Shocking Disparity in LTC Insurance Rates

The American Association for Long-Term Care Insurance found that the average price for traditional, stand-alone long term care insurance plans have only slightly increased over the past year. This statistic does not include hybrid plans, which offer the insurance as a package with life insurance or other financial product. 

But the prices of the policies differ dramatically from one provider to another, even for equivalent plans. For a married couple, both age 55, the difference between the lowest and highest priced policies was 243%. The association’s executive director, Jesse Slome, indicated that this was the largest spread he could recall and declined to name the individual providers.

Len Hayduchok, president of Dedicated Senior Advisors in Hamilton, New Jersey, remarked that there could be a number of reasons behind the disparity. When LTC plans first came along, there was not enough data to accurately base prices so many policies were underpriced. The insurance companies have since had to play catch-up, and newer companies do not have to charge against those liabilities on their books. Whit Cornman, a spokesperson for the American Council of Life Insurers in Washington, D.C. said that each ” insurance carrier sets their premiums differently based on a variety of factors.” The companies are free to set their own rates, provided that they are approved by the local regulatory authority, usually the individual state insurance department.

Clients should be thoroughly advised of their options as well as the smaller decisions to potentially lower their costs. Cookie-cutter approaches to LTC plans should be avoided, according to Slome.

See Ben Mattlin, Shocking Disparity in LTC Insurance Rates, Financial Advisor, January 10, 2019.

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