Long-term-care insurance was sold for decades on the promise of a stable premium locked in at the age of purchase. For hundreds of thousands of policyholders, that promise has not held. State insurance regulators, coordinated through the National Association of Insurance Commissioners, have approved wave after wave of rate increases on older policies, and the hikes tend to land hardest in the years when a policyholder is most likely to actually need the coverage.
Why Decades-Old Policies Keep Getting Repriced
Long-term-care insurers that wrote policies in the 1990s and 2000s built their pricing on assumptions that turned out to be wrong on two fronts: far fewer people let their policies lapse than insurers expected, and the cost and duration of long-term-care claims ran higher than projected. Rather than absorb the gap, insurers went back to state regulators and requested permission to raise premiums on existing policyholders, something the original contracts generally allow subject to regulatory approval. The National Association of Insurance Commissioners notes that long-term-care coverage differs from most insurance in exactly this respect: the premium a policyholder pays today is not necessarily the premium locked in at purchase, because state regulators can and do approve later increases on the whole block of similar policies.
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The Scale of the Increases, Documented by Regulators
The size of the increases is not a fringe complaint. NAIC’s own Center for Insurance Policy and Research has tracked thousands of approved rate increases nationwide on legacy long-term-care blocks, with single approved increases averaging in the range of a third of the prior premium and cumulative approved increases, stacked over multiple filings across many years, running well above the original premium in a meaningful share of cases. Because rate increases are typically approved policy-block by policy-block rather than policy by policy, a large group of similarly situated policyholders, often people who bought coverage around the same time from the same insurer, can be hit with the same jump in the same renewal cycle.
Why the Timing Hits Hardest Right Before Care Is Needed
The financial squeeze tends to peak at the worst possible moment. Policies sold decades ago are now held mostly by people well into retirement, precisely the age range in which long-term-care needs become more likely rather than less. A retiree living on a fixed Social Security or pension income who faces a premium increase of hundreds of dollars a year has few options for absorbing it through additional earnings, and the years remaining until a claim might actually be filed keep shrinking, making the original decades of paid-in premiums feel increasingly at risk of being wasted if the policy lapses just before it would have paid out.
The Regulator-Required Alternative to Simply Cancelling
State insurance regulators have built one specific consumer protection into this pattern: when an insurer implements a large enough rate increase, most states require the company to offer a reduced-benefit option, sometimes called contingent nonforfeiture, that lets a policyholder keep the original premium by accepting a shorter benefit period, a lower daily benefit, or reduced inflation protection instead of paying more. That option is not automatic in every state and every policy, and it is easy to miss inside a renewal notice, but it exists specifically because regulators recognized that letting a decades-paid policy simply lapse for nonpayment strips a policyholder of everything paid in with nothing to show for it.
Getting an In-Force Illustration Before Deciding
Anyone who receives a long-term-care premium increase notice has a concrete first step available before deciding whether to pay, reduce benefits, or drop coverage entirely: requesting a current in-force illustration from the insurer, which lays out exactly what the policy would pay under the current premium, the higher premium, and each reduced-benefit alternative side by side. State Departments of Insurance and their affiliated counseling programs can review that illustration alongside a policyholder for free, a step that costs nothing and often surfaces an option that was never mentioned in the renewal notice itself.
The Added Stake for Partnership-Qualified Policyholders
The decision to pay, reduce, or drop coverage carries extra weight for anyone whose policy was approved by a state as a long-term-care insurance partnership policy. State insurance regulators note that a partnership-qualified policy can let a holder keep some of their own assets that would otherwise have to be spent down before Medicaid help becomes available, tied to how much the policy actually pays out in benefits before Medicaid is ever needed. Letting a partnership policy lapse for nonpayment does not just end the long-term-care benefit itself; it also forfeits the linked asset-protection feature, since that protection only applies to benefits the policy actually paid. A policyholder weighing whether a rate increase is worth absorbing should treat that asset shield as part of what is being given up, not just the daily benefit amount printed on the declarations page.
The Multistate Framework Regulators Built to Slow the Pattern
Regulators have not simply watched this repricing pattern unfold. In 2022, the NAIC’s Long-Term Care Insurance Task Force adopted a Long-Term Care Insurance Multistate Rate Review Framework, a coordinated national approach meant to produce actuarially appropriate rate decisions on a more consistent timeline across states and to curb one state’s policyholders effectively subsidizing another’s through mismatched approvals. The same task force had earlier, in 2020, adopted guidance on how insurers must evaluate and communicate the reduced-benefit options tied to a rate increase, the process behind the nonforfeiture alternative described above. Neither step stops future increases from being approved, since the pricing gap on decades-old policy blocks is real, but both are aimed at making the increases, and the alternatives to them, more consistent and better explained from state to state.
This article was produced with the assistance of AI 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.
