Facts about Long-term Care Insurance Rate Increases

long-term care insurance rate increases

We understand how upset people get when they receive a rate increase notification. The American Association for Long-Term Care Insurance has posted this page to help consumers better understand why insurers raise rates. And, what others do when they get a rate increase.

We cannot give anyone specific recommendations. But, we hope this information helps you better understand the reasons and the options. Thank you for taking the time to read.

Why Do Long-Term Care Insurance Raise Rates?

First, it is important to understand that insurers CAN NOT single out specific policyholders. They must file rate increases for a 'Class' of policyholders. That could be everyone who bought a particular policy in specific state(s) with specific policy features.

Second, insurers must demonstrate specific reasons that a rate increase is requested. Lack of profitability is NOT A VALID REASON to request a rate increrase.

Here are some main reasons insurers have requested rate increases:

  • Lower than anticipated voluntary lapse rates - (31%)
  • Higher than anticipated incidence (policy claims) - (29%)
  • Longer than anticipated claim continuemnce - (20%)
  • Change in investment rate - (3%)

    What does this really mean? When insurers calculate pricing for long-term care insurance, they factor in a "lapse" rate. Simply said, they know that over time people will decide they no longer want to pay for this coverage.

    Boy were they wrong! Insurers in the 1990s and early 2000s were conservative. But they still projected that (say) 4% would lapse their policy each year. Over say 20 years, 80% of policyholders would thus lapse their coverage.

    What really happened? People DID NOT LAPSE THEIR COVERAGE. Only 1% did (or less). So a company that sold 100,000 policies and expected 20,000 after 20 years (20 x 4% = 80% dropped policies) ACTUALLY HAD 80,000 policies still in-force (20 x 1% = 20,000 lapsed policies). More policies meant more claimants.

    To be preparded to pay future claims, insurers needed to raise rates.

    States approve the increases to raise certainty that insurers are funded adequately to meet their responsibility to pay future LTC claims.

    TODAY NEW POLICIES BEING SOLD generally use lapse rates of 1% (or maybe less). As a result, policies holders face little (if any) risk of a future rate increase. That's the good news. But newer policies COST A LOT MORE.
    Click the link if you are interested in seeing Long-Term Care Insurance Costs For 65 Year Olds.

    Data comes from a Milliman Actuarial study reported in 2022.

    What Is The Typical Long-Term Care Insurance Policy Rate Increase?

    Many rate incraeses are relatively small but some are large. Here's a look at averages:

  • 5% to 9% - (6%)
  • 10% to 19% - (29%)
  • 20% to 29% - (31%)
  • 30% to 39% - (9%)
  • 40% to 49% - (14%)
  • 50% to 59% - (3%)
  • 60% or More - (9%)

    Again, these are generalities for 2016 analysis and will vary by state. That's because some states limit rate increases. But the Milliman data gives a general sense.

    Insurers Offer Options To Avoid The Rate Increase

    Insurers offer policyholders options to avoid paying a rate increase (keep paying the same or about the same premium).

    These will be explained to you in writing. You should read the information carefully.

    Here's a look at some of the most common options offered to help policyholders offset a rate increase:

  • Reduce the daily benefit - (94% of insurers surveyed offer)
  • Reduce the benefit period - ( offered)
  • Increase the Elimination Period or deductible - (79% offered)
  • Reduce or Change the Inflation Growth Option- (68% offered)

    What Do Most Consumers Do When Facing A Rate Increase?

    What do most people do? Here's our latest data. Read more statistics about buyers and claimants.

    Long-term care insurance statistics

    long-term care insurance rate increases

    What Can YOU Do When Facing A Rate Increase?

    Long-term care policy features and benefits can vary by state and by insurer.

    But the following are the typical options you'll have. These will all be specifically outlined in written communications sent to you from the insurer.

    Option 1. Keep Your Current Coverage
    If you are able to pay the increased premium, you will keep your current level of coverage.

    Option 2. Adjust Your Coverage
    If you are comfortable having less coverage the insurer will typically offrer ways to reduce your benefits and premium. Below we outline some reasons to consider this.

    Option 3. Pay Nothing More
    If you'd like to stop paying premiums altogether, in most situations you'll receive a paid-up policy with benefits approximately equal to the total of premium paid. In other words, if you've paid $20,000 in total premiums over the years, the insurer will offer you $20,000 of benefits (you'll still need to meet policy claim qualifications).


    Many people facing rate increases find that their policy has grown enormously in value. That initial Daily Benefit of $200-per-day is now $400 (or $12,000-per month). It's more than they think they might need. They often consider lowering or dropping the INFLATION GROWTH OPTION. Or they will reduce the Daily Benefit amount. It makes smart financial sense.

    Many people find that their savings and assets are worth far more than when they bought the policy. You might realize that you can cover some of the risk yourself. So, if you worry about a $10,000 home care cost and adjusting your policy means it will provide $6,000, then you agree to cover the potential $4,000.

    Common Ways To Adjust Your Long-Term Care Coverage

    Lower Your Benefit Amount
    Referred to as Daily or Monthly Maximums on your policy schedule page, this is the maximum amount that can be reimbursed for long term care expenses on a daily or monthly basis. It is also used to determine the maximum lifetime benefit amount on your policy. Lowering your benefit amount will reduce your premium. (Example: $350 per day daily benefit can be reduced to $250 per day).

    Shorten Your Benefit Coverage Period
    The benefit coverage period is the period of time used in calculating the policy payment maximum. Shortening your benefit coverage period will reduce your premium. (Example: Shortening a lifetime benefit period to a 3 or 4 year benefit period).

    Lengthen Your Elimination Period
    The Elimination Period is similar to a deductible. It is the number of days of covered care that you must pay for before your coverage begins to pay benefits. Lengthening your elimination period will reduce your premium. (Example: Changing the elimination period from 30 days to 100 days).

    Decrease Your Inflation Protection
    This option helps your coverage keep up with the rising cost of care by growing your Daily or Monthly Maximum and Coverage Maximum over time. Compound and simple increases are applied to your Daily or Monthly Maximum and remaining Coverage Maximum on each anniversary of your coverage effective date until you make a claim. Decreasing your inflation protection percentage will reduce your premium. (Example: Reducing your inflation protection from 5% to 3% or from compound increases to simple increases).

    Cancel Riders
    Some policies offer optional benefits that you may have purchased. Examples include First Day Home Care, Restoration of Benefits, and Survivorship. Cancel these to reduce your premium costs.

    Are All Rate Increases Approved?

    NO they are not. Insurers must demonstrate to the various State Department of Insurance that there is a real need.

    And then it can take months to get a rate increase approved.

  • 4 to 6 months to get approved - (29% of insurers surveyed)
  • 7 to 12 months to get approved - (44% of insurers surveyed)

  • Full increase approved - (36% of insurers surveyed)
  • Partial increase approved - (38% of insurers surveyed)
  • Denied any increase - (6% of insurers surveyed)

    Valuable Resources for Consumers

    2022 Long-Term Care Insurance statistics

    Long-Term Care Insurance prices ages 55 and 65

    Medicare Insurance Statistics

    Find A Local Medicare Insurance Agent