“This was a very, very good business for a short time, with people buying long-term care insurance like it was candy in a candy store,’’ said Michael Perry, a vice president at the Opus Advisory Group, a strategic financial planning firm in Purchase, N.Y.
No more. Mr. Perry has sold only one long-term care policy in the last six months and is “backing off from marketing’’ them as he watches this corner of the insurance business contract, raise premiums, tighten eligibility requirements and reduce key benefits. Long-term care insurance is a comparatively new product, launched in the late ’80s, and only now, as claims begin to pour in, have the actual costs to insurers become apparent.
Companies like MetLife, Prudential Financial, Allianz and Berkshire Financial (a subsidiary of Guardian) have stopped selling new policies and are hiking premiums for the ones already in place — up 37 percent, by one estimate, in 2011. Insurers are increasing elimination periods — the period during which a beneficiary must cover his or her own costs — and reducing inflation protection to 3 percent from 5 percent, once customary. They are requiring home visits instead of phone interviews from new applicants, as well as blood tests and a thorough examination of their medical records.
But the change that has generated the most public attention is so-called gender-distinct pricing, a new strategy that will raise rates for single women by as much as 40 percent beginning in April. Genworth Financial, the nation’s largest long-term care insurance provider with more than a million policy holders, is the first to win approval by state insurance commissions to raise rates for single women purchasing new policies. Women, most of them single by the time they reach advanced age, cost the company $2 of every $3 in benefits paid so far, according to Steve Zabel, Genworth’s senior vice president for long-term care insurance.
The company also will introduce what Mr. Zabel called “enhanced underwriting,” or more stringent qualifying standards, including blood testing to check for nicotine, drugs and markers of cardiovascular disease for all new applicants, regardless of gender or marital status.
Now permitted in all states except Montana and Colorado, gender-distinct pricing will not affect Genworth’s current policyholders, only new applicants. But all other carriers are likely to follow, according to Jesse Slome, executive director of the American Association for Long-Term Insurance, a trade group in Westlake Village, Calif. With the entire industry headed toward higher rates, Mr. Slome recently warned women that “the window is closing” and that now is the time to grab a policy while the price is still manageable.
Women have always paid less than men for life insurance. But because they live longer, women are the disproportionate beneficiaries of long-term care insurance, which paid out $6.6 billion in benefits in 2011. Mr. Slome expects that number to top $7 billion in 2012.
The reasons are well known:
* On average, women outlive men by five years. Among those born in 1960, the average man will live to age 67 and the average woman to age 73. And women who reach age 65 can expect to live an average of 20 more years.
* By age 75, 7 in 10 women are widowed, divorced or have never been married. Some 40 percent of them live alone, compared to 22 percent of men. Two-thirds of those past the age of 85 are women, as are 80 percent of centenarians.
* Women who live to age 65 experience on average two years of disability requiring assistance before death. Those who reach age 80 will require three years of assistance.
* In nursing homes, the most expensive form of long-term care, 7 in 10 residents are women. They represent 76 percent of the residents in assisted living facilities and two-thirds of the recipients of home care. Virtually none of this is paid for by Medicare, the government’s health plan for those 65-and-over. In nursing homes, Medicaid, a poverty program, kicks in for residents who run out of money.
“Woman live longer than men,” said Suzanna de Baca, a vice president of wealth strategies at Ameriprise Financial. “This may mean we experience a longer period of decline. Unfortunately, we are often less likely to have a partner around to help take care of us than our male counterparts.’’
Long-term care, Mr. Slome said, “is truly a women’s issue.”
While acknowledging the extra expense of caring for women, Mr. Slome said that in his view insurance carriers are being disingenuous in blaming the new policies on long-apparent gender differences. Rather he said, the culprit in the changing requirements is interest rates. “Blame the Federal Reserve,’’ he said.
Insurance carriers invest premiums and need to earn enough on that investment to pay benefits. When interest rates were higher, it was not all that difficult. Now the numbers don’t pencil out, and stockholders are fuming. But it is illegal to file for premium increases with the state insurance commissions based on changes in the financial market, Mr. Slome said.
This position does not endear Mr. Slome to his membership, at least one of whom disputes the claim. Asked if the new rate policies were related to interest rates, Mr. Zabel of Genworth, in an e-mail, replied with a succinct “no.”
Insurers say they were not able to judge the costs of care until the payouts began in earnest.
So what is a woman trying to prepare for old age supposed to do, especially after the elimination of the Class Act, a modest attempt to include long-term care in the Affordable Care Act?
Ms. da Baca suggests “careful and thorough budgeting,” “focusing on wellness,” and “proactive steps” to research suitable places to live when home is no longer an option. Ms. da Baca also advises women to make home modifications — incrementally, as one’s budget permits — to increase the chances that you’ll be able to stay there longer.
Mr. Perry, of the Opus Advisory Group, suggests an intriguing option: life insurance with a chronic care rider, which permits the policy-holder to spend money for such needs while alive, although doing so will reduce the tax-free death benefit. Still, not all buyers — or their survivors — are willing to sacrifice those benefits.
“The need is still there, no question about it,’’ Mr. Perry said. But long-term care insurance is likely to become much harder for everyone to find and afford, especially women.
