Long-term care math still a puzzle in Connecticut

July 1, 2018 GMT

For 30 Connecticut residents who had purchased long-term care insurance more than 15 years ago from MedAmerica Insurance, the revelation surely came as a shock, after the upstate New York carrier signaled its intent to hike premiums by 130 percent on average for its tiny remaining book of Connecticut policies.

State regulators held the company’s increase to a mere 15 percent last month — but the episode placed an exclamation point on the sticker shock facing some who purchased long-term care policies in yesteryear.

Of people nationally who purchased long-term care insurance between 1990 and 2015, two-thirds of respondents cited fears of future premium increases as a significant reason why they chose to purchase policies, according to a LifePlans survey on behalf of the industry trade group America’s Health Insurance Plans.

But many buyers have absorbed major hikes on the policies they purchased regardless, with Connecticut rates subject to the approval of the state insurance department. The agency bases its verdicts on a review of the loss costs any insurance carrier pays out or anticipates doing so on claims, versus the premiums they want to charge.

In the case of MedAmerica, the Rochester, N.Y., company had based its price hike on grounds it was absorbing both higher-than-expected costs and duration of payments in claims, with the Connecticut Insurance Department ruling that the company’s small block of Connecticut policies has actually performed better than expected. It awarded MedAmerica a 15 percent rate increase.

Eight years for 20 months

This year, the Connecticut General Assembly considered a law that would have forced insurance carriers starting this October to space out over five years any premium hikes in excess of 20 percent, versus three years under the current rules.

In testifying this spring for the expanded window, Branford resident Dr. Milton Wallack noted that premiums had will have increased 250 percent over eight years for a policy he and his spouse Joan had purchased in 2011 from MetLife, to more than $12,000 annually.

Wallack estimated MetLife should have been able to accrue $150,000 as a reasonable rate of return on the couple’s $156,000 investment over that span. He submitted a 2015 email from the agent who sold the policy, in which she expressed being “appalled” at the hikes and surmising that carriers erred in assuming people would cancel their policies as they grew older. In the email, the agent expressed the opinion that a fairer policy would be for carriers to charge new customers more, rather than penalizing existing policyholders.

The combined $306,000 figure estimated by Wallack would cover 20 months worth of care in a private room at a southwestern Connecticut nursing home, according to a Genworth’s most recent annual study of the costs of nursing home care nationally.

Connecticut ranks in the top echelon of state residents getting long-term care, whether in the home, during daytime at rehabilitation clinics, or as patients in nursing homes. In 2013, about 34 of every 1,000 retirement age residents of Connecticut were in a nursing home, according to the latest date produced in a massive ongoing study of long-term care by the Centers for Disease Control and Prevention. That was the eighth-highest incidence rate in the nation and trailing only Rhode Island in the Northeast.

Connecticut also ranked eighth for the rate at which residents rely on home health rehabilitation services, at 114 of every 1,000 seniors. As the case nationally, lawmakers have been making home rehabilitation a priority in an attempt to cut costs and improve outcomes for patients, on the theory people fare better in the familiar environment of their homes with the support of family and friends.

Connecticut ranked 12th nationally for the percentage of seniors undergoing rehabilitative care at a walk-in clinic, at four of every 1,000 residents, about half the rate as Massachusetts and New Jersey.

‘Everything possible’

The National Association of Insurance Commissioners notes a dwindling number of carriers offering long-term care insurance over the past 15 years, as people live longer exposing them to greater risk of lengthy claims. NAIC has been studying ways to help states stabilize rates, to include reinsurance plans for carriers and hybrid plans that lump together long-term care coverage with standard health insurance and Medicare plans, life insurance or 401(k) retirement accounts.

Heading into July, the rate adjustment requests continue to arrive at the Connecticut Insurance Department, including from MetLife which requested a relatively modest 7 percent increase for the coming year on three books of policies for about 1,100 customers.

In the meantime, companies continue to grapple with how to pay for long-term care insurance they underwrote years ago, without adequately pricing policies for what they must pay going forward. Included in that cohort is the Norwalk-based GE Capital division of General Electric, which took a $6.2 billion charge last year for policies it is still paying out today despite no longer being in the insurance business.

“We want to reduce the insurance thing,” GE CEO John Flannery said at a May investment conference sponsored by Barclays Bank. “We are looking at everything possible to do that.”

Alex.Soule@scni.com; 203-842-2545; @casoulman