Long Term Care Insurance Rate Increases Explained

Long term care insurance is one of the only products where prices are designed to remain the same for as much as 30 years.  That’s not always possible according to a leading industry expert.

“I’d love to be paying the same for gasoline as I did 10 or 15 years ago but things change and the same is true with long term care insurance,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance, an organization focused on creating heightened consumer understanding of the importance of planning.  “No one likes to pay more for anything but when an insurer needs a rate increase they typically have to get state approval and, more important, it’s not a take it or leave it option for policyholders.”

Speaking to consumers, the long term care insurance industry expert explained that rates on policies priced 10 years ago are often facing rate increases.  “Not every policy but most often those that include a five percent annual growth of benefits option,” Slome notes.  “An insurer can not raise the payout five percent in today’s historically low interest rate environment so they offer consumers the opportunity to continue paying the same but have future benefits grow at say three percent.”

The biggest misperception when it comes to rate increases for long term care insurance is the belief that consumers have no option except to pay more.  “That just is not the case, insurers voluntarily have decided to offer options to policyholders,” Slome acknowledges.  “There is no law or government ruling that mandates it.  It’s the right thing to do and while many can be skeptical, they are looking to do the right thing for those who bough policies.”

Citing data from the only study of policyholder action following a rate increase Slome points out that when faced with a 25 percent premium increase as part of the Federal long term care insurance program some 46.1 percent of policyholders made no change to their policy benefits and agreed to pay the higher amount.  “Less that two percent dropped their coverage,” Slome admits, “and some took the opportunity to redesign their plan and ended up paying less than they were before.”

The Los Angeles, California-based American Association for Long Term Care Insurance advocates for the importance of planning for long term care. To learn more about long term care insurance costs call the organization’s offices at (818) 597-3227 or visit the Association’s website.

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