Among the group of smaller carriers, where long-term care comprises a bigger chunk of their business, the average rating during the past decade fell to B- (vulnerable) from B++ (secure).
"You're safer with a larger, more diversified company with sufficient capital that will be around longer to pay claims," Lane says.
Jesse Slome, executive director of the American Association for Long-Term Care Insurance, concurs with A.M. Best's assessment of the state of the industry. "Long-term care insurance is a small market and probably one of the most difficult industries to be in from financial and reserve perspectives," he says. "And with the interest-rate environment adding to that, it makes it real tough for smaller players to stay in the business. In fact, a number of them have left because it's much easier to make money elsewhere."
Slome cited Equitable Life & Casualty in Salt Lake City, which stopped writing LTC policies in January. "And they were one of the few companies that had sales growth [in LTC policies] during the past year," he says.
An interesting new twist to the LTC business are products combining annuity-like features with LTC policies. These "combo" products--also called linked or hybrid products--are policies that pay out between two to three times the annuity value for long-term care.
Slome notes the adoption rate for these combo products has been slow. "They're still offered by only a few companies--mostly long-term care carriers," he says. He expects more annuity underwriters to enter the LTC space.
Plan Ahead To Cushion Medicare Surtax
(Dow Jones) The Medicare surtax at the heart of the new health-care law is certain to hit wealthy taxpayers hard unless they make a good plan to manage it, and some are already starting to do so.
Strategies for the tax involve creating effective tax deductions under new investment income rules, choosing the right investments, insurance products and business structures, and picking the right time to set up trusts. The idea is two-pronged but basic: Reduce overall taxable income, and reduce investment income.
There has never before been a separate tax to support Medicare beyond a levy on wages, and it looks to be the biggest revenue raiser in the health-care law over the next 10 years.
The surtax adds a 0.9% Medicare Hospital Insurance Tax on earned income over $200,000 for single taxpayers and $250,000 for married couples, and an Unearned Income Medicare Contribution of 3.8% on investment income for taxpayers with adjusted gross incomes over $200,000 for single filers and $250,000 for married filers.