I have received notice of a requested rate increase from my Long-Term insurance carrier. Does this mean my rates are increasing by the amount they requested?
No, the notice does not mean your rates are increasing.
By law, Long-Term Care insurers must notify policyholders of requested increases at the same time they submit a rate request to the Bureau of Insurance. However, no rate increase will take effect unless and until the Bureau of Insurance approves the request. The Bureau only approves an increase that is not excessive, inadequate, or unfairly discriminatory. The amount approved may be the amount requested or a lower amount. In addition, the Bureau generally requires the insurer to provide policyholders with benefit change options, which may lessen the amount of the premium increase. You will receive an additional notice from the insurer with specific information about the approved rate change and the effective date of any change.
What if I can no longer afford the premium?
Insurers often provide benefit modifications to help lessen the impact of a premium increase. These modifications can include:
- Reduction in the daily, weekly, or monthly benefit amount.
- A decrease in the benefit period/maximum benefit pool.
- A reduction in inflation protection going forward while preserving accumulated inflation protection.
- An increase in the elimination period.
- The choice of a nonforfeiture benefit (for certain policies). The nonforfeiture benefit (i.e. - paid-up reduced policy) converts the existing policy to a paid-up policy for coverage equal to the amount of premiums paid at the time of conversion so that no more premiums are owed. For example, someone may have been paying for a lifetime benefit of $500,000, but if they choose the nonforfeiture option and they have only paid $27,000 in premiums at the time they convert they will now have coverage generally equal to the total premium paid in the amount of $27,000.
You should not stop paying your long-term care insurance premium unless you fully understand your policy rights and options.
I do not like the premium increases I have received. Can I receive back all the premiums I paid?
No, your premium payments will not be returned to you. The policy under which you have coverage is a contract, which would have required your insurer to pay policy benefits if a covered event occurred and you received covered services.
You may inquire about a reduced paid-up policy, which would enable you to pay no additional premium while receiving a paid-up benefit equal to all premiums you have paid, though this amount may be reduced by past claims. This paid-up benefit would be available to you to cover eligible long-term care expenses you may incur. Some policies offer paid-up options in the form of riders.
How do I calculate what my premium would be if rates increase?
You will receive a separate notice from your insurer with details of your actual increase at least 90 days prior to the effective date of the increase. To understand the calculations behind your rate increases, multiply your current premium by the percentage increase to get the amount of the increase in dollars. For example, if your premium was $975 and the approved premium increase is 40%, the increase in dollars would be $390 ($975 x 0.40). You would then add $390 to $975 to calculate the new approved premium, which would be $1,365.
Will my rates go up?
Yes.
Rate increases have become more common on long-term care policies primarily because companies introduced this product when there was little reliable data on which to base their rates. These premium increases have been significant in some instances.
Before a company issues a policy, Maine law requires long-term care insurers to provide you with information on how often and by how much premiums have increased in the past.
Although the policy is guaranteed to be renewable, that does not prevent the premium from increasing. Increases in premiums, however, are allowed only for the entire “class” of persons with the same coverage and only with the prior approval of the Maine Superintendent of Insurance. For example, the premium may be increased for all insureds who have the same policy and who have reached their 68th birthday. Premium increases are based on an increase in the company's claims experience as insureds grow older. The insurer may not raise your premium based only on your actual claims.
The insurer may offer a premium discount if you and your spouse are covered, and some policies offer an additional benefit if your spouse is covered.
Can I make any changes to my plan and maintain my status within the Maine LTC Partnership Program?
For policies sold to consumers under age 61, the policy must maintain an annual benefit growth rate at a fixed percentage of at least 1% or the consumer price index to maintain its Partnership status. For more information, please review the Bureau of Insurance’s Consumer’s Guide to Long-Term Care and Maine’s LTC Partnership Program at https://www.maine.gov/pfr/insurance/sites/maine.gov.pfr.insurance/files/inline-files/consumer_guide_ltc_insurance_maine_partnership.pdf.
What happens if my long-term care costs rise?
From the time you first buy the policy until you actually need to use the benefits, the cost of care is likely to increase. Maine law requires insurers to offer you an option to increase the amount of benefits in your policy to account for the growing cost of care. These options come in a few forms and are usually available only when the policy is initially purchased. These options increase the overall and daily maximums in the policy as follows:
- An automatic built-in percentage increase each year with no change in premium. The cost of this option may significantly increase the premium.
- Each year, you may be offered the option to take an automatic increase in benefits with a corresponding increase in the premium.
These options may be called different names like “guaranteed insurability,” “cost of living coverage,” “inflation protection,” etc.
How does the Bureau determine if a requested rate is excessive?
The Bureau requires long-term care carriers to use the premiums that they receive to pay claims and overhead according to a formula (the loss ratio standard). Depending on when the policy was issued, the formula is 60/40 or 58/42. A carrier subject to the 60/40 rule must pay at least 60% of its premium to claims and 40% may go to overhead. Increased premium is subject to the 85/15 rule and the carrier must pay at least 85% of its increased premium to claims and 15% to overhead. The Bureau would consider the requested increase excessive if it does not meet the required loss ratio standard.
Where can I learn more?
Please visit www.maine.gov/pfr/insurance/consumers/long-term-care-insurance for general information about Long-Term Care insurance.
Further information can be found in the Shopper’s Guide to Long-Term Care Insurance provided by the NAIC at https://content.naic.org/sites/default/files/publication-ltc-lp-shoppers-guide-long-term.pdf.