Long Term Care Premium Increases

Long Term Care Premium Increases – The cost of providing long-term care services has risen faster than the rate of inflation since 2004, according to a report released this month by the Bipartisan Policy Center, with annual costs ranging from $19,240 for adult day care to $105 , 850 for a private room in a nursing home.

The cost increases – which the report said are expected to increase further over the next six months by at least 5% – were linked to increased demand and labor shortages exacerbated by the pandemic.

Long Term Care Premium Increases

Long-term care spending reached $426.1 billion in 2019, accounting for 13 percent of all national personal health care spending that year, the report said.

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The Report’s Solution — Congress should establish a caregiver tax credit for out-of-pocket long-term care costs and standardize private long-term care insurance as part of retirement long-term care insurance (LTCI).

The authors of the Bipartisan Policy Center also suggested that Congress incentivize employers to offer LTCI and automatic enrollment to employees age 45 and older, while offering penalty-free withdrawals from retirement savings accounts to pay LTCI premiums and making it easier for employees to convert their life insurance to long-term care.

“As the number of individuals with unmet need increases, so do the long-term costs to both Medicaid and Medicare through increased and fragmented use of acute care and institutional settings,” the report said. “This study was undertaken to estimate the federal costs associated with subsidizing LTSS ‘buy-in’ to the Medicare program or, alternatively, as enrollment in favor of Medicaid.”

The report cited a projected 34 percent increase in home health and personal care jobs over the decade as well, a finding echoed in a national PHI survey earlier this month.

Federal Long Term Care Insurance Program (fltcip)

These jobs are growing faster than the average for all other occupations, the report said, and with an average hourly wage of $13.02, finding workers for these positions will become increasingly difficult over time.

“By comparison, social and human assistants — a similar occupation with similar educational requirements — earn an average wage of $17.29 an hour,” the Bipartisan report said; such workers also receive reimbursement through Medicare and Medicaid.

The bipartisan policy center was created by Democrat Tom Daschle and Republican Bill Frist, former Senate Majority Leaders; former Secretary of Health and Human Services and Governor Tommy Thompson (right); and Alice Rivlin (D), former vice chairman of the Federal Reserve, director of the Office of Management and Budget, and director of the Congressional Budget Office.

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Hybrid: Whole Life/annuity With Ltc Benefits

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As the long-term care insurance industry continues to struggle in today’s low interest rate environment, an increasing number of customers who have purchased long-term care insurance in the past are receiving notices of premium increases — and often they are very significant increases , even from big companies like GenWorth, John Hancock, Prudential and MetLife.

While the LTC rate increase may come as a shock, the reality is that in many cases the coverage is still cheaper than it would be to buy the policy new in today’s market – which essentially means that even with the premium increase, continuing LTC coverage can be a pretty good deal. However, in some situations, premium increases make insurance unaffordable, forcing them to decide how to modify and reduce coverage to maintain original premiums. When such reductions are necessary, most customers should choose to reduce the benefit period, and older customers can also reduce the rate of the inflation rider; most clients will probably want to avoid a reduction in the amount of the daily benefit.

The good news, at least, is that given how much more expensive long-term insurance is in the current market, premium increases on today’s new policies are dramatically less likely. Regardless, it’s still necessary to get it right and manage the rate increases that occur with coverage purchased years ago.

Handling A Long Term Care Insurance Premium Increase

Michael is Head of Planning Strategy at Buckingham Strategic Wealth, which provides an evidence-based approach to private wealth management for near and current retirees, and Buckingham Strategic Partners, a turnkey wealth management service provider supporting thousands of independent financial advisors across the scaling phase of growth.

He is also the co-founder of XY Planning Network, AdvicePay, fpPathfinder and New Planner Recruiting, former practicing editor of the Journal of Financial Planning, host of

Podcast and publisher of the popular financial planning industry blog Nerd’s Eye View through his website dedicated to advancing financial planning knowledge. In 2010, Michael was awarded one of the FPA’s Heart of Financial Planning awards for his dedication and work in developing the profession.

Qualified long-term care insurance (qualifying for tax-free benefits under the Internal Revenue Code) must be “guaranteed renewable”—meaning that as long as premiums continue to be paid, the insurance company must continue the client’s coverage, and they cannot separate the customer to either cancel their coverage or raise their premiums.

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However, rates on guaranteed renewable insurance can be increased by going to your state’s insurance department and requesting a premium increase for an entire “class” of policies, such as “all policies issued to people age 55- 64 years old in 1998 ” – and if your customer falls into that group of policyholders of that age group and that year in that state, the customer’s rates may be increased.

Given that state insurance departments have to agree to premium increases — which are not very popular — why do they even approve? Because in situations where premiums are too much below expected claims, there is a risk that the insurance company will be declared insolvent and unable to fully pay all claims to all policy owners. Ultimately, it is better to have a rate increase that ensures policy owners get all their benefits than to keep premiums in effect with the risk of policies being partially or completely non-performing.

It allows companies to make up for past losses they have had, nor to increase premiums so much that the insurance company can make a large profit in the future. Premium increases are usually sufficient to ensure that the company remains solvent and able to fully pay all claims for all policyholders. Of course, there is some uncertainty in the estimates, so it is possible that the insurance department will approve a rate increase large enough for the insurance company to enjoy some additional profits.

In practice, however, it seems just the opposite; insurance departments have been so reluctant to push premium increases unless absolutely necessary that often the increases are

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When they show up (because it’s been so many years that the insurance company has undercharged) and some companies end up having to come back later and claim

Premium increase because it ended up being that the first increase was so conservative for existing policyholders that it still wasn’t enough to make the insurance company solvency (much less profits).

So, given all the steps it takes for an insurance company to get approval for a premium increase, what should customers do when the notice arrives?

The good news and the bad news is that there are usually more choices than just “pay the new premium or get rid of the policy.” To give policyholders flexibility in how to deal with rate increases, insurance companies typically offer several options, including:

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To the extent necessary to align benefits with costs (eg from a 5-year benefit period to 4 years)

(if the policy includes inflation) to the extent necessary to bring the benefits in line with the costs (eg from 5% inflation down to 3.5% inflation)

The bad news, of course, is that more choices make the decision more complicated. While not every insurance company and premium increase situation will include all five options—requirements for what’s offered vary by state and some insurance companies offer more flexibility than others—most companies will offer at least one or two of the options in the middle , in addition to the first and last.

This is available. For example, consider the situation in another context, as if the cable company came out one day and said:

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“Our apologies. We just discovered an error in our billing. It turns out that although you are currently receiving the premium cable service for channel 187, we have actually charged you for the basic service for channel 114. After discovering our mistake, unfortunately you have to raise your rates

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