The Long-Term Care Financing Crisis: GE Struggles With Reinsurance Obligations
Like Many Other Companies, General Electric Has Been Swept Up in the Long-Term Care Financing Crisis
The costs of long-term care (LTC) for older Americans can be catastrophic, often reaching hundreds of thousands of dollars over the course of a lifetime. While insurance carriers and corporations jumped at the opportunity to market LTC insurance products as a consumer safeguard in the 1980s and early 1990s, many of these companies are now finding themselves in a serious financial predicament. Having sold billions of dollars in LTC products to consumers, these entities are struggling with how they are going to cover the cost of care as more and more policyholders are making claims for benefits.
A recent article in the Wall Street Journal highlighted the serious financial issues that LTC insurance carriers and other corporations are grappling with. In particular, this article focused on the problems General Electric Co. (GE) is facing in light of the concerns surrounding the health of the long-term care industry. Although GE spun out its unit associated with long-term care years ago, the company is still being impacted by the long-term care financial crisis. This is because GE still maintains billions of dollars in reinsurance obligations stemming from the reinsurance coverage it sold to other insurance carriers in the long-term care market. To the extent these LTC carriers now lack sufficient reserves to cover their policyholders’ claims, GE may be on the hook.
Factors Leading up to the Crisis
GE is certainly not alone as companies across the nation are finding themselves at risk for LTC reserve problems. As the block of LTC insurance matures, more and more aging consumers are making claims for LTC benefits. With the costs of long-term care growing exponentially, insurance carriers are discovering that they may have underestimated the costs associated with LTC. In many instances insurance companies offered top level LTC benefits to keep up with the competition but failed to charge sufficient premiums to cover the future costs of care. Actuaries may have also overestimated the lapse-rates associated with long term insurance – the number of people who would stop paying premiums and hence forfeit their LTC coverage. Additionally, lower than predicted interest rates have contributed to the reserve problem because insurance companies invest and generate interest on policy premiums until they are needed to cover the claims filed by LTC policyholders.
Impact Upon Policyholders
While companies are grappling to wrap their arms around the long-term care insurance reserve problem, consumers are bearing the brunt of the crises. Policyholders who have faithfully paid their premiums are now finding themselves in an uphill battle against carriers that are denying and delaying their claims for LTC coverage. Additionally, many consumers have been slapped with substantial premium increases as insurers gain regulatory approval from state insurance commissioners to increase their long-term care insurance rates.
Unfortunately, with the aging population and long-term care costs continuing to explode, this problem is unlikely to go away anytime soon. Consumers who need to file claims for LTC benefits or who have been denied coverage by their insurance carriers should seek out he advice of a qualified Chicago insurance lawyer. Bryant Legal Group PC has decades of collective experience assisting clients with long-term care coverage and other types of insurance products. We have a solid understanding of the LTC insurance industry and are currently monitoring developments on the state and national level. We invite you to discuss your situation with an attorney at our firm by calling 312-561-3010 or emailing us at firstname.lastname@example.org.