Most older Mainers don’t purchase long-term care insurance.
It’s too expensive — first-year premiums currently range from about $5,000 to more than $20,000 per year, depending on the policy — and designed primarily to protect the assets of higher-income earners as they age. Most lower income earners who need care in old age instead spend down their assets until they are eligible for the taxpayer-funded Medicaid program — called MaineCare in Maine — to pick up the tab.
But the roughly 35,000 Maine residents who do have private coverage for nursing home care, assisted living or in-home services have seen sharp increases in their annual premiums over recent years as companies that issued their policies come to grips with years of high expenses and low revenues.
After approving a series of double-digit rate increases over the past five years, Maine Insurance Superintendent Eric Cioppa has scheduled a daylong public forum for Monday, May 9, in Augusta to take oral and written testimony from policyholders, insurers and advocates. This is not a formal rate hearing for the purpose of evaluating a proposed increase. His goal is to gain a fuller understanding of the likely need for more rate hikes going forward as well as the impact on consumers.
“As the regulator of insurance companies selling long-term care policies in Maine, I want to hear firsthand from those who purchased and are relying on these policies and those who sold the policies and are continuing to request substantial rate hikes,” Cioppa said in a written notice about the forum. He added that the forum is an opportunity for consumers to understand the role of the insurance bureau and to hear company’s explain the need for the recent increases.
The informational forum is an outgrowth of proposed rule changes this winter that would have capped rate increases in the long term care market, a failed measure Cioppa opposed for its inflexibility to industry needs while acknowledging the burden imposed on consumers by repeated rate hikes.
“We understand the hardship that rate increases put on consumers, especially retirees who may be on fixed incomes and who have to make difficult choices to retain their policies,” he wrote in his testimony.
The deadline for scheduling an oral statement at the forum is Monday, April 25.
Under Maine law, Cioppa’s office is charged with reviewing proposed rate increases for all long-term care policies and approving, amending or denying them based on a combination of public and business considerations, including consumer protection and the ability of companies to fulfill their obligations to policyholders.
Actuaries, the statistical experts behind insurance companies’ risk and pricing strategies “got a lot of their assumptions very wrong” when they launched their long-term insurance lines back in the 1980s, Cioppa said in a phone interview earlier this week from New Orleans, where he was attending the annual meeting of the National Association of Insurance Commissioners. The issue of long-term care underwriting is a hot topic across the country, he said, though regulations vary from state to state.
The experts failed to accurately predict some key actuarial trends, Cioppa said, including the national increase in longevity, the rising incidence of Alzheimer’s disease and other forms of dementia, the length of time people would spend in long-term care and the relatively few policyholders who would drop their coverage after paying in to the companies for a period of years. At the same time, investments that companies make with their premium dollars have performed poorly in the shaky economy, driving down essential revenues.
It took insurers years to compile the claims data companies needed to support the need for significant premium increases, Cioppa said, so those increases have been frequent and steep in recent years after being mostly unchanged in the past. Some companies have lost money to the point of becoming unstable, and many have stopped selling long-term care policies while maintaining other, more secure lines of business. Of the approximately 50 companies that were issuing long-term care policies in Maine in the 1980s, only 10 remain in the market, Cioppa said.
One of the largest is Tennessee-based Unum, which has offices in South Portland. The company issued policies nationwide, to individuals and through employer benefit plans, between 1989 and 2012, before withdrawing from the long-term market altogether. Unum still administers about 16,500 plans in Maine and more than 1 million across the country, paying out more than $370 million in benefits during 2015.
In testimony provided at a rate hearing in Pennsylvania last month, Unum’s Steve Zabel, who oversees product lines no longer actively marketed by the company, said “significant” losses related to long-term care policies have adversely affected the company’s other insurance divisions including disability, life, dental and vision insurance. Although premium increases are needed to stabilize revenues, Zabel said, policyholders should also be allowed to adjust their benefits, level of inflation protection, length of benefit period and other policy provisions to help hold their down costs.
Lori Parham, state director for AARP in Maine, will be participating in the May 9 hearing at Cioppa’s invitation, to share the organization’s consumer-based perspective and resources for seniors considering long-term care insurance. Consumer protections are essential, Parham said, including clear buyer information about policy provisions, a “nonforfeiture” option that provides a level of benefit even if a policy is canceled and increased availability of more affordable “partnership” plans that protect some personal assets in the spend-down toward Medicaid eligibility for long-term care.
The insurance forum will be held from 10 a.m. to 3 p.m. Monday, May 9, at the Augusta Civic Center. A live, interactive webcast will be available through the Bureau of Insurance website, maine.gov/insurance, and a video recording will be posted there after the event. For more information on submitting written testimony, scheduling an oral statement or participating via the webcast, contact Consumer Outreach Specialist Judi Watters at judith.k.watters@maine.gov or 624-8445 by April 25.
