Long-term-care insurers explain rate increase requests to state commissioners

Posted: March 12, 2016

Insurance that helps pay expenses for nursing care or other help in old age sounds like a great idea.

But when companies started selling long-term-care insurance policies decades ago they did a poor job of figuring out how much to charge, forcing them to repeatedly raise rates to consumers.

That pattern earned four insurers, which requested premium increases this year up to 130 percent, invitations to a Pennsylvania Insurance Department hearing Thursday in Harrisburg.

"The public needs to know that we're carefully reviewing the information that is sent to us," commissioner Teresa Miller said of the requests for often large rate increases.

But part of protecting consumers is also making sure the long-term-care insurance companies have enough money to pay all their claims, Miller said, adding that in the last four years the department approved 143 rate increases averaging 16 percent.

Long-term-care insurance provides a pool of money that can be used to pay for nursing homes and other care that health insurance does not cover and that can quickly deplete retirement savings.

After a person can no longer independently perform a specified number of daily activities, such as bathing, dressing, and eating - followed by a waiting period - benefits start.

Among the key factors driving higher premiums are low interest rates, which make it harder for companies to earn income on reserves, and fewer policy lapses than anticipated when the policies were sold.

About 46,000 Pennsylvania policy holders are affected by the requested increases that prompted the hearing Thursday.

Four major insurers were asked to talk about their requests, which vary depending on the policy: Genworth Life Insurance Co., requesting increases from 33 to 130 percent; Unum Life Insurance Co. of America, requesting increases from 63 to 94 percent; John Hancock Life Insurance Co., requesting increases from 14 to 88 percent; and Metropolitan Life Insurance Co., requesting increases from 43 to 60 percent.

Genworth Life's chief executive, Thomas McInerney, said the company's requests for large increases centered on certain policies issued from 1974 to 2002. The company has lost $2 billion on those policies nationwide through 2014, McInerney said.

In one case, Genworth requested an increase that would boost the annual premium for 2,117 Pennsylvanians to $2,440 from $1,333 - an 83 percent increase, the 139-page rate request filing shows.

"We're not trying to recover the losses we had," McInerney said. "We're just trying to get the policies from losing hundreds of millions a year to break even going forward."




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