Value of reduced benefit options in long-term care insurance rate increases

This issue brief examines the relationship of benefits to premiums for reduced benefit options (RBOs) in the context of ongoing premium rate increases for long-term care insurance (LTCI). Policyholders usually can reduce benefits, and such RBOs are at the policyholder’s discretion. However, when significant cumulative rate increases make LTCI coverage less affordable, such rate increases may limit the policyholder’s viable options. What constitutes reasonable value for benefit reductions when a rate increase occurs? In the brief, we discuss: 

• Perspectives on actuarial equivalence
• An in-depth look at RBOs
• New RBOs with rate increases
• Other considerations

This article was originally published by the American Academy of Actuaries.