Last week, I made my once a decade trek to a dealership to buy a new car. I did my research in advance (and even negotiated the price) so I was hoping for a stress-free experience.
Long Term Care Insurance (LTCI) for whatever reason is considered part of health and has some properties in common with health contracts you are writing about. Since LTCI is a Long Duration Contract (LDC), it too has a notion of loss ratios, but these are LIFEITME loss ratios (LLR) typically spanning 50 - 60 years before the book-of-business is done with.
The history of the industry has been to drive rate increases to meet a target LLR of 60%, despite original (circa 1990 - 2005) marketing ploys to signup policyholders to an alleged "level premium product". While contracts stipulated "we can raise rates", it was true that carriers encouraged agents to claim, "we never have raised rates" and to add further assurance to the unwary client "please sign this document to say that, if we were to raise rates by 20%, would you still be able to afford the premiums?" giving the client the impression that such a rate increase (i.e. 20%) would be excessive.
You can easily Google & find references to what has happened to LTCI premiums over the past 10 - 15 years to seniors who now hold this (LDC) "toxic paper", baited year after year paying flat premiums, now being forced out of their contract due to premiums that have grown parabolic just about the time these policyholders have aged up & ready to go on claim.
I looked into many different insurance coverages for long term care. Did a great deal of research while I was still working, long before retirement. Even two decades ago LTC insurance was extortionately priced - as in $12k a year premiums (right - $1,000 per month) but that generally meant obtaining a mere five years' worth of care. Moreover, many LTC facilities do not like dealing with LTC insurance and do not accept it - hassle factor. There needs to be something reasonably positioned between the predatory LTC insurance practices and ending up on Medicaid in a mismanaged substandard 'nursing' home - especially with Medicaid disappearing. Brainiacs please take note. This is your assignment now!
The average long-term care insurance premium (including all rate increases) is about $2,200 per year as of 2022 (the most recent published data by the NAIC). "$12,000 per year premium two decades ago", is inconsistent with the published data (it's not even in the same ballpark). Is it possible it was actually a life insurance policy? Most financial advisors sell life insurance with a rider that allows the death benefit to be used to pay for long-term care.
For the standalone product (as opposed to the hybrid that combines life insurance & LTCI as a rider), if the numbers of $2,200 and $12,000 were reversed - that would make more sense. We measure the current rate increases and what the new premium would be as a function of Original Pricing (OP), 1x being the original premium. OP(s) can vary significantly by carrier & book-of-business. We hear & see cases where OP(s) can be 10 x OP or greater. Using the example of $12,000 and $2,200 (if reversed) that translates to current premium of 5.45 x OP. Some books-of-business fall under this value, others below but generally to see an OP of 5 is not shocking in our experience, maybe a little above current industry average (last run of the numbers). Note the term Shock(ing) is a key industry term, used in the phrase Shock Lapse premium, which suggests what premium increase actuaries consider would immediately meet a lifetime loss ratio of 60%. One such filing suggested 2314% or 24.14 x OP. But this would never fly, so carriers gradually ramp up increases year after years to slowly clean out the book-of-business as LTCI consumers eventually catch on to this gambit thus increasing the forced lapse rate (more industry jargon).
You misunderstood what I was referring to regarding the $12,000 per year premium. I was trying to point out to the Rox that long-term care insurance 20 years ago did NOT cost $12,000 per year. The average premium TODAY is only $2,200 (and that average includes ALL premium increases).
Regarding rate increases, the data is public information. Also the insurance companies have to disclose their rate increase history to new applicants.
A 500% rate increase is unheard of.
A 2314% rate increase? Really?
Policies sold before the Rate Stability Regulation have consistently seen cumulative rate increases of 100% to 200% (not 500%). Most policies sold after the Rate Stability Regulation have had cumulative increases of 30% to 50%, if any. The Rate Stability Regulation removed the profit incentive from rate increases, which has helped to stabilize pricing for newer policies.
My policy, which I purchased in 2009, has had one rate increase of 20%. My policy is regulated by the Rate Stability Regulation in California. California has one of the better track records for overseeing long-term care insurance rate increases.
HI, in my jurisdiction (CT), all SERFF rate filings are public for greatest transparency & freely analyzable for those so inclined. So-called rate stabilization are mere words until one gets into the weeds, but luckily one transparency level down in the weeds before heading into actuarial obfuscation, certain carriers' post as part of their SERFF filings their rate history, such that a researcher can see what has happened across all states over the long-term by carrier's book-of-business.
CA may be an exception to the rule, but a policyholder that purchased post-legacy (2023+) may have yet to incur the wrath of the industry. It really depends on the projected lifetime loss ratio in relation to the target (60%). NAIC has claimed there is cross-subsidization taking place, defined as certain states not paying their fair share into the national book-of-business coffers at the expense of those states that jacked up premiums where regulation has been carrier friendly. This (NAIC) claim, and the response, has yet to play itself off so do not pop the champagne cork (of a mere 20% increase) for a standalone policy, if that is the one you hold < your mileage may differ >. The fact that any increase was given after premiums were "corrected" by 2009 (actually earlier) is not a cause for celebration.
Certain CT policyholders did, however, break out the champagne today when a proposed rate increase of 167% of one carrier's actuarial justified proposal was denied. It is hard to convey the political pressure that has taken place, including recent articles shedding a spotlight on this topic (ref. CT Mirror, an independent). If you also go over to the CT Dept of Insurance -website & lurk around, you will discover an eye popping SERFF filing that would have brought the net premium to 11.75 x OP (aggregate, average original premium across multiple books). This is the sort of thing that Seniors are especially concerned about when next year rolls around when the carrier in question refiles.
1) Please send me more information about the SERFF filing "that would have brought the net premium to 11.75 x OP". I was not able to find it. Maybe you can share the name of the company, when the increase was filed, etc...
2) Also, please send the same information for the filing which "suggested 2314% or 24.14 x OP." The name of the company would be helpful. Thanks in advance.
3) Since your reply brushed over the Rate Stability Regulation, I'll explain how the regulation works explaining the "old rules" and the "new rules". Connecticut is one of only 9 states that STILL uses the "old rules". 41 states adopted the "new rules" 15 years ago!
Under the old rules, when a rate increase was requested the insurance company could include normal profit levels into the rate increase. In many cases, a rate increase can result in increased profits for the insurance company.
Under the new rules, if an insurance company requests a rate increase they must decrease the profit levels in their pricing to a cap that is pre-determined by the new regulation. Hence, this regulation has removed the profit motive from rate increases.
Under the old rules profits were capped in the initial pricing, but more profit could be made when a rate increase was requested.
Under the new rules, higher profits are allowed in the initial pricing, but the higher profits can ONLY be kept IF THEY KEEP PREMIUMS LEVEL.
Under the old rules, the insurance companies were NOT allowed to include in their pricing any “margin for error”. There was no cushion priced into the policy in the event their claims exceeded their original projections. This resulted in a lot of rate increases.
Under the new rules, every insurance company is REQUIRED to include a “cushion” in their pricing–a margin for error. The goal of the “cushion” is to try to avoid the need for any future premium increases.
Also, under the new rules, all new policies must include all prior rate increases in the current pricing. Consumers purchasing a policy today will not be hit with the old, big rate increases because those old, big rate increases are required to be included in the policies sold today.
In the US, people setting up their estate planning now have to consult both lawyers and fiduciaries on how to protect at least some assets they would like to be able to leave to their heirs. In the US, for example, if an elder ends up in a Medicaid-based nursing home what little is left of their entire estate can be seized to reimburse Medicaid. There are other claw backs by both private insurers and the federal and state governments but that's one that gets lots of media attention.
The state Medicaid programs are required to "claw back" to reimburse themselves for what they paid for someone's care.
The "claw back" can be avoided by those who plan ahead and purchase special long-term care insurance policies called "Long-Term Care Partnership Programs".
1. Because it is a percentage based calculation, as the premium goes up, so does the amount of eligible retained dollars (the 15 or 20%). It is like a fee for service claim. As costs go up so does the amount the insurer can retain for "administration."
2. Many insurers have moved commissions to "service fee's," thus eliminating them from the calculation and artificially increasing the loss ratio.
If you are large enough, self funding should be a strong consideration to get out of this cycle.
Limiting profits from the provider side of vertically-integrated health insurance companies without also limiting profits from the provider side in a more general way will only redistribute outrageous profits away from insurers and towards monopoly hospital chains and their ilk.
As such, it could even make the problems worse by causing a dearth of companies willing to be insurers under those conditions.
Medical clinics often collude with insurance companies in assisting with usage "management." Sometimes takes the form of incentivizing doctors to limit access to care (especially Medicare patients, limiting to one or two a year accepted by the clinic) and also by instructing doctors to do the bare minimum of examining and immediately declare that treatment is medically unnecessary.
The "Medicare for all" slogan with its politically-generated connotations is what will continue derailing universal health care. Why? Because millions have experienced, directly or with loved ones, the expensive and mismanaged system labeled "Medicare." Try using universal health care instead. Amazing how that works because those against "Medicare for all" are actually not against universal health care yet have the belief that Medicare is some kind of socialism (or worse). And hopefully a universal health care system would avoid most of the problems plaguing Medicare!
No. Not "life insurance." LTC insurance. I met multiple times with insurance industry sales people SPECIFICALLY for an LTC policy having gone through the process already with an older relative. The least expensive plan I found between 2005 and when I retired was $7500 annual premium. Paying that for five years running would have earned LTC support for less than the paid premium totals. I no longer consider the LTC insurance industry to be a jot less than predatory and I think the industry counts on people not understanding what they are paying for - or doing the math.
You're 100% correct that a policy that cost $7,500 per year for $37,500 of benefits is HORRIBLE. Thankfully, there is no long-term care insurance pricing regulation that would have ever allowed such a policy.
Here's what true long-term care insurance looks like (a case I'm working on right now):
52-year old female in great health.
$400,000 of starting lifetime benefit, guaranteed to grow to $800,000 of benefits in 20 years.
Annual premium: $4,277
And another:
65-year old couple in great health. (another case I'm working on right now)
$750,000 of shared benefits guaranteed to grow to $1.5 million in benefits within by age 89.
Annual premium: $7,058 (that premium covers both spouses)
To suggest that a policy costs $7,500 per year for only $37,500 of benefits is ridiculous. It's like saying that a Lexus costs $1,000,000. Anyone with a little bit of common sense knows that a Lexus does not cost $1,000,000. But this is the internet and anyone can make a post saying, "A Lexus costs one million dollars. I still have the proof in my archives."
The average long-term care insurance premium (after rate increases) is about $2,200 per year as of 2022 (the most recent published data by the NAIC). "$12,000 per year premium two decades ago", doesn't fit with any published data. Is it possible it was actually a life insurance policy?
Long Term Care Insurance (LTCI) for whatever reason is considered part of health and has some properties in common with health contracts you are writing about. Since LTCI is a Long Duration Contract (LDC), it too has a notion of loss ratios, but these are LIFEITME loss ratios (LLR) typically spanning 50 - 60 years before the book-of-business is done with.
The history of the industry has been to drive rate increases to meet a target LLR of 60%, despite original (circa 1990 - 2005) marketing ploys to signup policyholders to an alleged "level premium product". While contracts stipulated "we can raise rates", it was true that carriers encouraged agents to claim, "we never have raised rates" and to add further assurance to the unwary client "please sign this document to say that, if we were to raise rates by 20%, would you still be able to afford the premiums?" giving the client the impression that such a rate increase (i.e. 20%) would be excessive.
You can easily Google & find references to what has happened to LTCI premiums over the past 10 - 15 years to seniors who now hold this (LDC) "toxic paper", baited year after year paying flat premiums, now being forced out of their contract due to premiums that have grown parabolic just about the time these policyholders have aged up & ready to go on claim.
I looked into many different insurance coverages for long term care. Did a great deal of research while I was still working, long before retirement. Even two decades ago LTC insurance was extortionately priced - as in $12k a year premiums (right - $1,000 per month) but that generally meant obtaining a mere five years' worth of care. Moreover, many LTC facilities do not like dealing with LTC insurance and do not accept it - hassle factor. There needs to be something reasonably positioned between the predatory LTC insurance practices and ending up on Medicaid in a mismanaged substandard 'nursing' home - especially with Medicaid disappearing. Brainiacs please take note. This is your assignment now!
The average long-term care insurance premium (including all rate increases) is about $2,200 per year as of 2022 (the most recent published data by the NAIC). "$12,000 per year premium two decades ago", is inconsistent with the published data (it's not even in the same ballpark). Is it possible it was actually a life insurance policy? Most financial advisors sell life insurance with a rider that allows the death benefit to be used to pay for long-term care.
For the standalone product (as opposed to the hybrid that combines life insurance & LTCI as a rider), if the numbers of $2,200 and $12,000 were reversed - that would make more sense. We measure the current rate increases and what the new premium would be as a function of Original Pricing (OP), 1x being the original premium. OP(s) can vary significantly by carrier & book-of-business. We hear & see cases where OP(s) can be 10 x OP or greater. Using the example of $12,000 and $2,200 (if reversed) that translates to current premium of 5.45 x OP. Some books-of-business fall under this value, others below but generally to see an OP of 5 is not shocking in our experience, maybe a little above current industry average (last run of the numbers). Note the term Shock(ing) is a key industry term, used in the phrase Shock Lapse premium, which suggests what premium increase actuaries consider would immediately meet a lifetime loss ratio of 60%. One such filing suggested 2314% or 24.14 x OP. But this would never fly, so carriers gradually ramp up increases year after years to slowly clean out the book-of-business as LTCI consumers eventually catch on to this gambit thus increasing the forced lapse rate (more industry jargon).
You misunderstood what I was referring to regarding the $12,000 per year premium. I was trying to point out to the Rox that long-term care insurance 20 years ago did NOT cost $12,000 per year. The average premium TODAY is only $2,200 (and that average includes ALL premium increases).
Regarding rate increases, the data is public information. Also the insurance companies have to disclose their rate increase history to new applicants.
A 500% rate increase is unheard of.
A 2314% rate increase? Really?
Policies sold before the Rate Stability Regulation have consistently seen cumulative rate increases of 100% to 200% (not 500%). Most policies sold after the Rate Stability Regulation have had cumulative increases of 30% to 50%, if any. The Rate Stability Regulation removed the profit incentive from rate increases, which has helped to stabilize pricing for newer policies.
My policy, which I purchased in 2009, has had one rate increase of 20%. My policy is regulated by the Rate Stability Regulation in California. California has one of the better track records for overseeing long-term care insurance rate increases.
HI, in my jurisdiction (CT), all SERFF rate filings are public for greatest transparency & freely analyzable for those so inclined. So-called rate stabilization are mere words until one gets into the weeds, but luckily one transparency level down in the weeds before heading into actuarial obfuscation, certain carriers' post as part of their SERFF filings their rate history, such that a researcher can see what has happened across all states over the long-term by carrier's book-of-business.
CA may be an exception to the rule, but a policyholder that purchased post-legacy (2023+) may have yet to incur the wrath of the industry. It really depends on the projected lifetime loss ratio in relation to the target (60%). NAIC has claimed there is cross-subsidization taking place, defined as certain states not paying their fair share into the national book-of-business coffers at the expense of those states that jacked up premiums where regulation has been carrier friendly. This (NAIC) claim, and the response, has yet to play itself off so do not pop the champagne cork (of a mere 20% increase) for a standalone policy, if that is the one you hold < your mileage may differ >. The fact that any increase was given after premiums were "corrected" by 2009 (actually earlier) is not a cause for celebration.
Certain CT policyholders did, however, break out the champagne today when a proposed rate increase of 167% of one carrier's actuarial justified proposal was denied. It is hard to convey the political pressure that has taken place, including recent articles shedding a spotlight on this topic (ref. CT Mirror, an independent). If you also go over to the CT Dept of Insurance -website & lurk around, you will discover an eye popping SERFF filing that would have brought the net premium to 11.75 x OP (aggregate, average original premium across multiple books). This is the sort of thing that Seniors are especially concerned about when next year rolls around when the carrier in question refiles.
1) Please send me more information about the SERFF filing "that would have brought the net premium to 11.75 x OP". I was not able to find it. Maybe you can share the name of the company, when the increase was filed, etc...
2) Also, please send the same information for the filing which "suggested 2314% or 24.14 x OP." The name of the company would be helpful. Thanks in advance.
3) Since your reply brushed over the Rate Stability Regulation, I'll explain how the regulation works explaining the "old rules" and the "new rules". Connecticut is one of only 9 states that STILL uses the "old rules". 41 states adopted the "new rules" 15 years ago!
Under the old rules, when a rate increase was requested the insurance company could include normal profit levels into the rate increase. In many cases, a rate increase can result in increased profits for the insurance company.
Under the new rules, if an insurance company requests a rate increase they must decrease the profit levels in their pricing to a cap that is pre-determined by the new regulation. Hence, this regulation has removed the profit motive from rate increases.
Under the old rules profits were capped in the initial pricing, but more profit could be made when a rate increase was requested.
Under the new rules, higher profits are allowed in the initial pricing, but the higher profits can ONLY be kept IF THEY KEEP PREMIUMS LEVEL.
Under the old rules, the insurance companies were NOT allowed to include in their pricing any “margin for error”. There was no cushion priced into the policy in the event their claims exceeded their original projections. This resulted in a lot of rate increases.
Under the new rules, every insurance company is REQUIRED to include a “cushion” in their pricing–a margin for error. The goal of the “cushion” is to try to avoid the need for any future premium increases.
Also, under the new rules, all new policies must include all prior rate increases in the current pricing. Consumers purchasing a policy today will not be hit with the old, big rate increases because those old, big rate increases are required to be included in the policies sold today.
Yes. It did. I still have multiple written quotes in my archive files.
The average long-term care insurance premium is $2,200 per year (including all premium increases.)
Why were you quoted a premium more than 5x the average?
In BC, Canada, long term care costs 80% of the person’s income with no obligation to spend one’s assets. So LTC insurance doesn’t exist here.
In the US, people setting up their estate planning now have to consult both lawyers and fiduciaries on how to protect at least some assets they would like to be able to leave to their heirs. In the US, for example, if an elder ends up in a Medicaid-based nursing home what little is left of their entire estate can be seized to reimburse Medicaid. There are other claw backs by both private insurers and the federal and state governments but that's one that gets lots of media attention.
Private insurers can't "claw back" one's estate.
The state Medicaid programs are required to "claw back" to reimburse themselves for what they paid for someone's care.
The "claw back" can be avoided by those who plan ahead and purchase special long-term care insurance policies called "Long-Term Care Partnership Programs".
Why not just eliminate the MLR requirement?
This is not beyond my ability to understand. But it sure did give me a headache.
Your car dealer analogy made me laugh...and then I wanted to cry.
You missed two of the biggest issues with the MLR
1. Because it is a percentage based calculation, as the premium goes up, so does the amount of eligible retained dollars (the 15 or 20%). It is like a fee for service claim. As costs go up so does the amount the insurer can retain for "administration."
2. Many insurers have moved commissions to "service fee's," thus eliminating them from the calculation and artificially increasing the loss ratio.
If you are large enough, self funding should be a strong consideration to get out of this cycle.
Limiting profits from the provider side of vertically-integrated health insurance companies without also limiting profits from the provider side in a more general way will only redistribute outrageous profits away from insurers and towards monopoly hospital chains and their ilk.
As such, it could even make the problems worse by causing a dearth of companies willing to be insurers under those conditions.
Excellent point!
Medical clinics often collude with insurance companies in assisting with usage "management." Sometimes takes the form of incentivizing doctors to limit access to care (especially Medicare patients, limiting to one or two a year accepted by the clinic) and also by instructing doctors to do the bare minimum of examining and immediately declare that treatment is medically unnecessary.
Expanded and improved Medicare for all will stop this game of corporate welfare
The "Medicare for all" slogan with its politically-generated connotations is what will continue derailing universal health care. Why? Because millions have experienced, directly or with loved ones, the expensive and mismanaged system labeled "Medicare." Try using universal health care instead. Amazing how that works because those against "Medicare for all" are actually not against universal health care yet have the belief that Medicare is some kind of socialism (or worse). And hopefully a universal health care system would avoid most of the problems plaguing Medicare!
We are all trying for the same outcome.
Get for-profit out of our healthcare.
No. Not "life insurance." LTC insurance. I met multiple times with insurance industry sales people SPECIFICALLY for an LTC policy having gone through the process already with an older relative. The least expensive plan I found between 2005 and when I retired was $7500 annual premium. Paying that for five years running would have earned LTC support for less than the paid premium totals. I no longer consider the LTC insurance industry to be a jot less than predatory and I think the industry counts on people not understanding what they are paying for - or doing the math.
You're 100% correct that a policy that cost $7,500 per year for $37,500 of benefits is HORRIBLE. Thankfully, there is no long-term care insurance pricing regulation that would have ever allowed such a policy.
Here's what true long-term care insurance looks like (a case I'm working on right now):
52-year old female in great health.
$400,000 of starting lifetime benefit, guaranteed to grow to $800,000 of benefits in 20 years.
Annual premium: $4,277
And another:
65-year old couple in great health. (another case I'm working on right now)
$750,000 of shared benefits guaranteed to grow to $1.5 million in benefits within by age 89.
Annual premium: $7,058 (that premium covers both spouses)
To suggest that a policy costs $7,500 per year for only $37,500 of benefits is ridiculous. It's like saying that a Lexus costs $1,000,000. Anyone with a little bit of common sense knows that a Lexus does not cost $1,000,000. But this is the internet and anyone can make a post saying, "A Lexus costs one million dollars. I still have the proof in my archives."
Thank you
If the MLR was lowered to pre-ACA levels (60% to 65%) wouldn't that help to lower the cost of medical care?
The average long-term care insurance premium (after rate increases) is about $2,200 per year as of 2022 (the most recent published data by the NAIC). "$12,000 per year premium two decades ago", doesn't fit with any published data. Is it possible it was actually a life insurance policy?
You did "research" as in the scientific method... ?
The word quality is a noun.
Bill