In early January, the American Association for Long-Term Care Insurance crunched a few numbers and found that, on average, prices for traditional stand-alone LTC policies have increased only slightly year over year. That's the good news.
The Westlake Village, Calif.-based independent industry organization studied the pricing for typical plans that cover clients who are age 55. It did not include the increasingly popular hybrid or linked-benefit plans, which offer LTC coverage as part of life insurance or another financial product. For many policies, there was no increase at all. For women covered individually, the average price had actually come down.
"That's true by the numbers, but it could just be because one higher priced policy last year is no longer a leading seller," said Jesse Slome, the association’s executive director, who declined to identify individual carriers.
The bad news, though, is the wide price disparity among equivalent policies from different providers. For a married couple, both age 55, the difference between the lowest and highest priced policies surveyed was a whopping 243 percent. That's the biggest spread Slome can recall in years.
Longtime industry watchers were equally surprised, if not outright doubtful. Brian Gordon, president of MAGA Ltd., an LTC specialist based in Riverwoods, Ill., said, "There is a difference from carrier to carrier, but we normally don’t see that big of a difference."
Len Hayduchok, president of Dedicated Senior Advisors in Hamilton, N.J., cited some possible causes behind shifting LTC insurance rates.
LTC insurance prices have risen steadily for years, because when these policies were first written there was very little actuarial data available on which to base prices. So many early plans were underpriced. Older insurers have been playing catch-up ever since.
Newer carriers don't have those liabilities on the books. So they are less likely to jack up rates.
That's one key reason why prices among carriers can vary. Some are "recapturing premiums from previously underpriced policies," as Hayduchok says, while others don't have to. But there may also be geographical reasons for the price disparities. Long-term care is more expensive in some regions than in others.
“[It's] really impossible to say" what's the primary explanation for these price changes, Hayduchok says.