Long-term care insurance costs are skyrocketing
State Sen. Saud Anwar
As Connecticut’s population gets older – more than 575,000 residents, or 16 percent of the population, were over age 65 in 2016, with more aging into that group every year since – a ticking time bomb awaits them. Long-term care insurance was a good investment in years past, but the cost of that insurance is now skyrocketing. That leaves seniors in a dangerous situation.
Beginning in the 1980s, long-term care insurance policies went on sale. In theory, these policies are sensible investments. As we age, we require additional help and more intensive health care. Long-term care is designed as a safety valve, protecting policy holders from the precipitous cost of nursing homes, elder care assistance and other health care services necessary at older ages.
But recent years have seen the costs of these plans swell much faster than overall health care costs rise. When I talk to residents of my district, they tell me their insurance premiums are growing well out of their control, with some increases spiking as high as 300 percent. This is not sustainable. In some cases, these increases have led to voluntary lapses in coverage by consumers who paid into their long-term care plans for years or decades.
Over time, the number of companies offering such plans has dwindled from about 100 nationwide to only eight serving Connecticut today. Most have also discontinued long-term care plans, claiming their financial predictions were off. While care longevity has increased since these plans were developed, along with the cost of care, remaining plans are seeing increases reaching crisis levels. They are asking for unsustainable, unrealistic plans that lead many seniors to question whether eschewing meals and expenses or lapsing out of coverage would be the better move – even when both of those options would directly harm their health now or in the future.
As this growing crisis becomes more evident, states are taking notice. The National Association of Insurance Commissioners (NAIC) has created a 38-member task force to combat these shifts in the long-term care market. As of now, states are trying to address this situation, including officials here in Connecticut. The state Department of Insurance, and the insurance commissioner, are concerned about the potential insolvency of long-term care insurance carriers. When this happens, policy holders receive new benefits through a guarantee fund. The department also monitors increases to insurance premiums; it’s believed Connecticut is in the middle when it comes to the rate of such increases.
This disaster-in-the-making is harming many today, and will harm many more in the future. Connecticut must develop a comprehensive strategy to respond. Consumers should not be forced to shoulder the burden of corporate cost miscalculations made in the 1980s. There is no evidence that payouts will match the increased rates they’re paying, and it’s quite likely that increased premiums will only go to further strengthening corporate profit margins. Insurers are known to keep significant reserves,so there are alternatives to these jarring premium increases.
To address this impending crisis, we need to protect consumers. That means making sure insurance companies, federal and state governments and health care systems and care facilities such as nursing homes are on the same page. There are a number of options to achieve better management – the state Commissioner of Insurance could follow the lead of other states to limit premium increases to 5 percent to 8 percent. If that is not possible, legislators could limiting premium increases in Connecticut. The guarantee fund, which can guarantee up to $500,000 for those purchasing maximum coverage and remaining in Connecticut, needs to be protected.
The federal government may need to introduce legislation allowing long-term care to be combined with additional programs, or to potentially introduce Medicare plans that integrate long-term care. There could even be opportunities for individuals to make penalty-free distributions from retirement accounts or for Medicare lifetime coverage of long-term care to expand. At the very least, the federal government should require transparency and oversight of premium hikes.
Without action, seniors and families who bought long-term care insurance in good faith will continue to struggle in light of these drastic cost increases. Without change, the insurance industry will continue to see significant profits and salary increases for executives while individuals are priced out of their plans, putting their futures in danger.
Anwar, a Democrat from South Windsor, represents the 3rd Senate District.
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41 states have already addressed this issue. It’s called the “Rate Stability Regulation”. Unfortunately, Connecticut is one of the few states that has not passed this regulation.