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“The reports of my death have been greatly exaggerated.” — Mark Twain

by | Mar 30, 2013

For years “experts” have concluded that the long-term care insurance industry is dead.  Here are some of the headlines:

“What’s killing the long-term care insurance industry?”  Aug. 2012

“Long-term care insurance begins to fade away”–New York Times, Nov. 2010

“When a Safety Net is Yanked Away–is Long-Term Care Insurance Doomed?”–NYT Nov. 2010

Crumbling Economics Undermines Long-Term Care Offerings

and, most recently:

“Dodge the long-term care insurance mess”–Forbes March, 2013

and

CalPERS plans 85% rate hike for long-term-care insurance–Los Angeles Times Feb. 2013

The CalPERS 85% rate hike on their long-term care policies validates my comments made on the Forbes article.

CalPERS is NOT an insurance company.
CalPERS is NOT regulated by the California Dept. of Insurance.

If CalPERS was regulated by the Calif. Dept. of Insurance, the CalPERS policyholders would have been protected.

Bottom line:  The reports of the death of the long-term care insurance industry have been greatly exaggerated.
The facts are indisputable.

  1. Contrary to what is often published on the internet, 4 of the top 10 long-term care insurers have never had any premium increases on any of their LTCi policyholders. 2 of the top 10 long-term care insurers have not had any premium increases on any of the LTCi policies they’ve sold since the rate stabilization regulations began to take effect in each state (2001-2004).  I wish my medical insurance premium was the same as it was in 2001.
  2. Although those who purchased the CalPERS LTCi policies are faced with a big premium increase, there are over a dozen different LTCi policies that were for sale in California, at the same time, that have not had any premium increases.
  3. Today, about twice as many people own long-term care insurance as did in the year 2000.
  4. The industry is paying about $7 billion every year in claims to over 200,000 LTCi policyholders that are on claim.
  5. While some LTC insurance companies’ sales have been down over the past few years, other long-term care insurers have had growth of over 20% each year the past few years. In this economy, that is a remarkable feat for any industry, particularly long-term care insurance.
  6. Since the financial meltdown of 2008, two of the top long-term care insurers have even had their financial ratings go up–improving from an “A” rating to an “A+” rating.  In fact, those two companies are the only insurance companies to have their ratings upgraded since the mortgage crisis of 2008.

Is the long-term care insurance industry in a state of flux? Of course. Every industry today is in a state of flux. Every industry has been changing rapidly since the mid-90′s and the pace of change is getting faster and faster.

It wasn’t that long ago when personal computers were referred to as “IBM-compatible”.  Yet, in December of 2004, the company that set the standard for personal computers stopped selling personal computers. After dominating the PC market for most of two decades, IBM abruptly left the PC market.

No journalist was silly enough to write the headline:

“IBM stops selling personal computers–the future of personal computing is in doubt!”

Yet, in the Spring of 2012, after one of the larger long-term care insurers announced that it would stop selling new long-term care policies, “experts” concluded that the future of the long-term care insurance industry was “in doubt”.

IBM made a simple business decision in 2004. They concluded they were not nimble enough to profit from low-margin, price-sensitive, computer manufacturing.

Insurance companies also make simple business decisions. There are significant overhead expenses to create, market, and underwrite long-term care insurance.

These expenses are incurred regardless of how many (or how few) policies are actually sold. If sales are too low, the overhead costs per policy make it unprofitable for the company to sell new policies.

Those companies that are providing a good product at a good price are experiencing significant growth–some companies as much as a 50% growth in sales in the past two years.

Not only are some LTC insurers growing, but some that had gotten out of the business have decided to get back into the business.

Two highly-rated insurers that sold long-term care insurance for nearly 20 years, and then stopped selling new LTCi policies, started selling new LTCi policies again after significantly reducing their overhead and streamlining their business processes (something every company, regardless of industry, must do today in order to remain competitive.)

Healthcare reform (aka “Obamacare”) does not provide any long-term care benefits.  The “CLASS Act” is now defunct.  Medicaid is not the solution for long-term care for the middle class or the wealthy.

Long-term care insurance policies are not the perfect solution. But, a well-designed long-term care policy, especially a government-approved long-term care partnership policy, may be the best way to prepare for the “long-term care tsunami” headed to our shores in the next 15 years.