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Beware of steep premium increases on long-term care policies

Written by Diane Archer

As you age, it’s critical to plan for long-term care services and supports, including home or nursing home care. Many people end up qualifying for Medicaid, which covers these services. Others rely on the volunteer services of family and friends as well as local resources. The Wall Street Journal reports that people who rely on long-term care insurance policies are at risk; many of them are now facing steep premium increases.

As we have previously explained on Just Care, most of us will not benefit from a long-term care policy. People who buy long-term care policies are seeing their premiums rise sharply over time. The policies usually include “level premiums.” The problem is that insurers offering policies with level premiums still can increase their premiums substantially. And, you can end up with premiums for your long-term care insurance that are a lot more than you anticipated.

The long-term care insurance industry is not faring well, as more policyholders are filing for benefits than anticipated. As a result, 7.3 million people who hold policies, about 20 percent of people 65 and older, are being forced to choose between continuing their policies at a much higher premium or dropping their coverage.

Between 2016 and 2018, CNA Financial Corp. has almost doubled its annual premium for long-term-care insurance. If people don’t find a way to come up with the additional money, they throw away all the money they had already invested in their policies. So, many are foregoing vacations and home maintenance or taking on additional work to cover their premiums.

The number of companies selling long-term care insurance has fallen from more than 100 in the 1980’s to about 12. And, the scope of coverage has narrowed significantly. A typical policy costs about $3,500 a year for a couple and pays out a minimum of $164,050 and a maximum, after 25 years, of $333,000. Not surprisingly, sales of policies in 2016 were fewer than 100,000, down more than 650,000 from a high of 750,000 in 2002.

One other warning: Long-term care insurance companies may wrongly deny people’s claims for coverage. The Wall Street Journal reports that one family was forced to sue a long-term care insurance company for denying a legitimate claim for in-home care. The family won, but it was “stressful.”

Medicare pays for only limited nursing home care and home care. People fortunate enough to have Medicaid, and that includes many middle-income people who spend down their assets, are guaranteed long-term care coverage, typically at home or in a nursing home. Some are lucky enough to participate in PACE, a program for all-inclusive care for the elderly.

Too many people struggle to get needed care. Long-term care can easily cost $100,000 a year, more than almost anyone can afford. Americans need the federal government to guarantee long-term care coverage to everyone.

Here’s more from Just Care:

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