Policy Rate increases and long term care insurance costs real facts for consumers

Long Term Care Insurance Policy Rate Increases

Information for consumers who are facing an increase in premiums for their long-term care insurance (Posted September 2019)

Thank you for visiting our website. The American Association for Long-Term Care Insurance was established in 1997 with the goal of providing individuals with the most relevant, factual and current information upon which informed decisions could be made.

The following information is excerpted from a talk delivered by Jesse Slome, AALTCI's director (September 2019) based on his 20+ years in the long-term care insurance field.

Reporters, Bloggers and others may reference material on this page with credit to the American Association for Long-Term Care Insurance. Thank you.


There have been multiple generations of long-term care insurance policies. While policies offered today look like they are the same as those sold in the 1990s and 2000s, THEY ARE PRICED DIFFERENTLY and must meet very different State-imposed requirements.

Click here to read rate increase info for those considering long-term care insurance.

FACING A RATE INCREASE: Quick Links To Important Information on This Page

Why Is That "!@#xp$%!@" Insurance Company Raising My Rate?

No one likes paying more for anything. It's only natural that your first reaction is anger. And, I'm not here to defend insurance companies (the Association receives ZERO funding from insurers) but rather to explain why rates are being increased. And, to share my thoughts on some options.

SOME EXPLANATION: In order to increase your premium, the insurance company had to provide proof to State insurance regulators that things had changed (from when they first priced the policy based on what they expected to happen). And, the insurance company has to show that the rate increase was needed in order to assure funds were adequate to pay future claims.

>We understand that after hurricanes or floods, it costs more to insurer homes in flood zones or hurricane prone areas. That's because your policy price is set for one year. FolIt can change next year when yit's time to renew. And, if houses all around you are damaged by floods - you know your rate will increase. No one is happy about it. But we all understand and pay the price because we want the protection in case it happens to us.

But back in the 1980s and 1990s, insurance regulatrors established and approved different standards for long-term care insurance. Insurance companies based their premiums on what they expected (predicted) what will hoppen 15 to 25 years into the future. They were right on many factors. They were wrong on a few important ones. For those who want details, we've posted more information at the very bottom of this page.

Just to give you an example of how hard it is to predict the future, I just found some of my own personal financial records. In 1981, I was earning 15 1/2 percent on a bank CD. Investment return is a critical part of pricing a long-term care insurance policy.

BUT, let's get back to long-term care insurance rate increases. First, it is important to know that each year long-term care insurers pay more claims than the year before. In 2018, LTC insurers (those offering traditional health-based policies) paid a combined $10.3 Billion to over 303,000 policyholders.

Second, you are NOT being singled out. The law prevents that. The rate changes must impact a 'class' of policyholders. You are not being singled out. Everybody who purchased policies as defined by the class are included. They basically have the same policy, purchased over the same year(s), typically with similar provisions - say a five percent compound growth option.

Very often long-term care insurance policies subjected to rate increases contain provisions that are no longer even offered - or, if they are- are very costly for new buyers. For example, most insurers today don't offer lifetime or unlimited benefit policies and few people would pay the cost of a 5% inflation growth option.

We give some current pricing examples below. It's VERY LIKELY THAT YOU'LL PAY MORE today for LESS PLAN COVERAGE.

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National Reports: Rate Increases By Leading Insurers

The links below will take you to reports showing historical rate increases from five leading long-term care insurance companies. The reports were compiled in December 2018 and will show rates by States and years.

Bankers Life & Casualty - Long-Term Care Insurance
Click here to access Bankers Life Rate Increase History

Genworth Long-Term Care Insurance
Click here to access Genworth's LTC Rate Increase History

Mutual of Omaha - Long-Term Care Insurance
Click here to access Mutual of Omaha's LTC Rate Increase History

New York Life - Long-Term Care Insurance
Click here to access New York Life's Rate Increase History

Transamerica Life Insurance - Long-Term care Insurance
Click here to access Transamerica's Rate Increase History

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What Would I Pay For A New Policy (Today)?

We can almost assure you that YOU WILL PAY MORE to buy a new policy today. And, that assumes you can get the same benefit levels. And, EVEN MORE IMPORTANT that you can still meet the health qualifications.

But let's share costs from one insurer that generally has competitive prices.


New Policy Cost: $4,800 annually.
Each person buys a 3-year benefit starting at $5,000 a month with a 3% inflation compound growth option.

New Policy Cost: $7,600 annually.
Each person buys a 3-year benefit starting at $5,000 a month with a 5% inflation compound growth option.

New Policy Cost: $6,500 annually.
Each person buys a 5-year benefit starting at $5,000 a month with a 3% inflation compound growth option.

New Policy Cost: $10,200 annually.
Each person buys a 5-year benefit starting at $5,000 a month with a 5% inflation compound growth option.


New Policy Cost: $8,700 annually.
Each person buys a 3-year benefit starting at $5,000 a month with a 3% inflation compound growth option.

New Policy Cost: $11,000 annually.
Each person buys a 3-year benefit starting at $5,000 a month with a 5% inflation compound growth option.

New Policy Cost: $11,500 annually.
Each person buys a 5-year benefit starting at $5,000 a month with a 3% inflation compound growth option.

New Policy Cost: $14,700 annually.
Each person buys a 5-year benefit starting at $5,000 a month with a 5% inflation compound growth option.

These are actual prices as of September 2019. The Association does not sell insurance but if you want to connect with a specialist who does, call us at 818-597-3227. NEVER cancel your policy until you have been completely health-approved for a new policy and that policy has been issued to you by the insurer. Note that we assume by ages 65 and 75 both parties will NOT meet 'preferred health' discount standards but are still insurable.

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Okay, What Do I Do Now?

It's time to REVIEW and REBALANCE your long-term care plan.

No one should pick an investment portfolio and never look at it again (Blockbuster seemed like a great company at one time!). It's smart to review your investment diversification and rebalance from time to time. Most people know to do this at specific events in their life, such as upon retirmement.

When you are notified that your long-term care insurance policy premium will be increasing, the insurance company will give you options. They are worth considering.

It may be worth calling the insurance company to ask if they will permit other options not outlined in their letter.

ADJUST THE BENEFIT PERIOD Many policies experiencing rate increases offered 'lifetime' or 'unlimited' benefit coverage. It is true that some claims do last for many years and, if you worry about that, and can afford the premium, keep this Cadillac level of coverage. But, most (the vast majority) never last more than 2-to-3 years. Review your overall current financials. For most people, their long-term care insurance will pay some but not all of the potential costs. They'll pay some from savings, retirement assets. And, in the worst case scenario, if they exhaust their insurance policy benefits, they have other assets (a house), etc., that can be used to pay for needed care.

ADJUST YOUR INFLATION GROWTH OPTION Many policies that are experiencing rate increases included the 5 percent compound inflation growth option. It was great at the time but unsustainable. Instead, consider one of the options being offered (often a 3 percent growth factor). Just as we all have become accustomed to sharing some of the risk for our health insurance (called co-payments) or our car insurance (called deductibles), you still will benefit by having long-term care insurance if you need care. You may just have to pay a portion of the cost (or you may have to pay none!)

Bottom line, you bought this policy because you recognize there is a real risk of needing care one day. You are now actually closer to that day when care is likely needed. You probably couldn't afford a new policy. You might not health qualify.

So actually congratulate yourself on your smart purchase. Review your options. Review your current financial situation. Decide what's your best option.

I talk to hundreds of consumers every year. I tell them that I've had personal friends need and use their long-term care insurance policy. They were glad they had this coverage. It made their lives so much easier. And, their family's lives so much better.


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More Details On Why Rates Have Been Increasing

Comments from a presentation given by Jesse Slome, director of the American Association for Long-Term Care Insurance (may be used as quotes with proper attribution, thank you).

"Let's face it. No one in their right mind likes or wants to pay more for anything. I remember when The New York Times cost a quarter, not the $2.50 it costs today or the $6.00 for Sunday. But we understand that costs increase for most things.

And because my house was across the street from where the California wildfires burned, I understood and paid when my homeowner's incurance increased 20 percent. I knew people who lost homes and had smoke damage.

But, long-term care insurance. When people bought their policy 5, 10 or 15 years ago, they had the sense that their rates would be level for life. And, what hurts even more is that now they are older, often living on a fixed income. Why did this happen?

Aren't those bastard insurers screwing us?

Here's what happened ... in layman's terms. There basically have been three generations of long-term care insurance.

THREE GENERATIONS OF POLICIES withe the first generally sold in the 1990s and early 2,000s. To be honest, the insurers had no way to really predict what would happen. They made the assumption that over time people would drop (called lapse) their policies. So, when they calculated rates, they assumed 4 percent would lapse each year. That number was actually far more conservative (lower) that other forms of insurance.

WHY LAPSE RATES MATTER SO MUCH Say an insurer sold 100,000 long-term care insurance policies to policyholders in their 60s. The 4 percent lapse rates means that after 20 years, when policyholders were in their 80s (when most LTCi claims begin) there would be 20,000 policyholders remaining. [100,000 x 4% = 4,000 lapses a year x 20 years = 80,000 lapsed policies]. Of the 20,000 policies roughly ONE THIRD will claim benefits.

BUT ONLY 1% LAPSED so, at the end of 20 years the insurer would face having 80,000 policyholders. With one third claiming benefits, you can see they would face paying 26,000 claimants, not 6,000 or 7,000. That was the main problem. More claimants living longer equalled more claims.

And, unlike my homeowners or health insurance where the insurer can raise rates every year, the regulators stipulated that these policies could not change rates EXCEPT when the company showed dire circumstances

LONGER LIVES = LONGER AND MORE COSTLY CLAIMS With long-term care insurance an insurance company needs to forecast 20 years into the future. They sell a policy to someone in their 60s who will go on claim in their 80s. Will people be living longer? Will new drugs keep many of us alive into our 90s and 100s when it's far more likely that care will be needed? The answer was yes. And, that's why policies that offered LIFETIME or UNLIMITED benefits are exceeding what insurers anticipated. In fact, our 2019 study revealed more individual claims that had surpassed $2 million. So, people who paid maybe $20,000 for long-term care insurance were collecting $2 million in benefits.

FINALLY INTEREST RATES I am a diligent planner as are most people who purchase long=term care insurance to plan for their future. I just found some of my records from 1980 where I was earning 15 percent interest on a CD. In 2006, I was earning 5.5 percent on a 6-month CD. Long-term care insurance is a very 'interest rate sensitive' product.

YOUR PREMIUMS PAY ONLY A SHARE OF FUTURE CLAIMS with the balance - basically HALF - coming from the earnings from your premiums. If an insurer assumed they would earn 5 percent a year and then interest rates plunge, the impact is enormous. NOW, it's important to understand that State regulators who oversee rate increases will NOT allow an insurer to request rate increases becauyse they predicted interst rates incorrectly.

But we have just entered the 11th year of historic low interest rates. It's had a huge impact. How can you expect an insurer to increase your policy benefits by 5 percent annually when they are earning less than 2 percent?

So when you take all of this into account, one can see why older policies have been experiencing rate increases. It is important to note that NEW POLICIES (the THIRD GENERATION) have to take all these factors into account. That's why premiums for new policies are higher and why lifetime benefits are NO longer being offered (in general) and why 5% compound inflation growth is no longer the most common choice among consumers

So, while I understand that paying more is never desirable, there are real valid reasons why rate increases occur. I hope this explanation has been helpful. Thanks for listening."
Jesse Slome


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Some insurance agents only are appointed to sell policies from one company. A good long term care insurance specialist will be appointed with 4 to 6 (or more) insurers. They'll work to find you the best coverage for the best cost.
Click here to have an Association Designated Specialist compare costs
for you from leading insurers. There's NO cost and No obligation.

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