Low interest rates have helped the stock market, home buyers and borrowers, at the expense of arrangements that are supposed to help retirees get through retirement.
The current low, low rates punish anyone trying to use, or provide, bank certificates of deposit, annuities that offer income guarantees — and long-term care insurance (LTCI).
LTCI issuers once assumed that they could use a combination of the policyholders’ premium payments and earnings on cash invested in high-grade corporate bonds, and similar instruments, to fund the LTCI benefits obligations.
Instead, a combination of inaccurate assumptions about policyholder behavior and interest earnings have punished LTCI issuers. The issuers’ LTCI blocks have entered the financial services world’s bond-yield-decrease-victim doghouse first, as other players that will ultimately depend on bond earnings hope that no one notices that they, too, hold bonds.
Blocks of LTCI business make up a relatively small share of insurance obligations at most issuers.
The LTCI blocks’ finances could improve dramatically, and rapidly, if and when the world’s central bankers start to let interest rates increase.
Meanwhile, issuers continue to protect about 6.1 million people in the United States against the risk that they will need constant supervision due to dementia, or frequent help with eating, bathing, going to the bathroom and other activities of daily living.
LTCI issuers continue to work to remind members of the public that ordinary health insurance and Medicare policies do not cover ordinary long-term care services, and that Medicaid pays for nursing home care only for people who meet strict eligibility criteria, and only for people who enter nursing homes that are willing to accept state Medicaid programs’ low reimbursement rates.
For a look at a list of the top 10 U.S. LTCI issuers, based on 2019 Long-Term Care Experience Reports data compiled by the National Association of Insurance Commissioners, see the slideshow above.