Crisis Unfolds in Minnesota’s Long-Term Care Insurance Industry

Minnesota’s long-term care insurance market is in turmoil, leaving many senior citizens struggling to access their benefits despite years of paying premiums. Judith Felker, 87, experienced significant delays and obstructions from her insurer, Transamerica, before finally receiving benefits for her memory care facility. This issue is widespread, with insurers raising premiums, capping benefits, and frequently denying claims.

The industry, once flourishing, is now facing financial difficulties due to faulty projections made in the 1980s and 1990s. Many companies underestimated the costs and longevity of policyholders, leading to significant deficits. Currently, 54 companies manage traditional long-term care plans for approximately 200,000 Minnesotans, but only three continue to sell new policies.

State regulators are struggling to balance protecting consumers from skyrocketing premiums and ensuring the solvency of insurers. In 2022, 13 companies raised premiums by at least 25%, with some going over 50%. This has led to a significant financial burden on policyholders, forcing some to reduce their benefits or drop their policies altogether.

Denials and delays in benefit payments are becoming more common, adding to the distress of policyholders and their families. In 2022, Minnesota’s insurers denied almost 9% of long-term care benefit payments, the second-highest rate in the nation. The state has fined several insurers for their handling of claims, but issues persist.

Elder care costs in Minnesota are high, with assisted living averaging $60,000 annually and nursing home care reaching $120,000. Despite the high costs and challenges, some policyholders, like Felker, have managed to secure their benefits, albeit after significant struggles.