Future Long-Term Care Insurance Rate Increase Risk Near Zero

The head of national consumer education and advocacy group states the risk of future premium increases on today’s Long-Term Care Insurance is nil. This is good news as more people nowadays are planning for the costs and burdens associated with aging, health, and long-term care. 

For many, Long-Term Care Insurance is a big part of retirement planning. However, some consumers are concerned with what they read about rate increases.

The American Association for Long-Term Care Insurance (AALTCI ) completed a study reviewing the pricing expert’s opinions of today’s Long-term Care Insurance. The research shows that under the new regulations, pricing, and actuarial methods, consumers face little if any chance of future rate increases under the products being sold today.

“Policies priced years ago using different assumptions have seen rate increases so consumers today assume they face the same risk.”   “That’s simply not the case.”  The AALTCI just released results of a poll of actuaries across the Long-Term Care Insurance industry.

 Jesse Slome, director of the AALTCI.

Rate Stabilization Rules Help Consumers Plan in Confidence

Rate stability rules that are in force in most states require even more conservative assumptions than ever before. (You can see if your state has these rules in place).These rules include several factors, including:

1.   More accurate and conservative underwriting. Major companies have more knowledge and actual claims experience today than they did when they designed and priced the older “legacy” products. The insurance companies can price their products much more accurately since they know their expected claims and the health problems which initiated those claims. With this knowledge, they can set appropriate underwriting standards and rate classes and pricing that match the risks they are taking at the time of application.

2.   Lapse rates. When insurance companies started selling Long-Term Care Insurance, they never expected policyholders to keep their policies in force in the numbers they actually do. They expected the lapse rates to be no different from any other type of policy. The fact is when a person purchases a Long-Term Care policy; it stays in force. The older legacy policies were never priced for low lapse rates. Companies now use a lapse rate assumption of less than one percent per year. 

3.   Interest rates. Did anyone expect interest rates to drop and stay as low as they have been for as long as they have been? The answer is no. The low-interest rates had a tremendous impact on the investment returns actuaries expected. Today’s Long-Term Care Insurance premiums reflect extremely low-interest rates. As the interest rates go up, pressure on interest rates from a premium standpoint goes down. This is good news for both the policyholder and the insurance company.

“Most actuaries responding see little or no the risk of needing future rate increases on recently priced policies.” 

Jesse Slome

Some 79.1 percent of the responding actuaries expressed the risk was 10 percent or less.

Articles About Older Legacy Products Don't Apply to Today's LTC Policies

Older Long-Term Care Insurance policies priced 10 or 20 years ago used different pricing assumptions and generally had specific policy provisions that necessitated the need for premium increases. When you read articles about premium increases, it applies to these older products, not today's Long-Term Care Insurance.

“Back in the 1990s, Long-Term Care Insurance was a new form of protection and there just wasn't the data available.”  

“With several decades of experience and millions of policies sold and hundreds of thousands of claimants, policies priced today can more accurately project important aspects.”

Jesse Slome 

Today's LTC Insurance Provides Benefits Most People Want

Long-Term Care Insurance specialists have seen the industry grow and change over the decades.

"Thirty years ago, the only option for protection were nursing home only policies. Over time, as the market change and demand for planning increase, policies changed. They then provided a continuum of care from your home to assisted living facilities to nursing home care. With the expanded benefits, the industry did not price the products based on increased utilization, underwriting, and other actuarial considerations. Today's Long-Term Care Insurance remains very affordable, but is priced and designed to be rate stable," said Brent Donarski, a Long-Term Care specialist with 30 years' experience in the industry.

Donarski, who operates My LTC Specialist, says the industry has become much better in fulfilling the needs of individuals in need of care in the environment and care location they are most comfortable.

"I have assisted in thousands of claims with the adult children of the policyholder, and they have such a relief knowing that their parents planned ahead for their long-term care needs. Yes, the industry has had some challenges along the way, like other industries, but today has never been a better time for people who are interested in protecting their families from the emotional and financial burdens of long-term care. The good news is that today's Long-Term Care Insurance is priced with more experience and under new rules that make them affordable and rate stable,"

Brent Donarski, a Long-Term Care specialist

Confidence in Today's Long-Term Care Insurance

The AALTCI report underscores confidence in the industry pricing models.

“I believe the risk of future rate increases is zero.”

“Rising interest rates and the new regulations mean someone purchasing a new Long-Term Care Insurance policy in 2018 and 2019 faces little if any chance of a future rate increase."

Jesse Slome

The policy designs available in today’s products also add to the pricing confidence compared to older legacy products.

“Older policies with provisions like unlimited policy benefits or compounded annual benefit increases of five percent may face rate increases, but even these are never take-it or leave-it propositions.  Insurers always offer options that enable the policyholder to avoid the increase.”

Three Types of Products Available

There are several ways consumers can plan for the financial costs and burdens of aging. These include:

1.   Traditional Long-Term Care Insurance. This category includes partnership policies that are available in most states that offer additional dollar-for-dollar asset protection. Traditional LTC Insurance offers many affordable features and benefits, including shared spousal/partner plans. Tax incentives are available for some people and for the self-employed and businesses. Pre-tax money from Health Savings Accounts can also be used to pay premiums. Generally, these plans have more conservative underwriting but are priced very affordability, depending on your health and age at the time of application.

2.   Asset-Based/Hybrid Plans. These are either life insurance or annuities with a rider to cover long-term care costs. They are often single premium products, but some companies offer limited payment options or even annual payment options with premiums can never increase. These plans provide a death benefit in the event the policy is not used for long-term care costs.

3.   Limited Duration/Short-Term Plans. These plans are designed to provide a limited amount of benefits, often at home. The underwriting rules are usually broader, and the age limits for eligible applications are wider.

Donarski says an experienced Long-Term Care specialist can help you find an appropriate plan placed on your age, health, concerns, and budget.

• Types Of Long-Term Care Insurance Policies & Which Is Best For You

Research Options with LTC NEWS Tools

Long-Term Care Insurance is custom designed. While a specialist can make professional recommendations, you get to decide the total amount of benefits you wish to have in place.

No matter the size of the policy, Long-Term Care Insurance is helping American families take care of their loved ones. In 2022 the major insurance companies paid over $13.2 Billion in benefits to American families. 

These benefits provide the policyholders and their families with their choice of quality care in the setting they desire. The policyholder maintains control and independence. 

Most states have rate stabilization rules in place. Forty-five states offer Partnership Long-Term Care Insurance policies that provide additional dollar-for-dollar asset protection. Find your state's details.

The cost of long-term care services increases every year. Find the current and future cost of care services in your area by using the LTC NEWS Cost of Care Calculator. You will also see key facts about your state, including the availability of tax incentives.

LTC NEWS can help you find a trusted and qualified specialist. A specialist can match your age, health, and other factors with the best options. Premiums vary between insurance companies by over 100% for the same benefits.