Proposed Long Term Care Insurance Changes

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Proposed Long Term Care Insurance Changes

Postby donall » Thu Jul 25, 2013 4:49 pm

As some of the readers know, I am helping an elder relative with finances, health care, etc. The relative recently received a mailing from Penn Treaty, the relative's long term care co. It is in rehabilitation status and the mailing informed of proposed revisions to the plan.
The proposed changes to those who are not currently receiving benefits are:
-future compounded inflation reduction (inflation limited to 3% to 4.5%)
-maximum benefit period reduction (8-15 years maximum)
-benefit eligibility restricted to tax qualified triggers
-elimination period increased to 90 days for policies with less than 90 day elimination period (6 months added to length of benefits)
The first two vary by state. And yes "increases could become necessary later."
What do others think about these changes? Could changes such as this affect your long term care decisions?
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Re: Proposed Long Term Care Insurance Changes

Postby CaliJim » Fri Jul 26, 2013 1:25 pm

I don't have LTCi myself, so I can't speak from direct experience. But I have been interested in this area because I go back and forth in my own mind about 'self-insuring' vs buying a policy.

There have been several threads on long term care. If you haven't read them yet, you might find some helpful thoughts there. Use the search box in the upper right corner to find them. Some bogleheads have mentioned dropping their policies when rates have gone up.

The LTC industry is under pressure... they underestimated costs and future liabilities, and offered policies with benefit levels that were too high compared to their premiums. So it is not at all surprising to hear about your situation.

I guess there just just aren't enough people in the LTC insurance pools who die suddenly without needing to collect benefits. Instead of compressed morbidity, a lot of people who buy LTCi DO go into nursing homes.
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Re: Proposed Long Term Care Insurance Changes

Postby Phineas J. Whoopee » Fri Jul 26, 2013 5:38 pm

Your relative has a contract, and their counterparty is proposing to make the terms worse. Are they offering anything to compensate your relative for it?

It sounds as if they are threatening unspecified price increases if your relative doesn't agree. They can do it, as long as it's not per individual and the relevant state insurance regulator agrees.

Are they offering a written, concrete, guaranteed-for-as-long-as-they-stay-in-business promise of never increasing premiums if your relative agrees to the reduced coverage?

If not, what is the incentive to give up what has already been contracted? It's not as if the insurer couldn't apply to the state to raise the premiums even if all of the insureds agree to accept less than they have been paying for.

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Re: Proposed Long Term Care Insurance Changes

Postby Taylor Larimore » Fri Jul 26, 2013 5:49 pm

donall:

To make an informed decision, you need to know, as PJW suggests, exactly what will happen if your relative does not agree to the benefit reductions.

Best wishes.
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Re: Proposed Long Term Care Insurance Changes

Postby Dandy » Fri Jul 26, 2013 5:59 pm

LTC is a great concept but seems to be a terrible product now. Large premium increases, companies exiting the market, benefit restrictions etc. Seems like you are buying a pig in a poke. You don't know what you have bought, what the benefits will be and what it will cost and might be serviced by a company no longer selling the product. Now there's a product I don't want to buy -- but might need.
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Re: Proposed Long Term Care Insurance Changes

Postby Phineas J. Whoopee » Fri Jul 26, 2013 6:08 pm

Dandy wrote:LTC is a great concept but seems to be a terrible product now. Large premium increases, companies exiting the market, benefit restrictions etc. Seems like you are buying a pig in a poke. You don't know what you have bought, what the benefits will be and what it will cost and might be serviced by a company no longer selling the product. Now there's a product I don't want to buy -- but might need.

I suppose, Dandy, but the OP's question is not "should my relative buy it today," but rather "my relative bought it before and has been paying all along - so how should she or he respond to the insurance company's proposal?"

Yes, there is sunk cost, but on the other hand Penn Treaty has an obligation it's entered into. Perhaps it would not do so today, but it's done. So now what?

I already expressed my opinion regarding the latter.

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Re: Proposed Long Term Care Insurance Changes

Postby gerrym51 » Fri Jul 26, 2013 6:43 pm

i googled Penn treaty. it is in financial straits and regulators have decided to let it ask for large increase or let it curb contracts.you should google and read some of this.
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Re: Proposed Long Term Care Insurance Changes

Postby bluemarlin08 » Fri Jul 26, 2013 9:06 pm

Tough call. For years agents used the company for all their medically challenged clients. Chickens coming home to roost. Things will only get worse.
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Re: Proposed Long Term Care Insurance Changes

Postby donall » Fri Jul 26, 2013 11:24 pm

The notification is a legal proposal for the entire group that needs to be approved by the court, inviting informal comments until 8-31. No notification of premium increases yet, but since the company is in such financial straits, there will probably be some in the future. There was an increase in premiums a number of years ago and a consideration or lump sum was offered if one did not accept the higher premium and terminated the contract. That was an unbelievably low amount. A consideration for termination has not yet been offered.

Since the relative is in the mid eighties, I don't think there is any other decision than continuing to pay the premiums even if the premiums increase. What I think is interesting is that the relative was sold the worst policy in terms of benefits: no inflation increases, 2 year benefit period, and no elimination period, so there really is no decision to make since the proposed benefits are almost the same.

But what is of interest in this situation is to see that some of the benefits that are recommended such as inflation increases and that one pays dearly for can be decreased. A contract is not exactly a contract.

As some of you know I keep bouncing back and forth about LTC for myself. Should I purchase or should I self-insure? I decide to buy LTC insurance because it makes sense and then I have to read something like this legal notice from Penn Treaty and then I say, "No way, self-insurance is the way to go."
Last edited by donall on Fri Jul 26, 2013 11:39 pm, edited 2 times in total.
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Re: Proposed Long Term Care Insurance Changes

Postby donall » Fri Jul 26, 2013 11:31 pm

bluemarlin08 wrote:Tough call. For years agents used the company for all their medically challenged clients. Chickens coming home to roost. Things will only get worse.


Hah, thanks for this information, it explains a lot of things. Makes me pleased that the rehabilitation plan includes a suspension of commission and other payments to agents.
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Re: Proposed Long Term Care Insurance Changes

Postby Dandy » Sat Jul 27, 2013 9:33 am

Without knowing all the particulars it seems as if paying future premiums is likely throwing good money after bad. It is hard to stop paying and "easy" to pay and hope it will be there when/if needed. I don't know if there is a "right" answer -- it is a gamble either way and no trusted odds maker. If the company had poor underwriting then I doubt they can save the product. There is long term exposure and you can be sure that those most likely to need the coverage will hang on to the bitter end.

Not every response to every post can answer the OP's question. Sometimes the response is just a sympathetic comment about the OP's situation and an expression of concern about the product for prospective buyers.
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Re: Proposed Long Term Care Insurance Changes

Postby gerrym51 » Sat Jul 27, 2013 10:03 am

my wife own ltci policies from Genworth(when GE). we think they are a valuable product.

i won't try to convince anybody.

what i will say is ONLY CONSIDER policies from the top 3 providers, they have been in this a long time and will likely be the survivors.

Genworth has been in this the longest and never sold policies at ridiculously low prices(although low interest rates have hurt them). there are a couple of others that are also good.

I suggest research and stick to one of top 3.
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Re: Proposed Long Term Care Insurance Changes

Postby dhodson » Sat Jul 27, 2013 12:44 pm

donall wrote:The notification is a legal proposal for the entire group that needs to be approved by the court, inviting informal comments until 8-31. No notification of premium increases yet, but since the company is in such financial straits, there will probably be some in the future. There was an increase in premiums a number of years ago and a consideration or lump sum was offered if one did not accept the higher premium and terminated the contract. That was an unbelievably low amount. A consideration for termination has not yet been offered.

Since the relative is in the mid eighties, I don't think there is any other decision than continuing to pay the premiums even if the premiums increase. What I think is interesting is that the relative was sold the worst policy in terms of benefits: no inflation increases, 2 year benefit period, and no elimination period, so there really is no decision to make since the proposed benefits are almost the same.

But what is of interest in this situation is to see that some of the benefits that are recommended such as inflation increases and that one pays dearly for can be decreased. A contract is not exactly a contract.

As some of you know I keep bouncing back and forth about LTC for myself. Should I purchase or should I self-insure? I decide to buy LTC insurance because it makes sense and then I have to read something like this legal notice from Penn Treaty and then I say, "No way, self-insurance is the way to go."


Well its more like the guarantees of the contract are only as good as the company's ability to make good on them. People throw around the term guarantee like it means the opposite cant happen but that isnt the truth. When one buys a contract, one isn't really transferring all the risk to the insurance company.
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Re: Proposed Long Term Care Insurance Changes

Postby dhodson » Sat Jul 27, 2013 12:45 pm

gerrym51 wrote:my wife own ltci policies from Genworth(when GE). we think they are a valuable product.

i won't try to convince anybody.

what i will say is ONLY CONSIDER policies from the top 3 providers, they have been in this a long time and will likely be the survivors.

Genworth has been in this the longest and never sold policies at ridiculously low prices(although low interest rates have hurt them). there are a couple of others that are also good.

I suggest research and stick to one of top 3.


Genworth is one of the lower cost providers. I wouldnt say ridiculously low but its a stock company whom GE decided to spin off.
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Re: Proposed Long Term Care Insurance Changes

Postby gerrym51 » Sat Jul 27, 2013 12:56 pm

i said research carefully. they are the longest supplier of ltci-many companies have come and gone since then. IF you are going to buy ltci-buy from the ones with the best and longest track records. when we bought GE was not the lowest cost provider-but they were the longest in and NOT the highest cost provider. :mrgreen:
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Re: Proposed Long Term Care Insurance Changes

Postby Calm Man » Sat Jul 27, 2013 1:02 pm

Insurance is great as long as the insurer can pay. With LTC policies "you ain't seen nothing yet". I don't really care how strong the insurer is as from an actuarial view they blew it on these policies.
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Re: Proposed Long Term Care Insurance Changes

Postby dhodson » Sat Jul 27, 2013 1:07 pm

some of that doesnt necessarily apply. For instance like you mentioned some companies have gone. That means they arent selling LTCi any longer. It doesnt mean they wont pay necessarily. Will such companies be more likely to raise rates then other companies or have problems similar to the OPs. I dont know but if you consider how much a percentage of the business genworth has in its possession, some might consider it more risky. I cant remember who posted it but genworth's stock was said to be close to zero a few years ago. If you talk to enough agents about straight LTCi polices and im talking agents that want to sell them (some agents even ones here arent fans any longer), they seem to go under 2 camps. Some will say go with a company like genworth with the significant understanding that rate increases are likely. As long as they stay in business and the rates dont continuously go through the roof, they seem to have one of the better bangs for the buck (assuming u are purchasing ltci which i am not). Others will say go with a mutual such as NWM or one of the others that have yet to increase rates, LTCi is also a smaller part of their business so the hope is they can weather the storm better. They are at least initially more expensive. They may pay dividends and thus in the end not be more expensive but one doesnt know that for sure. They will say that instead of focusing on the fact that some companies have been in the business longer, these companies waited until they understood the situation better before diving in and thus are better prepared.
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Re: Proposed Long Term Care Insurance Changes

Postby mickeyd » Sat Jul 27, 2013 1:34 pm

Any kind of insurance policy seems to be driven by the amount that has to be paid out in the form of claims by the insurance company. Life insurance, for example, has over 100 years of very accurate claims history among many companies and the death rate can be be predicted in a fairly accurate way using the law of large numbers. LTCi does not have that track record as it has only been around for around 30 years so few actual claims have been submitted for payment. No law of large numbers seems to apply here.

The insurance company actuaries have been playing a guessing game so far and it has been failing at a pretty high rate. Things to consider when paying higher and higher LTCi premiums.
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Re: Proposed Long Term Care Insurance Changes

Postby gerrym51 » Sat Jul 27, 2013 2:13 pm

dhodson wrote:some of that doesnt necessarily apply. For instance like you mentioned some companies have gone. That means they arent selling LTCi any longer. It doesnt mean they wont pay necessarily. Will such companies be more likely to raise rates then other companies or have problems similar to the OPs. I dont know but if you consider how much a percentage of the business genworth has in its possession, some might consider it more risky. I cant remember who posted it but genworth's stock was said to be close to zero a few years ago. If you talk to enough agents about straight LTCi polices and im talking agents that want to sell them (some agents even ones here arent fans any longer), they seem to go under 2 camps. Some will say go with a company like genworth with the significant understanding that rate increases are likely. As long as they stay in business and the rates dont continuously go through the roof, they seem to have one of the better bangs for the buck (assuming u are purchasing ltci which i am not). Others will say go with a mutual such as NWM or one of the others that have yet to increase rates, LTCi is also a smaller part of their business so the hope is they can weather the storm better. They are at least initially more expensive. They may pay dividends and thus in the end not be more expensive but one doesnt know that for sure. They will say that instead of focusing on the fact that some companies have been in the business longer, these companies waited until they understood the situation better before diving in and thus are better prepared.


you answered your own question. if a company does not sell ltci now you can't buy from them even if they are still servicing clients they had. what i said was IF you are going to buy a policy the things to consider. OF the companies still in the game-repeat still in the game-Genworth to me still has the best track record.of course i own theirs. still only 3 companies should be considered tody. i will leave it to people to research which ones.
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Re: Proposed Long Term Care Insurance Changes

Postby ourbrooks » Sat Jul 27, 2013 2:16 pm

Ask yourself, what's the risk the insurance is covering? It's not medical care expenses; those are covered by Medicare. As long as your relative is being treated for a medical condition, the insurance isn't needed.

Long term care is not medical care; it's help in performing the normal activities of every day life: getting dressed, preparing and eating food, cleaning oneself and the house. Not surprisingly, statistically speaking, most long term care is performed in the home by relatives. Next biggest category is care in the home provided by outsiders. That hardly sounds like the kind of thing you need insurance for; many people pay for it out of retirement income.

At some point, most people end up needing full time nursing care. That's a $90,000 a year proposition, but they need it for a very short period of time. The median is only for 5 months. Generally, if you're feeble enough to require round the clock skilled nursing, you probably are suffering from some severe medical condition and are near the end of life. Again, many people can afford the $50,000 or so that care costs; if nothing else, they no longer need their house at this point.

So what's all the fuss about? Why LTCi? A small fraction of people are diagnosed with senile dementia at a fairly young age, 60s or 70s. Their bodies are in fine shape but they require constant supervision for 5, 10, or even 20 years. They're the ones who raise the average nursing home stay to two years, from the median of 5 months.

Someone in their 80's is very unlikely to require nursing home care for long periods of time, even if the reason they need some financial help is because of mental failing. They just aren't likely to live that long. Besides nursing home care, there are still all of the other kinds of long term care. Without the LTCi policy, would the person still have enough funds to pay for, say, someone coming in daily to prepare meals and clean? If they're to the point at which they need help getting into and out of bed and dressing, could they afford assisted living? All of these kinds of things need to be thought about in making the LTCi decision.
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Re: Proposed Long Term Care Insurance Changes

Postby dhodson » Sat Jul 27, 2013 2:36 pm

gerrym51 wrote:
dhodson wrote:some of that doesnt necessarily apply. For instance like you mentioned some companies have gone. That means they arent selling LTCi any longer. It doesnt mean they wont pay necessarily. Will such companies be more likely to raise rates then other companies or have problems similar to the OPs. I dont know but if you consider how much a percentage of the business genworth has in its possession, some might consider it more risky. I cant remember who posted it but genworth's stock was said to be close to zero a few years ago. If you talk to enough agents about straight LTCi polices and im talking agents that want to sell them (some agents even ones here arent fans any longer), they seem to go under 2 camps. Some will say go with a company like genworth with the significant understanding that rate increases are likely. As long as they stay in business and the rates dont continuously go through the roof, they seem to have one of the better bangs for the buck (assuming u are purchasing ltci which i am not). Others will say go with a mutual such as NWM or one of the others that have yet to increase rates, LTCi is also a smaller part of their business so the hope is they can weather the storm better. They are at least initially more expensive. They may pay dividends and thus in the end not be more expensive but one doesnt know that for sure. They will say that instead of focusing on the fact that some companies have been in the business longer, these companies waited until they understood the situation better before diving in and thus are better prepared.


you answered your own question. if a company does not sell ltci now you can't buy from them even if they are still servicing clients they had. what i said was IF you are going to buy a policy the things to consider. OF the companies still in the game-repeat still in the game-Genworth to me still has the best track record.of course i own theirs. still only 3 companies should be considered tody. i will leave it to people to research which ones.


Sorry if i wasnt clear. My point is that being the longest in the industry ISNT worth much and is frankly a detriment. In fact they likely have the most "wrong priced" business on the books. Just so you know, if i were to buy a product today, id probably buy genworth but it wouldnt be bc they have been in the business longer bc that isnt helpful.
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Re: Proposed Long Term Care Insurance Changes

Postby gerrym51 » Sat Jul 27, 2013 2:54 pm

dhodson wrote:
gerrym51 wrote:
dhodson wrote:some of that doesnt necessarily apply. For instance like you mentioned some companies have gone. That means they arent selling LTCi any longer. It doesnt mean they wont pay necessarily. Will such companies be more likely to raise rates then other companies or have problems similar to the OPs. I dont know but if you consider how much a percentage of the business genworth has in its possession, some might consider it more risky. I cant remember who posted it but genworth's stock was said to be close to zero a few years ago. If you talk to enough agents about straight LTCi polices and im talking agents that want to sell them (some agents even ones here arent fans any longer), they seem to go under 2 camps. Some will say go with a company like genworth with the significant understanding that rate increases are likely. As long as they stay in business and the rates dont continuously go through the roof, they seem to have one of the better bangs for the buck (assuming u are purchasing ltci which i am not). Others will say go with a mutual such as NWM or one of the others that have yet to increase rates, LTCi is also a smaller part of their business so the hope is they can weather the storm better. They are at least initially more expensive. They may pay dividends and thus in the end not be more expensive but one doesnt know that for sure. They will say that instead of focusing on the fact that some companies have been in the business longer, these companies waited until they understood the situation better before diving in and thus are better prepared.


you answered your own question. if a company does not sell ltci now you can't buy from them even if they are still servicing clients they had. what i said was IF you are going to buy a policy the things to consider. OF the companies still in the game-repeat still in the game-Genworth to me still has the best track record.of course i own theirs. still only 3 companies should be considered tody. i will leave it to people to research which ones.


Sorry if i wasnt clear. My point is that being the longest in the industry ISNT worth much and is frankly a detriment. In fact they likely have the most "wrong priced" business on the books. Just so you know, if i were to buy a product today, id probably buy genworth but it wouldnt be bc they have been in the business longer bc that isnt helpful.



i gave several criteria. it seems to me the number one criteria is will they still be in business. the past is no predictor of the future but their history seems to predict they ywill. again it's a research issue. I have ltc insurance. many don't and don't want to pay the price. I'm only talking to those who plan on buying-i'm not advocating buying in general
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Re: Proposed Long Term Care Insurance Changes

Postby dhodson » Mon Aug 12, 2013 6:40 pm

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Re: Proposed Long Term Care Insurance Changes

Postby gerrym51 » Mon Aug 12, 2013 7:12 pm




if somebody wants a LTC policy they should think about buying now. Genworth is a big company and will still be around to service policies and it will be many years before they start to work down policy serving staff. if they stop selling the providers left may not be able to handle business.


i have genworth ltci policy myself
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Re: Proposed Long Term Care Insurance Changes

Postby Steelersfan » Mon Aug 12, 2013 9:02 pm

gerrym51 wrote:



if somebody wants a LTC policy they should think about buying now. Genworth is a big company and will still be around to service policies and it will be many years before they start to work down policy serving staff. if they stop selling the providers left may not be able to handle business.


i have genworth ltci policy myself


Just be ready for this, whatever Genworth decides to do about exiting the business:

"the firm could withdraw from the market if it does not win regulatory approval for new rate hikes on about 650,000 older, existing policies."

"Genworth is aiming for $200 to $300 million in rate hikes on all policies sold between 1974 and 2001 and on one policy sold between 2001 and 2007....In 2011, Genworth collected about $1.1 billion in premium from these policies. "

"if a major carrier stops selling new policies, buyers can keep their existing policies as long as they keep paying premiums. Those premiums, however, may be increased."


What no one knows is how much premiums on existing policies will increase in the future.
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Re: Proposed Long Term Care Insurance Changes

Postby gerrym51 » Mon Aug 12, 2013 9:11 pm

Steelersfan wrote:
gerrym51 wrote:



if somebody wants a LTC policy they should think about buying now. Genworth is a big company and will still be around to service policies and it will be many years before they start to work down policy serving staff. if they stop selling the providers left may not be able to handle business.


i have genworth ltci policy myself


Just be ready for this, whatever Genworth decides to do about exiting the business:

"the firm could withdraw from the market if it does not win regulatory approval for new rate hikes on about 650,000 older, existing policies."

"Genworth is aiming for $200 to $300 million in rate hikes on all policies sold between 1974 and 2001 and on one policy sold between 2001 and 2007....In 2011, Genworth collected about $1.1 billion in premium from these policies. "

"if a major carrier stops selling new policies, buyers can keep their existing policies as long as they keep paying premiums. Those premiums, however, may be increased."


What no one knows is how much premiums on existing policies will increase in the future.



i don't own any genworth policy that is affected by any current rate hike requests. Having said that there may be some. nevertheless genworth is the major big carrier. they do over 1/2 the policies. if they stop selling it it will be a gigantic shift-i don't know if any ltci policies will be sold by anybody. Having said that i have watched genworth constantly over the 10 years since we bought our policies from them and keep waiting for a rate hike request and not getting it. I actually do not think they will stop selling policies. they usually bluster,bully, threaten to get out to scare the regulators. what i think is most likely is they will drop out of some states and keep others. the number of polcies they sell has dropped this year but that is mostly because they have increased underwriting and prices. like all insurance companies they want profitable business not just business.
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Re: Proposed Long Term Care Insurance Changes

Postby bluemarlin08 » Mon Aug 12, 2013 10:00 pm

IMO, Genworth has come very close to pricing their policies at a proper rate. They are assuming very low lapses, very low interest rates, a continuing stream of rate increases on older policies.
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Re: Proposed Long Term Care Insurance Changes

Postby Phineas J. Whoopee » Tue Aug 13, 2013 8:42 am

Steelersfan wrote:...
What no one knows is how much premiums on existing policies will increase in the future.

It seems as if stopping sales of new policies would leave the population they've insured getting older and older, that is higher and higher risk, without anybody lower-risk coming in. That wouldn't bode well for premiums.
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Re: Proposed Long Term Care Insurance Changes

Postby Steelersfan » Tue Aug 13, 2013 3:25 pm

Phineas J. Whoopee wrote:
Steelersfan wrote:...
What no one knows is how much premiums on existing policies will increase in the future.

It seems as if stopping sales of new policies would leave the population they've insured getting older and older, that is higher and higher risk, without anybody lower-risk coming in. That wouldn't bode well for premiums.
PJW


Also without sales of new policies, they don't have the cash coming in from people who buy new policies, pay premiums for several years, then cancel before they ever collect anything.
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Re: Proposed Long Term Care Insurance Changes

Postby donall » Tue Aug 13, 2013 4:29 pm

Yes, it would be nice if the relative did research and found ratings on a proposed LTC policy two decades ago. Research twenty years ago was not as easy as today using the Internet. Unfortunately the relative took the advice from an insurance agent, a situation that is not uncommon, especially when English is not spoken or understood well.
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Re: Proposed Long Term Care Insurance Changes

Postby gerrym51 » Tue Aug 13, 2013 4:58 pm

Steelersfan wrote:
Phineas J. Whoopee wrote:
Steelersfan wrote:...
What no one knows is how much premiums on existing policies will increase in the future.

It seems as if stopping sales of new policies would leave the population they've insured getting older and older, that is higher and higher risk, without anybody lower-risk coming in. That wouldn't bode well for premiums.
PJW


Also without sales of new policies, they don't have the cash coming in from people who buy new policies, pay premiums for several years, then cancel before they ever collect anything.



from what i have been reading practically nobody cancels a policy. thats the problem. I read that ltci companies had figured 5 percent cancellation and less than 1 percent cancelled. that and low interest rates zapped them.
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Re: Proposed Long Term Care Insurance Changes

Postby dhodson » Tue Aug 13, 2013 5:59 pm

http://www.soa.org/research/experience- ... eport.aspx

those numbers are average per year. Overall more than 1/2 surrender/lapse. This is still a much higher persistency then permanent life insurance which is what they based their calculations on. I believe SOA and LIMRA have other even more recent data but not sure if its readily accessible. There is a trend to decreasing lapse rates especially in later years which is hurting them in particular when those who develop conditions more likely to need ltci keep the policy while those who dont just let the policy go.
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