Rates could rise for long-term care insurance

July 15--Two large long-term care insurers are seeking large rate increases -- up to about twice as much as what policyholders are currently paying, state regulators said.

The insurers argue that they priced their policies too low, based on incorrect assumptions about how many people would let their policies lapse, live longer and develop cognitive issues such as Alzheimer's disease.

A majority of affected policyholders live in Broward and Miami-Dade counties, and the state Office of Insurance Regulation plans to hold public hearings over the proposed hikes on Aug. 12 in North Miami.

Metlife, the largest life insurance company in Florida, as well as one of the state's largest long-term care insurers, is seeking rate hikes from 20 percent to 95 percent for 22,796 Florida residents. If approved, the average annual premium would change from $1,593 to $2,580.

Unum, the largest provider of disability insurance products in the U.S., is proposing rate increases from 0 percent to 114 percent for 45,666 Florida policyholders. If approved, the average annual premium would change from $581 to $862.

Contacted by email, Unum spokeswoman Mary Clark Guenther said her company is seeking the increases for policies sold at prices based on "assumptions and predictions about how future experience would develop."

"Unfortunately, like many in the industry, our actual experience in the years or even decades since those policies were issued has turned out to be significantly different."

Judi Mahaney, a spokeswoman for MetLife, said, "The long-term care industry as a whole is facing challenges as a result of evolving actuarial assumptions on pricing, and MetLife is no exception."

Neither company sells new long-term care insurance policies, said Jesse Slome, executive director of the American Association for Long-Term Care Insurance, an independent organization representing brokers and agents.

Long-term care insurance is purchased in advance of a disability or infirmary that leaves a person unable to walk, dress, eat, use the bathroom, drive or carry out other day-to-day activities. The insurance pays for varying levels of care and treatment at home, in an assisted-care facility or in a nursing home.

Customers typically purchase policies when they are in their mid- to late-50s. They select benefits that will pay around $100 to $300 a day over three to five years after they age and need long-term care. While policy costs depend on the purchaser's age and coverage choices, pricing is designed, though not guaranteed, to be level for life. Insurers can ask regulators for increases only if conditions that guided their original pricing assumptions change.

Rate pressures facing companies that sold long-term care insurance policies stem from a combination of factors, Slome said. One is that people are living longer than expected, which increases the numbers of people living with debilitating conditions.

Slome said traditional long-term care policies sold 20 years ago were based on assumptions that 3 percent to 4 percent of policyholders each year would stop paying their premiums and allow their policies to lapse. That meant that over 20 years, about 80 percent of policies would be lapsed and of the remaining 20 percent that were active, just half would claim benefits -- leaving premiums paid by 90 percent available to pay claims filed by 10 percent.

Instead, less than 1 percent allowed their policies to lapse each year, leaving 80 percent active after 20 years, and half of that 80 percent filing claims.

Insurers also overestimated levels of return from reserves because they couldn't predict how low interest rates would remain in recent years, he said.

In an essay for a recent report on long-term care insurance for the National Association of Insurance Commissioners, former Florida Insurance Commissioner Kevin McCarty said fewer companies are offering long-term care insurance and some that used to sell it no longer do.

Sales of standalone policies have decreased from 750,000 in 2007 to 105,000 last year, Slome said. Products that combine life insurance with long-term care are growing in popularity, according to the insurance commissioners' report, because policyholders can get their investment back as an annuity if not used.

McCarty wrote that long-term care insurers face "potential solvency issues" if not allowed to increase their rates.

Florida -- one of the top three states for long-term care insurance sales -- has OK'd lower rate increases than some other states, and often under the condition that insurance companies allow policyholders to maintain their same premiums by adjusting their coverage levels, McCarty wrote. In addition, rate increases are distributed so younger policyholders -- ages 50 to 65 -- pay the largest increases and consumers 80 and older pay the lowest.

MetLife and Unum, if their rate increases are approved, are willing to help customers lower their benefits to keep their policies affordable, their spokeswomen said.

Slome said that even after rates are increased, 98 percent of affected customers keep their policies. Why? Because most have gotten older and "the new higher rate will be cheaper than anything available on the open market today," he said. "Most people will find their options acceptable if not ideal."

And, Slome said, nearly half of 70-yeaer-olds have a health condition that prevents them from buying a new policy.

Insurance Commissioner David Altmaier will preside over the state's public hearings starting at 1 p.m. at the Kovens Conference Center at Florida International University's Biscayne Bay Campus, 3000 NE 151st St., North Miami.

Typically, staff members of the Office of Insurance Regulation review proposed insurance rate increases but the commissioner has final say.

State law does not require a public hearing over the increases, spokeswoman Amy Bogner said in an email, but allows hearings "for any purpose at [the office's] discretion."

"Due to the significant impact these proposed rate increases could have on Florida policyholders, the Office determined [hearings were] in the best interest of all parties involved," she said.

Anyone unable to attend is invited to send comments to Altmaier by email. Comments about the MetLife increase proposal may be sent to MetLifeLTCHearing@floir.com. Comments about the Unum increase proposal may be sent to UnumLTCHearing@floir.com.

rhurtibise@sunsentinel.com, 954-356-4071

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