Committees Active on This Topic

News Releases

Retirement Planning Should Include Long-Term Care Costs
November 2017, USA Today

NAIC Holds Long-Term Care Hearing
08/25/16

NAIC Releases Long-Term Care Insurance Study
Paper addresses market issues, innovations and regulatory concerns
05/25/16

Articles/Studies

Additional Resources

Consumer Alert: Long-Term Care Insurance – What You Should Know

NAIC Special Section: Long-Term Care

Long-Term Care Consumer Fact Sheet

State of Long-Term Care Insurance Industry Presentation
May 2016, NAIC Insurance Summit - CIPR Event

Senior Issues (B) Task Force
Public Hearing on Long-Term Care Insurance Issues
2012 Fall National Meeting
November 28, 2012

Contacts

Media queries should be directed to the NAIC Communications Division at 816-783-8909 or news@naic.org

David Torian
Health Policy Analyst and Counsel
202-471-3979

NAIC Center for Insurance Policy and Research (CIPR)

CIPR Newsletter | Subscribe

Long-Term Care

Last Updated 12/13/17

Issue: Long-term care refers to a wide range of medical, personal and social services. You may need this type of care if you have a prolonged illness or disability. This care may include help with daily activities, as well as home health care, adult daycare, nursing home care or care in a group living facility. Long-term care insurance is one way to pay for long-term care. It is designed to cover all or some of the services provided by long-term care.

Overview: According to the U.S. Department of Health and Human Services (HHS), about 12 million of America's senior citizens will require long-term care by 2020. Although the long-term care insurance (LTCI) market has evolved greatly over the years, it has undergone significant contraction, both in terms of sales as well as insurers participating in the market following more than two decades of rapid growth.  As of 2014, the total number of individuals with long-term care insurance (LTCI) coverage was 7.2 million. This does not represent all people who have ever had policies—only those who still have them.

As the LTCI industry continues to mature, claims payments are increasing even as the average age of new purchasers has been declining. The average growth in annual incurred claims over the period is 12%. Through 2014, insurers reported paying out on a cumulative basis over the last two decades slightly less than $100 billion in incurred claims. On an annual basis, the liability covered from private LTCI is now roughly $9 billion, which is less than 5% of total expenditures on LTC services in the U.S.

Long-term care products were first developed in the 1960s following the creation of the Medicare program in 1965. These initial policies were intended to supplement payment for the primary form of long-term care at that time: nursing homes. Long-term care insurance policies now incorporate a myriad of long-term care service alternatives including home health care, respite care, hospice care, personal care in the home, services provided in assisted living facilities, adult day care centers and other community facilities. Public programs, such as Medicare and Medicaid, also cover certain long-term care services. As our population ages, the need for long-term care support and services will become increasingly important and require innovative new approaches. More on this topic and other issues related to the aging population can be found by watching the presentation videos for the CIPR's recent symposium, Boom or Bust? A Look into Retirement Issues Facing Baby Boomers, held June 16, 2015.

As illustrated in a recent CIPR Study on long-term care insurance, there are two key factors that drive life insurance product development—mortality risk and longevity risk. In recent years, the product focus has shifted to address longevity risk as the baby boomers reach retirement age in a time when the defined benefit pension plan has become a relic of the past. As the general health of the population improves over time, people are living longer. The blessing of a longer life is accompanied by the need to generate sufficient income in retirement to be able to enjoy the extra years and pay for long-term care. Life insurers are increasingly targeting product development to meet this need.

Whether you should buy long–term care insurance depends on your age and life expectancy, gender, family situation, health status, income and assets.

  • Age and Life Expectancy: The longer you live, the more likely it is that you will need long-term care. The younger you are when you buy the insurance, the lower your premiums will be.

  • Gender: Women are more likely to need long-term care because they have longer life expectancies and often outlive their husbands.

  • Family Situation: If you have a spouse or adult children, you may be more likely to receive care at home from family members. If family care is not available and you cannot care for yourself, paid care outside the home may be the only alternative. Different policies may cover different types of long-term care. It is important to buy a policy that will cover the type of care you expect to need and will be available in your area.

  • Health Status: If chronic or debilitating health conditions run in your family, you could be at greater risk than another person of the same age and gender.

  • Income and Assets: You may choose to buy a long-term care policy to protect assets you have accumulated. On the other hand, a long-term care policy is not a good choice if you have few assets or a limited income. Some experts recommend you spend no more than five percent of your income on a long-term care policy.

There are several avenues to pursue purchasing coverage in the long-term care insurance market:

  • Individual policies — Most long-term care insurance policies are sold to individuals by insurance agents. Individual policies can be very different from one company to the next. Each company may also offer policies with different combinations of benefits. Be sure to comparison shop among policies, companies and agents to get the coverage that best fits your needs.

  • Employee policies — Your employer may offer a group long-term care insurance plan. The employer-group plan may be similar to what you could buy in an individual policy. One advantage of an employer-group plan is you may not have to meet any medical requirements to get a policy.

  • Association policies — Many associations let insurance companies and agents offer long-term care insurance to their members. These policies are like other types of long-term care insurance. Like employer-group policies, association policies usually give their members a choice of benefit options. Policies sold through associations usually let members keep their coverage after leaving the association. Be careful about joining an association just to buy insurance coverage. Review your rights if the policy is terminated or canceled.

Status: State insurance regulators are working to enact protections designed to keep abreast of changes in product design and to address historical problems encountered in the marketplace. NAIC membership adopted amendments to the Long-Term Care Insurance Model Regulation (#641) in August 2014 aimed at improving rate-stabilization provisions. NAIC is producing and evaluating proposals related to LTCI rate stability for existing policies; developing a new mortality standard for long-term care reserves based on the 2012 Individual Annuity Reserving Tables; developing new tabular voluntary lapse standard for long-term care reserves; working with interested parties to determine the appropriateness of a principle-based framework for LTCI valuation; and developing regulatory guidance for premium deficiency reserve calculations.

Additionally, the NAIC Senior Issues Task Force is taking a broad look at recent changes in the LTCI market, including shifts in the profile of purchasers, evolution of types of products being sold, other changes in the marketplace and goals of regulation of this product. The Task Force created the Long-Term Care Innovation Subgroup in 2016 to examine the future of LTCI, what type of LTCI products should be on the market going forward, and who is likely to buy these products. The Long-Term Care Innovation Subgroup developed two documents: 1) a list of federal policy changes for Congress to consider to help to increase private LTC financing options for consumers and 2) a list of private market options for financing LTC services to provide regulators, policymakers, consumers, and other stakeholders an overview of the landscape of long term care financing mechanisms currently available in the private market.

The LTCI benefits of insolvent insurers are covered under the NAIC Life and Health Insurance Guaranty Association Model Act (#520). The NAIC Receivership and Insolvency Task Force will address issues and concerns with guaranty fund coverage developing as a result of new or ongoing discussions and work occurring in other LTCI groups.

In addition, the NAIC Center for Insurance Policy and Research recently published a study, The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations, which explores key issues facing the long-term care market. The study provides a detailed overview of the state of the long-term care insurance market, the economics and benefits of private long-term care insurance, the future demand of improved long-term care insurance, long-term care reform proposals and regulation of long-term care insurance rates.