Long-term care insurance faces troublesome future

While many people approaching or in their Golden Years want to take the wise precaution of acquiring long-term care insurance, increasingly they may discover they cannot afford to do so.

“With nearly 70 percent of Americans aged 65 or older expected to need long-term medical care at some point, millions of Americans have turned to long-term-care insurance to help them cover its high costs,” he wrote. “But rate hikes on long-term-care premiums are coming, meaning many of those who prudently planned for their long-term-care needs may not be able to afford to keep their coverage.

“Insurance companies have faced a triple-whammy that has hit them especially hard in recent years. Low interest rates and weak investment returns have hampered their ability to build up the loss reserves they need in order to pay out claims. And with long-term-care insurance often extending for decades, the assumptions that insurance companies make about what returns they’ll be able to earn are even more important than on other types of policies, such as homeowners’ insurance. At the same time, health-care costs have continued to rise. The same factors that are making it problematic for the federal government to ensure Medicare’s continued stability are hitting long-term-care insurance providers. Private insurers face the added handicap of having a smaller pool of available revenue and financial reserves to draw from.”

Sadly, according to Caplinger, a Motley Fool contributor, these factors will probably remain in play for quite some time to come, forcing older Americans looking for long-term care insurance to settle for less than they might have wanted and still more than they cared to pay.

“Some people will be able to accept less inclusive policies and still get by,” Caplinger wrote. “But given the financial realities of being retired on a limited income, a substantial portion of the people who currently have long-term-care insurance coverage may be so soured on the experience that they’ll stop paying their premiums and let their long-term-care policies go away entirely.

“That will represent a sad end for those who paid tens of thousands of dollars over the years for coverage that they may now never have any opportunity to use.”