Private Long-Term Care Insurance
Only 10 percent of people over age 65 have private insurance that covers long-term care. So, private insurance covers only about 9 percent of all long-term care costs.
There are several reasons that private insurance isn’t more widely used. Few employers offer long-term care insurance. Most people purchase plans through membership associations or, more commonly, in the individual market. As with standard health insurance, the individual market for long-term care insurance can be costly and confusing, and policies vary widely.
There is also a misperception that Medicare pays for long-term care, but Medicare coverage of long-term services is quite limited. Many also believe that long-term care costs are covered by job-based disability policies, but that is also incorrect. Those policies replace lost earnings in the event of a disability—they don’t cover the potentially substantial added cost of long-term care.
About Private Policies: Cost and Coverage
Cost and coverage vary dramatically by company and depend on the type of coverage that is purchased. Prices also vary based on the person's age at the time of purchase and his or her health status. (Individuals can also be denied coverage based on their health status.) Generally, companies offer a discount for a couple that purchases policies together.
Cost
The American Association of Long-Term Care Insurance has reported 2009 average policy prices. For example, a 55-year-old purchaser in good health with a “preferred health discount” who also receives a discount for spousal purchase would see prices ranging from $723 to $1,590 annually for a policy. This policy would cover home and nursing home care for up to three years; pay a maximum of $100/day; include a 5 percent annual inflation protection (which means that the daily benefit was adjusted for inflation); and require the policyholder to pay the first three months of costs. Costs go up significantly for older purchasers, for purchasers in poor health or those who do not receive a discount for purchasing coverage with their spouse, or for a more generous or longer-term benefit.
Coverage
Policies can vary based on type of coverage, e.g., whether or not home care is covered and what home care items are included, whether the benefit offered is a cash or service benefit, whether or not there is inflation protection, and the amount of coverage (daily benefit level or time period the policy will cover). Policies may also exclude long-term care that is related to a health condition that was pre-existing at the time the policy was purchased. Purchasers also need to be sure that policies cover facilities or costs incurred in states other than the state where the policy was written.
The National Association of Insurance Commissioners’ Web site lists factors that individuals should consider when thinking about whether to purchase long-term care insurance, because this kind of insurance is not the best option for everyone. These factors include making sure that premiums are affordable and that the company is reputable. Some companies have increased their rates, sometimes dramatically, on policies that were issued years before. Others have gone out of business, leaving policyholders with no coverage.
Long-Term Care Insurance Partnership Plans
The Deficit Reduction Act of 2005 allowed states to explore a new insurance model for financing long-term services called "long-term care partnership plans." This type of insurance was designed to encourage more people to purchase private coverage and hopefully reduce the financial pressure on Medicaid programs.
Today, about 30 states offer these plans. The plans are partnerships between the state and companies that offer private long-term care insurance. The plans that companies offer through the program must include certain consumer protections, such as inflation protection. In most states that offer these plans, coverage is portable to other states with partnership plans.
These plans give purchasers dollar-for-dollar asset protection in the event that their benefits are exhausted and they need to apply for Medicaid to help cover long-term care costs. For example, if an individual purchases a partnership policy that covers up to $200,000 in long-term care costs, and the policy benefit is exhausted, he or she can protect up to $200,000 in assets and still qualify for Medicaid coverage.
These are relatively new plans, and many of the purchasers have not yet had to use their long-term care benefit. It is unclear how much, if any, money these plans will ultimately save for state Medicaid programs.
Health Reform and the Private Market
The American Tax Relief Act of 2012, signed into law on January 2, establishes a Commission on Long-Term Care responsible for developing a plan for the establishment, implementation, and financing of a comprehensive, coordinated, and high-quality system that ensures the availability of long-term services and supports. In developing this plan, the Commission will examine: 1) the interaction of a long-term services and supports system with existing programs, including Medicare, Medicaid, and private long-term care insurance; 2) improvements to health care programs that are necessary for ensuring the availability of long-term services and supports; and 3) issues related to workers who provide long-term services and supports, including workforce adequacy, quality of services, employer representation, and gaps in federal and state infrastructure. The Commission replaces and expands the task of the Personal Care Attendants Workforce Advisory Panel, established as part of the Community Living Assistance Services and Supports (CLASS) Act, a national, voluntary long-term care insurance program in the health care law, which was repealed by the Tax Relief Act.
The Commission will be comprised of 15 members, appointed by the President, the Senate majority leader, the Senate minority leader, the Speaker of the House, and the House minority leader within 30 days from the enactment of the Tax Relief Act. The members must represent consumers of long-term services and supports, older adults, individuals with cognitive and functional limitations, caregivers, the health care workforce, private long-term care insurance, employers, and state insurance departments and Medicaid agencies. The Commission has the power to hold hearings, commission studies by the Government Accountability Office and the Congressional Budget Office, and receive information and technical assistance from federal agencies. Six months after the Commission is appointed, members will vote on a comprehensive long-term care plan. The proposed plan will be sent to Congress if a majority of the Commission votes in favor.
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