Alarm raised on long-term care insurance fees

08/29/2014 5:04 PM

08/30/2014 6:28 PM

My friend from Prairie Village just received a harrowing letter from the insurance company that covers his long-term care policy.

The key paragraph reads: “I am sending you this letter to inform you that we are implementing a 53.6 percent increase on your long-term care insurance policy, which was issued in Kansas.”

This letter explains this increase applies to everyone in Kansas who has long-term care coverage with this company. It had nothing to do with my friend’s age, health status or claims history.

It went on to say this, which is laughable: “Please note that a larger increase was justified and could have been requested.”

So my friend’s premium will jump from about $3,200 annually to almost $5,000 annually.

According to officials at the Kansas insurance commissioner’s office, another company offering long-term care just received authorization for an 80 percent increase.

The simple explanation for this huge increase is that the long-term care insurers are not taking in enough to pay claims.

A lot of assumptions made by long-term care insurance companies years ago turned out to be faulty.

So, why doesn’t the insurance commissioner’s office fight for Kansans? Why don’t they ask for a smaller increase? Shouldn’t the insurance company bear some of the responsibility for bad business decisions? Or why don’t they demand that the rates be gradually raised over, say, five years?

According to Kansas Insurance Commissioner Sandy Praeger, who is retiring after 12 years, this is a nationwide problem and has been the subject of ongoing work by the National Association of Insurance Commissioners for longer than she has been commissioner.

The dilemma for Praeger and almost all other state insurance commissioners is her department has no teeth when it comes to rate increase requests by long-term care insurance companies.

Said one official in the Kansas insurance commissioner’s office: “The regulatory authority given to us for long-term care by the Kansas Legislature does not provide us with a legal mechanism to limit the amount of the increase.”

He explained that statutes on the books are concerned primarily not with the public but what is needed to keep the companies solvent financially.

What is needed, clearly, is a remedy in the legislatures throughout the country, including Kansas. (Missouri has seen long-term care rates go up as much as 160 percent in one year!)

In fact, Praeger noted that at a recent national meeting of her peers, they approved changes to the long-term care “model regulation,” which adds requirements to help mitigate rate increases going forward. In other words, they are recommending changes in the laws.

Some might argue that this is the free market at work, and if you don’t like the increase, you can take your business elsewhere.

If only it were that easy.

As my friend said, “I am in no position to start all over again at my age and look for another long-term care insurance company to take me on.”

He is seething but all he can do is vent his anger.

At the commissioner’s office, they said, I think we all understand your friend’s consternation with the price increase. But under current law… Yada, yada, yada.

Kansas will have a new insurance commissioner in January. We can be hopeful that there will be a major push with the Legislature to put an annual cap of some sort on long-term care insurers.

I’m all for the free market. But in a truly free market, no company would hit its customers with a 53.6 percent increase at one time.

Steve Rose, a longtime Johnson County columnist, can be reached at srose@kc.rr.com.

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