Changes in store for long-term care insurance [Pittsburgh Post-Gazette]
|By Bill Toland, Pittsburgh Post-Gazette|
|McClatchy-Tribune Information Services|
The change is one of several policy and pricing revisions in store for buyers of long-term care insurance, which provides a payout in the event that the policyholder needs to be cared for in a nursing or assisted-living facility. Some carriers are seeking dramatic premium increases and axing spousal discounts and lifetime benefits; others are coming out with new hybrid products; and still others are getting out of the product line altogether, citing its unprofitability and unpredictability.
One of the biggest changes is
The result is that women could be charged 40 percent more than men for a newly written policy.
"If you walk down the hall of an assisted living home, it's mostly ladies," said
In so doing, long-term care insurance is following in the footsteps of auto insurers -- which set rates based on age and driving record -- and health insurers -- which sometimes set rates based on health, age and gender.
"Other companies are taking a look" at
In the short term, she said
And on Friday, two more LTC premium increase requests were announced by the state
The premium increases have been so dramatic, experts say, because long-term care insurance was, in retrospect, underpriced, particularly for policies that were sold more than a decade ago.
Even as the pricing comes into what insurers consider better alignment, low interest rates over the last four years have been hurting the industry, which takes the premium money, invests it and uses the return to pay benefits down the road. Low interest rates means lower returns on investments and less money to pay beneficiaries.
"All of the carriers have been challenged by the record-low interest rates," said
Despite the high cost of nursing care -- which can easily hit
The long-term care payout generally kicks in only after 90 days of nursing care, meaning many people -- even those who end up needing care -- will never realize the benefit, because they die within three months of falling ill. For seniors who have the coverage, the utilization rate is 50 percent, meaning there's a 50-50 shot that they never cash in.
That's why insurers have been coming up with hybrid products, such as life insurance policies with long-term care riders attached; it's a trend
Some insurers also are offering "shared-care" policies that allow a married couple to take out separate but connected, plans, and the benefits are transferable if one of the spouses dies.
"People are looking for alternatives,"
While the alternative policies are gaining favor among buyers, they aren't necessarily more profitable for the carriers. "The interest rate environment is still [damaging] the combo product market as well as the standalone product market," Ms. Pahl said.
She expects a few more carriers may drop out of the long-term care market segment before the industry stabilizes. A decade ago there were dozens of companies selling long-term policies, while now there are about 18.
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