When we turned 60, my wife and I confronted a question we all face as we age: How would we pay for in-home or assisted living care if we could no longer take care of ourselves?
The answer was long-term care (LTC) insurance. We bought policies from General Electric Capital. The decision made in 2003 meant annual premiums totaling $5,001 a year. That didn’t last.
If you are under 50, you may ask, why read this? Answer: If you have life insurance and are hit by a truck and killed, your family will be protected. If you are hit by a truck and paralyzed, your family could be impoverished if you don’t have LTC. Those over 60 know why LTC is important.
While GE Capital explicitly did not promise that premiums wouldn’t rise, the company dismissed the potential.
“GE Insurers have never had to raise premium rates on any of their existing long-term care (LTC) insurance policyholders, dating back to 1974,” the firm stated. Actuaries had carefully studied all the variables: payouts, lifespans, quality of health, policy lapses and returns on investments.
The good news today is that Carol and I enjoy excellent health.
The bad news is that our premiums went up 40 percent to $7,002 in 2014, and then 70 percent to $11,900 in 2017. We are awaiting the arrival of renewal premium notices March 1.
GE Capital got its math wrong. People are living longer, healthier lives and – most importantly – investment returns are far below historic averages, like 6.24 percent on 10-year Treasurys. The 10-year dipped as low as 1.5 percent in 2012 and now pays only 2.8 percent.
This crushed profits for an LTC insurance company, which panicked around 2012 and hiked customer premiums through the clouds. Now, GE is rich.
So, it was that in 2005 GE headed for the door, spinning off the LTC business into a partially owned subsidiary called Genworth — and then taking Genworth public with an initial public offering priced at $19.50 a share. Today, a Genworth share costs $3.28, less than a Big Mac. Its credit ratings are fair to poor.
Genworth reassured us, even as its CEO reported GE had chosen “to redeploy capital to other business lines, such as technology and services.” Yep. GE skipped town.
Our policy pays for lifetime care, along with 5-percent inflation protection that has increased daily benefits from $150 in 2003 to $297 today. No carrier offers lifetime benefits today. They are capped at 2 to 5 years. You will pay dearly today for 3-percent inflation protection.
Trapped by policies such as ours, Genworth has hiked rates to outrageous levels, offering to “adjust” the premiums if only we would give up lifetime benefits and inflation protection. So far, we have held out. One more than 70-percent rate hike and our knees may begin to buckle.
Last year, Genworth sought relief in the arms of China Oceanwide Holdings Ltd., a state company ultimately under control of the Communist Party. A proposed $2.7 billion merger would pump new capital into Genworth.
Yet, the merger depends on approval by the U.S. Committee on Foreign Investments, which reviews possible threats to national security by foreign entities buying U.S. companies. Genworth’s data files include detailed personal information on tens of thousands of Americans.
Genworth continues to reassure us that it will “continue to fulfill all policy obligations.” Two weeks ago, I wrote Genworth and asked if the Chinese were picking up Genworth’s LTC obligations, and whether GE Capital would protect us if Genworth went belly up. So far, no response.
We will see. We have no say in the merger. Right now, I would have trouble picking between the abandoned offspring of General Electric and the Chinese Communists.
GE is reeling. The company disclosed Jan. 24 that the Securities and Exchange Commission was investigating the company’s handlings of its reinsurance obligations left over on its books from coverage it sold to Genworth and other companies that had sold policies to consumers. We think that means GE remains obligated to us if Genworth bellies up.
Spinoffs can be a dumping ground for debt and other unwanted liabilities, allowing dumpers like GE to polish its own balance sheet while hurting others. The U.S. government should ensure that the parent company is held to its fiduciary responsibilities.
Which brings us to the Trump administration (doesn’t everything?), doing everything it can to give business a boost by relieving it of government regulation. Citizens should remember that most regulations are there to protect you.
Our next Genworth premium notice arrives March 1. That’s why my knees will weaken as I approach the mailbox.
Oppel is a retired editor of the American-Statesman.