The increases, which go into effect in November, affect all but 10,000 of the more than 270,000 people in the program. For comparison, approximately 7 million Americans have traditional LTC policies through the private insurance market, according to AALTCI. A male and female couple, both age 60, will pay anywhere from $2,000-$3,500 per year, or roughly $83-$146 per month each, in LTC premiums. “I think it's always going to be a difficult market,” Mr. Witt said. “It's a very difficult model to price, and if it's priced appropriately it's not appealing. You price yourself out of the market for what people are willing to buy.” Mr. Slome paints the cost increases as an unfortunate consequence of Americans' increasing longevity, but one that's a bit misunderstood by the investing public, because high lapse rates don't necessarily follow a cost increase on in-force business. A report by the U.S. Government Accountability Office found a 1.6% lapse rate among those in the Federal Long Term Care Insurance Program after the last rate hike in 2009. Those numbers are largely consistent in the private insurance market, according to Mr. Slome. “The insurance industry has done a terrible job of making consumers aware of why rate increases are needed, how they pay claims, and how people actually act when a rate increase takes place,” he said. However, many advisers and investors see the “use it or lose it” argument as another knock against traditional LTC insurance. Much like car insurance, investors can sock away premiums over years and ultimately not get anything in return if benefit claims aren't necessary or a policyholder lapses a policy. Some see it as wasted money, even though they get peace of mind from knowing they have coverage in the occurrence of a claim-paying event. But Mr. Slome takes issue with this perspective, because investors don't necessarily get nothing in return if they lapse a policy. Depending on specific policy features, insurers could give some investors' money back in the form of a return of premium or by paying the aggregate premium amount toward a qualifying benefit claim, for example. COMBINATION POLICIES Of course, LTC insurers haven't raised a white flag over the ramparts or gone quietly to their grave just yet. They've been able to pivot to combination life insurance-LTC policies and bolster otherwise flagging sales. Sales of these hybrid policies have gone up markedly since 2007, when there were 15,000 new policies sold. In 2015, there were 220,000 new policies sold, according to Limra, an insurance industry group. These policies offer features LTC insurance generally doesn't: liquidity and some sort of return on investment (heirs still get a death benefit if LTC benefits aren't used, for example), according to Mr. Witt. These features have popularized these products at the expense of traditional LTC insurance. They do come with a caveat — those concerned with hedging against long-term-care risk would likely get more bang for the buck with a traditional policy. “The standalone policy is much more efficient, in my opinion,” Mr. Witt said. Ultimately, there remains a definite place for traditional LTC insurance products in the market, Mr. Parker said. “The adviser has to do a good job setting expectations,” he said.Ouch. Federal LTC premiums rising as much as 126%... :/ "Federal long-term care premiums rising by triple digits" https://t.co/a1NvkH6sOm
— MichaelKitces (@MichaelKitces) July 19, 2016
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