Increases of 10% to 20% in long term care insurance premiums have become standard fare over the past few years. But the announcement that government employees will see a rate increase of 83% in November is a shock. Here are 5 tips for deciding what to do with your long term care insurance policy.
The program was bid out last year and awarded to John Hancock in May of 2016. The new rates are the result of updated assumptions on the use of the benefits, according to the Office of Personnel Management. With the new assumptions the current rates would not cover future costs so rates had to be increased. Why does this happen? Generally it is because more people than expected keep their plans and use the benefits than original rates had anticipated.
So what do you do about the long term care insurance rate increase?
1. Be angry and frustrated and then get on to decision making. No doubt about it â€“ you made a responsible decision to mitigate the financial risk that comes with the high cost of long term care services. You selected a plan to fit your budget and your needs knowing that the price could increase. But who would have anticipated an 83% hike in insurance costs? No one, but here it is and the clock is ticking on looking at options.
2. Watch the deadlines for decision making. Those enrolled in the program will receive a packet of information explaining their options. Packets are being mailed out over several weeks beginning July 18. A decision to change benefits must be made by Sept. 30, 2016 or the current coverage will remain the same and the increase will go into effect Nov. 1.
3. Review your current financial and health situation. Have there been any major changes in your situation or the reasons you originally purchased long term care insurance. This will help guide you in looking through and assessing your options whether it is to keep the policy and pay the higher premium or make changes to lower the benefits and keep the premium the same.
4. Review the options with your financial advisor. Having long term care insurance to mitigate the future cost of care has probably been calculated into your financial plan and investment strategy. If you make changes that reduce your coverage or increase your monthly costs, or drop the coverage, your advisor needs to know.
5. Use resources to help make your decision. There are online videos and a fact sheet to help you walk through the options and how each would impact your benefits and premium. You can also look at a new policy from a different company. But chances are you will find the prices comparable to your new rate, as rates on long term care insurance at all companies have increased and you are older now and these plans are priced on the age when you buy. Also, long term care insurance is underwritten so there are many health issues that can lead to higher rates or keep you from being able to buy a policy at this time of your life.
Current enrollees impacted by the rate increase include:
- enrollees whose age at purchase was 79 years or younger,
- enrollees who have standard FLTCIP coverage and are not enrolled in the FLTCIPâ€™s
Alternative Insurance Plan,
- enrollees who applied for coverage before new application rates were raised on August 1,2015, and
- enrollees who are not currently eligible for benefits or awaiting a decision on a pending claim.
Thereâ€™s no right or wrong decision on how to proceed with your long term care insurance policy â€“ it all depends on your specific situation. Just make sure you make a decision based on your future financial needs and not just emotion.