser Health News ran a story on March 17, 2016 about long term care insurance policies. Long-Term Care Insurance: Less Bang, More Buck explains how one insured saw her premiums cost almost four times as much if she kept her same coverage. Although an important option for many middle-income Americans, it seems, from the article, that the industry has specific challenges facing it.

[I]insurers botched just about every aspect of the policies they sold in the early days of the industry, said Joseph Belth, a retired professor of insurance at Indiana University known as one of the insurance industry’s toughest critics. They underestimated how long people would live and how long they’d need nursing home care — but overestimated how many people would drop their policies and how much interest insurers could earn on the premiums they banked.

Hemorrhaging money, many insurers left the business. Those that remain are in financial trouble on their long-term care policies. They’re charging far more for new policies, and sharply raising the premiums of old ones.

Not as many companies are offering the coverage as once was and many policy holders may be facing a choice of increased premiums, reducing or dropping coverage. As well, the article notes that many folks don’t know the limits of Medicare coverage for long term care.  Fewer people are purchasing the policies, but there are now some hybrid options on the market

Fewer people today are buying traditional long-term care insurance policies, which only adds to insurers’ financial woes. Some are considering newer “hybrid” products such as life insurance or annuities that provide a long-term care benefit, but they’re also expensive and some require a large up-front payment.

That’s why pressure is mounting for state and federal lawmakers to come up with ways to finance long-term care for millions of aging baby boomers. Policy proposals abound, such as requiring people to buy subsidized long-term care insurance, much as they now need to buy health insurance. Other ideas include creating a government-run catastrophic plan or allowing people to convert their life insurance policies to long-term care policies. But all of these would require legislative action, and lawmakers at the state and federal level have been slow to act because of the sheer scope of financing Americans’ long-term care.