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180,000 Received LTCI Benefits Last Year, New Study Shows

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About 180,000 Americans with long term care insurance policies were paid benefits in 2007, according to a new study by the American Association for Long Term Care Insurance, which says this is the first time information was gathered on the total number of individuals on claim.

The LTC insurance industry paid out $3.5 billion in benefits to individuals last year, up from $3.3 billion the year before, the association reports.

The study covered over 60 insurers, representing 98% of all LTC policies currently in force, AALTCI says.

The association’s study revealed that 43% of claims paid in 2007 were for home care, 32.9% for assisted living and 24.1% for nursing home care.

Of policies sold last year, 97% provided for some form of home care, up from 86% in 2000 and 67% in 1995, AALTCI says.

For new claims, 32.3% were for individuals aged between 70 and 79, while 55.2% began for those aged 80 or over and 11.5% were for those between 50 and 69.

The youngest individual on claim (a group insured) was 23, AALTCI found.

The 5 most common reasons for an LTC claim were Alzheimer’s disease, stroke, arthritis, circulatory issues or injury.

“One in 8 persons age 65 and over has Alzheimer’s,” says Jesse Slome, executive director of AALTCI. “The number of new cases is expected to increase to 450,000 a year by 2010 and to 615,000 a year by 2030.”

Women comprise around 66% of people on claim and receive just over 66% of all claim dollars. “Women, especially those who are divorced, widowed or living alone, need to plan for the risk,” Slome advises.

Some of the largest open claims (those still being paid) ranged from more than $500,000 to just over $1 million, with claimants receiving benefits for between 7 and 13 years, AALTCI reports.

Most claims are from 1 to 3 years, however, notes Slome.

In 2007, 25% of all individual policies sold last year were for 3 years of coverage, while 40% bought 4 to 5 years; 11% bought 6 to 10 years, and 18% bought unlimited protection.

Sales are increasing for shorter time periods of coverage because lifetime coverage is very expensive, notes Slome. “Shorter terms make long term care insurance more affordable and expands the marketplace.”

The fast growth of partnership policies, which enable buyers to protect some of their assets from Medicaid if they exhaust their LTC policies, may also be a factor, he says. “As more people see the benefit of partnerships, that has created interest.”

The large number of people filing claims each year shows that LTC needs to be part of retirement planning, Slome adds.

Most people should begin this planning when they are in their 50s, he says, explaining that’s because individuals are far more likely to qualify for significant good health discounts offered by insurers when they are in their 50s than if they waited to purchase coverage until they’re in their 60s.

In 2007, the average purchase age for individual coverage was 58, down from an average age of 67 as recently as 2000, according to AALTCI.

“As more individuals become aware of and understand the importance of planning for long term care needs, the number of individuals and families deriving benefit from this coverage will only increase,” Slome predicts.