While General Electric is spinning off its healthcare unit, the company is facing challenges when it comes to its long-term care insurance policies, according to Marketplace.
Here are four things to know:
1. GE has 300,000 long-term care insurance policies. Long-term care insurance covers the cost of caring for elderly Americans, whether they are in a nursing home, in an assisted living center or, increasingly, at home.
2. The amount of premiums GE takes in on the long-term care plans falls significantly short of what the coverage actually costs, according to Chris Farrell, a senior economics contributor for Marketplace.
“What’s happened is that medical costs keep going up. Americans are living longer, on average. And the people who bought these policies? They’re not dropping them,” Mr. Farrell said, according to Marketplace.
3. To back the long-term care policies, GE needs to put about $15 billion in required reserves.
“They’re not even coming close to covering the costs that they’re incurring,” Mr. Farrell said. “Put that in context: GE’s dividend payments is [something] like 4 billion.”
4. GE isn’t alone. Healthcare costs are putting a larger strain on corporations than ever before. In 2018, large U.S. employers expected medical and pharmacy benefit costs to increase 5 percent for the fifth consecutive year, a recent National Business Group on Health survey found.
Date: January 3, 2019