Long-term care insurance hikes hit policyholders [Virginian – Pilot]

If you have long-term care insurance, you've probably received a notice that your premium is increasing.

If you haven't, just wait.

Many companies have raised or will be raising premiums, said Sharon Luker, a Plano, Texas, certified financial planner who specializes in long-term care insurance.

When Linda and Leonard Behr of Dallas each got a notice last year of a 20 percent premium increase in their individual policies, they paid the higher cost.

"We're OK with it, but I'm just hoping they'll wait another 11 years to do the next one," said Linda, 61. She and her 69-year-old husband bought their policies in 2002. "I wouldn't want them to be doing this every year."

Long-term care insurance helps pay for the care you need when you can no longer care for yourself. It generally covers home care, assisted living, adult day care, respite care, hospice care, nursing homes and Alzheimer's facilities.

Companies that sell the policies have seen their profits hurt by low interest rates because they invest policyholders' premiums, and when rates are low, their investment returns are low.

Underwriting a long-term care policy is full of uncertainty because the company is dealing with an event that might not happen for decades.

As a result, many are no longer selling long-term insurance. In the past five years, 14 companies have stopped selling new individual long-term care insurance policies, according to LIMRA, an insurance consulting firm.

"If you have a policy that was issued more than 10 years ago, you are more likely to face a rate hike," said Lynn Lawrance, certified financial planner at Cetera Advisor Networks LLC in Dallas.

Insurance companies can't raise your individual premium because of advancing age or declining health. But each company has groupings of policies based on when they were issued, and they can apply to raise the entire group's premiums.

"You do not want to drop your existing coverage based on a quote," said Tom Murphy, certified financial planner at Murphy & Sylvest in Dallas. "Only when you actually have a policy in hand and in force should you consider canceling an old policy."

And don't count on Medicare coming to your rescue.

Generally, it doesn't pay for long-term care. Medicare pays for skilled nursing facilities or home health care only when your stay is medically necessary. And you must meet strict conditions for Medicare to pay for these types of care.

know your options

When an insurance company sends you a notice of a premium increase, it will typically give you options. Those choices typically are to:

* Keep your current policy and pay the higher premium.

* Keep the current premium and reduce your policy's daily benefit. For example, instead of paying $300 a day, the policy would pay $250 a day.

* Keep your current premium but reduce the length of time a policy will pay benefits, known as the benefit period.

* Keep your current premium but reduce the policy's inflation protection. It might be years before you need long-term care, and costs could rise during that time. A policy's inflation protection helps you keep up with the higher costs of services.

what to expect

The gold standard is 5 percent compound inflation protection, meaning that your benefits increase in value by 5 percent a year.

The younger you are, the more important inflation protection is, and the cost of inflation protection is based on your age when you buy the policy.

average cost

In Texas, the state Department of Insurance says that on average it costs about:

* $3,000 per month to live in an assisted-living center.

* $6,000 per month for a private room in a nursing home.

* $40 a day for adult day care.

* $20 an hour for home health care.

evaluate your policy

You might be able to co-insure some of the cost and thus reduce your coverage and avoid paying more, said Jesse Slome, executive director of the American Association for Long-Term Care Insurance, which represents insurance companies.

should you switch?

The Behrs said a reason they decided to pay the higher premium because it would cost them more to buy new coverage. Like them, you might find that the grass isn't necessarily greener on the other side.

If you decide to change insurance companies, keep paying premiums on your old policy until you know for sure that the new coverage has taken effect.