December 28, 2011 in City

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

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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.”

Shawn Vestal can be reached at (509) 459-5431 or shawnv@ spokesman.com. Follow him on Twitter at @vestal13.

12 comments on this story so far. Add yours!

• 

  Jeffrey_Grey on December 28 at 4:50 a.m.

  Clearly, the only rational response is to brand everyone who needs long-term health care a deadbeat and leech - after all, it’s their fault for getting old and sickly - and then drop the whole mess in the lap of charity.

  Surely, that will fix everything.

  Until we find a way to contain the skyrocketing cost of health care, no insurance reform or bandaid changes to the way that skyrocketing cost is collected will ever amount to anything substantive.

• 

  D Statler on December 28 at 8:35 a.m.

  Corporate greed in America is out of control. The elderly and disabled are the easiest targets. I guess I should feel alittle better about the continuous 4% AVISTA increases. It could just as easily been 41% and granted. It is hard to say when this behavior started. Government deregulation of these industries in the name of competition and lower prices was obviously wrong.
  Now if we could figure a way to keep these corporate interests honest. It is clear that big buisness has influenced all branches of our government. Not in a good direction to say the least. A perfect example is AVISTA’s influence over the Utilities and Transportation Commission right here at home. :^(
  btw: It’s hell to get old ! maybe these insurance companies should just round up all these costly old people and shoot em.

• 

  philipgregory on December 28 at 8:46 a.m.

  D Statler — ‘shoot em’ ? No, no. They aren’t done sucking every dime out of them. Then, because individually they have no power, they can just ignor their cries for justice. That’s the American capitalistic way.

  And, you’re right on about deregulation being part of the sell off of this nation to corporations and their super wealthy owners and executives. But, the reason they convinced all those die-hard working-class republicans is the promise it would produce ‘jobs’. JOBS is the holy grail of politics today. They use it as justification for giving business a free hand to rob this country even after the Wallstreet debacle.

• 

  misjustice on December 28 at 8:52 a.m.

  And yet, somehow, other nations manage to take care of elderly folks…I wonder how the heck they do it? What do they know that we, the greatest nation-state EVER, don’t know?

• 

  Scoutster on December 28 at 8:55 a.m.

  misj..

  It’s because we are exceptional.

  You know, like we used to have “exceptional children”.

• 

  WillyPeter on December 28 at 9:18 a.m.

  Cradle to grave is alright with me
  A happy independent I wants to be.

  But at the end of my line, know all that I crave,
  Is knowing others cared for me, cradle to grave.

• 

  therailroader on December 28 at 3:17 p.m.

  Time to shop the Met LTC policy or drop it completely. Did you really think the cost will be held for the life of the policy? Did you actually read the fine details of the contract? Thank God we live in a state where you can die with dignity. Get your living will completed & let your loved ones know what to do in the future when your health deteriorates where you can no longer live the life you want to.

• 

  D Statler on December 28 at 4:11 p.m.

  @ the railroader, Do you really believe that 41% is justifiable ? Corporate greed in America is running rampant. Our elected officials just keep looking the other way. Where is the Attourney Generals office?

• 

  ManleyPointer on December 28 at 4:16 p.m.

  I thought that the President’s health care plan was going to make all health care more affordable for everyone? Not so? I’m confused….

• 

  Scoutster on December 28 at 7:02 p.m.

  ManleyPointer.

  You are confused. That was not what it was going to do.

• 

  ManleyPointer on December 29 at 8:57 a.m.

  Well, you’re right about that, scout. But it WAS what they SAID it was going to do. Big difference.

• 

  greenlibertarian on December 29 at 9:17 a.m.

  Doesn’t anybody PAY ATTENTION?

  The LTC insurance RACKET sold these policies by the 100’s of thousands starting about 10-12 years ago when the richer and older baby boomers were aging out and were flush with cash and assets. They scared ‘em, then hooked ‘em in with low rates and are now switching the game; this con has been done a MILLION times before.

  Talk to an Estate Attorney, you’re likely going to need to spend down wisely and carefully, it’s the only option now except for the super-rich.