Inquirer Editorial: Long-term-care insurers bailing out on the elderly

Aging baby boomers in Pennsylvania thought they were being careful planners when they bought long-term-care insurance to cover future nursing home expenses and end-of-life costs while protecting their assets. Boy, were they wrong. The insurance companies they paid premiums to now say they can't afford the policies and want consumers to bail them out.

Four companies want rate hikes ranging from 14 percent to 130 percent, depending on the coverage. The increases would affect 75,000 Pennsylvanians. But at a state Insurance Department public hearing Thursday, consumers said they were unable or unwilling to subsidize the insurance industry's bad business decisions.

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In just three years, the state has permitted rate hikes to more than 20 insurance companies affecting more than 110,000 Pennsylvanians. Elderly consumers are especially vulnerable because they live on fixed incomes, or are about to, which leaves little or no room to pay higher premiums.

People who no longer can afford long-term-care policies face limited and painful options. They can stop paying premiums and accept severely limited coverage. If, like most seniors, they require the average two years in a skilled care facility, they will have to sell their homes and drain their savings accounts to become eligible for Medicaid, which pays 65 percent of the total cost of nursing home care in Pennsylvania.

One glaring contributor to the problem is a lack of cost containment. A study by the University of Pittsburgh Institute of Politics and the Jewish Healthcare Foundation three years ago called attention to the expense, noting that it cost an average of $91,652 annually for a semiprivate nursing home room in Pennsylvania, and $99,280 annually for a private room.

Insurance companies say long-term-care costs have increased more than their actuaries predicted. Their mistake raises a question: Why haven't they tried to negotiate cost caps with nursing homes? The cost-setting model insurers use with medical providers may not be applicable, but any containment effort is better than saddling consumers with another rate hike.

About 20 companies have pulled out of the Pennsylvania market, a sure sign that long-term-care policies aren't very lucrative for insurers. Under consideration is a proposal that would allow insurance companies to buy out policy holders, which would allow them to use that money, plus interest, to invest in annuities that help cover their nursing home expenses. That's an idea worth considering.

Also worth a look is a program offered in Connecticut that protects consumers who bought long-term insurance from having to liquidate all their assets to qualify for Medicaid when their policy runs out. With one of the most rapidly aging populations in the nation, Pennsylvania must be proactive.