Like everything else, the cost for long-term health care keeps going up because low interest rates that have reduced investment yields for those insurance companies providing such policies, according to a report issued Wednesday by the American Association for Long-Term Care Insurance (AALTCI).

Jesse Slome, executive director of the AALTCI, said this year's 2012 price index indicates that current offerings by insurers are now 6 percent to 17 percent costlier than they were just a year ago. Insurance prices have increased as a result of the historic low interest rates and yields on fixed income investments, said

And for every half percent drop in interest rates, and thus on a company's investment returns, an insurer company needs about a 15 percent premium increase to maintain their projected net profit, according to Slome in AALTCI's report for 2011. And roughly between 40 percent to 60 percent of the funds brought in by an insurer to pay out on future claims comes from that insurer's return on investments, according to AALTCI.

In AALTCI's 2011 annual analysis of the premium cost for the most popular policies offered by 10 companies, the association found that, on average, a 55-year-old single individual who qualifies for preferred health discounts (available to applicants who demonstrate they're in good health) will pay $1,720 annually for $165,000 to $200,000 in long-term care current coverage. In 2010, the same individual would have paid an average of $1,480.

The AALTCI study examined prices for single individuals age 55 as well as couples, ages 55, 60 and 65. According to the report, a 60-year old couple purchasing the same level of protection ($340,000) could expect to pay about $3,335 -per-year if both spouses qualified for preferred health discounts. The preferred health discount would save them approximately $500 compared to standard health rates and are a good incentive to act at younger ages, Slome said.

"The available benefit pool for the 60-year-old couple would only grow to about $610,000 when the couple turns 80," Slome said. "To have future coverage of $700,000, equal to what the 55-year-old couple would have, they will have to buy a higher, more expensive policy."

The report also noted that there is a wide divergence in prices for similar policies offered by different insurance companies. "For some categories, the difference was as much as 132 percent, and no single company always had the lowest nor the highest rate, which is why we stress the importance of comparison shopping," Slome said.

Inflation is an important factor to consider when purchasing long-term care coverage said Slome. A policy valued at $170,000 for each policyholder would grow to roughly $300,000 in 20 years.

Married couples, said Slome, can opt for policies with a "shared care rider" that allows couples who are insured with the same insurance company to use one another's benefits or split it between them. For roughly 15 to 25 percent, instead of having access to a benefit pool of $350,000, either spouse has access to a combined pool in excess of $700,000.

More information about the study is available at www.aaltci.org.

-Jim McConville