Insurance for long-term care is designed to cover the sometimes crushing expense of paying for help with daily living, perhaps at home, perhaps in a facility.
It can be crucial. It can be expensive. It is getting harder to find. And the older you are, the more it could matter.
“We don’t want to be a burden on our kids,” said Jeff Whitlatch, 71, of Sandy Springs.
He and his wife have seen premiums for long-term care with Massachusetts Mutual Life Insurance Co., rise 89% in the past four years, nearly doubling from the $125.86 he paid when he bought the policy in 2003 to $237 a month now.
Baby Boomers have aged into the category of needing the benefits they’ve paid for, and more of them have claimed the benefits than insurers expected. And those benefits are very expensive.
Most companies were losing money covering expensive long-term care claims and raised premiums in the effort to lose less. Many companies — including Mass Mutual — stopped offering the policy to new customers, although they were required to keep offering it to existing customers.
As long as the customers keep paying the premiums.
“It’s terribly expensive right now, but I am prepared to pay this through October,” said Whitlatch. “But if they keep jacking it up, I don’t know.”
A spokeswoman for Massachusetts Mutual Life Insurance declined comment.
The company is not out of step. Long-term care insurance companies paid out $14.1 billion last year in benefits, up from $11 billion in 2020, according to the American Association for Long-Term Care Insurance, whose members are mostly agents that sell insurance.
Policies covering long-term care, like most kinds of insurance, must be approved by regulators. Under Georgia law, they must file their plans for premiums with the state office of the Insurance and Safety Fire Commissioner.
The office receives 12,000 to 14,000 such filings in a year across all types of insurance, according to Deputy Commissioner Steve Manders.
Many are accepted as is, but many are subject to negotiation, he said. “We tell the company, they need to fix this and this. I would say probably 5% of the filings get rejected.”
‘A competitive market’
Individual policies differ, but a comprehensive policy covers care given in a facility for assisted living, a nursing home or at home.
In Georgia, the median cost of home health aides is $4,385 a month, for assisted living it’s $3,535 a month and for a nursing home it’s $7,604 a month, according to Genworth Financial, a large insurance company that tracks economic data.
“The reason you’ve got the insurance is that care is so expensive now,” said Whitlatch, a retired real estate finance executive. “It’s a tough box to be in.”
Despite the high cost of care, the share of older Americans with long-term care insurance has been falling, according to AARP.
Georgia ranks 11th from the bottom, AARP said. About 145,000 Georgians have the coverage, according to the AARP, of about 6 million nationally, which includes some people who have “a rider” attached to life insurance that provides for long-term care.
Like many kinds of insurance, people hope it’s not needed, but if it is, they know it can be the difference between comfort and poverty.
Companies are allowed to build in a 5% profit to the premiums they charge, Manders said. “If you just tell them, ‘Heck no’ on everything, well, we’ve had some companies pull out.”
In the end, if a company can’t accept the regulators’ judgment, it can appeal to an administrative court. But relatively few do appeal.
In recent years, companies often showed calculations justifying premium hikes of up to 40%, but they usually won’t even ask for that much, Manders said.
“Remember, this is still a competitive market,” he said. ”They don’t want to raise rates 40%. Half their business would shop elsewhere.”
There is no formal process for comment, but consumers can see filings and decisions online, and send their thoughts to the commission. Consumers who are unhappy with their premiums should consider their alternatives, Manders said. “You pick up the phone and shop around.”
Unfortunately for those with long-term insurance, the choices are ever-more limited and everyone’s prices are going up.
“Many traditional companies have gotten out of the business,” said Jesse Slome, director of the American Association for Long-Term Care Insurance. “The companies don’t want your risk.”
Moreover, if you do try shopping for a new carrier, you’ll have to pass a health screening. After age 70, about 40% of the people who apply are rejected, he said.
And if you are accepted, a new policy like the one Whitlatch has would likely cost significantly more than what he is paying now, according to the American Association for Long-Term Care Insurance.
A bad bet
The industry’s reluctance is the result of a bad bet.
In the 1970s and 1980s, when the massive boomer generation was younger, selling long-term coverage seemed like a great business, Slome said. And for decades, the companies cashed incoming checks while needing to pay benefits to just a few policy-holders.
Moreover, they figured that the vast majority of policy-holders would never need the coverage — they’d either die going to long-term care or they would just stop paying on the coverage before needing it, Slome said.
But that “lapse” rate turned out to be less than 1% a year, he said. “With long-term insurance you need multiple crystal balls to predict the future 20 and 30 years ahead. They calculated wrong.”
Now, the companies that still offer the coverage — either to long-time customers or in a few cases, to new ones — are raising rates, trying to improve the bottom line. So, with premiums climbing, those who have coverage must decide whether it’s worth it.
Whitlatch is not happy with the hikes approved by state regulators. He also knows that few carriers are accepting new customers for that coverage.
“We really have nowhere to go to replace this insurance,” he said.
Whitlatch said he and his wife have savings, but their nest-egg would take a beating if either needed long-term care. The most expensive coverage provides unlimited care. The three years promised in his coverage would pick up about a half-million dollars in costs, he said.
“They keep jacking up the premiums on me,” said Whitlatch. “But I am getting to the age where I might need it.”
