Monday, March 03, 2014

3827 Slammed, #1

Monday, March 3, 2014

I got slammed twice this past week, plus one screaming meemie.

The first slam:  I received a letter from John Hancock, the providers of my Long-Term Care policy, stating that my annual premium would be increasing.

Shortly after Jay died Daughter informed me that she hoped I had a good LTC policy, because there was no way she could do for me what I had done for Jay.  I had no policy.  I knew that the older you are when you get one, the more expensive they are, so I got me one right away, well before I turned 60.  It's pretty much the gold standard, providing for everything from housekeeping help to full home nursing care, nursing home, whatever necessary.  It includes a 5% annual increase in daily limits (the maximum offered), and lifetime benefits.  It costs me $3,384.00 annually.

I had been hearing rumors that most LTC insurers were applying for premium increases.  Their actuaries had screwed up.  They'd figured that about half of the people who signed up for LTC policies would eventually let them lapse.  Well, that didn't happen.  Most, in fact, kept them, so now the insurance companies are looking at a huge balloon they didn't expect.

Most of what I'd read said that they were looking for anywhere from 15% to 45% increase, with some sources saying an average of 40%.  John Hancock says their increases will average 25%.   (One article:  Insurers are not allowed to raise individual premiums.  By law, they have to raise premiums across the board for a class of policies. 

The letter I got assures me that my "class" has nothing to do with my age.  They did not otherwise deign to define the class for my edification.

My premiums will increase from $3,384.00 to $6,429.60, as of May 2, 2014, the due date of my next premium.  Ack!

This is a 90% increase!!!!!

Even if 90% weren't already ridiculous (average 25%?), I carefully budget and save to make that payment.  With the increase, I am now $3,100 short of making it.  A little more than 2 months notice would have been nice.  WTF!  I can pull from investments to make it up, but what about people who just plain can't pay that much?

I think John Hancock's actuaries will get their heart's desire.  A lot of people are going to drop their policies, even though they may have been paying on them for decades.

It's a 12 page letter.  I read only the first two pages and set it aside, because every time I looked at it I felt like I was going to throw up.  All day Friday and Saturday my stomach churned.  Finally, Sunday, I read the rest of it.  They give me several options that will reduce my increase, most of which involve reducing my benefits, like going from lifetime coverage to a set number of years, or setting a longer wait time of need before benefits kick in, and so on.

Then I found the magic key.  If I reduce the inflation number for the daily max benefit from the current 5% compound to 2.7% compound, my premium increase drops to 0%.  Nothing.  Same as before.


That leaves me wondering now, if that's all it takes on a gold-standard policy, who in the rest of my class is contributing to that 25% average?  Something smells fishy here.  It's not adding up.

I'm supposed to return a form by the end of this month requesting that it be changed.  So that's what I have to do, I guess.

You know, when I bought this policy, I thought the premiums would never go up, since it was based on age and risk and what I'd asked for, and this is what they had figured their risk was for me.  One thing I had considered was investing that money earmarked for long-term care, but after running the numbers I figured insurance would actually end up providing more.  A lot of people buy LTC insurance and end up using very little of it (they die quick, I guess), so it still averages out as a win for the insurance companies.

Now I'm going to worry constantly.  There's no assurance that next year they won't try the same thing again.


Just to show you how little faith I have in anyone anymore - in all the articles I had read about insurance companies raising premiums on LTC policies, they all said that the companies were applying for state board permission.  In none of them was there any indication that permission had actually been granted.

So what if they are subsequently not given permission to raise rates?  Will they still hold me to the lower inflation figure?


rockygrace said...

Oh man, that's ... bullsh*t. Insurance companies suck.

~~Silk said...

That's nothing compared to what Hartford did to us. When Jay was no longer able to work, he lost his life insurance through his employer. So they offered us a short-term (2 year?) extension for the same face value. We took it, and paid that premium. Then, six months later, they offered us an individual "replacement" for the group policy, so we accepted that, and got a NEW policy. When he died, both policies were in effect. They paid off on the second policy, but refused to pay on the extension policy. Instead, they refunded A PORTION (6 months worth) of the premium we'd paid.

I was mad enough to sue, but lawyers I talked to said an individual has next to no chance of winning against an insurance company. They'd just grind us down. They got away with it.