Mainers with long-term care insurance facing hefty premium increases

Joel Martin said he's not going to swallow a proposed 65% rate increase to his long-term care insurance without a fight.

Proposed steep rate increases for his MetLife policy and other long-term care policies held by Maine residents are awaiting review and approval by the Maine Bureau of Insurance.

Martin said his annual payment for the insurance – which covers services such as nursing home care, assisted living and home health care – would jump from $2,844 to $4,693 if the rate increase is allowed to go through.

"This represents 17% of my Social Security income," said the 79-year-old Scarborough resident. Martin has written letters to the bureau in an attempt to stave off the increases. "I would be highly annoyed if I had to pay that."

The cost of long-term care insurance for certain policyholders like Martin has skyrocketed in recent years, and there are 13 proposed rate increases by insurance carriers now pending before the Maine Bureau of Insurance. The pending increase requests range from 15% to 152%.

In addition, since 2022, the insurance bureau has made decisions on 22 other rate hike requests, turning one down and approving 21 others ranging from 10% to 81%. In many case, the bureau scaled back an initial request – in one case reducing a requested 141% increase to 53% – but still approved hefty hikes. About 6,100 Maine policyholders are affected by the pending and approved rate increases. About 38,000 people have long-term care insurance in Maine, according to the bureau.

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So what's happening?

Insurance experts say many who purchased policies decades ago are now seeing large rate increases because the initial policies were not priced properly. The problem is national and not unique to Maine, insurance experts say.

Kerry Peabody, senior account executive with Maine-based Marsh McLennan Agency and an expert on long-term care insurance, said that although these policies have been offered for decades, long-term coverage is relatively new compared to life and other insurance policies.

"The carriers all made the same errors," Peabody said. "Products sold in the past were ridiculously underpriced, and that's caught up to the carriers."

He said some of the mistakes include too-generous benefits for the premiums paid, not accounting for increased life expectancies for those receiving long-term care, and people holding onto their policies longer than expected.

"Very few people ever cancel their long-term care insurance, so carriers are on the hook for a lot more claims than they expected to be," Peabody said.

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Some insurers put off rate increases for years but eventually had to make up for the underpricing, he said.

Judith Watters, spokeswoman for the Maine Bureau of Insurance, said that for many years, "insurers have been leaving the market, and those with renewing policies have been raising premiums to cover higher costs than were initially projected when the products were first offered."

Peabody said errors in writing long-term care policies have largely been fixed, with premiums now more accurately priced, so that purchasing long-term care insurance now will not likely lead to sticker shock rate increases later.

Martin, a retired attorney and teacher, said it shouldn't be his problem that the carriers improperly priced his plan.

"That was a business decision, the risk that they took. They lost," Martin said. "(MetLife) shouldn't be making the policyholders pay for it."

Especially galling, he said, is that the benefit his policy pays out has a lifetime cap of $300,000 and $75,000 per year. So if the rate increase goes through, he would be paying 65% more for the same benefits, should he ever need them.

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A MetLife spokeswoman did not respond to queries from the Press Herald about the proposed rate increases.

Sherry Worth, insurance actuarial assistant for the Maine insurance bureau, wrote to Martin, in response to his questions, that rate increases are carefully scrutinized.

"When it is determined that a rate increase is justified, we press the insurers to offer the policyholders options, such as benefit modifications to mitigate rate increases and/or to spread the increases out over a number of years," Worth wrote. "In other cases we have denied increases or modified the requested increase based upon our review. That being said, the law does require that we review rates to ensure that they are not excessive, inadequate, or unfairly discriminatory."

A decision by the Maine insurance bureau on a rate increase could take several months. There are no public hearings, but the insurance bureau conducts an actuarial analysis using in-house and outside actuaries to determine the need for rate increases compared to the request.

Peabody said those hit with unaffordable rate increases should seek advice from an insurance adviser before canceling. Many times, benefit amounts that were initially purchased were more generous than what most people likely need, and reducing benefits can help offset rate increases.