Premiums are soaring by 20 to 90 percent for thousands of Minnesotans who carry long-term care insurance, and many older people are struggling to figure out what to do.

"I guess we'll just bite the bullet," said Peter Wyckoff, 67, of Shoreview, a retired advocate for seniors, who said his annual premium will rise by more than $2,000. He got a letter recently saying that the annual premium for the John Hancock policy covering him and his wife, Sue, will rise from $1,816 to $3,834.

The unforeseen premium increases have caused a rash of calls to state regulators and advocates from worried or irate older Minnesotans.

But the effect could go much further. It could dampen a new three-year effort by state agencies to convince more people to finance their own long-term care in old age. About 7 percent of nursing home residents have long-term care insurance. But about two-thirds are covered by Medicaid, which spends $3.5 billion a year on long-term care in Minnesota and whose rising costs present growing budget problems for the state.

"It's an important issue. Government will not be able to keep up as the population ages," said Commerce Commissioner Michael Rothman, whose department must approve rate increases.

"But it's hard to convince someone to buy insurance now if they worry they might not be able to afford it in the future," he said.

Longer lives

While Medicare helps pay hospital and doctor bills for the aged and disabled, many turn to private insurance to help pay for non-medical care in nursing homes, assisted living or at home. Nursing home care can cost more than $5,000 a month, stripping the aged of their life savings and ultimately forcing them onto the state-federal Medicaid program for the poor.

About 200,000 Minnesotans now carry long-term care insurance; about one-fourth are seeing big premium increases this year.

Nationally, about 8 million Americans own long-term policies, according to the American Association for Long-Term Care Insurance. The average buyer is 57 and pays $2,100 a year. This year, the trade group said, the cost of a new policy for a 55-year-old rose about 10 percent on average.

Insurers say higher premiums became necessary because people are living longer and fewer than expected are dropping their policies. At the same time, extraordinarily low interest rates mean insurance companies are earning less on investments that back the policies. For the most part, state regulators have agreed.

Unlike consumers with health insurance, people with long-term care policies can't just drop one policy and jump to a different company when rates soar. That's because premiums are based on a buyer's age and health at the time of purchase. A policy that cost $400 annually 10 years ago now may cost $2,000.

Pattern of increases

Rising premiums are not a new phenomenon. Every year a few of the 68 companies authorized to sell long-term care policies in Minnesota seek increases. In 2004, about half the 120,000 policy holders then with insurance saw increases of 10 to 45 percent. That led the Commerce Department to take a second look to ensure that the increases were justified.

This time, "our actuarial evidence is that the increases were merited," Rothman said recently. "That's not true with every company. We don't approve every request."

But he said the increases illustrate the importance of the state's new Own Your Own Future campaign, an effort to figure out how to make saving for long-term care easier.

"More tax breaks? More information about how likely you are to need long-term care? Other kinds of financial investments people can make? We need to develop more answers for people," Rothman said.

In the meantime, his department has had calls from scores of people concerned about the premium increases.

In Minnetonka, business expert Fred Zimmerman, 76, the retired head of the University of St. Thomas' chemistry department, has reached his own solution to higher premiums: He and his wife, Joanell, are scaling back coverage to keep the premiums from rising; in his case, he's cutting back from six years to two years of coverage.

Both Wyckoff and Zimmerman grudgingly acknowledge that insurers probably do need the rate increases. But they also suspect that other forces are at work.

"I'm no dummy," said Zimmerman, who has served on 14 corporate boards. "I know they're not supposed to jack up their rates because of incompetence or to prop up some other part of their business. But I'd feel more comfortable if my insurer hadn't been bought out by another company with a credit rating as bad as Spain's."

Warren Wolfe • 612-673-7253