Since their inception in the late 1970s, long-term care insurance has undergone a few critical changes within past years, according to trends analyzed by FinancialPlanning.com. Even Motley Fool is weighing in with their article titled “4 Reasons Boomers Don’t Have Long-Term Care Insurance.”
Three trends about long-term care insurance that FinancialPlanning.com are calling “unwelcome” include the fact that premiums for long-term care insurance have gotten more expensive, benefits are shrinking, and cost-of-living adjustments have shrunk as well, sometimes from five percent to three percent or even to nothing at all.
Motley Fool notes that many big insurance companies are leaving the long-term care insurance business, with fewer than 20 players in a market where more than 100 once existed, causing the significant increase (sometimes 50 percent) in long-term care insurance premiums. Simply, long-term care insurance providers can charge more because there is less competition.
“It’s impossible. The fact is that insurance companies are losing money on long-term care insurance because people are starting to use it,” Lynn Ferraina, a partner at Ciccarelli Advisory Services in Naples, Fla., told FinancialPlanning.com.
“The insurance companies are starting to pay out and they are realizing the costs and that’s why they are increasing the premiums for others,” Ferraina adds. “I think it’s a national dilemma.”
Motley Fool also notes that many—as many as 35 percent of those seeking coverage—will be rejected as insurers look more closely at health profiles. Boomers are rejected for a number of chronic health conditions, including being obese, while some are being rejected for being too thin as well.
But there are some options with insurance companies making home care more attractive than, for instance, care within a nursing home. This is due to competition and the increase in technological advancements, such as wireless monitoring, automated pharmaceutical deliveries, and even the Uber app.
According to the Department of Health and Human Services, the cost of in-home care in 2010 was $21 per hour while the cost of a semi-private room in a nursing home was $6,235 per month. And certainly, cost for both has likely risen in the past four years.
For those looking for both long-term care insurance and life insurance, insurance companies offer hybrid packages as well, according to FinancialPlanning.com, but they offer no inflation protection and less valuable benefits than traditional long-term care insurance benefits.
With all the changes, it’s easy to see why most Boomers don’t have long-term care insurance, even as retirement age approaches.