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Long-term care insurance rates going up

January 30, 2015
by Lois A. Bowers, Senior Editor
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Long-term care (LTC) insurance is taking a bigger bite out of the incomes of residents and prospective residents who are buying such policies, according to the American Association for Long-Term Care Insurance (AALTCI). Overall costs for new insurance coverage increased 8.6 percent compared with a year ago, based on data from the 2015 Long-Term Care Insurance Price Index, released every January by the trade group. Its findings are based on top-selling policies offered by leading insurers.

“A healthy 55-year-old man can expect to pay $1,060 per year for $164,000 of potential benefits, compared to $925 last year,” Jesse Slome, AALTCI director, said in a statement. “The average cost for a 55-year-old single woman is $1,390, an increase from $1,225 per year” over 2014. 

Also according to the 2015 price index, a married couple who both are aged 60 years would pay a total of $2,170 per year for a combined $328,000 in LTC insurance coverage. In 2014, the association reported, a couple would have been expected to pay $1,980. Adding an inflation growth option that builds their benefit pool to a combined $730,000 at age 85 will added $1,760 to the couple’s yearly cost.

“Rate increases are the result of both higher claim costs and the historic period of low interest rates,” Slome said. Last year, LTC insurers paid out a record $7.5 billion in claim benefits, and the association predicts that the industry will pay around $34 billion in annual claim benefits by 2032.

The associatioan found a wider spread between the lowest and the highest available costs for each segment analyzed. “The largest spread now represents a 119 percent difference between the lowest available cost and the highest rate one pays for virtually identical coverage,” he added. Much of the difference still affects single women, because insurers continue the trend of charging such women more for coverage due to their increased likelihood of needing long-term care.

AALTCI reported a larger spread in costs than in previous years. “In some situations, the difference between the lowest-cost policy and the highest-cost was 34 percent, but it could be as much as 119 percent,” Slome said. “Our average 55-year-old woman could pay as little as $890 a year or as much as $1,829, based on which insurer she buys from.”