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Long-Term Care Premiums Sky Rocket As Claims Are Made On Policies

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CalPERS recently announced that it expects to increase premiums on long-term care coverage by 85 percent over the next two years. With one of the largest long-term care programs in the country promising a dramatic increase in costs to insureds, it's very likely a harbinger of what's to come from private insurers who also offer long-term care insurance.

Insurance companies have long cited rising health care costs as a reason for increased premiums. In addition, companies are claiming that the low interest rates that have come with the economic downturn have hurt their ability to build the reserves necessary to pay long-term care claims.

CNA Financial and ManuLife Financial have requested permission to increase their rates by almost half from the California Department of Insurance. MetLife and Prudential have opted to get out of the long-term care market entirely and will no longer offer these types of policies.

As with many insurance issues, the problem ends on the shoulders of the insured, or on those seeking long-term care insurance. There just aren't a lot of available options and those that are available may no longer be affordable with the substantial increase in premiums. Rather than lifetime coverage, many will find that they can only purchase long-term care coverage for a specific term of years any more.

The fairness behind the premium increase should be a question on everyone's mind. For those who have paid into a long-term care program for years but who may now be retired, on a fixed income and have been priced out of coverage, is it fair that they have to let the coverage lapse without ever receiving a benefit?

Source: Daily Finance, "Why Long-Term-Care Insurance Premiums Are Soaring," April 4, 2013

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