Private Long-term Care Insurance Market Research Articles

Private Long-Term Care Insurance Decision: The Role of Income, Risk Propensity, Personality, and Life Experience.

The rising aging population contributes to increased caregiver burden and a greater need for long-term care services, thereby posing stronger financial burden. The current study aimed to examine the effect of income, risk-taking propensity, personality traits, and life experience on the ownership of and intention to own private long-term care insurance (LTCI). Primary data were collected from 1373 registered nurses with a minimum of two years of full-time working experience. Multinomial logistic regression was used to examine the relationships between ownership of LTCI and personal discretionary income, risk propensity, openness to experience, and life experience. Personal discretionary income was a crucial positive indicator in predicting ownership of LTCI. Higher risk-taking propensity was found to be negatively related to both currently own and future intention to own private LTCI. Participants who currently live with elders and who agree to caregiving responsibilities with government-provided cash allowance showed future intention to purchase LTCI. Little evidence was found for an association between life experience and future intention to own LTCI. Income, risk-taking propensity, and personality traits differ in their impact on ownership of and future intention to own LTCI. Our results provide policy makers with a better understanding of the forces driving demand in the private LTCI market, as well as the accompanying implications for public LTCI.

The emerging market for supplemental long term care insurance in Germany in the context of the 2013 Pflege-Bahr reform

The growing cost of long term care is burdening many countries’ health and social care systems, causing them to encourage individuals and families to protect themselves against the financial risk posed by long term care needs. Germany’s public long-term care insurance program, which mandates coverage for most Germans, is well-known, but fewer are aware of Germany’s growing voluntary, supplemental private long-term care insurance market. This paper discusses German policymakers’ 2013 effort to expand it by subsidizing the purchase of qualified policies. We provide data on market expansions and the extent to which policy goals are being achieved, finding that public subsidies for purchasing supplemental policies boosted the market, although the effect of this stimulus diminished over time. Meanwhile, sales growth in the unsubsidized market appears to have slowed, despite design features that create incentives for lower-risk individuals to seek better deals there. Thus, although subsidies for cheap, low-benefit policies seem to have achieved the goal of market expansion, the overall impact and long-term sustainability of these products is unclear; conclusions about its impact are further muddied by significant expansions to Germany’s core program. The German example reinforces the examples of the US and France private long term care insurance markets, to show how such products flourish best when supplementing a public program.

Interactions between Private Health and Long-term Care Insurance and the Effects of the Crisis: Evidence for Spain.

This paper analyzes the reasons for the scarce development of the private long-term care insurance market in Spain, and its relationship with health insurance. We are also interested in the effects the crisis has had both on the evolution of the demand for long-term care insurance and on the existence of regional disparities. We estimate bivariate probit models with endogenous variables using Spanish data from the Survey on Health and Retirement in Europe. Our results confirm that individuals wishing to purchase long-term care insurance are, in a sense, forced to subscribe a health insurance policy. In spite of this restriction in the supply of long-term care insurance contracts, we find its demand has grown in recent years, which we attribute to the budget cuts affecting the implementation of Spain's System of Autonomy and Attention to Dependent People. Regional differences in its implementation, as well as the varying effects the crisis has had across Spanish regions, lead to the existence of a crowding-in effect in the demand for long-term care insurance in those regions where co-payment is based on income and wealth, those that have a lower percentage of public long-term care beneficiaries, or those with a smaller share of cash benefits over total public benefits. Copyright © 2016 John Wiley & Sons, Ltd.

Lemons or Cherries? Asymmetric Information in the German Private Long-term Care Insurance Market

This study provides evidence of the presence of asymmetric information in the German long-term care (LTC) insurance market. While certain private information—individuals’ pessimism level and preference for insurance—contributes to advantageous selection, the major source of adverse selection—individuals’ self-assessed high LTC risk—switches the final correlation between insurance and risk to one that is significantly positive. In addition, the study reveals that although individuals’ self-assessment of poor health predicts their future care needs very well, such assessments are not necessarily reflected in insurance demand. The results from this study could assist insurers in better understanding and managing LTC risk.

Partnership Long-Term Care Insurance: Lessons for CLASS Program Development

The Community Living Assistance Services and Supports (CLASS) Act was a voluntary public insurance strategy intended to help people pay for long-term care. CLASS was passed as part of health reform to overcome aspects of private long-term care insurance market failure but came under close scrutiny from both its supporters and its detractors. Experience with the long-term care insurance market and State Partnership Programs provide insights about how to make CLASS fiscally viable. A CLASS program that offered one set of options to cover front-end risk (e.g., 1 to 3 years) and another set to cover catastrophic risk (after a high deductible) could have been offered as an alternative to the basic CLASS “long and lean” benefit model with all enrollees joined into a single risk pool. This would have broadened the risk pool and lowered premium costs under the program.

Can the Government Incentivize the Purchase of Private Long-Term Care Insurance? Evidence from the Long-Term Care Partnership Program

While the private long-term care insurance market has remained small, an important trend in the United States has been the increased dependence on Medicaid to provide long-term care services for the elderly. As a result, the government has attempted to develop laws that would incentivize the purchase of private long-term care insurance policies, in order to at least initially shift some of the financial burden away from Medicaid. The Deficit Reduction Act of 2005 (DRA05) allowed states to adopt Long-Term Care Partnership (LTCP) programs, which provided incentives for individuals to purchase private long-term care insurance policies by decreasing the implicit tax the elderly face for holding financial and non-housing assets. However, the literature to date has little empirical evidence on whether the government has been successful in expanding the private long-term care insurance market. Using the Health and Retirement Study (HRS) and state-by-time variation in adoption of LTCPs, I find that state adoption of these programs increased the incidence of having long-term care insurance by 3 percent and decreased Medicaid use among respondents by 18 percent. Additionally, I find an increase in private long-term care insurance policies that provide nursing home care and a decrease in plans that provide in-home care. These results are especially important with the recent OAA and CLASS legislation.

Insuring Long-Term Care in the United States

Long-term care expenditures constitute one of the largest uninsured financial risks facing the elderly in the United States and thus play a central role in determining the retirement security of elderly Americans. In this essay, we begin by providing some background on the nature and extent of long-term care expenditures and insurance against those expenditures, emphasizing in particular the large and variable nature of the expenditures and the extreme paucity of private insurance coverage. We then provide some detail on the nature of the private long-term care insurance market and the available evidence on the reasons for its small size, including private market imperfections and factors that limit the demand for such insurance. We highlight how the availability of public long-term care insurance through Medicaid is an important factor suppressing the market for private long-term care insurance. In the final section, we describe and discuss recent long-term care insurance public policy initiatives at both the state and federal level.

The Complementarity Of Public And Private Long-Term Care Coverage

Discussions about long-term care financing often get mired in the false dichotomy that long-term care should be primarily either a public or a private responsibility. Our starting premise is that public and private long-term care coverage can best serve complementary roles. Therefore, public policy should focus on supporting both mechanisms to achieve efficient and equitable outcomes. The current state of the private long-term care insurance market, and the possible reasons for its modest size, provide a starting point for exploring how public policy might interface more productively with it, in the context of both existing and potential programs, such as the proposed Community Living Assistance Services and Supports (CLASS) Act.

Why is the market for long-term care insurance so small?

Long-term care represents one of the largest uninsured financial risks facing the elderly in the United States. We present evidence of supply side market failures in the private long-term care insurance market. In particular, the typical policy purchased exhibits premiums marked up substantially above expected benefits. It also provides very limited coverage relative to the total expenditure risk. However, we present additional evidence suggesting that the existence of supply side market failures is unlikely, by itself, to be sufficient to explain the very small size of the private long-term care insurance market. In particular, we find enormous gender differences in pricing that do not translate into differences in coverage, and we show that more comprehensive policies are widely available, if seldom purchased, at similar loads to purchased policies. This suggests that factors limiting demand for insurance are also likely to be important in this market. Our evidence also sheds light on the likely nature of these demand-side factors.

Private long-term care insurance: a look ahead.

The author's objective is to summarize and synthesize what is known about the private long-term care insurance market and its impact on public expenditures, policyholders, their families, and providers. Primary data were compiled from national studies and published and nonpublished information from the long-term care insurance industry. The study design was the review and analysis of empirical data. Data were collected from in-person, mail, and telephone interviews, as well as from a review of the literature. The market is growing rapidly in part due to the vast improvements in product design and to federal and state public policies. Growth in the market should result in modest reductions in public long-term care expenditures. Most claimants are satisfied with their policy, but many still do not feel that their needs are being met. Service delivery and provider issues are critical to making money work for disabled persons and insurers will be increasingly called on to help address this issue. The market for long-term care insurance will continue to grow. Over time, this insurance will likely play a more meaningful role in meeting the needs of disabled elders and their families.

Connecticut Partnership for Long‐Term Care

To the Editor:–The recent editorial on the “Connecticut Partnership for Long-Term Care” (October 1992, Vol. 40, No. 10) did not do that program justice. Wiener and Hanley question whether it is appropriate to use the means-tested Medicaid program as a mechanism to protect the assets of middle and upper income elderly. They ignored the fact that elder-law attorneys specializing in Medicaid estate planning are doing just that and doing it in a way that is damaging to both the fiscal and philosophical integrity of Medicaid, a program meant for the poor. The Partnership Program, in contrast, offers a positive response to this problem. It requires people to contribute to the cost of care before becoming eligible for benefits and does not require impoverishment. The Partnership offers an important extra benefit that can help assure policy makers that the elderly have reasonable options for protecting themselves against impoverishment. With this assurance should come more aggressive action to close the loopholes that allow abuse of the Medicaid system. Another concern raised by Wiener and Hanley is whether the poverty protection incentive will work. They suggest that asset protection may not be important to consumers who purchase long-term care insurance while avoidance of Medicaid is important. Let's be clear, the poverty protection is a benefit over and above that offered by most long-term care insurance currently marketed. Only lifetime coverage can assure protection from poverty, and for the majority of people, especially those most at risk of spend-down, lifetime coverage is not affordable. With the Partnership, people get the additional peace of mind that if their insurance runs out, they will not have to spend all their remaining resources or resort to gaming the system before Medicaid will help. The intent of the program is not to preserve people's estates, though this could be what some participants may want. The intent is to give individuals the next best thing to their health, the chance to preserve some financial independence when faced with physical dependence. Furthermore, with insurance helping to pay the bill, more people can receive long-term care as private-pay patients. Increased private patient census paying higher rates than those of Medicaid should serve to improve care quality, not reduce it. Another concern raised by Wiener and Hanley is whether the incentive program is worth the risk of failure. In truth their real fear is that it might succeed and erode support for a social insurance approach. Clearly the participating states feel their efforts are worth the risk. The growth of the private long-term care insurance market has tapered off recently. The backing of the state and the details of the Partnership Program can serve to bolster confidence in long-term care insurance. The unique insurance policies will carry a stamp of approval from the states, indicating they have meet rigid state certification requirements. As part of the program, educational campaigns will increase awareness among elders and their families about the lack of protection and their financial options. Regulatory oversight is also being strengthened to help consumer confidence. All participating insurers will be required to provide the state with data for program monitoring. The data will be used for a variety of special studies, including analysis of underwriting rules, utilization patterns and insured event criteria. To be sure, the Partnership Program is not a panacea for reforming our long-term care financing system. Held to the standard of being at least budget-neutral, its accomplishments cannot easily compete with the promises embodied in universal coverage financed through new social insurance taxes. But if progress on long-term care is to be made, the Clinton administration will need support for manageable improvements to our long-term care system that fall short of social insurance. One such step would be an improved state-based, means-tested program for long-term care to replace Medicaid's role. The Partnership model and an improved means-tested long-term care program in the states would be mutually complementary. Improvements to the Medicaid program cannot be sustained unless affordable and appealing private financing options can serve to keep people from using those benefits unless it is as a legitimate last resort. The Partnership Program serves to mitigate concerns about means testing: that programs for the poor are poor programs because they lack broad based political support. By linking the Partnership incentive to Medicaid, the constituency for the means-tested program should be enhanced rather than eroded.

High quality private long-term care insurance: can we get there from here?

The private long-term care insurance market has undergone rapid change in the last several years. Although the quality of policies has generally improved, problems remain. Consumer protection issues include the lack of adequate inflation protection features, how activities of daily living are measured, potentially high lapse rates and lack of nonforfeiture values, how home care benefits are defined, and the appropriate loss ratio standards. The concerns of consumer and elderly advocates about the quality of private long-term care insurance have prompted congress to consider the need for federal intervention. While there are numerous approaches that the federal government could take, mandatory standards substantially higher than the current model standards of the National Association of Insurance Commissioners may prove the most effective in improving the quality of policies on a nationwide basis.