Is Pricing Discriminatory or Good Business Practice?

gender equality in long-term care insurance image Some of the leading long-term care insurance companies have recently announced that they will soon offer policies that have different rates for men and women.

Gender-based pricing for insurance is not new. Most insurance policies have premiums that are based upon gender, as well as other factors. Life insurance, auto insurance and disability insurance all have different prices for men and women because the risk factors are different for each gender.

Men pay higher premiums than women for most forms of insurance. One type of insurance for which women have paid higher premiums than men is medical insurance. However, as part of the Affordable Care Act, effective Jan. 1, 2014, all medical insurance policies are required to charge men and women the same rates.

Some reports on the Internet have stated that gender-based pricing for long-term care insurance is a violation of the Affordable Care Act (aka Obamacare). However, the Affordable Care Act does not have any regulations regarding long-term care insurance; it regulates only medical insurance.

As of the publishing of this column, all long-term care insurance policies available for sale still use unisex rates, meaning that men and women pay the same rates. However, this will change in most states sometime in 2013.

If you’re a woman and you’ve been thinking about purchasing long-term care insurance, you may want to buy a policy that has the unisex rates rather than wait for the policies that will have gender-based rates. Some have estimated that the gender-based rates may be as much as 20 percent to 50 percent higher for women than the current unisex rates.

Once you purchase a policy with the unisex rates you will always have the unisex rates; your policy cannot be switched to gender-based rates.

The justification for charging women higher rates than men for long-term care insurance is that women account for roughly two-thirds of long-term-care insurance claims. However, more women own long-term care insurance than men, so the data may not be quite so lopsided.  Women tend to become caregivers themselves for the men in their lives, thus reducing the number of claims made by men. With women typically living longer than men, there may be no one left to provide extended care for them.

To learn more, send your questions or comments to questions@LTCFacts.org.

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Welcome to LTCFacts!

Easy Way CoupleWe help you make informed decisions about long-term care.

LTCFacts.org is committed to educating consumers about long-term care insurance by providing an easy-to-use website filled with simple definitions about long-term care insurance terms and concepts.  By providing simple definitions for complex long-term care insurance terms, consumers become empowered to make intelligent buying decisions that impact their financial and family lives.

Contributing authors of LTCFacts.org have been involved with the long-term care insurance industry for over 17 years with knowledge of underwriting guides from top insurance companies in over 40 states.  This website is not sponsored by any insurance company, nor does it promote any particular insurance company or policy.  It is our goal to have sample policies for all of America’s top insurers available for you to research at your leisure in the comfort of your home.

Every consumer has different financial needs and health history, which is why educating consumers is especially important.  Once consumers understand the intimate relationship between their personal health history and financial situation, then they are ready to begin shopping and comparing long-term care policies offered by the various companies.

How to use LTCFacts.org?

LTCFacts.org is designed for consumers seeking to learn more about long-term care insurance.  On the right-side of the page you will see “LTCI DICTIONARY” with a drop-down list of long-term care insurance terms.  Some terms will have definitions only, and some will have other useful articles about that term.  You may search our site on the right-side of the page as well, or ask your own question by choosing the button at the top of the page.

What is Long-Term Care?

Long-term care includes a variety of services that may be both medically and/or non-medically necessary for people with a chronic illness or disability.  Health and personal needs are met through long-term care.  Generally speaking, long-term care provides people assistance with activities of daily living, such as bathing, dressing, eating, toileting or transferring.  People of all ages may need long-term care.

Choosing long-term care is an important decision.  Planning for long-term care requires you to think about possible future long-term care needs and costs.  It is important to plan for long-term care before you need it, and before a crisis occurs.  By thinking and planning your choices now, you will have more control over your individual situation, possibly remaining independent longer.  Even when you plan ahead, making long-term care decisions can be very difficult.

You may never need long-term care.  Even if you make careful plans and arrangements, you may never need it.  According to the US Department of Health and Human Services, “This year, about nine million men and women over the age of 65 will need long-term care. By 2020, 12 million older Americans will need long-term care. Most will be cared for at home; family and friends are the sole caregivers for 70 percent of the elderly. A study by t

he U.S. Department of Health and Human Services says that people who reach age 65 will likely have a 40 percent chance of entering a nursing home. About 10 percent of the people who enter a nursing home will stay there five years or more.”

Here are a few facts which may surprise you:

  1. Long-term care insurance is very flexible.  Every long-term care policy gives you many choices for your benefits.  You choose your:  Daily BenefitInflation BenefitPolicy Limit, and Elimination Period.  The richer the benefits you choose, the higher your premium.  The more modest the benefits you choose, the lower your premium.  You are in control of those choices.
  2. Shop around. You can save thousands of dollars over your lifetime by shopping and comparing prices from several of the top long-term care policies.  Every long-term care policy has a unique way of calculating your premium based upon your age, your choice of benefits, and your health history.  When comparing several of the leading policies, with nearly identical benefits, premiums will often vary by as much as 70%.
  3. Premium Payment Periods. You can choose one of four premium payment periods for your long-term care policy.  You can choose:  a stepped premium payment, a standard premium payment, a shortened premium payment, or a single premium payment.  A “stepped premium payment” method can start off about 30% less than a “standard premium payment” method.
  4. Use pre-tax dollars. You can significantly decrease the “net cost” of your long-term care policy by using pre-tax dollars to help pay your long-term care insurance premiums.  There are now 10 different ways owners of long-term care insurance can save on their federal and state income taxes.  Depending upon your state and federal income tax bracket, this can decrease your “net cost” by 30% or more.
  5. Buy a Partnership-Qualified Policy. Now that 40 states have“Long-Term Care Partnership programs” you do not have to buy an expensive “unlimited” long-term care insurance policy.  You only need to buy an amount of long-term care insurance equal to the amount of assets you want to protect for yourself, your spouse or partner, and/or your heirs.  The Long-Term Care Partnership programs provide dollar-for-dollar asset protection.  Each dollar that your Partnership-Qualified Policy pays out in benefits entitles you to keep an extra dollar of countable assets if you ever need to apply for Medicaid services.
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How Much Does Long-Term Care Insurance Cost?

Here are a few facts which may surprise you:

  1. Long-term care insurance is very flexible.  Every long-term care policy gives you many choices for your benefits.  You choose your:  Daily BenefitInflation BenefitPolicy Limit, and Elimination Period.  The richer the benefits you choose, the higher your premium.  The more modest the benefits you choose, the lower your premium.  You are in control of those choices.
  2. Shop around. You can save thousands of dollars over your lifetime by shopping and comparing prices from several of the top long-term care policies.  Every long-term care policy has a unique way of calculating your premium based upon your age, your choice of benefits, and your health history.  When comparing several of the leading policies, with nearly identical benefits, premiums will often vary by as much as 70%.
  3. Premium Payment Periods. You can choose one of four premium payment periods for your long-term care policy.  You can choose:  a stepped premium payment, a standard premium payment, a shortened premium payment, or a single premium payment.  A “stepped premium payment” method can start off about 30% less than a “standard premium payment” method.
  4. Use pre-tax dollars. You can significantly decrease the “net cost” of your long-term care policy by using pre-tax dollars to help pay your long-term care insurance premiums.  There are now 10 different ways owners of long-term care insurance cansave on their federal and state income taxes.  Depending upon your state and federal income tax bracket, this can decrease your “net cost” by 30% or more.
  5. Buy a Partnership-Qualified Policy. Now that 40 states have“Long-Term Care Partnership programs” you do not have to buy an expensive “unlimited” long-term care insurance policy.  You only need to buy an amount of long-term care insurance equal to the amount of assets you want to protect for yourself, your spouse or partner, and/or your heirs.  The Long-Term Care Partnership programs provide dollar-for-dollar asset protection.  Each dollar that your Partnership-Qualified Policypays out in benefits entitles you to keep an extra dollar of countable assets if you ever need to apply for Medicaid services.
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What is Long-Term Care?

What is Long-Term Care?

Long-term care includes a variety of services that may be both medically and/or non-medically necessary for people with a chronic illness or disability.  Health and personal needs are met through long-term care.  Generally speaking, long-term care provides people assistance with activities of daily living, such as bathing, dressing, eating, toileting or transferring.  People of all ages may need long-term care.

Choosing long-term care is an important decision.  Planning for long-term care requires you to think about possible future long-term care needs and costs.  It is important to plan for long-term care before you need it, and before a crisis occurs.  By thinking and planning your choices now, you will have more control over your individual situation, possibly remaining independent longer.  Even when you plan ahead, making long-term care decisions can be very difficult.

You may never need long-term care.  Even if you make careful plans and arrangements, you may never need it.  According to the US Department of Health and Human Services, “This year, about nine million men and women over the age of 65 will need long-term care. By 2020, 12 million older Americans will need long-term care. Most will be cared for at home; family and friends are the sole caregivers for 70 percent of the elderly. A study by the U.S. Department of Health and Human Services says that people who reach age 65 will likely have a 40 percent chance of entering a nursing home. About 10 percent of the people who enter a nursing home will stay there five years or more.”

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Future Claims of Policyholders Come Before Stockholder Profits

Genworth Financial (the holding company of Genworth Life Ins. Co.) reported an $844 million dollar loss in the 3rd quarter of 2014 and a $760 million dollar loss in the 4th quarter of 2014.  
 
The losses resulted in about a 30% drop in the stock price.  The primary reason for the loss was because they added over 1.2 Billion (with a “B”) dollars to their long-term care claims reserves.  

…..insurance regulations require that the future claims of policyholders come before stockholder profits.  

 
Over the past 40 years, Genworth has paid claims to more than 200,000 long-term care policyholders.  Genworth currently has about 50,000 policyholders on claim receiving long-term care benefits.  
 
About every two years Genworth does an extensive analysis of their claims trends.  Their most recent analysis found that their claims are lasting longer than they did in the past, especially claims that have already lasted at least 7 years.  Claims that have lasted at least 7 years are lasting about 65% longer than they had projected.
 
Every state’s insurance regulator requires every insurance company to set aside enough money to pay all future claims.  Therefore, based upon their most recent analysis, Genworth concluded that they needed to add about $1.2 Billion dollars to their long-term care claims reserves.
 
Genworth already had over $19.7 Billion in their long-term care reserves.  Adding about 6% more brings their total long-term care claims reserves to about $20.9 Billion.
 
Putting money into LTCi claims reserves is obviously very good for policyholders, but it’s “not-so-good” for stockholders.
 
Money that is put into LTCi claims reserves is NOT considered profit.  It’s not even considered an asset.  Money that is put into LTCi claims reserves is nothing more than pre-paying a future obligation.
 
Stockholders would have preferred that the $1.2 Billion be counted as profit and not set aside to pay claims.  But insurance regulations require that the future claims of policyholders come before stockholder profits.  
 
Anyone who owns a Genworth policy (or is considering owning one) should be very pleased that Genworth is making sure they have adequate reserves to pay all future claims.  
 
It’s important to keep in mind that the stock price of the “holding company” has no reflection on the insurance company’s claims-paying ability.  Although Genworth’s stock price has dropped by about 50% over the last 12 months, the stock price is up about 900% compared to its lowest values in 2009.  Again, what’s good for policyholders is oftentimes “not-so-good” for stockholders.  Although it hurt the stock price, adding an extra $1.2 Billion to their LTCi claims reserves was certainly good for policyholders.  
 
Genworth’s internal announcements, their investor conference calls, as well as their filings with the SEC, all show that they are as committed now to the LTC insurance market as they were when they first started selling LTC insurance over 40 years ago.  
 
Genworth’s CEO stated emphatically:
 
“We believe staying in the LTC business is the right decision.”
 
“We believe that our commitment to the LTC business is a positive catalyst…”
 
“…we believe our new LTC products have strong returns and manageable risks.”
 
“…we believe there is future demand for LTC insurance as Americans seek to mitigate long term care costs in retirement and there are a limited number of providers (of LTC insurance).”
 
“…we remain confident that over time the LTC insurance business can become a very good business for Genworth.”
 
Their recent announcement to sell one of their life insurance/annuity divisions is another sign of their commitment to the LTC insurance market.  The profits from the sale of that division will help them to continue to grow their LTCi division, which they see as one of their core products with tremendous growth potential.
 
Genworth has no plans to leave the LTCi market.  And their financial strength rating from A.M. Best is “A- (Excellent)”.  A.M. Best states that its “A” (Excellent) rating is assigned to companies that have, in its opinion, an excellent ability to meet their ongoing insurance obligations. The “A-” (Excellent) rating is the fourth-highest of fifteen ratings assigned by A.M. Best, which range from “A++” to “F.”