LifePlans is a unit of Munich Re, a big German reinsurer. It has providing data analysis and support services for the U.S. private long-term care insurance community for years.
America’s Health Insurance Plans paid for the Waltham, Massachusetts-based organization’s latest long-term care insurance claimant study, which covers the experiences of claimants interviewed over the telephone last year and earlier this year.
But LifePlans is independent enough to conduct research on long-term care and long-term care finance for government agencies and academic researchers far outside the private long-term care insurance community. Recently, for example, Portia Cornell, a researcher at Harvard University, worked with LifePlans analysts to develop a paper on the possibility that ordinary older Americans are too sick for commercial long-term care insurance issuers to do much to help them.
When LifePlans conducted the new study, it received funding from AHIP, a Washington, D.C.-based trade group for sellers of major medical insurance, disability insurance, long-term care insurance and other types of health-related insurance products.
The analysts started out by asking for random samples of long-term care insurance claimant contact information from 11 insurers that are, or were, major long-term care insurance issuers.
The insurers could have found some way to skew the samples. But, based on LifePlan’s description of the contact lists, the information doesn’t sound all that well sifted: the analysts were able to reach and get completed surveys from only about one-quarter of the 5,649 claimants listed.
The nature of the claimants who were willing and able to complete the survey may have also skewed the results: Maybe people who complete insurance surveys are happier with their insurance than other people.
But the LifePlans analysts say they were able to get answers from 1,291 people who have actually used private long-term care insurance coverage to pay for long-term care services.
Because insurers began selling large amounts of private long-term care insurance only in the 1970s, and typical buyers were decades away from needing care, information about the views of long-term care insurance claimants is still harder to find than information about the views of consumers who have filed claims against other types of insurance policies, such as health insurance or dental insurance.
The U.S. Department of Health and Human Services sponsored a 1997 study of a cross-section of claimants, and a second study, conducted from 2004 through 2006, that focused on what new long-term care insurance claimants experienced in the first two years after they filed claims.
The two HHS studies occurred during the long-term care insurance market’s early boom years, when premiums were low, earnings on insurers’ bond portfolios were high, and insurers were optimistic about what their long-term care insurance experience would be like.
Now, long-term care insurance issuers face low interest rates, withering stares from rating analyst agents, and tough questions from securities analysts about when they will sell their closed blocks of long-term care insurance business, or when they will sell their remaining active long-term care insurance units. They are under intense pressure to cut costs.
Under these new conditions, “it is important to again examine claimant experience and explore whether the insurance that claimants purchased is working for them,” LifePlans analysts write in their study.
Marc Cohen, LifePlans’ chief research and development officer, previewed preliminary results from the survey in March, at the Intercompany Long-Term Care Insurance Conference in San Antonio.
For a look at more of what the 2015-2016 long-term care insurance claimants said about how their coverage really works, read on.
Typical long-term care insurance claimant survey participants have been to college. (Photo: Thinkstock)
1. Who the claimants are
Private long-term care insurance has been a niche product.
Insurers have struggled to explain it. Many of the people selling it started out as teachers. They worked hard to help consumers understand why the distant risk of needing assistance with the activities of daily living was something for a healthy, energetic person to worry about.
As a result of the nature of the product, the buyers were a well-educated bunch of people. The current claimants are, too: About 65 percent have spent at least some time in college.
Their average age is 84, and 70 percent are women.
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About 83 percent of the claimants surveyed had policies that paid for both nursing home care and home care. (Image: Thinkstock)
2. What claimants bought
Six percent of the claimants surveyed had home-care-only coverage, and 11 percent had nursing-home-only coverage.
The average daily benefit for nursing home care was $123, or about $45,000 per year, and the average home care benefit amount was $121.
The average nursing home benefit duration was 5.7 years, but 33 percent had nursing home benefits durations of three or fewer years.
About 24 percent had policies that provide less than $90 in benefits per day.
Claimants may have feared the claim procedure would be like a maze. But for most of the survey participants, it wasn’t. (Image: Thinkstock)
3. What filing the claims was like
About 15 percent of the claimants surveyed said the claim-filing process was difficult, but 78 percent said it was easy.
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About half of the claimants surveyed had been collecting benefits for two or fewer years. (Photo: Thinkstock)
4. How long claimants have been collecting benefits
Today’s low interest rates make supporting any products with long claim periods difficult for insurers.
Many insurers are trying to get around investment challenges by focusing on the sales of products with returns that depend mainly on success at forecasting claims in the short term, not on guessing what interest rates will do.
Because of that shift, many long-term care insurance issuers are trying to move toward selling more policies with benefits periods under two years, or even under one year.
Advocates of the idea that “something is better than nothing” and advocates of the idea that what consumers really need is protecting against catastrophic nursing home care bills have engaged in a fierce debate over whether the shorter-term policies have any value.
The LifePlans survey results suggest that the short-term policies might be helpful to many consumers: About 49 percent had been collecting benefits for more than two years, but 51 percent had been getting benefits for less than two years.
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Only 17 percent of the long-term care insurance claimants surveyed live in nursing homes. (Photo: Thinkstock)
5. Where the claimants live
Relying on telephone interviews of claimants might have affected these statistics: People who live in a nursing home might be more likely than other users of long-term care insurance benefits to have trouble with talking on the phone.
But only 17 percent of the claimants who participated in the survey were living in a nursing home.
Thirty-one percent were in an assisted living facility, and 45 percent were still living in an ordinary private residence.
Many long-term care insurance claimants said their benefits affect where they can get their care. (Image: Thinkstock)
6. How the coverage has affected where the claimants live
About 39 percent of the claimants said they would be getting their care in the same place where they were at the time of the interview even if they had not had long-term care insurance coverage.
But 47 percent said their long-term care insurance made getting their care where they were at the time of the interview possible.
About 64 percent said they would have had to rely more heavily on family, friends and volunteers if they had no long-term care insurance.
Most of the survey participants said they were happy with the amount of coverage they purchased. (Image: Thinkstock)
7. How the benefits compare with the cost of care
Typical current long-term care insurance claimants may have purchased their coverage back when premiums were much lower than they are today, but their $45,000-per-year benefit looks low by current standards.
In spite of that, the answers the claimants gave LifePlans tend to support the backers of the “something is better than nothing” position.
About 93 percent said their policy benefits are meeting current care needs, and 88 percent said they were satisfied with the amount of coverage purchased.
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