Study Examines Long-Term Care Insurance Rate Increases

A report released today by the U.S. Government Accountability Office (GAO) examines the impact of rate increases on long-term care insurance policyholders.  Specifically, the report examines the Federal Long-Term Care Insurance Program (FLTCIP), the largest private long-term care insurance program in the nation. 

“As a voluntary plan consisting of typical employees, this is a most representative group,” states Jesse Slome, executive director of the American Association for Long-Term Care Insurance (, one of those interviewed by GAO staff  preparing the study.  “Instead of hyperbole, we now have facts to prove that the majority of consumers understand the value of their long-term care insurance protection and do not drop or reduce their coverage even when faced with a rate increase.”

In 2009, some 146,415 participants in the Federal program, about two thirds of the enrollees at the time, were notified that their premiums were subject to an increase of up to 25 percent.  All of these enrollees had selected a particular inflation protection option – the 5 percent automatic compound inflation option (ACIO).

The majority of FLTCIP enrollees facing the premium increase made no change to their benefits.  Specifically, 46 percent or 67,511 individuals maintained their coverage with the 5 percent compound inflation option and elected to pay premium increases. 

An equal percentage of individuals chose to reduce their future inflation growth protection benefits to 4 percent (ACIO) by either switching to the new FLTCIP II plan (26 percent) or retaining the original plan (20 percent).  The new benefit plan provides enhanced coverage.  For example, it covers 100 percent of the cost of home care and adult day care.  The prior plan covered these costs up to 75 percent. 

All plan enrollees who decreased their ACIO protection to 4 percent retained their (current) accrued daily benefit amount that would then increase at the reduced ACIO rate.

Only 1.6 percent of enrollees facing the premium increase, or 2,344 individuals lapsed their coverage and are no longer enrolled in the program.  “We have long attempted to counter the perception that rate increases caused large numbers of people to drop coverage,” Slome acknowledged.  “People understand the risk they face when they purchase long-term care insurance and the protection becomes even more valuable as they age themselves.” 

“What may surprise many is that 23 percent of policyholders actually experienced up to a five percent  decrease in their premium,” Slome adds.  Some 18 percent had a decrease between 0.1 percent and five percent.  

The Federal Long-Term Care Insurance Program currently has 268,200 enrollees (as of June 30, 2011).   In 2009, a 7-year contract for the program was awarded to John Hancock Life Insurance Company. 

Established in 1998, the American Association for Long-Term Care Insurance ( is the national trade organization committed to increasing consumer awareness and support of insurance and financial professionals offering long-term care solutions.

Chart 1

Benefit Selection Of Federal Lontg-Term Care Insurance Program
Enrollees Facing Premium Increases

46.1%       No Change (FLTCIP 1.0 plan with 5% ACIO)
25.7%       FLTCIP 2.0 plan with 4% ACIO
20.0%       FLTCIP 1.0 plan with 4% ACIO
5.6%          FLTCIP 2.0 plan with 5% ACIO
1.6%          Lapse
0.5%       Other benefit changes (changing a benefit amount)
0.4%       No selection (many died or became claimants before rate increase took effect)

Chart 2
Premium Change

Decrease more than 5%       5%
Decrease 0.1% to 5%          18%
No change                          2%
Increase up to 5%               17%
Increase 5.1% to 10%          6%
Increase 10.1% to 15%       2%
Increase 15.1% to 20%       1%
Increase 20.1% to 25%       43%
Increase more than 25%       6%

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