A Long-Term Care Insurance Rate Headache

Here’s how to work through your other options.

1. If it’s a manageable increase, consider paying it. A 2014 analysis done by Marc Cohen, a professor of gerontology at the University of Massachusetts in Boston, found that 22 years of average LTC premiums cost the same as a five-month stay in a nursing home. It’s important, however, to carefully check correspondence from your insurer to see whether your state has already granted future rate increases. You’ll have to decide whether you can afford them, too.

2. If you can’t manage the increase, study your insurer’s options for premium-reducing concessions. Cohen suggests reducing the number of years you have benefits. Another analysis he did showed that “in a large majority of cases, people died or went off claim before using all of their benefits.” (A 2017 Rand study estimated that older adults who spent any time in a nursing home stayed just under eight months on average. For 90 percent of those studied, the total was less than three years.) Another option is to reduce your daily benefit. Bonnie Burns, a consumer advocate who has counseled hundreds of people through rate increases, advises cutting daily benefits, years of coverage or both instead of giving up any inflation-protection rider, especially for people in their 60s or early 70s. “Their benefit can still grow because they have time,” she says.

3. If you are married, think about who is more likely to need paid care. Does one of you, for example, have a family history of Parkinson’s or Alzheimer’s disease? All other things being equal, keep in mind that a wife will likely live longer than her husband of the same age, spending her latest years alone. Cohen’s wife has five years of coverage; he has three.

4. If none of these work, you can either convert the premiums already paid into a smaller paid-up policy or take a cash buyout, if one is offered. “That paid-up benefit is a consumer protection, a serious one,” Burns says, partly because you may not be able to qualify for a replacement policy. On the other hand, if you bought a policy at age 50 and now you’re 60, you may be young and healthy enough to find a new policy, Burns says. “Taking the cash might be a good decision.”

The outcome

Unfortunately, I could work no miracles for Koplan, who decided to take the cash. His reasoning was that he bought the policy to protect against a worst-case LTC cost scenario — say, expenses totaling $500,000. On the other hand, he explained, he and his wife luckily have enough money that if they had caregiving costs in the neighborhood of $61,607 — the amount of the policy benefit they could retain without paying more premiums — they could cover that expense comfortably with cash on hand. So instead of the benefit, he’d rather have the cash, which he plans to set aside for caregiving and add to over time. And he’s contacted his state’s insurance department to complain about what he considers an unfair deal.