Rates keep rising, and long-term care insurers hold the reins

John Thielbahr got an unpleasant holiday surprise this year: an enormous increase in the “level” premiums for his long-term care insurance policy.

Within a couple of weeks, he and his wife – and everyone else in Washington who holds the same kind of policy through Met Life – will be paying 41 percent more a month for coverage of the various steep costs that come with long illnesses or health care needs late in life. The Thielbahrs face a difficult choice: Pay a lot more, get a lot less, or risk the life-crushing debt that can come with long-term health care.

“We’re stunned right now,” said Thielbahr, a 68-year-old retiree living in Pullman. “I’m not sure what we’re going to do.”

Thielbahr and his wife are caught in the vice that is the modern American health care system: The cost simply goes up, up, up. Insurers would argue they’re caught in the same vice. Met Life’s rate increase was approved by state regulators after it opened its books last year: The company drastically underestimated claims costs, and was paying out about $1.31 for every $1 in premiums it took in nationwide, said Stephanie Marquis, spokeswoman for the Washington Office of the Insurance Commissioner.

Met Life is by no means the only example. For several years, long-term care costs have risen at two to three times the inflation rate. Though there is great variety in costs based on location and the type of services, between 2004 and 2010 the price of long-term care increased between 31 percent and 47 percent, according to a report prepared by Prudential.

As a result, “we have seen some very high increases for long-term care insurance,” Marquis said.

All these trends are expected to continue. The Prudential report noted that in the next 20 years, the number of people older than 65 is expected to double, reaching about a fifth of the national population. Those people are living longer and longer. Some 70 percent are expected to need some form of long-term care, and nearly a third are expected to need nursing-home care.

Seniors are not alone in this – though they’re getting hit from all directions. As a country, our health care spending has exploded; between 1990 and 2008, overall health care spending tripled. This has put pressure on everyone – on governments, businesses and individuals.

According to figures filed with the Insurance Commissioner’s office, Met Life’s claims payments have risen much faster than its premiums in recent years. Marquis said that long-term care insurance is a relatively new product, and that actuarial estimates for costs made in years past have proven to be well below the actual costs.

So, yeah, things are tough all over. But the thing that sticks in the craw about Thielbahr’s experience – or yours, or mine, or any individual’s experience in relation to a large organization – is how quickly the terms of our “agreements” change these days, and how powerless we are in the face of it. The recession seems to have exacerbated the imbalance between organizations and people – or maybe it has merely clarified the relationship.

More and more it feels as though we make agreements with organizations that we are expected, even morally bound, to keep – deals with our employers, deals with our banks, deals with our governments, deals with our insurance companies – only to discover that these organizations can and will change these terms as their needs change.

Your paycheck or pension? Renegotiable. Your interest rate? Adjustable. Your fee schedule? Fluid. Your premiums? In flux.

Unless you want to change them, that is. Unless you find yourself suddenly unable to keep your part of the bargain. Imagine the prospects if you approached your employer thus: “I know I originally agreed to work here for X hours a week in exchange for X dollars, but since then my time has been stretched incredibly thin. We’ve had a baby and gotten very busy with our ailing parents – my whole time economy has gone into the tank, really. I simply don’t have X hours to give anymore, so I’m going to offer you fewer hours a week for the same pay … ”

Utter lunacy. Absolute insanity. Absurdly naïve.

But switch the terms and the parties, and we’re right back in the real world. The way it is. Stop whining about it.

Thielbahr is not some commie. He spent 25 years in the private sector, including working for Citicorp. He finished his career at Washington State University as director of professional education in the school’s distance-learning program. He understands that the cost of long-term care is going up, up, up, and that annual adjustments for inflation are a part of the deal. He thinks perhaps it’s not his fault that Met Life underestimated those costs so drastically.

“They miscalculated – well, OK,” he said. “An insurance company is nothing but legions of actuaries doing number crunching. So they blew it. Why should senior citizens have to bail them out?”

He’s considering “going naked,” he says – living without long-term care insurance. But he looks ahead, and he knows what can happen. Take Alzheimer’s disease. It’s something he thinks about.

“No one can stay at home with that,” he said. “I don’t have any symptoms and chances are I’ll escape … but one never knows.”