According to the Long Term Care Consumer Price Index, the overall costs for long-term care insurance coverage increased 8.6% compared to the costs last year. Researchers found that these costs affected both men and women at varying age levels that are currently paying for or are interested in purchasing long-term care insurance for possibly future needs.
Increased Costs for Long-Term Care Insurance
The American Association for Long-Term Care Insurance group has estimated that a healthy 55 year old man can expect to pay $1,060 per year for $164,000 in long-term care insurance benefits. This amount is fifteen percent higher than the 2014 cost of $925. However, the 2014 figure was a fifteen percent decline from 2013, which means that for healthy middle age men the annual premium has stayed steady between 2013 and 2015.
Women began seeing an increase in their long-term care coverage in 2013 after reports were released that showed that women are more at risk of needing some type of long-term care. For a healthy 55 year old woman, the annual cost of a long-term care policy is $1,390 for the same amount of coverage ($164,000). This is a thirteen percent increase over the 2014 figure of $1,225 per year and has resulted in lawsuits against insurance companies for gender discriminating policies.
Consumers Buying Less Policies
These prices are for new policies that are being issued to seniors or people nearing retirement for long-term care insurance. However, some insurance companies have been increasing the rates on existing policies for years. This is because the companies have been hit particularly hard by low interest rates and higher than expected future claims. One glaring examples of this is the insurer Genworth Financial, that raised its premiums on some policies by as much as fifty percent in 2012.
The higher premiums on long-term care insurance policies mean that seniors are purchasing fewer policies for long-term care coverage and those that do buy policies are paying for less protection. This was backed by an industry-wide survey in July 2014 that found that sales of three year policies increased from 23.6% in 2007 to 35.3% in 2013. For the same time period, sales of five year policies dropped from 18.9% to 13.5%. In addition, the sales of more expensive policies that offer lifetime coverage for long-term care decreased from 5.7% to just 3.6%.
Glaring Price Disparities
For a new policy this year, a married couple that were both sixty years old would pay $2,170 annually for a total of $328,000 in long-term care coverage. Just last year, that number was only $1,980. By adding on inflation to their policy that would garner them $730,000 in coverage by the time that the couple was eighty years old, the couple would pay an additional $1,760 for a total of $3,930.
The price disparity for inflation protection is particularly glaring. Right now, a typical sixty year old man could buy a $200,000 long-term care insurance policy with no inflation protection for about $1,300 a year, but the same policy with five percent inflation protection would cost him almost three times as much, nearly $3,700.