Or, as Whit Cornman, a spokesperson for the Washington, D.C.-based American Council of Life Insurers, put it, "Every LTC insurance carrier sets their premiums differently based on a variety of factors."
Companies set their own rates, but the terms have to be approved by the local regulatory authority. "LTC prices are typically applied for by the insurance company and are subject to approval by the individual state insurance department," said F. Michael Zovistoski, a managing director at UHY Advisors NY, a fee-based advisory service. "Each state insurance department is in place to ensure the insurance company has properly priced the product and to protect the consumer. No insurance product can be sold in a given state without obtaining approval."
In other words, there are limits. It's not anything goes. "Carriers cannot just make up rates," concurred Lewis Walker, a wealth advisor at Capital Insight Group in Peachtree Corners, Ga. "They must be based on actuarial assumptions and pricing models and be realistic if a company wants to be competitive." He added, however, that pricing can be affected by the compensation paid to brokers and agents. "Companies with captive sales forces may be a bit more expensive," he said.
Policyholders can significantly reduce costs, the study reported, by tweaking options such as choosing spousal coverage over individual coverage, scaling back the years of coverage from perhaps three years to two years, or by lowering inflation protection from, say, 3 percent to 2 percent a year. For a 55-year-old couple, these measures could reduce total annual costs from $4,750 to $2,500.
To be sure, prices can and do change. "I tell all of my clients that the only thing I can guarantee about any new LTC insurance policy is that the premiums will increase," said David Beck, an insurance specialist and partner at Egan, Berger & Weiner, a law firm in Vienna, Va. "But hopefully, by dealing with a reputable company, the degree to which the policy increases [will be] more modest."
Needless to say, advisors must help clients navigate the many choices. "Many advisors take what I call a simplified, cookie-cutter approach," said Slome. They may not realize the options and their cost advantages. He urges advisors to tell clients that coverage can be affordable, and any degree of LTC coverage is better than none.