You can go into a discount store and buy a multi-tool with or without a sharp knife blade, with or without scissors, and with or without pliers.
In the U.S. private insurance market, you can get stand-alone long-term care insurance (LTCI). You can get a life insurance or annuity product with features that could help the user pay for long-term care (LTC) services.
But it’s not easy to find a product that combines LTC benefits with medical insurance, LTC benefits with critical illness insurance, or LTC benefits with disability insurance — even though the LTC benefits and the other health insurance benefits might be helping the same consumer cope with the same effects of the same ailment.
LTC specialists are now participating in a private-sector “National Conversation on Long-Term Care Financing,” and the government is setting up an LTC Commission.
Should the idea of extending the list of hybrids be on their agenda?
What they have — and think they have
The SCAN Foundation looked at disabled U.S. residents ages 65 and older who had incomes over 5 times the federal poverty level. Even at that high income level, only about 20 percent of the consumers had LTCI coverage.
Meanwhile, 28 percent of U.S. workers have long-term disability insurance, 64 percent of U.S. households have private health insurance, and 70 percent of U.S. households have life insurance.
Insurers have promoted LTC planning by adding riders or other features that can help the holders pay for LTC services to life and annuity products. But LTC planners note that the life-LTC and annuity-LTC hybrids tend to appeal to a niche market within a niche market: Qualified consumers who can pay an initial minimum premium that might be as high as $50,000 to $100,000.
The life-LTC and annuity-LTC hybrids also work best for consumers who happen to have skilled LTC planners.
Krys Reid, a principal at Tower Benefit Consultants Inc., a member of the United Benefit Advisors consortium, is 59. He can remember his parents sitting down to talk with their life insurance agent at the kitchen table.
“That doesn’t happen anymore,” Reid said. “We don’t have those kinds of life insurance agents.”
John Scatterday, a senior vice president at Keenan, an insurance brokerage firm that sells life-LTC hybrids, said he thinks offering hybrids increases LTC planning awareness.
“Often times, packaging long-term care with better-known products (i.e., life insurance) can provide an easier entrée for consumers to better understand the value of long-term care,” Scatterday said.
One twist: Many consumers who own no private LTCI coverage think they own LTC hybrids.
Northwestern Mutual reports that 19 percent of U.S. adults say they have no need for private LTCI coverage because their medical insurance will pay for any LTC services.
LifePlans Inc. drew attention to the health-LTC hybrid topic in 2012, by asking insurers that had left the LTCI market about regulatory changes that might lead them to consider returning.
A significant minority — 32 percent — said their companies might take another look at the market if regulators would make it easier for insurers to create new types of LTC hybrids, such as disability-LTC hybrids or critical illness-LTC hybrids.
Insurers themselves are not racing to the LTC product laboratory. When asked to comment for this article, representatives for several said the Patient Protection and Affordable Care Act (PPACA) is giving their companies enough excitement for now.
How we got here
Historically, insurance regulators have been skeptical of innovation in health product design, and especially in the design of products aimed at elderly consumers.
In the 1970s, as insurers were building nursing home insurance distribution networks, consumer groups were blasting most health insurance products other than major medical plans provided by government agencies and the rich group health plans provided by giant private insurers.
The consumer groups regarded supplemental health products as, at best, an excuse for the government to leave holes in Medicaid coverage, Medicare coverage and commercial health coverage requirements.
The late Rep. Claude Pepper, D-Fla., blasted private LTCI carriers in December 1987, when he held a House subcommittee hearing with the memorable title, “Nursing Home Insurance: Exploiting Fear for Profit?”
Pepper’s panel acknowledged in a hearing report that nursing home care could be ruinously expensive, and that 1 in 4 elderly people ran the risk of eventually needing nursing home care.
But the panel railed against the policy provisions that insurers used to manage claims risk, such as exclusions for dementia or lack of inflation protection.
Because of the limitations, “at present, the consumer’s odds of collecting off these policies are better at the track,” the panel said.
The Pepper panel urged Congress to eliminate the need for stand-alone LTCI coverage by adding nursing home benefits to Medicare and to set up a commission that would create a comprehensive LTC program for people without Medicare coverage.
South Dakota insurance regulators recently seemed to echo the Pepper’s skepticism about innovation in LTC product design, in a bulletin about LTC riders offered along with annuities. The South Dakota regulators emphasized that an annuity must offer special features in addition to the LTC-linked features, and that the marketers must not focus on the idea of using the annuity to pay for long-term care.
In 2010, Congressional Democrats tried to make good on the Pepper panel’s call for a universal LTC program by including the Community Living Assistance and Support Services (CLASS) Act in PPACA. The CLASS program was supposed to create a voluntary stand-alone LTC program for workers. The Obama administration killed the program after actuaries decided that the program would be unsustainable.
Although the CLASS program is now officially dead, Medicaid still provides nursing home benefits for the poor, and Medicare still provides home health care services for the non-indigent elderly.
“Care coordination” programs” are trying to hold down Medicaid nursing home costs by managing medical services along with LTC services for “dual eligibles” – people who qualify for both Medicare and Medicaid. They include the Program for All-Inclusive Care for the Elderly (PACE), the Medicare Advantage special needs plan program, and new managed care programs for dual eligibles.