Long-term care insurance covers assisted living services, nursing homes and treatment for chronic conditions, all of which are vital as the American population ages and as the country contends with the COVID-19 pandemic. Yet the industry is contracting at an alarming rate.
Of the more than 100 companies offering long-term care insurance in 2004, according to the
Between 1990 and 2015, the average annual long-term care insurance premium increased from
“It’s become a situation where many of these companies either become insolvent, or they’re heading in that direction,” Idaho Insurance Commissioner and NAIC President
The diminishing market leaves policyholders, many of whom are elderly and have been paying for coverage for years or decades, at risk of losing coverage altogether or experiencing untenable premium increases. As the population ages, lack of access also foreshadows a need for greater government intervention, likely at a greater cost to taxpayers, unless meaningful action is taken.
“It’s an unfortunate position that we find ourselves in,” Cameron continued.
Since private insurers began offering long-term care policies in the 1970s to help cover costs associated with nursing homes, the industry was marred by a series of miscalculations, Cameron said.
“From the very start, the industry underestimated the longevity of people – and perhaps we can even point the finger at ourselves in the regulatory community,” Cameron said. “The industry underestimated how long they would live; it underestimated the cost of a long-term care facility, the advances in medical technology that would help people live longer. The products, right from the very start, were underpriced.”
Actuaries also assumed more people would drop their policies – lapse rates have remained low – and underestimated the length of claims, which have increased as treatment for chronic conditions like Alzheimer’s disease has improved.
Sales of new policies peaked in the early 2000s and have declined quickly in the roughly two decades since, as insurers have sought to exit the market due to the poor performance of the product line, according to a 2020
The total number of covered Americans, around 7.5 million, has been mostly stagnant since 2008. By one recent estimate, fewer than one in 30 Americans, and just 7 percent of those over 50, has a long-term care policy.
Those numbers suggest to some lawmakers, like Senate Banking ranking member
“Long term care insurance frequently provides one of the best solutions to paying for this care, but many Americans don’t invest in LTCI or wait until later in life to invest when the cost of this insurance is higher,” Toomey, whose family had to confront long-term care options when a relative was diagnosed with Alzheimer’s disease, said via email.
Meanwhile, according to
As Americans get older and demand for long-term care increases, access to private insurance is dwindling and Medicare and Medicaid offer limited coverage.
The expectation is the government will need to pick up the slack. The
Three years ago, the NAIC created an executive committee dedicated to addressing problems in the long-term care insurance industry. This month, that committee adopted a new framework for multistate actuarial review of long-term care insurance rate increase requests, an initiative supported by Cameron.
That multistate review process would help ensure rate parity and ensure costs are not shifted to policyholders in states with more permissive regulators, Cameron said.
The NAIC, in a 2019 brief on the industry, also endorsed other potential efforts to ameliorate some of the problems plaguing the industry.
Hybrid policies – ones that, for instance, combine different lines like life insurance with long-term care insurance – could help reduce premiums and increase take-up.
The NAIC also proposed potential federal interventions, like adding a home-care benefit to Medicare, Medicare Supplements and Medicare Advantage plans; allowing the creation of long-term care savings accounts, similar to health savings accounts, to cover expenses; and allowing retirement plan participants to make distributions from their savings without paying penalties.
Legislation enabling that last option was introduced by Toomey in 2021 and by Rep.