Many clients who reject long-term care insurance (LTCI) or consider dropping their coverage do so on the argument that it’s too expensive.
But that attitude overlooks several important aspects of the costs of not buying the coverage, including the financial and personal burdens imposed on long-term care (LTC) recipients’ families. We asked several LTCI experts for their thoughts on the cost issue and how they approach it with prospects and clients.
A focus on premiums
If you’re not yet experiencing client complaints about LTCI rate hikes, get ready. And don’t be surprised if you get calls from policyholders who bought the insurance from other advisors.
Honey Leveen, LUTCF, CLTC, LTCP, in Houston, has received many calls from policy owners whose agents are no longer in the business.
The callers, typically in their 70s and 80s, bought the policies when rates were much lower and now they’ve received a rate increase notice. Their initial reactions, says Leveen, are fear, rage or a mixture of both.
The pricing pressure is likely to persist. Insurers continue to request rate increases from state regulators; those requested hikes can be substantial and headline-grabbing.
In May, for example, John Hancock Life Insurance Co. re-filed a request for a 58.1 percent average increase on its LTCI group plans in Connecticut.
Regulators denied the request in August after an actuarial review. This was Hancock’s third increase request in the past two years, and the Connecticut Insurance Department disapproved all three.
Even if your clients haven’t experienced a proposed or actual rate increase, they’re probably reading news reports describing seniors on fixed incomes getting squeezed by LTC insurers raising premiums.
For example, a Sept. 6 Boston Globe article, “Long-term Care Insurance Premiums on the Rise,” discussed price trends and consumers’ complaints. Since early 2012, the article notes, the Massachusetts Division of Insurance has regularly approved LTCI premium increases of about 10 percent.
Requests to nearly double rates are under review, according to the article.
The paper also reports that the average cost of a policy for a 55-year-old couple has increased 80 percent since 1987, climbing from less than $2,000 to over $3,500 over that period.
The American Association for Long-Term Care Insurance 2013 Long Term Care Insurance Price Index cites similar current costs, with premiums for a couple age 55 ranging from $1,816 (good coverage) through $1,942 (better coverage) to $3,725 (best coverage).
Phyllis Shelton, president of LTC Consultants in Nashville, Tenn. and author of “Protecting Your Family with Long-Term Care Insurance” (LTCi Publishing, 2013), struggles to understand the hoopla over higher premiums.
The major carriers have been selling LTCI since the late 1980s, she notes. In the intervening years, rate increases were typically modest or nonexistent until the economic downturn in 2008.
Raising rates in response to higher costs is standard business practice for insurers, says Shelton, whatever line they’re in, and consumers typically understand this.
“Automobile and homeowners’ insurance go up constantly,” she points out. “Some of the (LTCI) carriers either have had no increase or they’ve had one or two, and people are flipping out.”
Some carriers, such as Hancock in the previous example, request larger catch-up increases while others distribute them more evenly over time.
Nonetheless, says Shelton, the percentage of increase over a 20-year time is not that much and policyholders and the news media need to keep it in perspective relative to overall medical-care inflation.
Shifting the conversation
Policyholders’ aggravation over higher premiums is understandable but it often results from a lack of education, says Leveen, especially among policyholders without agents.
In Leveen’s experience, policyholders calm down when they understand the impact of insurers’ claims experience and low interest rates.
“Once the circumstances are explained in a businesslike, rational, professional manner, the anger just goes right off their back,” she says. “They just say, oh, well, the rate hike is so that the company is going to be around to pay my claim in 10 years.”