Millions of Americans bought long-term-care insurance in the 1990s and 2000s expecting a fixed, predictable premium in exchange for coverage of nursing-home or in-home care later in life. Many are now discovering that the premium was never truly locked. Insurers continue to file steep rate increases on those older policies, and retirees who have paid faithfully for two or three decades are being asked to pay far more, cut their benefits, or walk away from coverage just as the years they bought it for arrive.
Why decades-old policies keep getting more expensive
The increases trace back to pricing mistakes made when these policies were first sold. Carriers set early premiums on assumptions that proved badly wrong: they expected more policyholders to drop coverage over time, they underestimated how long people would live and draw benefits, they assumed higher investment returns, and they misjudged the rising cost of care. When those assumptions collided with reality, the blocks of older policies, known in the industry as legacy or in-force business, no longer collected enough in premiums to cover projected claims. Rather than absorb the shortfall, insurers file for rate increases, and the size can be jarring. According to the National Association of Insurance Commissioners, thousands of rate increases have been approved across the country, with research citing an average single approved increase of roughly 37 percent and average cumulative approved increases above 100 percent on the studied blocks, meaning a policy’s premium can more than double over the span of several filings. Most of these policies were sold as guaranteed renewable rather than truly non-cancelable, a distinction that lets an insurer raise premiums for an entire class of policyholders even though it cannot single out one person, and many buyers did not grasp the difference when they signed.
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The regulators’ role, and why approval is common
A long-term-care insurer cannot raise a premium on its own. It must file the increase with the insurance regulator in each state where the policy was sold, supported by actuarial data showing the block is underfunded, and the regulator can approve the request, deny it, or grant a smaller increase than the one sought. In practice many increases are approved, at least in part, because a state department has an interest in keeping the insurer solvent enough to pay the future claims it owes existing policyholders. Regulators have tried to bring order to a patchwork process; the NAIC adopted a multistate rate-review framework so that a national approach, rather than fifty separate outcomes, governs how these filings are evaluated. Because approval still happens state by state, the same policy from the same insurer can carry a different premium depending on where the owner lives, and a retiree who relocates may find a different increase history applies in the new state. State insurance departments also publish rate-increase histories, and California’s regulator, for example, maintains a public record of long-term-care rate changes so consumers can see how much a given company’s policies have climbed over time.
The choice a rate increase forces
When a large increase is approved, the policyholder is left with a narrow set of options, none of them comfortable. Paying the higher premium preserves the coverage but strains a fixed retirement budget, sometimes for a benefit that is still years away. Dropping the policy stops the bleeding but forfeits decades of premiums and the coverage itself, often at the age when it is least replaceable. Between those extremes, regulators require insurers to offer reduced-benefit options, sometimes called landing spots, that let a policyholder hold the premium closer to its current level by trimming the coverage instead: shortening the benefit period, lowering the daily benefit amount, or reducing or dropping the inflation-protection rider that was driving much of the cost. Regulators also generally require a contingent nonforfeiture option after a large increase, which lets a policyholder stop paying and keep a paid-up benefit worth at least the premiums already paid, a partial backstop that preserves some coverage rather than forfeiting everything. The NAIC has issued guidance on how these options should be evaluated and communicated, but the tradeoff is real, because a trimmed benefit may fall short of what a future nursing-home or home-care bill actually costs.
What a policyholder can do before deciding
A rate-increase notice deserves a careful read rather than a rushed reaction. The letter should spell out the new premium, the effective date, and the reduced-benefit alternatives, and comparing those alternatives against the actual cost of care in the relevant area helps clarify how much coverage is worth keeping. State insurance departments and their consumer-assistance lines can confirm whether an increase was in fact approved and explain the options, and a fee-only financial planner who does not sell insurance can model whether continuing, reducing, or dropping the policy fits the broader retirement plan. Inflation protection is frequently the most expensive component, so scaling it back can be a middle path that keeps the core coverage intact. The one approach that rarely serves a retiree well is ignoring the notice, because a missed decision can default the policy into a lapse and erase the years of premiums already paid.
This article was created with AI assistance and was reviewed, edited, and fact-checked by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
