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THE HIGH COST OF LIVING LONGER Industry adjusts to loss of long-term care insurance sales

Fewer companies are selling long-term care insurance policies in Pennsylvania. Despite a waning appetite from consumers concerned about rising rates, the industry is evolving to keep pace with demand for coverage.

Fewer companies are selling long-term care insurance policies in Pennsylvania. Despite a waning appetite from consumers concerned about rising rates, the industry is evolving to keep pace with demand for coverage.

People still want some kind of coverage for personal care as they age, but they’ve been put off by the unpredictability of traditional long-term care policies and are now being offered other options.

Earlier this year, four insurance companies that sell long-term care policies asked the Pennsylvania Insurance Department for rate increases, some as much as 130 percent, a bellwether for the shrinking list of companies that offer long-term care insurance in Pennsylvania.

In late April, Insurance Commissioner Teresa Miller announced that most of the rate change requests made by Metropolitan Life Insurance Co., Genworth Life Insurance Co., Unum Life Insurance Company of America and John Hancock Life Insurance Co. would be capped at around 20 percent.

As a result of the decision, all four companies are now offering options that may further reduce or eliminate any rate increase for many policyholders, in return for accepting some type of reduced benefit. For example, the companies can request more increases in the future but cannot change plan benefits without the approval of their policyholders.

“Quite a number of companies have dropped out of the market over the past decade. They need to get approval from us to sell long-term care insurance but not when they stop,” said Ron Ruman, director of communications for the state department.

Ruman estimates that there are about a dozen companies still selling long-term care insurance — policies that help people pay for services they may need when they’re older such as assisted living, skilled nursing or home health care. In 2003, about 100 companies sold long-term care policies. The National Association of Insurance Commissioners reports there are about 288,000 long-term care policies in Pennsylvania.

The drop-off reflects a number of factors. Costs for insurance companies have increased, especially on lifetime policies, as people are living longer in a state with one of the highest populations of senior citizens in the country.

Low returns on insurers’ investments have reduced revenue. Insurers are required to invest in lower risk instruments such as bonds and CDs to make sure they don’t lose money in riskier investments. The low-interest environment of the last decade has hurt those investments, Ruman noted.

“It’s all an indication, unfortunately, of what has happened with long-term care insurers,” he said. “In the 1980s, they made some miscalculations on what the costs would be; they expected many people to die before they used the policies and underestimated the costs of long-term care. Many of their investments were in low rate, conservative bonds and CDs.”

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