Insurance firms' blunders on long-term care insurance create disaster for millions

[Zorro]

Jeffrey Gerber has had a front-row seat for the unfolding disaster in the long-term care insurance business.

The Century City insurance broker not only sold the policies to numerous clients but became a customer himself. Now, a decade or more after the policies — which provide daily payouts to cover expenses for assisted living or nursing care — were first written, he and some 26 clients have been hit with increases in their monthly premiums of as much as 80%. That’s forcing the policyholders to make a harsh choice. “You’re forced into accepting the increase in premium or a reduction in benefits, which amounts to the same thing,” Gerber told me.

Gerber and his wife, Gayle, were each entitled to about $200 a day in benefits from Genworth Life Insurance Co. once they needed assistance. But they will have to give up an automatic inflation-related increase in their potential daily benefit if they want to keep their combined monthly premiums at the current $345, instead of swallowing an increase to $621.

As Gerber told an official of the California Department of Insurance in April, Genworth executives had assured him repeatedly “not only was Genworth safe, but that their reserves were such that all claims could be paid easily. This was a lie.”

https://www.latimes.com/business/story/2019-07-24/long-term-care-insurance-disaster

[spooky3]

1. And Genworth is/was a leader. This is scary. Many

People are being hurt by this.

[TexasTowelie]

5. Bernie has incorporated long-term care coverage in his Medicare for All proposal.

So far, I haven't seen how much this extra coverage will cost compared to his M4A plan that he advocated previously.

Insurance coverage that costs $6,000 monthly (or more) with no limit as to when those expenses may end (since it could continue for years) will be an expensive proposition to cover. The insurance company must be learning that their reserves are inadequate based upon their experience, particularly since type of insurance coverage only flourished within the past couple of decades. A single-provider may be negotiate some lower prices compared to an insurance company, but LTC for the masses won't be a cheap program.

[delisen]

2. Lapsed Policy rates over 1/3

Webb expected to find a lapse rate of about 10 percent over a lifetime. He was stunned to find that men and women at age 65 have, respectively, a 32 percent and 38 percent chance of lapsing prior to death. (It’s higher for women because women live longer.)


Instead, he found, poorer people are more likely to lapse than others, which makes sense since they’re the least able to afford the premiums. Webb calls these “Financial Lapsers.” (The cost of premiums varies enormously depending on your age and the coverage, but a healthy 65-year-old couple might pay $3,600 or more a year for $165,000 of benefits, according to the American Association for Long-Term Care Insurance.)


But Webb thinks one of his most important findings was how common lapses are among the cognitively impaired — the group he calls “Forgetful Lapsers.”

“People who suffer a cognitive decline have trouble remembering to pay their bills and one of those bills can be for long-term care insurance,” he said. “Then, the premium doesn’t get paid. And these are the very same people who are likely to go into long-term care due to cognitive impairment.”

https://www.forbes.com/sites/nextavenue/2015/11/06/how-long-term-care-insurance-policies-backfire/#753f411ab9b7


So over 1/3 of policyholder pay high premiums -maybe for years or decades-then forget/can't afford premiums/stop paying and all benefits are lost

[MadDAsHell]

3. This issue is far more complicated then just insurance company blunders, per an NPR story.

Many of these policies were written in the early 90s, when healthcare was expensive but not even remotely close to what it is today.

Everyone, including the government officials who estimated Medicare and Medicaid costs, were off by many multiples regarding how expensive health care would be by 2019. Check out some of the original estimates from the sixties of what Medicare and Medicaid would cost by the 90s, it's unbelievable how far off projections were.

The compounding issue is that premiums tended to be invested in low-risk things that depended on rising interest rates, which was a pretty safe bet based on history. But with the great recession, interest rates were nearly flat for many, many years, so the invested premiums did not have the kind of growth necessary to cover future costs.

[KPN]

6. So aside from annual inflation rate (3-5% generally pre-2009, lower since)

and expensive technological advances and drugs, why is healthcare so much more expensive than in the early 1990s? Where’s all that money going if it’s not the insurance industry? Some is probably stock owners and executive salaries as healthcare has become more corporatized? But all of it?

[benld74]

4. This is why my family steered clear

We didn’t believe their line. Lucky I guess.
Similar to the college cost being locked but without a devastating conclusion.
If something sounds too good to be a true,,,

[Bob Loblaw]

7. A real strain on Gerber I suspect.

Before they passed on, my folks had LTC insurance through Bankers Life. My mother died unexpectedly after a short illness and no claims on her coverage. She had been my dad's caretaker, supplemented by LTC professionals who would come to the house to spell her. A sibling moved in with dad to help him after mom died and continued to employ these professionals while at work. Meanwhile the premium notices started arriving in the mail closer and closer to their due date, to the point where on two occasions the premium payment had to be wired so it wouldn't be late. It was an obvious strategy to me that they were trying to have the payment be late so they could drop the policy for non-payment and stop paying out claims. I called their office. I told them I knew what they were up to because I had heard they'd try this shit and that if the next premium notice, and those thereafter, didn't arrive at least two weeks prior to their due date I would be having a conversation with the state insurance commissioner and it would not go well for them. At the time I held a Life and Health producer's license and told them so they'd know I wasn't blowing smoke. It did not happen again. Nevertheless I share this story anytime a friend mentions consideration of a Bankers Life policy.