Long term health care insurance has not been a profitable product for most insurance companies in the last decade. Many insurance companies found themselves paying out more than was expected to customers due to rising health care costs, including pharmaceutical cost increases. The number of customers buying long term health care policies in the last decade has declined considerably due to many factors, including the downturn in the economy. In the U.S., only a small percentage of people are insured for long term health care insurance, and currently this number is roughly 8 million.
After so many losses suffered by the insurance companies this past decade, many companies are reluctant to offer this type of long term insurance realizing it may not be a product they wish to promote. After the economic crisis of 2008, the severe weather damage payouts to homeowners businesses and a general reluctance of the public to pay for insurance that is not absolutely necessary at the moment makes this kind of insurance less attractive. Long term health care insurance coverage has become rather risky for many insurers, including some of the largest companies in the country.
The financial projections of most insurance companies have carried a profit margin that included the aging of the baby boomer population, which should have made long term health care insurance one of the most sought after insurance products for this aging group. Contrary to the speculation of the most successful insurance administrators, seniors, despite their age related health issues, have been hit hard by the economic down turn and are unwilling to spend the monies required to fund long term health care options offered by the major health care insurers.
For most insurance companies, the long term health care policies are expensive for them to sell, with a risky rate of return.
The current financial atmosphere makes most companies eager to drop their older policies which are coming due for return at the companies’ financial losses; a scenario that was not anticipated by the insurance companies.
Another problem for insurance companies was how to price the product. After selling long term care that was held onto for longer than the companies budgeted for, they are reluctant to issue new long term health care policies in this economic environment.
The majority of sales for long term health care insurance have fallen over 20% in just the last five years. Some say it is the cost of the premiums which have risen as much as 40%. For some companies, a price increase this large has meant that some of the biggest insurance companies in the U.S. are discontinuing this product. Most consumers are not only unwilling but unable to pay these steep price increases. Most insurance companies attribute their increase in premiums to their policy holders living longer. Health care costs will only continue to rise. With customers living longer, their policies might include a more expensive future pay out making these products a poor choice for most insurance companies.
Megan writes for Assisted Living Today, a leading source of information on a range of topics related to New York Assisted Living.