Help! My LTC Insurance Premium Is Going Up

Inflation, you can’t live with it, and economists say we can’t live without it.  But when you get a letter telling you that the cost of something you are paying for is going up, it’s not a pleasant experience.

There are several things you can do to mitigate a price increase on your LTC insurance policy, but lets first look at why it is going up.  The early policies, from the 80’s and 90’s were offered while this industry was in its infancy.  The insurance companies made several mistakes.  One in your favor is that the companies have learned that couples (who love each other) will take care of each other longer before calling in the hired help.  Thus couples discounts are larger now than they used to be.

One assumption that turned out to be incorrect was that over time, the insurance companies thought some percentage of people would simply drop their coverage.  I for one, know that with each additional ache and pain that seems to come with age makes me want to keep my insurance as I may someday be using it.  Most people felt this way resulting in the majority of insurreds keeping their coverage for life, not dropping it.

Medical research has uncovered problems that have only become evident in the past few years.  Diabetics have a 65% greater chance of developing Alzheimer’s than  non-diabetics.  Things that used to kill us, now only “wing” us, resulting in longer lives with more chronic conditions.  Lastly, the insurance industry, which invests premium dollars conservatively, is only earning 3.2% on their investments, while promising 5% compound growth on the LTC insurance benefits, and are thus falling behind.  Nobody anticipated that interest rates would drop this low.

The states approve price increases, when justified after evaluation, as they want the insurance company to be able to pay claims in the future.  The first thing for you to consider when a price increase letter arrives is to re-evaluate to be sure you have sufficient, but not too much coverage.  Perhaps your investments have done well, an inheritance has arrived, or income is up significantly, meaning less coverage is required to make up the shortfall.

A price increase letter usually comes with an offer or two to mitigate the price increase.  Often these options are the ones your insurance company hopes you will choose.  Let’s look at what might be in your best interest.

It is better to have sufficient coverage for a shorter time, than insufficient coverage for a longer time.  If the policy’s daily or monthly benefit is reduced, will the shortfall require you to use up savings and possibly end up on Medicaid?  Consider reducing the length of benefit if need be, so that you have sufficient cash flow to pay for care for fewer years, instead of reducing the benefit amount so that you must immediately start using up savings.

The deductible, called the elimination period, might be lengthened to reduce costs.  Just be sure you can easily pay out of pocket for the length of time before the insurance starts paying.

Often, the insurance company will suggest reducing the inflation percentage on the daily or monthly benefit.  Unless care is imminent, this is a poor choice.  Inflation on the costs of LTC services have been a bit less recently, due to the stagnant economy.  The people who will take those difficult, minimum wage caregiving jobs are now looking for better paying, easier work.  This is going to cause the costs of care to increase more in the future.  Remember that you may not be using this coverage for 20-30-40 years or more.

More information is available at www.TheLongTermCareGuy.com  

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