When a Safety Net Is Yanked Away

When a Safety Net Is Yanked Away

The New York Times, November 12th, 2010

November is long-term care awareness month, and to celebrate, a big player in the long-term care insurance industry announced on Thursday that it wanted to get as far away from the business as possible.

Citing well-known challenges to the long-term care insurance industry (but without really saying what they were), MetLife said that it would stop underwriting new long-term care policies for individuals after Dec. 30. The company will also cease new enrollments to group and other plans, say, through an employer.

The company added that it would continue paying claims on existing policies as long as customers continued paying premiums. Many of them may not, however, since MetLife recently asked state insurance regulators for permission to raise premiums on many policies by as much as 44 percent.

It wasn’t the only company not charging enough for its policies. The two leading players in the industry are trying to raise prices, too. Genworth Financial is seeking an 18 percent increase on older policies held by about 25 percent of its customers. And John Hancock has filed for permission to raise premiums for about 80 percent of its customers by an average of 40 percent. It has also temporarily stopped offering new long-term care insurance plans through employers while it tries to figure out what to charge.

State regulators may not bless these requests. But it suggests how far off the companies were in pricing their products.

So now that you’re aware of the situation, a question presents itself: Is long-term care insurance doomed?

Let me start by saying that this is a separate question from whether you should plan ahead for the possibility of many hundreds of thousands of dollars in long-term care costs. You should. One big risk here is facing down a $100,000 annual care bill for years on end and having no savings or insurance. Even if you have a decent amount of savings, you could spend everything and leave your spouse (more often than not a woman) with nothing to live on.

Wealthy people can pay for their own care. And Medicaid covers long-term care for people with no assets, though they may not be able to get the care they want where they want it.

Everyone else either has to save for the possibility that they’ll need care for years or buy insurance to cover the cost. If you’re wondering how likely you may be to make a claim, well, the insurance industry has had some trouble figuring that out, too.

Want some evidence? In the last decade, 11 companies that were once in the top 10 in market share in this area have bailed out, according to Limra, an industry research group.

A MetLife spokeswoman, Karen Eldred, didn’t want to add to the company’s statement from Thursday. She was more communicative earlier this month when I was finishing a column about long-term care planning.

Read more of this article.

Long Term Care insurance:  What does this upheaval mean for those looking to purchase Long Term Care insurance?  The market for programs is becoming tighter, and it might now be a good time to consider pulling the trigger on this insurance product.  Consider the options at NewRetirement.com

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