Millions of Americans made the decision to protect their financial future by investing in a long-term care insurance policy when they were younger. The logic is sound: by paying into a rather affordable policy when they were young, they could then count on the financial coverage provided by that policy when they need it as they get older.
What those people didn’t count on was the miscalculations made by myriad of insurance companies. As a result, these consumers are being asked to shoulder the costs in their old age—precisely the reality they were trying to avoid in the first place.
The reality is that long-term insurers have been steadily raising their rates for the past ten years. Unfortunately, those raises look like they are only going to continue to grow in the future. In fact, the problem has become so pervasive that state regulators have noticed the issue and established a task force to address it. Whether that task for can create meaningful change in time to help everyone affected is another matter entirely.
Scott A. White, the Virginia insurance commissioner and chairman of the task force spoke with the New York Times about the problem the task force faces. “There is an inherent tension as a regulator,” said White. “You want to protect consumers against rate hikes, but you also want to make sure the carriers remain solvent and are able to pay claims into the future.”
The issue traces back to two main mistakes insurers made years ago. The first, and most obvious, is that insurers simply underestimated how long their policyholders were going to live. The average lifespan in the U.S. has only increased over the years. That means more and more policyholders are drawing on their policies for years longer than insurers anticipated.
The second problem isn’t with underestimation, but overestimation this time. Insurers grossly overestimated the number of policyholders that would drop their policies. As it turns out, people who purchase long-term care insurance early on are loath to drop the policy, and instead budget around it throughout their lives.
These two issues combine to create a situation where insurers are paying significantly more claims than they expected, which means they are raising rates to help recoup some of those costs. It’s putting policyholders in a tough position: pay up or lose out on the policy you’ve been paying into for years.
The New York Times reports that Insurance “Regulators approved higher premiums on at least 84,000 policyholders at Genworth alone during the second quarter, according to a sampling of filings recently analyzed by S&P Global Market Intelligence.”
Long-term care is a serious concern for millions of Americans across the United States, and for good reason. Half of Americans turning 65 will develop some kind of disability that requires long-term services. Knowing that, going without long-term care insurance is probably not a good idea, if you can afford it.
To learn more about your current long-term care policy, or to inquire about a new one, we encourage you to reach out to TGS Insurance at www.tgsinsurance.com.