couple-in-libraryMany U.S. insurance companies have had challenges, to say the least, with their long-term care insurance product lines in the past decade and still desire how they can find some way to help consumers. 

A Washington-based insurer trade group commissioned a major consumer study by Waltham, Massachusetts-based LifePlans Inc., to look for ways to continue offering Long-Term Care Insurance.

The survey team interviewed 1,326 U.S. consumers who bought LTC insurance policies in 2015; of this number, 225 consumers, who had recently reviewed a policy, decided not to buy coverage; and 800 were randomly picked U.S. residents ages 50 and older.

The team also analyzed a sample of 8,791 LTC insurance policies purchased from seven different insurers.

Researchers compared the results from the 2015 interviews and 2015 policy analyses with the results from similar surveys and LTC insurance policy analyses conducted every five years since 1990.

One thing LifePlans found is broad consumer support for a number of policy proposals that insurers could support in Congress.

Only about one-quarter of the LTC insurance buyers, non-LTC-insurance buyers, and age 50-and-older Americans interviewed said they think the government should pay for long-term care services for all people, according to the LifePlans survey report.

But 86 percent of the LTC insurance buyers, 83 percent of the non-buyers, and 73 percent of the age 50-and-older Americans agreed that LTC insurance premiums should be “fully tax deductible.”

In Washington, one hot topic has been the idea of the government offering a universal catastrophic long-term care benefits program, aimed at people who need two or more years of care. The United Kingdom recently set up a similar public coverage care program for its residents.

LifePlans found that 55 percent preferred the idea of an extended public coverage care system and that 27 percent preferred the idea of the government offering an immediage public coverage care system, which would cover the first few years of care.

LifePlans also came up with information about trends in what LTC insurance policies are really like, what the buyers are like, and what the buyers and active non-buyers are thinking:

Price

Issuers of long-term care insurance policies incorrectly evaluated how many policyholders would keep their policies long enough to file claims, and how long the claims would last. They also miscalculated what low interest rates would do to their investment earnings.

The insurance companies have dealt with the forecasting errors by asking state insurance regulators to approve rate increases.

The LifePlans policy analyses show how the same forces have pushed up the cost of new policies.

In 1990, 59 percent of the LTC insurance policies sold cost less than $1,000 per year, and just 9 percent cost $2,000 or more per year.

In 2015, only 5 percent of the policies sold cost less than $1,000 per year, and 64 percent cost $2,000 or more per year.

The average annual premium increased from $1,071 to $2,727.

Home health care

LTC insurance prices have increased partly because, in some ways, the policy benefits have improved.

The average duration of policy benefits fell to 4 years in 2015, from 5.6 years in 1990.

But the average daily benefit increased to $161, from $72, over that period.

Insurers also added home health care benefits.

Home health care benefits were so rare in 1990 that LifePlans did not track them that year.

In 1995, only 49 percent of the policies analyzed that offered home health benefits could pay for more than two years of care in the home.

The home health care benefit’s richness peaked in 2000; that year, the home health care benefits sold had an average duration of 5.4 years.

But home health care benefits were still better in 2015 than in 1995. In 2015, 79 percent of the policies that offered home health benefits could pay for more than two years of care, and the average home health care benefits duration was four years.

Personal characteristics

The average age of a buyer fell to 60 in 2015, from 68 in 1990. Over that same period, the percentage of purchasers ages 75 and older fell to 1 percent, from 17 percent.

In part because of the age shift, the percentage of buyers who are widowed fell to 7 percent, from 23 percent.

The percentage with a college degree increased to 68 percent, from 33 percent.

Financial characteristics

Between 1990 and 2015, the changes in LTC insurance buyer personal characteristics went hand in hand with changes in financial resources.

The percentage with annual income under $25,000 fell to 4 percent, from 42 percent.

The percentage with less than $75,000 in total liquid assets fell to 13 percent, from 47 percent. 

Buyer motives

LifePlans discovered that the younger, better-educated, higher-income LTC insurance buyers of 2015 had different goals than the 1990 buyers.

In 1990, 30 percent of the buyers wanted to avoid dependence on other relatives, and only 24 percent wanted to protect their assets or leave an estate to heirs.

In 2015, just 13 percent were worried about dependence, and 36 percent were worried about estate protection. 

Non-buyer motives

In spite all of the headlines about long-term care insurance price increases and market withdrawals, high prices may only be about as much of a barrier to today’s LTC insurance sales as they were in 1990.

LifePlans found that 51 percent of non-buyers cited “too costly” as a very important reason for not buying coverage in 2015, but 53-58 percent of the non-buyers also gave “too costly” as a very important reason for not buying coverage from 1990 through 2010.

The popularity of other barriers to buying LTC insurance fell much more dramatically.

In 1990, for example, 36 percent of the non-buyers were very skeptical about whether insurers would pay LTC insurance claims. In 2015, only 13 percent of the non-buyers gave skepticism about payment of claims as a reason for not buying coverage.

LifePlans added a new reason in 2015 for resisting LTC insurance with the uncertainty about whether a policy will cover the types of services a consumer might need. More than half of the consumers say uncertainty about whether a policy will cover the right services is a very important reason not to buy coverage.

Information

 

If you are thinking about purchasing LTC insurance but have uncertainties, there are better alternatives with a viable solution for reasonable cost and excellent coverage.