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LTCI Prices: A Distributor Speaks

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As a veteran long-term care insurance (LTCI) specialist in California, I have been witness to the turmoil surrounding the availability of this insurance. Following are some of my perceptions relating to provider/pricing stability.

As a relatively new insurance product, LTCI premiums were initially set on faulty actuarial assumptions. Even the most experienced provider, Genworth, has had to admit that it takes time to gain the information necessary to allow for a more accurate assessment of the factors that result in LTCI claims and the probable length of these claims. Also, keep in mind that this carrier kept premiums stable from 1974 to 2007; over 30 years without any premium increase to existing policy holders.

When it was realized that, due to advances in medical technologies and better health practices, we were living longer, even when disabled, and as such more of the insured would be going into claim and staying for longer periods of time, that threw an additional wrench into the companies’ ability to maintain premium stability.

Added into all this was the effect of the 2008 financial bust, which wiped out the ability of insurers to earn a return from invested premiums. That was combined with a miscalculation on the assumed lapse rate. Fewer policyholders were dropping their coverage early. The combination of the 2008 bust and the lapse-rate miscalculation resulted in a near collapse of the industry.

Many companies have dropped out of the business, and those that are left are scrambling to get their financial houses back on track with major premium increases, fewer benefit options, and stiffer underwriting.

Even with increased premiums and the other adjustments, this industry is far from turning the corner and stabilizing the market.

It will, in my opinion, fall to the government, both federal and state, to provide tax credits or other incentives to help drive greater participation.

The government’s Medicaid and Medical loopholes must be closed so that it is more difficult for people to qualify for state-paid care by transferring savings and assets to others.

The aging population makes these changes critical if we are to provide quality care in the years to come for the ones we care about.