Part 6: What the New York Times article on long-term care insurance got VERY wrong!
What the New York Times article on long-term care insurance got VERY wrong!
The New York Times article on long-term care insurance states that a Florida man bought a policy through his employer and “paid monthly premiums for 27 years beginning in 1993. …over time he paid about $120,000 toward the policy.” It then states that “over three years” the policy paid “about $90,000 of benefits.”
The policyholder who paid $120,000 in premiums did NOT pay $120,000 in premiums. Here’s how I know:
A typical policy bought in the early/mid 1990’s had an $80 per day benefit amount. Most of the policies purchased then did not have any inflation protection, especially if the policy was purchased through a group sponsored by an employer. That explains why the policyholder received only “about $90,000 of benefits” over a three-year period:
$80 per day x 365 days x 3 year = $87,600 in benefits.
The article isn’t clear, but he purchased the policy somewhere between the ages of 61 and 64.
Today’s policies are priced A LOT higher than policies sold in the 1990’s. If a male, age 64, purchased a policy like this today, it would cost about $150 per month. The article wants us to believe that he paid about $370 per month for a policy that today would cost about $150 per month.
Clearly, a mistake was made in the calculations. I don’t blame the writers of this article for making this mistake. They would not know how much a policy would have cost 27 years ago.
However, I have seen a similar mistake made by Kaiser Health News in the past. Here’s the link:
The woman who was the subject of that article purchased her policy in California in 1999. Over 17 years, everyone who purchased that same policy in California had a 13 percent increase, a 41.6 percent increase and a 58.6 percent increase. This is one of the largest cumulative increases of any long-term care policy form ever sold. However, the article states that her premium “nearly quadrupled”.
The article’s writer miscalculated the premium increase because the policyholder paid her premium every quarter, but the writer thought it was a monthly premium.
I directly contacted the woman who was the subject of the article. She confirmed that her premium was quarterly, not monthly. I also notified the writer a few times about this error. She said she would “look into it.” To my knowledge, Kaiser Health News never published a correction.