In the 13 November 2010 NY Times, Ron Lieber writes When a Safety Net Is Yanked Away.

Citing well-known challenges to the long-term care insurance industry (but without really saying what they were), MetLife said that it would stop underwriting new long-term care policies for individuals after Dec. 30. The company will also cease new enrollments to group and other plans, say, through an employer.

The company added that it would continue paying claims on existing policies as long as customers continued paying premiums. Many of them may not, however, since MetLife recently asked state insurance regulators for permission to raise premiums on many policies by as much as 44 percent.

It wasn’t the only company not charging enough for its policies. The two leading players in the industry are trying to raise prices, too. Genworth Financial is seeking an 18 percent increase on older policies held by about 25 percent of its customers. And John Hancock has filed for permission to raise premiums for about 80 percent of its customers by an average of 40 percent. It has also temporarily stopped offering new long-term care insurance plans through employers while it tries to figure out what to charge.

State regulators may not bless these requests. But it suggests how far off the companies were in pricing their products.

In Lieber’s 5 November 2010 NY Times article, Ignore Long-Term Care Planning at Your Peril, he quotes a MetLife spokeswoman, Karen Eldred,

“Assumptions used to initially price many long-term care insurance products have changed. Evolving assumptions and their impact on pricing is a challenge the industry is facing over all. The primary assumptions that have changed since the initial pricing of these products include: interest rates, persistency, morbidity and mortality experience, which have not materialized as expected.”

Lieber goes on to translate what Eldred said, and you can read that in his articles.

But, at its core, the insurers made “guesstimates” which turned out to be off the mark, and now they want the various state insurance commissioners to retroactively shift the risk back onto past policyholders, who bought their insurance policies in good faith.

Let’s hope the state governors and insurance commissioners don’t knuckle under. If you agree, write to your governor.

You might also be interested in Lieber’s 12 November 2010 blog post, The Trouble with Long-Term care Insurance. See, especially, the comments to his post.

By the way, Lieber makes reference to two academics, Amy Finklestein (MIT) and Jeffrey Brown (U of Illinois at Urbana-Champaign) who have written on the long-term care insurance market. If any of you wish to delve deeper, here is one place to start: The Private Market for Long-Term Care Insurance-Review of the Evidence (2008).

I consider all of this one more argument for national health insurance.

-RichardH