Premium Rate Increases and Reduced Benefits Options
Long-term care insurance policyholders who receive rate increase notices must make a complex decision about whether to keep the policy and pay higher premiums, reduce the benefits, or drop the coverage.
Learning your options is important before you make any decision. You should not decide to drop the coverage until you fully understand all your choices.
Below are answers to some commonly asked questions:
Why is the Premium Increase Happening?
Long-term Care Insurance is regulated by state Departments of Insurance throughout the country. Regulators have been aware of the challenges facing the insurance companies and the policyholders for decades and have been monitoring how much premium increases have been approved. The issue began decades ago when the insurance companies failed predict how many people would keep their coverage, how long they would use benefits for, and how much costs would rise.
The challenge for insurance regulators is that there are now two competing goals:
- Minimizing rate increases to keep policies affordable, and
- Protecting benefits that policyholders paid for, planned for, and need in the future.
The challenge for policyholders is that it may become too expensive.
Are the Premium Increases Legal?
Yes, these premium increases are legal. In Delaware, rate increases must not be excessive, inadequate, or unfairly discriminatory. However, there are limits on what increases can be approved based on a certain percentage of premium dollars which will go towards paying claims.
Delaware law requires all long-term care insurance companies to issue a Cost Disclosure notice with each policy. This notice informs each policyholder that premiums cannot increase more than a certain percentage every year.
What if I Can No Longer Afford the Premium?
If you will have difficulty affording the premium increase for your policy, the premium can be offset by Reduced Benefits Options. Learn all your options before deciding. At least one of the Reduced Benefits Options must be either a reduction in the maximum benefit or a reduction in the daily, weekly, or monthly benefit amount.
Here are some of the options:
- Reduce the daily, weekly, or monthly benefit amount.
- Decrease the benefit period/maximum benefit pool.
- Reduce inflation protection going forward while preserving accumulated inflation protection.
- Increase the elimination period.
- Choose the contingent nonforfeiture benefit (certain policies).
You should NOT stop paying your long-term care insurance premium unless you fully understand your policy rights and options.
Where Can I Learn More?
This link Long-Term Care Insurance Rate Increases and Reduced Benefit Options Insights from Interviews with Financial Planners will bring you to a publication that will help answer more of your questions.
Please contact your insurance company directly or contact the Delaware Department of Insurance:
Phone: (302) 674-7300
Email: consumer@delaware.gov
