Long Term Care Insurance Rates Account For 2013 Change

The impact of the changing reserve requirements for long term care insurance has generally already been taken into account and isn’t expected to create further rate increases starting next year according to Jesse Slome, executive director of the American Association for Long-Term Care Insurance.

“We’ve had several recent calls from consumers after being told by a financial planner that rates for insurance would ‘increase significantly’ in 2013,” Slome explains.  “The new discount rate will have minimal impact on long term care insurance and in many cases has already been taken into account by insurers.”

According to Slome, the ‘valuation discount rate’ used for calculating statutory reserves or capital requirements for long term care insurance is dropping from 4 percent to 3.5 percent for new business starting in 2013.  “The rate is tied to Treasury yields based on a complicated formula,” Slome notes.  “It automatically updates when new money rates change over a period of time.”

Five-year Treasury rates are at historic lows (0.62%) and 10-year yields are at 1.59 percent as of September 4, 2012.  “By comparison, both five and 10-year rates were 4.68 percent on January 1, 2007 and 2.65 percent and 4.60 percent as recently as January 4, 2010.

“Low interest rates have been the primary cause of increasing rates for long term care insurance and have impacted other insurance lines including fixed annuities as well as life and disability insurance,” Slome states.  “To compensate for every one percent decline in interest rates which equates to lower investment income, an insurer needs a 10-to-15 percent increase in premiums.   The drop in just the past two years has had an enormous impact.”

The Association reports that the changing reserve requirements that take effect January 1^st are designed to provide added protection to policyholders.  “The half percent drop in reserve rates will have a nominal impact on premiums,” Slome.  “The impact depends on a policy’s duration but is in the two-to-five percent range.”

The American Association for Long Term Care Insurance was established in 1998 to advocate for the importance of planning for long term care and to support insurance and financial professionals who market LTC insurance.  To learn more about long term care insurancecosts call the organization’s offices at (818) 597-3227 or visit the Association’s website.

New Report Lauded By Long Term Care Insurance Industry Executive

The executive director of the American Association for Long-Term Care Insurance cited a new report that called further attention to the sever economic strain America’s aging population will place on federal programs such as Medicare and Social Security.

According to the report by the National Research Council and funded by the U.S. Treasury, there are options that can help the nation avoid what others call a very grim reality.  “As a nation we need to act sooner rather than kicking the can further down the road,” declares Jesse Slome, executive director of the nation’s long term care insurance industry trade group.  “Waiting will only make the matter worse and the cure that much more severe, and yet we seem to be willing to bury our heads and avoid what expert after expert predicts.”

The report notes that the aging of the American population will pose continuing economic challenges for the country for decades to come.  According to the report, the ratio of adults aged 65 and over compared with people aged 20 to 64 will increase by 80 percent in the coming decades.

Experts explain that the shift is partly the result of increases in average life expectancy which has risen from 47 years in 1900 to 78 years today.  According to Slome, life expectancy continues to grow and is projected to be 84.5 years by the year 2050.

“America is rapidly becoming an aged nation without a plan for dealing with the needs of our people and their families,” Slome concurs.  “Declining birth rates among younger people means a smaller proportion of the population will be under 65.”

The report mandated by Congress notes that while some people have saved amply for retirement, between one-fifth and two-thirds of today's seniors have not saved enough, leaving them to rely heavily on Medicare and Social Security -- programs that, along with Medicaid, now account for about 40 percent of all federal spending.

Medicare, Medicaid and Social Security account for roughly 40 percent of all federal spending and 10 percent of the nation's gross domestic product according to the authors of the report.   The report outlines strategies including increasing the retirement age beyond the currently accepted age of 65 years.   A second strategy called for workers to increase their savings in order to have more resources when they retire.

“We’ve called on both Presidential candidates to address the long term care problem facing aging Americans,” Slome notes.  “We believe tax incentives are a way to get more people to pay attention and to plan.  We praise the authors of this report and Congress for requesting the study but it’s time to take action, talking will not fix this problem.”

The American Association for Long Term Care Insurance was established in 1998 to advocate for the importance of planning for long term care and to support insurance and financial professionals who market solutions. To learn more about long term care insurance costs call the organization’s offices at (818) 597-3227 or visit the Association’s website.