Thursday, January 25, 2018

Long-Term Care Insurance

My partner, Juan, gave me a heads-up on this from NPR's "Planet Money."

The link gives a pod-cast button that is worth a listen.  The related text includes the following;

Last week, General Electric said it was taking a massive loss — $6.2 billion — related to an obscure corner of the company: long-term-care insurance.

Long-term-care insurance is this kind of insurance that anyone can buy. It covers things like nursing home care, or a home health aide.

But recently, GE came out and said it was having an "adverse claims experience" with these policies. 
Basically, the company got the math wrong, and lost billions as a result.

This isn't just about GE. MetLife got out of this business and so has just about everybody else. They all said the same thing: we underestimated how much this was going to cost.

Carol and I have a policy on myself, and two policies on Carol.  The premiums have gone up in the last few years.  When I bought one of the policies years ago from Northwestern Life, the agent warned me that the insurance company was only guessing at what the premium needed to be, and that I should expect that the premium would go up at some point as the company began to figure it all out.  The NPR podcast to which I refer above states that they haven’t figured it out yet.

One thing that I have noticed in my law-practice experience is this: The better care one receives as an elderly person, the longer one lives, generally speaking.  So, perhaps the long-term care insurance model works against itself.  What the model seems to require, at least in part, is some certainty about when the customers will die.  If the insurance company looks at the mortality tables, however, it is looking at a universe of people for whom the level of care varies substantially.  But their customers, who will receive better long-term care than most, will not die on time.

The question Carol and I have is whether the companies will figure it out before they go under.  In the meanwhile, we pay the higher premiums.  I’m not sure that’s the right choice.

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