Long Term Care Coverage: By Ben Sutherly The Columbus Dispatch • Sunday April 27, 2014 10:02 AM Don Pearse Sr. received a jolt last month when he learned that the cost of his long-term-care insurance is going up nearly 30 percent in June. And 29 percent more the following year. And another 29 percent the year after that. Pearse, who is in his 70s and had paid a fixed rate of just under $1,500 per year for his policy, learned in a letter that his rate will effectively double in the next three years to more than $3,000 annually. He said he’ll probably drop the coverage, which would have reimbursed him 80 percent of the cost of assisted care, up to $120 per day. “How many people who are retired can afford that kind of an increase for long-term-care insurance?” said Pearse, who lives near Sunbury and said he is in good health and has had no need to use his policy yet. An estimated 7 million U.S. residents — 260,000 of them in Ohio — have traditional long-term-care insurance, which reimburses policyholders a set daily amount for services that help them with activities of daily living, such as dressing, bathing or eating, according to the American Association for Long-Term Care Insurance. Many of those policyholders — the majority of whom buy the coverage in their 50s and 60s — have seen significant rate increases in recent years. “This is a marketwide problem,” said Carrie Haughawout, assistant director for policy and product coordination at the Ohio Department of Insurance, which reviews the rates proposed by insurance carriers for coverage. It approved the rate increases for the policy that Pearse has. Many state insurance officials might be reluctant to approve large rate increases, but “they fundamentally need to make sure that people get the claim paid,” said Steven Weisbart, chief economist and a senior vice president with the Insurance Information Institute. The industry paid out about $7.5 billion in claims in 2013. The company that sold Pearse the policy — Continental Casualty Co., the underwriting unit of Chicago-based CNA — said it no longer sells individual policies for long-term-care insurance in Ohio and other states. As of the end of 2013, CNA had 9,400 long-term-care policyholders in Ohio, including more than 3,800 whose policies are similar to Pearse’s. The last of the 10-year guarantees recently expired, said spokeswoman Jennifer Martinez-Roth. Pearse and other policyholders have the option of scaling back their coverage to make it more affordable, Martinez-Roth said. “We do recognize that these increases are difficult.” Several factors have driven premiums for long-term-care coverage higher. Years ago, carriers anticipated that about 5 percent of policyholders would let their coverage lapse each year, but only about 1 percent have done so, resulting in claims totals that were far higher than forecast, said Jesse Slome, executive director of the American Association for Long-term Care Insurance. Many policies also guaranteed consumers an inflation growth factor of 5 percent, compounded annually, Slome said. That was at a time when interest rates were far higher than they are now, and insurance companies could expect greater returns from their investments, he said. “That’s why insurance companies have left the industry,” Slome said. MetLife is among the companies that have exited the business in recent years. “Now there are only a few companies people would consider reliable bets,” Cindy Farson, director of the Central Ohio Area Agency on Aging, said in an email. In Ohio, 45 companies were actively marketing long-term care policies in 2013. That’s down about a third from a decade earlier. Those are among the reasons that relatively few U.S. residents have long-term-care coverage. The National Bureau of Economic Research said in 2004 that only about 10 percent of Americans 50 or older were insured. “Many people don’t save for it,” said Judith Brachman, a former director of the Ohio Department of Aging and one of 15 people who served on a federal Commission on Long-Term Care. “They think Medicare will take care of their expenses for long-term care, which is actually not the case.” A person turning 65 has a 20 percent chance of experiencing at least five years of functional impairment requiring help from family or paid care, Brachman said. He or she has a 31 percent chance of dying without a serious long-term-care need. The Affordable Care Act included provisions for a voluntary, national insurance program for American workers that would help them pay for long-term services and supports. But that program was nixed because it wasn’t actuarially sound. Since 2007, Ohio has required insurance carriers to offer consumers a “non-forfeiture” option so that they don’t lose out entirely on their investment if significant premium hikes make coverage unaffordable, Haughawout said. But such consumer protections come too late for people such as Pearse. “I paid all that in, and now I’m faced with getting nothing back,” he said. bsutherly@dispatch @BenSutherly
Posted on: Tue, 23 Dec 2014 13:39:47 +0000
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