|By David Ranii, The News & Observer, Raleigh, N.C.|
|McClatchy-Tribune Information Services|
But that peace was shattered recently when the Sextons got a letter from their insurer,
"I was in pretty good shock," said Sexton, 64, of
Sexton's distress level lessened when his insurance agent pointed out that he and his wife could avoid the premium hikes by reducing their future benefits. That's a bargain Sexton is willing to make.
But Sexton is keeping his fingers crossed that the steep premium hike he and his wife faced was an anomaly.
"Hopefully, this never occurs again," he said.
Similar scenarios are being played out across
So far this year, six insurance companies have obtained approval from state regulators for premium hikes on long-term care insurance ranging from a low of 10 percent to a high of 32 percent.
Those are average increases, with individual increases varying significantly. Indeed,
Steep increases can be especially tough to swallow for seniors on fixed incomes, which many policyholders are. The escalating premiums also complicates the decision for people considering buying long-term health care insurance, knowing that the price you agree to pay today can jump significantly down the road. That's a calculation you don't have to make when buying life insurance.
Regulation of product limited
"This kind of just proves that people are using this product," said
"There is very little we are able to do under existing law," he said, noting that rates are jumping across the nation. "I'm upset we are in this box."
Some insurers have even stopped selling new long-term care policies to individuals nationwide, including Prudential and
With long-term care insurance, however, Goodwin doesn't have the authority to establish industry-wide rates. Companies request rates individually, and state regulators are required to approve them as long as they're "actuarially justified," Goodwin said.
Of the six companies that requested rate hikes this year, five were approved as requested. The sixth, Mutual of
Young industry, aging clientele
Long-term care insurance originated in the 1980s, and insurers say they are still getting a handle on their costs as their policyholders are becoming older and need to tap their policies for in-home, assisted living or nursing home care. "The long-term care industry is still young and only now is seeing actual usage data which indicate the need for rate increases,"
The rate situation is being further exacerbated by low interest rates, which depresses the returns the insurance companies reap when they invest their reserves, said
Still, Slome noted, when insurers hike their rates they typically offer a way for policyholders to adjust their coverage to avoid a rate hike. For example,
The annual increases, which offset the rising costs of care, would be reduced from 5 percent to 2.7 percent. "It's not a take-it-or-leave-it proposition, and most people find the counter-offer acceptable," Slome said.
Slome added that policyholders generally can't find an equal policy for less money from a competing insurer, given that they purchased their policies years ago and premiums for brand-new policies rise along with your age.
Meanwhile, Goodwin, the state insurance commissioner, is putting together a legislative proposal that would give the state greater authority to regulate rates. Among the measures he's looking at recommending is a cap on annual rate increases -- possibly 10 percent or 15 percent -- and an overall cap on the dollar amount of increases during the life of the policy that would be pegged to the original premium.
But with the legislature expected to adjourn in a matter of days, Goodwin doesn't expect legislators to consider the issue until next year.
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