BOSTON (TheStreet) -- The observance of "National Long-Term Care Awareness Month" in November came as two major insurance companies retreated from the industry, dramatically shrinking their role in it.
There are new products on the way that could serve as replacements, but for those approaching retirement, or considering a long-range plan, the troubles facing this marketplace are cause for concern.
Given longer life spans and the massive number of baby boomers retiring over the next decade, the potential for asset-ravaging care needs is an often neglected but no less important planning need.
In a sign of industry troubles, insurers such as MetLife are discontinuing some or all sales of long-term care insurance policies.
Retreats
On Nov. 11, MetLife(MET) announced that it will discontinue the sale of new long-term care insurance policies as of Dec. 30. Existing customers will not be affected and, "as long as premiums are paid on time, coverage cannot be canceled," the company assured.
"While this is a difficult decision, the financial challenges facing the LTCI industry in the current environment are well known," said Jodi Anatole, vice president of long-term care products for MetLife, in a statement.
On the heels of that announcement, another dominant underwriter, John Hancock, moved away from the business of selling LTCI policies to companies who offer them as an employee benefit. It will now sell policies only to individuals. It has also sought as much as a 40% premium increase in some states.
Despite the potential that a vast number of aging boomers could benefit from LTCI, products offered by such companies as Prudential(PRU), New York Life, Northwestern Mutual, Mass Mutual and State Farm are underused. Sales were down by nearly one-fourth last year and, according to industry statistics, a mere 7 million policies are active.
The American Association for Long-Term Care Insurance, an industry trade group, estimates that roughly 10 million Americans need long-term care, with annual expenditures exceeding $200 billion.
A sense of the economic impact is also laid out in research by Genworth Financial(GWN) showing that long-term care costs have outpaced inflation.
In 2005, the median annual rate for a private nursing home was $60,225, it said in its latest Cost of Care Survey. The rate this year was $75,190 -- a 4.5% compound annual growth rate. The company's website features an interactive map designed to help consumers see a variety of long-term care costs in their home state.
"Aging baby boomers are going to put enormous pressure on the health care system 20 years from now, when they might need long-term care, however defined," says Martin A, Corry, director of Federal Health Policy for Buchanan Ingersoll & Rooney, a firm with 450 attorneys and government relations professionals. "People who otherwise would have died from an injury or illness are not going to."
