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    Long-Term Care Insurance: Less Bang, More Buck

    By Barbara Feder Ostrov

    Thu, Mar 17 2016

    Mary Julia Klimenko thought she was prudent 20 years ago when she invested in a long-term care insurance policy, one she believed would help pay for the care she’d need as she aged.

    Now she wishes she’d banked the money instead.

    Her monthly premiums have nearly quadrupled over the past two years, and Klimenko, now 69, is furious about the choices she’s been given: pay the higher cost, lower her premiums by cutting her policy’s benefits or drop the insurance altogether.

    For now, the Vallejo, California therapist said she will pay the higher premiums, but she’s not sure how many more price hikes she can take.

    “I have no choice. If I drop my insurance, I’ve thrown away all that money,” Klimenko said. “If I pay less, they’re not going to cover what I need.”

    Long-term care insurance was supposed to help the middle class ease the financial burden of expensive in-home or nursing home care that now can top $90,000 a year.

    Consumers were urged to buy policies in their 50s, because premiums rose the longer they waited. About 4.8 million people were covered by long-term care policies in 2014.

    But insurers botched just about every aspect of the policies they sold in the early days of the industry, said Joseph Belth, a retired professor of insurance at Indiana University known as one of the insurance industry’s toughest critics. They underestimated how long people would live and how long they’d need nursing home care — but overestimated how many people would drop their policies and how much interest insurers could earn on the premiums they banked.

    Hemorrhaging money, many insurers left the business. Those that remain are in financial trouble on their long-term care policies. They’re charging far more for new policies, and sharply raising the premiums of old ones.

    “The industry is a state of severe decline,” Belth said. “Companies … don’t see a way to successfully market the product and make money on it.”

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