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Subject:  Re: LTHC Date:  8/23/2019  3:00 PM
Author:  Hawkwin Number:  94978 of 96904

They can increase your premiums at will, and your only options are to either pay up or abandon the policy?

Not quite, but close enough that it feels that way. BTW, your Medicare Supplement likely works the same way.

They generally can only increase by age bands. That is, everyone age 74 would pay the same rate based on what they actuarially determine the cost should be (or most recently was) for that age-based risk.

Basically, insurance companies have been jacking up the price because 1) they greatly underestimated future expenses under these policies and 2) greatly overestimated default/cancellation rates - leaving them on the hook to pay more benefits. People cancel their life insurance all the time. They rarely cancel their LTC policy. Insurance companies assumed LTC policies would have similar cancellation rates.

New rules have rolled out for new policies but the older policies operate(d) under a loss ratio of 60%. Meaning, that 60% of all premiums had to go to cost actual care. The other 40% was gross profit. So, the drastic increases someone might see on an old policy are still limited by that upper limit - which means that those policies are indeed going up in cost because costs are actually higher.

The new rules cap any premium increases to 85% loss ratio (only 15% can go to gross profit) - but only if your state participates in the new rules. Thankfully, the vast majority do.
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