Many Long-Term Care Insurance Claims Begin Later in Life, New AALTCI Data Shows

It comes as no surprise that as Americans live longer, long-term care and long-term care insurance needs are increasing.

The American Association for Long-Term Care Insurance (AALTCI) recently released data  surveying the landscape of who needs long-term care insurance (LTCi), when they need it and how their claims end in different care settings.  AALTCI published its findings in its “2022 Long-Term Care Insurance Information” survey.*

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Senior Living 2021 Claims Benchmarking Study

Senior Living owners and operators have seen­­—and will likely continue to see—growing liability costs as the COVID-19 pandemic persists, a new survey from Willis Towers Watson shows. The study aimed to estimate loss costs, defined as loss cost per unit of exposure, over a 10-year period to measure how the frequency and severity of claims brought against long-term care (LTC) facilities’ owners and operators has changed over time.

The survey included 38 senior living owners and operators. Those owners and operators reported more than 14,000 claims and almost $2 billion in incurred losses from 2009 to 2019. The survey also found that the number of claims against LTC operators for more than $1 million rose over the course of the 10-year period. Similarly, the average cost of claims is higher since 2016 than from 2009 to 2016. Prior to 2016, the value of an average claim rose by 4% annually. Between 2016 and 2019, claim value grew at a rate of 11.56% per year.  States with tort reform generally saw less severe claims, and thus lower loss costs, whereas states without senior living tort reform generally saw higher, increasing costs.

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The NAIC LTCi Reduced Benefit Options Subgroup Reports on Potential Issues Related to LTC Wellness Benefits

On July 22, 2021, the NAIC Long-Term Care Insurance Reduced Benefit Options (EX) Subgroup, led by Commissioner Altman (PA), posted its first draft of a discussion paper Issues Related to LTC Wellness Benefits online. Comments are due September 5, 2021.

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COVID-19 Driving Insurance Sales Over the Past Year

It should come as no surprise that the COVID-19 pandemic has been one of the biggest, if not the biggest factors driving the insurance market over the last year and a half.

More than half (54%) of Americans said that COVID-19 has made them more anxious about dying early, becoming disabled or needing long-term care (LTC), according to a new survey from the Million Dollar Round Table (MDRT).* Among those surveyed who said they acquired new insurance policies since March 2020, 42% said the COVID-19 pandemic was a factor while other reasons included wanting to provide for their family (36%), a major life event (29%) and new concerns about potential future disability or LTC needs (27%).

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Shifting Trends in Life-LTC Combination Products Due to COVID-19

At the recent 2021 Supplemental Health, DI & LTC Conference, hosted by LIMRA, LOMA, and the Society of Actuaries in early August, panelists discussed the current market trends of long-term care (LTC) products, particularly Life-LTC combination products. The market for these combination products has typically seen a steady 12% growth rate from 2009 to 2020, explained Mohammad T. Reza, CFA of New York Life. However, the pandemic had unprecedented effects in many regards and the Life-LTC market was no exclusion. The total number of life-LTC combination products sold decreased 7% in 2020.

According to LIMRA’s 2020 U.S. Individual Life Combination Products Annual Review, total new premiums for individual combination products decreased by 23% in 2020. A recurring theory for the decline is that the priorities of potential insureds shifted dramatically as a result of COVID-19, which impacted single-premium combination products the strongest at a decline of 41%. With Americans facing more immediate concerns for liquidity and cash during the pandemic, the demand for these life-combination products dampened, derailing the consistent upward trend the market had previously seen.

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A New Study Highlights the Need for Long-Term Care Planning

A report recently issued by HealthView Services, “Long-Term Care & Financial Planning,”  summarized the likelihood that individuals will require long-term care (LTC) and the expected costs associated with such care. The study indicates that a healthy 65-year-old male/female couple has a 44% and 56% chance (respectively) of needing some level of LTC if each spouse attains their actuarial life expectancy. Combined, there is a 75% chance that at least one of them will require LTC.

The report also projected the future cost of LTC. Taking the same 65-year-old male/female couple, if they both only needed one year of LTC, their projected combined (national average, future value) costs are estimated at $398,000 for a nursing home or $223,000 for 44 hours of weekly home health care.

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Is the WISH Act the Answer to Concerns About the Cost of an Aging Population?

A new bill proposed in Congress seeks to address financial concerns due to an aging population through the Well-Being Insurance for Seniors to be at Home Act (“WISH Act”). The current population of the United States is aging rapidly, leading to an increasing percentage of the population aged 65 and over. In fact, it is estimated that by 2050 the number of people living over the age of 65 will almost double and the number of people living over the age of 85 will triple.

The WISH Act, introduced on July 1, 2021 by U.S. Representative Tom Suozzi (NY), cautions that “the typical U.S. senior could afford only about 12 months of nursing home care, assisted living care, or extensive home care using their financial wealth.” This is consistent with the idea that over “half of Americans entering old age today will have a long-term need for constant attendance by another person, averaging $298,000 costs per person for about 2 years of serious self care disability (as defined in HIPAA), and more than half will be out-of-pocket, according to the U.S. Department of Health and Human Services (HHS).”

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Long-Term Care Insurance Policy Sales Declined in 2020

The number of people who purchased traditional long-term care insurance policies last year dropped significantly compared to previous years, based on new figures released by the American Association for Long-Term Care Insurance (AALTCI).

AALTCI reports that at its peak in 2000-2001, sales of traditional LTCi policies soared to more than 700,000. Numbers have fallen over the last two decades and hit their lowest point in 2020 with just 49,000 policies sold. AALTCI says while the need for LTCi hasn’t changed, “more people are opting for a linked-benefit product such as a life insurance policy that can also pay long-term care benefits.”

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