What is LTC Insurance and

Where is the Market Headed?

Susan A. Coronel
LTC Director
America’s Health Insurance Plans
Overview
Status Report on Current LTC Insurance
Marketplace

Benefits of LTC Insurance

Current Federal and State Proposals on LTC

Future Trends

Conclusions
 The LTC Insurance Marketplace is
Growing
10,000+
10,000
9,126
8,261
Policies Sold (In Thousands)

8,000 7,529
6,831
6,080
6,000 5,542
4,960
4,351
3,837
4,000 3,417
2,930
2,430
1,930
2,000

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003* 2004*
*NOTE: 2003 and 2004 figures are estimates.
Source: AHIPLTC Market Surveys
LTC Insurance Products by Percentage
of Policies Sold and Average Age of Buyer
   % of % of Policies  % of Avg Age
LTC product companies Sold Policies of Buyer
  (n =103) as of 12/02 Sold in in
2002
  2002

 Individual  94 79 68  60

 

 Employer-sponsored  20      
  18 32 45

 LTC as part of a life  7  3 N/A N/A

insurance policy  

Source: AHIPLTC Market Surveys

Claims Paid by LTC Insurance
Insurers

Paid as of December 31, 2002 $8.4 billion

Paid between January 1 and December 31, 2002 $1.4 billion

Source: AHIP LTC Market Surveys

Average Annual Growth Rates in
the LTC Insurance Marketplace

25
22
20 18

15
Percent

12
10
6
5

0
Total Individual Employer Life Riders
Source: AHIP LTC Market Surveys
 Number of Employer-Sponsored
LTC Insurance Plans Offered
6000 5,675

5000 4,776

3,956
Number of Plans

4000 3,520

3000 2,749

1,953
2000 1,532
1,260
968 1,028
1000 506
135 288
2 7 54
0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Year
Source: AHIP LTC Market Surveys
 Typical Coverage under LTC
Insurance Policies
Services Covered: Other Benefits Offered:
Nursing Home Care Bed Reservation
Assisted Living Facility Care Coordination/
Home Health Care Management
Alternate Care Medical Equipment
Hospice Care Caregiver Training
Respite Care Restoration Benefit

Source: AHIP LTC Market Surveys

Typical Coverage under Long-
Term Care Insurance Policies (cont’d)
Policy Type: Comprehensive integrated policies/
Facility only / Stand-Alone home health care
Daily Benefit Amounts: $50-$500
Benefit Periods: 1 year to lifetime coverage
Deductible Periods: 0-365 days
Age limits for purchasing: 18-99
Limited pay policies: single premium/ 10-pay/
pay until 65
Waiver of Premium
30-Day Free Look Period
Inflation Protection Options
Nonforfeiture Benefit Options
Average Annual LTC
Insurance Premiums
Age Base With 5% compounded
inflation protection (IP)

40 $422 $890
50 $564 $1,134

65 $1,337 $2,346

79 $5,330 $7,572

Note: Coverage is $150 daily benefit amount, four years of coverage, and a 90-day elimination period.
*Reported by 11 of the 13 sellers identified as having sold 80 percent of all individual and group association
LTC insurance policies in 2002.

Source: AHIP LTC Market Surveys

 Comparison of Using LTC Insurance vs.
Out-of-Pocket Dollars to Pay for LTC Costs
Scenario: A 50-year old purchases a LTC insurance policy that covers $150/day, for 4
years of coverage, with 5% comp inflation protection. He pays $1200/year for this
policy. When he turns 85, he goes to a nursing home for 2 ½ years (average nursing
home stay). How much would his nursing home stay cost? How does this compare
to premiums he would have paid over 35 years?

LTCi Benefits Payable Actual Nursing Difference between

Premiums Under LTCi Home Costs LTCi Payments and
Paid for 35 Policy Policyholder Will Potential Out-of-Pocket
Years (1) Face* (2) Costs
$42,000 $788/day for 4 $367,734 per year $877,335 in savings for
years or up to a or a total of LTCi policyholder
total of $919,335 for 2 ½
$1,150,483 in year stay
benefits

•Average annual premiums of $1,200 x 35 years

•Assuming current costs are $70,000/year and increases at annual 5% comp rate for 35 years
Benefits of LTC Insurance to
Policyholders
– Having LTC insurance allows disabled elders to
remain in their homes and delay or avoid using
institutional services.

– LTC insurance reduces the out-of-pocket expenses

– average savings of $60,000 and $75,000 for
nursing homes and can total more than $100,000
for assisted living costs.

– Buying this insurance makes these purchasers feel

more secure about their future and better about the
way they plan to secure that future. These
purchasers also feel that they have taken
appropriate steps to protect their spouses.
Benefits of LTC Insurance to
Caregivers
– Family caregivers suffer less stress if the disabled
elder they are caring for has private long-term care
insurance.

– Working age family caregivers double their chances

of remaining in the workforce if the disabled elder
they are caring for has private long-term care
insurance. These caregivers also experience
significantly fewer work disruptions and social
stresses.
Benefits of LTC Insurance to
Medicaid and Medicare
– Long-term care insurance reduces state and federal
Medicaid expenditures and federal Medicare home
health expenditures. Medicaid savings are projected
to total about $5,000 per policyholder and Medicare
savings are estimated to exceed $1,600 per
policyholder.

– Aggregate savings to Medicare and Medicaid for

the current number of policyholders are estimated
at about $30 billion. These savings will grow as
more people acquire policies and the average age
of purchasers continues to decline.
Federal Long-Term Care
Legislative Activity
 Long-Term Care &
Retirement Security Act

 Ronald Reagan
Alzheimer's Act

 President’s Proposal

 Other LTC-related Bills

–LTC Partnerships
–IRAs and other vehicles
–Others
Long-Term Care &
Retirement Security Act
Bill sponsors: Grassley-Graham and Johnson-Pomeroy

Introduced in 105th, 106th ,107th and 108th Congress; In

108th Congress, about ¼ of Senate sponsored and over
130 House sponsors.

Phase in an above-the-line deduction for Qualified LTC

insurance premiums and LTC coverage under cafeteria
plans/FSA

LTC caregiver tax credit up to $3,000

Updates HIPAA consumer protection standards

LTC Partnerships - Providing Medicaid
Protection for LTCI Purchasers
4 Existing Partnerships (California, Connecticut, Indiana
and New York)
– Dollar for dollar protection
– Total asset protection
– Hybrid

Tightening Medicaid Eligibility Rules

Future Partnerships
– National model
– Simplicity
– Reciprocity
– Consumer Education
State LTC Initiatives

State Tax Incentives

State-sponsored LTC
employer plans
Other innovative state
initiatives
 States Offering Long Term Care Insurance

WA MT ND
MN
VT NH ME

ID SD WI
OR MI
WY NY
NE IA MA
IL OH PA
NV CO IN RI
UT KS MO WV NJ CT
KY VA DE
CA OK TN NC MD
AZ NM AR
SC
MS AL GA
TX LA

AK FL
HI

Prepared by:

www.ltcg.com 2/04
Other Possible Legislative
Actions
Creating/enhancing LTC Education campaigns
– Setting up multi-purpose LTC information centers
– Using websites and clearinghouses

Promoting other vehicles for LTCI purchase

– Health Savings Accounts; Reverse Mortgages
– Others

Combination of different approaches

Establishment on new and innovative Medicaid

approaches/demonstrations
 Future Market Trends
 Awareness of LTC issues and LTC insurance will
increase but there will remain the need for more LTC
consumer education efforts

 Partnerships between public and private sectors will

increase.

• Federal/State legislative proposals to encourage

LTCI
• Federal/State Innovative programs or
demonstrations on LTC
Conclusions
The LTC insurance market is growing. LTC insurance
policies offered today are comprehensive and provide
good value.

LTC insurance benefits policyholders, caregivers and

state and federal budgets.

Demographics and market trends will inevitably look to

private sector for help in financing LTC. Future LTC
insurance products must continue to be flexible and
consumer-friendly.

Media will play a key role in expanding the LTC market

and encouraging savings for LTC.
Additional Resources
HHS LTC Awareness Campaign –
www.ltcaware.info or call 1-866-PLAN-LTC

Guides to LTC Insurance – available through the Federal

Citizen Information Center by calling 1-888-8 PUEBLO or
www.ahip.org

LTC Champions Network

www.ltcchampions.org