Mounting Costs of Long-Term Care Insurance

For about 1.2 million Americans, Tom McInerney will be paying their nursing home bill.  McInerney, 58, is the chief executive officer of Genworth Financial Inc., the giant of long-term care insurance. 

Long-term care policies written years ago have become a black hole for the insurance industry.  Executives misjudged everything from how much elder care would cost to how long people would live; costing insurers like Genworth billions. 

Struggling to contain the damage, Genworth warned of a “material weakness” in some of its accounting.  To cope with mounting costs on the policies, Genworth has been continually raising premiums.  Despite furious policyholders, there is no quick fix for Genworth. 

“What’s happened over the last five, six years is an example, frankly, of market failure,” said Howard Bedlin, vice president at the National Council on Aging.  “There was a slew of pretty significant premium increases.”  Nonetheless, McInerney says they will get it right eventually. 

See Bloomberg News, The Old-Age Bill That’s Crushing Genworth, Financial Advisor, March 3, 2015. 

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.