Trouble on the horizon for LTC...

Low interest rates and policyholders' unwillingness to drop coverage are two of the key reasons the long-term care insurance market is in trouble, an expert recently asserted. Long-term care insurance carriers used to operate under the assumption that a reliable number of policyholders would drop their coverage before they reaped their claim, Howard Gleckman, a journalist and Urban Institute fellow, writes in Forbes magazine. But as interest rates plunged in the economic downturn, more policyholders have not cashed in. Additionally, not enough consumers are buying the policies, he says.

In this environment, LTC insurance carriers have had to either exit the market or increase premiums substantially. Genworth increased premiums this year and decreased product offerings, while Prudential has decided to offer only group long-term care policies.

“Overall, though, the decline of the private LTC market is a huge problem, especially since it is coming just as Washington is seeking ways to reduce Medicaid, the most important payer of long-term care costs,” Gleckman wrote.