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Colorado Puts LTCI Rates in Context

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Individual long-term care insurance (LTCI) prices increased an average of 9.7% in Colorado in 2010, according to officials at the Colorado Division of Insurance.

That rate of increase was down from 23% in 2009, and it was lower than the rate of increase for individual major medical insurance, individual limited benefit plans and CHAMPUS military dependent coverage, officials say in the state’s 2011 health cost report.

In the individual market, CHAMPUS prices increased 9.9%, major medical prices increased 10%, and limited benefit prices increased 11%.

Over the 6-year period starting in 2005 and ending in 2010, the average annual rate of increase for LTCI products was 12.6%.

That was higher than the major medical cost increase average of 10.4% but lower than the average 14.8% increase for limited benefit plans. It was also lower than the 13.4% rate of increase for CHAMPUS military supplemental dependent coverage.

Tom Abel, supervisor of the rates and forms section at the division, said in an interview that officials there do not think comparing price changes for products as different from one another as LTCI coverage, major medical coverage and CHAMPUS produces meaningful results.

“Long-term care insurance is really much different from the other products,” Abel said. 

The factors that drive major medical insurance price changes, for example, include changes in the cost of hospital care and physician services, Abel said.

In the LTCI market, a carrier usually promises to be a benefit amount that is adjusted for inflation but otherwise fixed, Abel said.

The major factors leading to increases in LTCI prices have been the rapid, prolonged drop in interest rates and the fact that the actual percentage of LTCI policyholders who let policies lapse has been closer to 2% than to the lapse rate of 15% originally expected, Abel said.

In 2011, another factor leading to increases in LTCI prices likely will be that claims costs were higher than expected, Abel said.

When an LTCI product is properly priced to start with, premiums should not increase, Abel said.

Although Colorado officials have concerns about the idea of comparing the price changes that occur in the markets for different types of health insurance products, the tables in the 2011 cost report do give a different perspective than single-product tables. 


In the large-group market, LTCI prices increased 5.1% in 2010 and an average 1.2% per year over the 6-year period ending in 2010.

Colorado large-group major medical prices actually fell 0.8% in 2010, but the 2010 price increase for large-group LTCI programs was substantially lower than the rate of increase for other large-group health insurance products, such as limited benefit plans, hospital indemnity plans and prescription drug plans.

The 1.2% 6-year average increase in the large-group LTCI market was much lower than the average increase for comparable large-group health insurance products. The 6-year average increase for major medical, for example, was 3.7%, and the 6-year average increase for prescription drug coverage was 4.3%.


Colorado officials note that about 138,251 residents had individual, large-group or small-group LTCI coverage in 2010. That compares with 1.7 million people who had major medical coverage or managed care plan coverage.

Although penetration was much lower than for major medical and managed care coverage, Colorado residents were more likely to have LTCI coverage than they were to have two other types of health insurance — Medicare supplement insurance and credit accident and health insurance.

Colorado found that the average annual amount of premium earned per covered LTCI life was about $1,828.


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