LTC premiums: Is the worst yet to come?

Being up on the news is generally a good thing. An informed citizen can be a more intelligent voter. A wiser parent. Possibly a better spouse and overall a better citizen. Yada yada yada …

Being part of the news, however, is trickier. It’s OK if you’re picked as CEO of a major company. Or you win the lottery. But being in the news is trickier if it involves something awful or deadly, like a fire, flood or tornado, or your Metro car jumps the tracks. Or you learn that your long-term care insurance premiums are going up an average of 83 percent in a couple of months.

That’s the situation facing nearly 300,000 current and retired federal workers whose LTC premiums, in most cases, are going up big time.

The “average” increase will add $111 per month to LTC bills, but it will be even more for some people depending on their coverage. The increase is coming in November, which many people find ironic. Just a few days after the higher prices go into effect, Americans will be going to the polls to choose between what many experts say are the two candidates with the highest negatives in our history of elections.

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Currently, the options facing federal LTC policyholders are accept the increase or downsize their coverage, in one of several ways ranging from the daily rate the policy will pay, to the duration of coverage and inflation-protection. Neither is a good option. Many very angry policyholders think they are being ripped off.

In fact, most people who have LTC insurance — whether a group plan like the government or as individual coverage — have been hit with big premium increases in the past. More are coming up as contracts expire and many companies decide LTC is a losing proposition.

Example: In the year 2000 there were 102 companies offering LTC insurance. Today, there are 12 to 14. And only one bid on the federal program this year. Over the years, premium hikes of 40 percent were not unusual at the end of each contract period.

Insurance companies make money off premiums, and by then investing those premiums in something safe. Something that will make more than the companies have to pay out in premiums whether it is health, life insurance, auto or LTC. They often invest in U.S. Treasury bonds and, until the recession, real estate. But because of low interest rates — combined with the skyrocketing costs of providing long-term care and the fact that more people are using it for longer periods of time — many companies find it costs more than it’s worth. For more on how the system works, click here.

Since the higher premiums were announced, we’ve been swamped with emails. All of them —100 percent — think it is an outrage. Here’s one from a policy-holder who thinks things will be even worse in the future:

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Mike:

This increase really hurts and I would have to thin out my coverage to continue and wonder will it be worth it?

With the size of this increase and no other insurance companies bidding, this program is dead and wonder why would anyone buy into this mess.

So in seven years from now , when I will be 77 and facing another seemingly large increase. it will be totally unaffordable or possibly be dropped with no insurance company willing to bid. So, do I quit the program now knowing it quite possibly will not be there for us or take even weaker coverage with higher premiums in the future if offered?

It seems like OPM turned its back on retirees trying to do the right thing for their families and trying to avoid being placed on Medicaid down the road.

Maybe everyone should probably save their premium money, sell down later in life to go on Medicaid like everyone else.

Thanks Mike for letting me sound off because I am totally ticked off.

Sincerely

J.M.Cloyd

Some members of Congress are making noise about doing something. But short of changing the law (which requires the federal program be self-funding) and appropriating federal money to help run it, there isn’t likely to be any reprieve from higher premiums.

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