Rate increases have become a fact of life for those who purchased traditional long-term care insurance decades ago. Count me in. Traditional policies are renewable which means that a carrier cannot cancel coverage unless premiums are not paid. But premiums can be increased. Just not at the whim of the carrier.

In-force rate increases are a last alternative. Carriers will increase premiums to new applicants before increasing premiums to in-force policyholders.

Insurance is governed by the states.

If an insurance carrier sees the need to increase premiums to in-force policyholders, the carrier must submit a business case to every insurance commissioner in every state in which it wants to increase premiums. The need for a rate increase is based on the claims history in each specific state.

Briefly, the business case includes premiums paid, claims expenses paid and projected deficits based on future claims and required reserves. Insurance commissioners can approve, modify or decline. This is not an automatic approval process. And state commissioners can phase in premium increases. For example, a rate increase could be submitted for a 60% increase and is approved for a 40% increase, but the annual premium increase cannot be more than 20%, creating multi-year increases over two years.

These rate increase requests can take four to 12 months to decide. Sometimes longer. So, it’s not a quick process. Here are rate increase actions reported by the American Association of Long-Term Care Insurance (AALTCI):

• Full increase approved 36% of carriers surveyed
• Partial increase approved 38% of carriers surveyed
• Denied any increase 6% of carriers surveyed

Why are the increases necessary?

Lots of reasons and among them are:

• The original product pricing was inaccurate. This product was introduced in the 1970s and much of the design was based on life insurance experience. People buy life insurance for numerous reasons. That’s not the case with long-term care insurance. It is purchased for a very specific reason.

The first industry reporting on claims history occurred in the early 2000s. Why? People bought this insurance in their fifties or sixties but did not file claims until they were in their eighties. That’s still the case today.

Carriers validate design, underwriting and pricing of a product by evaluating claims. Think about this. A carrier has a product in the market for twenty or thirty years before it has statistically relevant claims history to evaluate.

Up until the time the first industry statistics were reported, the vast majority of long-term care insurance policies were traditional designs and clients bought 100% coverage usually with a 5% compound inflation rider and lifetime coverage. There was not much customization in the early days. But today, we customize coverage for every client based on health, wealth, asset location and financial goals.

• Underwriting morbidity was in its infancy. In the early days of this insurance, functional activities were the focus. Old applications demonstrate the lack of expertise underwriting morbidity. Today, underwriting is far more sophisticated and numerous medical databases have been developed that are important resources for carriers underwriting morbidity risk.

Today, the primary concern of underwriters is cognitive impairment. Couple that with cardiovascular disease, neurological diseases and advanced arthritis. Most carriers require a cognitive skills exam for applicants 65 years of age and older.

• We’re living longer. The longer we live the greater the chance that we will need assistance. This may seem counterintuitive to some. Back in 1946, the first year of the baby boomers, life expectancy for men was 64.4 years and for women 69.4 years. Today, the life expectancy for men has increased to 76.5 and for women to 81.4 years.

Living longer doesn’t equate to living healthier. Modern medical science has contributed to the increase in life expectancy and the cost of care. Carriers have experienced 29% more claims than projected and 20% of claims last longer than anticipated.

• An integral component of product design is the planned rate of return to increase the growth of the reserve funds to pay for claims. Those projections have been significantly lower in past years. No doubt we have all experienced disappointing returns on investments due to projections not met.
• Projected lapse rates were not realized. As mentioned previously, people buy life insurance for several reasons and these are reflected in the lapse rates. For example, once the mortgage is paid off and the kids are through college, the need for life insurance may diminish and policyholders quit their policies.

It’s different with long-term care insurance.

Once in place, policyholders hold onto this insurance. It is purchased for a very specific purpose. We see less than a 1% lapse rate with this insurance. Early projected lapse rates based on life insurance experience were faulty.

• There is a shortage of caregivers and care venues and at the same time there is greater demand for care given increased longevity. The leading edge of baby boomers are turning 80 years old. Most claims are filed between ages 80 and 85. It’s the old supply and demand economic equation. Overall, the combined cost of care venues has increased about 4% annually since the end of COVID.

Here are the median national monthly and annual costs of care venues based on the 2025 CareScout survey:

• Home Care: $6673 per month or $80,080 annually for 44 hours per week.
• Assisted Living: $6200 per month or $74,400 annually for a one-bedroom apartment.
• Skilled Nursing: $10,798 per month or $129,575 annually for a private room.

You can review the costs where you reside at Cost of Long Term Care by State.

How to deal with a premium increase.

Today, most carriers will offer several options to keep coverage and premiums close to what it was in the past year. But carriers don’t know our clients like we do. What we recommend is greatly influenced by the percentage of the increase, the client’s age, health, wealth and affordability.

Additional information from AALTCI reports the percentages of rate increases. Here is a look at averages:

• 6% are between 5% and 9%
• 29% are between 10% and 19%
• 31% are between 20% and 29%
• 9% are between 30% and 39%
• 14% are between 40% and 49%
• 3% are between 50% and 59%
• 9% are 60% or more

When consulting with clients about rate increases, we typically will look at the following components of product design in this order to revise cost and coverage:

• Daily/monthly benefit amount in comparison to the cost of care. Is the policyholder over-insured based on the growth of the coverage as a result of the inflation option?
• Benefit period relative to age, health and life expectancy. If the policyholder is now in his/her late nineties, is lifetime coverage prudent?
• Optional riders that may no longer be necessary or appropriate. Does the initial product design include a shared rider or a survivorship rider for a couple, but one spouse is now deceased?
• Inflation rider percentage given benefit amount, age, health and life expectancy. Is the percentage of inflation still prudent given age, health and life expectancy?

Costs of care are increasing because of a shortage of caregivers and the number and duration of claims. Unrealized product assumptions on older policies also drive premium increases.

Our counsel is to review with a financial advisor or consult with an agent or broker who holds a Certified in Long-Term Care (CLTC) credential who can review your situation, evaluate your coverage and make prudent recommendations.