Long-term care insurance rates soaring
The cost of long-term health insurance for Bentley University biotechnology professor Lynn Arenella will double in the next year, to about $2,600 annually.
This wasn’t supposed to happen. Legislators passed a law in 2012 aimed at protecting consumers from such steep increases. But nearly four years later, amid a tussle between industry and consumer groups, state insurance regulators still haven’t issued final rules for implementing the law, leaving insurance companies to raise certain rates at will.
The delay has allowed Arenella’s insurer, Chicago-based CNA Financial Corp., to raise premiums by close to 100 percent for Massachusetts consumers who bought their policies through their employers, unions, or associations — known as group coverage — with no regulatory review. Hundreds of Massachusetts residents will see their premiums rise by 95 percent over two years, CNA has told customers.
And nearly 100,000 Massachusetts residents who purchased long-term care insurance through other group plans face potentially skyrocketing premiums.
“This is a stunningly large increase,” said Arenella, who bought her policy about 15 years ago, when Bentley participated in a consortium with Babson College, Brandeis University, Wellesley College, and Wheaton College to offer employees long-term care insurance at cheaper group rates.
State regulators, college officials, and the Boston Consortium for Higher Education, which initially recommended CNA to the colleges, all say there is little they can do to stop the increases.
“That’s a whopper of a rate hike, without question,” said Chris Goetcheus, a spokesman for the state Division of Insurance.
While CNA had a courtesy meeting with state insurance officials last fall and informed them of the increase, the agency has no authority to review or approve rates for long-term care policies in group plans, he said.
CNA made the move “after extensive review” of its expected claims and the life expectancy of its clients, said Brandon Davis, a spokesman for the company.
State officials are hoping to have rules in place soon to regulate the group market, but exactly when remains unclear. That is leaving consumers vulnerable, said Al Norman, executive director of Mass Home Care, a network of nonprofit agencies that manage patient care.
Group plans have always been a weak spot in the long-term care insurance market, usually flying under the regulatory radar, Norman said.
“This shows how group purchasers who thought they could leverage a better rate by pooling their members, ended up vulnerable to massive rate hikes,” Norman said. “These group plans were one of the major loopholes in the old regs, and now the Division of Insurance is leaving consumers prey.”
CNA is one of several companies to nearly double the premiums on group policyholders of long-term care plans.
Boston-based John Hancock Financial is raising premiums on federal employees and retirees nationwide who purchased its group long-term care insurance policies by as much as 126 percent in some cases.
On a website for government employees, a John Hancock subsidiary said an analysis of the plan “indicates that the current . . . premiums are not sufficient to meet the program’s future, projected claims costs.”
It is difficult to pinpoint how many Massachusetts consumers are being hit with rate increases and how high those increases are, because the state doesn’t oversee that part of the market.
Insurance companies, including CNA and John Hancock, have argued that they need these steep increases to cover the costs of future claims as people live longer and health care costs rise.
Long-term care insurance was designed to fill the gap between Medicare, the health insurance for the elderly that covers short-term rehabilitation and recovery services, and Medicaid, the program for the poor that pays for long-term care after a senior exhausts assets and meets income requirements. In addition to group plans, the policies are sold to individuals directly.
The insurance was pitched to baby boomers and was popular for a while. But in recent years, rates have risen rapidly for individual and group plans nationwide, in part because insurers set prices too low when they launched the policies, underestimating how long people would live and need nursing home care, and overestimating how many people would drop their plans before collecting benefits.
Insurance companies also expected to earn much more in interest on premiums they invest to pay future claims.
Several companies have stopped writing new policies.
Massachusetts insurance regulators have been grappling with rate increases for both group and individual plans. Regulators must approve rate increases for individual plans and have rejected proposals from insurance companies to double premiums on individual long-term care policies, keeping increases more modest.
Earlier this summer, John Hancock informed nearly 6,000 Massachusetts long-term care insurance policyholders that their premiums would increase by 20 percent.
Still, these increases have left consumers angry. Under pressure to address rate increases for all long-term policies, the Legislature in 2012 passed a law that expanded consumer protections and attempted to control prices. The law also gave state regulators the authority to review group rates and policies and write rules.
Work on the regulations began under the administration of Governor Deval Patrick and has continued since in fits and starts.
The agency created working groups, held a hearing about draft rules, and more recently met privately with insurance companies, health care law experts, and consumer advocates to restart the process and reach some agreement on how to regulate the market, Goetcheus said.
At the same time, the Division of Insurance has been addressing other priorities, such as ensuring that outdated and cumbersome regulations are removed, he said.
Goetcheus said that while consumer advocates have pushed to cap annual rate increases, insurance companies have balked at such restrictions.
“We have a delicate balance to ensure that carriers can pay their claims down the road while ensuring their rates are justifiable,” Goetcheus said.