Imbalance between adequate and affordable rates
The Long-Term Care insurance business continues to be one of the toughest lines to offer and manage, as premiums haven’t been able to keep pace with rapidly rising medical costs and longer life expectancies. Double- and even triple-digit rate increases have become common over the past few years, with Blue Cross and Blue Shield of Florida gaining the recent spotlight with an average 94% rate increase.
At the recent Florida Office of Insurance Regulation (OIR) Summit I attended, Insurance Commissioner David Altmaier referred to the “sticker shock” these policies create, especially as more baby boomers reach retirement age and our senior population in this state increases. While the policies are needed more than ever as a hedge against rapidly rising end-of-life care costs, they are increasingly unaffordable to the average consumer.
When Long-Term Care (LTC) policies came on the scene 25 years ago, they were attractively-priced to folks in their 50’s and 60’s who wanted the financial security of knowing their nursing home or home-health care would be covered when they reached the age that they couldn’t care for themselves anymore.
Since then however, insurance companies have come to realize that what they offered in premiums then was too good a deal and unsustainable. They didn’t realize how expensive coverage would become and many today say the benefits they pay exceed the premiums they’ve collected over the years.
At the OIR Summit, Deputy Commissioner for Life and Health Craig Wright noted OIR’s challenge: How do you balance the need for actuarially-sound rate increases with protecting consumers who bought these policies in good faith and are now in their 70’s and 80’s and in a financially vulnerable position? Wright noted that premiums “aren’t even adequate to service the block of business,” a damning statement from insurance regulators whose prime directive is to ensure rates are adequate and affordable (as well as non-discriminatory).
Back in 2016, OIR held public hearings on LTC rate increase requests that have since resulted in consent orders and rate increases for nearly 30 carriers, ranging from 15% to 130%. The hikes are typically phased-in over 3-5 years followed by rate freezes of 5-10 years. Under the consent orders, consumers must be offered the choice of either paying the increase, keeping their existing premium but accepting reduced benefits, or freezing the policy and accepting a maximum lifetime benefit based on the cumulative premiums they’ve paid.
Sun Sentinel insurance reporter Ron Hurtibise recently wrote an insightful article on the LTC dilemma prompted by Blue Cross Blue Shield of Florida’s recent notices of average 94% rate increases to longtime policyholders.
Commissioner Altmaier warned that carriers who can’t make the rates work, will likely stop offering those particular products. I am curious to hear if a) you have a long term care policy and b) if you are seeing rate increases?