Long-Term Care Insurance May Be a Dying Breed

A report earlier this fall by Moody’s Investors Services – “Long-Term Care Insurance: Sector Profile” – says that despite the need for long-term care insurance, the product’s future is in question because of persistent losses and a challenging operating environment.

The benefits under early policies were often too generous relative to factors such as actual benefit utilization rates and lapses, according to Moody’s. To compensate insurers had to increase reserves and raise rates to improve the profitability of older products.

New, better designed and priced products seek to reduce risks for insurers, with changes including more restricted benefits and payout periods, as well as “combination” policies, which offer long-term care combined with a life insurance policy or an annuity contract.

Nevertheless, Moody’s believes potential buyers may balk at fewer benefits and higher rates, and sales could go down noting that senior citizens on fixed incomes form a highly sensitive constituency and regulators could therefore reject or limit new rate requests.

The exit or retreat of five key firms from the market since 2010 leaves only one dominant player.
MetLife and CUNA Mutual stopped selling LTC in 2010. In 2011, CNA and Berkshire pulled out. This year Prudential stopped selling individual to focus on group sales, while Unum stopped selling group but had previously pulled out of individual sales.

Since the CLASS Act died, there are still few solutions to funding long-term care. Remember Medicare only pays for this in certain situations. Your choices are limited.

Buy an expensive long-term care policy.
Investigate the assurance benefit, in short, using your life insurance to pay for long-term care needs.
Do effective, ethical and legal estate planning.
Pay for long-term care out of pocket until you exhaust resources and then hope to qualify for Medicaid.

None of these are sure bets. With block grants in states, there is no assurance that Medicaid will be able to continue funding long-term care. And who knows what will happen with Medicare.

And remember, Medicare, Medicaid might be used for skilled nursing. Assisted living by and large is self-pay until you can’t. Medicaid factors in at times but not usually.

If you are smart plan to age in place. Which means plan to start looking at your house and what you need to do to it now to make it safe for living as you age. With more services moving to community settings, you will be able to access the care and transportation you need as well as find the social interaction that is vital to a quality of life at any age. And with tele-health options increasing, your health care will be increasingly monitored from home.

People are fixated and rightly so on assuring everyone has health insurance for medical needs. This in no way covers your needs as you age. That is swept under the rug.

Prepare people.

Sources: Moody’s, Broker World