Policyholderswere stunned when John Hancock recently announced that it would ask for permission to boost premiums on many of its long-term care policies by an average of 40 percent. Then, Genworth, another major player in the long-term care arena, announced that it would request an 18 percent rate increase that would affect about one-fourth of its policyholders. Now, consumers who have dutifully paid premiums for years are wondering whether they can afford the higher price, and some are asking whether the coverage is worth it. Read on to find answers to some of the most common questions. Why are insurers raising rates? A John Hancock study found that the number of claims, the length of claims and the use of benefits from 1990 to 2010 were much higher than the company had expected — particularly the open-ended expense of providing lifetime benefits to an aging population with an increasingly long life expectancy. (John Hancock stopped selling new policies with lifetime benefits in June 2010.) Genworth says that it needs to boost rates because more people are keeping their policies in force than the company originally expected.
Whose rates will rise? For John Hancock policyholders, the size of the increase will vary depending on your age and when you purchased the policy. The increase applies to both individual and group policies, but it does not affect Hancock’s long-term care policy for federal employees, which already had a premium increase of up to 25 percent in the spring of 2010. The John Hancock rate increase will not apply to Leading Edge or Custom Care II Enhanced policies — two of its newer offerings that were issued after regulators passed stricter rate-setting requirements.
Is it a done deal? When will new prices take effect? The insurers need permission from regulators in most states before the premium increases can take effect. In the past, the large long-term care insurers haven’t had much trouble getting their rate increases approved. But it might be tough to get approval for rate increases this time.
If regulators don’t approve the full increase, they could endorse a partial boost or direct insurers to phase in their increases. Or they could reject the proposed rate increase altogether.
“We anticipate that this will be a several-year process, as we work with the states to justify the increase and provide all the documentation they’ll require to approve the rate change,” says Beth Ludden, senior vice president of product development for Genworth.
Policyholders will receive a notice before their rates rise, but that won’t occur until early 2011 or later.
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