Massive Increase in Long Term Care Insurance for My Parents - Can They?

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prd1982
Posts: 189
Joined: Sun Jan 08, 2017 4:43 pm

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by prd1982 » Fri Mar 15, 2019 5:01 pm

I see a slightly different problem in my state. LTC insurers are asking for large (eg. 40%) increases, but the state is only granting 10-20% raises. Two years later the insurers are asking for 50% raises because they believe the wave of claims they see coming will be more than the premiums, and they are falling further behind. The state then grants another 20% raise. So you know the insurer is going to come back in 2 years asking for 60%. Personally I would like my state to raise the rate to what is really needed while there are still a number of payers. I can envision in 15 years where there are very few payers, and the rates will approach paying on your own. But in my state, kicking the can down the street is the way things are done. We need to admit the insurers and the state insurance folks messed up, and lets get the premiums right.

Another issue. A lot of the LTC insurers pay the person who sold the policy a percentage of the premium each year. So as the rates increase, the seller gets more money. That is hard to swallow.

grok87
Posts: 8864
Joined: Tue Feb 27, 2007 9:00 pm

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by grok87 » Fri Mar 15, 2019 5:12 pm

dodecahedron wrote:
Fri Mar 15, 2019 4:03 pm
Very interesting discussion.

My understanding is that LTCI turned out to be much less profitable/viable/sustainable than insurers originally thought. A number of LTCI carriers have totally left the industry and others have raised their prices significantly.

The original pricing was based on a number of actuarial assumptions, at least two of which turned out to be significantly flawed. One is that insurers assumed a much higher lapse rate than they actually experienced. (In other words, they underpriced the true lifetime risk pricing on the assumption that many folks would pay in profitably during their low risk decades only to allow their policies to lapse before they reached their high risk decades.) Another is that insurers did not imagine that interest rates on the kind of safe investments they are required to maintain in their reserves would fall to the low levels we have seen in the past decade.

Here is a study by the Society of Actuaries discussing these factors:

https://docs.google.com/viewer?url=http ... roject.pdf
yep from page 12 of your linked doc
wrote: Voluntary Lapse
As indicated in the preceding mortality discussion, increased policyholder persistency—above that
anticipated during policy pricing—will place a financial strain on LTCI blocks. Earlier generations of LTC
policies were priced with voluntary lapse rates similar to those seen on annuity blocks, based on the
reasoning that long-term care benefits resembled an annuity-like benefit. Figure 8 shows industry
average voluntary lapse rate assumptions in the three pricing years.
Figure 8: Industry Average Voluntary Lapse Rates
Pricing Year First-Year Lapse Rate Ultimate Lapse Rate
2000 8.5% 2.8%
2007 4.5% 1.1%
2014 5.0% 0.7%
Voluntary lapse rates that emerged on in-force blocks in the past 15 years were significantly lower than
anticipated. This was the impetus for many of the premium rate increases requested in the past 15 years,
as well as the decrease in lapses assumed in pricing seen in Figure 8.
Because ultimate lapse rates are already close to the theoretical floor of 0%, it is far less likely that rate
increases will be required on products priced today.
RIP Mr. Bogle.

Saving$
Posts: 1786
Joined: Sat Nov 05, 2011 8:33 pm

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by Saving$ » Sat Mar 16, 2019 4:57 pm

smitcat wrote:
Thu Mar 14, 2019 9:31 am
I do not know how anyone can reasonably assess the decision at hand without knowing the details of the policy - what is the deductible? what are the limits per time interval? what are the total limits? What exactly is covered by person and in total? etc.
This. Please advise.

Also:
1. Most of these policies pay out upon a person needing help with x number of ADL's (Activities of Daily Living). Please look at the policy to determine if this is the case. If so, you may be able to obtain reimbursement from the policy for costs related to the previous recovery. That may help fund the increase in premiums.

2. Agree that continuing to pay is probably the right way to go.

3. If your parents and/or you and your sibs just cannot fund the premium increase, and you must cancel, look to see if the policy has a residual coverage. Many policies have residual coverage of a high percentage (like 80%) that was paid if you cancel while the policy holder is still living. So if your parents have paid out $50k in premiums over the years, you may still have $40k coverage if you cancel (as opposed to $300k or whatever coverage if you continue to pay the premium).

WoW2012
Posts: 590
Joined: Sun Dec 23, 2012 11:28 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by WoW2012 » Sat Mar 16, 2019 5:21 pm

Saving$ wrote:
Sat Mar 16, 2019 4:57 pm
smitcat wrote:
Thu Mar 14, 2019 9:31 am
I do not know how anyone can reasonably assess the decision at hand without knowing the details of the policy - what is the deductible? what are the limits per time interval? what are the total limits? What exactly is covered by person and in total? etc.
This. Please advise.

Also:
1. Most of these policies pay out upon a person needing help with x number of ADL's (Activities of Daily Living). Please look at the policy to determine if this is the case. If so, you may be able to obtain reimbursement from the policy for costs related to the previous recovery. That may help fund the increase in premiums.
TRUE


2. Agree that continuing to pay is probably the right way to go.
TRUE

3. If your parents and/or you and your sibs just cannot fund the premium increase, and you must cancel, look to see if the policy has a residual coverage. Many policies have residual coverage of a high percentage (like 80%) that was paid if you cancel while the policy holder is still living. So if your parents have paid out $50k in premiums over the years, you may still have $40k coverage if you cancel (as opposed to $300k or whatever coverage if you continue to pay the premium).
TRUE, but it's usually 100% of the premiums paid, not 80%. It's called a "nonforfeiture" benefit or a "contingent nonforfeiture" benefit.

Topic Author
WolfgangPauli
Posts: 310
Joined: Sun Aug 23, 2015 8:28 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by WolfgangPauli » Mon Mar 18, 2019 8:13 pm

WoW2012 wrote:
Thu Mar 14, 2019 12:52 pm
Your parents have not been singled out for this rate increase. The rate increase has nothing to do with their age nor their change in health. The same increase has been requested in over 40 states on all Allstate LTCi policyholders in every age group.

Allstate sold very few long-term care insurance policies starting in the late 1980's to the mid 1990's when they started selling LTCi through their subsidiary "Lincoln Benefit Life". As of 2018, there were only 1,799 in-force "Allstate" long-term care insurance policies. This is the second rate increase on this policy series. The first rate increase was in 2010 and it was for 20%.

All of the Allstate LTCi policies were sold under the old rules. These policies, unfortunately, are not governed by the Rate Stability Regulation which is in effect in 41 states.

Your parents policy probably has a 5% compound inflation benefit and a lifetime/unlimited benefit period. It probably has a very short elimination period, too, like 20 days or less. And, because of the 5% compound inflation benefit, your parents probably have a daily benefit that is much greater than the actual cost of care in your area. Allstate is offering policyholders ways to modify the benefits to avoid the rate increase. It's called a "landing spot". I'm not privy to the specifics, but it is likely your parents could avoid the rate increase if they took advantage of one of these "landing spots". If you'd like to call Allstate and find out more about it, please share it on the forum and we can help you make a decision.
Details:

1. There is no inflation factor. They are covered for a max of $300k total, $144 per day (Nursing home), Home Health care $72 per day max $60K, Adult day care $24 per day (Max $30K

2. 60 day waiting period

3. Guaranteed renewable.

4. Know all about the landing spot. Benefits get reduced 14%.

Thanks
Twitter: @JAXbogleheads | EM: JAXbogleheads@gmail.com

LAR
Posts: 52
Joined: Mon Feb 04, 2013 11:25 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by LAR » Mon Mar 18, 2019 8:32 pm

If your father requires help with daily living he might qualify for nursing home care now and there might be an assisted living facility that also provides skilled nursing services that the insurance policy can pay for.

pdavi21
Posts: 1238
Joined: Sat Jan 30, 2016 4:04 pm

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by pdavi21 » Mon Mar 18, 2019 8:36 pm

If they end up saving money by paying for insurance, congratulations. If not, are you surprised that the insurance provider is profiting?
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

WoW2012
Posts: 590
Joined: Sun Dec 23, 2012 11:28 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by WoW2012 » Mon Mar 18, 2019 8:55 pm

WolfgangPauli wrote:
Mon Mar 18, 2019 8:13 pm
WoW2012 wrote:
Thu Mar 14, 2019 12:52 pm
Your parents have not been singled out for this rate increase. The rate increase has nothing to do with their age nor their change in health. The same increase has been requested in over 40 states on all Allstate LTCi policyholders in every age group.

Allstate sold very few long-term care insurance policies starting in the late 1980's to the mid 1990's when they started selling LTCi through their subsidiary "Lincoln Benefit Life". As of 2018, there were only 1,799 in-force "Allstate" long-term care insurance policies. This is the second rate increase on this policy series. The first rate increase was in 2010 and it was for 20%.

All of the Allstate LTCi policies were sold under the old rules. These policies, unfortunately, are not governed by the Rate Stability Regulation which is in effect in 41 states.

Your parents policy probably has a 5% compound inflation benefit and a lifetime/unlimited benefit period. It probably has a very short elimination period, too, like 20 days or less. And, because of the 5% compound inflation benefit, your parents probably have a daily benefit that is much greater than the actual cost of care in your area. Allstate is offering policyholders ways to modify the benefits to avoid the rate increase. It's called a "landing spot". I'm not privy to the specifics, but it is likely your parents could avoid the rate increase if they took advantage of one of these "landing spots". If you'd like to call Allstate and find out more about it, please share it on the forum and we can help you make a decision.
Details:

1. There is no inflation factor. They are covered for a max of $300k total, $144 per day (Nursing home), Home Health care $72 per day max $60K, Adult day care $24 per day (Max $30K

2. 60 day waiting period

3. Guaranteed renewable.

4. Know all about the landing spot. Benefits get reduced 14%.

Thanks
If the benefits will only be reduced by 14%, to avoid a 90% premium increase, then it sounds like the landing spot makes a lot of sense.

WoW2012
Posts: 590
Joined: Sun Dec 23, 2012 11:28 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by WoW2012 » Mon Mar 18, 2019 8:56 pm

LAR wrote:
Mon Mar 18, 2019 8:32 pm
If your father requires help with daily living he might qualify for nursing home care now and there might be an assisted living facility that also provides skilled nursing services that the insurance policy can pay for.
Great point. If one or both of them can qualify for benefits now, get the claims process started.

clown
Posts: 136
Joined: Sun Jan 03, 2016 2:04 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by clown » Mon Mar 18, 2019 10:41 pm

Some posters have mentioned running down the assets and then letting Medicare take care of things.

Have you actually SEEN a Medicare facility?

They are nowhere near as nice as private pay facilities. Your parents deserve better than bare-bones.

I recommend paying the new rate. $300 a month versus the average monthly cost of a SNF? The $300 is cheap, plus you honor mom and dad.

WoW2012
Posts: 590
Joined: Sun Dec 23, 2012 11:28 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by WoW2012 » Mon Mar 18, 2019 11:01 pm

clown wrote:
Mon Mar 18, 2019 10:41 pm
Some posters have mentioned running down the assets and then letting Medicare take care of things.

Have you actually SEEN a Medicare facility?

They are nowhere near as nice as private pay facilities. Your parents deserve better than bare-bones.

I recommend paying the new rate. $300 a month versus the average monthly cost of a SNF? The $300 is cheap, plus you honor mom and dad.
I believe you mean Medicaid, not Medicare.
Every senior gets Medicare.
Medicaid is only for those who meet the income/asset tests.

There are two facilities in our small town.
The one that does not accept Medicaid patients is MUCH nicer than the one that does.

Leesbro63
Posts: 5986
Joined: Mon Nov 08, 2010 4:36 pm

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by Leesbro63 » Tue Mar 19, 2019 9:34 am

WoW2012 wrote:
Mon Mar 18, 2019 11:01 pm
clown wrote:
Mon Mar 18, 2019 10:41 pm
Some posters have mentioned running down the assets and then letting Medicare take care of things.

Have you actually SEEN a Medicare facility?

They are nowhere near as nice as private pay facilities. Your parents deserve better than bare-bones.

I recommend paying the new rate. $300 a month versus the average monthly cost of a SNF? The $300 is cheap, plus you honor mom and dad.
I believe you mean Medicaid, not Medicare.
Every senior gets Medicare.
Medicaid is only for those who meet the income/asset tests.

There are two facilities in our small town.
The one that does not accept Medicaid patients is MUCH nicer than the one that does.
What happens at that non-Medicaid facility if someone burns up their assets but continues to live?

WoW2012
Posts: 590
Joined: Sun Dec 23, 2012 11:28 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by WoW2012 » Tue Mar 19, 2019 9:44 am

Leesbro63 wrote:
Tue Mar 19, 2019 9:34 am
WoW2012 wrote:
Mon Mar 18, 2019 11:01 pm
clown wrote:
Mon Mar 18, 2019 10:41 pm
Some posters have mentioned running down the assets and then letting Medicare take care of things.

Have you actually SEEN a Medicare facility?

They are nowhere near as nice as private pay facilities. Your parents deserve better than bare-bones.

I recommend paying the new rate. $300 a month versus the average monthly cost of a SNF? The $300 is cheap, plus you honor mom and dad.
I believe you mean Medicaid, not Medicare.
Every senior gets Medicare.
Medicaid is only for those who meet the income/asset tests.

There are two facilities in our small town.
The one that does not accept Medicaid patients is MUCH nicer than the one that does.
What happens at that non-Medicaid facility if someone burns up their assets but continues to live?

That's what's nice about my mother-in-law's situation. Even though her long-term care policy had "only" $360,000 of benefits in it, she'll never have to go on Medicaid. Her policy currently covers the full cost of her care in the facility. Since she has no other expenses, we're investing nearly all of her income every month. As of the end of April her policy will have paid out $100K while her net worth has increased more than that. If she lives long enough where the policy runs out of benefits, between her pensions, rental income, and investment income, she'll never have to go on Medicaid.

Now, re-run her numbers without the LTCi policy and it's a whole different ball game.

clip651
Posts: 472
Joined: Thu Oct 02, 2014 11:02 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by clip651 » Tue Mar 19, 2019 10:13 am

Leesbro63 wrote:
Tue Mar 19, 2019 9:34 am
WoW2012 wrote:
Mon Mar 18, 2019 11:01 pm
clown wrote:
Mon Mar 18, 2019 10:41 pm
Some posters have mentioned running down the assets and then letting Medicare take care of things.

Have you actually SEEN a Medicare facility?

They are nowhere near as nice as private pay facilities. Your parents deserve better than bare-bones.

I recommend paying the new rate. $300 a month versus the average monthly cost of a SNF? The $300 is cheap, plus you honor mom and dad.
I believe you mean Medicaid, not Medicare.
Every senior gets Medicare.
Medicaid is only for those who meet the income/asset tests.

There are two facilities in our small town.
The one that does not accept Medicaid patients is MUCH nicer than the one that does.
What happens at that non-Medicaid facility if someone burns up their assets but continues to live?
I am definitely not an expert. But my understanding is that the non-Medicaid facilities do pre-admission financial investigation, and are sure based on that the the person will not run out of income and/or assets for the projected life remaining. And if they can't confirm that to the facility's satisfaction, then the new resident isn't admitted.

Edited to add - and the care facility can consider long term care policies as part of that financial investigation, which is one of the reasons it can be worth keeping up with the long term care payments for people with low or moderate assets and income. Something for the OP and OP's parents to consider.

Leesbro63
Posts: 5986
Joined: Mon Nov 08, 2010 4:36 pm

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by Leesbro63 » Tue Mar 19, 2019 2:21 pm

clip651 wrote:
Tue Mar 19, 2019 10:13 am
Leesbro63 wrote:
Tue Mar 19, 2019 9:34 am
WoW2012 wrote:
Mon Mar 18, 2019 11:01 pm
clown wrote:
Mon Mar 18, 2019 10:41 pm
Some posters have mentioned running down the assets and then letting Medicare take care of things.

Have you actually SEEN a Medicare facility?

They are nowhere near as nice as private pay facilities. Your parents deserve better than bare-bones.

I recommend paying the new rate. $300 a month versus the average monthly cost of a SNF? The $300 is cheap, plus you honor mom and dad.
I believe you mean Medicaid, not Medicare.
Every senior gets Medicare.
Medicaid is only for those who meet the income/asset tests.

There are two facilities in our small town.
The one that does not accept Medicaid patients is MUCH nicer than the one that does.
What happens at that non-Medicaid facility if someone burns up their assets but continues to live?


I am definitely not an expert. But my understanding is that the non-Medicaid facilities do pre-admission financial investigation, and are sure based on that the the person will not run out of income and/or assets for the projected life remaining. And if they can't confirm that to the facility's satisfaction, then the new resident isn't admitted.

Edited to add - and the care facility can consider long term care policies as part of that financial investigation, which is one of the reasons it can be worth keeping up with the long term care payments for people with low or moderate assets and income. Something for the OP and OP's parents to consider.

My own experience has been that the better facilities make sure the potential resident/patient has enough for a certain period of time...maybe 3 to 5 years. And if they do end up outliving that, they'll accept Medicaid for the remainder of that person's lifetime. But I agree that there may be places that flat-out won't accept Medicaid.

smitcat
Posts: 4296
Joined: Mon Nov 07, 2016 10:51 am

Re: Massive Increase in Long Term Care Insurance for My Parents - Can They?

Post by smitcat » Tue Mar 19, 2019 3:20 pm

Leesbro63 wrote:
Tue Mar 19, 2019 2:21 pm
clip651 wrote:
Tue Mar 19, 2019 10:13 am
Leesbro63 wrote:
Tue Mar 19, 2019 9:34 am
WoW2012 wrote:
Mon Mar 18, 2019 11:01 pm
clown wrote:
Mon Mar 18, 2019 10:41 pm
Some posters have mentioned running down the assets and then letting Medicare take care of things.

Have you actually SEEN a Medicare facility?

They are nowhere near as nice as private pay facilities. Your parents deserve better than bare-bones.

I recommend paying the new rate. $300 a month versus the average monthly cost of a SNF? The $300 is cheap, plus you honor mom and dad.
I believe you mean Medicaid, not Medicare.
Every senior gets Medicare.
Medicaid is only for those who meet the income/asset tests.

There are two facilities in our small town.
The one that does not accept Medicaid patients is MUCH nicer than the one that does.
What happens at that non-Medicaid facility if someone burns up their assets but continues to live?


I am definitely not an expert. But my understanding is that the non-Medicaid facilities do pre-admission financial investigation, and are sure based on that the the person will not run out of income and/or assets for the projected life remaining. And if they can't confirm that to the facility's satisfaction, then the new resident isn't admitted.

Edited to add - and the care facility can consider long term care policies as part of that financial investigation, which is one of the reasons it can be worth keeping up with the long term care payments for people with low or moderate assets and income. Something for the OP and OP's parents to consider.

My own experience has been that the better facilities make sure the potential resident/patient has enough for a certain period of time...maybe 3 to 5 years. And if they do end up outliving that, they'll accept Medicaid for the remainder of that person's lifetime. But I agree that there may be places that flat-out won't accept Medicaid.
Our experience in NY is that they will keep them after they are on Medicare as well - you need about 2 years of confirmed payments here to have been accepted 3 years ago (likely the same now) - that was our experience.

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