Long-term-care insurance was sold to millions of Americans as a way to lock in protection against the enormous cost of nursing homes, assisted living, and in-home aides. Many who bought policies decades ago, expecting a stable premium for life, have instead received a steady stream of rate-increase notices. The insurers behind these policies continue to seek and win large premium hikes, and each one leaves the policyholder with the same hard choice: pay more, accept less coverage, or drop the policy after years of contributions.
Why the rate increases keep coming
The increases trace to a set of assumptions the industry got wrong when these policies were priced. Insurers underestimated how many people would file claims, how long those claims would last, and how long policyholders would live to collect. Cognitive conditions such as dementia, which can require years of care, stretched benefit periods well beyond early projections. At the same time, a long run of low interest rates undercut the investment returns insurers had counted on to fund future claims. The American Academy of Actuaries attributes the repeated increases to exactly these mispriced assumptions, which have left many older blocks of policies underfunded.
Because the shortfall is structural rather than a one-time miss, the increases arrive in waves rather than a single adjustment. A policyholder who absorbed one hike years ago often faces another, and then another.
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How state regulators review the hikes
Premium increases on long-term-care policies are not imposed at will. An insurer must file a request with each state’s insurance regulator and justify it, and regulators can approve, reduce, or deny what is sought. The National Association of Insurance Commissioners has documented thousands of approved rate increases across the lifetime of these policies and adopted a framework meant to bring more consistency to how states evaluate the filings and to curb the practice of policyholders in one state subsidizing those in another.
The review process explains why the same policy can carry different increases in different states, and why an approved hike is often smaller than the one an insurer originally requested. It does not, however, stop the increases, because regulators must also keep insurers solvent enough to pay the claims already promised.
The choices a rate notice forces
When an increase arrives, insurers typically offer alternatives to paying the full new premium. A policyholder can reduce the daily benefit amount, shorten the benefit period, lengthen the waiting period before coverage begins, or drop inflation protection. Each option lowers the premium by trimming the protection the policy provides. Some insurers also offer a paid-up option that ends future premiums in exchange for a reduced benefit equal to what has already been paid in.
For an older policyholder, none of these paths is comfortable. Paying more strains a fixed income, while cutting benefits erodes the very protection the policy was bought to provide, often at the age when the odds of needing care are climbing.
Weighing whether to keep the policy
Dropping a long-term-care policy is rarely the right move for someone who has paid into it for years, because the money already spent buys nothing back and replacing the coverage at an older age is far more expensive, if it is available at all. Advisers who work with these policies generally suggest evaluating a reduced-benefit option before abandoning coverage outright, since a scaled-down policy still offsets part of a care cost that Medicare will not cover. Comparing the reduced premium against the benefit retained is the calculation that matters most.
The broader pressure is unlikely to ease. The forces driving the increases, longer lives, costly cognitive care, and the investment math behind the policies, are the same ones regulators cite when they approve the next round of hikes, which means policyholders are likely to keep facing the same choice between paying more and holding less.
This article was produced with AI assistance and reviewed 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.
