Growing older while facing skyrocketing long-term care insurance premiums

RAYMOND, Maine — Sharon Ash Tancredi decided to take out a long-term care insurance plan about 20 years ago to make sure she wouldn’t be bankrupted by elder care costs as she grew older. But with premium increases in recent years, and another potential triple-digit rate hike looming, she now questions whether any of it was worth it.

Her long-term care insurance company, MedAmerica Insurance Co., asked the Maine Bureau of Insurance on May 15 for a rate increase of 133 percent. Tancredi, who currently pays $7,617 per year, would see her annual premium skyrocket to $17,748.

State regulators may not approve the company’s full request, but Maine has already granted MedAmerica three rate hikes since 2013, of 43 percent, 40 percent and 32 percent.

A retired clinical social worker, Tancredi, 77, of Raymond, said she doesn’t know what she will do if the bureau approves the full or even a partial increase. She could back out and lose her coverage and two-decade-long investment. Alternatively she could agree to reduced benefits or continue paying premiums that could rise even more — all for coverage she may actually never need or that could turn out to be a lifesaver.

“It’s just outrageous. I can’t afford this,” Tancredi said.

The sting is even greater because her premiums have risen far more than those of her husband, Elliot Katz, 75. He bought coverage from a different long-term care insurance company, Genworth, nearly 40 years ago. By the luck of his choice, he still has annual premiums of only $1,791, according to his payment records.

Nearly half of the 35,990 Mainers with long-term care insurance could see their rates increase under pending requests before state insurance regulators as part of a long-term trend of rising premiums for plans purchased decades ago. The insurance fills in many of the gaps not covered by regular health insurance or Medicare when people develop prolonged illnesses or disabilities.

When policyholders become eligible for long-term care, their coverage will provide them with a cash amount, up to a maximum limit, that they can use to help with the basic activities of daily living, such as bathing, dressing, eating and getting around. Policies cover care provided at nursing homes and assisted living facilities, but most of the time people are using the insurance to cover services that help them remain at home. Medicaid can also help with long-term care but only after people have spent down their assets.

Long-term care insurance premiums have risen over time to make up for lowball projections about future costs that companies made in the 1970s and 1980s when pricing the policies, said Kerry Peabody, a long-term care, life and disability insurance agent with Clark Insurance in Portland, a business of Marsh & McLennan Agency. He has been in the long-term care business for 32 years.

Insurance carriers didn’t realize how many people would keep their insurance. They didn’t anticipate how long people would need care and be filing claims. They underestimated how expensive claims related to cognitive disorders such as Alzheimer’s would be. And they believed they would earn more interest on their reserve funds than they did, Peabody said.

“They had never tackled this risk before, so they didn’t know how to price the products,” Peabody said.

After selling millions of policies , the number of companies offering new long-term care insurance plans nationwide dwindled from more than 50 to about 10 today, he said.

Along the way they locked in policyholders who had to buy earlier in life when they were healthy. People can’t wait to buy coverage until they have a debilitating illness because insurers don’t cover those with certain pre-existing conditions, according to the American Association for Long-Term Care Insurance. Insurers can also disqualify people based on their age, meaning that, at 77, Tancredi would be unlikely to get a policy with a different insurer if she wanted one.

Seventy people in Maine have MedAmerica’s long-term care insurance who would be subject to the potential 133-percent rate increase, according to the insurance bureau.

MedAmerica declined an interview request but said in a statement that it asked for a rate increase to help make sure it had adequate funds to pay future claims. If regulators approve the request in full, the company does not anticipate needing additional rate increases in the future, MedAmerica wrote in its state filings.

A total of 15,829 Mainers would be affected by all 10 pending rate increase requests before state insurance regulators that range from 2.8 percent to MedAmerica’s 133 percent.

The requested rate increases have to be actuarially justified and approved by Maine’s insurance bureau, said Bob Carey, the bureau’s superintendent. The agency uses both in-house staff and an independent consulting firm to analyze the requests. The bureau also considers public comments.

The bureau can reject a request or approve a scaled back amount if the original ask is not justified, Carey said.

The insurance bureau has approved 27 rate increase requests since February 2023 that affected 3,531 policyholders, according to the bureau. Of those requests, the bureau scaled back the increase in 13 instances but still approved rate hikes ranging from 2.5 percent to 81 percent.

State regulators don’t want to put insurance companies out of business, and they also want to protect consumers as much as possible, Peabody said, creating a difficult balancing act for the state. Some insurance companies have asked for more rate increases than others, depending on their number of clients, how many claims they’ve paid and how their policies were initially priced, he said.

The bureau knows that each “rate increase involves substantial sums of money, which impact people who are now, or will soon be, beyond their years of gainful employment,” Carey said.

Tancredi and Katz bought their policies because they didn’t want their loved ones to feel responsible for their eventual care. They want to continue to enjoy as much time as possible with their grandchildren and be able to set aside some money for them for college.

“We’re trying to not be a burden and be able to exist,” Katz said.

If Tancredi one day needs long-term care, under her policy she would receive a benefit of up to $12,999 a month for five years. Given the pending rate increase, it’s possible that she will be able to reduce that benefit to avoid paying higher premiums, but she said the situation still feels wrong.

“MedAmerica is gouging their policyholders in an unconscionable way,” she said.

The insurance bureau has tried to ease the burden of the large increases by requiring insurance carriers to phase them in over several years, Carey said. Companies are also offering a number of alternative options for consumers to avoid a price hike, such as decreasing people’s benefits, reducing the benefit time period or offering paid-up options based on the value of the premium paid so far, he said.

“There are lots of ways you can take your price down, and the carriers are being really creative and offering ways to do that,” Peabody said. “But it’s really important that the clients work with somebody who can help them understand the impact of those options.”

He never recommends that people cancel their policy and lose the often tens of thousands of dollars they have already paid.

“I show them the value of what they have with that old policy even after the rate increase. Typically if they’re going to do anything, they’re going to adjust their benefits to keep their price down,” Peabody said.

Though there are now different insurance options, such as hybrid life and long-term care coverage where rates are guaranteed to not change, people are still buying traditional long-term care insurance because it’s comparatively more affordable, he said.

While today’s prices for long-term care insurance are higher to correct past pricing mistakes, they are also more stable, and the plans can offer important protections for people as they age, Peabody said.

One of his clients has been using her benefits on and off for the last three years. Her policy has so far paid out about $70,000 for home care, he said. Now she’s considering moving into an assisted living facility where the coverage will continue.

“You can’t imagine the difference that just having a little long-term care insurance policy makes,” he said. “She’s been able to get the resources to keep her in her own home as long as she could.”

Erin Rhoda is the editor of Maine Focus at the Bangor Daily News. She may be reached at erhoda@bangordailynews.com .