Wednesday, June 20, 2012

LTCi: Greater Need, Fewer Choices

Jim Reynolds runs Caring Companion Home Care in Concord, Massachusetts. The 20 year old company provides home health care services, and Mr Reynolds has a message for those of us who sell Long Term Care insurance (LTCi):

"You're doing a good job; keep at it."

That's the good news.

The bad news is that, according to the National Association for Home Care & Hospice, some "7.6 million Americans received formal home health care and related services with a total value of about $58 billion in 2007;" by now, that number is likely to have grown substantially. The problem, of course, is that this care isn't free, and Medicare pays only a part (if any at all).

That's where LTCi comes in:

"When asked during an interview about how many of the families can use LTCI coverage to pay for the care, he thinks a bit, then says the percentage might be "10% to 10%." Then he thinks a bit more and says, "Closer to 10 percent.... It's not near as high as it ought to be."

And therein lies the rub: just as we see the need for this kind of plan peaking, its availability is on the decline:

"Shopping for long-term-care insurance? You should expect higher costs and a tougher approval process as a growing number of household-name insurers quit selling the policies."

As Bob noted this spring, "Prudential has announced they will be withdrawing from the individual long term care market." Met and Unum had already bailed on the individual LTCi market, and other carriers are now tightening their belts.

Those carriers "toughing it out" are making significant changes (aka reductions) in their product offerings. The latest comes from MassMutual. Although it's unlikely that they'll completely exit this market anytime soon, they're making some pretty significant changes. From email I received this morning:
"MassM announced ... that they are eliminating/limiting the following LTC options:

*Lifetime and 10-year benefit periods
*Full Return of Premium on Death and Return of Premium on Death riders
*All limited premium-payment options (10-year, paid-up at age 65 and discounted renewals
*Limiting the Shared Care rider to 2-3 year benefit periods
Granted, these tend to be the more expensive, low-volume offerings, but they indicate that the carrier is taking the shrinking market very seriously. That is, when there are fewer carriers even offering LTCi, "no carrier wants to be out on an island offering riders/benefits no one else does because it attracts an inordinate amount of business and remaining in balance is critical to LTC success."


So what to do? Well, if you have a need for this kind of coverage, then you'd best be acting sooner rather than later in getting it.

[Hat Tip: MM's Jeff M]
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