Retirement News : Seniors : Long-term care policyholders caught in a dizzying cost spiral

Long-term care policyholders caught in a dizzying cost spiral

Date Added: 04-04-2005

Julius Mariasis of Framingham is grappling with one of the most pressing issues facing his generation: how to pay for his care when his health starts declining.

The 72-year-old Mariasis thought he had put the issue behind him nine years ago, when he made the decision to purchase long-term care insurance from CNA Financial Corp. of Chicago to help cover the costs of a nursing home or home care.

But CNA is now forcing the retired economics professor to revisit that decision. The company recently notified him that his annual premium would rise over the next three years to $3,447 from $2,295, a jump of 50 percent.

The increase is so big that Mariasis now finds himself in a real bind. He can't jump to another company because at his age the premiums would probably be even higher.

His only choices: Come up with the extra money on a fixed income, eliminate or reduce benefits to shrink his premium, or drop the coverage altogether after nine years and about $20,000 in payments. The lack of control really galls him.

''It's a vicious cycle," he said. ''Once you're in it, you have no control over what the costs will be."

More and more seniors may be facing a similar scenario.

Massachusetts regulators say about 10 companies with long-term care insurance policyholders here have pushed through hefty premium increases over the last year, one as high as 88 percent. Analysts say more increases are likely.

''It's going to get worse and I don't see a solution," said Benjamin Lipson, a Boston insurance broker who has written extensively about long-term care insurance. ''The only people who can afford it now are very affluent people. The person on a fixed income simply can't afford it."

Van Ellet, senior legislative assistant at AARP, a group that represents Americans over 50, said the benefits provided under long-term care policies are significantly better today than they were years ago.

''But the policies are expensive and they're subject to price increases, usually at a time when you can afford it the least," Ellet said.

Long-term care insurance is a complicated product that's not for everyone.

Policies can vary dramatically from one company to the next, and can cover or partially cover the cost of such services as nursing homes, assisted-living facilities, and the employment of home care workers.

Companies generally issue policies only to people who meet medical underwriting standards, meaning they don't have existing serious health problems.

LIMRA International, a Connecticut association serving insurance and financial services companies, estimates just over 6 million people have purchased the coverage. The number is expected to rise as the population ages, but right now it represents less than 10 percent of the potential market. 

For More Information:

http://www.boston.com/business/articles/2005/04/03/long_term_care_policyholders_caught_in_a_dizzying_cost_spiral/