Long-Term Care Insurance Rate Increases Affect Seniors

BURLINGTON, Vt. (WCAX) – Insurance regulators are considering a proposed 340% rate increase for a long-term care insurance company, causing a stir among some Vermont seniors.

Bob Stetson is 88 years old and lives with his partner in Middlebury. In 1988, he purchased a long-term care insurance policy to cover his medical expenses if he ever needed to be in a nursing home. “I don’t want to be a burden to my family. They have their family, their expenses. They don’t want to take care of dear old dad. Dad can take care of himself, and that’s what I’m trying to do,” Stetson said.

But Stetson is on a fixed income, and earlier this year her insurance company, Brighthouse Financial, sent her a letter saying her premiums could increase by 340%. “Suddenly, when we might need it. We are looking at my policy going from $2,500 to almost $9,000 a year,” he said.

Long-term care insurance policies like Stetson’s are a challenge for policymakers and regulators. The plans were created in the 1970s, when the nursing home industry was just emerging and insurers had to do a lot of guesswork about how to structure policies, how long people would live, and how long people would keep their policies.

“Unfortunately, all of those assumptions were lost,” Vermont Financial Regulation Commissioner Mike Pieciak said. He says that returns on insurance investments were lower than expected.

At the same time, medical and technological advances have allowed many seniors to live longer while at the same time needing to manage costly chronic conditions like Alzheimer’s and heart disease.

“Because of that, what they have to pay policyholders is much more than they estimated in the ’70s, ’80s and ’90s,” said Kevin Mullin, chairman of the Green Mountain Care Board.

Many of these long term care insurance plans are no longer offered and some of the companies have gone under. The Department of Financial Regulation says that in the 1980s there were more than 100 companies selling long-term care insurance. Today, that number is just over a dozen nationally.

To recoup past losses on policies that were undervalued in the past and to cover future expenses, insurers have come to the states asking them to increase their rates. Over the past five years in Vermont, long-term care insurers have requested rate increases averaging 125% on about 60 different policies. About two-thirds of those applications have been approved, with fees increasing gradually over several years.

Policyholders like Stetson have the option of paying higher premiums or reducing or restructuring their benefits. Pieciak says it’s a balance between keeping businesses solvent and mitigating financial pain for consumers. But he says the department applies an actuarial analysis that focuses on the consumer and doesn’t allow companies to offset past losses.

Reporter Calvin Cutler: If you’re a senior on a fixed income or you’re a low-income Vermonter, how do you navigate that?

Mike Pieciak: That’s something we take seriously and really try to focus on when we look at these performances.

In a statement to WCAX, Brighthouse Financial says, in part: “Brighthouse Financial understands that rate increases on LTC policies can be challenging for some policyholders, and to provide flexibility for our customers, we offer options to give them the choice. to find a premium tier that works for your individual needs.”

While Brighthouse’s application is still pending, Pieciak says the department stands up for Vermont policyholders. He also says that the original is ready to approve a 49% increase that will be implemented gradually. Pieciak says that even with some of the rate increases, annual premiums are still lower than some plans offered today.

“We’re just trying to make sure these companies stay solvent and keep their promises, but at the same time they’re not getting approved rates that would be considered unaffordable,” Pieciak said.

Stetson says any increase or decrease in the fee would be detrimental, especially considering that Brighthouse’s CEO earns $8 million a year. “We believe in capitalism and we want those who run companies to be paid fairly. But wow, turning around and wanting that kind of raise doesn’t seem right,” he said.

Some insurers will not receive your full order and some Vermonters will not be able to pay the full increase.

Click here for more information on long-term insurance and rate increases.

On The Channel 3 News Friday, Calvin Cutler explores what happens to those who can’t pay and how it affects what all of us pay in Medicaid.

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