Rate Hikes Follow Changing Nature of Long Term Care
More than 150,000 health care consumers have sued their insurers for raising long term care insurance premiums between 25% and 700% -- a trend that has left many Americans unable to afford the insurance "just when they need it most," the Los Angeles Times reports. Many consumers originally purchased the policies, which promise to pay for nursing home care and home-health aides, under the assumption that premiums would remain constant. But in the face of rising health care costs and an aging population, insurers are raising premiums in order to "keep up with their costs" and "break even," according to Scott Daniel, a partner at the Galveston, Texas-based law firm Herz & Adams, which has represented insurance companies named in several class-action lawsuits. The "problem" of rising premiums on long term care policies has become so "serious" that Sen. Charles Grassley (R-Iowa), chair of the Senate Special Committee on Aging, held hearings in mid- September "to explore the causes and potential solutions." The Times reports that the problem "is fairly complex," as the policies are "relatively new and evolving." The paper explains that rate hikes accompany the changing nature of caring for the elderly, including the following shifts:
- The number of "two-income families" is growing, leaving fewer stay-at-home spouses to care for needy elderly. This care is being shifted to paid providers;
- Americans are living "longer than ever," and the need for long term care "could break records and bankrupt companies that underestimate the costs and need for these services";
- The long term care insurance product has changed according to market demands. Policies originally offered to pay for "unattractive" services such as nursing home stays, which proved to be a "tough sell." Now, policies have evolved to provide more attractive benefits such as "home-health benefits, hospice care, medical equipment, caregiver training and even homemaker or chore services." However, insurers "don't know exactly how to price the [new] policies and can't guarantee that they won't have to pass on rate increases to customers";
- Because such services are more attractive, policies paying for home health aides and housekeepers may "ultimately boost usage, thus boosting costs for long term care insurers," who may consequently raise premiums.