When It Rains…

Seniors seem to be getting whacked from all angles these days.  First, it was the reality for most that they would be retiring on Social Security alone, and now they are finding out that the long-term care insurance that they secured years ago may not be as secure as they thought, at least at the rate they thought that they were getting it. The WSJ published an article today regarding the state of the insurance market for long-term care in the U.S.

It appears that the industry is in deep trouble caused by financial turmoil that is causing angst among the roughly 7.3 million long-term policy owners.  According to the Journal, this cohort is equal to about 20% of the senior population (those over 65 years-old). Steep policy rate increases are forcing many to either pay up or pull out of the program.

At one time, there were about 100 firms selling long-term care policies.  Today that group numbers roughly 12, and many of them are not on steady footing.  In fact, GE has announced that it is taking a $9.6 billion charge that is mostly attributable to their long-term care business.  In addition, more than $10 billion in additional charges have been taken by insurance companies in this space since 2007.

Long-term care often costs more than $100,000 / year for an individual and it is estimated that long-term care was over $200 billion last year. Most individuals don’t have the resources to meet this expenditure, especially given the lack of a DB pension, anemic DC balances, and weak personal savings rates. A collapsing long-term care industry is just another sad event for many of our senior citizens.

This scenario just further solidifies for me the likelihood that we will have multiple generations living under the same roof sooner than later.

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