Long-term care insurance premiums increase because the original pricing assumed things that turned out to be wrong, not because of anything a policyholder did. Increases apply to an entire class of policies, and in Florida an insurer cannot raise rates until the Office of Insurance Regulation reviews and approves the filing.
Why a Level Premium Policy Can Still Have a Rate Increase
Most long-term care insurance sold in the United States was priced on a level premium basis. The premium was set at the age you applied and designed to stay flat for life, with the early years overfunding the policy to pay for the later years when claims arrive.
Level premium is not guaranteed premium. Nearly all of these policies were issued as guaranteed renewable: the insurer can never cancel your coverage or refuse to renew it as long as you pay, but it reserves the right to change the premium rate schedule for an entire class of policyholders, subject to state approval. The guarantee is on your coverage, not your price.
The Three Assumptions That Turned Out Wrong
The U.S. Government Accountability Office examined this in its 2008 report Long-Term Care Insurance: Oversight of Rate Setting and Claims Settlement Practices (GAO-08-712), finding that incorrect pricing assumptions on older policies were largely responsible for the increases that followed.
- Lapse rates. The largest single factor. With no long-term care claims history to work from, insurers borrowed lapse assumptions from other lines of insurance, where many buyers stop paying and walk away. GAO found lapse rates proved far lower than companies anticipated in initial pricing, increasing the number of people likely to submit claims. Pricing that quietly depended on policyholders paying premiums and never collecting benefits lost that subsidy.
- Interest rates. These policies accumulate reserves for decades before the average claim is paid, and projected earnings on those reserves were built into the premium. Policies priced when interest rates were high assumed those returns would continue; the prolonged low-rate environment that followed meant reserves grew more slowly than the pricing required.
- Claims incidence, duration, and longevity. Morbidity assumptions, meaning how many insureds would need care and for how long, were drawn thin. People are living longer, more reach the ages where cognitive impairment is common, and claims have lasted longer than projected. Trends in the costs of long-term care and in the delivery of long-term care services, including the shift toward extended home care alongside nursing home care, added pressure.
This Was an Industry-Wide Pricing Problem
Policyholders often assume an increase reflects poor management at their particular insurance company. The mispricing was structural: every insurer entering the market in the 1980s and 1990s priced a product with no credible experience data, using the same borrowed assumptions, and an entire generation of policies was sold at premiums that later proved insufficient. The National Association of Insurance Commissioners notes that while roughly 100 companies offer some form of LTC insurance nationally, only about 15 to 20 insurers write most policies today. Legacy blocks, closed to new sales but still paying claims for decades, sit at the center of the rate increase question.
A Rate Increase Applies to a Class, Never to You Alone
A premium rate schedule increase is filed against a policy form, a class of policies with the same contract language issued during a particular period. Every policyholder in that class is affected according to the approved schedule. Your own claims and your own health do not enter into it.
Section 627.9407, Florida Statutes, provides that a long-term care insurance policy cannot be canceled or nonrenewed on the grounds of the insured’s age or the deterioration of the insured’s health, and that premiums cannot be increased solely on the basis of the insured’s age. Filing a claim or receiving a diagnosis does not trigger a premium increase and cannot be used to end your coverage.
The same section caps where an increase can land: rates for existing policyholders cannot exceed those charged to newly issued policyholders with comparable benefits. Rule 69O-157.301, Florida Administrative Code, implements this through maximum rates the Office publishes annually, the weighted average of insurers’ new business rates using Florida first-year premium market share as the weight. An insurance carrier no longer selling comparable coverage is still measured against that benchmark.
How Florida Reviews and Approves a Long-Term Care Insurance Rate Increase
Long-term care insurance in Florida is governed by Part XVIII of Chapter 627, Florida Statutes (sections 627.9401 through 627.9408), with the operative detail in Chapter 69O-157, Florida Administrative Code. Rate increase filings run through Rule 69O-157.113, Premium Rate Schedule Increases, with the filing procedures in Rule Chapter 69O-149.
An insurer seeking more premium on an in-force block must file the request with the Office and obtain approval before implementing it. The filing is an actuarial submission: current and proposed rate schedules, experience on the block, revised assumptions, projections of future claims and premiums, and the benefit options to be offered.
The Standards the Office Applies
- The loss ratio test. The insurer must show that accumulated and projected incurred claims are not less than the accumulated value of initial earned premium times 58 percent, plus 85 percent of the accumulated value of any prior premium rate schedule increases. The effect of the 85 percent figure is that only a thin margin stays with the insurer; the great majority of increase dollars must go back out as benefits. Increases fund paying claims, not an original profit target.
- Exceptional increases. A narrower category covers increases attributable to approved causes such as changes in law. There, the insurer must show that 70 percent of the present value of projected additional premiums will be returned to policyholders in benefits.
- Actuarial certification. A qualified actuary must certify that if the increase is implemented and the revised assumptions are realized, including moderately adverse experience, no further increases are anticipated. That is a compliance statement rather than a promise, but it pushes the insurer to price the block to a durable level.
- Ongoing accountability. If experience after an approved increase does not track the projection filed, the Office may require premium adjustments or benefit modifications, and in defined circumstances may bar the insurer from filing comparable coverage for up to five years.
Notice to Policyholders
Rule 69O-157.107, Required Disclosure of Rating Practices to Consumers, requires notice to affected policyholders at least 45 days before an approved increase takes effect. That notice carries the rating practice disclosure required at application, including the insurer’s history of increases on that form or similar forms over the past 10 years, in Florida or any other state, and the amount or percentage of each.
Are All Rate Increase Requests Approved?
No. An insurer that has requested a rate increase has made a filing, not a decision, and the Office reviews the actuarial support behind it. Requests are approved as filed, approved at a lower percentage than requested, phased in over several years, or disapproved. Because each state reviews independently, one nationwide filing can produce different outcomes in different states. Regulators addressed that inconsistency through the NAIC’s Long-Term Care Insurance Multistate Rate Review Framework, adopted April 8, 2022, under which a multistate actuarial team reviews a filing and issues a recommendation. Participation is voluntary, and no state loses its own authority to approve or deny.
What the NAIC Rate Stabilization Reforms Changed for Newer Policies
The response came through the NAIC Long-Term Care Insurance Model Regulation (Model #641), which in 2000 adopted what are commonly called the rate stabilization amendments. Florida incorporated the framework into Chapter 69O-157, and Rule 69O-157.102 applies those provisions to policies and certificates issued on or after March 1, 2003.
The shift was philosophical as much as technical. Under the older approach, still reflected in Rule 69O-157.022 for pre-2003 Florida business, an LTC policy’s benefits were deemed reasonable in relation to premiums charged if the expected loss ratio was at least 60 percent. That tested how premium was divided, not whether the premium was adequate in the first place.
The stabilization framework attacks adequacy directly. Under Rule 69O-157.108, a qualified actuary must certify that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and is reasonably expected to be sustainable over the life of the form with no future increases anticipated. Model #641 pairs this with a composite margin of not less than 10 percent of lifetime claims, and the 58 and 85 percent test then applies if an increase becomes necessary anyway. The NAIC strengthened the framework in 2014, converting the certification from a one-time statement into an annual one and improving consumer disclosure.
Why Newer Policies Have Generally Seen Smaller Increases
Policies priced under the stabilization standards rest on assumptions informed by two decades of actual claims experience, with an explicit margin for adverse deviation, and were sold in a lower interest rate environment. The severe long-term care insurance rate increases reported in the press have overwhelmingly hit policies issued before these standards applied. Newer LTCI blocks are not immune, but repeated large increases are concentrated in legacy business. The NAIC compiles insurer-reported results in its annual Long-Term Care Insurance Experience Reports.
Options a Policyholder Is Offered When Higher Premiums Arrive
When an approved increase is implemented, Florida’s rules require the insurer to present alternatives, generally a choice between paying the higher premiums and agreeing to reduce your benefits, rather than a single take-it-or-leave-it number. Which one fits a given household depends on facts this article cannot know.
- Pay the increased premium. Every benefit stays exactly as issued and the premium rises to the approved level.
- Reduce the daily benefit amount. Lowering the maximum the policy pays per day of care, or per month on policies written that way, lowers the premium. The policy still pays but covers a smaller share of care costs at claim time. Policies with separate facility and home care daily benefits may allow either to be adjusted.
- Shorten the benefit period. Policies carry a benefit period or a total pool of dollars, sometimes a lifetime benefit. Reducing it, say from unlimited to a fixed number of years or from five years to three, lowers the premium and the maximum the policy will ever pay.
- Lengthen the elimination period. The elimination period is the wait between becoming eligible for benefits and the policy beginning to pay, functioning like a deductible measured in days. Extending it, say from 30 days to 90, lowers the premium and increases the days of care expenses funded from your own resources.
- Reduce or drop inflation protection. Many policies include a rider that raises the daily benefit annually, often at a compound rate. Reducing the rate, converting compound growth to simple, or stopping future increases while keeping the benefit already accumulated can substantially lower the premium, and also means the benefit will no longer keep pace with the future costs of long-term care. Under the mandatory offer provisions in Part XVIII, inflation protection must be made available, but a policyholder may decline or reduce it.
- Contingent nonforfeiture, also called a contingent benefit upon lapse. Section 627.9407 requires that a contingent benefit upon lapse consistent with the 2000 NAIC model regulation be made available, and Rule 69O-157.118 sets the mechanics. It is triggered when cumulative increases reach a threshold percentage that varies by age at issue; for an insured issued at age 65 the trigger is a cumulative increase of 50 percent or more over the initial annual premium, with higher thresholds at younger issue ages. Once triggered, the insurer must offer, on or before the effective date of the substantial premium increase, both a reduction in benefits that holds the premium at its current level without new underwriting, and conversion to a paid-up policy with a shortened benefit period, under which you stop paying premiums and keep a reduced pool of remaining coverage. Failure to pay the increased premium within 120 days of the due date operates as an automatic election of the paid-up benefit in the circumstances the rule describes.
Because benefit period, elimination period, and rider definitions vary across contract generations, the policy language itself is more reliable than any summary. Some policyholders review the notice with a financial advisor or with the insurance agent who wrote the policy.
Your Coverage Rights as a Florida Policyholder
- Advance notice with rating history. At least 45 days before the increase takes effect, including the 10-year rate increase history for the form under Rule 69O-157.107.
- Coverage that cannot be canceled for age or health. Under section 627.9407 your policy cannot be canceled or nonrenewed because of your age or a decline in your health. Statewide nonrenewal is available only on a showing to the Office involving jeopardy to solvency or substantial unexpected losses.
- A rate capped at the new business rate. Your post-increase rate cannot exceed what a new applicant would pay for comparable benefits, measured against the Office’s published rates under Rule 69O-157.301.
- The right to see the filing. Rate and form filings are public records. The Office maintains the IRFS Forms and Rates Filing Search at irfssearch.floir.gov, covering filings from January 2001 forward, searchable by company name, file log number, product, and filing dates. That is how you read the actuarial justification for the increase on your form, what was requested, and what was approved.
- Access to the regulator. The Office of Insurance Regulation, headed by the Commissioner of Insurance Regulation, reviews and approves rate filings. Consumer questions and complaints go to the Division of Consumer Services at the Florida Department of Financial Services: Insurance Consumer Helpline, 1-877-693-5236, or 850-413-3089 from outside Florida, and Consumer.Services@myfloridacfo.com.
Frequently Asked Questions
Can long-term care insurance premiums increase after I buy a policy?
Yes, on a guaranteed renewable insurance policy. The insurer cannot cancel the coverage or refuse to renew it while you pay, but it can request a change to the premium rate schedule for the whole class of policies on that form. The change takes effect only after the Office approves the filing and after at least 45 days’ notice.
Why do long-term care insurance premiums increase?
Because the assumptions behind the original premium proved wrong in the same direction across the industry: far fewer policyholders lapsed than expected, invested reserves earned less as interest rates fell, and claims incidence, duration, and longevity ran higher than projected. It is a pricing failure on old blocks, not a reaction to any policyholder’s claims.
What is the typical long-term care insurance policy rate increase?
There is no single typical figure. Increases vary by policy form, issue year, state, and whether the block was priced before or after the rate stabilization standards. Legacy forms from the 1980s and 1990s have seen the largest cumulative increases, sometimes across several rounds. The reliable answer for your own LTC policy is in the filing for your form.
What is the average monthly premium for long-term care insurance?
Published averages for LTC insurance generally come from industry trade association surveys of newly issued policies, describing what a new buyer at a given age pays for a stated benefit design rather than what someone holding a decades-old policy pays. Premium costs depend on age at issue, the daily benefit amount, benefit period, elimination period, inflation protection, and underwriting classification, so a single average says little about what any one policyholder pays to help pay for long-term care costs.
At what age might a long-term care policy premium be too expensive?
Premiums are set by your age at issue and do not rise as you get older; Florida law prohibits an increase based solely on the insured’s age. What changes with age is the household budget, particularly in retirement when income is often fixed while a class-wide increase can arrive at any time. Affordability is a question about a specific household’s income, savings and assets.
Does a rate increase mean the insurer will never raise premiums again?
No. The actuary certifies that no further increases are anticipated if the revised assumptions are realized under moderately adverse experience. That is a statement of current expectation under a defined standard, not a guarantee. If experience deviates further the insurer may file again.
Does the rate increase apply to all the products offered by a company?
No. Filings are made against specific policy forms. An insurer may hold several generations of long-term care forms priced at different times under different standards, and an approved increase on one says nothing about the others. Two people insured by the same company can be treated differently depending on which form they hold.
If I do not want the policy anymore, can I just get my money back?
Long-term care insurance does not build cash value the way some life insurance products do, so there is generally no refund if you stop paying premiums. What may be available instead is the paid-up shortened benefit period under the nonforfeiture or contingent non-forfeiture provisions, converting what you have paid into a reduced amount of remaining coverage rather than cash. Availability depends on your policy and on whether the trigger in Rule 69O-157.118 has been met.
Will long-term care insurance rates continue to increase in the future?
For legacy blocks priced before the stabilization standards, regulators have generally expected correction to continue, because the gap between original pricing and actual experience was large and closing it takes several approved steps over years. Under the stabilization framework, the margin and certification requirements were designed to make repeated increases the exception.
Disclosures. This article is general information about insurance regulation and is not financial, tax, or legal advice. It does not recommend any course of action regarding any insurance policy. The framework described here comes from Part XVIII of Chapter 627, Florida Statutes; Chapter 69O-157, Florida Administrative Code; NAIC Model Regulation #641; and GAO-08-712. Statutes, rules, and regulatory practice change, and these descriptions should be verified against current law and against your own policy, which controls your benefits and options. Lifeworth Insurance Agency is a trade name of Lifeworth Financial Group LLC, National Producer Number 21228343, licensed in Florida.