Retirement & Financial Planning Report

The numerous issues involved long-term care insurance are largely responsible for the relatively low rates of purchases of such policies, and there are pressures on the providers that limit participation from that side as well, a study has found.

A report from the TowersWatson consulting firm noted that many such policies have increased premiums in recent years or at least sought to increase them, raising doubts in the minds of potential purchasers regarding whether premiums will remain level for life—such stability is one of the primary selling points of such coverage. That happened with the Federal Long Term Care Insurance Program, which raised premiums several years ago for certain types of policies even though many enrollees asserted that the government had promised that those rates never would increase if a policy were maintained without interruption.

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The study also said that while LTC policies typically spell out in detail what types of coverage will be covered, an enrollee might not be claiming benefits until many years in the future. “People’s attitudes and preferences for care likely will change. There is a genuine concern that today’s policy will not pay for prevailing services in the future,” it said.

“Long-term care services are continuously evolving. Nursing home only policies purchased years ago have a declining utility today as home and community care are increasingly in vogue. The distinction between sub-acute and long-term care is blurring,” it said.

The study added that many insurance companies no longer are offering coverage. Reasons include the difficulty of projecting future claims rates accurately, a high obligation to make future payments due to previously loose underwriting rules, and lower than projected earnings on investments.