A page on the Oregon Insurance Division website is giving us a preview of rate hikes that insurance companies will be implementing on existing policies for Long Term Care insurance. This latest move follows a pattern of these rate hikes over the last several years as insurers have had to grapple with the poor policy design and pricing they rushed to market a number of years ago. While it’s not clear just what factors precipitated this latest round of hikes the culprits seem to be faulty initial assessments of lapse rates among policyholders along with lower interest rates (which reduce company profits) and greater utilization by policy holders.
Folks holding these policies will likely be given some choices by the insurance companies to help control the cost increases. Benefit trimming, inflation adjustment reductions and elimination period lengthening are all possible choices that companies will offer. Sadly this latest round of premium increases just may be the ‘straw that broke the camel’s back’ as retirees grapple with their own cash flow issues and try to make their retirement income stretch to cover other living expenses.
While no one likes to pay more for existing benefits it’s extremely important to put these rates hikes in the context of your overall financial plan. For many, the reasons to purchase coverage haven’t changed and these benefits may be important to ensure retirement sufficiency throughout a lifetime For others unexpected windfalls may have made this coverage not as necessary as it had been previously. Each family’s situation is unique, there is no one size fits all solution. We’re happy to help clients think through this latest change to their retirement landscape and we encourage folks to seek advice before making big policy changes.