Long-Term Care Insurance Rates Surging in Pennsylvania

Long-term care insurance rates are skyrocketing in Pennsylvania, signalling potential insolvency risks and shocked insureds.
By: | January 24, 2019

Long-term care insurance rates are skyrocketing in Pennsylvania, signalling potential insolvency risks and shocked insureds. In just October of 2018 alone, some insureds saw a 20 percent rate increase. But that’s just the beginning.

Snapshot​: The long-term care insurance market is facing a series of issues, especially in states like ​Pennsylvania​, as insureds live longer than expected, and years of depressed interest rates caused insurance company investment income to plummet. The biggest long-term care insurer operation in Pennsylvania, Genworth Life Insurance Co., has issued a letter to its policyholders, stating that it anticipates at least a 150 percent premium increase in the next six to eight years.

The company needed to act. Genworth, to put it into perspective, reported a $34 million loss in its third-quarter last year, naming long-term insurance as the cause. It estimates it has lost a grand total of $3.1 billion on long-term care insurance business.

The Good​: The long-term care market is being substituted with other products, like fixed annuities that offer some flexible benefits for long-term care or life insurance plans with features for non-hospital medical treatment. For those that do hold long-term care policies (and face a premium increase), Genworth is offering policyholders who don’t want to pay the premium anymore a paid-up policy equal in value to what has already been paid.  Genworth is doing that so policyholders who wish to drop their policies do not lose the premiums they’ve paid to date and still have some coverage in place and can still access care coordination services, which can be critically important at the time of need.  Genworth also gives policyholders who are receiving premium increases options to help them reduce or avoid premium increases altogether by adjusting their benefits, while still retaining some coverage.

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The Bad​: This is a growing trend. One Pennsylvania long-term care insurance company, Penn Treaty of Allentown, has already been forced into liquidation by state regulators, and more collapse could be on the horizon unless policyholders are willing to pay sharp increases in premium.

National Association of Insurance Commissioners data shows that there were 100 companies selling long-term care insurance in 2002. Today, only 17 remain. In addition to increased longevity among the United States’ senior population and investment income issues, some companies expected more policyholders to drop coverage before receiving benefits — this didn’t happen.

Why It Matters​: A 2016 Population Reference Bureau ​Fact Sheet​ on Aging in the United States found that the number of Americans age 65 and older is projected to more than double — from 46 million today to over 98 million by 2060, and the 65-and-older age group’s share of the total population will rise to nearly 24 percent from 15 percent. The actuarial mistakes that led to this crisis are compounding the already-depleted long-term care insurance market. If these products are no longer available, it could put the squeeze on other markets catering to retirees just as the U.S. sees an increase in people needing these services.

Learn More: The Philadelphia Inquirer ran an in-depth article on long-term care insurance premiums earlier this month, diving into the lives of those affected, as well as the advice insurers and brokers alike are giving to curb long-term care insurance rate spikes.

Nina Luckman is a business journalist based in New Orleans, focusing primarily on the workers' compensation industry. Her credentials include a B.A. and M.A. from Tulane University, both in the study of English Literature. Over the last several years, Nina has served as Editor of Louisiana Comp Blog, a news site she started in 2014 under the auspices of a group self-insurance fund. Louisiana Comp Blog won the WorkersCompensation.com Best Blogs award in 2016, 2017, and 2018. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]