WoW2012 wrote: ↑
Mon Aug 05, 2019 11:25 pm
willthrill81 wrote: ↑
Mon Aug 05, 2019 10:06 pm
So the industry was providing junk before the federal government forced them to do otherwise, but they are now providing great products? I won't apologize for remaining dubious about the whole affair.
I agree with nisiprius who said earlier that when it comes to paying for LTC, there are no good options (unless you're willing and able to self-insure).
Why are you dubious?
A federal audit of long-term care insurers showed that the improvements made to long-term care insurance in 1997 are working?
https://aspe.hhs.gov/pdf-report/nationa ... -payments
Why are you dubious?
Over 1,000,000 families have received over $100 BILLION (with a "B") of long-term care insurance benefits. (Over $50 Billion of that has been incurred in just the last 5 years.)
Why are you dubious?
This year over 300,000 families will receive over $15 billion of long-term care insurance benefits. My family is one of them. We'll receive over $70,000 from my mother-in-law's policy this year. The influx of close to $400,000 from my mother-in-law's policy will have added enough to her portfolio to guarantee that she'll never have to go on Medicaid and she can remain in her beautiful assisted-living facility (which does not accept Medicaid). There's no need for an unlimited policy. Her policy was only for "3 years". Right now her net worth is growing every year by about $55,000, not including capital appreciation on her stocks.
I'm dubious because this is an industry that, according to you, was selling basically junk policies until the federal government stepped in and forced them to overhaul it. And not too long after that, the actuaries' huge error resulted in many policies being priced so high that many long time policyholders were left unable to pay for them, which resulted in many states then stepping in to regulate premium increases on new policies. It strongly appears that the improvements in the industry have been forced upon it, and that doesn't lend faith in the industry itself.
"Fool me once, shame on you. Fool me twice, shame on me."
I'm dubious of the prices on policies currently on the market. If the actuaries messed up badly once, they could do it again, or some other change could occur which would result in substantial increases in premiums. And if they 'actuarially fair', then regulators may not have much choice but to permit the increases. A lot
can change over the course of the 20-30 year period or longer that someone may hold a LTC policy.
I'm dubious as to how many people actually stand to really benefit from LTC insurance. The majority of retirees clearly do not need it since they do not have enough assets to protect, and a LTC event lasting longer than a few months will almost certainly result in them falling back on Medicaid. And many on this forum can certainly self-insure LTC. So there is a relatively narrow band of net worth where I believe that the math indicates that LTC insurance may
I'm dubious of what LTC insurance has morphed into, a product where most of your premiums are going toward prepayment of a likely but not financially detrimental event (i.e. LTC event lasting up to a few years) with relatively little premium funding the very unlikely but potentially detrimental event (i.e. LTC event lasting for many years). Michael Kitces summed this up very well below.
https://www.kitces.com/blog/can-increas ... ing-again/
Insurance functions best when it is used to cover high-cost low-probability risks – the kind that aren’t likely to occur, but would be devastating if they did. Technically, paying insurance premiums on an ongoing basis has a slightly greater expected loss than just retaining the risk, but an appealing trade-off if it means converting a potential financial disaster into a manageable ongoing premium.
Yet when it comes to long-term care needs in today’s environment, what was perhaps once a higher-cost lower-probability event has now turned into a very high-probability event with an increasingly large volume of “lower-cost” claims. As a result, long-term care insurance has begun to morph from effective insurance, into something that looks more like just prepaying long-term care expenses in advance at a high premium rate and with little insurance leverage.
And, like Kitces and many others here, the 'solution' that I would rush toward is simple: a LTC policy with a long elimination period. States' regulations currently prohibit this, but I'm not convinced that the industry couldn't craft a product that would effectively sidestep such regulations if they wanted to.
As a result, perhaps it’s time to reform long-term care insurance policies so they once again focus on covering (only) high-impact low-probability events. For instance, what if elimination periods for long-term care insurance were increased to allow for a 2 or 3 year deductible, instead of today’s common 3-month period, and individuals could then take the significant premium savings and use it to cover their care during that time period? Could such an increase in deductibles reduce the cost of long-term care insurance coverage enough to make it affordable once again to most of the general public?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings