Health

High Nursing Home Bills Squeeze Insurers, Driving Rates Up

Published

10 years ago

March 24, 2015

In this Feb. 28, 2013, file photo, Tina Reese leads a word game for residents at a nursing home in Lancaster, Pa. Life insurance firms pitched long-term care policies as the prudent way for Americans to shoulder the cost of staying in nursing homes. But those same companies have found that long-term-care policies are squeezing their profits. (AP Photo/Intelligencer Journal, Dan Marschka)

MATTHEW CRAFT, AP Business Writer

NEW YORK (AP) — Thirty years ago, insurance companies had the answer to the soaring cost of caring for the elderly. Plan ahead and buy a policy that will cover your expenses.

Now, there’s a new problem: Even insurers think it’s unaffordable.

Life insurance firms pitched long-term care policies as the prudent way for Americans to shoulder the cost of staying in nursing homes. But those same companies have found that long-term-care policies are squeezing their profits. Earnings for life insurers slid 11 percent in the most recent quarter, according to Moody’s Investors Service, and long-term care was the chief culprit.

“Insurers that sell these products lose money on them,” says Vincent Lui, a life-insurance analyst at Morningstar. “So they’re raising prices and also trying to get out of the business right and left.”

Four of the five largest providers — including Manulife and MetLife — have either scaled back their business or stopped selling new policies, according to Moody’s. The largest provider, Genworth Financial, continues to offer them, yet has struggled under the weight of rising costs.

The trends behind the industry’s troubles sound like good news outside the world of insurance. Older Americans are healthier and living longer. But that makes it difficult for the industry to turn a profit. Stays in nursing homes tend to last longer, so insurers have to pay out more in benefits than they had planned.

For older Americans and their families, however, there are few options besides private insurance. Medicare doesn’t cover nursing home stays except in certain circumstances. The Obama Administration had planned to make a long-term insurance program part of the Affordable Care Act but eventually abandoned it.

Sean Dargan, an analyst at Macquarie Group, an Australia-based investment bank, expects to see more people turning to Medicaid, the government’s health insurance for the poor, to cover the costs of care.

“It could really blow a hole through state budgets,” he says. “I think states and the federal government are going to need to think creatively to find a way out of this.”

For insurance companies, long-term care has proven to be a tough business.

Genworth, based in Richmond, Virginia, has turned in losses for two straight quarters. On March 2, the company reported that it discovered errors in its accounting for funds set aside to cover long-term care claims, knocking its stock down 5 percent in a single day. Analysts say problems with these policies explain why Genworth has lost more than half its market value over the past year, plunging from $17 to a recent $7.79.

“Their single biggest product is long-term care, and look at their share price,” Lui says. “It’s one trouble after another.”

In an interview with The Associated Press, Tom McInerney, Genworth’s CEO, says his company has been taking steps to make long-term care insurance a viable business, raising prices on older policies, introducing new products and throwing out their previous assumptions.

“There’s clearly a very high need for these policies,” McInerney says. “Given high demand and the limited number of insurers offering it today, I think it can be a very good industry going forward.”

When they began selling policies widely in the 1980s, the industry made a slew of assumptions about how long people would live, health care costs, and interest rates. Nearly all of them turned out wrong, analysts say.

Take life spans. At nearly 79 years, overall life expectancy in the U.S. has never been higher, according to the Centers for Disease Control and Prevention. That’s the biggest issue, analysts say, because it means more people who took out policies stick around to make claims, moving into nursing homes and asking insurance companies to help cover the steep bills.

The rate for staying at a nursing home has gone up an average of four percent every year for the last five years, according to Genworth’s annual survey. In 2014, the median bill for a shared room topped $6,000 a month.

“They were making their best estimates at the time. They just turned out to be wrong,” says Shachar Gonen, a Moody’s analyst who covers the industry. “If insurers knew full well what they were getting into, they probably would have priced their policies much higher. So who knows if the long-term insurance business would have ever started.”

The industry’s actuaries also made a bad call on the bond market, betting on much higher interest rates. That misstep proved critical because insurers buy bonds to cushion against future payouts, so years of historically low interest rates have thrown their accounts out of balance. It’s yet another reason why insurers keep putting more money aside to cover claims, resulting in big charges and lower profits.

All of these trends have forced companies like Genworth to spend much more than they had planned. Last year, insurers paid out a record $7.5 billion in claims on these policies, according to the American Association of Long-Term Care Insurance, which tracks insurance rates.

To cope with mounting costs and faulty assumptions, insurers have been cutting benefits and hiking their premiums year after year. Average premiums for new policies rose nearly 9 percent over the past year.

Prices range widely, depending on where you live, your age, level of benefits, and much else. In Tennessee, for instance, a 55-year old woman who is healthy enough to qualify for a policy can expect to pay $2,411 in the first year for $136,000 in benefits. That’s a brand-new policy, likely the lowest premium a person will pay. The expense climbs steadily as people age, and those holding policies typically don’t make a claim until they reach their 80s.

Insurers keep asking state regulators to let them raise prices on existing policies. In the last month, TIAA-CREF Life Insurance, MetLife and American General asked Connecticut’s insurance department for permission to raise rates as much as 22 percent over three years. The state rejected American General’s request and approved the other two.

McInerney, Genworth’s CEO, says that when regulators refuse to allow changes — such as signing off on single-digit rate increases or allowing other tweaks to older policies — the business becomes “‘impossible to run.”

If they’re not flexible enough to help make long-term care insurance viable for insurers, McInerney says he has told regulators that “Genworth isn’t going to stay.”

“Without it,” he adds, “a lot of these Baby Boomers are going to wind up on Medicaid.”

Analysts who follow the industry think that insurers have learned from their missteps and probably figured out the right price to charge for long-term care policies to turn a profit. The problem is, it might be too high for most people to pay.

“I’m of the opinion that it’s appropriately priced today,” says Macquarie Group’s Dargan. “But it’s also out of reach for most middle-income Americans. And that’s who needs it the most.”

Oakland Post

Posts by Oakland Post

Up Next

10 Habits Of People Who Love To Work Out

Don't Miss

This New Documentary Sheds Light On What It Really Takes To Combat Childhood Obesity

Oakland Post

Click to comment

Activism

Through Two Programs, Shuja Helps Others Get a Second Chance at a First-Class Life

Damon Johnson, a peer counselor who serves as the executive director of Black Men Speak and Men and Women of Color will be affected by the state’s new rules. Living with a behavioral health condition, he is an advocate and a leader. Damon, best known as Shuja, was incarcerated for 34 years and today is advocating for the rights of persons with similar lived experience and for the survival of peer-led programs like the one he manages.

Published

3 days ago

December 24, 2024

Oakland Post

Damon “Shuja” Johnson at an Alameda County Behavioral Health Care Services Holiday Cultural Event for the Office of Peer Support Services. Courtesy photo.

By Melody Parker, Gloria Woodson, Jaleah Winn and Damon Shuja Johnson
Special to The Post

Under recently passed Proposition 1, California’s behavioral health services will be allocated $1 billion for services for the unhoused in 2026-27, Governor Gavin Newsom announced last summer.

Although some of the funds from the Mental Health Services Act were diverted to Proposition 1, individuals living with behavioral health conditions and housing challenges are maintaining hope for wellness and recovery.

Two days after his reentry to the community, Shuja began work as an outreach coordinator for Black Men Speak. Within a year, Shuja was promoted and later appointed to director after the loss of former Black Men Speak Executive Director Joe Anderson.

A native of North Oakland, Shuja was raised in an all-women household after his grandfather was murdered. Though dealing with his own grief, the loss caused Shuja to become the “man of the family.”

His grandmother’s nurturing helped him to overcome the trauma of his grandfather’s death which, “gave him a foundation as a child.” He recalls fond memories of his childhood, like riding a new bike he received for the holidays. “My friends and myself spent meaningful time together as children,” he said. “Together, we would build go-carts, climb trees, have rock fights and find worms, crabs and bees.”

But his trauma impacted his childhood and led to his being impacted by the system. Shuja grew up mostly in detention halls and prison.

Besides directing Black Men Speak! (BMS!)/Men and Women of Color (MWOC), he is also the director of a self-help center in Oakland. There, Shuja and the peer workers provide support to the unhoused. He coordinates a digital literacy program, co-facilitates trainings for peer support specialists, organizes a service animal resource, provides peer support and directs speakers’ bureaus.

BMS! and MWOC are programs increasing wellness and recovery by sharing stories of hope and journeys to meaningful living. Members have authored presentations and spoken to audiences on topics such as post-traumatic stress disorder, family, community violence, self-worth, spirituality, and mental health, alternative therapies, eight dimensions of wellness, reentry, single parenting and health.

The members have been featured nationally and locally, at trainings and conferences and throughout Alameda County Behavioral Health Care services. The organization has been in operation for over a decade.

It all began in 2009 and received nonprofit status in 2012. The group developed from Peers Organizing Community Change, formerly known as Pool of Consumer Champions (POCC), originally established as an all-men’s committee.

The committee co-founders Dewitt Buckingham and Darnell Livingston organized men with experience in the public mental health system for a speaker’s bureau. This was the consensus of the committee after a process facilitated by Katrina Killian, Steven Bucholtz, Sally Zinman and Jaleah Winn.

The committee and facilitators composed the following mission. The BMS!/MWOC mission is “to inform and enlighten the mental health community and the general public about issues concerning men and women of color suffering from mental health and substance abuse challenges, through storytelling thereby promoting ad increasing wellness, recovery, and freedom.”

Shuja has a vision and plans for the organization. “BMS!/MWOC will be sustained with the funding of $1.5 million for capacity building to hire people to pay salaries for staff.”

Currently, BMS!/MWOC has volunteers assisting the programs. Funding will enable the enhancement, increase in self-help services and provide for outings and meals. “We want exposure as when adults and children have taken the free BART rides to go to places outside of Oakland that they never traveled,” Shuja said. “We want to go to Africa. More influential communities can travel, and we need the same opportunity.”

Despite several barriers that are facing Shuja and the organization, he is determined to fulfill the nonprofit’s mission. “There is money. Children wear $200 shoes. We want to teach financial literacy, not to be a slave but how to buy and how to keep. BMS! needs some rich friends and we also need friends who have know-how. We need support from private and public sectors.

“BMS! is one of the only Black organizations in ACBHCS. Today we have the SB 803, Peer Support Specialist bill that will enable us to bill Medicaid/Medi-Cal and only two full-time staff. We do not have the support of the community.”

Shuja is honored to be a participant in advocacy for legislation to improve the lives of peers and is not discouraged by changes to statewide policies. The current changes coming down the pike with Prop 1 are motivating him to work more diligently for the rights of behavioral health clients.

“This is about employment and empowerment and authenticity. The unhoused can be asked about hope and faith. I had to have faith and hope every day that I awakened in prison. I would have died in prison, but I had hope, faith and peer support and it manifested.

“My first reentry job is to go back to my family and save them and if this is repeated among families then we will have wellness and community. Kids raise themselves today. Today, grown folks cannot be in kids’ business. We want to do better. How can we bring back the good of the past?”

Today, the good of the past is coming back with the work of Black Men Speak! Men and Women Of Color. All support is welcome. Black Men Speak and Men and Women of Color welcome contributions and invitations to collaborate. In order to contact the program staff please reach out to 510-969-5086 or shuja@blackmenspeak.org.

Oakland Post

Posts by Oakland Post

Activism

A Student-Run Group Is Providing Critical Support Services to Underserved Residents

During his three years volunteering at the program, Resource Director Zain Shabbir, says he noticed that many of the people who come in do not know how to navigate social services support systems, particularly online. This knowledge deficit, Shabbir says, is due to age or limited exposure to technology.

Published

3 days ago

December 24, 2024

Oakland Post

UC Berkeley Law Students help a clinic attendee with legal advice at their Tuesday night services. The Clinic offers a variety of resources, including medical, to those in the community who have little access to these services. Photo by Magaly Muñoz

Part 2

By Magaly Muñoz

Resource Director Zain Shabbir is a jack-of-all-trades at the Suitcase Clinic, a student-run resource center that provides health and other services to underserved residents of Berkeley and surrounding areas.

Shabbir was once a clinic director. Now, he manages the General Clinic, floating around when case managers need assistance. And he has big plans for a new initiative.

During his three years volunteering at the program, Shabbir says he noticed that many of the people who come in do not know how to navigate social services support systems, particularly online. This knowledge deficit, Shabbir says, is due to age or limited exposure to technology.

So, he teaches clients the basics of using email, writing in word documents, and backing up files to their phones.

Shabbir shared a story about an interaction he had with a woman who came in seeking help to create a template to message property owners and realtors as she was seeking housing. Until that point, the woman was composing separate messages to each listing she was interested in, and that process was taking up too much of her time. With Shabbir’s help, she created a standard template she could modify and use for each housing inquiry or application.

He’s also hoping to use the technology to help people create resumes to find jobs.

“[The intent] is to help people find work in the city or wherever they live — or help them find housing. As most are probably aware, the two really go together because for housing, you need income verification, and for a job you need housing,” Shabbir said.

Having a warm place to go and a hot meal may seem basic buy it is critical for people who are struggling, clinic leaders say.

Mark, a frequent attendee of the Tuesday clinic, told the Oakland Post that he’s been receiving services from the program for nearly 25 years.

Mark said he was able to receive a referral to dental care through the Clinic, which he’s been using for about 20 years now. He also utilized the chiropractor, a service that is no longer offered, for pain and aches he acquired over the years.

Many program participants say they visit the clinic now for services provided by Berkeley medical students, who rely on osteopathic care rather than traditional methods. Osteopathic medicine is a medical philosophy and practice that focuses on the whole person, rather than just symptoms.

Executive director Nilo Golchini said that many clinic patients tend to appreciate and trust this type of medicine over mainstream practices because of sub-standard care they have received in the past because they are homeless or poor.

Acupuncture is also an extremely popular station at the Clinic as well, with participants saying it “soothes and calms” them.

Attendees of the clinic are generally in happy spirits throughout the hours they’re able to interact with fellow residents. Some even participate in arts and crafts, moving from table to show their friends their new creations.

“It’s a program that’s going strong,” said Golchini. “There’s a space for everyone” who wants to volunteer or receive services, and they’ll keep going as long as the community needs it.

The Suitcase General Clinic is open every Tuesday from 6:30 to 9:30pm. Women’s and Youth Clinics are held every Monday from 6 to 9pm.

Oakland Post

Posts by Oakland Post

Activism

2024 in Review: Seven Questions for Frontline Doulas

California Black Media (CBM) spoke with Frontline Doulas’ co-founder Khefri Riley. She reflected on Frontline’s accomplishments this year and the organization’s goals moving forward.

Published

4 days ago

December 22, 2024

Oakland Post

Khefri Riley, co-founder of Frontline Doulas. Facebook photo.

By Edward Henderson, California Black Media

Frontline Doulas provides African American families non-medical professional perinatal services at no cost.

This includes physical, emotional, informational, psychosocial and advocacy support during the pregnancy, childbirth and postpartum period. Women of all ages — with all forms of insurance — are accepted and encouraged to apply for services.

California Black Media (CBM) spoke with co-founder Khefri Riley. She reflected on Frontline’s accomplishments this year and the organization’s goals moving forward.

Responses have been edited for clarity and length.

Looking back at 2024, what stands out to you as your most important achievement and why? 

In 2024, we are humbled to have been awarded the contract for the Los Angeles County Medical Doula Hub, which means that we are charged with creating a hub of connectivity and support for generating training and helping to create the new doula workforce for the medical doula benefit that went live in California on Jan. 1, 2023.

How did your leadership and investments contribute to improving the lives of Black Californians? 

We believe that the revolution begins in the womb. What we mean by that is we have the potential and the ability to create intentional generational healing from the moment before a child was conceived, when a child was conceived, during this gestational time, and when a child is born.

And there’s a traditional saying in Indigenous communities that what we do now affects future generations going forward. So, the work that we do with birthing families, in particular Black birthing families, is to create powerful and healthy outcomes for the new generation so that we don’t have to replicate pain, fear, discrimination, or racism.

What frustrated you the most over the last year?

Working in reproductive justice often creates a heavy burden on the organization and the caregivers who deliver the services most needed to the communities. So, oftentimes, we’re advocating for those whose voices are silenced and erased, and you really have to be a warrior to stand strong and firm.

What inspired you the most over the last year?

My great-grandmother. My father was his grandmother’s midwife assistant when he was a young boy. I grew up with their medicine stories — the ways that they healed the community and were present to the community, even amidst Jim Crow.

What is one lesson you learned in 2024 that will inform your decision-making next year?

I find that you have to reach for your highest vision, and you have to stand firm in your value. You have to raise your voice, speak up and demand, and know your intrinsic value.

In a word, what is the biggest challenge Black Californians face?

Amplification. We cannot allow our voices to be silent.

What is the goal you want to achieve most in 2025?

I really would like to see a reduction in infant mortality and maternal mortality within our communities and witness this new birth worker force be supported and integrated into systems. So, that way, we fulfill our goal of healthy, unlimited birth in the Black community and indeed in all birthing communities in Los Angeles and California.