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State protections still awaited for long-term care

Rules on insurers delayed

More than a year after Massachusetts passed legislation aimed at curbing the rapidly rising cost of insurance for long-term care, regulators have yet to adopt new rules that would help protect consumers as they buy products to cover nursing homes and similar services.

Regulations were scheduled to be in place by Oct. 31, but the Division of Insurance missed the deadline and recently extended the process to July 1.

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The state’s insurance commissioner, Joseph G. Murphy, said he does not plan to approve premium increases while his agency finalizes rules, but other protections, such as making it harder for companies to deny coverage, will be further delayed.

“It’s frustrating to consumers,” said Deborah Thomson, a lobbyist for the Massachusetts chapter of the National Academy of Elder Law Attorneys, which provides legal services for seniors. “Everybody would like some certainty on how this would play out. The sooner they issue the regulations the better.”

More than 150,000 people in Massachusetts hold long-term care policies.

The Legislature acted in 2012 in reaction to sharp increases in premiums, which nationwide have nearly doubled to an average of $3,700 a year for a couple, according to industry estimates.

Two national insurance companies, John Hancock Financial Services of Boston and Genworth Financial Inc. in Richmond, Va., said they plan to ask states for premium increases of 6 to 25 percent on some existing policies this year, according to recent earnings reports.

Massachusetts regulators have in recent years allowed insurers to raise premiums by about 10 percent annually. Several companies over the past two years have submitted requests to raise premiums by as much as 100 percent, or double, Murphy said.

Long-term care insurance is a complex product, and developing new rules and ways to manage rates has taken time, Murphy said. His agency is also considering comments from consumers, insurers, and Attorney General Martha Coakley.

“It’s more important for us to get this done right than do it quickly,” Murphy said.

Among the undecided issues is whether controls that would limit annual increases over multiple years should apply only to new policies sold in Massachusetts, Murphy said. Insurance companies have indicated that if older policies are included in the cost controls, they may have to ask for even bigger rate increases, Murphy said.

Ken Deitch, 75, of Carlisle, said the state needs to include old policies. His rate jumped by more than 70 percent over three years.

Without new regulations and knowing which policies will benefit from cost controls, consumers are left wondering “when the second shoe is going to drop” in terms of another rate increase, Deitch said.

The new law also requires insurance agents who sell long-term care insurance to receive regular training to ensure they understand what they are selling. And the Division of Insurance must hold public hearings on rate requests, which are currently handled administratively. These provisions, however, won’t go into effect until the division adopts regulations.

Long-term care insurance was introduced in the 1980s to fill the gap between Medicare, health insurance for the elderly that covers only short-term rehabilitation and recovery services, and Medicaid, a program for the poor that pays for long-term care after seniors exhaust assets and meet income requirements.

Rates have risen rapidly, in part because of an aging population and rising health care costs. But insurers also made mistaken assumptions when they launched the product, leading them to set prices too low. They expected more policyholders to stop paying or drop their plans before they collected benefits.

Also, insurance companies have not generated the investment income they anticipated from the premiums because of low interest rates. As a result, insurers are seeking annual double-digit increases from regulators across the country. Several have stopped selling new plans.

Despite the uncertainty about long-term care insurance and its costs, consumers still want protection against the rising costs of caring for the elderly, said Mark Baron, an insurance agent in Andover and legislative liaison for the Massachusetts Association of Health Underwriters on long-term care issues.

Once regulations are adopted, they should give consumers more certainty about the costs and the products they are buying, Baron said.

It would give agents some assurances, too, as they talk to clients about these policies, he said.

“Who wants to call their client and talk about the rate increase?” Baron said.

Deirdre Fernandes
can be reached at deirdre.fernandes@globe.com. Follow her on Twitter @fernandesglobe.
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