What to do about long-term care insurance premiums

Will your long-term care insurance premiums increase?

I have seen a number of people who are dealing with this issue. Many of them purchased coverage through the Federal Long Term Care Insurance Program while serving at Robins Air Force Base. This particular plan is offered through John Hancock Life and Health Insurance Co., which recently had to increase its rates on some policies.

If you have long-term care insurance and have not yet experienced a rate increase, you may have one this year. Some of the largest long-term care underwriters are asking state regulators for large increases, according to the ElderLaw Matters newsletter. Why is this happening?

First, low interest rates and a tough market mean low investment earnings for insurance companies. Investment returns fund up to 60 percent of benefits paid, according to the American Association for Long-Term Care Insurance.

Second is how long we are living. If you are now age 60, your life expectancy is 82.6. If you are now 70, your life expectancy is 85.2, and if you are 80, your life expectancy is 89.2. And these numbers keep increasing.

Third is the fact that we are hanging on to our policies. Insurers expect a certain percentage of customers to drop their policies before they ever draw benefits, and that’s not happening with long-term care insurance.

Investment News magazine reported rate hikes are being sought by Prudential Insurance Company of America, MetLife Inc. and John Hancock. The requests, which won’t cover all of the companies’ policies, range from 18 percent to 25 percent.

John Hancock plans to raise premiums by up to 25 percent on policies held by up to 140,000 federal employees under age 65. MetLife has received approval from 41 states, with most of the increases set at 18 percent.

In most cases, no rate increases have been put through for policyholders who were age 70 or older at the time the policies were sold.

The Urban Institute, which researches and educates on social and economic issues, estimates 25 percent of people older than 65 will need help for an extended period of time with some aspect of basic personal care.

If you have long-term care coverage and find yourself facing a rate hike, consider the following:

1. If you purchased your policy years ago, compare the price to what you would pay for that policy today, and you are probably still saving money, even with the rate increase.

2. Why did you purchase this policy in the first place? Do those reasons still make sense?

3. Has the policy value increased? If your policy has an inflation rider, the daily or monthly benefit has increased, making the policy more valuable.

4. If you just can’t afford the rate hike, look at changing the coverage to make it more affordable. That’s better than canceling the policy altogether.

5. Consider the cost of care. If you drop the policy and need care, how will you pay for it? Long-term care planning should be part of your long-range financial plan.

Certified Financial Planner Sherri Goss is senior vice president of Rosenberg Financial Group, Inc., in Macon and Warner Robins. She can be contacted at 922-8100 or sherri@rfmoney.com.