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|Source:||A.M. Best Company, Inc.|
Health reform has put the health insurance industry under a microscope but medical loss ratios and double-digit premium rate increases aren’t unfamiliar terrain for long-term care insurers. And the rate hikes they are requesting could be giving them similar black eyes in the public realm.
Among the problems insurers are facing include product affordability, said
Some states, such as
In the annual statement, long-term care insurance is mostly found within individual accident and health, said Austin. “We consider it more health insurance although large life insurers are generally more active in writing the coverage today.”
Today, requested rate increases by LTC insurers range from 10% to 40%, Austin said. Some companies had even higher requests a few years ago “when they first discovered how underpriced their products were,” he said, noting they missed assumptions on persistency and investment returns and misclassified underwriting classes, among others.
Although a tiny market compared with health insurance, about 4.8 million people in
A senior would need to take on a rate increase fight at their state department of insurance, Darras said, noting few seniors can spend
During the late 1980s and 1990s, LTC insurance was oversold and under-priced, with “too many bells and whistles” and benefits, Darras said. As policyholders got older, they needed more care and also were living longer, he said, noting medical care “isn’t getting any cheaper.”
Carriers have since been “crushed” with a deluge of claims, and seniors are “on-claim” longer, he said. Carriers expected more seniors to lapse their policies but instead they’re keeping their coverage. Why? Because they’re “terrific policies,” Darras said.
Insurance regulators generally are approving requested rate increases by carriers, Darras said, saying
What line LTC is considered depends on how individual states define it, said
Health reform targets health insurers’ medical loss ratios, or percentage of premium spent on medical care costs. Individual health plans must spend at least 80% of premiums on medical costs.
There’s no mandated LTC loss ratio as that now primarily only applies to major medical insurance, Austin said. The primary medical cost in the loss ratio is the cost of a facility, such as assisted living or nursing home, he said. As for administrative costs, there’s nothing “radically different” from other health insurance lines.
LTC insurance doesn’t pay for medical care even though it might be provided by a skilled nurse, said Slome. It pays for “qualified” assisted care. Most care is provided at home or in a non-nursing home facility, Slome said, noting the average cost of a nursing home is