By Maria Iacobo
Researchers at the LTSS Center and ATI Advisory analyzed 19,000 long-term care insurance policies purchased between 1995 and 2005.
New research should have state policymakers and regulators exploring ways to secure the benefit value of long-term care insurance policies in order to protect the financial resources of states and consumers.
Researchers at the LeadingAge LTSS Center @UMass Boston and ATI Advisory, a research and advisory services firm, analyzed policy value and buyer demographics among people who purchased long-term care insurance between 1995 and 2005. Their analysis of approximately 19,000 policies revealed that these policies are worth an estimated $800 billion in value.
The funds locked in these policies would pay for services such as in-home care, assisted living, and nursing homes, should policyholders need them. The report, LTCi Policy Value Research Findings, was funded, in part, by the Anthem Public Policy Institute.
“There’s a lot of potential buying power in these policies that can pay for long-term care,” says Marc Cohen, co-director of the LTSS Center, and one of the lead researchers. “But if these funds are not adequately protected, a meaningful proportion of these individuals will have no choice but to go on Medicaid.”
Cohen says researchers also found the financial risk profile of policy holders has shifted considerably.
“The individuals who bought policies in the 1990s are more likely to be more financially vulnerable than purchasers in the mid-2000s,” he says.
Private, long-term care insurance developed and evolved in the 1970-80s as life expectancy increased along with the understanding that longevity brings with it a higher likelihood of needing long-term services and supports (LTSS). While the long-term care insurance market experienced significant early growth, a number of factors have contributed to its downward spiral.
“The long-term care insurance market has been a really troubled market over the last 20 years or so,” says Cohen. “In addition to poor underwriting and incorrect pricing assumptions, the recession that began in 2018, which negatively affected investment returns, saw several insurance companies go out of business.”
Recognizing the financial risks associated with in-force long-term care insurance policies, the National Association of Insurance Commissioners formed a task force focused on improving protections and options for consumers. The researchers recommend states also consider alternative ways to finance long-term care outside of private insurance and the Medicaid program. For example, Washington has become the first state to pass its own version of public long-term care insurance. Other states, including California, Michigan, and Illinois, are looking to create similar long-term care financing models.
“These types of approaches may help to significantly boost the private market by encouraging private insurance and public insurance to jointly reduce Medicaid liabilities and expand insurance-based protections for citizens,” says Cohen.