Texas long-term care rate increases and policyholder options

Why an old LTC policy can cost more later

Long-term care insurance is priced using assumptions about how many policyholders will claim, how long claims last, investment returns, expenses, and lapse behavior. Actual experience can differ from the assumptions used when a block of policies was priced. An insurer may seek a rate revision, but an increase is not effective merely because the company sends a bill or says its costs rose. Texas requires rates to be filed and approved before use under Insurance Code Chapter 1651.

A rate increase changes the premium required to keep the contract in force. It does not mean the policyholder became a worse risk because of age, diagnosis, or a claim. TDI explains that a company may not increase an individual policyholder’s rate because that person’s health worsened or because that person filed a claim; an increase applies to the relevant class of policies. The policyholder should read the notice and determine exactly which policy series, premium, and options it covers.

TDI review and notice safeguards

A company submits support for the proposed rate to TDI. The department reviews whether the request is justified under applicable law and actuarial standards. TDI may approve, modify, or reject a filing. Approval is not a prediction that premiums can never change again; the rate notice and the insurer’s disclosures should be read carefully. Consumers can check with TDI if the notice is unclear or they question whether the filing applies to their contract.

TDI’s consumer guidance says a policyholder must receive at least 45 days’ notice before the premium increase takes effect. The company must also provide an opportunity to adjust benefits to reduce or avoid some or all of the increase, subject to policy terms and regulatory requirements. This is a decision window: compare the revised premium and the benefits that would remain before electing a change.

The main choices after notice

The first option is to pay the increased premium and preserve the current benefit structure. This may be appropriate when the coverage remains affordable and the policy’s daily or monthly benefit, benefit period, inflation protection, and elimination period are important. The policyholder should still confirm the revised billing amount and effective date, then keep proof that payment remains current.

A second route is to adjust benefits. Depending on the contract and the options approved for the filing, a policyholder may reduce the daily benefit, shorten the benefit period, lengthen the elimination period, or make another allowed change. A lower benefit can reduce protection precisely when care becomes expensive. Ask the carrier for a side-by-side schedule: old benefit, proposed adjusted benefit, new premium, and whether inflation growth or other riders change.

Nonforfeiture and contingent nonforfeiture

A policy with a purchased nonforfeiture benefit can provide a limited paid-up benefit after premiums stop, based on the policy’s terms. A contingent nonforfeiture option may be available after a qualifying rate increase even when a standard option was not originally purchased. Whether it applies and what benefit it provides depend on the policy, increase size, and applicable Texas rules.

Do not treat “stop paying premiums” as a safe election. Lapse can eliminate future benefits or trigger a reduced paid-up value instead of preserving full coverage. Before terminating, request the insurer’s written nonforfeiture calculation and compare it with the cost of keeping the policy. The Texas potential-rate-increase disclosure form describes choices such as paying the increase, reducing benefits, exercising purchased nonforfeiture, or using contingent nonforfeiture when eligible.

A measured decision framework

Start by verifying the notice: insurer, policy number, affected policy form, current premium, new premium, effective date, response deadline, and available choices. Next, review the policy’s current benefit amounts, remaining lifetime maximum if any, inflation rider, elimination period, and covered services. Ask whether an adjustment is reversible, whether it changes eligibility for future increases, and whether the carrier has provided the exact new premium for each offered alternative.

Then consider household affordability and realistic coverage needs. A policyholder should not compare premiums without comparing benefits. If the premium increase is unaffordable, identify which reduction preserves the most valuable protection. If the policy has an inflation feature, ask how a benefit reduction interacts with future compound or simple increases. If already receiving benefits, contact the claims team before changing terms so the effect on an open claim is explained.

What a rate increase does not let the insurer do

A class-based premium increase is different from individual underwriting. TDI says an insurer cannot target one person with a higher rate because of a health decline or claim history. A claim can still be reviewed under the policy’s benefit triggers and exclusions, but it is not a reason to single out that claimant for a rate increase. Consumers should document communications if they suspect an individual adjustment.

An approved increase also does not automatically change the coverage definition or make a valid claim invalid. The contract continues under its terms if premiums are paid. A policyholder who elects a benefit change may have a different contract going forward, so the company should confirm the effective date and state the changed coverage in writing. Save the notice, election form, revised schedule, and confirmation.

How to contact the carrier and TDI

Ask the insurer specific, answerable questions: What filing number supports this increase? Is the policy in the affected class? What is the exact premium under every option? Does the option preserve inflation protection? Will any adjustment affect current eligibility or a claim already in progress? How much time remains to elect? Ask for replies in writing and avoid relying on an oral estimate that cannot be matched to the policy.

TDI publishes consumer information about long-term care rate increases and accepts consumer questions or complaints. Use the agency’s current contact instructions. Provide the policy and notice, but protect sensitive information when sending documents. If the choices involve a substantial amount of coverage or the notice is inconsistent with the policy, a licensed insurance professional or attorney familiar with long-term care contracts can help review the language.

Exam distinctions

For the Texas exam, separate three ideas: rates require regulatory filing/approval; an increase is class-based, not a health-based surcharge on one claimant; and policyholders must receive notice and options to adjust benefits. The notice period emphasized by TDI is at least 45 days. A policyholder may pay more, accept a benefit reduction, or qualify for nonforfeiture options.

A tempting distractor is that TDI approval permanently freezes an LTC premium. Another is that the insurer can raise only a claimant’s rate after that person uses benefits. Both confuse the review process with individual risk rating. Remember that exact choices and consequences come from the policy and the offered adjustment schedule; not every policyholder receives an identical menu.