Our John Hancock LTC Premiums Doubled!

[dm200]

Ouch! Just got notice that our LTC from John Hancock Premiums doubled. Mine is going from $1623 to $3246 and my wife's from about $1300 to about $2600. Our financial situation can not stand doubling of premiums. We have options to reduce the coverage in various ways so the premiums will not go up. We chose the 5% compounded benefit increase, and one option (looks good to me) is to reduce the 5% compounded benefit to 2.5% compounded and the premium stays the same.

Ideas and suggestions? My benefit amount is now a bit over $8,000 per months, 90 day elimination period and 4 years benefit period.

[tomd37]

Our policy (originally issued in 1997 by Fortis) taken over and serviced by John Hancock as of about five years ago, rose sixty percent on the last renewal. The reduction in compounding might be a good alternative.

[dm200]

Our policy (originally issued in 1997 by Fortis) taken over and serviced by John Hancock as of about five years ago, rose sixty percent on the last renewal. The reduction in compounding might be a good alternative.

I may need to do some math (or some Diehards can comment), but at our ages (mid sixties), paying half as much for the difference between 5% and 2.5% compounding seems a bit distorted. That is, I would expect that doubling of premiums ($1623/yr) seems like a lot for 2.5% more compounding of benefits.

[rustymutt]

Our policy (originally issued in 1997 by Fortis) taken over and serviced by John Hancock as of about five years ago, rose sixty percent on the last renewal. The reduction in compounding might be a good alternative.

I may need to do some math (or some Diehards can comment), but at our ages (mid sixties), paying half as much for the difference between 5% and 2.5% compounding seems a bit distorted. That is, I would expect that doubling of premiums ($1623/yr) seems like a lot for 2.5% more compounding of benefits.

We have John Handcock, and it was purchased through an employer. Our premiums have never gone up, and won't as long as we make the payment. I thought premiums wouldn't go up on this type of policy, unless you've chosen to rise you limits.

[tomd37]

Rustymutt,

How old are you, are you still with the same employer where you bought it, and what happens to the policy when and if you leave that employer? For us older folks (mid to late 70s) who purchased LTC policies on our own and not through an employer, the rates can increase but only if the rates for everyone rise equally and are approved the the State Insurance Commission.

[rustymutt]

Rustymutt,

How old are you, are you still with the same employer where you bought it, and what happens to the policy when and if you leave that employer? For us older folks (mid to late 70s) who purchased LTC policies on our own and not through an employer, the rates can increase but only if the rates for everyone rise equally and are approved the the State Insurance Commission.

Tom, I retired in 2009, at age 53, and get that policy through my employer as a benefit. I think that group policies don't go up, if premiums are kept paid. I'm thinking that personalty bought policies don't have this stipulation.

[mikep]

Rustymutt,

How old are you, are you still with the same employer where you bought it, and what happens to the policy when and if you leave that employer? For us older folks (mid to late 70s) who purchased LTC policies on our own and not through an employer, the rates can increase but only if the rates for everyone rise equally and are approved the the State Insurance Commission.

Tom, I retired in 2009, at age 53, and get that policy through my employer as a benefit. I think that group policies don't go up, if premiums are kept paid. I'm thinking that personalty bought policies don't have this stipulation.

All LTC policies can have the premium go up on a class (not per person) basis.. all they have to do is convince the state board of their financial condition. The details should be in the very fine print of your policy. These policies are not guaranteed level premiums like term life or disability. Main reason I haven't bought one, I'm not sure the insurer would be around in 50 years to pay up when needed.

[stan1]

I think people sometimes view LTC in absolute terms: either you self insure 100% of costs or the insurance pays 100% of need. You may want to plan to share the risk of LTC with the insurer. For example, plan to have the LTC insurance pay the first $30K/year or $50K/yr of costs (with standard inflation), and self insure for the remainder (pick your dollar threshold). If you take that approach of sharing risk with the insurance company I think lowering the inflation compounding is a good way to manage your premium costs.

You may also want to consider whether it is possible to obtain LTC in a less expensive part of the country (long term care can be more than 50% less in flyover country than it is in high cost areas along the coasts). Fortunately my brother lives in Utah, so our plan is to move my mother there from California as she gets to the point where she needs assistance.

[stan1]

We have John Handcock, and it was purchased through an employer. Our premiums have never gone up, and won't as long as we make the payment. I thought premiums wouldn't go up on this type of policy, unless you've chosen to rise you limits.

You are quite lucky to have such a plan as it is rare. My group premiums went up about 25% a few years ago. I was given a menu of options to keep my current coverage with a 25% premium increase, reduce coverage to maintain my current premium, and several "compromise" options in the middle.

[nisiprius]

I stand here smugly self-satisfied about our decision, eleven years ago, to opt for a ten-annual-payment plan. I am sure the fates will punish me for my smugness. Our policy is also with the company whose name, identity, and corporate offices change every few years but always begin the words "John Hancock." JHBTFSLPK or something. Maybe the payments had built-in padding, but, in any case, we were able to judge that we could afford them and we got them done and over with. I was very concerned about the scenario of paying year after year and not needing it, then having to drop it due to increasing costs and decreasing income and then not having it when needed. Incidentally the premiums could have increased during the ten-year period, but fortunately didn't.

I think people sometimes view LTC in absolute terms: either you self insure 100% of costs or the insurance pays 100% of need.

One of the compromises we made to afford the policy we selected was to choose the minimum daily coverage that made the policy "Medicaid-qualified." That appeared to be--we didn't have the courage to look into it in great detail--an amount that was low but not impossibly unrealistic. But that most likely would cover about 2/3 of costs. I'm still not sure whether 2/3 of a loaf is better than none. There's always the concern that we might be the hardworking ants who simply managed to end up paying for something we coulda gotten The Government to pay for. Of course, with our luck we'll never use it and the premiums will have been wasted anyway--hey, wait, that would be good luck.

[bluemarlin08]

I have never seen a group LTC policy that doesn't have the right to increase rates. I would read your policy and confirm, if that is true it will say non-cancellable.

To the OP, rate increases may continue if we continue in this low interest rate environment, changing the inflation rider would be choice.

[HardKnocker]

JH will let you know the next time when they would like to lose you as a policyholder by again doubling your premium.

You are the frog in the pot of slowly heating water.

[Calm Man]

I am far from an expert on this topic however I do read a lot. I am 60. I made the decision 20 years ago to forego LTC. I have read that these policies are a disaster for the insurance companies and many or most do not write them anymore. The only saving grace for the insurance companies is they ahve the right to raise the premiums. I would think that any policy with a benefit increase will get hit very hard with increases. Even policies without a benefit increase will. I would not be surprised if your premiums double again in the next few years so I would watch carefully to see and decide each year whether to continue. I suggest remembering my mantra which is that sunk costs are sunk costs and should not influence future decisions. Good luck on this as I am sure it is a difficult financial and emotional decision.

[dhodson]

since insurance companies do not have skin in the game, this type of problem is practically inevitable.

in many states, the state insur comm has to allow the increase if they are shown data that the original assumptions were wrong and the rate increase is thus justified in their view.

In this case the two big problems for the insurance company are lack of lapses and low interest rate environment. They expected lapse rates more in line with permanent insurance where the great majority lapse/surrender. A higher percentage of people are continuing to value their policies. The increases in medical costs for the most part are not a factor except for unlimited benefit policies which are uncommon especially at this time and most arent even selling them any more.

considering one is for the most part purchasing for future protection (while protection occurs once the policy is in force, most are concerned about the need as they get older and the risk is greater), one should only purchase policies where they feel comfortable that they can afford potential rate increases.

[dm200]

1. I was well aware of the ability of JH to increase premiums when we purchased the policies. It was my understanding, at the time, though that "solid" companies like JH were less likely to do so, and, if raised, the raise was likely to be "moderate".

2. The notice of the premium doubling attibutes this increase to larger benfits being paid out as well as the projected future increases in benefits paid. The notice also, with large print emphasis, says that the increase has nothing to do with low interest rates, or the financial crises of the past few years.

3. We purchased this as individuals, and not through an employer. A friend of mine is a , now retired, federal employee. he and his wife purchased LTC through the federal employee plan and he tells me their premiums have increased as well. It is my understanding (could be wrong) that employer plans, in general, can have increased premiums as well.

4. If there is any "good news" in any of this, the fact that we chose a fairly high coverage amount per month means that lowering the annual adjustmenrt of benefits to 2.5% will still have a not-so-small benefit amount (now over $8,000 per month).

[dhodson]

1. I was well aware of the ability of JH to increase premiums when we purchased the policies. It was my understanding, at the time, though that "solid" companies like JH were less likely to do so, and, if raised, the raise was likely to be "moderate".

2. The notice of the premium doubling attibutes this increase to larger benfits being paid out as well as the projected future increases in benefits paid. The notice also, with large print emphasis, says that the increase has nothing to do with low interest rates, or the financial crises of the past few years.

3. We purchased this as individuals, and not through an employer. A friend of mine is a , now retired, federal employee. he and his wife purchased LTC through the federal employee plan and he tells me their premiums have increased as well. It is my understanding (could be wrong) that employer plans, in general, can have increased premiums as well.

4. If there is any "good news" in any of this, the fact that we chose a fairly high coverage amount per month means that lowering the annual adjustmenrt of benefits to 2.5% will still have a not-so-small benefit amount (now over $8,000 per month).

There is nothing solid about one company or another that will make a difference on this unless you want to use an example of a company that priced it a lot higher to begin with like NWM. They have a lot more breathing room before rate increases should be expected but that is sort of like prepaying your taxes and being super happy if you get a refund. Otherwise all these companies have the same issue and none are really taking a hit on it but passing it along. If you go over to insurance-forums.net and hang out at the ltci forum, you will see that some of the ltci specialists realize that not having skin in the game is a problem. When they say larger benefits being paid out that is directly related to the lapse rate especially since most policies have limits so they have always known what their maximum exposure is on those policies. They just felt fewer would be in force.

If by financial crisis you are talking about stocks then it shouldnt affect the company much. Insurance companies are required to mostly invest in treasuries and bonds. That plus the lapse rates is why they are so secure. There are no magical investments in this world for individuals or insurance companies. To say the interest rates are having no effect isnt appropriate in my view. It directly relates to costs and how much money they can make. Most companies that have posted notices of increases or removal of product or repricing have owned up to this.

I personally would only consider a limited pay ltci policy and those are getting harder to find.

[washjeff]

We live in Tennessee (where LTC costs are reasonable), are 66 and have JH LTC policies that we bought in 2008. Premiums were $3,300 each, including riders, for 5 year 5% compounding, $180/day. Our premiums are going up 16%. There is a strong history of dementia in my family (including my 63 year old sister who has early onset Alzheimer's) so there is no way I am giving up this policy as long as I can afford it.

JH provided lots of changes one could make to maintain the same premium, including accepting a 4.2% inflation factor rather than 5%. I could probobly self insure, but I'm looking at this as more "estate preservation insurance." So, I changed from a 90 day elimination period to a 365 day elimination period which resulted in my premium actually going down a little bit. I can handle a year (or two if my wife needs it too) of assisted living if I have to, but would really like to continue to have the "catastophic" coverage in the event (likely for at least one of us based on family history) my wife or I face an extended stay in an assisted living/dementia unit. If we don't need to use the policy, I won't begrudge the "wasted" premiums, just as I don't begrudge the homeowners or car insurance premiums I pay but, fortunately, have not used much over the past 45 years.
Jeff in Tennessee

[nedsaid]

I considered buying LTC Insurance at one time. I wavered after seeing threads like this on this forum. Seeing firms like Met Life drop out of this business also gave me pause.

It made me think that these policies were not properly priced to begin with. Low interest rates probably have a lot to do with this as well.

[john94549]

LTCI always seemed foolhardy. The premiums were always hard to predict (read: unaffordable) while the benefits were capped.

As with most insurance products, folks with even modest assets were likely better off not buying it.

[zaplunken]

Why would you decrease the inflation protection from 5% to 2.5%, I think the inflation rider is critical unless you expect to use your LTC in a year or 3. Also why have a 4 year coverage, the average stay is 2 years. I'd keep the former and decrease the latter if that made a significant change in the premium which I think will be difficult to achieve. I have a JH LTC policy and my rates have yet to increase in 5+ years.

[BruceCM]

The principal reason for the continuing premium hikes is because these specialized form of 'qualified' disability insurance were underpriced when first offered in 1998 and 1999. This is partly because LTC insurers were projecting much better sales and laspse rates at 10 years were projected to be greater than they have been. Long term insurers hold primarily bonds not because they are required to, but because the NAIC set ratios of liability to capital must be maintained, and high credit bonds are the best way to do this, although insurers do hold equities.

As mentioned, its is always risky to pay a financial entity, insurance company or anyone else, today for projected future benefits, when your payments are illiquid and the financial entity has no stake in the promised or implied-promised outcome. You see the same kind of situation with unlisted REITs and the various forms of indexed annuities. It always sounds better on the front end than what it ends up becoming.

When I retired from the military (Federal employee) in 1999, I was flooded with promos from the OPM, recommending we purchase JH (then in association with NY Life or Met Life...can't remember which) LTCi. I thought it through then and spoke with some experienced CFP and CPA friends, who recommended against it. The concept of LTCi is fine, its the way this new form of insurance is being marketed and the incentives to the insurers selling these that dissuaded us from buying the policies. And not to sound too discouraging, but I think there are more premiums hikes to come.

BruceM

[jeffyscott]

I stand here smugly self-satisfied about our decision, eleven years ago, to opt for a ten-annual-payment plan.

Because of threads like this one, that sort of premium plan is the only way I would consider buying this. My wife's employer previously provided coverage for both her and me. After they dropped this benefit we were offered the option to convert to a personal policy, we did not even investigate the cost, because the current cost would tell us nothing about what it will be in future.

Recently we got an offer to get a price on a paid-up policy, with the full premium paid at once or over three years. This one we asked for a quote on. I am expecting the cost to be more than we would be willing to pay, but we will see.

[jeffyscott]

Also why have a 4 year coverage, the average stay is 2 years.

Why would you insure based on the average? To me the opposite would make more sense...I pay for the first 1 or 2 years and then the insurance company has to pay, without limit.

If the average person has lifetime medical costs of $300,000, would you then say to someone who had a policy with a $600,000 lifetime cap that the best way to lower premiums would be to opt for a policy with an even lower cap?

[dm200]

My wife leaned towards just cancelling the LTC policies, but I pressed for continuing them. I (at least temporarily) prevailed. I told her that we could re-evaluate at any time, but the offer of the SAME premiums by just reducing the 5% annual compounding to 2.5% vs. doubled premiums and keeping the 5% seemed a relatively good way to go.

I still am just as "perplexed" by the premium options. The numbers just don't make sense. My policy, for example, is 4 years, 90 day elimination period and the current benefit amount (compounded upwards by 5% compounded per year since the policy was purchased) is $8,145. My annual current premium is $1,623 and that would double to $3,246 if I kept the 5% compounded benefit. Lowering the annual increase to 2.5% lowers next year's benefit by $204 per month. The benefit difference between 5 and 2.5% rakes 29 years to double. I am no actuary, but doubling the premium that takes 29 years do halve the benefit doesn;t make sense to me. There must be something else going on - OR my sense of the numbers is wrong.

[madbrain]

I also have John Hancock LTC, purchased through a former employer. The premiums went up in the first year !
The policy has an option to have reduced benefits after 3 years, fully paid . Which means no more premium after that time.
It's coming up in April, and I will be exercising that option.