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Many people really want long-term care insurance

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This is a challenging time for insurers to write stand-alone long-term care insurance, and a challenging time for agents to sell it.

No matter why some issuers may be getting out of part or all of the market, or how different the remaining players might be from the ones that have gotten out, the announcements about the players getting out are stressful.

Designing a complicated long-term care insurance program is difficult.

The bond interest rates that could smooth over that difficulty, by increasing earnings on long-term care insurance issuers’ huge reserves, hover near zero and, in effect, turn the reserves into the abstract financial equivalent of binge-watching bums on a sofa.

More liberal Democrats’ lingering anger over policymakers’ failure to add nursing home benefits to Medicare in the 1980s, and the sudden actuary-driven death of the long-term care benefits program in the Affordable Care Act in 2011, have cast a strange, quiet cloud of hate dust over efforts to improve how the federal government treats private long-term care insurance.

Many moderate Democrats have crossed party lines to support long-term care insurance tax break proposals, for example, but, somehow, the proposals have always been taken to a backroom somewhere and strangled. Usually quietly.

Now, however, Donald Trump, the president-elect, owns a company that has offered a group long-term care insurance benefits plan for years. His vice president-elect was a strong supporter of Indiana’s Long-Term Care Partnership program. And two new news stories show that consumer hunger for long-term care planning solutions is still out there.

One is the effects of the recent huge premium increase at the Federal Long Term Care Insurance Program.

Related: Federal workers cling to long-term care insurance

Enrollees who wanted to keep their coverage had to accept some combination of premium payment increases and benefits reductions that created what amounted to an 83 percent average increase in the cost of the coverage.

Managers report that only 3.3 percent of the enrollees who made an active decision during the enrollment period chose to stop paying the premiums, and either let the coverage lapse or accept paid-up nonforfeiture benefits.

Maybe the people who failed to make an active choice will all let their coverage lapse. Even if that happens, about two-thirds of the people who had coverage from the program this past summer will still have it in a few months, even after going through a huge rate hike.

The other news is buried deep in a survey report from the Los Angeles-based Transamerica Center for Health Studies.

Center analysts asked workers about nine different supplemental insurance benefits, including accident insurance, critical illness insurance, hospital intensive care insurance, post-retirement health care insurance, health benefits for active employees who are eligible for Medicare, and long-term care insurance.

The survey participants reported being more aware of whether they had been offered long-term care insurance at work than whether they had been offered any other products on the list.

Seventy percent of the participants knew whether they’d been offered long-term care insurance. Just 65 percent knew whether they’d been offered critical illness insurance. Only 64 percent knew whether they’d been offered post-retirement health care benefits.

The reported take-up rate for long-term care insurance benefits was also higher than the take-up rate for a number of other well-known supplemental benefits.

The reported take-up rate was 49 percent for long-term care insurance. That was lower than the take-up rate for accident insurance, hospital intensive care insurance and hospital indemnity insurance, but it was higher than the take-up rate for critical illness insurance, health benefits for Medicare-eligible active employees, post-retirement health benefits and cancer insurance.

In other words: Many people really, really want long-term care insurance.

For insurers, policyholders’ passionate love for their long-term care insurance coverage has been a problem. Higher lapse rates would help the issuers’ finances.

But it might be nice if policymakers could find ways to help insurers meet that hunger for private stand-alone long-term care insurance with a financially sustainable product, and to maintain and improve the environment for hybrid products that combine long-term care benefits with other types of insurance benefits.

In recent years, critics of efforts to support the private long-term care insurance market have dismissed it as a negligible factor. They have argued that the focus has to be on Medicaid, or other government programs, because few people will have the drive and means to pay for their own long-term care services. But it seems as if the government should at least give consumers and insurers a fair chance to test that hypothesis, not just leave private long-term care insurance strangled in honor of the ghosts of Claude Pepper and Ted Kennedy.  


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