2 Investigators: Couple Can No Longer Afford Insurance Premiums For Long-Term Care
(CBS) -- Almost all of us will need home health care, nursing care or assisted living care in our twilight years.
In order to pay for it, millions of people have purchased long term care insurance. But as 2 Investigator Pam Zekman found, the premium costs are quickly becoming out of reach for aging customers just as they get closer to needing the benefits.
Dalya and Mike Horowitz, both 69, bought long term care insurance from Met Life 10 years ago. Their policy had provisions for both nursing home care and home care services ranging from help with preparing meals to nursing services.
"We were afraid that we wouldn't be able to afford hospital bills, nursing home bills, if we got sick when we were older," Dalya Horowitz says.
Her husband adds: "We were trying to be responsible and make sure we didn't become a burden to our kids down the road."
The Horowitzes are determined to stay in their Skokie home throughout their lives.
"Our goal is to stay in our house, to be taken out feet first from our house.We don't ever want to be in a nursing home," Dalya Horowitz says.
The couple bought the long term care policy a decade ago when the premiums cost them a combined $3,600 a year. They were prepared for the premiums to increase -- up to a point.
This year, the increases took a dramatic turn—a 102 percent increase. What once cost the couple $3,600 would now cost them $8,700 a year. They are living on a fixed income and can no longer afford to pay.
Dalya was in shock. "I couldn't believe it. I just couldn't believe it. I thought somebody calculated it wrong, it can't be right," she says.
The couple felt betrayed by MetLife, and by the Illinois Department of Insurance. They filed a complaint with the agency about the rate increase.
"The bottom line is we've got no protection, and we got screwed because of it," Mike Horowitz says.
A letter from MetLife explains the premium hike was "driven by changes in actuarial assumptions." That means, among other things, that people are living longer, and the cost of care has increased more than they anticipated.
Bob Gallo, Illinois state director for the AARP, says what happened to MetLife and other long term care insurance companies is an "unfortunate history lesson," from when they first started selling long term care insurance years ago.
"They completely underestimated and misjudged what care was going to cost in the future," Gallo says.
When the earliest insurance customers started to need care, insurance companies began to realize that the premiums charged may not cover the claims they had to pay.
Low interest rates over a longer than expected time period also reduced the amount the insurance companies expected to make on their investments.
In a written statement to CBS2, a spokeswoman said MetLife's requested increases have been reviewed by regulators and implemented in 39 states, including Illinois. It says the increases were needed because of "financial challenges facing the industry" and that it "regrets the impact on policy holders."
Now Gallo warns consumers to read all the details of a long term care policy before signing up for one.
"It's something that people really need to think carefully about when they making a decision on how they're going to care for their future and look at the whole spectrum of options that are available to them, not just an insurance product," he says.
Now the Horowitzes have let their insurance policies lapse because the premiums are too high for them to pay on their fixed income. Dalya remains utterly disappointed. "We thought that we were covered, we thought we had done the right thing and then they threw us to the wolves," she says.
Met-Life agreed to pay $20,000 toward long term care services when and if they need it. It is the total amount they paid over the years they kept the policy. But they will be unable to get new policies at a competitive rate because they are now older and have had some illnesses.
Clients who want to keep some coverage can reduce the increased premiums by reducing some of their benefits.
The newly appointed director of the Illinois Department of Insurance declined to be interviewed for this report. But a spokeswoman said all current regulations were followed before the rate increases went into effect. Last year, a bill that would have put a cap on the amount long term insurance carries could charge died in the state legislature.
The National Association of Insurance Commissioners has a booklet available to the public on questions you should ask when considering longer term care insurance.
Here is MetLife's full written statement in response to CBS 2 inquiries for this report:
"MetLife determined that a rate change was necessary on four of its individual long-term care insurance policy series, and began filing the increase requests with state regulators as well as implementing the rate increase. While we regret the impact of a rate increase to policyholders, the impact of evolving assumptions on pricing is a challenge the industry is facing overall. To date, MetLife has implemented an increase on these policies in 39 states.
"The long-term care insurance industry as a whole is facing challenges as a result of evolving actuarial assumptions on pricing, calling for the need to increase rates. Following an extensive review of its LTCI business, MetLife discontinued the sale of Individual LTCI products in 2011 and Employer Group plans at the end of 2012. It was a difficult decision, but the financial challenges facing the LTCI industry are well known."
