The longterm care insurance cost crisis
As Connecticut’s population gets older — more than 575,000 residents, or 16 percent of the population, were over the age of 65 in 2016, with more aging into that group every year since — a ticking time bomb awaits them. While longterm care insurance was a good investment in years past, the cost of that insurance is now skyrocketing. That leaves seniors in a dangerous situation.
Beginning in the 1980s, longterm care insurance policies went on sale. In theory, these policies are sensible investments. As we age, we require additional help and health care. Longterm care is designed as a safety valve, protecting residents from the precipitous cost of nursing homes, elder care assistance and other health care necessary at older ages. But recent years have seen the costs of these plans swell much faster than 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 even led to voluntary lapses in coverage by consumers who paid into their plans for years, and in many instances, decades.
Over time, the number of companies offering such plans has dwindled from 100 nationwide to only eight serving in Connecticut today. Most of them have also discontinued longterm care plans, claiming their financial predictions were off. While care longevity has increased since the plans were developed, along with 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 directly harm their health, whether now or in the future.
As this growing crisis becomes more evident, states are taking notice. The National Association of Insurance Commissioners, or NAIC, has created a 38member task force to combat these shifts in the longterm care market. As of now, states are trying to address this situation, including officials here in Connecticut. The Department of Insurance, and the Insurance Commissioner, are concerned about potential insolvency of longterm care carriers. When this happens, policy holders receive new benefits through a guarantee fund. The department also monitors insurance premium increases; it’s believed Connecticut is in the middle when it comes to these increases.
This disasterinthemaking is harming many people 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 miscalculations. There is no evidence that payouts will match the increased rates they’re paying; it’s quite likely that increased premiums will only amount to further strengthening corporate profit margins. Insurers are known to keep significant reserves; there are alternatives to these jarring premium increases.
To address this impending crisis, we need to protect consumers, and that means making sure insurance companies, federal and state governments and health care systems and care facilities are on the same page. There are a number of options we could use to try and reach a better management — the state Commissioner of Insurance could follow the lead of other states to limit premium increases to 5 to 8 percent. If that is not possible, legislators could look at limiting the 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 longterm care to be combined with additional programs or to potentially introduce Medicare plans that integrate longterm care. There could even be opportunities for individuals to make penalty free distributions from retirement accounts or for Medicare lifetime coverage of longterm care to expand. At the very least, the federal government should require transparency and oversight of premium hikes, ending the practice of drastic increases.
Without action, seniors and families will continue to struggle in light of these drastic 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.