Changes in the Long-Term Care Business

{5 minutes to read}  Today, I want to go over the ongoing and continuous changes in the long-term care business. Since the beginning of 2021, we have seen two additional carriers pull out of the standalone or traditional long-term care space. Those carriers include MassMutual and Trans America, leaving a very small number of carriers still selling traditional, standalone, long-term care policies.

Recently, one of my brokers sent me a letter from Genworth talking about what their position is with their long-term care block of business. Here is an excerpt:

Your long-term care insurance policy is part of a class action settlement in Scotchen et al v. Genworth, etc., etc. As a result, we are making one more special settlement option available to you while still providing meaningful coverage. Some options also provide a one-time cash payment to you. You may choose one of the options or keep the policy as is.

As you evaluate these choices, please be aware that as of 2/18/2021, and over the next three to six years, we are planning to seek additional rate increases of up to 250% for lifetime benefits and up to 250% for limited benefits in the state where your policy was issued. 

Now, that is a scary thing. Genworth is the largest provider of long-term care and has the most business on the books. The company’s financial ratings are not very strong, and I think that you’re going to find that, based upon their capital being at stake, they’re going to be requesting these large rate increases, forcing people to drop their needed long-term care coverage or reducing these policies. With that being said, the alternative hybrid policies and the life policies with long-term care riders may be a better option.

At this stage, my opinion is that we are seeing the beginning of the end of traditional long-term care. With only a few carriers remaining, I think the better bet for most consumers is going to be policies that have an exit strategy. Traditional long-term care policies really didn’t have very strong exit strategies, in that you pay for them for the rest of your life. The premiums could go up, and you might never make a claim. We call it, “use it or lose it.”

A lot of people have been getting rate increases, as this letter indicates, and are going to be forced to make a decision to pay a higher premium, reduce their coverage, or get a check back. If they get a check back, that would mean that they’re not going to have coverage anymore, so they may be better off looking at alternative options.

The tsunami of long-term care is on the way, and I think Genworth being the largest provider of long-term care is going to affect a lot of people. We have some good alternatives:

A. We have our hybrid products, from Care Choice One, which is a single-pay, whole life, long-term care policy, to Care Choice Select, which is a 12 pay long-term care product.

B. We have our long-term care access rider that allows you to utilize the death benefit in a whole life policy to pay for long-term care. What that does is allow you to have an option that is not a “use it or lose it” because you’ll have three pools of money: death benefit, cash value, and long-term care.

If you would like to learn more about these alternative products that will cover long-term care, give me a call or send me an email. We would be happy to help you plan for your long-term care needs.

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.  Strategic Wealth Advisors Network and Gassman Financial Group are not affiliated with APFS.

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