Aug. 06--Some experts say new long-term care insurance policies are pricing the middle class out of the market as premiums for new policies climb higher, not just for individual coverage but many group policies as well.

For people ages 55 to 65, premiums for new policies are up an average of 30 to 50 percent compared with five years ago and have risen 6 to 17 percent in the past year, according to the American Association for Long-Term Care Insurance, a trade group.

Premiums are rising because insurance companies are paying more claims than expected, because people are living longer than actuaries thought they would, better medical care is extending the lives of the chronically ill and more people are hanging onto their policies rather than dropping them.

In some states, another reason is that low interest rates have slashed the returns insurers are getting from their investments. But in Indiana, the Indiana Department of Insurance does not allow insurance companies to raise rates based on a decrease in a company's investment returns.

Whatever the reasons for escalating prices, the number of new individual buyers of long-term care insurance policies in the U.S. dropped by 43 percent between 2004 and 2009 and has recovered only slightly since, reports Limra International, an industry-funded research firm.

Some large companies, like Prudential Financial and MetLife, have decided long-term care policies are no longer financially feasible and have stopped selling them in the individual market. Ten of the top 20 writers of individual long-term care insurance coverage five years ago are no longer selling long-term care policies, and seven have stopped selling employee group policies, according to Limra.

But if you can afford long-term care insurance and want to buy it, you shouldn't dally, because the younger you are when you buy a policy, the lower your premiums will be.

Rebecca Vaughan, director of the Indiana Long Term Care Partnership Program, said long-term care premiums on new policies are about 6 percent higher each year from age 60 to 65, about 7 percent higher each year from age 65 to 70 and about 10 percent a year higher for each year after 70. She said those who buy long-term care insurance are, on average, between ages 45 and 60.

Raising policyholders' premiums

Insurance companies are not allowed to hike long-term care insurance premiums on individual policyholders, but with state approval can raise rates across the board -- on a defined group of policyholders who have the same type of policy.

They can't raise rates capriciously. In Indiana, insurers must get the green light from the Department of Insurance, the body that regulates long-term insurance rates in the state.

"Any rate increase for long-term care has to be reviewed and approved by the Indiana Department of Insurance," Vaughan said. "Indiana has an extensive rate review process, which includes both an actuarial review and administrative review. State regulation also provides criteria that a company must meet before a rate increase can be approved."

She said the department does not allow companies more than one premium rate increase in a 12-month period on a defined group of policyholders.

Vaughan said companies vary greatly in how often they raise long-term care insurance premiums on groups of policyholders.

"Many have never implemented an increase on current policyholders," she said. "Others have asked for increases as often as every year. It is more common to be once every five to 10 years." She said in the past year, the highest long-term care insurance rate increase approved by the department was around 15 percent. The largest requested, which was declined, was 90 percent.

Vaughan said if a company raises your rates, it will typically allow you to reduce the increase in exchange for trimming your benefits -- such as reducing your inflation protection.

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