Beverly Hills, Calif.
It’s a question that many in the industry ask themsleves over and over. Namely, why isn’t long term care insurance growing faster?
A researcher and a consumer journalist offered some answers from their respective vantage points here at the Second Annual Intercompany LTCI Conference sponsored by the LTC Section of the Society of Actuaries.
The researcher, Matthew Greenwald, who heads Matthew Greenwald & Associates, characterized the background attitudes of consumers toward the LTC product as “a mix of ignorance, anxiety, wishful thinking and inability to plan.” But this is also coupled, he added, “with the recognition that LTCI offers some worthwhile benefits.”
To support his contention, Greenwald drew on findings from a number of surveys his firm has done since 1996.
Regarding ignorance, Greenwald quoted from a 1996 survey done for the National Council on Aging and John Hancock LTC, that showed Americans were wildly off-base in many instances when asked whether statements about LTC were true or false. In one such statement–Medicare is the primary funding source for most older persons’ long term care costs–73% of respondents said it is true when, in fact, it is false.
Similar misconceptions were held regarding the percentage of the LTC population under age 65 (it is nearly 40%) and whether the average length of stay in a nursing home was more than 4 years (it is not).
Anxiety revealed itself in the same survey in the percentages of respondents who said they were worried that they might need LTC some day (60%) and who said they were concerned about how to pay for LTC (69%).
Greenwald said these responses show there “should be receptivity to the product because there’s so much anxiety about LTC.”
The same survey also showed that little planning has been done for LTC. While 41% of respondents said they had done “some” planning, Greenwald said he wondered what “some” means in this case. Of the 11% who said they had done “a great deal” of planning, he said this “probably means they have done something constructive.”
A SOA Retirement Risk survey due to be released this month shows how deeply in denial many people are about the possibility of needing LTC. When respondents were asked about the likelihood of an average 65-year-old and themselves spending some time in a nursing home before death, retirees said this was “somewhat likely” for 46% of others as opposed to only 30% for themselves. Workers said 51% for others compared to 32% for themselves.
Greenwald said his firm asked producers and marketers the top reasons that consumers do not buy LTC when meeting with financial advisors and got such answers as sticker shock and confusion over tax treatment (see chart).
In addition to these reasons, Greenwald said other impediments to the growth of LTCI were:
–Inconsistent signals from the government;
–Mixed signals from financial journalists, some of whom are critical of available products;
–Poorly designed products; and
–Financial advisors who are poorly trained or not motivated to recommend the product.
In the light of these findings, the key solution to growing LTCI faster, Greenwald concluded, is education of consumers and producers.
Trudy Lieberman, who is director of the Center for Consumer Health Choices, Consumers Union, has been covering LTCI since the late 1980s. She offered some observations on why the product’s growth has been so slow.
For one, she said, the product is too expensive. This is particularly true, she said, for seniors who may be on limited incomes and who can’t afford rate increases.
The escalation of prescription drug prices is another factor slowing the product’s acceptance, Lieberman said, because it creates a competition for funds with LTCI. Many seniors, she said, are faced with the situation of having to choose between paying for the drugs they need now as opposed to paying for an insurance product they may never use.
For younger people, one impediment to buying LTCI is the uncertainty over what long term care will look like in 10, 20 or 30 years, according to Lieberman. These people wonder whether current policy provisions will cover care that could be completely transformed in the future, she said.
A fourth reason that Lieberman gave for slow growth is the uncertainty over rate increases.
A final problem with the product, she said, is underwriting. The situation this creates, she said, is that “the very people who need LTCI the most–those with early Alzheimer’s disease or diabetics–can’t get it.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, February 11, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.