Penn Treaty Network America LTC insurance company will now go into liquidation. A Pennsylvania court gave the PA Department of Insurance final approval to liquidate the LTCI company on March 1st.  Benefits will still be payable if premiums continue to be paid on-time, but according to the PA DOI about 50% of policyholders may have their benefits limited.

Liquidation means that the claims liabilities now fall to individual states' insurance "guarantee funds" which most commonly limit total benefits to $300,000.  A few states are slightly higher and a couple - including Missouri - have a cap of only $100,000 for LTC insurance.  Note that in most cases you would be covered by your state of residence at the time of liquidation (March 1, 2017), NOT the state where you bought the policy.

While this insurance company failure is being reported as the largest financially in US history, it's important to note that Penn Treaty's policyholders account for only one-percent (1%) of all LTC insurance policyholders in-force, and that along with grossly under-pricing its overly-liberal policy benefits, Penn Treaty accepted people with health risks that no other insurance company would consider.

My general advice to Penn Treaty policyholders: Keep your coverage, especially if you are older or uninsurable and cannot replace your coverage.  Even if you could qualify for a replacement, you may be better off keeping Penn Treaty on a limited basis.

Contact us for a policy/coverage review.

According to the PA DOI, Policyholders with questions about policies, claims, or related to liquidation should call Policyholder Services at:  1-800-362-0700.

We are hearing stories almost daily of unscrupulous agents urgently telling their clients to immediately replace their in-force long-term care (LTC) insurance for a variety of reasons, all bad:

• A premium rate increase itself is never a reason to replace your coverage.  You will pay much more - in some cases two to three times more - for a new policy with the same benefits.  Even with a rate increase, your policies still have an "original issue age" price, and will cost you less than a replacement.  If you need to lower your premium after a rate increase you can always reduce your current policy's benefits to a more affordable level, which again will be cheaper than a new policy with lower benefits.
• Just because premiums have increased for older policies, does NOT mean they will continue to increase in the future, or increase at the same rate and frequency.  In fact, today's new rates (which the older policies are being adjusted up to) are already showing evidence of being more rate stable than ever.
• A lower financial-strength rating on the current policy compared to a replacement company is also not a good reason to replace your coverage.  The risk of financial failure of large insurance companies is rare.  (If you are told a scary story about a Pennsylvania company (PennTreaty) that is being liquidated with $8-billion-something dollars in claim liabilities, you should understand that 90% of all policyholders will still receive all of their benefits if they go on claim in the future, and the other 10% will receive most of their benefits through the state insurance guarantee associations.  That company also represents only a couple percent of all LTC insurance in-force.)
• Finally, we're hearing that some agents are trying to scare Genworth policyholders into replacing their coverage because a Chinese investor is trying to buy the company.  First, Genworth will remain a US company, subject to all federal and state insurance regulations.  The policy reserves that provide the foundation for current and future claims payments are protected by law, no foreign OR US buyer can strip the legal reserves out of any insurance company.  Did you know that John Hancock is owned by a Canadian company (Manulife)?  And that Transamerica is owned by a Dutch company (Aegon)?

A huge mistake that many people make when considering LTC insurance is "over-quoting".

Most people do not need to buy coverage for 100% of the cost of the highest-possible cost of care (skilled nursing home), and even shorter benefit periods (3-4 years) will cover the vast majority of care needs.  It's kind of like thinking, "If I can't afford a Mercedes, then I'll just wait for the bus."  It shouldn't be a zero-sum, all-or-nothing decision - that's a HUGE mistake.  A Malibu with cloth seats and a 4-cylinder is great transportation ...
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$3000 a month of LTC insurance benefits will pay for five hours of home care seven days a week, or 10 hours every-other day.  It will cover more than 1/2 of a good Assisted Living Facility in most of the country, and provides a 33% "discount" to a $9000/month bill in a nursing home.

LTC insurance claims data show that 60%+ of claims start at home. Guess what, about 60% of claims also END at home.  Only about 20% of LTC insurance claims end in a nursing home.
The average LTC insurance claim is less than four years, even less than three years for men.  Cover that first before you worry about Alzheimer's care for 6+ years.  If you only buy a 3-year policy (couples can "share" up to a total of 6 years for the price of 3 each), and if you do get Alzheimer's, you will still have much more private-pay flexibility than having nothing.

We need to stop worrying about the cost of care in a facility where most of us are NOT likely to end up (especially with reasonable - and affordable - planning).  We do need to worry about where we will get an extra $3000-$4000 a month to pay for part-time home care so our spouse can have a life, get a good night's sleep, stay healthy, etc., and so our adult kids can be care managers not caregivers.  Home care comes first.  Always.  And this is also where families are personally and financially most at risk when someone they love needs care.

Solve the part-time home care problem first.

China Oceanwide will buy Genworth in a $2.7-billion deal which includes a $1.1-billion capital commitment to pay off debt and invest in the US life insurance business.

​I believe this is good news for Genworth policyholders and the LTC insurance marketplace overall.  Readers should note that two other active LTC insurers are also now foreign-owned. John Hancock is owned by the Canadian insurance company Manulife, and Transamerica is owned by Dutch insurer AEGON.

The US life & LTC biz must and will remain a US-based subsidiary of China Oceanwide, subject to US federal and state regulators.  In-force policies must all be honored by law. 

Click here for a link to the company's full press release:
http://investor.genworth.com/investors/news-releases/archive/archive/2016/China-Oceanwide-To-Acquire-Genworth-Financial/default.aspx 

​As an insurance broker who has sold LTC insurance since 1992, and who has focused exclusively on LTC insurance since 2000, I have been following the FLTCIP rate increase news since it is such a large player in the marketplace.  The "average" increase for current policyholders is over 80%, with some as high as 125%!
 
Here's my take:  Welcome to LTC insurance. 
 
The FLTCIP is basically having to realize the same increases, for the same reasons as the rest of the private LTC insurance marketplace.  125% is NOT an outlier.  Several other companies including some of John Hancock's individual policies, and Genworth’s have had 80%-100%+ increases.  Others have had those amounts as well cumulatively over 2 or 3 increases in the past 10 years ..........

The Motley Fool does a good job of examining a couple of different studies on what we should expect to pay out of pocket for health care in retirement, and how even with estimates exceeding $240,000 over a 20-year retirement we may still be UNDER-estimating the cost.

MOST of the costs are monthly premiums for Medicare Part B and Medicare Supplement insurance, plus an average of Medicare deductibles and co-payments.

None of the studies cited include the cost of long-term care services.

Here's an excerpt from a Money magazine article about the cost of health care in retirement, and again, it is noted that the staggering numbers DO NOT include long-term care costs.