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Why are two insurers seeking a major rate hike for long-term care policies?

The Florida Office of Insurance Regulation recently announced that it will be holding a public hearing in just a few weeks to discuss requests by two of the state's largest long-term care insurers to raise the rates paid by customers to a considerable degree.

These requests for a rate increase come at a time when many insurance companies are either limiting the sale of long-term care policies or abandoning new sales altogether in the face of what former Insurance Commissioner Kevin McCarty called "potential solvency issues."

What is long-term care insurance?

For those unfamiliar with long-term care insurance, it is generally purchased by customers when they are in their mid- to late-50s, and designed to help defray some of the costs associated with the onset of old age. For example, it can help cover some of the expenses of in-home care, or residence in a nursing home or assisted living facility.

The policies are purchased under the assumption that pricing will remain static.   

Which insurers are asking for the rate increases and how significant are they?

Unum is seeking rate increases of anywhere from 0 percent all the way up to 114 percent for 45,666 policyholders, the majority of whom reside in Miami-Dade and Broward counties. If given the green light, the average premium would jump by $281.

Met Life is seeking rate increases of anywhere from 20 percent all the way up to 95 percent for 22,796 policyholders, the majority of whom reside in Miami-Dade and Broward counties. If given the green light, the average premium would jump by $987.

Why are they asking for these steep rate hikes?

Officials with both companies attribute the need for rate hikes to actuarial missteps. Specifically, they argue they priced long-term care policies too low in reliance on inaccurate assumptions about how long people would live, how many would develop cognitive disorders and how many would let their policies lapse.

Are they permitted to do this?

State law provides that insurers can submit requests for rate increases in the event the conditions upon which they based their original pricing assumptions somehow changed.

What are the prospects for the rate hike being approved?

In the past, Florida has permitted rate changes provided that insurers are 1) willing to adjust coverage such that policyholders could maintain their current premium level and/or 2) willing to make younger policyholders (between the ages of 50-65) pay the largest increases and older policyholders (80 and over) pay the smallest increases.

It will be interesting to see if Insurance Commissioner David Altmaier approves the request. Stay tuned for updates …

If you have questions or concerns about an insurer failing to live up to their obligations under a policy, consider speaking with an experienced legal professional to learn more about your rights and your options for holding them accountable. 

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