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What is the future for long-term care?

July 12th, 2010

By jeremy.engdahl-johnson

A new article in National Underwriter called “Is this the end for LTC?” looks to the future of long-term care (LTC). Here is an excerpt:

Group long-term care insurance is in a slump, and it is unclear when, if ever, the slump will end. The latest bad news for the market is that the percentage of organizations that offer the benefit either as a true group plan or voluntary benefit fell to 31% last year, from 46% in 2006, according to the Society for Human Resources Management, Alexandria, Va…

There is one sector of LTC that could provide some relief, however: group LTC. Although it has a history of low sales, it can still be a growth market for some producers, says Amy Pahl, principal and consulting actuary in the Minneapolis office of Milliman Inc.

One reason for her confidence is that as Americans age, they are becoming increasingly aware that there is a need to protect their assets at some point in their lives.

While the group market may offer opportunities for growth, there are other questions. We’ve blogged before about the CLASS Act. Here is another excerpt from the National Underwriter article:

Pahl believes CLASS could be a double-edged sword. On the one hand, it may encourage individuals to buy private LTC coverage to complement their daily benefit under CLASS. However, it may cause some covered employees to believe they are sheltered adequately, when in reality CLASS benefits would cover only a fraction of LTC costs.

On the other hand, it could also help convince many others to recognize they have a need for this type of insurance, she says.

“The economy is a factor as to employers’ participation,” Pahl says. “Most group LTC is still employee-paid. You have to sell the employer sponsor to get access to employees, but you are still selling the employees because they are funding it themselves.”

The voluntary side of the group market for LTC insurance is likely to grow, Pahl says. True group LTC insurance, however, is a tougher sale, because it is guaranteed issue. That makes it appealing to older workers as well as those who may otherwise have trouble being underwritten in the individual LTC market. But for younger, healthier employees, true group can mean they would pay higher premiums than they could get in the individual market.

Eventually, Pahl sees growth for true group LTC coverage, but for now, employers are scrambling to figure out what health care reform means for their health care benefits, and LTC is a lower priority.

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