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Long-Term Care Insurance Costs Not Expected To Rise

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Long-term care is a coming tsunami in this country. What’s worse is that no one wants to talk about it. When people do discuss it they’re unsure of how much it will cost. They are unsure if they’ll need it? Also, is the insurance worth it? One thing is for sure, if you have a long-term care event, something that 7 in every 10 people experience. The cost of care can really break the bank. The median annual cost of care for an assisted-living facility was $43,539 in 2016.  While a private room in a nursing-home would cost $92,378. Consider the fact that people age 65 and above will nearly double as their share of the population from 13%-25% between now and 2050. The costs of long-term care are likely to rise even faster than normal inflation.

Unlike many healthcare costs, paying for long-term care services is the individual or family’s responsibility. Medicare will not cover these services. Medicaid will only pay for care once all other available resources have been exhausted. What this means is that someone needs to either set aside an appropriate amount of funds for the amount of care they predict they’ll need. They can also transfer that risk to an insurance company. Transferring the risk through the purchase of a long-term care policy is the more affordable of the two options. Unfortunately, people hesitate because they’ve heard horror stories about seniors on fixed incomes having their premiums increased on them to the point of unaffordability. This is a valid concern because older policies from 10 or 20 years ago used different assumptions than policies do today. Also, the rates have been increased in order to make up for those faulty assumptions.

According to Jesse Slome, the director of the American Association for Long-Term Care Insurance, “Back in the 1990s, long-term care insurance was a new form of protection and there just wasn’t the data available. Now with several decades of experience and millions of policies sold and hundreds of thousands of claimants, policies priced today can more accurately project important aspects.” Slome believes the risk of future rate increases on new long-term care insurance policies is “zero” because of rising interest rates and new regulations.

Figure 1-1:

Risk of long term care insurance rate increases, credit: American Association for Long-Term Care Insurance study, September 2018

Jesse Slome is not alone in his prediction and has good reason for feeling the way that he does. According to a survey performed by the Association for Long-Term Care Insurance (see Figure 1-1) 79.1% of actuaries who responded believed the chance of future rate increases to be less than 10%. This comprehensive study polled 80 long-term care insurance actuaries who are the professionals responsible for pricing these insurance policies. This should be good news for people who are considering the purchase of long-term care insurance.  However, the people are afraid of what the future might hold in relation to price increases. I’ve spoken with many customers whose primary objection to the purchase of a policy was not being able to afford premiums. If rates were increased later on down the road, and this information should help ease some of those concerns.

Healthcare costs are some of the highest expenses that retirees will face. Also,  making sure you have a plan for managing these costs are crucial for the success of your overall retirement plan. At Stolly Insurance we have the expertise necessary to help you navigate this challenging retirement landscape. Call us today so we can help you with all your retirement healthcare planning needs!