Birth of LTCi: Fatal miscalculations spur decades of angst,” by John Hilton, InsuranceNewsNet


“In fact, the assumptions stood on a quite reasonable foundation, Slome explained. But two things did not play out as insurance executives and actuaries expected: the changing dynamics of long-term care, and the lapse rates. Fast forward a few decades, and LTCi is a perplexing product landscape. The need for the product is overwhelming, yet, insurers are busier trying to maintain old blocks of business that are actuarially unsound. That means repeated rate requests in states across the country. It means reduced benefits. It means denying coverage to nearly half of applicants who most need it. Finally, it means some insurers have gone insolvent. Many others have left the LTCi business entirely. Meanwhile, state insurance regulators struggle to weigh the needs of policyholders against the needs of insurers. It has pitted state against state in some instances.”



LTC Comment, Stephen A. Moses, President, Center for Long-Term Care Reform:

The best laid schemes o’ mice an’ men. Gang aft a-gley”–Robert Burns. But there’s even more to it than my friend Jesse Slome points out. The Federal Reserve forced interest rates to near zero which made obtaining reasonably expected returns on reserves impossible. That forced carriers to raise premiums which alienated prospects and angered insureds. Those same artificially low interest rates enticed politicians to spend with abandon resulting in the inflation we’re experiencing now. Likewise Medicare and Social Security face insolvency in a decade or so. When will those government programs acknowledge they cannot pay promised benefits and take action as LTCI carriers already have? If rate increases upset LTCI insureds, what do you think the reaction will be from voters when Medicare and Social Security cut benefits or raise payroll taxes?