LTC Rate Hikes Persist as Legacy Block Mispricing Compounds

From reviewing LTC rate filings across 15 states over the past two years, one pattern stands out above all others: the gap between the 28% national average approval and 100%+ approvals in certain states reveals how much regulatory discretion shapes policyholder outcomes on identical policy forms. Two policyholders holding the same coverage from the same carrier can face dramatically different premium trajectories depending solely on where they live.

The long-term care insurance rate increase cycle shows no sign of ending. Carriers continue to file for substantial premium hikes on legacy blocks sold in the 1980s, 1990s, and early 2000s. These filings are not speculative asks; they reflect actuarial shortfalls that have been compounding for decades. The Milliman/SOA 2024 Rate Increase Survey, covering 17 companies representing over 75% of LTC premium in the United States, provides the clearest available picture of where the repricing stands and how far it still has to go.

The Three Mispricing Drivers That Compounded

The LTC legacy block crisis traces back to three actuarial assumptions that failed simultaneously. Each error alone would have required significant rate adjustments. Together, they produced a compounding shortfall that has taken decades to address and is still far from resolved.

Lapse Rates: The Largest Single Driver

When carriers first priced standalone LTC policies, they assumed voluntary lapse rates in the mid-single digits, typically around 4% to 5% per year. This assumption was grounded in experience from other insurance lines where policyholders routinely dropped coverage. The logic seemed reasonable at the time: some percentage of LTC policyholders would decide the coverage was too expensive, no longer needed, or superseded by other financial plans.

Actual lapse rates turned out to be approximately 1% per year, and in many legacy blocks even lower. The SOA’s 2000-2016 Individual Long-Term Care Policy Persistency Study documented this gap in detail. The behavioral explanation is straightforward: policyholders who purchased LTC coverage recognized the option value embedded in their guaranteed-renewable policies. A policyholder holding a $300/day benefit with inflation protection has an embedded option worth hundreds of thousands of dollars. Surrendering that option voluntarily proved far less common than initial models predicted.

The mathematical impact of this error compounds over time. A 3-percentage-point annual lapse rate overshoot accumulates over 30 years into a population of in-force policyholders roughly 26% larger than the pricing actuary anticipated. Every one of those extra policyholders represents a potential future claim that was never funded by the original premium structure.

Critically, there is an interaction between persistency and morbidity that amplifies the problem. Policyholders who lapse tend to be healthier; those who remain are more likely to eventually file claims. As Milliman has documented, the lower-than-expected lapse rates did not simply add more average-cost policyholders to the book. They disproportionately added higher-cost policyholders, because the healthier cohort that might have left instead stayed.

Longevity and Morbidity: Underestimating the Claim Tail

Early LTC pricing assumed that morbidity experience would track patterns similar to life insurance mortality. The SOA’s Morbidity Improvement Study later showed that LTC experience more closely resembled annuitant mortality, reflecting significant anti-selection among purchasers. Policyholders who bought LTC coverage tended to be individuals with a heightened awareness of their own long-term care risk, whether through family history, personal health concerns, or simply a more conservative financial outlook.

The result was that both the incidence of claims (how many policyholders eventually used benefits) and the duration of claims (how long benefits were paid) exceeded initial assumptions. Nursing home stays, home health aide utilization, and assisted living facility admissions all produced longer and more expensive claim patterns than the pricing models anticipated.

Medical advances further complicated the picture. Improved treatment for conditions like stroke, heart disease, and certain cancers extended life expectancies, but often left survivors requiring years of long-term care support. The pricing assumption that mortality would limit the claim tail proved optimistic as medical technology extended the period of disability without restoring full functional independence.

Interest Rates: The Asset Side Collapsed

Many legacy LTC policies were priced during periods of higher interest rates, with investment income expected to subsidize premiums substantially. Carriers assumed that reserves backing LTC liabilities would earn 6% to 8% annually, providing a significant investment income offset against claims costs.

The prolonged low-rate environment that began in 2008 and persisted through 2021 devastated these assumptions. Even as rates rose from 2022 forward, the damage was already embedded in the asset portfolios backing legacy blocks. Carriers that had been reinvesting maturing bonds at 2% to 3% for over a decade had permanently reduced the asset base supporting their LTC obligations. The gap between assumed and actual investment returns created a liability shortfall that premium increases alone could not easily close.

The adverse correlation between interest rates and care demand compounded the problem. The same economic conditions that suppressed investment returns (recessions, economic stagnation) also reduced the availability of informal family caregiving, as adult children needed to work rather than provide care, and increased demand for paid formal care services.

What the SOA/Milliman Survey Reveals

The Milliman 2024 Long-Term Care Rate Increase Survey, published in the SOA’s Long-Term Care Section Newsletter in April 2025, represents the most comprehensive available dataset on LTC rate increase filing activity. This was the third iteration of the survey, following earlier rounds in 2016 and 2021.

The headline findings quantify the scale of the ongoing repricing:

17 companies participated, representing over 75% of LTC premium in the United States.
16 of the 17 provided detailed information on 37 nationwide rate increase filings, comprising more than 1,000 individual state submissions.
The average rate increase requested was 56%.
The average state approval rate was 28% of the requested increase amount, essentially unchanged from the 29% average in the 2021 survey.
73% of submitted rate increases were fully or partially approved; the remainder were disapproved or still pending.
75% of filings requested increases that varied across benefit characteristics, targeting specific cohorts (e.g., policyholders with rich inflation protection riders) rather than applying flat percentage increases.
The average time from filing to approval was six months, an improvement from seven months in the 2021 survey.

The 28% approval-to-request ratio has remained remarkably stable across the three survey iterations. This consistency suggests a structural equilibrium: carriers file for what the actuarial math requires, and states approve roughly what they believe policyholders can absorb without mass lapsation or political backlash. The gap between the two represents unfunded liability that remains on carrier balance sheets.

State-by-State Approval Variation: The Regulatory Lottery

From tracking state-level approval patterns across these filings, the degree of interstate variation is striking. Two policyholders holding identical policy forms from the same carrier can face cumulative premium trajectories that differ by hundreds of percent over a decade, depending entirely on their state of residence.

The Milliman survey identified California, Florida, New Jersey, New York, and Texas as the states requiring the most effort for rate filings, consistent with findings from both the 2021 and 2016 surveys. Connecticut and New Jersey also emerged as jurisdictions with particularly involved processes.

At the other end of the spectrum, certain states have approved increases exceeding 100% of current premiums, often in exchange for rate stability guarantees or phased implementation schedules. The variation creates a direct policyholder equity problem: a retiree in a permissive state may see premiums double or triple, while a retiree in a restrictive state pays lower premiums but faces elevated carrier insolvency risk.

The NAIC Multistate Actuarial Framework

The NAIC adopted the Long-Term Care Insurance Multistate Actuarial (MSA) Review Framework in April 2022 at the Spring National Meeting in Kansas City. The framework was designed to address precisely this interstate inconsistency by providing a standardized national approach to reviewing LTC rate increases.

Key features of the MSA framework include:

A 100% cap: the Multi-State Actuarial Team will not recommend a rate increase exceeding 100% of current rates for any state.
Standardized review of actuarial justification, eliminating duplicative state-by-state analysis of the same underlying experience data.
Elimination of cross-state rate subsidization, where restrictive states effectively forced permissive states to absorb a larger share of the shortfall.
A policyholder communication checklist for premium increase notifications, originally adopted in November 2021 and amended in March 2023.

The Long-Term Care Actuarial (B) Working Group continued refining the framework through late 2024, considering revised cost-sharing factors to accompany implicit cost-sharing in the blended “if-knew” aspect of the MSA approach. Whether the framework materially narrows state-by-state variance remains an open question; the 28% average approval rate in the 2024 survey was essentially unchanged from the pre-framework 2021 survey.

State-Level Regulatory Approaches

Individual state approaches illustrate the range. Massachusetts has never approved LTC insurance as a fixed-premium product; each policy explicitly states on its face that premiums may increase. The Division of Insurance requires carriers to demonstrate that increases are necessary to finance covered services, and mandates at least 90 days’ notice before the renewal date. Rate increases are conditional on carriers accepting certain consumer protections defined by the Commissioner.

Washington State takes a different approach: under state law, insurers must request OIC approval for rate increases and submit documentation justifying the need. If there is actuarial justification and the filing complies with state law, the OIC cannot deny it. Washington’s regulatory stance has taken on additional complexity with the WA Cares Fund creating a supplemental long-term care insurance market where private carriers must compete alongside the state program.

The Federal Program: FLTCIP’s 86% Increase

The Federal Long Term Care Insurance Program (FLTCIP), administered by Long Term Care Partners (a John Hancock/MetLife joint venture), provides a concrete case study in the magnitude of repricing required. OPM approved premium increases of up to 86% for the program’s approximately 267,000 enrollees, phased over three years: Phase 1 effective January 1, 2024; Phase 2 on January 1, 2025; and Phase 3 on January 1, 2026.

For individual enrollees, the impact was substantial. One documented case showed monthly premiums rising from $76.27 to $141.90 by 2026. This was the first rate increase in seven years; OPM cited recent program analysis showing the existing premium structure was actuarially inadequate.

Perhaps more telling than the rate increase itself was OPM’s decision to suspend new FLTCIP enrollments. The suspension, initially imposed in December 2022, was extended for 24 months effective December 19, 2024, through at least December 19, 2026. The stated reason: “ongoing volatility in long-term care costs and a diminished insurance market.” When the federal government’s own LTC program cannot attract a willing underwriter at a price that makes actuarial sense, the structural depth of the market problem is clear.

Has Post-2014 Pricing Fixed the Problem?

The SOA’s Long-Term Care Pricing Project provides the most rigorous available test of whether newer LTC products have corrected the assumption errors that destroyed legacy blocks. The findings are cautiously optimistic.

LTC insurance priced and issued since 2014 has only a 10% probability of needing a future rate increase. If an increase were needed on these newer policies, the SOA estimates it would need to average only 10%. The potential for future rate increases on new LTC products has fallen in each study year and is now the lowest it has ever been.

Several structural changes drove the improvement:

Corrected lapse assumptions. New policies are generally priced using lapse rates of 1% or lower, reflecting two decades of actual experience data rather than analogies from other insurance lines.
Conservative morbidity tables. Pricing now incorporates SOA experience studies that capture the anti-selection dynamics inherent in voluntary LTC purchase decisions.
Rate stability certification. Under the post-early-2000s regulatory framework, actuaries must certify that premiums can withstand moderately adverse experience (MAE) as required by ASOP No. 18, using alternative data sources and public data where a carrier’s own experience is thin.
Lower interest rate assumptions. New products assume earned rates closer to recent investment experience rather than historical averages inflated by 1990s bond yields.

CareScout Insurance, a Genworth subsidiary, launched its standalone “Care Assurance” product in October 2025, available in 40 states by February 2026. The product was explicitly designed with conservative pricing intended to avoid the legacy rate-hike cycles. The CareScout Quality Network now covers approximately 97% of Americans aged 65 and older. This entry represents a meaningful test of whether post-reform LTC pricing can sustain a viable standalone product in a market where most competitors have exited.

Legacy Block Run-Off and Market Consolidation

The financial consequences of mispriced legacy blocks have driven consolidation that fundamentally reshaped the LTC market. In the 1990s, more than 100 companies actively sold individual LTC policies. By 2020, sales of traditional standalone policies had dropped to approximately 49,000 per year, and the number of active carriers had fallen to fewer than a dozen. As of 2026, perhaps 15 carriers remain in the market, and most of those focus on hybrid life/LTC products rather than standalone coverage.

Major carriers that exited standalone LTC underwriting include MetLife (formally departed in 2010), Prudential, Allianz (stopped individual LTC in 2009 and shifted to annuity-based riders), and Transamerica (exited in the early 2000s after being a leading LTC writer in the 1990s). The remaining active carriers include Nationwide, New York Life, Northwestern Mutual, Mutual of Omaha, National Guardian Life, OneAmerica Financial, and the CareScout/Genworth subsidiary.

Carriers holding legacy blocks have increasingly turned to reinsurance transactions to reduce exposure. Unum Group announced a $3.4 billion LTC reinsurance agreement with Fortitude Reinsurance Company in February 2025, ceding 19% of Unum’s total LTC statutory reserves. The transaction generated approximately $100 million in capital benefit for Unum. Fortitude Re subsequently retroceded 100% of the LTC insurance risks to a highly rated global reinsurer. This was the third major LTC reinsurance transaction in recent years, following two Manulife deals in December 2023 and November 2024.

Genworth’s approved cumulative rate increases and benefit reductions from 2012 through 2025 produced an estimated $34.5 billion in cumulative economic benefit on a net present value basis, according to SEC filings. Genworth received $209 million in incremental LTC premium approvals during 2025 alone, with an average increase of 38% per approved action. The company is investing approximately $50 million in CareScout Services and $85 million in CareScout Insurance in 2025, signaling a transition from legacy block management to new-product market entry.

Reduced Benefit Options: The Policyholder Trade-Off

Reduced benefit options (RBOs) remain the primary alternative offered to policyholders facing premium increases. Rather than absorbing the full rate hike, policyholders can typically reduce daily benefit amounts, shorten benefit periods, increase elimination periods, or reduce inflation protection riders. Most carriers also offer cash buyouts and coinsurance options, though availability varies by jurisdiction.

The Milliman survey found that innovative approaches are expanding. “Landing spots” allow policyholders to select a benefit configuration calibrated to keep their premium roughly flat, accepting reduced coverage in exchange for premium stability. Cash buyout programs offer a lump sum in exchange for policy surrender, providing carriers with certainty of liability reduction at the cost of immediate cash outflow.

For actuaries, the RBO election patterns contain valuable information. Policyholder choices between absorbing premium increases and reducing benefits reveal risk preferences and financial constraints that inform future lapse and utilization assumptions. Patterns we have seen in recent filings suggest that policyholders with richer inflation protection riders are disproportionately targeted for rate increases, and that RBO election rates vary significantly by age band and benefit level.

2026 IRS Tax Deduction Limits for LTC Premiums

For policyholders absorbing premium increases, the 2026 IRS tax deduction limits provide partial relief. The age-based maximum premiums eligible as medical expense deductions increased approximately 3% from 2025 levels, reflecting inflation adjustments:

Age at End of Tax Year	2026 Deductible Limit
40 or younger	$500
41 to 50	$930
51 to 60	$1,860
61 to 70	$4,960
71 or older	$6,200

These limits apply only to tax-qualified LTC insurance policies and remain subject to the 7.5% adjusted gross income floor for medical expense deductions. Married couples can apply the limit separately for each spouse based on each spouse’s age. For a 72-year-old policyholder facing a $4,000 annual premium increase, the $6,200 deductible limit offers meaningful but partial offset, reducing the after-tax cost by roughly $1,500 to $2,200 depending on marginal tax bracket.

COVID-Era Experience: The Open Actuarial Question

An active area of debate within the LTC actuarial community is how to incorporate COVID-era experience data from 2020 through 2022 into pricing and reserving assumptions. The pandemic produced two offsetting effects on LTC blocks:

Elevated mortality among existing claimants. COVID-19 disproportionately affected nursing home residents and other long-term care recipients. Some carriers saw temporary reductions in active claim counts and claim costs as higher mortality reduced the claimant population.

Suppressed new claim incidence. Lockdowns, visitation restrictions, and family care patterns during the pandemic reduced new admissions to care facilities and delayed transitions from informal to formal care.

The Milliman survey noted that the question of whether to incorporate 2020-2022 experience into forward-looking assumptions remains unresolved. Optimistic carriers argue that elevated mortality permanently reduced the claim-prone population. Conservative carriers treat the pandemic years as an anomaly and exclude them from trend analysis. The answer has material implications for reserve adequacy: a carrier that credits COVID mortality into its morbidity assumptions will hold lower reserves than one that treats the pandemic as a transient shock.

Why This Matters for Actuaries

The LTC rate increase cycle carries implications across several actuarial practice areas.

For valuation actuaries, the 28% average approval rate creates a direct gap between actuarially indicated rates and actual earned premiums. Reserves must reflect the reality that carriers will not collect the full actuarially required premium on legacy blocks. The gap between actuarially indicated and state-approved increases represents an implicit unfunded liability that appointed actuaries must address in their asset adequacy testing.

For pricing actuaries working on new hybrid LTC products, the legacy block data provides the most robust available calibration for lapse, morbidity, and interest rate assumptions. The SOA’s finding that post-2014 pricing has only a 10% probability of requiring future increases suggests that current assumption-setting practices are materially improved, but the small number of years of experience (roughly 10-12) means that confidence intervals around the 10% estimate remain wide.

For enterprise risk management, the LTC legacy block experience illustrates the danger of correlated assumption failure in long-duration products. The three mispricing drivers were not independent: low interest rates coincided with reduced informal caregiving capacity, which increased formal care demand, which increased morbidity costs, which increased the value of maintaining coverage, which reduced lapse rates. Risk models that treat lapse, morbidity, and investment return assumptions as independent will understate tail risk in similar long-duration product lines.

For regulatory actuaries, the NAIC MSA framework represents an attempt to standardize rate review across jurisdictions, but the 28% average approval rate in the most recent survey (essentially unchanged from the pre-framework 2021 result) raises questions about whether the framework is achieving its stated objectives. The MSA team’s 100% cap, while protecting policyholders from extreme single-year increases, may slow the resolution of legacy block shortfalls.

The LTC rate increase landscape also intersects with the broader industry conversation about product design. The shift toward hybrid life/LTC products, which embed long-term care benefits within a life insurance or annuity chassis, was driven in part by the legacy block experience. Hybrid products typically price LTC benefits using asset-share models within the broader product framework, avoiding the standalone reserve and rate increase dynamics that destroyed the traditional LTC market. Whether this structural difference genuinely resolves the underlying assumption risk or merely redistributes it across a different balance sheet line remains an active area of actuarial research.