Low interest rates spell trouble for LTC insurance
Long-term care insurance carriers used to operate under the assumption that a reliable number of policyholders would drop their coverage before they reaped their claim, Howard Gleckman, a journalist and Urban Institute fellow, writes in Forbes. But as interest rates plunged in the economic downturn, more policyholders have not cashed in. Additionally, not enough consumers are buying the policies, he says.
In this environment, LTC insurance carriers have had to either exit the market or increase premiums substantially. Genworth increased premiums this year and decreased product offerings, while Prudential has decided to offer only group LTC policies.
“Overall, though, the decline of the private LTC market is a huge problem, especially since it is coming just as Washington is seeking ways to reduce Medicaid, the most important payer of long-term care costs,” Gleckman wrote.