I was very happy to see the “Priced Out” series by Jenna Carlesso and the investigative team at the Connecticut Mirror. Long-term care insurance cost is an important issue that needs to be discussed.
There is another aspect to this story that, I believe, the industry and perhaps some in our legislature, don’t want told.
The industry would have us believe that they are victims of uncontrolled circumstance and that theses ongoing premium increases are not their fault. I disagree.
The financial conditions that plague the long-term care insurance industry today were created by the industry’s deliberate actions.
Insurers grossly undercut the initial premiums on policies as a way to entice applicants to buy these policies. While they did disclose that they had the right to raise premiums in the future, they also stated that they had never raised premiums in the past. They then set an expectation of what future increases might be, by asking if the policyholder could afford a 20% increase in premiums. Today, those increases are 200%, 400% or more.
Insurers then intentionally closed these policies to new business in as little as three to four years, not selling enough policies to cover even a fraction of their future liabilities.
The industry cries that when they started selling long-term care insurance in the mid-1970s, they needed 20 years to collect data to understand the risk. I purchased my policy in 2004, a full 10 years after this 20-year data collection period. Surely by then they would have the needed data, yet my policy premium has increased by over 300%, with more increases to come.
The long-term care insurance industry has systematically isolated their long-term care insurance business into separate divisions, as a means to isolate their poor financial condition from the rest of their highly profitable business. Because the Connecticut Insurance Department only looks at the underfunded division that owns the long-term care insurance business, and ignores the profits of the parent organization, these rate increases continue to be approved.
CT Gen Stat § 38a-501, provides in part, that “[n]o insurance company, may deliver or issue for delivery any long-term care policy that has a loss ratio of less than sixty per cent.” Yet, time and again, the Insurance Department grants premium increases on policies that not only currently fall short of the 60% requirements, but have many times been in the single digits.
While the Connecticut Insurance Department states in its own disposition reports that these policies must still meet the 60% requirement, they have, to date, failed to explain any mechanism to recover money for the policyholders should that requirement not be met.
Finally, like most insurance companies, long-term care insurance carriers purchase “reinsurance,” which is insurance for the insurance company, and allows them to recover much, if not all of the money they pay policyholders who file claims.
On March 24, 2024, Brighthouse Life Insurance Company requested a 167% rate increase on a block of policies. In their initial filing documents, Brighthouse stated: “Genworth is currently the administrator on this block of LTC [long-term care] policies and UFLIC [Union Fidelity Life Insurance Company] is the ultimate risk holder and has been the ultimate risk holder since 2008.”
In plain language, Brighthouse has been reimbursed 100% of the money they have paid out on these claims for over 15-years.
Yet, in an Nov. 12, 2024 email by Jim Carson, Asst. Deputy Insurance Commissioner, he stated, “We do not consider the impact of reinsurance on the legal entity filing for a rate increase on a block of LTC business.” That means Brighthouse is not only being reimbursed for the claims paid, but they continue to enrich their bottom line with every premium increase granted. This filing is still under review so no final decision on an increase has been made.
These are just some of the issues that show how the industry created their own financial crisis, and how the Insurance Department continues to put the industry ahead of the policy holder.
It is time our legislators understand this other side of the story, which is rarely told, and take action. The estimated 96,000 long-term care insurance policyholders, mostly seniors, are being priced out of a product they purchased in good faith, when they are entering a phase in their lives when they may need this coverage most.
The Insurance Department has stated that it believes it is following the laws as they are currently written. We need to update current laws and add new ones — laws that will bring an end to these punitive premium increases.
David I. Schwartzer of Newington has over 40 years of experience in the property and casualty insurance industry.