Long-term care insurance rate hikes putting a pinch on seniors

BURLINGTON, Vt. (WCAX) - Insurance regulators are considering a proposed 340% rate hike for a long-term care insurance company, causing sticker shock for some Vermont seniors.

Bob Stetson is 88 years old and lives with his partner in Middlebury. In 1988, he bought 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 on my family. They’ve got 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 his insurance carrier, Brighthouse Financial, sent him a letter saying his premiums could be increasing by 340%. “All of a sudden when we might need it. We’re 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 challenging for policymakers and regulators. The plans were created in the 1970s, when the nursing home industry was just emerging and insurers had to make a lot of guesses about how to structure the policies, how long people would live, and how long people would retain their policies.

“Unfortunately, they missed all of those assumptions,” said Vermont Financial Regulation Commissioner Mike Pieciak. He says insurance investment returns were lower than expected.

At the same time, medical and technological advances have allowed many seniors to live longer while also needing to manage expensive chronic conditions such as Alzheimer’s and heart disease.

“Because of that what they’re having to pay out to the policyholders, it’s a lot more than they estimated in the ‘70s, ‘80s, and ‘90s,” said Kevin Mullin, chair of the Green Mountain Care Board.

Many of these long-term care insurance plans are not offered anymore, and some of the companies have gone under. The Department of Financial Regulation says in the 1980′s, there were over 100 companies selling long-term care insurance. Today, that number is just above a dozen nationally.

To recoup past losses on the policies that were underpriced in the past and to cover future expenses, insurers have been coming to states to ask to raise their rates. Over the last five years in Vermont, long-term care insurers have asked for rate increases averaging 125% on about 60 different policies. About two-thirds of those requests have been approved, with the rate increase phased in over several years.

Policyholders like Stetson have the option to pay the higher premiums or reduce or restructure their benefits. Pieciak says it’s a balance between keeping the companies solvent and mitigating the financial pain on consumers. But he says that the department applies an actuarial analysis that is consumer-focused and does not allow companies to make up for past losses.

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

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

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

While Brighthouse’s request is still pending, Pieciak says the department advocates on behalf of Vermont policyholders. He also says the original is ready to approve a 49% increase that is phased in. Pieciak says even with some of the rate hikes, annual premiums are still lower than some plans being offered today.

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

Stetson says any rate increase or reduction would hurt, especially when considering that Brighthouse’s CEO makes $8 million a year. “We believe in capitalism and we want those that run companies to be paid fairly. But wow, to turn around and want that kind of an increase doesn’t seem right,” he said.

Some insurers won’t receive their full ask and some Vermonters won’t be able to pay the full increase.

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

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