LTC Bullet: Latest Update on LTC Insurance Sales and Characteristics

Thursday, February 6, 2003

Santa Fe, NM--

LTC Comment: The Health Insurance Association of America's (HIAA's) latest survey-research-based update on long-term care insurance sales and characteristics is now available. Read a summary and link to the executive summary after the ***news***.

*** Center President Stephen Moses' article "The Elephant, The Blind Men, and LTC" has been published in the National Underwriter LTC E-Wire, Vol. 2, No. 3, February 2003. Read it at . Here's an excerpt: "This modernized version of the ancient parable of the blind men and the elephant teaches the folly of making conclusions about any complex thing without comprehending its entirety. Its message rings true when assessing today's long term care scene. LTC is a complex subject comprised of many inter-related parts. When people, even experts, analyze one facet without taking into consideration all of its aspects and inter-relationships, they often reach wrong, incomplete or misleading conclusions. So, then, who are the 'blind men' of LTC? What mistaken suppositions do they tend to make? And what can we learn if we remove our blindfolds and observe LTC in its fullness and complexity?"

*** NEW ALZHEIMER'S BROCHURE AVAILABLE. The newest release in the AHCA (American Health Care Association) and NCAL (National Center for Assisted Living) consumer series - "Caring for Someone with Alzheimer's" - is receiving an immediate positive response from media and the public. The brochure offers clear and concise information regarding warning signs, caring for someone with Alzheimer's, where to find help and much more. It is available free of charge, one per customer to consumers at 1-800-628-8140, or . Bulk copies may be purchased at . ***

*** Donor zone content now goes daily by email to all paid subscribers. Our LTC E-Alerts, LTC Data Base and LTC Reader publications are designed to keep LTC insurance producers and other LTC experts at the forefront of knowledge and professionalism. We track the electronic, trade and academic literature in all LTC-related fields; we choose the reports and articles we think you will find most useful; we distill the information into a quick read (five minutes or less); we add a brief analysis to indicate why we think the information should matter to you; we email you the publication daily; and we archive it all at so you can find back issues when you need them. Our latest donor-only zone content sent during the past few days includes:

LTC E-Alert #3-011--Another One (ALF) Bites the Dust

If you already qualify for The Zone, you can click the following link, enter your user name and password, and go directly to the latest donor zone content and the archives: . To Zone In, mail your tax-deductible contribution of $150 or more to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA 98109. Then email your preferred user name and password (up to 10 characters each). You can also contribute online by credit card or direct withdrawal at . ***


LTC Comment: Following is HIAA's press release on their latest LTCI update titled "Long-Term Care Insurance in 2000-2001" and published January 2003. The executive summary is available online at . The press release does not explain how to order the full report nor did we find instructions on HIAA's website at , but interested parties should be able to track it down by calling the contact listed in the press release.

This report shows that private long-term care insurance (LTCI) is gaining ground, but despite many years of annual sales increases averaging 18 percent (off a base of nothing of course), LTCI is still barely a fly speck on the windshield of the long-term care industry. Of 8.3 million policies sold since 1987, approximately 5.8 million policies remain in effect. America has 35 million seniors and 76 million baby-boomers. So, only about 5 percent of the people likely to need long-term care in the next 30 years are privately insured for the risk despite 15 years of intense marketing efforts to convince them of the need.

If you really want to understand what drives long-term care (and the long-term care insurance market), however, take this advice: "Follow the Money." Long-term care insurance paid $839 million in claims during 2001. In that same year, America spent $98.9 billion on nursing home care and $33.2 billion on home health care. That means private LTCI paid only six-tenths of one percent of the cost of long-term care in the United States in 2001. So, who does pay for long-term care? Mostly, Medicaid and Medicare. For details on who pays for LTC and how this affects the LTC insurance market, see our "LTC Bullet: New LTC Expenditure Data Provide Clues to Low LTCI Sales and LTC Facilities' Financial Woes," published January 14, 2003 at .

Here's the problem, long-term care has become a public utility. Our long-term care service delivery system is nursing-home-based and welfare-financed. Most revenue to nursing homes and home health agencies flows through government. Assisted living facilities are 90 percent private pay but too few people can afford ALFs to fill the surplus of beds in their overbuilt facilities profitably. LTC providers and financiers see long-term care insurance as "pie in the sky, by and by." They focus most of their public policy advocacy on enhancing Medicaid and Medicare financing in the short term instead of creatively encouraging private financing sources like LTC insurance for the future. Financiers, who provide the debt and equity capital (scarce as it is) to build and operate long-term care facilities, pooh-pooh long-term care insurance and ridicule its role. They say "Show Me the Money." In other words, prove LTCI can play a significant part in financing long-term care or leave us alone.

Obviously LTC insurance will play an ever-bigger role in financing long-term care as time goes on when current and future policy holders finally move into claim status. In the meantime, however, heavy government financing of long-term care, even for the middle class and the affluent, impedes LTC insurance sales and keeps the proportion of privately protected Americans minimal. That reality creates a foregone conclusion that LTC insurance will only play a small role in LTC financing in the decades ahead. This fact diverts the attention of LTC providers and financiers from the urgent need to push for public policy to divert people from Medicaid LTC dependency toward early planning and insurance. In the meantime, our government programs, Medicaid and Medicare, continue to drift toward insolvency and the services they provide are already dismally inadequate. What's needed is for the long-term care insurance industry to work closely with LTC providers and financiers to push the government in the direction of public policy to encourage private financing through insurance and home equity conversion while discouraging excessive dependency on public safety net programs. That effort must happen now or very soon or it will be too late.

If any of this analysis piques your interest or curiosity, read the Center's Report titled "The LTC Triathlon: Long-Term Care's Race for Survival" available free in .pdf format at . For the diagnosis and treatment of the problem, read "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" at .

Now, on to the new HIAA report:


HIAA's Press Release:
Long Term Care Insurance: Sales Show Continued Growth, Premiums Steady
Jan 31, 2003
CONTACT: Larry Akey
(202) 824-1696
New HIAA Survey Confirms Employer Market Posting Big Gains

WASHINGTON - The number of Americans who have purchased insurance against the catastrophic costs of long-term care has increased more than tenfold in the last fifteen years, according to a survey released today by the Health Insurance Association of America.

The study also shows that long-term care insurers have paid out more than $6 billion to cover a wide range of services, including home health care, care in an assisted living facility, nursing home care, respite care and hospice care, including $839 million in benefits paid during 2001 alone.

The total number of long-term care insurance policies sold has grown from 815,000 in 1987, when HIAA began systematically tracking long-term care insurance, to nearly 8.3 million in 2001. More than 1.4 million people purchased a policy during the recent two-year survey period, according to HIAA's research findings "Long-Term Care Insurance in 2000-2001."

"Long-term care insurance protects the financial security of American families today in the event that a loved one needs help handling day-to-day activities," said Donald Young, MD, president of HIAA, "and it also provides a way of assisting states with the burden of rising Medicaid costs in the future."

With many states' Medicaid programs already reeling from swelling long-term care costs, many experts believe that aging Baby Boomers will place an intolerable strain on government spending in the future.

Although premiums paid for long-term care insurance varied widely based on a number of factors, primarily benefit design chosen and entry age of the policyholder, the HIAA study found that the average premium paid in 2001 remained nearly constant when compared with the average premium paid two years earlier.

For example, a basic policy purchased in 2001 at age 65 cost $996 a year, compared to an average annual premium of $1,002 for the same policy purchased in 1999. A policy with similar daily coverage as well as inflation protection and nonforfeiture benefits cost $2,261 in 2001, compared with $2,130 two years earlier.

"Given the significant enhancements to long-term care insurance policy design, the stability of premium rates over the last couple of years means buyers today clearly receive a better value for their insurance dollar than ever before," Young said.

Significant expansion for long-term care insurance has occurred in the employer market, the survey shows. The number of employers offering long-term care insurance as an employee benefit skyrocketed over the last decade, with more than 4,700 employers now making long-term care insurance available for purchase by their employees.

The total number of policies sold through the employer market passed 1.3 million in 2001, accounting for nearly a quarter of the long-term care market during that year. The average annual growth in this market has outpaced growth in the individual and group association markets, and the federal government recently began offering a long-term care insurance plan to all federal employees, retirees and their families.

Based on data reported by survey respondents, HIAA estimates that roughly 70% of all individual long-term care policies sold remain in effect.

HIAA's studies on the long-term care insurance market are the only research based on surveys of every known long-term care insurer in the country. They have become the definitive source of data on the long-term care market.

HIAA is the nation's most prominent trade association representing the private health care system. Its nearly 300 members provide health, long-term care, dental, disability, and supplemental coverage to more than 100 million Americans. It is the nation's premier provider of self-study courses on health insurance and managed care.

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EDITOR'S NOTE: An executive summary of "Long-Term Care Insurance in 2000-2001" is available at the following link: . Free media copies of the complete report are available in PDF format by contacting HIAA's Communications Department at 202-824-1696 or .