LTC rate hikes coincide with Awareness Month

Long-term care (LTC) insurance is back in the headlines, with several leading insurance carriers seeking rate increases to help offset investment shortfalls in an ultra-low interest rate environment and greater-than-expected plan usage.

John Hancock, American International Group Inc., MetLife Inc. and Lincoln National Corp. recently applied for or received approval in one or more states for rate increases ranging from 10% to 40%.

Even the Federal Long-Term Care Insurance Program raised premiums for its automatic compound inflation option as much as 25% last year, which angered many participants.

Elsewhere in the market, John Hancock, which runs the federal government’s LTC program, will seek rate increases that average about 40% on many of its retail long-term care policies. The Manulife Financial Corp. unit also suspended sales of new group LTC policies as it re-evaluates product pricing and plan design in the current economic climate.

"Those who hold long-term care insurance policies, or those who consider buying them – from any source – should take this news as a wake-up call, and factor substantial rate increases into their plans," according to an article on the Federal Times Web site.

At least one bright spot from a cost standpoint is that the Internal Revenue Service increased deductibility levels for LTC insurance policies purchased in 2011 under Section 213(d)(10). Those amounts are as follows: $340 for people age 40 or younger, $640 for those in their 40s, $1,270 for those in their 50s and $3,390 for those in their 60s.

The LTC rate hikes come as Long-Term Care Awareness Month, which Congress established in 2007, shifts into high gear throughout the month of November. No single organization sponsors this annual campaign, but one group that’s at the forefront of LTC education is the American Association for Long-Term Care Insurance (AALTCI), which estimates that 8 million Americans own an LTC policy, the average buyer is 57-years-old and pays $2,150 in annual premiums.

"From a congressional resolution to proclamations issued by governors and mayors across America, support for the campaign’s goal continues to grow," according to AALTCI Executive Director Jesse Slome, who laments that most Americans age 50 and older have no plan in place. 

Another avenue for learning more about LTC is an eight-page guide appearing in the November 2010 edition of Kiplinger’s Personal Finance magazine, which has about 2 million readers. AALTCI prepared the insert, which was funded by four leading LTC insurers, including John Hancock, MetLife, Mutual of Omaha and Prudential.

Despite the LTC rate hikes, some industry observers believe the time is right for more working Americans to express interest in this product.

Employers of all sizes will soon be presenting their employees with a full range of LTC insurance options as a result of the CLASS Act, predicts Dan Cahn, senior vice president of business development for LTC Financial Partners, LLC.

He doesn’t believe the recent proposed increases of premiums by major LTC insurance carriers will deter the need for both the public and private sector to "try and defer the financial risks long-term care events create," reporting that his firm has had four consecutive years of record sales.

The trouble is that "few companies are prepared to explain the complexities so employees can make the best choice – not only between the CLASS Act and private options, but the best choice among the many, many private options," he adds.

Cahn cites a recent Prudential report that found while the number of Americans age 65 and older is expected to double and equal 20% of the U.S. population in the next two decades, 74% of consumers age 55 to 65 are concerned about needing some kind of LTC and 77% of those age 30 to 65 think they should know more about this product than they do.

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