Long-term care rate increases

Questions and answers

Why are rates increasing on long-term care policies?

Generally, insurers are seeing that their policyholders are not lapsing at the rate they expected. Also, low interest rates and weak investment returns have hampered insurers ability to build up the loss reserves they need in order to pay out claims. Finally, health-care costs have continued to rise.

What are my options?

Prior to making any decisions, it is important to reach out to your insurance company or agent to discuss your options.

Accept one of the offered mitigation strategies. When an insurer raises rates on long-term care, they are required to offer strategies that would lower benefits to offset some or all of the premium increase. These options can include, but are not limited to, reducing or removing optional riders, reducing daily benefits, and increasing the elimination period.
Some policyholders may qualify for non-forfeiture benefits. This allows the policyholder to stop paying premiums and receive some benefits based on the amount of premium already paid.
Pay the new, higher rate and maintain all of your benefits.
Cancel the policy.

Will rates continue to increase?

It is difficult to say whether rates will increase in the coming years. Companies need time to see how recent rate increases will affect their performance and what affect that will have on loss ratios in the coming years.

UNUM rate increase

I'm a PEBB member and recently received notice that my UNUM long-term care policy rate will be increasing.

What did UNUM request and what was approved?

UNUM requested a 60 percent average annual rate increase for long-term care policies covering over 13,000 policyholders, 55 percent of which are PEBB members. The Oregon Division of Financial Regulation, after a thorough review, approved a 44 percent increase, to be implemented 20 percent each year for 2 years.

Why did UNUM receive any increase?

UNUM no longer sells new long-term care policies, but still issues coverage to employees if their employer is an existing policyholder.

This is unique in comparison to most long-term care companies in Oregon, as UNUM's liability increases for each new life joining the block.

Prior to the request for rate increase, UNUM's loss ratio (how much of each premium dollar that goes towards paying claims) was between 107 and 129 percent. Oregon law requires a minimum loss ratio of 60 percent. The company, like many other long-term care companies, was in a position of losing money on this group of policies and was attempting to reach a level of self-sustainability with the rate increase.