Treasury to up nursing-care premiums in effort to keep coverage intact
Move set to lighten wallets of some 200,000 Israelis aged 60 and older.
The Finance Ministry is expected to order a hike in the premiums for some nursing care insurance policies shortly, lightening the wallets of some 200,000 Israelis aged 60 and older in a bid to keep their coverage intact as they age.
Oded Sarig, the Finance Ministry's commissioner of capital markets, insurance and savings, is expected to order the rate hike soon for group nursing care policies that cover a limited time period - which often ends before the policy holder actually needs the insurance, usually starting from the age of 75. These policies were sold to large groups of workers at very low prices.
Today, some 1.1 million workers in Israel have such insurance policies, 200,000 of whom are older than 60. They are the ones expected to take the worst hit because of the hike in premium prices.
Sarig is expected to announce that such insurance policies will no longer be sold on a group basis, at least not as group plans are defined today. From now on, group nursing care insurance (bituach si'udi ) will be sold only for the duration of a policy holder's life, and plans that cover specified periods of time will be annulled.
The reason for this change is simple: seniors typically don't require nursing care before the age of 75. Nursing care insurance sold to relatively young workers (of an average age of, say, 40 ) for a period of five years basically constitute no-risk insurance comparable to selling automobile insurance plans to workers who don't own a car. Naturally, the premium on such a car insurance plan would be extremely low.
This makes it quite tempting to purchase group nursing care plans, whose premiums are much cheaper than policies sold to individuals for the duration of their lifetimes. Unlike the time-limited group policies, the lifetime ones factor in the risk that the policy holders will need nursing care when they are older than 75.
The problem is that the popularity of the group policies is inversely proportional to their usefulness. Millions of workers have purchased extremely low-cost insurance that won't help them in the least, because the policies do not cover their needs after the age of 75.
Take the estimated 1,000 retirees issued group nursing care policies by Clal Insurance company in 2003. The workers originally paid NIS 82 a month for the policy, but as the years went by and the policy holders got older, the monthly payments spiked. Under the last adjustment, made in 2010, the monthly premium was set at NIS 530. In May the policy came to an end when Clal Insurance announced that it would not review the policy at any monthly rate.
The policy holders had paid tens of thousands of shekels to Clal Insurance over the years and suddenly found themselves without nursing care coverage, just as they were facing the prospect that they might need such coverage soon. The money they had paid on insurance was wasted, and they found themselves uninsured.
Clal Insurance cannot be accused of behaving with exemplary moral conduct in this case, but the company did not break the law. The policy was defined to cover a specified time, and the company had every right to refuse to renew it beyond that period. It bears mention that nursing care for the elderly is extremely expensive, ranging in cost from NIS 5,000 a month to NIS 15,000 a month per person, for an undefined time that can last many years. Insurance companies are unwilling to provide nursing care insurance to the elderly at any price, leaving the Clal Insurance policy holders stuck. They had reached an average age at which the insurance company would have lost money covering them had it offered renewed insurance plans, even at astronomical prices. The company did offer individual policies at monthly premiums of NIS 800 to NIS 900. It can be assumed that many pensioners do not have sufficient income to meet such monthly payments, so they were trapped without insurance coverage.
These are precisely the problems Sarig intends to forestall by banning the sale of group nursing care coverage for limited periods. Once the change is announced, the policies will have to cover the duration of the policy holder's lifetime. The price of the policy will either be set as a constant for the duration of the policy holder's life or the rate of increase will be spelled out in advance (up to 4% increases a year, with the highest possible monthly premium to be reached at the age of 65 ).
In this way, the price of a policy sold to a 40-year-old will take into account the risk of a person needing expensive nursing care after the age of 75. All of this amounts to a necessary evil: the cost of nursing care coverage is going to rise, for all age groups.
The most dramatic premium cost hike will affect the 200,000 people aged 60 and up who currently hold group nursing care plans that are limited to a specified time period. It appears they will have to switch to more expensive group policies that don't specify a time period, though Sarig has yet to announce exactly what he plans to do about these 200,000 policy holders.
He could try to work out a special plan for them, similar to what was devised five years ago for a group of pensioners who were left without nursing care coverage. Drawing on that precedent, Sarig might try to convince the insurance companies to absorb some portion of the loss, while also compelling the 200,000 senior citizens to pay higher monthly premiums.
That would be a complicated formula and would take some time to implement. In any event, it appears that the commissioner's decision to raise insurance premiums for nursing care could end up keeping 200,000 people insured.